Companies push labor debts onto cities and states
The Labor Prosecution Service has identified a growing number of dismissals as more companies decide not to join the frameworks set up by provisional measures (MPs) 927 and 936, which curbed labor rights during the pandemic in exchange for job stability. The layoffs increased after a couple of meetings between President Jair Bolsonaro and business leaders, the first on May 7 and the other last week. They are being led by companies trying to skirt worker compensation by pushing the responsibility to governors and mayors.
The first large business group to start doing this was barbecue chain Fogo de Chão, which has restaurants in São Paulo, Rio de Janeiro and Brasília in addition to 40 locations abroad. Listed on the NYSE, the chain took a hint from President Bolsonaro. On March 27, at the height of his clashes with governors, he encouraged them to use the loophole: "There's an article in the CLT [Consolidation of Labor Laws] stating that any business or shop owner forced to close down due to a decision from the respective executive chief, governors and mayors are the ones who pay the labor costs."
Seven days later, the group currently controlled by private-equity firm Rhône Capital made its first layoffs in Rio, connecting them in the contract rescission notices to a decree of Governor Wilson Witzel and citing CLT article 486, which the president had mentioned: "In case of temporary or definitive shutdown of work, motivated by an act of the municipal, state or federal authority, or by law or resolution that makes it impossible to continue activities, the payment of compensation will prevail, and the liable government will have to cover it."
The company declined to offer further detail on the layoffs, which it says reached 439 employees in Rio, São Paulo and Brasília. It only issued a note stating: "We reinforce we are acting according to CLT rules in article 486, compensating members of our team according to the law, so that all of them have access to unpaid vacation days and 13th wage, in addition to the Workers' Severance Fund [FGTS] and unemployment insurance. Fogo de Chão Brasil expects to gradually rehire our team as restaurants reopen and the economy improves."
Union consultant João Guilherme Vargas Neto blames layoffs like those of Fogo de Chão on the second wave of labor-rights mitigation begun by MPs 927 and 936, which may be surpassed by what he calls "savagery of social chaos with mass layoffs," even before Congress confirms them.
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