Brazil and the United States have complex employment laws. This article relates some of the main topics of this subject in both countries.
It might be really difficult to find similarities in the employment conditions of Brazil and the U.S., but both countries have laws that somehow protect workers: In Brazil almost everything is regulated by national legislation, while in the U.S. most contracts between employers and employees are “at will” contracts.
Nowadays, even the percentage of people employed in each country is considerably different. While the U.S. is recovering from the past crisis and finished the 2013 year with a 6.7% unemployment rate, Brazil finished 2013 with the best unemployment rate since 2002: 4.3%.
Basic Differences Between Brazil and the U.S.
The differences are just as numerous when looking at the working conditions provided in each country. In Brazil, most labor rights were originally conceived so workers could have decent living conditions and weren't exploited by their companies, no matter where they worked.
In the U.S., where states have autonomy to define which benefits are provided to workers and how big these benefits are, workers' rights exist mainly to attract and maintain qualified employees.
Also, the sources of employment laws are different in these countries. While in Brazil the Consolidation of Labor Laws — CLT, or Consolidação das Leis do Trabalho — bring together all of the employee rights, in U.S. most states allow the working bond to be terminated at any point, by any party.
It is also up to the companies choosing whether to provide some of the benefits or not, but if they agree to do so, they must follow existing laws regarding these benefits. One of the main statutes that serve as the basis for the working rights on the federal level is the Fair Labor Standards Act (FLSA).
Below there is a list of some of the main employment aspects, and how they apply in Brazil and in the U.S.
The payment for time not worked is not required in the U.S. The FLSA states that benefits such as vacations are not mandatory and are matters of agreement between employers and their employees. Despite the recent discussions regarding this subject in places like Washington, no American state considers paid vacations mandatory.
There are two types of vacations conceded to workers in Brazil: the annual ones and the collective ones. Both are scheduled by the company, but usually the employer and the employees reach an agreement to define which dates would be more suitable.
Everyone working in Brazil has the right to have 30 calendar days of vacation per year, as long as the employee has less than five unjustified absenct days in 12 months of work.
If companies choose to do so, it can provide collective vacations to the whole company or to only a specific department. In this case, companies must concede periods of at least 10 days. The days of collective vacations are discounted from the employee’s annual vacation.
Mandatory Insurances and Social Security
The Social Security Administration (SSA) may provide different advantages to workers, such as retirement benefits, disability benefits, and benefits to the employee’s family in case of death. Some contributions and benefits are required by federal law, such as the Social Security Tax — which is collected from both company and employees to pay for retirement benefits — and workers’ compensation, which is granted to workers that suffered any damages or accidents while carrying out labor activities.
Other benefits are usually not mandatory but are commonly offered as a way to attract more qualified workers, such as health insurance. However, almost every paid employee in the United States needs to pay the Medicare tax, which pays for the health insurance of people over 65 years old. The Medicare tax can be partly deducted from the worker’s paycheck, even if he doesn't qualify for Medicare benefits.
The responsible entity for social security in Brazil is Instituto Nacional do Seguro Social, which is translated as National Institute of Social Security, and has the acronym of INSS. This entity is administered by the Ministry of Social Security. INSS gives various benefits to Brazilian workers as long as their employers — or themselves, in the case of autonomous workers — pay the INSS contribution. Individuals that are unemployed can voluntarily pay this INSS contribution in order to have access to the benefits offered. It is important to highlight that the INSS contribution is deducted partly from the workers’ paychecks.
Brazilian employees are also entitled to insurance benefits in case of work accidents. This benefit is known as SAT, the acronym for Seguro de Acidente de Trabalho. A contribution related to SAT, which is paid by the employer, is collected monthly with a rate varying from 1% to 3% on each employee’s wage, according to the job risk.
Workday and Overtime Payment
Unless strictly exempted, employees covered by the Fair Labor Standards Act receive overtime pay if they work for more than 40 hours in a week. The company must pay for the additional hours plus a premium of 50% over the regular payment, just like in Brazil.
Some workers — mainly retailers and those whose salaries are composed mainly by commissions and tips — are exempt from these overtime rules. Also, there are state overtime laws. If both federal and state laws are applicable, the law that is more beneficial between them must be granted to the employee.
Workdays in Brazil cannot exceed 8 hours per day or 44 hours per week. Beyond these limits, employees have the right to receive overtime payment. Workers are also free to refuse doing overtime in Brazil, except in cases of Force majeure or when their actuation is ultimately necessary.
Overtime pay must be at least 50% higher than their regular pay. This payment can be dismissed if the worker has agreed to work less hours on other days, as long as the work does not exceed 10 daily hours or the annual limit of working hours.
Rules For Termination
Despite laws that legally protect employees from being fired for discriminatory reasons, most contracts in the U.S. allow both parties to break any bonds between them, for any reason, and at any moment.
In cases of termination, the employee has certain rights granted, either by state laws or by the federal law. For example, the federal law states that some workers and their families may choose to continue their group health benefits for a certain period.
As for the employers, they are obligated by federal law to provide notice in a few specific cases, such as mass layoffs, affecting 50 or more employees. Companies are not obligated to give former workers’ final paychecks immediately, unless state legislation defines otherwise.
Rules for termination in Brazil depends on how long the employee has been working for the company. As a rule of thumb, in cases of dismissals or resignations, the employee has the right of being notified within at least 30 days prior to his termination. This notice is known as aviso prévio, and during this period, the employee works two hours less per workday without a wage discount.
If the company does not give the employee the aviso prévio notice, it must pay his salary for that period anyway. On the other hand, if the employee does not work the 30 days from aviso prévio, the company is free to discount the respective salary.
If the termination is considered an unfair dismissal, the company must grant different payments related to workers' rights, such as:
- Aviso prévio
- 13th salary — the bonus wage paid in Brazil at the end of the year
- Vacations that expired, or the proportional part, would still be granted
- Proportional wage
- Other social security fees, like FGTS
Employees in the U.S. must receive overtime pay if they work more than 40 hours per week. The FLSA defines a week as any fixed and regularly recurring period of 168 hours, and does not necessarily have to be a calendar week. There is no federal law that defines a weekly rest, as long as the 40-hour limit is observed.
Some states (e.g. New York, Illinois, Wisconsin) grant a “one day rest in seven” to some workers. Usually the ones benefited by this measure are those who operate machinery or whose jobs require high levels of attention, such as firefighters and watchmen.
Brazilian workers have the right to a paid weekly rest granted by the employer. This weekly rest must be at least 24 consecutive hours, which preferentially coincide, partially or fully, on Sundays.
Even if an employee is absent from one of the workdays prior to the weekly rest without justification, the rest must still be conceded.
Rights And Obligations For Labor Unions
The National Labor Relations Act (NLRA) is the federal law that regulates the activities of labor unions in the United States. Most of the employees of the private sector are covered by the NLRA and can also choose or reject union representation. These organizations cannot threaten or impose any sanctions to employees that refuse to join a labor union or a strike.
Unions can be formed by any employees as long as they follow the requirements. Unions’ activity in the U.S. is regulated and supervised by the National Labor Relations Board, an independent federal agency. This agency has different functions, such as:
- Providing legal framework for employees to organize bargaining units in their workplace, or even dissolving existing labor unions
- Investigating charges of violation of the NLRA
- Facilitating settlements between employees, employers, and labor unions
- Deciding cases through the Administrative Law Judges and enforcing orders if needed
Labor Unions in Brazil are recognized by law as the representative body of a certain class of workers before authorities. Only Labor Unions are able to:
- Conclude collective decisions related to workers
- Elect the working class’ representatives
- Collaborate with the government to solve problems relating to their working class
- Collect financial contributions of those represented
Labor Unions must also provide juridical aid to workers that cannot pay for an attorney and can approve labor terminations of those working in the same company for over a year. Without this approval, the rescission can be legally challenged and the severance might not be paid.
Maternity Rights And Protection
As in many other cases presented above, this type of benefit is usually reached through an agreement between the employer and employee, but since many contracts define that the company may fire the worker at any time, there is not a clear protection for pregnant women, unlike in Brazil.
However, there are two laws that affect this matter directly: the Family and Medical Leave Act (FMLA), and the Pregnancy Discrimination Act (PDA). Basically, the first one defines that eligible employees can take 12 workweeks of job-protected unpaid leave in different cases, including the birth of a child and to care for a newborn within one year of birth. This right is not granted for every American worker, though, since the employee must meet certain conditions, such as:
- Has worked for the employer for at least 12 months
- Have at least worked 1,250 hours in the past 12 months
- Working for a company that employs at least 50 people
PDA is also a federal law that seeks to prevent pregnancy discrimination. This law states that pregnant women should be treated in the same way as the company would treat disabled employees. This means that if the company allows disabled employees to take unpaid leaves, provide them lighter duties, or allow alternative working hours, it must also grant this right for pregnant employees.
Women that have given birth can get a paid license of 120 days, known as “maternity pay" or salário-maternidade. This is paid by the company but refunded through tax reductions by the government. Men are able to get a paid license for 5 days, or in case of the mother’s death, they can get the full 120-day license.
In addition to the 120 days of maternity pay, women that have given birth are protected from being dismissed arbitrarily or without just cause from the moment when the pregnancy is confirmed and up to five months after childbirth. Until the child completes 6 months of age, women can also have a break every 30 minutes to breastfeed during the workday.
Seasonal And Temporary Labor
In most cases, FLSA does not differentiate seasonal labor from regular labor. The only requirement is that employees receive overtime pay if they work for more than 40 hours in a week. Also, the minimum wage must be respected. Some states also have a set minimum wage. In these cases, the highest wage between the federal and the state wage must be granted to the employee.
There are different types of seasonal or temporary labor in Brazil. The bond between worker and company can last for a fixed period or until a job is done.
The contract of a fixed deadline cannot be set for more than two years and can be extended only once, for another two years tops. If the contract is extended more than once, then the new contract cannot have a fixed deadline.
There are different retirement plans in the United States, some of them offered by companies and others offered by labor unions. The federal law known as the Employee Retirement Income Security Act (ERISA) basically covers two types of plans: defined benefit plans and defined contribution plans.
Defined benefit plans grant workers a specified monthly benefit at retirement. Defined contribution plans don't promise a specific amount at retirement, but a benefit is calculated after a series of contributions made throughout the years by the employee, employer, or both. One of the most famous defined contribution plans is 401(k) plan, which allows employees to defer receiving a part of their salary. This part is contributed before taxes to the 401(k) plan, and is used as pension after retirement.
The retirement pension is granted in Brazil by the Ministry of Social Security. There are basically four types of retirements in Brazil:
The age retirement is for men over 65 years or women over 60 years old who have worked for at least 15 years
The special retirement is for those who worked in unhealthy conditions for 15 to 25 years
The disability retirement is for those that cannot work anymore due to a disease or an accident
The retirement for years of contribution is for men that worked at least 35 years and are at least 53 years old, or women that worked for 30 years and are at least 48 years old
Only Brazilians that pay the monthly contribution to Instituto Nacional da Seguro Social (INSS) are able to receive a pension. The minimum pension in Brazil is the same as the minimum wage, currently BRL 724, and the maximum limit is currently BRL 4,396.
We would like to thank Greg Barnett, president of LatAm Legal Services, for the background information to this article.