Labor Legal regime applicable to employees hired abroad for providing services in Brazil and digital nomads based in Brazil

Nayara Ferreira Marques da Silva.

Labor lawyer at Furriela Advogados.

Cristiane Fátima Grano Haik.

Labor lawyer at Furriela Advogados.

 

1. Material Law Standards

1.1.      Employees hired abroad to carry out In Brazil activities in Brazil

 

Within the scope of private law, obligations contracted abroad are regulated by the law of the country in wich they were constituted. It is what predicts Article 9 of the Rule of Introduction to the Norms of Brazilian Law.

 

Such rule crearly applies to property relations under private law. However, the question that arises is whether in the context of social labor relations the rule in question is applicable to define the norms of substantive law that will govern the contract.

 

In this way, the worker hired abroad, but who renders services in Brazil, has his/her contract governed by which law? Brazilian  or of the country  of hiring?

 

Until 2012, this question could be answered by Precedent 207, TST[1], that just like the Bustamante Code (Havana Convention of 1928, ratified by Brazil through Decree nº 18.871/1929) adopted the lex loci executionis criterion. Under this criterion, labor relations would be governed by the law of the place where the employee provides services and not by the law of the place  of hiring.

 

The cancellation of the Precedent and the alteration of the ex loci executionis criterion took place of its incompatibility with art. 1, of Law 7.064/82, amended by Law No. 11.962/2009. Thus, if the hiring took place in Brazil to carry out of activity abroad in favor of a Brazilian employer, the principle of territoriality should not be applied, but rather Law 7.064/82[2].

 

However, the law in question  expressly addresses the relationship between employees hired in Brazil or transferred by their employers to work in other countries. This is not the situation of employees hired in the Foreigner to provide services in Brazil.

 

For employees carrying out activities in Brazil, even if hired abroad, the legal doctrine headed by Sérgio Pinto Martins, Vólia Bomfim and Octavio Bueno Magano teaches that the substantive rights must be applied in accordance with the law of the place where the services were performed, prevailing the lex loci executionis criterion, or Principle of Territoriality, already enshrined in the Bustamante Code, Convention of Rome and Recommendation No. 2 of the International Labor Organization (ILO), which provides:

 

The General Conference recommends that each Member of the International Labor Organization (ILO) guarantees to foreign workers employed in its territory and to their families, on a reciprocal manner and under the conditions agreed between the interested countries, the benefit of laws and regulations protecting worjers and the exercise of the right of association legally reconized for its own workers[3].

 

The Bustamante Code, in article 198 provides:

 

Article 198. Is also territorial the legislation about accidents at work and social protection of the employees.

 

Therefore, if the employee is hired abroad, by a company based in that country, but comes to carry out its activities in Brazil, the Brazilian law will be applied, and no the law of the place of hiring.

 

In this sense the teaching ofSergio Pinto Matins stands out (page 111)[4]:

 

The example would be the case of a Brazilian employee who had worked two years in Brazil, then later spent six months in Uruguay, two months in Italy, five months in England and finally he was released in France, where he worked for a year. Which labor law should be applied to such a worker? Each law of the respective country in which the services were provided would apply to the worker, that is, in the first two years Brazilian law would be applied, in the following six months the Uruguayan law, in the two months following the Italian law, in the five months subsequent years to English law, and in the last year  French law. This is because most countries adopt the understanding that the law of the place of provision of services should apply  to labor issues.

 

In this way, it would be possible to state that foreigners hired abroad, but who carry out their activities in Brazil, are governed by Brazilian labor laws and have right to Employee’s Severance Guarantee Fund (FGTS), minimum wage, payment for overtime, legal additionals for risks, union representation and rights negotiated by them, among others.

 

However, the conflict occurs in such cases like that which happened in Spain,  in view of the provision in the Employee’s Statute that determines the application of the Spanish law to employees hired in that country, by a Spanish company, to provide services in another location. The Statute provides[5]:

 

4. The Spanish labor legislation will apply to the labor perfomed by Spanish employees hired in Spain at the services of Spanish companies abroad, without prejudice to the public order regulations applicable in the workplace. These workers will have, at least, the economic rights that would be granted to them if they worked in Spanish territory.

 

Therefore, in these cases,  the understanding is that the minimum garantees of the law of the place of hiring apply, without prejudice to the application of legislation of the place where the services are provided, if more favorable.

 

This is Sergio Pinto Martins’s lesson (pages 111-112):

The legal doctrine admits that if the worker domiciled in the country is contracted by a national company to provide services abroad, must be provided the minimum guarantees arising from the law of the contracting country, without prejudice to the application of the most favorable working conditions in the country where the service is provided.

(…)

Gérard Lyon-Caen mentions that in the European Economic Community the most favorable law principle applies. As means of resolving conflict of application of laws in space in labor matters.

 

In this way, flexibility of the lex loci execution criterion is allowed if the law of the place of hiring is more favorable to the worker than that of the place where the services are provided.

 

 

1.2.      Digital nomads

 

However, a complex situation is that of workers called digital nomads, because they are hired abroad and provide services to companies headquartered there, but reside in Brazilian territory.

 

That contracting modality, also known as anywhere office work , is mainly characterized by the possibility to carry out tasks anywhere, as the employee does not need to attend the company’s headquarters to carry out their activities.

 

This fact makes it difficult to define the substantive law applicable to the employment contract, because the provision of services  may take place at any given time from a different location.

 

In Brazil employees recognized as digital nomads are entitled to a special visa provided for in Resolution 45 of the Council National Immigration Office, edited in September/2021, effective since its publication in January/2022[6].

 

The rule above provides for the granting of a temporary visa and authorization to residency for 1 year to foreigners who work remotely, if that fulfilled certain requirements. This period can be extended.

 

Among the requirements for obtaining a visa, it is possible to mention the presentation document proving the nationality of the worker, travel insurance, criminal background check, payment of consular fees and proof of means of subsistence equivalent to the monthly remuneration of US$1,500.00 or availability of funds of US$18,000.00.

 

It is worth mentioning that the foreigner must also prove his condition of digital nomad by presenting an employment contract or provision of services that demonstrate the link with the foreign employer.

 

It is noteworthy that the activity of such workers could be framed in the legal concept of teleworking described in art. 75-B, CLT:

 

Art. 75-B. Teleworking or remote work is considered to be the provision of services outside the employer’s premises, preponderant or not, with the use of information and communication technologies, which, by its nature, does not constitute external  work.

 

However, despite the such digital nomad workers only reside in Brazil, the Resolution 45 of the CNIG, when regarding the category in article 1, §1º, provides that these are workers capable  of carrying out their activities in Brazil for a foreign employer.

 

In this case, by the lex loci executions criterion, or Territoriality Principle, it would be the case of applying to such workers the Brazilian law, as already exposed in the previous item.

 

However, Brazilian labor jurisprudence has resolved conflicts of Law in Space based on the Center of Gravity Theory, orTheory of Choice-of-Law of the Fact of Savigny.  The theory has been used as justification for not applying to multinational facts the Flag Law provided for in the Bustamante Code.

 

In this context, by the Center of Gravity Theory, or Most Significant Relationship Theory,, when a fact generates multinational legal effects, that is, in more than one country, international law norms must be set aside in order to apply the substantive law norms of the location with which the case is most closely connected.

In this regard has decided the Superior Labor Court (TST):

 

In addition to the above exceptions, I understand that, exceptionally, applies the principle of the Center of Gravity (most significant relationship), according to which the rules of private international law can cease to be applied when the case has a much stronger connection with another right, in this case, the Brazilian one.

In agreement with the legal principle with of the Center of Gravity (Otto Von Gierke) – which, initially, was developed as the Theory of Choice-of-Law of the Fact (Savigny) -, when a fact create consequences in several countries at the same time, there is a mixed or multinational fact.

In this situation, any judge will be competent as long as, in his country, the fact has generated effects.

It turns out that, although the fact generates effects in several orders legal entities, it has only one legal seat (a single center of gravity), since only in one of the countries does the fact generate greater effects. In this case, it appears that the greatest irradiation of the effects occurred in Brazil, since, in addition to the provision of services also took place in national waters, the worker was hired in Brazil and there filed a lawsuit, facts that, by the logic of the system, justify the application of Brazilian legislation.

According to the legal principle of the Center of Gravity, Brazilian legislation, as it is more closely connected to the legal relationship formed, attracts the incidence to itself.

Verified fraud in the legal relationship, is justifiable the exception to the application of the National Flag Ordinance , for the preservation of public order.

(TST – AIRR: 432520175090014, Judge Rapporteur: Guilherme Augusto Caputo Bastos, 4th Class, Publication Date: 09/09/2020)

 

In this context, it would be possible to state that, despite carrying out the activities remotely with residence in Brazil, the situation of the nomad digital has a stronger relationship with the location of the company, that really benefits from its workforce.

 

In this way, based on The Most Significant Relationship Theory, it would be possible to apply the legislation of the place where the employee was hired and not Brazilian one, since the activities carried out by this employee generate effects abroad and not in Brazil.

 

This conclusion is also supported by the provisions of article 1, §2º, of the CNIG Resolution 45, which regulates the visa for digital nomads in Brazil:

 

• 2 Immigrants who work, with or without an employment relationship, for an employer in Brazil, or whose residence permit to work in the country is regulated by another regulation of this Council, will not be considered “digital nomads.

 

The law differetiates between the digital nomad, the immigrant hired  by a Brazilian company and  the immigrant with a residence permit for work activity. The Brazilian legislation applies to them, as per the treaty in the previous topic.

 

Therefore, if the norm differentiates workers, the legal treatment given to each of them may also be different.

 

However, extreme caution must be exercised with the factual reality of the employee framed as a nomad. If the contracting company is headquartered in Brazil and the worker constantly carries out his activities in this place, for example, we understand that there may be greater difficulty in defending the application of The Most Significant Relationship Theory in a conflict to be resolved in the Labor Court.

 

The fact is that the normative framework in Brazil still does not contemplate the situation of digital nomads and there is no case law on the subject, which should be generate discussions, and various theses and the possibility of defending the application of the law of the place of the provision of services and also the law of the place of hiring for digital nomads. s.

 

However, it seems to us that the tendency of labor courts would be to bow to the Maximum Principle – the Protective Principle – and grant the rights foreseen in the more favorable norm, in addition to analogously applying the paragraph 8 of article 75-B, of the CLT, as amended by Law 14,442/2022:

 

• 8 The Brazilian legislation is applicable to the employment contract of an employee hired in Brazil who opts to telecommute outside the national territory, with the exception of the provisions of Law no. 7,064, dated December 6, 1982, unless otherwise stipulated by the parties.

 

 

2. Rules of jurisdiction .

 

As for the competent jurisdiction for the assessment of conflicts involving employment relations, the rule is the application of the  article 651, CLT:

 

Art. 651 – The jurisdiction of the Conciliation and Judgment Boards is determined by the location where the employee, claimant or defendant, provide services to the employer, even if it has been contracted elsewhere or abroad.

• 1 – When an agent or commercial traveler is a party to the dispute, the jurisdiction will be the Board of the locality where the company has an agency or branch and to which the employee is subordinate and, failing that, the Board of the location where the employee is domiciled will be competent or the nearest location.
• 2 – The jurisdiction of the Boards of Conciliation and Judgment, established in this article, extends to agreements that occur in an agency or branch abroad, provided that the employee is Brazilian and there is not an international convention providing otherwise.
• 3 – In the case of an employer that promotes the performance of activities outside the place of the employment contract, the employee is entitled to file a claim in the court where the contract was signed or where the respective services were rendered.

 

Therefore, the Brazilian procedural rule provides as competent for the assessment of labor disputes the jurisdiction of location where the employee provides services, even if the hiring occurs abroad.

 

Thus, if the worker was hired abroad, but came to carry out his activities in Brazil, it would be a case of understanding that the Brazilian courts have jurisdiction to hear the conflicts.

As for the digital nomads, controversy once again arises, because, despite being residing in Brazil, their activities are carried out remotely, producing effects in a other location. That’s because, in case of the nomad, the service can be provided anywhere.

 

This is also extracted from the provisions of the Code of Civil Procedure (CPC), specifically in article 21, II, since the obligation, in theory, would be fulfilled in Brazil:

 

Art. 21. It is incumbent upon the Brazilian judicial authority to prosecute and judge lawsuits in which:

1. the defendant, whatever his nationality, is domiciled in the Brazil;
2. in Brazil the obligation must be fulfilled;

III. the basis is a fact that occurred or an act performed in Brazil.

Paragraph. For the purposes of item I, the foreign legal entity that has an agency, branch, or affiliate in Brazil is considered to be domiciled in Brazil.

 

In this context, to the digital nomad, since he is a traveler and has no contract with a Brazilian company nor performs activities that produce effects in Brazi, , would be subject to the same rule used for the commercial traveler provided for in the CLT,  that is, the jurisdiction of the location where the company or subsidiary to which the worker is subordinate (art. 651, §1, CLT)?

 

Or would it be the case of applying the general rule of civil procedure, provided in Article 21, II, of the CPC, according to which jurisdiction is defined by the place where the obligation is fulfilled? In this case, Brazil.

 

While there is no specific regulation, we understand that both positions can be defended.

 

In the case of jurisdiction of the Brazilian courts, it may be defended based on the need to interpret the rules of competence in such a way as to favor the production of evidence and the worker’s access to the Judiciary.

 

This is what Carlos Henrique Bezerra Leite[7] teaches (page 365):

 

The interpretation and application of the provisions of article 651, CLT, must be to facilitate the economically weaker litigant to enter the court under conditions that allow him to pursue his rights, provided that this does not imply damage to the defendant’s right to full defense, which requires the examination of the concrete case submitted to judicial cognition.

In these terms, if the worker who has been hired and provided services in another location, files a labor lawsuit in the jurisdiction of the his domicile, stating in the Statement of Claim that he is unable, for economic reasons, to travel to the place where the contract is signed or the services were provided (art. 651, caput, of the CLT), the judge, in the case the defendant files an Objection of Incompetence, shall, considering the verisimilitude of the claimant’s assertion, interpret such rule according to the Constitution (art. 1, III and IV; art. 5, LV and LXXVIII) and reject the exception.

 

The author also understands that the jurisdiction of the Brazilian courts is not removed, not even if the contracting party does not have its headquarters or branch in Brazil.

 

This is what Carlos Henrique Bezerra Leite[8] says (page 370):

 

If the company does not have headquarters or a branch in Brazil, Sergio Pinto Martins sustains that “there will be the impossibility of bringing the action, as it will not be possible to subject it to the decision of our courts”.

We believe, however, that, despite the operational obstacles to filing a claim against a company that does not have its headquarters or branch in Brazil, it is possible to notify the employer by rogatory letter, being competent the Labor Court, by analogous application of article 21, I and II, of CPC. Whether or not he will accept submitting to the jurisdiction of the Brazilian Labor Court is already a problem unrelated to the issue of  the juristiction.

 

However, in the case of digital nomads, it would be the case of determining jurisdiction by the place where the hiring company to which the employee is bound is located, since there are no elements of strangeness capable of attracting Brazilian jurisdiction, since the employee’s activities produce effects in the place of hiring and not in Brazil..

 

This is because, unlike the expatriate foreigner, the digital nomad does not have a link to a Brazilian company and does not even have a work activity producing effects in Brazil. He only travels to Brazil and resides here during of the labor pact, since he can work from any location, according to the anywhere office concept.

 

In addition, for practical reasons, considering the difficulty of  enforcing the decision of the Brazilian Court by a company not located in Brazil, it is convenient to follow the understanding of Sérgio Pinto Martins, according to which competence will be defined by the place of hiring.

 

A possible solution to resolve the issue would be to elect in the employment contract of the digital nomad the competent jurisdiction to resolve the controversies.

 

Despite this practice finds reservations in the labor area, it is convenient customs to adapt to the new reality.

 

In addition, authors such as Carlos Bezerra Leite[9] (page 375) defend the  possibility of choosing a court location in labor matters:

 

However, it seems to us that it is precisely in light of the constitutional principle of access to justice (CF, art. 5, XXXV) that we must interpret the consolidated text. To thisTo this end, we would like to inform that the understanding adopted in previous editions of this book regarding the incompatibility of the forum of choice with individual and collective labor disputes has changed.

In fact, we have come to recognize that all the rules provided for in the caput and in the paragraphs of art. 651 of the CLT have as their central objective the facilitation of access to justice for the working citizen, presumably vulnerable and hyposufficient. Therefore, it is necessary to examine in the specific case whether the choice of court agreement signed in the contract of employment (as a rule, an adhesion contract) is more beneficial to the employee to, in fact, ensure full access to the Labor Court. If the jurisdiction chosen in the employment contract is that of the domicilie of the employee, it seems to us that, was not enough the literality of the caput of art. 651 of the CLT, the competence to judge the labor claim will be fixed in the consensual source by application of the principle of the rule (procedural) more favorable to the worker, unless he himself prefers to file the claim in the jurisdiction where the service is provided, since, in this case, he will be giving up an advantage of procedural nature.

 

It would be the case, therefore, to provide in the digital nomad’s contract, in addition to the applicable substantive law rules, the competent jurisdiction to settle controversies.

 

It would be the case, therefore, to provide in the deal of the digital nomad, the competent court to resolve controversies in addition to the applicable rules of substantive law.

[1] Precedent 207, TST – 07/11/1985 – Hermeneutics. Conflicts of labor laws in space. Principle of «lex loci

executionis». Interspace conflict. Decree-law 4.657/1942, art. 9 (LICCB) and Decree Law 4.657/1942, art. 17 (LICCB). Decree 18.874/1929, art. 198 (Bustamante Code) (cancelled).«(Cancelled by Res. 181, of 04/16/2012 – DJ 19, 20 and 04/23/2012). – The legal labor relationship is governed by the laws in force in the country where the service is provided and not by those of the place of contracting.»

 

[2] If the company contracted in Brazil, but does not have its head office here, the law of the place where the services are provided prevails. In this sense teach Vólia Bomfim: Even so, the application of the law of the place of execution of the contract still prevails for that employee hired in Brazil to work in a foreign company, which does not have head office in our country. (Vólia Bomfim, Labor Law, 19th Edition. Ed. Method, 2022. Page 139).

[3]Available at em: <https://www.ilo.org/dyn/normlex/es/f?p=1000:12100:12902050527979::NO::P12100_SHOW_

TEXT:Y:>. Acesso em 09/01/2023

[4] MARTINS, Sergio Pinto. Labor Law. 38th edition -São Paulo: Ed. Saraiva, 2022.

[5] Link to Spanish Employee’s Statute.

[6] Link to Resolution

[7] LEITE, Carlos Henrique Bezerra. Labor Procedural Law Course. São Paulo: Saraiva, 2022.

[8] LEITE, Carlos Henrique Bezerra. Labor Procedural Law Course. São Paulo: Saraiva, 2022.

[9] LEITE, Carlos Henrique Bezerra. Labor Procedural Law Course. São Paulo: Saraiva, 2022.