New Brazilian Emergency Program for Maintenance of Jobs and Income

Executive Order no. 1,045 was issued today, implementing the New Emergency Program for Maintenance of Jobs and Income in Brazil. Such order contains additional employment related measures to face the consequences of the COVID-19 pandemic, reinstating some of the provisions previously contained in Executive Order no. 936, which was converted into Law no. 14,020/20.

The financial emergency benefit to preserve jobs and income has been recreated and will be, once again, operationalized and paid by the Ministry of the Economy in the specific cases set forth for the reduction of working schedule and pay, or the temporary suspension of the employment contracts.

The salary reduction can be agreed by means of an individual written contract of up to 120 days, as long as the requirements provided in the executive order are met. The temporary suspension of employment can also be agreed directly with the employee for a term of up to 120 days.

Besides the specific requirements for the actions to be implemented, an important aspect to be stressed is the recognition of a temporary job security for the employee who receives the benefit (whether it is a salary reduction or a suspension of employment) during the term agreed for the revised conditions, as well as an additional equivalent period thereafter. Pregnant employees are entitled to a job security for the same period agreed and an equivalent period thereafter counted as of the end of the constitutional protections already granted in this case.

In case of a termination without cause during the job security period, besides statutory severance, employer will have to pay an indemnity corresponding to: (i) 50% of the salary that the employee would have been entitled to during the job security period in case of a reduction equal or higher than 25% but lower than 50%; (ii) 75% of the salary that the employee would have been entitled to during the job security period in case of a reduction equal or higher than 50% but lower than 70%; (iii) 100% of the salary that the employee would have been entitled to during the job security period in case of a reduction equal or higher than 75% or in case of employment suspension.

The job security does not apply in cases of resignation, termination by mutual consent (as provided in article 484-A of the Brazilian labor code) or termination for cause.

The measures for schedule and pay reduction as well as employment suspension addressed in the Executive Order no. 1,045 can also be agreed by means of a collective negotiation with the union, including in different percentages from those provided in the Order.

Our employment team remains available to clarify any questions about the order just issued.