ARTICLE
29 November 2024

Applying The Labor Reform To Ongoing Employment Contracts

MB
Mayer Brown

Contributor

Mayer Brown is a distinctively global law firm, uniquely positioned to advise the world’s leading companies and financial institutions on their most complex deals and disputes. We have deep experience in high-stakes litigation and complex transactions across industry sectors, including our signature strength, the global financial services industry.
On November 25, 2024, Brazil's Superior Labor Court (TST) ruled that the Labor Reform (Law 13,467/2017) had immediate effect on ongoing employment contracts...
Brazil Employment and HR

On November 25, 2024, Brazil's Superior Labor Court (TST) ruled that the Labor Reform (Law 13,467/2017) had immediate effect on ongoing employment contracts, but only to facts occurring after the law's effective date of November 11, 2017. The court reached this majority decision in a Repetitive Appeals Incident (IRR), establishing a binding precedent (Topic 23) to be followed by the entire Labor Justice system.

I. Case Study: Horas in Itinere

The judgment involved a worker from JBS S.A. in Porto Velho (RO), who sought payment for horas in itinere — the time spent commuting using company-provided transportation, which had previously been considered time at the employer's disposal, prior to the Labor Reform. When the Labor Law entered into force, this obligation was eliminated. The main issue at question was whether the new rule would apply to contracts established before the reform.

II. Third Panel Decision and Appeal to the Full Court

Initially, the Third Panel of the TST ruled that JBS should pay for the horas in itinere, determining that this right was part of the worker's legal patrimony, covering the entire contractual period from December 2013 to January 2018. However, JBS appealed, and the case was taken up by the Full Court of the TST due to its prominence, aiming to set a precedent for similar cases.

III. TST's Interpretation on Legislative Changes

The reporting judge, Minister Aloysio Corrêa da Veiga, argued that the changes introduced by the Labor Reform should be immediately applied to ongoing contracts, but only for facts occurring after the new legislation. The court's opinion states that, when contract conditions are derived from legal provisions, the new law applies to pending or future situations without affecting acquired rights.

The majority opinion emphasized that the constitutional principle of wage non-reduction protects only the nominal value of permanent installments, not the calculation method or variable benefits linked to future events. Thus, legal changes impacting variable payments are applicable to ongoing contracts.

I.V. Limitation of JBS's Liability

Under this interpretation, JBS was ordered to pay horas in itinere only up to November 10, 2017, the day before the Labor Reform came into effect. The decision also reinforces the application of this understanding to other changes introduced by the Labor Reform.

V. Binding Precedent and Divergences

The binding precedent established by the TST is as follows:

"Law No. 13,467/2017 has immediate application to ongoing employment contracts, regulating rights derived from laws whose triggering events occurred after its effective date."

The Superior Labor Court is composed of 27 Ministers; 25 participated in the judgment, with two absent. The vote was 15 to 10. While the majority concurred, the Vice-President, Minister Mauricio Godinho Delgado, argued that contracts predating the Reform should follow the previous rules, a position supported by the other nine ministers.

VI. Participation of Entities in the Judgment

Several entities participated in the judgment, including the National Confederation of Industry (CNI), the Confederation of Agriculture and Livestock of Brazil (CNA), the National Confederation of the Financial System (CONSIF), and the Unified Workers' Central (CUT).

This decision marks an important milestone in the interpretation of the Labor Reform, providing greater legal certainty for both employers and employees regarding the application of new rules to ongoing employment contracts.

Visit us at mayerbrown.com

Mayer Brown is a global services provider comprising associated legal practices that are separate entities, including Mayer Brown LLP (Illinois, USA), Mayer Brown International LLP (England & Wales), Mayer Brown (a Hong Kong partnership) and Tauil & Chequer Advogados (a Brazilian law partnership) and non-legal service providers, which provide consultancy services (collectively, the "Mayer Brown Practices"). The Mayer Brown Practices are established in various jurisdictions and may be a legal person or a partnership. PK Wong & Nair LLC ("PKWN") is the constituent Singapore law practice of our licensed joint law venture in Singapore, Mayer Brown PK Wong & Nair Pte. Ltd. Details of the individual Mayer Brown Practices and PKWN can be found in the Legal Notices section of our website. "Mayer Brown" and the Mayer Brown logo are the trademarks of Mayer Brown.

© Copyright 2024. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More