The decision handed down by the Federal Supreme Court(STF) in the judgment of Topic 725 of the General Repercussion and the Argument for Non-Compliance with Fundamental Precept (ADPF) 324, marks a crucial point in the definition of labor relations and their legal limits in Brazil. In a scenario in which companies are increasingly seeking alternatives for hiring service providers, it is important to explore how these various forms impact the relationship between companies and workers and to analyze the implications of the STF’s current understanding for the business environment.

Hiring workers through Legal Entities (PJs) instead of the permanent employment format has become a frequent alternative in the labor market. This practice allows companies to hire service providers in a more flexible and less costly way compared to the traditional employment model. For workers, this model can offer greater autonomy and earning potential, since the tax regime can be more favorable depending on the context. However, a great deal of caution and care is needed to ensure that the premises that accompany this relationship are not misrepresented.

The Labor Courts have raised a very strong banner against Pejotização, the name given to employment relationships that have all the characteristics of an employment relationship, but are “masked” by hiring a Legal Entity. This can raise questions about the real nature of the relationship between the parties and whether it is being used to circumvent labor legislation.

The STF’s decision in Theme 725 and ADPF 324 established a fundamental understanding of the legality of outsourcing and other forms of division of labor between legal entities. The Court recognized the possibility of contracting services on a broad basis, without necessarily establishing an employment relationship. This understanding is crucial for this type of alternative, as it validates the practice from a legal perspective, as long as the provisions of current legislation are respected.

The STF, in the recent judgment in Claim 67976/SP, brought precisely this panorama to light when it ruled out the recognition of an employment relationship. In the specific case of this ruling, the Regional Court had initially recognized an employment relationship, claiming that the contract did not reflect the reality of the employment relationship and that “pejotização” was being used to camouflage an employment relationship.

However, the STF, based on the binding thesis established in theme 725 of the general repercussion, and referring to the decision of Minister Alexandre de Moraes, which mentions that citizens’ freedom of productive organization and the existence of other forms of organization are lawful, has ruled out the recognition of a relationship that is so protected by the labor courts. And this has been the understanding expressed by the Supreme Court in the majority of cases, recognizing this, as well as other forms of employment relationship, as valid as long as the specific legislation is observed, privileging the freedom of negotiation between the parties and the productive organization.

The STF’s decision has significant implications for companies, especially with regard to contract management and the structuring of labor relations. Among the main impacts are:

(a) greater contractual flexibility: companies now have greater freedom to structure their working relationships through contracts that do not necessarily create employment ties. This can lead to greater flexibility in hiring and managing staff, allowing them to adapt more quickly to changes in the market;

(b) cost reduction: by using legal entity contracting, companies can reduce costs related to labor and social security charges. This can be especially advantageous in sectors where flexibility and efficient resource management are crucial for competitiveness;

(c) the need for compliance: with the recognition of the validity of this form of contracting, it is essential that companies ensure that their contracts comply with the relevant legislation, avoiding legal risks and possible labor disputes, since this greater flexibility also brings less control by the company over the way the service is performed, timetables, impersonality, among others;

(d) re-evaluating business models: companies need to assess whether this is the best strategy for their operation. The STF decision supports the practice, but improper use can lead to legal challenges, especially if there is evidence of fraud in the contracting process.

In this way, the STF’s decision on alternative forms of hiring reaffirms the importance of adapting business practices to the new legal guidelines. While it offers companies greater freedom and flexibility, it also places an additional responsibility on them to ensure that their practices are in line with the legislation and principles established by the Supreme Court. The balance between business efficiency and legal compliance will be crucial to the success of strategies involving the future of labor relations.

By: Luiz Francisco Nunes Bandeira and Ariel Rocha Zvoziak
Labor Law | CPDMA Team