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Supreme Court Ruling May Validate Unrestricted Replacement of Workers with Employment Contracts by PJs, With Serious Risks to Social Rights and Social Security, Warns Prosecutor.
A future decision from the Supreme Court (STF) regarding “pejotização” may represent the biggest threat to workers’ rights since the Labor Reform. Labor prosecutor Cássio Casagrande points out that validating the unrestricted exchange of the CLT regime for Legal Entity (PJ) contracts would be a “catastrophe” for Social Security and for the entire protection system guaranteed by the Constitution. The discussion has gained so much importance that all rulings on the subject have been suspended by Minister Gilmar Mendes, awaiting a single decision from the Court.
The Origin of the Threat: The 2018 Decision That Opened the Gap
All began in 2018. After the Labor Reform of 2017, the STF was questioned about the outsourcing of core activities and declared it constitutional. The problem, according to prosecutor Cássio Casagrande, was the thesis established by the Court. The text stated that “outsourcing or any other form of division of labor“ is lawful.
This expression, which was not under discussion, was added. Company lawyers began to use this gap to defend the legality of pejotização. Consequently, they started appealing to the STF against Labor Court decisions that recognized the employment relationship in PJ contracts, and the Supreme Court began to side with the companies.
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Outsourcing and Pejotização: Understand the Crucial Difference
The two concepts are distinct. In outsourcing, one company hires another specialized company that has its own workers with employment contracts.
In pejotização, what occurs is the hiring of a worker as if they were a company (PJ or MEI). Often, this is a fraud to mask a real employment relationship. If the worker has set hours, follows orders, and is subordinate, the 3rd article of the CLT determines that the contract must be for employment. In this case, pejotização serves solely to avoid paying Severance Indemnity Fund, 13th salary, and social security contributions.
The Consequences of Replacing CLT with PJ: An Announced Catastrophe
The replacement of CLT workers with PJs removes all social rights. According to the prosecutor, what began with the annulment of employment links for high-income workers now applies to everyone. The consequences are devastating:
- Social Security: The company does not withhold the social security contribution from the PJ worker. This generates a billion-dollar shortfall, with studies already pointing to losses of R$ 60 billion.
- Women Workers: Women hired as PJs are fired upon pregnancy, losing their job security. Additionally, it becomes almost impossible to establish sexual harassment, as a “company” cannot be harassed.
- Ending Social Rights: Quotas for people with disabilities and apprentices are eliminated, as they only apply to employment contracts. The anti-discrimination law also ceases to apply to PJs.
- Severance Indemnity Fund: The FGTS, which finances public policies such as affordable housing, may also collapse.
The Proposal to Remove Cases from the Labor Court
Even more seriously, Minister Gilmar Mendes suggested that cases regarding pejotização be judged by the Common Court, rather than by the Labor Court. For Cássio Casagrande, the proposal is “absurd” and unconstitutional.
Article 114 of the Constitution is clear in defining that the Labor Court adjudicates controversies related to employment relationships. This jurisdiction has existed for 80 years. The change would prevent workers from even claiming their rights in the appropriate forum.
Brazil Going Against the Tide: The Advanced World Protects Workers
While Brazil discusses further flexibility, other countries are taking the opposite route. The European Union, for example, issued a directive to presume the employment relationship of app delivery workers.
In Spain, England, and Germany, legislation has been created to protect pseudo-autonomous workers. The International Labour Organization (ILO) also recommends that reality prevails over the label of the contract. Brazil, with this proposal, is moving against the civilized world. A public hearing on the subject is scheduled for October 6 at the STF.
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