Labor Law and COVID-19 - Part I: Proportional reduction of working hours and wages and suspension of the employment contract

Provisional Measure nº 936/2020, which instituted complementary labor measures to face the state of public calamity resulting from Covid-19, brought the possibility of proportional reduction of the working day and salary or the suspension of the employment contract, as measures of aid to employers who are suffering the effects of the pandemic. The proportional reduction in working hours and wages may be agreed between the employer and employees, for up to 90 days, while the state of public calamity lasts. Salary reductions may occur in the percentages of 25%, 50% or 75%, with the consequent and proportional reduction of working hours (art. 7 of the Provisional Measure). In addition, Article 8 determines that it will be possible to agree, by means of an individual written agreement, the temporary suspension of all employment contracts, for a maximum period of 60 days. During the suspension, the employer must pay all benefits previously granted and, if activities are maintained, even partially, the suspension will be mischaracterized, and the employer will be subject to the penalties provided for by law. In both cases, the re-establishment of the contract will take place within two calendar days, counted from the assignment of the state of calamity, the final date of the individual agreement or the communication from the employer to the employee of the anticipation of the end of this period. The measure also established the Emergency Benefit (Article 5), which will be paid within thirty days of signing the agreement and exclusively while the proportional reduction in working hours and salary lasts or the temporary suspension of the employment contract. The Emergency Benefit is a type of compensation determined by the measure, which will work as follows:

Salary and hours reduction in 25%, 50% and 75%	contract suspension
By individual agreement, with full supplementation for those who earn up to a minimum wage.	Receipt of the monthly unemployment insurance installment which may vary between R$ 1,045 and R$ 1,813.03.
By individual agreement, with proportional supplementation for those who earn up to three minimum wages.
By collective agreement, for those who earn from three minimum wages to two INSS ceilings (12,202.12 – reference value), with compensation limited to the proportion of three minimum wages.

Finally, it should be noted that the employer who adheres to the reduction or suspension program cannot dismiss the employee and must guarantee his employment for a period equal to that of the reduction or suspension. CBR Legal Advice