Wednesday (March 22, 2017), Legislative Bill (“LB” – Projeto de Lei) No. 4,302/1998, the so-called “Outsourcing Law” (Lei de Terceirização) – a Bill that had been presented to the Brazilian Congress almost 20 years ago – was approved by the Brazilian House of Representatives (Câmara dos Deputados), and sent to President Michel Temer for his approval/veto.

The President has fifteen (15) days to (i) sanction and approve the text of the Bill, (ii) veto specific articles or provisions, or (iii) reject it entirely. If the President does nothing after the time period has lapsed, it is considered that he has given (iv) tacit approval and the Bill is enacted into Law.

The current labor courts’ understanding is that a company may only outsource its non-core business (atividade-meio), but the Outsourcing Law would allow businesses to outsource even their core business activities (atividade-fim) through independent contractors or service providers, without limitations on the type of business activity that can be outsourced;

This is obviously a controversial piece of legislation, and there are factions on both sides for and against the outsourcing of core business activities without limitations. It is also worth noting that there are 3 other Bills (LB 30/2015, 300/2015 and 339/2016) currently pending approval of the Brazilian Senate, two which are deemed to be more conservative and impose certain limitations/restrictions on the outsourcing of core business, whereas the other also provides for broad outsourcing rules.

It is still unclear as to the implications that the Outsourcing Law will have on the labor risk relating to the recognition of an employment relationship between the independent contractor’s employees and the principal. It is highly possible that the requirements regarding employment relationships will still apply as is, and that the labor courts will uphold their case law in this regard.

Shervin Naimi, Attorney in the Corporate practice