Critical review about the Bill #4,302/98 that regulates the outsourcing services

After almost 20 waiting, the Chamber of Deputies approved by a simple majority, the Bill #4,302/98 that changes the rules for temporary work and regulates the outsourcing of services to all activities. As it had already been approved by the Federal Senate, the bill will follow for Presidential sanction, which may approve or reject the legislative proposal.

Before analyzing what changes and what the impacts generated in employment relations, we consider necessary to know the history of outsourcing services in the world.

Outsourcing was initiated during the World War II, when the war industries were forced to delegate secondary services to third parties, in order to meet the growing demand for armaments.

Decentralization of production ushered in a period of new management techniques that became known as subcontracting or outsourcing. During this period, perceived benefits were: i) possibility of transforming fixed costs into variables; ii) greater specialization in each stage of the production process; iii) increase in production quality; and iv) possibility of greater concentration of the efforts of the entrepreneur in the main activity of the company, delegating to specialized third parties the accomplishment of ancillary activities.

Although it was used world widely, the lack of regulation of outsourcing services used to drive a legal insecurity in Brazil. With the Bill # 4,302/98 approval, if sanctioned by the President of the Republic, the rules will be clear and defined.

What changes?

The main change is in the possibility of outsourcing activities considered as social purpose of the company (core activities) and not only support activities (means activities).

Work Conditions

The Bill provides that temporary workers shall follow the same conditions of safety, hygiene and health, as well as the same working period and labor guarantees applied to employees with equivalent functions.

Accountability

The service-takers company continues to be secondary liable for complying with the labor obligations due by the service providers. In the case of the social security withholding of 11%, the service provider remains responsible for the uncollected tax.

Temporary Work Term

The Bill provides an increase in the length of the time for temporary work as from 90 days to 180 days, consecutive or not, which might be extended up to ninety (90) days, when the conditions that led to the hiring were maintained. The Union Agreements might change the length of time.

Subcontract

The outsourcing company will be allowed to subcontract other companies to perform contracting services, remuneration and direction of work to be performed by its employees in the contractor's premises.

Minimum Corporate Capital

Precarious work?

What will define if the Bill represented a breakthrough in labor relations will be the way that this instrument is applied.

Despite the fact that it will allow outsourcing unrestrictedly, the provisions set forth in the Consolidation of Labor Laws (CLT) shall continue to apply. Therefore, if it is used as a way to suppress labor rights, the Tax Authorities and Labor Courts will continue to be competent to declare the recognition of employment relationship, if the service were rendered with recurrence, personal character, onerosity and hierarchical subordination.

Throughout its specialized team, RSM follows the tax, labor and social security legislative changes and is available to support its clients to be in compliance with the new legislation.

For more information, contact us: 

Marcelo Sampaio  - [email protected]
Partner - Head of Tax  

Leonardo Biar - [email protected]
Head of Labor & Social Security Services