Brazil: Changes to outsourcing rules
Up until now, the courts have interpreted the law as meaning that it is illegal for a business to outsource its core business. Businesses could only lawfully outsource ancilliary activities. And yet, certain sectors, such as construction, clothing and the automotive industries have been consistently allowed to subcontract specialised services or parts of their processes. The new Law turns this on its head by providing that the contracting business must specialise in the type of activity it wants to outsource.
It is unclear whether those two positions can co-exist or whether the new one will override what the courts have done in the past. Some say that businesses will be able to outsource any type of activity, while others who are against outsoursing as a matter of principle, say that the new law requires the services providers to be specialised but that outsourcing their core business remains illegal.
What both positions have in common is that the service provider will be the employer of the oursourced workforce and the client will only be secondarily liable for employment obligations and tax. The client will only be considered the employer if the oursourging agreement is deemed to be fraudulent.
Some new practical rules will apply as follows:
- The service provider’s minimum capital must be proportional to the number of employees (i.e. the service provider must have minimum vested capital of BRL 10,000 if they have up to ten employees, BRL 25,000 for up to 20 employees and so on up to BRL 250,000 if the service provider has more than 100 employees).
- Outsourcing may be provided in any workplace, provided the contracting company (i.e. the customer of the service provider) takes responsibility for the health, safety and hygiene of the workplace used.
- Workers may be allowed to use the medical services available at the contracting company’s workplace.
- It will not be possible to move outsourced workers to a different job.
- The contract between the contracting company and the service provider will need to specify the service to be provided and the length of time the service will be used.
- Security and money transportation services remain under specific regulation.
It is notable that the ban on moving outsourced workers to different jobs lacks a specific penalty and will not necessarily mean they are redeployed by the contracting company. In addition, it is not clear from the new rules whether public bodies are allowed to outsource (although, they will not be able to if the jobs involved are subject to public examinations). In the past, they have only been able to outsource limited ancilliary work, through public tenders.
Changes to temporary work rules
The new rules on temporary work are as follows:
- There will be a 180-day maximum term for temporary work, either in one block or otherwise. It will be possible to extend this for a further 90 days.
- There will need to be a minimum of 90 days between temporary engagements of the same worker. If this rule is not observed, the worker will become an employee of the contracting company.
- It will be possible to engage temporary workers for discontinuous or cyclical patterns, even if those patterns are predictable.
- It will be unlawful to bring temporary workers in to replace workers on strike.
- Probation periods will be prohibited for temporary workers.
- The contracting party will have secondary liability for labour and social security debts if the host company does not comply with its duties.
The fact that the new rules on temporary workers allow for temporary work to be done in cyclical patterns, with periods without employment in between, runs directly counter to what the courts have ruled in the past.
How the courts will apply the new rules that conflict with their traditional view on outsourcing is uncertain at this point, but it is clear that outsourcing and temporary work will undergo significant change, nonetheless.