In 2017, companies in Brazil welcomed changes to its labor code that introduced the option for securing enforceable releases to employment law claims. The changes to the labor code included allowing parties to seek a ratification of a private settlement with the labor courts. The rationale behind the new law was to permit parties to settle matters in an amicable way, thereby reducing judicial disputes.
However, the labor courts—in particular the trial-level courts—consistently denied the full release of claims. This undermined the main purpose of the settlements by requiring the parties to appeal to the higher courts and making the outcome uncertain and the process too long. Therefore, many companies decided not to use this mechanism.
On September 29, 2024, the National Council of Justice (CNJ) introduced a new resolution aimed at enhancing the efficiency and fairness of employment dispute resolutions in Brazil. This resolution, which builds on existing frameworks and introduces new guidelines, is set to have a significant impact on how employment disputes may be prevented with the use of private settlements with full release of claims. The following provides a detailed look at what this new resolution entails and its potential implications.
Key Provisions of the Resolution
- Broad and Irrevocable Settlement: The resolution stipulates that extrajudicial agreements approved by the labor court will have a broad, general, and irrevocable settlement effect. This means that once an agreement is approved, it is final and binding, provided certain conditions are met. These conditions include explicit terms of broad settlement, legal representation for all parties, and specific provisions for minors or incapacitated workers.
- Conditions for Approval: For an agreement to be approved, it must:
- Include explicit language that it includes a full release of claims.
- Ensure legal representation for all parties involved, either by individual lawyers or unions; both parties cannot be represented by the same counsel.
- Provide for the representation of minors or incapacitated workers by their legal guardians.
- Be free from any legal defects such as coercion, fraud, or undue influence.
- Exclusions: The resolution outlines specific exclusions to the broad release:
- Claims related to unknown occupational injuries or diseases.
- Claims based on facts or rights the parties were not in a position to know at the time they entered into the agreement.
- Claims from parties who were not represented or were substituted in the agreement.
- Rights that are expressly excluded in the agreement.
- Prohibition of Partial Approval: The resolution prohibits the courts from issuing a partial approval of agreements. Only entire agreements that meet all the stipulated conditions can be approved.
- Initial Application: For the first six months, the resolution applies only to agreements for amounts exceeding 40 times the minimum wage (about $11,500 USD). This phased approach allows for the assessment of the resolution’s impact on the workload of the courts.
- Implementation: The resolution is effective from the date of its publication (September 30, 2024), ensuring immediate application of its provisions.
Impact on Employment Disputes
The new resolution is expected to bring several benefits to the employment dispute resolution process:
- Increased Efficiency: By promoting extrajudicial settlements and providing clear guidelines for their approval, the resolution aims to reduce the number of cases that reach the courts, thereby speeding up the resolution process.
- Fairer Settlements: The requirement for legal representation and the exclusion of certain claims ensure that workers’ rights are protected, leading to more equitable outcomes.
- Encouragement of Amicable Resolutions: The emphasis on mediation and other consensual dispute resolution methods can lead to more amicable settlements and reduce the adversarial nature of employment disputes.
- Comprehensive Settlements: The broad and irrevocable release effect of approved agreements provides certainty and finality, helping both employers and employees to move forward without lingering disputes.
Challenging an Agreement/Protected Right to Sue
Workers can still challenge an agreement after it has been signed under certain conditions and sue the employer, such as:
- Legal Defects: If the agreement contains defects like coercion, fraud, or undue influence.
- Lack of Representation: If the worker was not properly represented.
- Violation of Exclusions: If the agreement improperly includes claims that should have been excluded.
- Discovery of New Information: If new information about facts or rights the employee did not have the means to know at the time they entered into the agreement may invalidate the release in relation to that particular right.
Time Limits for Suing for Employment Benefits
The private settlement process does not suspend the statute of limitations for employment claims, which is two years from the termination date.
Conclusion
The new CNJ resolution represents a significant step towards improving the employment dispute resolution process in Brazil. By promoting fair and efficient settlements, it aims to protect workers’ rights while reducing the burden on the courts. Employers can now have a more realistic option to avoid litigation by using this mechanism, which is hoped to work more efficiently and faster as originally intended.
