When it comes to the involvement of trade unions in the collective dismissal process, the current position in Brazil is that employers must negotiate with unions, however, reaching an agreement cannot be guaranteed, and unions cannot prevent dismissals. While this fundamental position is expected to stay the same, two upcoming Supreme Court reviews may result in key changes to the framework. Below, we take a look at the recent developments in Brazil, together with the view from Argentina, Germany and Poland.

Case law in Brazil defines collective dismissal as the termination of a significant number of employees (typically more than 10% of the total number of employees, although this is debated within case law) for a common reason. The justification could relate to economic, technological, or structural factors, for example. It occurs simultaneously, or within a short period of time, with no intention of replacement of the staff, and can have an economic, financial, and/or social impact both within the organisation and on the wider community.

For many years, Brazilian legislation was silent on the need for union participation in collective dismissals, while case law did not provide a clear answer on the matter. However, following a number of case law decisions and legislative reforms, the picture is now a more coherent one, confirming that negotiation with the union is indispensable for the employer to be able to dismiss collectively.

A brief timeline of the key developments is as follows:

• 2009: The Embraer Decision – Embraer, the aircraft manufacturer, laid off 4,273 employees, or approximately 20% of their workforce. In what has become a milestone decision, the trial court reversed the dismissals, and the Regional Court of Appeal upheld this. Embraer further appealed but had no practical option other than to approach the relevant trade union to negotiate terms and conditions for the dismissals.

• 11 November 2017: Labour Reform – as part of broader Brazilian labour reform measures, a new provision in the Labour Code was introduced stating that trade union authorisation is not mandatory for individual, plural, or collective dismissals, nor is an existing collective bargaining agreement required for their validity.

• March 2022: Review of Embraer – The Supreme Court reviewed the Embraer case, establishing Precedent No. 638 (the ‘Precedent’) which states that prior union intervention is an essential procedural requirement for the collective dismissal of workers, but the union does not have the authority to approve or veto the dismissals.

Since 2022 then, negotiation with the union has been a central part of the collective dismissal process for employers, but this does not guarantee that the parties will reach an agreement and the union does not have the power to avoid collective dismissal.

Despite these discussions and the enactment of the Precedent, the debate regarding collective dismissal is not over.

The relevant provision of the 2017 Labour Reform mentioned above is set to be reviewed by the Supreme Court through a Direct Unconstitutionality Action. The outcome of the Supreme Court’s judgment remains to be seen, although it is possible that it will lead to an improvement of the mechanisms to secure fair negotiation and dialogue, in addition to other protections of social welfare.

The forthcoming Supreme Court decision is not the only important development to keep an eye on. The framework of collective dismissals may also change as a result of a separate Direct Unconstitutionality Action filed by the Office of the Prosecutor General of the Republic in response to concerns regarding AI and automation.

In particular, the action argues that there is an urgent need for new legislation to protect employees against the impacts of automation and AI, considering their rapid development, and the expected changes they will bring to the future of the workplace – something that seems inevitable.

In fact, the World Labor Organization has estimated that 37% of the Brazilian workforce will be exposed to the effects of AI and automation, leading to profound changes, including their replacement by machines. Counter to this, a study by the International Monetary Fund indicates that economies in emerging and developing markets will face fewer immediate transformations from AI. Even so, it projects that 40% of employees will have their activities transformed or may lose their jobs. This supports the Prosecutor’s arguments.

Finally, the Brazilian Federal Constitution expressly establishes that the protection against automation is a right of employees, to be provided “according to the law”. Despite what the law says, however, no specific legislation has been created to date. Nevertheless, this supports the Prosecutor’s decision to bring the action, which closely relates to this constitutional protection.

In light of the above, the Supreme Court will soon be tasked with reviewing the collective dismissal framework in Brazil once again. It is unlikely that unions will be granted with the authority to approve or veto collective dismissal, however it is expected that the Supreme Court will improve the mechanisms to secure fair negotiation and dialogue, in addition to other protections of social welfare. Employers should continue to ensure compliance with the current framework in Brazil, whilst keeping a watching brief on these key developments.