Everyone knows that Brazil has an enormous number of labor claims. What perhaps a large part of the population is unaware of is that, as large as the number of labor claims in progress in Brazil are, the total amounts paid by companies to ex-employees are as large.
According to the research conducted by the Superior Labor Court (TST) itself, in 2020, about R$28 billion was paid to workers, an amount higher than the Labor Courts' own budget for the same year, of R$18.8 billion.
Leaving aside the reasons that lead Brazilian workers to sue their employers, the fact is that the Labor Courts move a lot of money, not only for the workers, but to the public coffers, since this is an important source of revenue.
With so much money floating around Brazil's Labor Courts, not a few saw labor claims as a form of investment. Thus, assignments of claims of their holders, claimants, to third parties began.
The TST was concerned about this indiscriminate assignment of claims, since it was increasingly common for claimants to assign claims to their own attorneys, which, in the view of the TST at the time, harmed the worker and the Judiciary itself.
In this context, Justice Emmanoel Pereira forwarded to the Federal Board of the Brazilian Bar Association (OAB) a consultation requesting that the entity pronounce an understanding on the assignment of claims from claimants to lawyers and, if it was allowed by the Statute and Code of Ethics of the OAB, whether it should be communicated to the Court in which the case where the assigned claim originated. The answer was simple and categorical: the acquisition of labor claims by the lawyer represented in the case violates the Code of Ethics of the Brazilian Bar Association, due to the privileged relationship that the lawyer has with his client, since, in general, he knows his client's financial condition, his expectations, and the peculiarities of the case he is representing.
The matter was then dormant for a while until it recently came back into the spotlight because of a decision handed down by the TST. In a judgment on a motion for clarification in a lawsuit that discussed the assignment of claims, Justice Douglas Alencar rendered the understanding that the assignment of labor claims is perfectly acceptable, provided that it is done in strict observance of the general requirements of validity of the legal transaction. That is, in the Justice's view, it can be done.
The decision was sufficient for big players in the financial market, previously wary of the practice, to feel more comfortable exploring the market and seeking some answers from their legal advisors. Investors' concerns are the most varied: how to map the lawsuits? How is the assignment effected? Must the judge of the case be informed of the assignment? Can the Labor Courts bar the assignment and annul the contract entered into between the parties concerned?
It is too early to have all the answers. However, we venture to opine that the greatest concern of labor judges regarding the good order of the process is, to a large extent, allayed by the professionalization of the assignment market.
Investment funds interested in Brazilian workers' claims have high levels of corporate governance, are supervised by regulatory agencies, and are subject to risk assessments and reputational damage for their practices. In other words, they have a lot to lose from dubious transactions.
As to the interference of the Labor Courts in the assignments of claims, we believe it makes total sense if performed in the form of ratification decisions with respect to the assignments. With this, not only the parties to the lawsuit win, but also those involved in the assignment of the claim and the Judiciary itself, since there will be a judicial declaration attesting to the good order of the assignment, the free and unimpeded will of the assignee, and the absence of harm to the litigating parties. The ratification procedure would be very similar to the one adopted in the evaluation of traditional agreements, with an evaluation of the terms of the agreement and ratification of the will of the parties.
It is clear that the issue will demand action by investors in the courts. A tête-à-tête with the judges will be fundamental to demonstrate the good faith in the acquisition of the claim, the benefits to the claimant party, and the importance, for the transaction, of the endorsement of the Judiciary on the assignment.
To the great litigants of the Labor Courts we send a message to tighten their belts, invest in prevention of labor violations, and take heart to endure some good battles with the funds, which will become the holders of their claims.