By Hannah Priante, Leticia Neves, Israel Cruz

The labor reform included § 11 in article 899 of the Consolidation of Labor Laws (“CLT”), allowing the replacement of the appeal deposit with a bank guarantee or insurance guarantee.

The appeal deposit is a legal obligation so that the appellant can partially guarantee the court to appeal against the decision that is unfavorable to him, thus seeking to avoid the filing of unnecessary or delaying appeals.

However, the fact that companies need to allocate capital due to the filing of appeals can be problematic, especially in times of crisis such as those that Brazil is currently experiencing.

Thus, the law sought to make the making of said deposits more flexible without, however, giving up the guarantee of execution.

However, this new scenario has created an environment of legal uncertainty, as in a recent decision the 2nd Panel of the Superior Labor Court (“TST”) decided not to accept the replacement of the appeal deposit by the surety bond due to the establishment of a validity period, under the understanding that the insurance could only be accepted if issued with an indefinite validity period or conditioned on the final resolution of the case.

The 6th and 8th panels of the TST understood differently, accepting the insurance guarantee regardless of the term, arguing that § 11 of article 899 of the CLT does not impose restrictions or limitations on the term of validity of the policy.

This situation has brought legal uncertainty to companies that use this instrument to obtain resources without making deposits. The effects of this procedure also result in commercial difficulties for companies, since in the Brazilian procedural system, setting deadlines for the duration of proceedings is a complex issue, which compromises the pricing of the guarantee service.

In a recent regulation, the TST decided to publish the Joint Act TST.CSJT.CGJT No. 1, of October 16, 2019, which established the requirements for the use of judicial guarantee insurance, as expressed in article 2, item XI, which specifies the need for an automatic renewal clause:

“Therefore, it will be the Insurer’s obligation to automatically renew the insurance guarantee policy for a period equal to that initially contracted, while the guaranteed legal proceedings last.”

Furthermore, under the terms of §1 of article 3 it is provided that:

“In addition to the requirements established in this article, the surety insurance contract may not contain a clause of exemption resulting from acts that are the exclusive responsibility of the policyholder, the insurer or both, nor a clause that allows its termination, even if bilaterally”

The act in question also states that the appellant or defendant must prove the renewal of the insurance or its replacement within 60 days before the end of the policy's validity period, under penalty of a claim being configured and the insurer being obliged to pay compensation.

It is also worth noting that the Ministry of Economy is planning to present a package of measures to encourage the creation of new jobs and inject financial resources into the market.

Among other actions, the project would authorize the replacement of amounts collected by employers as a deposit for appeals by judicial guarantee insurance, which would be immediately accepted by the judicial body, thus eliminating any discussion about whether or not to accept the insurance presented and, with this, new rules could be introduced for the acceptance of the insurance.

Finally, it is worth highlighting that according to studies by the Ministry of Economy, this package could release 65 billion Reais that are being held in the form of a recourse deposit.