An essential topic in business and labor relations, outsourcing and the impacts of its regulation have been the subject of frequent debate.
Bill 4330/04, whose main text was approved on April 8, 2015, will still undergo discussion in the Chamber of Deputies through voting on amendments, followed by a stage in the Federal Senate. However, based on the current landscape of discussions, we believe that the text of Bill 4330/04 warrants careful analysis by companies.
The bill introduces a series of amendments aimed at protecting employees assigned to outsourced service provision. However, our focus in this article will be on the core-activity topic and oversight. One of the main points of the bill is permitting the contracting entity to outsource the execution of a portion of any of its activities to the contractor, provided that this company is specialized.
The freedom to outsource any activities will reduce substantial legal uncertainty. After all, the current definition of core and non-core activities is entirely subjective, especially when dealing with essential services. A 2014 survey by the CNI points out that for 59.9% of industries, this legal uncertainty is the primary problem faced by companies.
However, a warning is warranted. A misinterpretation of the new law, if approved, can lead to severe losses if not interpreted systemically.
This is because the freedom to contract any activities has its limits regarding the form of hiring. Outsourcing will only be permitted through contracting specialized services, which will be evaluated based on the existence of a sole corporate purpose, proof of qualification, among other formal requirements.
Outsourcing in which non-compliance with the above requirements is demonstrated, as well as the existence of any requirement of an employment relationship, such as personal provision of services and subordination, will be deemed null and void. After all, we must remember that, regardless of regulation, the Labor Courts, the Labor Public Prosecutor's Office, and the Ministry of Labor Inspection retain their restrictive views and interpretations unchanged. In other words, even with greater freedom to outsource, a protective and restrictive view, from an interpretive standpoint, will remain a constant.
Another point that warrants attention is the mandatory oversight by the service-contracting company regarding monitoring compliance with labor and social security obligations of service-providing companies and subcontractors.
The relevance of such oversight is unanimous, not being a subject of dispute or potential amendment in the Bill. The bill provides that companies that supervise providers will be held subsidiarily liable, while those that do not will be held jointly and severally liable.
Contractor Management, as this practice is known in the market, is already present in more structured companies that maintain a preventive perspective. In other words, contracting companies, through internal or outsourced structures, receive and audit payments of wages, overtime, FGTS, INSS, among other remuneration components and social charges. However, once again we must remember that this oversight cannot be limited to mere receipt of documents, but rather must involve an effective process of analysis, identification of irregularities, and implementation of corrective and preventive action plans. The judiciary will likely consider effective only that oversight which is structured in terms of processes, monitoring, corrective actions, and penalties.
Indeed, we believe that Bill 4330/04 could represent progress for the adoption of outsourcing. However, it will be very important that organizations, when deciding to expand or maintain outsourcing, focus on planning the practice and implementing effective outsourcing risk management.
In this regard, LEVEL GROUP is already a benchmark in Contractor Management. Since 2012, we have been working across various organizations to deliver Contractor Management services (outsourcing risk management) and Contract Management, as well as risk diagnostics and outsourcing planning. Indeed, once the regulation is approved, our clients will already be prepared and capable of facing the new reality in a planned and structured manner, ensuring compliance with legal requirements.
Adriano Dutra da Silveira is an attorney and consultant at LEVEL GROUP, responsible for the Contractor Management product and for implementing outsourcing-related projects across various organizations. He is a speaker and co-author of four books on outsourcing and labor relations.
