Brazil: Labor rights and obligations during judicial recovery

Under Brazilian Law No. 11.101/2005, judicial recovery is a mechanism designed to allow companies in financial crisis to reorganize debts and preserve operations, jobs, and creditor interests without automatically terminating employment contracts.

Labor credits existing at the time of the judicial recovery filing, including unpaid amounts, are subject to the reorganization rules. However, wages and obligations arising from work performed after the filing date remain current obligations of the company. Law 11.101 provides specific treatment for these credits, generally setting a one-year limit for payment within the plan, subject to certain legal exceptions.

A recent case involving JMT Service in Rio Grande do Norte illustrates these principles, as the company continues operations while managing its legal processes regarding labor obligations.