Paloma da Silva Aguiar
Lawyer at Marcos Martins Advogados
The advance of the Coronavirus has caused astonishment worldwide, given the social, cultural, political and economic impacts, as well as the countless uncertainties for human beings all over the world in relation to their own relationships, including those at work, not only formal workers, but also the self-employed, informal workers and employers in general, who, in addition to worrying about their individual health, don’t know how they will survive the crisis triggered by the pandemic, which has required social isolation and the suspension of non-essential activities as a control measure.
If the emergency measures created by the government are aimed at protecting jobs, the question arises as to the future of employers who carry out non-essential activities and who have had to stop their operations. And if, in order to maintain their business and survive the crisis caused by the pandemic, they have to reduce their workforce, how will they pay their severance pay? This is the question many entrepreneurs are asking themselves in this current scenario.
But after all, in times of crisis, is it possible to make the payment of severance pay to your employee more flexible when dismissed without just cause?
Article 502 of the Consolidation of Labor Laws – CLT states the following, “in verbis” :
“Art. 502 – In the event of force majeure causing the extinction of the company, or of one of the establishments in which the employee works, the employee is assured, when dismissed, compensation as follows:
I – if stable, under the terms of arts. 477 and 478;
II – if they are not entitled to stability, half of that which would be due in the event of termination without just cause;
III – in the event of a fixed-term contract, the indemnity referred to in Article 479 of this Law, also reduced by half.”
Article 502 of the CLT allows us to conclude that an employer who finds himself in a state of crisis, with no daily cash flow, when dismissing his employee without just cause, can make use of the force majeure reason dealt with in the aforementioned provision regarding the payment of severance pay. However, the legal exception that allows the employer to pay only half of the severance pay that would be due to an employee dismissed without just cause must be applied with caution, always analyzing the relevance to the specific case.
This is because there is no consensus among legal practitioners as to the application of article 502 of the CLT and what can be understood as an effective incident of force majeure, with some jurists believing that the crisis caused by the pandemic cannot be seen as force majeure. And, although the legal text is express in providing for the possibility of underpayment only with regard to the indemnity fine of the guarantee fund for length of service – FGTS, there are lawyers who defend the possibility of non-payment of the indemnified prior notice of the employee dismissed without just cause.
Certainly, article 502 of the CLT authorizes the employer, in the event of force majeure, to pay half of the indemnity, which is the 40% (forty percent) FGTS fine, provided for in article 479 of the CLT, and may pay 20% (twenty percent), but says nothing about underpayment of severance pay.
Even though Provisional Measure 927 of 2020 recognized the state of force majeure, which consequently went against the provisions of article 502 of the CLT, it is necessary to take a cautious view of the flexibilization of labor rules, given that this issue cannot simply be generalized. In this sense, Dr. Guilherme Feliciano, former president of the National Association of Magistrates of Labor Justice – Anamatra, is pertinent when he states the need for judicial recognition for the coronavirus pandemic to be declared a reason for force majeure[1].
Even if the worker is dismissed without just cause, in the midst of the COVID-19 pandemic, he will be entitled to severance pay: salary balance, indemnified notice (if not worked), overdue and proportional vacation + 1/3, overdue and proportional 13th salary, withdrawal of the FGTS balance, 40% fine on the FGTS, and eligibility for Unemployment Insurance, if the legal requirements are met. Failure to pay the severance pay within the period laid down in article 477, paragraph 6, of the CLT will result in the employer paying a fine of one ( 1) of the employee’s salaries. Flexibility in the payment period can occur if the parties agree on a new payment date, or if consensus cannot be reached, the magistrate can set a different date for payment of the sums owed to the dismissed worker.
Although the recent Provisional Measures do not expressly provide for the possibility of severance pay being paid in installments, it is also understood that, if it is proven that the employer is unable to make the full and direct payment, solely and exclusively on account of COVID-19, and therefore due to force majeure, there is no legal provision preventing the parties, with the participation of the union, from paying the severance pay in installments, although the majority of case law understands that the fine in article 477, paragraph 6 of the CLT is due in these cases.
After all, it’s worth remembering that due to the nature of food, workers can’t be left without their severance pay, but there also needs to be common sense regarding the employer who has been forced to stop their activities due to the coronavirus. If there is an effective risk of the employer closing down its establishment for this reason, there is no illegality in the agreement between the parties regarding the payment of severance pay in installments, except for the 40% FGTS fine, which by constitutional provision cannot be paid in installments, since the crisis hurts not just one of the parties, but all of them.
It can therefore be concluded that the employer will be able to take advantage of all the flexibilization dealt with in Provisional Measure – MP 927 of 2020, but will still have to prove in court, if applicable, that the closure of his company was caused exclusively by the COVID-19 pandemic, and not by external/other forces. And only if this is proven, will the flexible payment of severance pay due to the employee be observed, when dismissed without just cause, taking into account only that those amounts to which the employee is fully entitled, such as overdue and unused vacation, and proportional 13th salary, although they can be paid in installments, cannot be reduced, and the exception for half payment applies only to the 40% fine, in accordance with current legislation.
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[1] “The employer will have to claim in court, in the event of a labor claim brought by the ex-employee, that it acted in a circumstance of force majeure, due to an abrupt drop in demand,” said Feliciano, former president of Anamatra (National Association of Labor Court Magistrates).
