In recent months, the Brazilian labor law scenario has undergone significant changes, especially with regard to monetary correction and interest applicable to labor debts. These changes directly impact employers, requiring more strategic management of labor liabilities and careful adaptation to the new rules established.

TST Decision and Legislative Changes

The recent decision of the Specialized Subsection 1 for Individual Disputes (SDI-1) of the Superior Labor Court (TST), issued in October 2024, brought clarity to the rates applicable in different phases of labor lawsuits. In the judgment of Appeal for Review No. 713-03.2010.5.04.0029, the TST established the following criteria:

·Pre-Judicial Phase: The monetary update will be carried out by the IPCA, plus interest on arrears in accordance with article 39, caput, of Law 8,177/91.

· Judicial Phase until August 29, 2024: Monetary correction and interest must be calculated based on the Selic Rate.

· Judicial Phase starting August 30, 2024: With the validity of Law 14,905/2024, monetary correction will be carried out by the IPCA, and interest rates will be defined by subtracting the Selic rate from the IPCA, which may result in a zero rate if inflation exceeds the basic interest rate.

This decision follows the guidance of the Federal Supreme Court (STF) in ADCs 58 and 59, which declared the Reference Rate (TR) as an index for adjusting labor debts unconstitutional. The STF set the IPCA for the pre-judicial phase and the Selic Rate for the judicial phase, until specific legislation regulates the matter.

Impacts for Employers

These changes significantly affect the way companies deal with their labor liabilities. The main impacts include:

1. Review of Liabilities: It is essential that employers reassess their accounting provisions to adapt them to the new indices and application dates.

2. Out-of-Court Settlement Strategy: The application of the IPCA in the pre-judicial phase may encourage the conclusion of agreements before filing lawsuits, mitigating additional costs with the incidence of the Selic.

3. Adequacy of Systems and Controls: Companies must adjust their financial and compliance systems to ensure that the new criteria are followed correctly, avoiding future inconsistencies or legal disputes.

How We Can Help:

Our firm is fully up to date on recent legislative and case law changes and is prepared to guide employers through all aspects of this transition. We offer comprehensive support for:

· Analysis and Review of Labor Liabilities: We adjust your accounting provisions to reflect current correction and interest criteria, ensuring accuracy and compliance.

· Development of Agreement Strategies: We identify opportunities to resolve disputes out of court, reducing costs and risks for your company.

· Personalized Accounting and Legal Consulting: We integrate legal and financial knowledge to offer solutions adapted to the needs of your business.

With the constant changes in the work environment, having a specialized team makes all the difference in protecting your assets and optimizing your management. We are available to clarify any questions and ensure that your company complies with the new regulations, mitigating risks and taking advantage of strategic opportunities.

Contact us to schedule a consultation and understand how we can help your company adapt to the new labor legal scenario safely and efficiently.