Understand the main changes brought by law and decree dealing with suspension of employment agreement and reduction of salaries and working hours

By Leonardo Bezerra

The MP 936/2020, created by the federal government to preserve jobs and income and to support the business community in the face of the crisis triggered by the Coronavirus pandemic, was converted into Law 14,020/2020. With the new version of the text, sanctioned by the presidency, in addition to the publication of Decree 10,422/2020, the effects foreseen by the measure were extended.

The MP established the Emergency Program for the Maintenance of Employment and Income, allowing the reduction of salaries and working hours and the suspension of contracts as a way to enable maintaining jobs, minimizing the effects of Covid-19 on the economic and productive sector. So far, more than 1.3 million employers have joined the program, covering around 9 million contracts.

Businesses that have been benefited with the measure so far and will choose to continue their actions, should pay attention to some issues, as we will list throughout the text.

The essence of what the initial measure proposed was maintained, but the final wording of the law brought some changes. The presidential decree consolidated the extension of the deadlines for entering agreements on the proportional reduction of working hours and salary and the temporary suspension of the employment contract.

See additional deadlines:

Measure	Previous term (Law 14,020/2020)	Term extension (Decree 10.422/2020)
Proportional reduction in working hours and salaries	90 days	+ 30 days
Agreement for temporary suspension of the employment relationship agreement	60 days	+ 60 days
Maximum deadline considering the sum of the reduction and suspension	90 days	+ 30 days

See more: The extension of the deadline for temporary suspension of employment agreement and reduction of working day and salary is regulated

Suspended employment agreements and reduction of working hours and salary that have expired

With the delay in the regulatory procedures, suspended and reduced contracts had reached the maximum term.

Effective as of early April, the measure allowed actions for up to 90 days, in cases of agreements to reduce salaries and working hours, and for up to 60 days in cases of suspension of agreement. Thus, the agreements signed the first period had ended.

For example, the company that reduced working hours and salaries at the beginning of April, had to resume full payment of salaries as of July, since the maximum ninety (90) days period has ended.

However, employers who intend to suspend contracts and reduce salaries and working hours of employees previously subject to these practices will need to establish new agreements with their employees and will not be able to benefit from "automatic" extensions of deadlines.

It is noteworthy that this renewal would remain linked to the maintenance of employment for the same period of the agreement.

Domestic workers

Also covered by the MP, domestic employees who had contracts and reduced working hours and salaries suspended are in the same situation.

If the parties are interested in continuing the measures, a new agreement shall be signed.

Employment is also maintained for the same duration of the agreement.

Major changes

In the process of converting the provisional measure into law, some provisions were amended and others were included by the legislative power. Some of these changes were promoted to ensure greater legal certainty in the adoption of these measures.

See the main issues brought by Law 14,020/2020:

Negotiation of suspension of agreement or reduction of salaries and working hours

Companies that earned gross revenues of BRL 4.8 million or less in 2019 can negotiate directly with their employees for suspension of contract or reduction of salary (of 25%, 50% or 70%) with those who earn up to three minimum salaries (BRL 3,135), or for employees with a higher level and who earn BRL 12,202.12 or more.

Companies that earned gross revenues greater than BRL 4.8 million in 2019 can negotiate directly with their employees for suspension of contract or reduction of salary (of 25%, 50% or 70%) with those who earn up to two minimum salaries (BRL 2,090), or for employees with a higher level and who earn BRL 12,202.12 or more.

Formerly, the salary range limit was three minimum salaries, equivalent to BRL 3,135.

*Attention: the rule will only apply to new agreements signed after the publication of Law 14,020/2020. For agreements signed during the term of MP 936/20, the salary range in force in the MP will apply.

The prevailing conditions are the most favorable to the worker

If the conditions of individual agreements are more favorable to the worker, they prevail over collective bargaining.

Pregnant employee

The pregnant employee who receives the Emergency Benefit has a provisional guarantee for employment for the period equivalent to that agreed for the reduction of the working hours and salary or for the suspension of the employment agreement. The provisional guarantee shall be applied after the license of job security - Maternity (from confirmation of pregnancy up to five months after delivery).

Intermittent employment agreement

If signed before Apr-1-2020, the employee is entitled to the benefit in three monthly installments of BRL 600 each. The benefit cannot be cumulative if the worker has more than one relationship agreement in this modality.

Reversal of advance prior notice

The reversal of the employee's termination during the prior notice period is allowed, with the application of reductions in hours and salaries or the suspension of the employment agreement.

Extending the scope of the program

The program extends to apprenticeship and part-time agreements and covers pregnant employees, including domestic workers.

The employees who has retirement benefit were also covered, provided that the employer pays the amount of the Emergency Benefit to which the employee would be entitled.

Suspension of agreement system

The adoption of que following systematic remains:

• The government will pay the equivalent to 100% of the unemployment insurance to which the employee would be entitled to those who have the contract suspended in the case of companies with annual revenues of up to BRL 4.8 million.

• In case of companies earning annual revenues Greater than 4.8 million, the employer bears 30% of the employee's salary, while the government pays the equivalent of 70% of the unemployment insurance to the worker.

Other highlights

With changes in systematics and scope, workers who were previously included in the measure, can now be left out of the cut or be subject to different rules.

Communication on the adoption of measures

The employer must inform the reduction in working hours and salaries or the suspension of the employment contract to the Ministry of Economy of within ten days from the date of the signature of the agreement.

Changes to the labor rules provided for in this new law must be reported to eSocial.

The acts necessary to establish the individual written agreements referred to in the Law may be conducted by any effective physical or electronic means.

Employers must also communicate the adoption of a measure to the respective trade union of the professional category, within a period of up to ten calendar days from the date of its signature.

Consequences of suspension and salary reduction on the "twelfths" of vacation and Christmas Bonuses

The text does not specifically address the impact on the calculation of the Christmas bonus and vacation. Thus, it is recommended that the evaluation of the effects of the period in which the worker had a reduction in salary or suspension of contract be submitted to the legal department of the company.

Benefits paid to the employee

Whether in the case of salary reduction or suspension of the agreement, the benefits that the company regularly provides the employee should m be maintained.

Labor consultancy to support strategic decisions

In this period, many companies continue to operate home-based, concentrating their efforts on keeping the quality of service and finances up to date.

In this context, it is important to have support for the management of labor and social security issues in order to fully meet the requirements and make a better use of measures supported by legislation.

The client focuses on the business, while the Domingues e Pinho Contadores team stands at front of personal department practices and, more consultatively, supplies you with information that guides strategic decision making.