What is at stake in the STF judgment on unjustified dismissals

The STF (Federal Supreme Court) may conclude in the first half of 2023 a judgment that has been dragging on for 25 years and with possible impacts on relations between companies and employees in Brazil.

In one of the possibilities at the table, you can prohibit unjustified dismissals, that is, those that do not have a reason based on economic issues (of the company) or behavioral issues (of the employee).

This possibility is not, however, under discussion in the STF.

What ministers have been discussing since 1997 in ADI (Direct Action of Unconstitutionality) 1625 is the legality of a decree signed by then-president Fernando Henrique Cardoso (PSDB) canceling Brazil’s adherence to Convention 158 of the ILO (International Labor Organization).

The convention defines criteria for terminating employment contracts on the initiative of the employer. In one of its articles, Article 158 provides that: “an employee’s employment relationship shall not be terminated unless there is a justifiable reason for doing so related to his capacity or behavior or based on the operating needs of the company, establishment or service.”

At the STF, the trial was resumed last year, but again paralyzed because Minister Gilmar Mendes asked for more time to vote. The expectation that the trial will be completed before the final half of the year exists because in 2023 a new regulatory deadline for requests for review (as this procedure is called in which the minister asks for additional time to analyze cases).

If a minister does not return or vote within 90 days, the process is automatically released to the agenda. The new deadline takes effect on February 1 (the Court has suspended procedural deadlines until January 31).

In the case of ADI, therefore, if Gilmar Mendes does not release the process by the end of April, it will be automatically released to the agenda and then it will depend on President Rosa Weber to open the virtual trial session or take the case to plenary.

What the Supreme Court can decide

There are three main possibilities on the table, based on the votes cast so far. As there are still votes from three ministers –Alexandre de Moraes, Kassio Nunes and André Mendonça– and those who have already expressed themselves can change their understandings until the end, the final result remains unpredictable.

Ministers Rosa Weber and Ricardo Levandowski and former minister Joaquim Barbosa considered that FHC’s decree would need to have passed through the National Congress to be valid and, by not doing so, the publication is unconstitutional.

What happens if Convention 158 comes into force again

If this understanding is the majority, the lawyer Luiz Antonio Franco, labor partner of the Machado Meyer office, sees still other uncertainties. One possibility would be to call into question all recent unfair dismissals.

“Without modulation, all dismissals of the previous two years could be discussed”, he says.

Modulation is the step in which the STF establishes limits to apply a defined understanding in a judgment. The period of two years is the so-called statute of limitations, the maximum time, from the end of the contract, for a worker to discuss rights in court.

Lawyer Cassiano D’Angelo, a labor partner at the Guadêncio office, considers it unlikely that the Supreme Court will finalize this judgment without a modulation. These parameters may include, for example, applying the rule only to large companies, organized careers or from a certain number of employees.

It is also possible, says the lawyer, that ministers exclude retroactivity from the norm, and the obligation of justification would only be valid for future dismissals.

In the assessment of Luiz Antonio Franco, the resumption of the validity of Convention 158 could still generate a second discussion, which may or may not be contemplated by the STF already in the judgment. The doubt refers to the framework of international treaties.

Currently, the understanding is that it is a supralegal norm and, in human rights issues, it has the same weight as the constitutional text. When this case began to be discussed, however, the STF itself understood that there was a need for a complementary law to regulate what was not yet provided for in the legislation (the convention would only be valid if the law created the figure of dismissal without justification).

What happens if Congress has to review the validity

Another possibility is the partial admission of the action, according to which the National Congress would need to analyze the decree signed by FHC. Minister Dias Toffoli and former Minister Nelson Jobim voted in this sense.

In this case, the doubt would be related to the interval between the decision of the STF and the conclusion of the analysis by the deputies and senators.

“Until the validation in Congress, the convention would be in effect and then we would also have the effects of two years of dismissals while the discussions run.”

What happens if the stock is overturned

So far, only one vote, by former Minister Teori Zavascki, has proposed that the future effectiveness of understanding this type of decree requires analysis by the National Congress. That is, the cancellation of adhesion to an international treaty depends on the assessment of senators and deputies, but only for new conventions.

With that, the break with Convention 158 would be maintained and the layoffs continue as they are today.

Dismissal with and without just cause or without reason; what are the differences

Dismissals for just cause are provided for in the CLT (Consolidation of Labor Laws) in the event of serious misconduct committed by the employee.

For the worker, it also results in the suspension of rights – he loses the right to a 40% fine on the FGTS (Service Time Guarantee Fund), vacation balance and 13th proportional or prior notice. It also does not access unemployment insurance.

What does ILO Convention 158 say?

The text approved at the International Labor Conference held in Geneva (Switzerland) in 1982 deals with “termination of the employment relationship by initiative of the employer” and, according to a survey by the CNI (National Confederation of Industry) in 2019, was adopted by 35 countries.

The central point of the rule provided for in the convention deals with the justification for dismissal. In behavioral matters, says lawyer Luiz Antonio Franco, the idea is that the employee has time to defend himself and even change his behavior with regard to productivity and attendance, for example.

On the economic front, the justification would be a little simpler, since it would be enough to demonstrate the financial unfeasibility of keeping that employee.

The rule also provides that some situations cannot be considered reasons for dismissal, such as race, color, sex, marital status, family responsibilities, pregnancy, religion, political opinions and social origin.

Union membership or participation in union activity, being a candidate for workers’ representative or filing a complaint against an employer for alleged violation of law or regulation are also on the veto list.