Supreme Court forms majority to overturn TR as an index for labor claims.

With eight votes in favor, the STF (Supreme Federal Court) formed a majority to declare the TR (Reference Rate) inadequate for the correction of labor credits and appeal deposits within the scope of Labor Courts.

The trial resumed this Thursday (27), but a request for review by the Court's president, Minister Dias Toffoli, postponed the final decision. There is no date for the conclusion.

Although most agreed on the unconstitutionality of the TR (Reference Rate) as an index for labor claims, the court was divided on the new index to be applied.

Three justices voted with the rapporteur, Justice Gilmar Mendes. According to him, the Selic rate should be used from the date of the formal summons – when the defendant is formally charged.

In the pre-trial phase, according to Gilmar, the same monetary correction indices in force for civil judgments in general should be used: the IPCA-E (Special Broad National Consumer Price Index).

Four ministers defended only the IPCA (Brazilian Consumer Price Index).

Entities representing banks and companies in the technology and communications sectors argued in ADCs (direct actions of unconstitutionality) that the STF (Supreme Federal Court) should confirm the validity of the TR (Reference Rate) in the adjustment of labor credits.

Anamatra (the association of labor judges) and labor unions defended the adjustment using the IPCA-E index, arguing that the legislation in question violates workers' rights.

The IPCA-E (Extended National Consumer Price Index) is at 1.92%, accumulated over the last 12 months, up to June. Labor adjustments are subject to an additional 1% monthly interest, which amounts to 12% annually.

The Selic rate—the basic interest rate of the economy—is at its lowest historical level, at 2% per year.

At the end of June, Gilmar provisionally ordered the suspension of all ongoing proceedings in the Labor Courts involving discussions about which index to apply. He later explained that the decision did not halt the progress of the cases.

The minister began his speech on Wednesday by acknowledging the "historical complexity" of the case and the "legal controversy." According to him, Congress creates laws and the Judiciary repeatedly denies their application.

He cited a series of precedents from the Supreme Federal Court (STF) regarding various aspects of the use of the TR (Reference Rate), whether deeming its use unconstitutional or constitutional.

"It's a jumble of letters," said Gilmar. "Every time we have to analyze what is most appropriate. We need to rethink this whole universe [of indexes] that causes legal uncertainty."

In the name of legal certainty, the minister stated that the court should not only reject the TR (Reference Rate). It is necessary to indicate which index to apply. In this sense, he pointed to the Selic rate.

Gilmar established a legal precedent. According to him, payments already made using the TR, IPCA-E, or other indices are valid and should not be re-litigated.

According to Gilmar, ongoing or initial discovery phases of legal proceedings should be subject to the application of the Selic rate, interest, and monetary correction, under penalty of future claims of unenforceability.

Justices Alexandre de Moraes, Roberto Barroso, and Cármen voted with Gilmar. Moraes, however, argued that the effects of the decision should be retroactive to the rule that established the TR as the correction index.

Edson Fachin said that using the TR (Reference Rate) does not fairly update labor remuneration and opened a dissenting opinion, defending the use of the IPCA-E (Extended National Consumer Price Index) as an index, as already decided by the TST (Superior Labor Court) in 2015.

"IPCA-E or INPC are those that reflect accumulated inflation and should be adopted as the correction index," said Fachin.

Rosa Weber, Ricardo Lewandowski, and Marco Aurélio Mello joined Fachin's understanding in establishing the IPCA-E as the correction index.

In practice, almost all lawsuits require correction. This applies to compensation for overtime, vacation pay, FGTS (Brazilian employee severance fund) deposits, or the 13th-month salary. On average, workers receive R$ 1 billion per month in settlements.

Data from the TST (Superior Labor Court) collected by Folha show that there are currently more than 1 million lawsuits awaiting judgment in the first instance.

From January of that year to May 2020, R$ 29.1 billion was paid out through enforcement actions — an average of R$ 1 billion per month.

The case regarding labor adjustments reached the Supreme Federal Court (STF) in 2018. Consif (a confederation of the financial sector) requested that the TR (Reference Rate) be declared constitutional because, according to the entity, the IPCA-E (Extended National Consumer Price Index) plus interest leads to the unjust enrichment of the worker.

In June, the TST (Superior Labor Court), composed of 27 ministers, was going to declare the TR (Reference Rate) unconstitutional. With a majority already formed, only 3 votes were needed. The judgment was suspended. The IPCA-E (Extended National Consumer Price Index), until then, was the index indicated.

The labor court ministers argue that the Supreme Federal Court (STF) has already declared the TR (Reference Rate) unconstitutional for adjusting court-ordered payments—public debts recognized in a judicial decision. The logic, then, would extend to labor credits.

In the Supreme Federal Court (STF), Consif's request gained the support of the National Confederation of Industry (CNI) and the National Confederation of Transport (CNT).

In its request for an injunction, Consif stated that the use of the TR (Reference Rate) is "reasonable and proportionate." The entity further asserted that, in the context of the Covid-19 pandemic, the IPCA-E (Extended National Consumer Price Index) plus interest will generate "indebtedness, also without cause, for the labor debtor."

Source: Uol