Supreme Court votes on termination of employment agreement

On 26 May 2023, the Supreme Court voted on the constitutionality of a presidential decree published in 1996. The Supreme Court voted that, by denouncing the application of the International Labor Organisation Convention No. 158 and providing for its non-application in Brazil, the decree allowed companies to terminate employees’ employment agreement without a motivation or cause. By majority vote, the Supreme Court ruled the Direct Action of Unconstitutionality No. 1625 groundless and, consequently, voted for the constitutionality of the decree.

This is an important decision for companies in Brazil since it maintains the employer’s ability to terminate employment agreements at their discretion.

Companies cannot terminate employment without cause when employees are protected against termination by the law or by collective bargaining agreements, such as in case of:

• work-related accidents;
• pregnancy;
• retirement; or
• the employee being a union representative or member of the Internal Commission for the Prevention of Accidents and Harassment.

The discussion in the Supreme Court about the constitutionality of the decree involved the obligation for the denunciation of international treaties by the president to be approved by the National Congress to be valid, a step that was not observed in this decree. The Supreme Court’s decision is yet to be published and there are indications that its content will determine the approval by the National Congress as a condition for similar cases in future. However, in this case, there will be no adverse retroactive consequences for employers regarding past or future terminations without cause.