The Future of Labor Relations in Brazil

New Labor Rules in Brazil: What Companies Need to Know

Amid changes in labor relations, the employment agenda for companies in Brazil is set to grow more complex and demanding in 2026. New debates have emerged over forms of contracting, and companies are stepping up their review of contracts and policies, strengthening preventive mechanisms, and refining their approach to these issues. Binding precedents adopted by Brazil’s Superior Labor Court (TST) and the progress of legislative bills are poised to impact labor governance and risk management, calling for strategies that balance operational efficiency with legal certainty to mitigate exposure to risks and avoid litigation.

These developments follow a 2025 marked by renewed debate in the labor courts over outsourcing and the practice of converting employment relationships into independent contract arrangements via legal entities (known locally as pejotização). Discussions have centered on potential fraud scenarios, such as dismissals that are followed by rehiring through outsourced providers and the deliberate replacement of employment relationships with independent contractor arrangements, which have raised companies’ vigilance around contract structuring and compliance policies.

At the same time, Brazil’s legislature has advanced key proposals, such as reforming the six-day workweek and initiatives to regulate app-based work, reinforcing the prospect of significant shifts in the current labor landscape.

It is essential to review cases whose outcomes may be challenged in light of binding precedents issued by the Superior Labor Court and rulings by the Supreme Federal Court. Companies should also explore improvements through union negotiations, as the idea that collective agreements prevail over legislative provisions continues to gain strength in the superior courts

Domingos Fortunato

Partner – Labor & Employment

Companies should reassess their organizational structures, business models and hiring models to ensure there is no basis for claims of fraud or the erosion of labor rights. Moreover, collective bargaining remains a viable path for making employment issues more flexible without compromising worker protections, at least until the limits regarding contractor arrangements and app-based work are defined more clearly