A new index was set to adjust the amounts involved in labor lawsuits pending before the Brazilian Labor Courts, which will make them even more onerous for the debtors. At a trial held on August 4, 2015, the Superior Labor Court, following a decision of the Federal Supreme Court, ruled that the credits of labor lawsuits will now be adjusted according to the inflation, and no longer by the Referential Rate (Taxa Referencial - TR).

The Special Broad Consumer Price Index [Índice Nacional de Preços ao Consumidor Amplo Especial - IPCA-E], calculated by the Brazilian Institute of Geography and Statistics [Instituto Brasileiro de Geografia e Estatística - IBGE], was chosen by the Superior Labor Court to adjust labor debts.

In the same decision, the Labor Court also ruled that the index change does not apply to consolidated legal situations, that is, lawsuits (either pending or dismissed) in which payments have been made and the obligation has already been fulfilled and eliminated, even if partially. However, as of June 30, 2009 — date when the provision (article 1-F of Law 9494/1997, introduced by Law 11960/2009) rendered unconstitutional by the Federal Supreme Court took effect, which decision was upheld by the Superior Labor Court —, the IPCA-E must be applied to lawsuits pending before the Labor Courts that do not fit the above-mentioned situations. 

It is believed that this decision will substantially increase the amounts paid in labor lawsuits, given that in 2014 the TR was only 0.8% whereas the IPCA-E exceeded 6% and is expected to top 7% in 2015. There is no doubt the companies will feel the biggest impact of this decision, as they usually are the debtors in labor lawsuits.  

It is worth pointing out that now the labor debts will not only be adjusted by the IPCA-E, but also accrue 1% default interest per month, from the date the lawsuit was brought until the date the execution is paid or secured.

Roughly speaking, it means that a labor lawsuit filed on 2/1/2010, whose historic amount is R$ 10,000.00 and whose execution was paid or secured on 7/1/2015, would be worth R$ 17,149.46, considering the TR. But, after the Labor Court's decision, such a lawsuit would be worth R$ 23,440.18, considering the IPCA-E. That is, the variation in this case exceeded 36%.

The Superior Labor Court's decision will force companies to go through their provisions for labor lawsuits, rethink their strategy to handle suits, and promptly adjust their accounts, for them not to be surprised by execution amounts way higher than their provisions.  The year of 2015 will most definitely be remembered by Brazilian companies for the challenges overcome, expenses and costs reduced, and especially for people and business management.

Finally, considering the new index (IPCA-E) set by the Labor Court and the 1% default interest per month, it is hard not to conclude that labor lawsuits will be encouraged, so that the investment market itself will view this situation as an "apparent competitor" among investment initiatives.

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