Alarming numbers: all of a sudden some of the major U.S. companies that have surfed the digital wave in recent years – largely as a reflection of the isolation imposed by the covid-19 pandemic –had announced mass layoffs, which in some cases, represent a decrease of up to 50% of their current job positions.
However, it would be wrongful to admit that in the United States mass layoffs may take place without previous discussions. Heated debates have arisen among experts concerning the legal impacts and potential lawsuits challenging such layoffs alleging violations of the Worker Adjustment and Restraining Notification Act of 1988 (WARN Act).
The WARN Act is a U.S. federal statute that, in general lines, requires prior communication to employees or unions and other authorities, at least 60 days in advance, for mass layoffs of not less than 50 employees in companies that have more than one hundred employees in a single site.
This termination movement in the United States turned on the yellow light for companies in Brazil and, especially, labor unions, which fear that the wave of layoffs may spread overseas.
The concept of mass layoffs within the Brazilian legal system was only regulated with the enactment of the Labor Reform (Federal Law No. 13,467/17), which has completely waived the prior authorization of the labor union or the performance of a collective bargaining agreement for this type of termination.
Like other Reform legal issues challenged before Courts, the mandatory collective bargaining for the mass termination of workers was also discussed in the Brazilian Supreme Court (STF). When assessing the theme 638 in the Extraordinary Appeal 999,435, the Court ruled that, in cases of mass layoffs, companies operating in Brazil shall allow a "prior union intervention". If such intervention does not occur, courts may declare null or abusive by the courts.
But what would be the so-called "prior union intervention" stated by STF’s Justices? Practice shows that the expression refers to the establishment of an effective dialogue between company and union representing the impacted workers, so that the layoff process would affect in a slighter way the group of terminated workers and society.
The STF has not determined that the dialogue and, consequently, the negotiation between the company and the union shall be fruitful. In our view, however, prior labor union intervention presupposes a duty of sincere effort between the parties to achieve a possible consensus or convergence. In case a stalemate happens, the company could proceed with the mass layoffs, regardless of union’s authorization.
In practice, companies sat within Brazilian territory that need to cut many workers should fulfill their duty to formally notify the union, so that they can meet with employees' representatives, aiming at an effective dialogue with the labor entity. This dialogue may be done by submitting proposals and counterproposals duly registered by the parties, capable of leading to a potential consensus or agreement between the interested sides.
