Mutual-Agreement Termination in Brazil: How the Labor Agreement Works

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

Mutual-agreement termination, provided for in Article 484-A of the CLT (Brazil’s Consolidation of Labor Laws) since the 2017 Labor Reform, allows employee and employer to end the employment contract by mutual consent.

Before this change, a worker who wanted to leave a job without cause faced a dilemma: resign and give up part of their rights, or wait to be dismissed.

Mutual-agreement termination, also known as termination by mutual agreement, entered Brazilian law through Article 484-A of the CLT, added by Law 13.467/2017 (the Labor Reform). The new mechanism created a third path, but it comes with specific conditions that deserve careful attention.

What Article 484-A of the CLT Says

Article 484-A provides that an employment contract may be ended by agreement between employee and employer. Under this arrangement, the parties must put the agreement in writing, and the worker is entitled to a set of payments calculated differently from those under other types of termination.

The rule was created to curb irregular practices that were already common in the job market, such as the so-called “arranged dismissal”: the employer would dismiss the employee and pay everything as if it were an ordinary dismissal, but then receive part of the money back. Termination by mutual agreement gives both sides a lawful way to part on satisfactory terms without circumventing the law.

“The termination agreement must be in writing, signed by both employee and employer, and may be ratified before the employee’s labor union or in the Labor Court, providing greater legal certainty to both parties.”

What Rights the Worker Receives in a Mutual-Agreement Termination

The termination payments in a mutual-agreement termination follow specific rules, different from both dismissal without cause and an ordinary resignation. Here is what the worker receives:

Advance Notice Reduced by Half

In a mutual-agreement termination, the worker is entitled to only 50% of the advance notice, whether it is paid out or worked. This means that if the notice period would have been 30 days, the employee receives the equivalent of 15 days. This reduction is one of the points that set this type of termination apart from dismissal without cause, in which advance notice is paid in full.

FGTS Penalty Reduced to 20%

In a conventional dismissal without cause, the employer must pay a 40% penalty on the FGTS (Brazil’s Severance Indemnity Fund) balance. In a mutual-agreement termination, that penalty drops to 20%. This is a concession the worker makes in exchange for being able to access part of the fund.

Withdrawal of 80% of the FGTS Balance

Although the penalty is lower, the worker may withdraw up to 80% of the total balance deposited in their FGTS account. The remaining 20% stays locked. This ability to withdraw is an advantage over an ordinary resignation, in which the worker has no right to withdraw the fund.

Other Labor Payments

Accrued and proportional vacation pay, plus the constitutional one-third vacation bonus, are paid as usual. The proportional 13th-month salary is also owed. None of these payments is reduced in a mutual-agreement termination.

Is the Worker Entitled to Unemployment Insurance?

No. This is one of the main limitations of termination by mutual agreement: the worker is not entitled to unemployment insurance. The reasoning behind the law is that the benefit exists to support people who were dismissed involuntarily. Because a mutual-agreement termination presupposes the will of both parties, the legislature concluded that unemployment insurance would not apply.

This point is critical to the decision. A worker who needs unemployment insurance to get by while looking for a new job should work out whether a mutual-agreement termination is really worth it.

Pros and Cons: When It Is Worth Accepting

A mutual-agreement termination can be advantageous in some situations and disadvantageous in others. It is essential to consider your individual circumstances before signing any document.

When Can a Mutual-Agreement Termination Be Attractive?

For a worker who already has another job lined up, termination by mutual agreement can be a good way out: they can access part of the FGTS and receive their termination payments without having to wait for a dismissal. For someone with personal projects or a business to launch who does not depend on unemployment insurance, the FGTS withdrawal can be valuable start-up capital.

For the employer, the advantage is that the FGTS penalty falls from 40% to 20%, which can be economically significant, especially in long-term contracts with a high fund balance.

When Can a Mutual-Agreement Termination Be Disadvantageous?

For a worker with no guaranteed income after leaving the job, giving up unemployment insurance can be harmful. It is also worth remembering that the shorter advance notice means less time employed and less salary received during that period.

We recommend that workers seek specialized legal advice before accepting any proposal for termination by mutual agreement. In many cases, what looks like an advantageous offer may hide unfavorable terms. You can contact us through our website at cassiusmarques.adv.br/contato for an evaluation of your case.

Frequently Asked Questions About Mutual-Agreement Termination

Can the employee back out of the agreement after signing?

Once the mutual-agreement termination document is signed, the termination agreement is valid and binding. However, if the worker can prove that they signed under duress, mistake, or fraud, it is possible to seek to have the agreement declared void in the Labor Court. Our advice is never to sign documents under pressure or without fully understanding the terms.

Does the union have to ratify the agreement?

The CLT does not expressly require union ratification for a mutual-agreement termination to be valid. Even so, ratification by the union or the Labor Court is strongly recommended, because it gives the worker greater legal certainty and reduces the risk of future challenges to the validity of the act.

Can a worker with job tenure protection agree to a mutual-agreement termination?

The law does not expressly prohibit mutual-agreement termination for workers with job tenure protection (such as pregnant employees, members of the CIPA (Internal Accident Prevention Committee), or union leaders). However, labor case law examines these cases carefully, checking whether the employee acted of their own free will, especially because tenure protection is a protective right that cannot easily be waived.

In situations involving job tenure protection, it is even more important to have the guidance of a labor lawyer. Learn more about our services at cassiusmarques.adv.br/áreas-de-atuação.

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