Labour & Employment Trends in Brazil- 3 Areas to Watch in 2026

The next 12 months are likely to bring significant developments in Brazil’s labour law landscape, driven by both political dynamics and evolving judicial and social expectations. 

The number of labour claims (which fell significantly following 2017 fee reforms) is again on the rise, with news reports of over 2.3 million cases having been filed with the Labour Courts in 2025, an increase of 8.47% from 2024. 

Many factors appear to be causing this increase, but most cite increased employment especially in the services sector which has traditionally suffered from high turnover rates. Our experience also suggests other factors including the use of AI by plaintiffs to reduce barriers to claims, persistent employer compliance gaps, workplace burnout, and a legal environment that favours employee-based litigation.

With elections in Brazil taking place in early October 2026, it is consequently little surprise that labour policy is taking centre stage.

1. Working time rules

Following a regional trend with similar changes in Mexico, Colombia and Chile, there are currently proposals before the Senate for a phased transition to a 5-day working week, with two weekly paid rest days and a reduction from 44 to 40 weekly working hours. This would reduce the current working week in Brazil from 6 working days followed by one rest day. 

2. Regulatory focus on psychosocial risk and increased risk of claims for moral damages

A reduction of working hours is just one aspect of the overall push to recalibrate the work-life balance in favour of a better quality of life for workers. Companies are facing a rapid rise in litigation and a regulatory focus on psychosocial risks, driven by increased awareness of burnout and mental health impacts in the workplace.

In May this year health and safety laws came into effect requiring the incorporation of psychosocial risks into workplace Risk Management Programmes. Employers that do not implement adequate measures to structure working conditions, prevent the imposition of unachievable goals, manage excessive workloads, and reduce conflicts between employees and/or moral harassment, are at risk not only of fines but of potential class actions and costly public civil claims.

3. Risk in relation to use of independent contractors

The Brazilian concept of “pejotização” or engaging an individual through their own personal services company (known as a “PJ company” or “pessoa jurídica”) is currently the subject of intense scrutiny by the Brazilian courts. The use of a PJ contract does not prevent Brazilian courts from determining that an individual is in fact an employee if the surrounding facts support it. In assessing employment status, courts look beyond the bare written contractual terms and examine how the relationship operates in practice, but this analysis is not consistent throughout Brazilian courts and much uncertainty remains. A significant case currently before the Brazilian Supreme Federal Court (STF) (Case 1389) is expected to be decided within the next 12 months and should provide much-needed high-level guidance on the permissible scope of PJ arrangements and the criteria for distinguishing between genuine independent contractor relationships on the one hand and disguised employment on the other.

The Court’s decision could have substantial implications for companies that rely on contractor-based engagement models, potentially increasing reclassification risks, expanding compliance obligations, and prompting a reassessment of workforce structures.