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Winding down the workforce when exiting Brazil

Last verified: 2026-10-27 · Status: Stable

Closing a Brazilian operation means dismissing employees without cause: notice of 30 to 90 days, a 40 percent fine on FGTS deposits, FGTS withdrawal on closure, and payment within 10 days. No union authorization is needed, but the Supreme Court requires prior union intervention for mass dismissals after 14 June 2022. Closing for business reasons is not force majeure, so severance is not halved. Selling the business instead keeps employment contracts with the buyer.

USD figures use the Banco Central do Brasil PTAX selling rate of R$5.3346 per US dollar for 27 October 2026 (PTAX had moved from 5.0377 on 23 October to 5.5007 on 26 October). Conversions are for orientation only; the rate on the day of each FX contract will differ.

Key facts

Prior union intervention for mass dismissals (after 14 June 2022)	Required; no union authorization needed STF Theme 638; CLT art. 477-A, as of 2026-10-27 · in force
Maximum notice period	90 daysLei nº 12.506 art. 1, as of 2026-10-27 · in force
FGTS fine on dismissal without cause	40 % of FGTS depositsLei nº 8.036 art. 18 § 1, as of 2026-10-27 · in force
FGTS fine when the labor court recognizes force majeure	20 % of FGTS depositsLei nº 8.036 art. 18 § 2, as of 2026-10-27 · in force
Days to pay termination amounts and deliver documents	10 daysCLT art. 477 § 6, as of 2026-10-27 · in force
Window to file labor claims after the contract ends	2 yearsCLT art. 11, as of 2026-10-27 · in force
Fine owed to the employee for late termination payment	One monthly salary CLT art. 477 § 8, as of 2026-10-27 · in force

The rule

1. No union authorization, but prior union intervention for mass layoffs. Individual, multiple and collective dismissals without cause are treated alike and need no prior union authorization or collective agreement. The Supreme Court nevertheless held, in binding Theme 638, that prior union intervention is an indispensable procedural requirement for mass dismissals, distinct from union authorization or a collective agreement. The requirement applies to dismissals after 14 June 2022, the date the judgment minutes were published; the decision became final on 23 June 2023.Decreto-Lei nº 5.452 of 1 May 1943 (CLT), art. 477-A added by Lei nº 13.467 of 13 July 2017; Supremo Tribunal Federal, RE 999435 (Theme 638), CLT art. 477-A; Theme 638 thesis, 2022-06-14 official text · verified 2026-10-27 · changed: Theme 638 (judgment minutes published 14 June 2022, final 23 June 2023) added a prior union intervention step for mass dismissals after 14 June 2022.

2. Notice. Without a fixed term, the party ending the contract gives at least 30 days notice to monthly paid employees; if the employer gives no notice it pays the salary for the notice period, which counts as service time. The notice is 30 days for up to 1 year of service, plus 3 days per year of service with the same employer, up to 60 extra days, for a total of up to 90 days.CLT, art. 487 items I and II and § 1; Lei nº 12.506 of 11 October 2011, art. 1, CLT art. 487; Lei nº 12.506 art. 1 and sole paragraph, 2011-10-11 official text · verified 2026-10-27

3. FGTS on dismissal. On dismissal by the employer, the employer deposits the FGTS for the month of termination and the prior month if unpaid; on dismissal without cause it deposits 40 percent of all deposits made during the contract, updated with interest. When force majeure or mutual fault is recognized by the labor court, the percentage is 20 percent. Employees may withdraw their FGTS on dismissal without cause and on total closure of the company or closure of an establishment, branch or agency that ends the contract.Lei nº 8.036 of 11 May 1990, art. 18 caput and §§ 1 and 2 (wording of Lei nº 9.491 of 9 September 1997) and art. 20 items I and II, Lei nº 8.036 arts. 18 and 20 I and II, 1997-09-09 official text · verified 2026-10-27

4. Closing is not force majeure by default. Only force majeure that causes the extinction of the company or of the establishment entitles the employer to pay half the severance due on dismissal without cause; a business decision to close does not qualify, and the 20 percent FGTS rate applies only when the labor court recognizes force majeure. Employment rights survive the company's bankruptcy or dissolution; in bankruptcy all salaries and severance owed are privileged claims.CLT, arts. 449 caput and § 1 and 502, CLT arts. 449 and 502, 1943-05-01 official text · verified 2026-10-27

5. Pay within 10 days. On termination the employer records it in the employment booklet, notifies the authorities and pays the termination amounts; the documents proving notification and payment must be delivered within 10 days of the end of the contract. Breach leads to an administrative fine per worker and a fine in favor of the employee equal to one salary, unless the employee caused the delay. The receipt must itemize each amount paid and discharges only those items.CLT, art. 477 caput and §§ 2, 4, 6 and 8 (caput, § 4 and § 6 as worded by Lei nº 13.467 of 13 July 2017), CLT art. 477 §§ 2, 6 and 8, 2017-07-13 official text · verified 2026-10-27

6. Vacation and time limits. On termination for any reason the employee is paid the vacation already earned; after 12 months of service, an employee not dismissed for cause also receives proportional pay for the incomplete vacation period at 1/12 per month or fraction over 14 days. Claims arising from the employment relationship prescribe in five years, up to a limit of two years after the contract ends.CLT, art. 146 (wording of Decreto-Lei nº 1.535 of 13 April 1977) and art. 11 (wording of Lei nº 13.467 of 13 July 2017), CLT arts. 11 and 146, 2017-07-13 official text · verified 2026-10-27

7. Selling instead of closing keeps the contracts. A change in the ownership or legal structure of the company does not affect employees' contracts or acquired rights; when there is a business succession, the successor answers for all labor obligations, including those from the time employees worked for the predecessor, and the predecessor answers jointly only if fraud is proven.CLT, arts. 10, 448 and 448-A (art. 448-A added by Lei nº 13.467 of 13 July 2017), CLT arts. 10, 448 and 448-A, 2017-07-13 official text · verified 2026-10-27

Item	Rule	Note
Notice	30 days plus 3 per year of service, up to 90 (CLT art. 487; Lei nº 12.506)	Paid in cash if not worked; counts as service time
FGTS fine	40 percent of deposits (Lei nº 8.036 art. 18 § 1)	20 percent only if the labor court recognizes force majeure (§ 2)
FGTS withdrawal	Allowed on total closure or closure of an establishment (art. 20 II)	Employer issues the written statement of closure
Payment deadline	10 days from the end of the contract (CLT art. 477 § 6)	Late: one salary to the employee plus an administrative fine (§ 8)
Mass layoffs	Prior union intervention (STF Theme 638)	No union authorization or agreement needed (CLT art. 477-A)

Main termination items when a Brazilian company closes (rules cited above; collective agreements may add more).

Worked example

An employee with 6 years of service and a monthly salary of R$10,000 (about US$1,875) is dismissed when the subsidiary closes. Notice is 30 + 3 x 6 = 48 days (Lei nº 12.506), paid as R$16,000 (about US$2,999) if not worked. With FGTS deposits of R$96,000, the 40 percent fine is R$38,400 (about US$7,198) (Lei nº 8.036 art. 18 § 1). Accrued and proportional vacation pay is added on top (CLT art. 146), as are other items due under the contract or collective agreement. Everything must be paid within 10 days of the end of the contract; paying late adds one salary, R$10,000, to the bill (CLT art. 477 § 8).
Closing a plant with 300 employees: before the dismissals, the company opens talks with the union (STF Theme 638). It does not need the union's consent or a collective agreement (CLT art. 477-A), and dismissals made without that prior step are open to challenge in the labor courts.

Step by step

1. Map the workforce: service time, salaries, FGTS balances, employees with job stability, and the collective agreements that apply, which may add items.
2. For mass dismissals, open a documented prior dialogue with the union before giving notice (STF Theme 638).
3. Decide worked or paid notice for each employee (30 to 90 days, Lei nº 12.506) and plan the closing date around it.
4. Compute termination amounts, deposit the FGTS for the last months and the 40 percent fine (Lei nº 8.036 art. 18), and issue the closure statement so employees can withdraw their FGTS (art. 20 II).
5. Pay and deliver the documents within 10 days of each contract's end (CLT art. 477 § 6), with itemized receipts (§ 2).
6. Keep payroll records with the person who keeps the books: labor claims cover up to five years of credits and can be filed up to two years after the end of each contract (CLT art. 11).

Common traps

Calling a closure force majeure. A business decision to close is not force majeure; halving severance (CLT art. 502) or paying 20 percent FGTS without court recognition (Lei nº 8.036 art. 18 § 2) invites claims.
Skipping the union in a mass layoff. No consent is needed, but prior union intervention is (STF Theme 638).
Late payment. One salary per employee as a fine adds up quickly in a closure (CLT art. 477 § 8).
Generic receipts. A receipt discharges only the items it lists with their values (CLT art. 477 § 2).
Assuming a sale ends the liabilities. In a business succession the buyer takes on all labor obligations (CLT art. 448-A), which buyers price in.

Sources

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