MEI and Labor Rights: What Changes When You Are Hired

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

Learn when hiring an MEI can amount to an employment relationship and which labor rights apply.

When hiring an MEI is fraud

Hiring an Individual Microentrepreneur (Microempreendedor Individual, or MEI) in place of an employment contract can be labor fraud when the elements of an employment relationship are present: personal service (only that person can do the work), regularity (continuous, ongoing work), subordination (the hiring party gives orders and exercises control), and compensation (regular payment). If those elements are present, the Labor Courts can recognize the employment relationship and order payment of all labor rights.

Protection for workers

So-called ‘pejotização’ (forcing a worker to open an MEI or a company to provide services as if he or she were an employee) is an illegal practice meant to evade labor law. The labor courts recognize an employment relationship in these cases and order the employer to pay all labor entitlements retroactively, including FGTS (Brazil’s Severance Indemnity Fund), vacation pay, the 13th salary, overtime, and social security contributions.

If those elements are present, the Labor Courts can recognize the employment relationship and order payment of all labor rights.

Labor rights of a genuine MEI

An Individual Microentrepreneur who truly works as a self-employed person, without subordination, has social security rights secured through a monthly payment via the DAS (the Simples Nacional tax payment slip). The MEI contributes 5% of the minimum wage and is entitled to an old-age retirement pension, a disability retirement pension, sickness benefits, maternity pay, and imprisonment benefits for dependents. A survivor’s pension is also guaranteed to dependents. However, this reduced contribution only entitles you to an old-age retirement pension in the amount of one minimum wage. To obtain a length-of-contribution retirement pension or a higher benefit amount, the MEI must top up the contribution with an additional 15% of the minimum wage.

Labor rights in Brazil are guaranteed by the CLT (Brazil’s Consolidated Labor Laws) and by the Federal Constitution. Among a worker’s fundamental rights are the minimum wage, the thirteenth salary, paid vacation with a one-third bonus, FGTS, unemployment insurance in case of dismissal without cause, and a maximum workweek of 8 hours a day and 44 hours a week.

The 2017 Labor Reform (Law 13.467/2017) brought significant changes to employment relationships. These include giving negotiated agreements priority over statutory rules on certain subjects, regulating intermittent work, changing the rules on contract termination, and allowing individual agreements for hour banks.

If your labor rights are violated, you can seek redress in the Labor Courts. You have up to 2 years after the end of the employment contract to file a labor claim, and you may seek the rights relating to the last 5 years worked.

What to do if you were “pejotizado”

If a worker was forced to open an MEI to perform services that are, in practice, those of an employee, he or she can seek recognition of the employment relationship in the Labor Courts. The lawsuit must be filed within 2 years after the end of the working relationship, and it may seek the rights relating to the last 5 years worked. The most relevant evidence includes time-clock records or work-hour logs, emails and messages showing subordination, statements from coworkers, and proof of fixed monthly payments.

Once the employment relationship is recognized, the employer will be ordered to pay all labor entitlements retroactively: registration in the work card (CTPS, Brazil’s employment record booklet), vacation pay with a one-third bonus, the 13th salary, FGTS with a 40% penalty, overtime, night-shift premium (if applicable), transportation vouchers, and any other benefits provided in the collective bargaining agreement for the worker’s trade. The judgment will also include payment of social security contributions to the INSS (Brazil’s National Social Security Institute), regularizing the worker’s standing with Social Security.

Oversight of work relationships involving MEIs has intensified in recent years. Labor tax auditors use objective criteria to identify pejotização, such as the existence of work-hour control, exclusivity in providing services, personal performance of the work, and subordination to the hiring party’s direct orders. Companies caught engaging in this practice can be fined and required to register the workers retroactively.

Frequently Asked Questions

What is the deadline to file a labor lawsuit?

A worker has up to 2 years after the end of the employment contract to file a labor claim. In the lawsuit, the worker may seek the rights relating to the last 5 years worked, counted back from the filing date. After these deadlines pass, the rights lapse and can no longer be collected in court.

What evidence is accepted in the Labor Courts?

The Labor Courts accept many types of evidence: documents (pay stubs, time-clock records, emails), witnesses who saw the events, audio and video recordings (when the worker is a participant in the conversation), WhatsApp messages, and photographs. In companies with more than 20 employees, the absence of time-clock records creates a presumption in the employee’s favor.

Does indirect termination guarantee all the rights of a dismissal without cause?

Yes. When the Labor Courts recognize it, indirect termination gives the employee the same entitlements as a dismissal without cause: unpaid salary balance, indemnified notice period, accrued and proportional vacation pay with the one-third bonus, proportional thirteenth salary, FGTS withdrawal with the 40% penalty, and unemployment insurance.

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