by Luiz Fernando Plens de Quevedo

Published in an extraordinary edition of the Official Gazette on April 1, 2020, MP 936, in addition to establishing the Emergency Employment and Income Maintenance Program, also supplemented MP 927/2020. We have already criticized the constitutionality of the Provisional Measure, especially for removing the requirement of collective bargaining to reduce salaries, as well as for reducing the Employment and Income Preservation Benefit, causing real harm to employees who, instead of negotiating individually, are assisted by their union in collective bargaining when the employer joins the Emergency Program.

In these terms, the entire content of MP 936 is truly fragile when compared to MP 927, which was weakened in its main measure, since, when art. 18 provided for the possibility of suspending employment contracts for up to four months, it contained no provision regarding the employees’ subsistence during that period. According to a statement by the Special Secretary of Social Security and Labor of the Ministry of Economy, there was an error in the wording of art. 18 of MP 927, as he stated the day after its publication: ‘we will publish the other text with everything that has a fiscal impact, with the advance of unemployment insurance” (https://twitter.com/brunobiancoleal on 03.23.2020).

The Emergency Employment and Income Maintenance Program has now been established, under which employee and employer may, by amending the employment contract, reduce working hours with a proportional reduction in salary for up to 90 days. The possible reductions are 25%, 50% and 70%, guaranteeing receipt of the monthly minimum wage. The Program also provides for the possibility of suspending the employment contract for up to 60 days. The benefit will be paid through the Unemployment Insurance Program, in amounts related to the employee’s last salary, regardless of the contribution period.

The salary reduction or even suspension of the contract will depend on the employee’s express agreement. Thus, the percentage of salary reduction or the suspension of the employment contract may be defined case by case, employee by employee. The reduction and/or suspension need not apply to an entire establishment or sector of the company.

Two gross revenue brackets were established for companies and three salary brackets for employees, a segmentation that defines the limits of salary reduction without collective bargaining and governs the costs to be borne by the Government and companies.

For companies with total gross revenue exceeding BRL 4.8 million in 2019, suspension of the employment contract will require the employer to pay a compensatory allowance equivalent to 30% of the employee’s salary. There is no provision for companies founded after January 2019. The compensatory allowance is justified by the proportional reduction in the benefit owed to employees of these companies, who will receive 70% of the unemployment insurance installments due.

Once the salary reduction has been set within the rates provided for in the Provisional Measure (25%, 50% or 70%), with the respective reduction in working hours, the employee will receive a supplement, “calculated by applying the percentage of the reduction to the calculation base” on the amount of unemployment insurance to which they would be entitled.

Suspension of the employment contract is limited to 60 days and may be agreed in up to two 30-day periods, within the limit of 90 days counted from the start of the 1st suspension to the end of the 2nd period. The employee will stop receiving a salary and will begin receiving unemployment insurance, equivalent to 100% of the amount to which they would be entitled in the event of termination. For companies with gross revenue exceeding BRL 4.8 million, the unemployment insurance amount will be 70% and there will be a compensatory allowance equivalent to 30% of the actual salary.

Regardless of salary bracket, MP 936 provides that all employees may enter into an individual agreement with a 25% salary reduction. It then distinguishes between employees earning less than three minimum wages (BRL 3,135.00), employees earning up to twice the social security benefit cap (BRL 12,202.12) and employees earning more than this limit and holding a university degree (sole paragraph, art. 444, CLT).

Employees earning less than BRL 3,135.00 and more than BRL 12,202.12 (with a university degree) are guaranteed broad freedom to enter into individual agreements for salary reductions in all the proportions provided for in MP 936, as well as to negotiate the suspension of employment contracts. Employees earning between BRL 3,135.01 and BRL 12,202.11, or above that amount if they do not hold a university degree, may only have their working hours and salary reduced by more than 25%, or their employment contracts suspended, through collective bargaining.

All individual agreements, whether for reduction of working hours or suspension of the contract, may establish a compensatory allowance to be paid for the duration of the situation. This payment will not be salary. It will be compensatory in nature and will not form part of the calculation base for income tax, FGTS or social security contributions. In cases where collective bargaining is required, the compensatory allowance must be included in the collective agreement.

The validity of the individual agreement for salary reduction or contract suspension will depend on the employer submitting the proposed individual agreement to the employee two calendar days in advance, and it must be sent to the Ministry of Economy within 10 days after the individual agreement is entered into, under a procedure yet to be defined by specific regulations. The agreement may be revoked immediately by unilateral act of the employer.