Brazil: An Analysis Of Possible Alternatives In Relation To Ford Factory Closing At São Bernardo Do Campo/SP

The news of the closure of activities at the Ford plant in the city of São Bernardo do Campo, SP, after more than 50 years of operation, has been shaking the automobile market in the country.

The measure is part of the company's overall restructuring plan, which has just entered into a partnership with Volkswagen to manufacture utility vehicles.

According to information from the President of the ABC Metalworkers' Union, the decision came from the head office of Ford in the United States and apparently no union or employee representation body was consulted or informed of the decision prior to the media release.

Historically, the ABC Metalworkers' Union is a very strong and active entity in the region, protagonist of several strikes and movements in favor of improvements in the quality of life and the standard of remuneration and benefits for the employees that it represents.

The Union has always participated in collective bargaining negotiations involving mass layoffs, since, although there is no rule regulating the subject, as a result of a precedent of the Superior Labor Court, negotiating with the Union of the category was an essential requirement for the validity of the mass layoffs, with a view to reducing impacts on society.

However, Law No. 13,467/17 began to expressly deal with the question, classifying terminations as: individual, plural and collective/mass, being the employer free to act as wish (embodied in its directive power), regardless of the modality of the termination, without obeying any antecedent conduct , i.e. in the case of collective termination, prior negotiation with the professional union is no longer a requirement of validity of the act.

In addition to the union, there is the figure of the Factory Commission, created in mid-1945, in the midst of the resurgence of the labor and trade union movement. It is a commission elected by the employees, to represent them with the union organs and the employer, in order to reinforce the employees' demands.

Until the entry into force of the Labor Reform in November/2017, the so-called Factory Commission was an historic creation, but without any legal support, although recognized by jurisprudence.

The Federal Constitution, in its article 11¹, ensures the election of a representative of the employees for the purpose of mediating the claims with the employer, for companies with more than 200 employees.

However, only upon the entry into force of Law No. 13,467/17, with the inclusion of Title IV-A in the Labor Code, was the legality of the election of the employees' committee established, and not only of a single representative, whose composition is defined by the number of employees of the company:

  • In companies with more than 200 and up to 3,000 employees, by three members;
  • In companies with more than 3,000 and up to 5,000 employees, by five members;
  • In companies with more than 5,000 employees, by seven members.

In addition, the commission's performance is also foreseen in the Labor Code:

  • Represent the employees before the administration of the company;
  • Improve the relationship between the company and its employees based on the principles of good faith and mutual respect;
  • Promote dialogue and understanding in the workplace in order to prevent conflicts;
  • Look for solutions to conflicts arising from the employment relationship, quickly and efficiently, aiming at the effective application of legal and contractual rules;
  • Ensure fair and impartial treatment of employees, preventing any form of discrimination based on sex, age, religion, political opinion or union activity;
  • Forward specific claims of the employees under their scope of representation;
  • Monitor compliance with labor, social security and collective bargaining agreements.

Therefore, upon the promulgation of the Labor Reform, the Factory Commission was legalized and its attributions defined by law.

Despite the fact that there are no penalties provided for in the Labor Code, to the company that no longer uses the employees' committee to resolve internal issues, we consider it quite beneficial, especially to announce the intention to close an important industrial center as a way of searching together with the employees, alternative measures to mitigate the consequences of the closing of activities, affecting approximately 3,000 direct employees and 1,500 outsourced workers, not counting the side effects on the region's economy.

In addition, another alternative measure, to avoid a mass commotion of employees, as a result of a mass layoff without any additional payment, would be the Voluntary Dismissal Program (so-called 'PDV'), through which it is possible to reduce the workforce, or, even terminate the company's activities, optimizing costs and rationalizing people management.

Through this mechanism, the company can, with the help of the professional union, devise a plan to encourage employees to resign, offering more attractive benefits/advantages than the ones that would be paid in the event of a termination without cause.

The Program, after being approved by the union, must be presented to all employees, without exception, to avoid future arguments of unawareness of the plan. With this, a deadline for adhesion and payment of severance is opened to employees who join.

For employees who do not adhere to the plan, the termination will be applied without cause, with the payment of the applicable severance amounts, not admitting future questioning, once the plan was presented to all and accepted by those who so chose.

The great advantage for the company in submitting a Voluntary Resignation Plan was brought by the Labor Reform, which, in its article 477-B², expressly established that adherence to the plan entails the total and irrevocable discharge of all rights arising from the employment relationship.

That is, the employee who joins the plan, after receiving what is due, can no longer file a labor claim to request other rights that he/she understands due to the employment relationship, which significantly reduces the number of lawsuits filed against the company after the dismissal.

On the other hand, for the employees, the 'PDV' is a good alternative, since it guarantees the receipt of funds/benefits that would not be paid in the event of a request for dismissal or termination without cause, such as the payment of an additional minimum or nominal wage for each year of work in the company or the extension of the health plan, as is customary.

The ABC Metalworkers' Union has already stepped in to seek legal action to have Ford forced to, at least, negotiate the mass layoff, in order to prevent thousands of workers from being harmed by the US ruling.

From the strictly legal point of view, based on the current wording of the labor legislation, both the news of the closure of the factory activities and the consequent future mass layoffs are in line with the rules, since, as seen above, there is no formal requirement to involve the employee commission in the company's decisions, as well as there is no formality for the implementation of the collective termination.

On the other hand, from a social point of view, given the importance of the company in the region and the number of employees that will be affected by the closure of activities, we believe that, for cases like this, a differentiated conduction is recommended, using the legal mechanisms available for better accommodate the situation and avoid serious effects on the population.

¹ Art. 11. In companies of more than 200 employees, the election of a representative of these is assured for the sole purpose of promoting their direct understanding with the employers.

² Art. 477-B. Voluntary or Incentivized Dismissal Plan for individual, plural or collective termination, provided for in a collective agreement, provides for the full and irrevocable discharge of all rights arising from the employment relationship, unless otherwise stipulated by the parties.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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