Brazil: Unions Struggle After Labor Reform

Ever since employer-friendly labor reform took effect in Brazil, unions have been struggling but fighting back. The labor reform, the largest modification to the Brazilian Labor Code since its enactment in 1943, took effect Nov. 11, 2017. Employers had lobbied for the modifications to help Brazil cope with an economic crisis going back to 2014. As expected, the new legislation led to union backlash.

The labor reform eliminated mandatory union dues. This was a major change, as these dues had been the unions' main source of income since the 1940s. As a result, union earnings decreased by more than 85 percent. Under the previous law, companies had to annually withhold union dues—which amounted to one workday's salary—from each worker's wages. While the total in union dues collected in 2017 came to 3.6 billion reals (approximately U.S. $908 million), that total shrank in 2018 to 500 million reals (approximately U.S. $126 million). This shortfall in finances forced unions to sell property and fire some of their workers.

Three Approaches

To avoid mergers or even extinction, unions are looking for creative options and have so far tried three approaches:

  • Challenging the constitutionality of the law that eliminated mandatory union dues.
  • Creating new types of dues.
  • Trying to convince more workers to unionize.

The first approach was frustrated in June 2018, when Brazil's Supreme Court ruled in a 6-3 decision that the reform was constitutional. But the Supreme Court added that it would not analyze the constitutionality of union dues if an assembly of the unionized workers approved the dues. This point gave unions some hope, so they shifted to the second approach.

Fueled by the Supreme Court's caveat, unions decided to create new union dues and get an assembly of the union-represented workers to approve them. To avoid the conditions of the labor reform, unions labeled these new dues with names like "negotiation contribution," "agency fee" or "social dues." According to union leaders, these new dues are voluntary if a union-represented assembly approves them.

But employers and some employees argued that these assemblies did not truly represent all union members because union leaders failed to let all members know when and where the assemblies would meet or what their agendas were. Employers also accused union leaders of rigging elections and threatening employees who voted against the new dues.

Courts have not made a final decision on these new union dues and are dealing with the issue piecemeal.

To try to circumvent these discussions in court, some unions have included in their collective bargaining agreements (CBAs) an opt-out system. Workers can refuse to pay union dues if they notify the unions within a given period after an assembly approves the dues. But the opt-out system can be burdensome. Employees must personally deliver handwritten opt-out notices to unions, and some union headquarters are not in the same neighborhood or town as the employees' workplaces.

On March 1, newly elected President Jair Bolsonaro, who adopted a pro-business platform during his campaign, issued a decree prohibiting this opt-out system. This decree took effect immediately, but the Brazilian Congress must approve it within 120 days or it will sunset.

Finally, unions are trying to engage with workers to increase union density. Besides organizing union campaigns using social media and big data, unions have also negotiated with companies a new type of CBA. These CBAs set forth that only employees who pay agency fees will be entitled to the benefits set out in these documents.

In short, the current political climate doesn't seem to favor unions. Unless they can find a strategy to cope with their new funding challenges, some unions may merge or become extinct.

Renata Neeser is an attorney with Littler in New York City. Lucas Camargo is an international attorney with Littler in New York City and an attorney with the Brazilian law firm Pinheiro Neto Advogados in Sao Paulo.


Republished with permission of SHRM. © 2019 SHRM. All rights reserved.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.