Essential Labor Law Concepts for Employers and Employees

Understanding Key Labor Law Concepts

Concept of Labor Law

Labor Law is a body of law that governs the relationship between employers, employees, and labor organizations. It is a set of principles and institutions that regulate labor relations. The primary subject matter of labor law is human labor.

What is the CLT?

The CLT (Consolidation of Labor Laws) is a foundational legal framework in Brazil, comprising a compilation of existing labor legislation at the time of its creation.

Distinguishing Work Relationships and Employment Relationships

The employment relationship is a specific type of work relationship, characterized by certain key elements. While a work relationship is a broader concept (the genus), the employment relationship is a specific form (the species).

A crucial element of the employment relationship is subordination. Subordination refers to the bond of dependency between the employer and the employee, where the employee is subject to the employer's direction and control.

Types of workers generally not considered employees include:

• Autonomous workers (self-employed)
• Independent professionals (e.g., architects, consultants, unless specific employment criteria are met)

Key Concepts: Employee and Employer

Employee Concept (Art. 3 CLT)

An employee is defined by several cumulative elements:

• Personal Service: The work must be performed personally by the individual.
• Non-Eventual Nature (Habitualness): The service is not sporadic but continuous.
• Subordination: The employee is subject to the employer's direction and control.
• Remuneration: The service is provided in exchange for payment.

Employer Concept (Art. 2 CLT)

Employers can be companies, organizations, or individuals who assume the risks of the economic activity. A key principle here is alterity (otherness), meaning the employer bears the business risks, not the employee.

Employer's Managerial Powers

Employers possess several powers essential for managing their business:

• Organizational Power: The right to structure and organize work as deemed fit.
• Control Power: The right to inspect and monitor employee performance.
• Disciplinary Power: The right to establish rules, apply punishments, and take disciplinary actions when necessary.

Group of Companies

A group of companies is formed when one or more companies are under the same direction, control, or management. In such cases, all companies within the group are solidarily responsible for the labor obligations of their employees. This means an employee can claim against any company in the group, regardless of which one directly hired them.

Business Succession and Structural Changes

Business succession occurs when the ownership or management of a company is transferred to new parties. According to Article 10 of the CLT, such a transfer does not affect the legal rights of employees; their employment contracts remain valid with the new entity.

Similarly, changes in a company's legal structure, such as a transformation from a Limited Liability Company (LTDA) to a Corporation (SA), or processes like:

• Incorporation: The absorption of one company by another.
• Merger: The union of two or more companies to form a new entity.

In all these scenarios, the employment contract persists, ensuring the continuity of the labor relationship and the protection of employee rights.

Understanding Outsourcing

Outsourcing involves contracting out specific activities or support services to external companies. These services are performed under a contract for the provision of outsourced services.

Common examples include:

• Security guards
• Janitorial services
• Call center operations

In an outsourcing arrangement, the service provider is the entity that hires, pays, and directs the outsourced employee. The employee provides services to the borrower (the contracting company) but remains legally bound to the service provider.

If the service provider defaults on its labor obligations, the borrower typically has subsidiary liability, meaning they become responsible for those obligations if the primary provider fails to fulfill them.

The Employment Contract

An employment contract is a tacit or express agreement that establishes an employment relationship between an employer and an employee. It can be formed verbally or in writing.

Key information typically contained in employment contracts includes:

• The employee's position or role
• The duration of the contract (e.g., indefinite, fixed-term)
• Specific functions and responsibilities
• Remuneration and benefits

Legal Nature of the Employment Contract

The employment contract is a legal instrument whose primary effect is the establishment of an employment relationship, creating reciprocal rights and obligations for both parties. The employer's main obligation is to pay remuneration, while the employee's obligation is to provide services.

While rooted in civil law principles, the employment contract is primarily governed by labor law. For its validity, it must have a lawful object and be free from legal defects (vices).

The law does not typically prescribe a specific elaborate form for the employment contract; its validity is often based on the factual existence of the employment relationship, even if not formally written.