End of Employment in Brazil

End of Employment Procedures & Guidelines in Brazil

Termination procedure

In Brazil, employment can be terminated without cause at any time, provided the notice period is respected (or paid in lieu) and severance is paid. In addition, some categories of employees enjoy additional protection against dismissal. Termination must be written, signed, and dated.

Upon termination without cause, employees are entitled to receiving accrued benefits. Those consist of their salary for the unpaid time worked, unused and accrued vacation and vacation bonus, the appropriate portion of the 13th month salary, FGTS, and an additional 40% on the balance of their FGTS fund. (FGTS and the penalty are not applicable if the termination is with cause).

The Brazilian legislation recognizes some reasons that lead to termination with cause. However, employers must have a legitimate and recognized reason and must prove the misconduct. Employees are entitled to neither notice period nor pay in these circumstances:

• Breach of trade secret
  • Employer must prove that they were financially impacted by it and that the employee did it knowingly.
• Insubordination and indiscipline such as breach of employer policies or employment agreement
• Inappropriate behaviour and harassment such as sexual advances and sexual harassment, physical and psychological bullying, sexism, racism
• Dishonesty and misconduct, such as theft, fake doctor’s note, and fraud
• Low productivity and negligence such as not showing up for work and constantly missing deadlines
  • It usually requires a disciplinary procedure involving three strikes.
• Ongoing drunkenness or drug abuse, but not because of alcoholism or dependency
• Physical violence
• Gambling at work
• A serious conflict of interest such as working on the side for a competitor or engaging in work in an industry or activity that impacts the employer
• Criminal conviction
• Gross negligence
• Abandonment of job
• Acts detrimental to national security

Termination by mutual agreement signed by both parties reduces the notice period to 15 days and lowers the FGTS penalty by 20%. Employees get access to only 80% of the funds in their FGTS account.

Employees who lost employment with or without cause must receive their salary and any outstanding payments on their last day of employment. If the employee resigns, the deadline for the payment is increased to ten days from the last day of employment. If the employee works through their notice period, the payment must be made on the last day of employment. If the employee doesn’t work through their notice period, payment can be made within ten days of termination. 

Employers must fill out and get employees to sign the following documents upon termination:

• The letter of termination
• Aviso prévio – termination notice letter
• Termo de Rescisao de Contrato de Trabalho (TRCT) – termination of employment contract terms
• Guia de Recolhimento Rescisorio do FGTS (GRRF) – form that is utilized to withdraw unemployment funds from FGTS
• Seguro Desemprego – unemployment insurance benefit
• Relatório de Medias – average salary report

Employers must notify the authorities mentioned above (FGTS, CAGED) about the termination.

Disciplinary procedure

There is no legal disciplinary procedure that companies need to follow in Brazil. However, in some circumstances involving just cause for dismissal, employers should be keeping proof that they have done their part and tried to help the employee before making the decision to terminate the contract. It is very common for companies to be taken to court by current or former employees in Brazil, so the more evidence employers have to back up their actions, the less likely they are to lose the case.

There are no rules on the number of warnings an employee must receive before dismissal in case of insubordination, poor performance, or constant lateness for work and missed deadlines. The company’s actions may depend on its policy and tolerance. However, it’s standard to give employees three warnings — the first verbally, the second in writing, and the third in the form of actual temporary employment suspension.

The first warning is a way of alerting an employee that such behaviour will have consequences to their employment status and should be duly documented. The second warning, which is in writing, requires it to be delivered to the employee in the presence of two witnesses. If the employee works remotely, the warning can be emailed and the two witnesses need to be CCed. The third warning leads to temporary suspension from work. If the employee doesn’t improve or change their behaviour, employers can terminate them with cause.

Resignation

Employees can resign at any time, without cause, as long as they respect the notice period. In case of resignation, the notice period is 30 days and doesn’t require the additional 3 days per year of service. Employees who resign are entitled to their accrued benefits, except for the FGTS (there is no 40% penalty for the employer to pay either) and unemployment funds. If the employee doesn’t serve their notice, the employer has the right to deduct one month’s wage from the employee’s final pay.

Employees should present their desire to resign in writing to their employer. The letter must be signed and dated. Employees serving their probationary period may request to be released before the 30 days of notice expire.

Redundancy

The concept of redundancy doesn’t exist in Brazil; therefore, such dismissal is treated as termination without cause. There is no legal distinction between being dismissed and made redundant.

Notice period

The minimum statutory notice period is 30 days, but some agreements may include longer notices, capped at 90 days. For every year of employment, there is an additional 3 days’ notice added to the 30 days. Employers may choose to pay employees in lieu of notice. Termination with cause, such as gross misconduct, don’t require a notice. Termination by mutual agreement allows the notice period to be cut in half if the parties agree to it.

Employees who work through their notice period are entitled to a work schedule shortened by two hours daily or seven days in total while receiving their full remuneration to look for work. The employee must have been employed for at least 12 months to be entitled to this right.

Severance

Employees who are terminated without cause are entitled to severance pay, which consists of the funds employers put aside monthly for employees on their Time of Service Guaranteed Fund (FGTS). Additionally, employers must pay 40% of the balance of the employees’ FGTS as compensation.

If the employer and employee agree to the termination, the 40% FGTS penalty is reduced to 20%. Fixed-term employment that gets terminated without cause requires compensation of 50% of the remaining pay.

Employee termination protection

As mentioned previously, some categories of employees benefit from protection against dismissal for a defined period, as follows:

• Pregnant employee from when the pregnancy is confirmed to five months after birth
• Employee who had a work-related accident or illness, was away for 15 days or more, and was receiving social security benefit, for one year from recovery
• Union leader leaving their post, for one year
• Employee elected as In-House Accident Prevention Commission member and leaving their post, for one year
• Employee who is one year away from retiring (should be set forth in a Collective Bargaining Agreement)

If any of these employees are dismissed without cause, they can take the company to court and be reinstated.

Unemployment funds

Employees are entitled to unemployment funds if their employment is terminated without cause. The government allowance varies depending on the employee’s salary in the preceding three months and cannot be lower than the minimum wage. The period an individual is entitled to receive the benefit for depends on their tenure.

To be entitled to the benefit, an employee must meet the following criteria:

• Has been employed for at least 6 out of the last 36 months
• Has received at least minimum wage for the last 6 months
• Was dismissed without cause
• Has not been receiving any other income from employment or investments
• Has not been receiving any government benefits, except for pension because of a partner’s death or work injury

Employees who worked from 6 to 11 months are entitled to 3 months of allowance; one year to one year and 11 months, 4 months of allowance; two or more years, 5 months of allowance. If the individual finds a job while they are still receiving the benefit, they must inform the Ministry of Labour so that the benefit can be suspended.