Major labor changes with the Green and Yellow Contract  

The Green and Yellow Contract ("CVA"), recently presented by the Presidency of the Republic through Provisional Measure 905 of 2019 ("MP 905/19"), aims to encourage the hiring of young people between 18 and 29 years old who have not yet have a signed work card.
 
In pursuit of this purpose, the Government’s package of measures focuses on easing youth labor rights and relieving employers of payrolls, especially due to the exemption from social security contributions (20%) and education salaries (2.5 %), and the contribution to the entities of the "S" System (variable rate) and to INCRA (0.2%). According to the Government, there will be a reduction of approximately 30% in direct contracting expenses.
 
Companies that decide to adopt the CVA may formalize the hiring of young employees from January 2020, respecting the maximum limit of up to 20% of the total employees hired through this modality. Companies with up to ten employees can hire up to two young employees.
 
In addition, the duration of the CVA cannot exceed 24 months and the base salary of young employees should be up to one and a half minimum wage, which currently corresponds to R $ 1,497.00.
 
The CVA does not revoke the labor rights provided for in the Federal Constitution and CLT, however, promotes the flexibility of some of them to encourage the inclusion of young people in the labor market.
 
Then we highlight the main changes.
 
Reduction of FGTS fine from 40% to 20% and monthly contribution rate from 8% to 2%
 
The CVA provides for the reduction of the FGTS fine from 40% to 20%. It is worth noting that the fine will be due even in cases of dismissal for cause. In addition, the FGTS monthly contribution may not exceed the 2% rate, even if the salary of the young employee is equivalent to one and a half minimum wages.
 
Possibility of monthly payment of FGTS fine, vacation and 13th salary
 
In addition to reducing the FGTS fine, the CVA authorizes the payment to be paid in advance month by month. The same condition applies to the payment of proportional leave plus 1/3 Constitutional and 13th salary. Thus, the financial impact caused by a contract termination becomes smaller, as the payment of such installments can be made during the CVA.
 
Reduced Health Hazard Value
 
The amount of the hazardous work premium may be reduced from 30% to 5% if the employer takes out private personal accident insurance in favor of young employees who may suffer damage from exposure to the hazard.
 
For the validity of the reduction, accident insurance should cover accidental death, personal injury, cosmetic damage and moral damage.
 
In addition, the hazardous work premium is only payable when the worker is permanently exposed for at least 50% of the working day period.
CVA Duration and Possibility of Extension
 
As this is a pilot project, the Government has demarcated the CVA’s validity period to 24 months, ie until January 2022.
 
During this period, the employer may employ young employees to carry out any professional activity, either temporarily or permanently, and even to temporarily replace another permanent employee.
 
If the CVA produces the expected results, it will be up to the Government to extend the measure or make it final. Consequently, the CVAs signed during the 24 months of validity of MP 905/19 will also be extended or become contracts of indefinite duration.
 
 Karen Viero and Fernando Cha
Chiarottino e Nicoletti