Brazil: Supreme Court Justice Maintains Suspension of Indexer on Labor Debts

This complete global solution for HR professionals combines custom research, strategic white papers, country primers, webinars, and the expert guidance you’ve come to expect from...

By Ed Taylor

Oct. 17—For the second time this year a Brazilian supreme court justice has issued an injunction suspending a labor court ruling that raised the costs for companies appealing labor court rulings.

It is common for companies in Brazil to appeal labor court rulings that go against them, and these appeals can drag on for years. Over this period, the courts correct the charges the companies are appealing for inflation. In August 2015, Brazil's superior labor court replaced the inflation index that had been used to adjust company labor court debts (the “reference rate”) with another tied to the consumer price index. This amounted to a significant increase in the cost for companies: in 2015, for example, the reference rate rose by 1.1 percent, the consumer price index by 10.70 percent.

Attorney Daniel Chiode of Mattos Engelberg Advogados told Bloomberg BNA that he has six cases in which he is challenging the use of the new indexer, including one where the extra cost for his client is over $1 million.

Injunctions Ignored

In October 2015 and July 2016, supreme court justice Dias Toffoli issued injunctions suspending use of the new inflation index.

Regional labor courts, however, have ignored the supreme court injunctions and have continued to use the new indexer with a resulting 40 percent increase in the costs to companies with labor court debts. Among the courts ignoring the injunctions are the labor courts of Brazil's two most important states, Sao Paulo and Rio de Janeiro, home to a majority of the multinational firms present in Brazil.

On Oct. 4, Toffoli issued yet another injunction for one of Brazil's largest food companies, Brazil Foods (BRF). This time, however, the justice said that all labor courts at all levels must use the old indexer.

‘All Judges at All Levels'

“Toffoli's injunction emphasized the extent of his previous decision, stating that all judges at all levels, including labor court judges, must follow his 2015 injunction,” said BRF's attorney Mauricio Pessoa of the law firm Pessoa Advogados in an e-mail to Bloomberg BNA Oct. 11.

According to attorney Andre Villac Polinesio of the firm Peixoto & Cury Advogados, however, some labor court judges have partially circumvented Toffoli's injunction by claiming they can apply the new indexer in cases that began before Toffoli's first 2015 injunction.

To contact the reporter on this story: Ed Taylor in Rio de Janeiro at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

For more information on Brazilian HR law and regulation, see the Brazil primer.

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.