What types of covenants can be recognized in Brazil?
Non-compete, intellectual property (IP), confidentiality, and non-disclosure agreement (NDA) clauses are allowed in Brazil and can be included directly in the agreement. Please note that if you would like to add an extra agreement, you will need to pay for the translation services and our legal team will have to approve it before we can extend it for signature.
An NDA (non-disclosure agreement) can be executed directly with your supported employee as a side agreement. It is critical to note that we cannot guarantee the enforceability of this document under Brazilian regulations. Furthermore, signing side agreements directly with the supported employee increases the risk of co-employment claims and the likelihood of triggering permanent establishment. In our experience, the risk is fairly low, but it does exist. It is advisable that all agreements in Brazil have a corresponding Portuguese translation.
Can these covenants be enforced? How are they enforced?
Velocity Global, as the legal employer of record, has the right to enforce confidentiality and intellectual property (IP) assignment. That said, IP will be transferred to the client via the ownership clauses outlined in our Standard of Work (SOW). Any IP assigned as part of the agreement is then provided to the client entity via that language.
Do employees need to be compensated in return for restrictive covenants?
The common practice in Brazil is to charge one or two months’ salary for these types of clauses. It is not recommended to set this at a higher amount as this can be a liability because the employee can make a legal claim stating we are denying the employee the right to work by adding an amount they cannot pay.