‘Pejotização’ advances in STF decisions and generates reaction from

Representatives of the Public Ministry of Labor and the Labor Court, in addition to popular movements, academics, lawyers and unions have been working together to reverse a recent offensive launched by companies in the Federal Supreme Court (STF) to guarantee the hiring of employees without having to sign the work card, through means such as “pejotização”. The term refers to the practice of workers opening a company and being hired as a legal entity, without basic labor rights.

The reaction comes after an explosion in the number of cases in the Court asking for the review of labor court decisions that condemn fraud in hiring that does not respect the CLT. As recently announced by the Estadão, more than half of the 6,148 complaints filed with the Supreme Court this year are actions by companies questioning Labor Court decisions. There are a total of 3,334 appeals of this type filed with the STF from January to November, a number that has been increasing every year since the labor reform was approved by the Michel Temer government.

In view of this, 63 entities published an open letter on the 13th in defense of the actions of the Labor Court to, among other things, identify and condemn cases of labor fraud. The groups continue to mobilize in an attempt to raise awareness of the Supreme Court, which has already received a request from the Attorney General’s Office (PGR) to analyze these practices that have been adopted by employers across the country and adopt a uniform understanding.

The National Association of Labor Justice Magistrates (Anamatra), in turn, has been holding meetings with STF ministers to raise awareness about the issue and aims to speak to all members of the Court about the subject.

Experts in the field consulted by the Brazil in fact see behind this scenario an undue expansion of the STF’s interpretation of work outsourcing, in addition to the improper use of complaints, which are a type of resource that can only be used in very specific cases in the Supreme Court. In practice, when using this mechanism, employers end up skipping several stages of the judicial process to obtain a decision from the Federal Supreme Court, which is the last instance of the Judiciary, being above the Labor Court.

For these experts, the risk is that, in practice, the Supreme Court’s decisions that invalidate labor fraud trials could make the work of the Labor Court unfeasible and deny workers fundamental social rights.

“The Federal Supreme Court has accepted these complaints, in my opinion, completely improperly and has declared that these decisions violate a decision of the STF, which authorized outsourcing on a broad basis. But this has nothing to do with outsourcing, it is a fraud in the employment relationship”, says Jorge Luiz Souto Maior, professor of Labor Law at the University of São Paulo (USP).

Supreme Court and labor reform

The imbroglio that worries experts today began after the sanction of the Michel Temer government’s labor reform in 2017, which was endorsed the following year in a judgment by the Federal Supreme Court that authorized the outsourcing of all activities of a company, the so-called activity- end. In practice, the decision allows the employer not to have any employee formally hired via CLT and to have all of its workforce hired from a service provider.

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Over time, companies took advantage of the changes brought about by the reform to increasingly hire workers as service providers, through individual companies, or even through other hiring mechanisms, such as cooperatives.

Many of these workers ended up appealing to the Labor Court, which, in several cases, recognizes pejotização as hiring fraud and understands that there is a labor relationship between the employee and the employer. To try to reverse this, companies began to take advantage of a method that until then had not been so widely used: complaints to the STF.

Some of the court’s ministers have adopted the understanding that, by releasing unrestricted outsourcing and other points of the labor reform, these other forms of contracting would also have been authorized and that the Labor Court would not be acting in accordance with this, which would legitimize the Supreme Court to decide through complaints.

“The highest body of specialized justice, the TST [Tribunal Superior do Trabalho], has placed some obstacles in political options endorsed by the Executive and Legislative branches. In the end, the social engineering that is sought and has been intended to be carried out is nothing more than an innocuous attempt to frustrate the evolution of the means of production”, said minister Gilmar Mendes in a session of the Second Panel of the STF on October 17 .

In another case, Minister Alexandre de Moraes sent a case to the common court in which a Cabify driver had obtained recognition of his employment relationship in the Labor Court. The company appealed to the Supreme Court and the minister understood that its relationship with the driver would be a commercial relationship and, therefore, it would not be possible for the Labor Court to act.

Other ministers, in turn, have understood that there is no constitutional claim to discuss this issue in the Supreme Court and have rejected these appeals. In practice, the situation has caused legal uncertainty, which led the then Attorney General of the Republic, Augusto Aras, to propose an Assumption of Jurisdiction Incident in September of this year.

This incident is a procedure for the issue to be taken up for debate by the STF plenary, and the ministers can reach a single decision on how the Judiciary should treat cases of pejotização and the complaints that have reached the Court. The trial for this incident, however, does not yet have a date and awaits a definition from the Supreme Court itself.

When proposing this debate, Aras pointed out that, from 2019 to June this year, the Labor Court received more than 780 thousand cases of employees requesting recognition of employment relationships and that it is necessary to have a uniform understanding so as not to congest the Supreme Court with these cases.

“The numbers indicate the great potential for expanding the discussion in the STF, if the procedural path is cut short in view of the extension of precedents for the purposes of complaints”, says a text released by the Attorney General’s Office at the time.

The role of the Labor Court

For the president of the National Association of Labor Justice Magistrates (Anamatra), Luciana Paula Conforti, the Supreme Court’s judgment on outsourcing not only did not address pejotization, but many STF decisions have failed to consider the role of the Labor Court in verify, case by case, the situation of employees.

“On the issue of outsourcing, the law itself states that certain requirements must be observed when contracting this outsourcing: the company must have economic support, be able to comply with this outsourcing, and these requirements have not been addressed by the Supreme Court”, explains Luciana.

“We have millions of employment relationships in Brazil, some will fall within that precedent (outsourcing) without any problem, or are covered by the law in accordance with the labor reform, and there is nothing that can be done. But when we see that, although the contract provides for that type of contracting (outsourcing), in practice, that did not occur, it is the role of the Labor Court to say that the form is not correct and that, therefore, the worker has the right to , and funds within its competence”, continues the judge.

For her, the simple argument that there are formalized contracts between two companies cannot be enough to make it impossible for the Labor Court to verify the hiring.

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In the same vein, the president of the National Association of Labor Prosecutors (ANPT), José Antonio Vieira, understands that the review of Labor Court decisions by the Federal Supreme Court can have serious social consequences.

“The review of decisions by the Labor Court, legitimately made in the exercise of its constitutional competence, will lead to the evasion of fundamental social rights, typical of employment relationships, not extended, in principle, to other employment relationships, such as prior notice, the Service Time Guarantee Fund (FGTS), vacations, the thirteenth salary, working hours limitation and inclusion in the social security protection regime”, stated the president of ANPT.

Alarmist speech

Another point that draws the attention of authorities and experts on the subject is the reproduction of an alarmist discourse that, without the relaxation of hiring standards, Brazil would crowd out more modern businesses, such as transport applications.

For the president of ANPT, this vision is distorted and only serves the interests of employers. “In Brazil, however, there is a discourse, which reflects a world view and has served exclusively the interests of capital, in the sense that legislative rigor could lead large companies to withdraw from the country, when, in fact, what will determine their permanence among us is the expectation that, considering the extent of the consumer market, they will make a profit, even if they are subject to labor and social charges”.

The president of Anamatra recalls that, in several developed countries, labor ties between app drivers and companies have been recognized, as in Europe and in some states in the United States, such as California. She also remembers that the CLT itself has been updated over the years and provides for partial or even separate employment contracts, which, in her view, could be used in the case of transport applications.

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“There are many arguments that our legislation is obsolete, but based on studies and research we see that this is not the case. In fact, it is a dispute that will always exist regarding those who understand that the government should not intervene in labor relations and those who understand that there must be a minimum of intervention, especially because our Constitution provides for this.

Editing: Geisa Marques