The Contrato de Trabalho Verde e Amarelo is established

The Federal Government, through the publication of Provisional Measure 905 (on Nov-12-2019), created a new type of employment contract for people between 18 and 29 years of age, in the period from Jan-01-2020 to Dec-31-2022.

This type of contract is possible only for the first job, and may be adopted for any type of activity, including the temporary replacement of a permanent person. For the characterization purposes as a first job, the relationships of a young apprentice, experience contract, intermittent work and single work will not be considered.

The contract will be signed for a fixed term, for up to 24 months, at the employer's discretion, and the hiring term will be assured even if the final term of the contract is after Dec-31-2022. After this period, it will be automatically converted into a contract for an undetermined period of time when this period is exceeded.

In adition, workers with a monthly base salary of up to one and a half national minimum salary (BRL 1,497.00 in current values) may be hired in the new modality, and companies may not have more than 20% of the employees with Contrato de Trabalho Verde e Amarelo (Green and Yellow Labor Employment Agreement, in a free English translation), considering the payroll of the current determination month.

Companies with up to ten employees, including those established after Jan-01-2020, are authorized to hire two employees in the Contrato de Trabalho Verde e Amarelo mode and, in case the number of ten employees is exceeded, the 20% rule will be applied.

If agreed between the parties, monthly, or within another work period of less than 1 month, the employee will receive the immediate payment of the remuneration, thirteenth proportional salary, proportional vacation with an increase of one third, and compensation on the balance of the Guarantee Fund for Length of Service ("FGTS").

With respect to the anticipation of the FGTS indemnity, it will always be paid in half, and its payment will be irrevocable, regardless of the reason for termination of the employee, even if for cause.

We emphasize that in the scope of the Contrato de Trabalho Verde e Amarelo, the daily duration of the day may be increased by up to 2 hours overtime, if established by individual agreement, collective agreement, or collective labor agreement. The remuneration for overtime will be at least 50% higher than the normal hour.

In this type of contract, the companies will be exempt from the employer's social security contribution of 20% on the payroll, the educational allowance corresponding to 2.5% and System S, which will vary according to the activity developed by the company.

The employer may contract, pursuant to the provisions of an act of the Federal Executive Branch, and by means of an individual written agreement with the worker, private insurance of personal accidents for employees who face adversity in the exercise of their activities due to the exposure to danger provided for by law.

The worker hired by other forms of employment contract once dismissed cannot be rehired by the same employer in the Contrato de Trabalho Verde e Amarelo mode for a one hundred and eighty days period from the termination date, unless for exceptions.

The maintenance of the agreement in the Contrato de Trabalho Verde e Amarelo mode is guaranteed when there is a salary increase, after twelve months of hiring, limited to the exemption of the specified installments of the employer's social security portion.

In the event of termination of the Contrato de Trabalho Verde e Amarelo, the terminations calculated based on the monthly average of the amounts received by the employee during the respective employment contract will be due, as follows:

I - the compensation on the 40% of FGTS balance, provided for in paragraph 1 of article 18 of Law 8036/1990, in the event that its monthly advance has not been agreed upon;

II - the other labor values due to the employee.

In case of early termination of the employment agreement, the indemnity provided for in article 479 of the Consolidation of Labor Laws does not apply to the contract, i.e., as indemnity, and for half, the remuneration to which it would be entitled until the end of the contract. It will be due to the application of the insurance clause of the reciprocal right of termination provided for in article 481 of the referred Consolidation, which is known as indemnified prior notice.

Those hired under this employment agreement modality may join the Unemployment Insurance Program, provided that the legal requirements are met.

The Provisional Measure also deals with other relevant matters. The following are comments on other topics:

a) Unemployment insurance

During the months when unemployment insurance is received, the beneficiary will be compulsorily insured by Social Security.

As of Mar-01-2020, the respective social security contribution will be deducted from the amounts paid to the unemployment insurance beneficiary and the period will be computed for granting social security benefits.

b) Accident allowance

Accident allowance will be granted, as compensation, to the insured person when, after the consolidation of the injuries from accident, there are sequelae that reduce the employee capacity to the work once performed.

Its monthly value will correspond to 50% of the disability retirement benefit to which the insured would be entitled.

c) Social Contribution

As of Jan-01-2020, the 10% penalty owed by employers in case of termination of an employee without a cause over the amount of all deposits owed, referring to the Severance Premium Reserve Fund - FGTS, during the validity of the employment contract is extinct.

d) Electronic storage

The MP amends the CLT to authorize the storage, in electronic, optical or equivalent means, of any documents related to labor duties and obligations, including those related to regulatory norms of health and safety at work, consisting of data or images.

e) Work on Sundays

The work on Sundays and holidays is allowed. However, paid weekly rest must be 24 consecutive hours, preferably on Sundays.

In addition, the remunerated weekly rest period should coincide with Sunday at least once within a maximum period of four weeks for the commercial and services sectors and at least once within a maximum period of seven weeks for the industrial sector. For commercial establishments, the employer must comply with local legislation.

The payment for work on Sundays and public holidays is double, unless the employer determines another day of compensatory rest. It for Sunday work shall correspond to the remunerated weekly rest period.

f) Work on Saturdays at banks

It was determined that the normal working hours of employees in banks and alike and the Caixa Econômica Federal, those who operate exclusively at the cashier will be up to six hours a day, totaling a total of thirty hours of work per week, with the possibility of agreeing a longer work day at any time, through individual written agreement, collective agreement or collective labor agreement.

For the other employees, the overtime will only be considered overtime after the eighth hour worked.

g) Labor Electronic Domicile

The Labor Electronic Domicile is instituted, regulated by the Special Secretary of Social Security and Labor of the Ministry of Economy, intended to (i) make the employer aware of any administrative acts, tax actions, subpoenas and notices in general, (ii) receive, from the employer, electronic documents required in the course of tax lawsuits or presentation of defense and appeal in the scope of administrative proceedings.

The electronic communications made by the Labor Electronic Domicile do not require publication in the Federal Official Gazette and sending by mail and are considered personal for all legal purposes.

h) Inspection, assessment and imposition of penalties

The Special Secretariat of Social Security and Labor of the Ministry of Economy, in the figure of its Labor Auditors, is the competent authority to inspect the compliance with the norms of labor protection.

The infraction notice shall be drawn up in the course of the tax action, and one copy shall be delivered to the offender, preferably by electronic means, in person upon receipt, or, exceptionally, by mail. The deadline for presentation of the defense will be 30 days from the date of receipt of the infraction notice.

The provision for fines in cases of non-notation related to hiring, duration of work, vacation and other circumstances that are of interest to the protection of the worker, as well as in the case of forgery of work permits, among other provisions.

The imposition of such fines is the responsibility of the regional authority in labor inspection matters and as established in an act of the Special Secretary of Social Security and Labor of the Ministry of Economy. The application of administrative fines for violations of labor protection legislation shall follow the criteria set forth in this rule.

Validity of the PM

MP no. 905 comes into force:

a) 90 days after its publication, for the changes made by its Article 28 in Article 161, Article 634 and Article 634-A of the Consolidation of Labor Laws;

b) on the first day of the fourth month following its publication, for the inclusion of Article 4-B in Law 7998/1990, promoted by its Article 43; and

c) at its publication, as to the other provisions.

It is noteworthy that any Provisional Measure must be converted into law within sixty (60) days, and may be extended for a further sixty (60) days, in order to maintain its effectiveness.

The PM 905 addresses other provisions that deserve your company's attention. Therefore, we suggest the full reading of the text here.