The Labor Reform (Law No. 13,467/17) expanded the use of judicial performance bonds in the labor sphere. Already employed to ensure enforcement due to suppletory application of the Code of Civil Procedure, it was also provided for also by the new law in order to replace the appeal deposit, pursuant to paragraph 11 included into article 899 of the Consolidated Labor Laws (CLT).[1]

Considering the express provision of law and the ceiling to file appeals in the labor context,[2] the measure has attracted an increasing number of companies interested in avoiding the potential decapitalization associated with the exercise of their right of defense.

However, even with the precision in the provision, the issue is still far from settled in the judiciary, nearly two years after the Labor Reform entered into force. The decisions coming from the different circuit courts and the Superior Labor Court itself (TST) are varied. While some judicial panels find that the measure cannot be used, others decide that it must comply with certain requirements, and a third group claims that there is no legal provision for imposing requirements on insurance policies, for which reason the measure should always be accepted.

All of this creates a climate of legal uncertainty for litigants in the labor courts regarding the acceptance of a performance bond. Linked to the equity issue involved in the discussion of the claims, the possible dismissal of the use of this form of satisfying appeal costs also constitutes patent curtailment of defense, since it would impede the parties' right to have their claims reviewed on appeal.

How does one prepare in order to mitigate risks of possible rejection of the use of a performance bond in satisfying the costs of a labor appeal?

Although, in fact, the law does not impose any conditions for using performance bonds as an appellate guarantee, the Judiciary's greatest concern in rejecting the measure is that the bond will not be able to effectively guarantee enforcement when enforcement begins.

 A large number of decisions establish that the performance bond cannot be accepted because it contains a date for expiration of validity. The argument is that the guarantee should continue indefinitely, which is not feasible for this modality, as is extracted from article 760 of the Civil Code.[3]

Therefore, in order to mitigate risks of rejection of the policy, companies must demonstrate that the insurance purchased provides the worker with the same security as an appeal deposit.

This condition of parity may be demonstrated by simple measures that do not burden companies, such as stipulating a period of validity compatible with the average duration of labor proceedings before the courts; inclusion of contract provisions allowing the guarantee to be renewed in the event that the expiration date is reached before discharge of the execution; and stipulation of the impossibility of revocation of the guarantee without an effective demonstration of fulfillment of the principal obligation.

These measures demonstrate the observance of litigants of the true legal nature of the system of appeal deposits, which is to ensure the right to an appeal, regardless of the guarantee used.

Therefore, until the matter is settled before the circuit labor courts, the performance bond may be safely used to enable guarantees of appeals and exercise of the right of defense with a lesser burden on the employer, based on the use of reasonableness and observing the principles that underlie the issue of appeal costs.

[1] “The appeal deposit may be replaced by bank guarantee or judicial performance bond.”

[2] Currently the amounts of the appeal deposit ceiling range from R$ 9,828.51 to R$ 19,657.02.

[3] Article 760. The insurance policy or coverage must be nominal, to the order or to the bearer, and must mention the risks assumed, the beginning and the end of its term of validity, the guarantee limit, and the premium due, and, where applicable, the name of the insured and the beneficiary.