18-Month Cooling-Off Period in Outsourcing (Art. 5-C, Law 6.019)

This page is a translation of the original Portuguese text, provided for convenience. It deals with Brazilian law. If there is any discrepancy, the Portuguese version prevails. Read the original in Portuguese

If a company dismisses you, it cannot bring you back to provide services as a company or as an outsourced worker for eighteen months. The rule, set out in Articles 5-C and 5-D of Law 6.019/74, was added by the 2017 labor reform and applies to both the worker and the company that tries to rehire.

What the Eighteen-Month Cooling-Off Period Says

The so-called “quarantine” arose alongside the expansion of outsourcing and the hiring of workers as companies in Brazil. Law 13.467/2017, known as the labor reform, added two provisions to Law 6.019/74 to prevent an employment relationship from being dissolved only on paper and recreated under a different label.

Article 5-D prevents a dismissed employee from returning to provide services to the same company, as an employee of a service provider, before eighteen months have passed since the dismissal. Article 5-C, in turn, prevents that company from hiring, as a service provider, a legal entity whose partners or owners were its employees within the same period.

Both provisions have the same purpose. They create a mandatory waiting period so that an employment relationship cannot be converted overnight into outsourcing or into a contract with a company. The period runs from the date of dismissal and applies to a return to the former employer.

The Difference Between Outsourcing and Pejotização

Although they often go hand in hand, outsourcing and pejotização (hiring a worker as a company instead of as an employee) are not the same thing. In outsourcing, a company hires another legal entity to carry out part of its activities, and the workers of that provider remain employees of the provider, not of the company receiving the services.

In pejotização, a worker who should be an employee is hired as a legal entity, usually an individual microentrepreneur or a single-member company. On paper, there is a contract between two businesses. In practice, there is often subordination, personal performance of the work, regularity, and a salary disguised as a professional fee, all hallmarks of an employment relationship.

Article 5-C targets the second situation. By prohibiting the former employer from hiring the company of someone who was its employee in the past eighteen months, the law tries to stop an employment contract from being swapped for a service contract that hides the same relationship as before.

In outsourcing, a company hires another legal entity to carry out part of its activities, and the workers of that provider remain employees of the provider, not of the company receiving the services.

When the Prohibition Applies and When It Does Not

The cooling-off period applies to a return to the same company. If you were dismissed, you can work freely for any other company, including as an outsourced worker or as a legal entity, without waiting at all. The restriction is specific. It is not a general ban on going into business for yourself.

Law 6.019/74 itself provides an important exception. The paragraph in Article 5-C lifts the prohibition when the partners or owners of the legal entity are retired. In that case, a retired worker can set up a company and provide services to the former employer without observing the eighteen months.

There are also borderline situations that deserve attention. How the period is counted, what counts as the “same company” within corporate groups, and the way the service is performed can all raise real doubts. Each arrangement must be examined in light of the facts, not just the contract the parties signed.

Keep in mind that the prohibition reaches dismissed employees under the Consolidation of Labor Laws. Interns, independent contractors with no prior employment, and professionals who were never employees of the company receiving the services are not subject to the same waiting rule, although they may be held liable for fraud if the facts as a whole point to a sham arrangement.

The Risks of Breaking the Rule

Ignoring the cooling-off period carries a concrete legal risk. The main one is a finding that an employment relationship exists. If the Labor Courts conclude that hiring the worker as a legal entity or as an outsourced worker was used to mask an employment relationship, they may declare the arrangement void and recognize the worker as a direct employee.

The consequences of that decision are broad. Once the employment relationship is recognized, amounts such as vacation pay plus one-third, 13th-month salary, deposits into the FGTS (Brazil’s Severance Indemnity Fund), overtime, and other items that come with an employment contract become due, with effects across the entire period of the irregular arrangement.

There is also the risk of being classified as fraud against labor legislation. Article 9 of Brazil’s Consolidation of Labor Laws (CLT) declares void any acts carried out to distort, prevent, or defraud the application of labor rules. When the cooling-off period is deliberately disregarded, this provision is commonly invoked.

For the company, social security and tax exposure is added on top. Recognition of the employment relationship tends to bring demands for unpaid contributions, administrative fines, and challenges to the tax treatment adopted. What looked like an immediate saving can turn into a substantial liability down the road.

How Workers and Companies Should Protect Themselves

For workers, the first step is to document how the services are actually performed. Time records, orders received, exclusivity, performance-target controls, and any sign of subordination help show the true nature of the relationship if you later need to dispute it.

If you were dismissed and receive an offer to return as a legal entity or as an outsourced worker within the eighteen months, evaluate the situation carefully. Accepting an arrangement the law prohibits can compromise your rights and create uncertainty, especially if the former employer later tries to deny any responsibility.

For companies, the recommendation is to treat the cooling-off period as an internal hiring policy. Before signing a contract with a service provider or legal entity, check whether its partners were employees within the last eighteen months and whether an exception applies, such as the one for retired workers.

In both cases, an individual analysis of the contract and the facts is decisive. The difference between valid outsourcing and fraudulent pejotização is rarely found on paper. It lies in how the work is actually performed, the degree of autonomy, and the presence or absence of the elements of an employment relationship.

Frequently Asked Questions

Does the eighteen-month cooling-off period apply to any new company?

No. The prohibition in Articles 5-C and 5-D of Law 6.019/74 applies only to a return to the same company that dismissed the worker. For any other company, you can provide services immediately, as an outsourced worker or as a legal entity, without waiting.

The rule aims to prevent an employment contract from being replaced by outsourcing or pejotização at the former employer. It is not meant to restrict a worker’s freedom to work in the market generally.

Do retired workers also have to observe the waiting period?

No. Law 6.019/74 itself provides an express exception. When the partners or owners of the hired legal entity are retired, the prohibition in Article 5-C no longer applies, and the former employer can hire them without observing the eighteen months.

Even so, the arrangement must reflect a genuine provision of services. If there is subordination and the other elements of an employment relationship, the arrangement can be challenged, even with the retiree exception.

What happens if a company breaks the cooling-off period?

The main risk is a finding by the Labor Courts that an employment relationship exists, with payment of everything owed under an employment contract for the entire period of the irregular arrangement. Article 9 of the Consolidation of Labor Laws, which voids acts aimed at defrauding labor legislation, may also apply to the case.

On top of that come social security charges, administrative fines, and tax challenges, which can turn an apparent saving into a heavy liability for the company.

As informações deste artigo são de caráter informativo e não substituem consulta jurídica individualizada. Cada caso possui particularidades que exigem análise específica.