This afternoon (July 13^th), Brazilian President, Michel Temer, signed the new law, referred to as “Labor Reform Project”, after the approval by both houses of the Brazilian Congress. The project represents a deep change in the Brazilian Labor Code (CLT), creates new rules to the labor process and modifies the rules on the outsourcing of services.

Among the most substantial innovations, the most relevant point of discussion is that the adjustments established by collective bargaining agreements will prevail over the law in topics such as offsetting system (bank of hours), reduction of break to minimum of 30 minutes, home office and the extension of the worktime in unhealthy environments, not being necessary to indicate the offered counterpart. The maximum term for validity of collective bargaining agreements is two (2) years, with the prohibition of ultra-strictness and the prevalence of agreements in relation to conventions.

In addition, the new law provides for greater freedom for individual employment agreements and increases legal certainty. The main innovations are:

• Exclusion of the mandatory payment of the union dues, which will depend on the employee’s approval;

• Possibility of celebration of out-of-court agreements, which must be approved by the Labor Court;

• Possibility of individual negotiation of the employment agreement clauses, as well as adoption of an arbitration clause, when the employee’s compensation exceeds twice the maximum limit established by the Social Security (currently, a compensation higher than R$11.062,62);

• Exclusion of the mandatory payment of the itinere hours, regardless the place where the company is situated or the fact that the company provides transportation to its employees;

• The increase of the limit for working hours to part time employees to thirty hours a week;

• Possibility of adoption of offsetting system (bank of hours) and a “12×36” schedule through an individual agreement;

• Regulation regarding home office;

• Possibility of a division of the paid vacation into three periods;

• Definition of parameters for the payment of moral damages, according to the nature of the offense and considering the employee’s last salary for calculation purpose;

• Possibility of a pregnant employee working in an unhealthy environment, in activities which the exposure is minimum or medium, except when there is a medical certificate that indicates risk to the pregnancy or to the child;

• Regulation of the intermittent jobs, with parameters to the value of the hour and deadlines to the employer call the employee;

• Exclusion of allowances, premiums and hotel-daily-room payments from the calculation base of tax and social security contributions;

• Possibility of adopting of job and salary administration plan through company’s policies or collective negotiation, regardless the approval or registry in a public agency;

• Exclusion of the mandatory homologation of the contractual termination by unions;

• Increasing of requirements to the edition and to the cancellation of precedents by the Labor Courts, which will not be allowed to create obligations unpredicted by the law.

Besides that, the new law prohibits that a dismissed employee be hired as an outsourced employee in a period of 18 (eighteen) months after the dismissal and establishes the raise of the administrative fines when verified the existence of unregistered employees.

Finally, the law modifies the regulation on outsourcing of services by establishing the possibility of company outsources its main activity to a service provider that has a compatible economic capacity. In addition, the outsourced employees will be entitled to the same benefits conceived to the employees of the hiring company, such as meals, transportation and medical/outpatient cares.

The new law will come into force within 120 days of President Temer’s approval.

In order to meet changes proposed by the senators, the government will issue a provisional measure establishing changes in nine points of the law, such as the work of pregnant women in unhealthy environments, union contributions and intermittent work.