Latin America Employment Law Update

By Daniela Arevalo, Renata Neeser, Mel M. C. Cole Nov 19, 2014
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Venezuela Minimum Wage Set to Increase on Dec. 1, 2014

On Nov. 4, 2014, Venezuelan President Nicolas Maduro announced an increase of 15 percent of the minimum wage effective Dec. 1, 2014. The increase raises the minimum wage from 4,251.40 to 4,889.11 Bolivars (VEF) per month (equivalent to USD 776.03 at the official exchange rate of VEF 6.30 per USD 1).

This is the third minimum wage increase in 2014 in Venezuela, the first increase being a 10 percent boost in January and 30 percent in May. The measure aims to protect workers’ salaries from the high inflation level running at nearly 60 percent this year. However, employers are only obliged to increase salaries of those workers earning minimum wages, unless otherwise agreed through a collective bargain agreement.

Impact of the Salary Increase on the Food Benefit

Additionally, according to the President’s announcement, the amount for food benefit will increase, as well, from an equivalent of a maximum of 0.50 tax units per day of work, up to 0.75 tax units (a maximum of VEF 95.25 per day).

According to the Feeding Law for Employees, employers must provide healthy meals during the workday to those employees who earn salaries up to the equivalent of three minimum wages. This benefit may be granted through coupons or electronic debit cards (under exceptional circumstances by cash), and the value of the benefit may not be less than 0.25 tax units. It is not yet clear if the minimum amount remains the same or if it will be increased as well.

The food benefit is not deemed part of the employee’s salary. This benefit must be granted during vacations and leaves of absences due to medical reasons.

Impact of the Salary Increase on Other Benefits

For those workers earning minimum wages the increase will impact other benefits such as vacations, vacation bonus, profit sharing, and guarantee of seniority which are calculated over the worker’s monthly salary. In addition, it also implies an impact in the caps of the salary basis for contributions to the Social Security and the value of the day care benefit (40 percent of minimum wage).

Brazil: Highest Labor Court Clears Franchisor from Vicarious Liability for Employment Law Obligations

In a recent decision, Brazil’s Superior Labor Court (“Tribunal Superior do Trabalho” or TST), the highest labor court in the nation, unanimously held that a franchisor was not vicariously liable for the franchisee’s alleged noncompliance with employment obligations. This decision represents a decisive victory for employers.

Under Brazilian law, a franchise is the system through which a franchisor assigns to a franchisee the right to use the trademark or patent, distribute exclusively or semi-exclusively the products and services, and use the technology of implementing and managing the business or the operational system developed or owned by the franchisor, with direct or indirect compensation, but without creating an employment relationship. Franchising, therefore, allows for a shifting of the legal responsibility from the franchisor to the franchisee (i.e., the operator of the franchised business) where the franchisee exerts the control over the acts or omissions that allegedly caused the injury.

In the U.S., however, the National Labor Relation Board (NLRB) is taking a different approach.The NLRB, the U.S. federal agency charged with, among other things, enforcing federal laws that protect the right of employees against unfair labor practices, recently authorized the issuance of a formal legal complaint against a franchisor and some of its franchisees, for alleged unfair labor practices. The Board is currently investigating the charges, but the franchisor may be charged as a joint employer should a complaint be issued. If the NLRB adopts this position, it would represent a direct attack on franchise law in the United States, holding the gates wide open for third parties to bring claims against franchisors, holding them vicariously liable for the injuries caused by the franchisees.

In contrast, Brazil’s TST has been consistently siding with franchisors on the theory that the franchisor-franchisee relationship is not grounded on a dependent relationship. The TST recognizes that franchisees run their business independently from franchisors. Generally, the agreement between these two parties grants the franchisees the right to hire, fire and manage their workforce, and shifts the operational risks inherent in the business to the franchisees.While the franchisor is entitled to set standards and guidelines for the franchisees and generally provides systems and technology for the franchise, the franchisor generally is not allowed to directly interfere in the day-to-day operation of the franchise.

The fact that the TST upholds the independence of these parties in their relationship is particularly interesting for Brazil because the labor courts have labeled some business arrangements as “outsourcing” and have imposed subsidiary liability. Because Brazilian law does not regulate outsourcing, its legality and reach currently are being shaped by court decisions that in part are inconsistent one from the others. Given the uncertainties about the legality of certain outsourcing arrangements, companies that outsource certain parts and functions of their business frequently face claims of direct employment from outsourced employees, as well as moral damages for illegal outsourcing.

The outsourcing debate continues in Brazil, but at least franchisors seem to be safe from vicarious liability for the time being.

EEOC and Mexican Consulates Team Up to Provide Guidance, Training and Even Checks

What started as a local effort has now become a national endeavor, as the United States Equal Employment Opportunity Commission (EEOC) and the Mexican Ministry of Foreign Affairs officially agree to join forces to create programs that will benefit both Mexican nationals working in the United States as well as their employers.

On Aug. 29, Jacqueline Berrien, the Chair of the EEOC, and Eduardo Mora, the U.S. Ambassador to Mexico, signed a national Memorandum of Understanding (MOU), committed to strengthening outreach on workplace rights, as well as reducing violations under Title VII of the Civil Rights Act of 1964; the Pregnancy Discrimination Act; the Equal Pay Act of 1963; the Age Discrimination in Employment Act of 1967; Title I of the Americans with Disabilities Act of 1990; and the Genetic Information Non-discrimination Act of 2008. In particular, the MOU focuses on the harms addressed by the laws and regulations that are administered and enforced by the EEOC.

Perhaps the most interesting element of the MOU is a proposed system through which compensation collected by the EEOC from “responsible employers” in the U.S. can be routed to Mexican nationals who have returned to Mexico. The EEOC will provide identifying information to the Mexican Consulate, who will then pass the baton to their counterparts in Mexico to contact these former employees. If and when the Mexican government succeeds in reaching an employee owed compensation, the EEOC will then route a check from the former employer to the worker, with the help of the Mexican Ministry of Foreign Affairs. Notably, the MOU describes this system as a goal—not a mandate—making its potential effectiveness and impact on both employers and workers difficult to evaluate at such an early stage.

The centerpiece of the MOU is a commitment to an educational program that combines outreach to employers and workers with the training of consulate staff by the EEOC. The EEOC aims to provide guidance to the Mexican national community both inside our neighboring country’s local consulates as well as in other “appropriate forums” that will better reach both the working Mexican national, as well as the person employing him or her. The MOU also focuses on promoting dialogue on employment discrimination and equal employment opportunity, the EEOC’s bread and butter.

The EEOC is not the first nor the only American agency to engage in such an endeavor with the Mexican Ministry of Foreign Affairs. The U.S. Department of Labor (DOL) recently announced that the DOL’s Wage & Hour Division, the U.S. Occupational Safety and Health Administration (OSHA), and the National Labor Relations Board (NLRB) reached workplace protection agreements with several Mexican consulates in Arizona to encourage immigrant workers to report workplace problems. OSHA and the DOL entered into such agreements with the Mexican consulates in Phoenix, Tucson, Yuma, Nogales and Douglas. The NLRB entered into an agreement with the Mexican consulate in Phoenix.

An agreement to increase education and awareness regarding the rights of workers in the United States, regardless of nationality, could impact not only the workers but the employers who are tasked with creating a compliant workplace in an already convoluted legal system. Ultimately, we will not know the reach of the effects until we see how seriously the two governments take the goals established in the MOU. What we do know, however, is that employers—no matter what happens—will be paying attention.

Daniela Arevalo is an associate attorney in Littler’s Caracas office, Renata Neeser is a shareholder based in Littler’s New York City office, and Mel M. C. Cole is an associate in Littler’s San Francisco office.

Read Littler’s original posts and additional global news and commentary on labor and employment issues worldwide here.

© 2014-2015 Littler Mendelson.All Rights Reserved.

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