The Federal Supreme Court (STF) recognized by a majority of votes (7 to 4)[1] the lawfulness of outsourcing companies’ core business activity.

The decision by the STF was handed down with recognized general repercussion in Allegation Breach of a Basic Precept (ADPF) No. 324 and Extraordinary Appeal (RE) No. 958252, actions in which the legality of outsourcing and the constitutionality of Supreme Court Precedent No. 331 (TST) were discussed, which prohibited outsourcing of a core business activity.

These actions were filed before the Outsourcing Law (signed along with the Labor Reform, Law No. 13,467/2017), which entered into force on November 11 of last year.

The Reform reinforced the permission to outsource companies’ core activity by including in the Outsourcing Law article 2: "The provision of services to third parties shall mean the transfer done by the customer of the performance of any of its activities, including its main activity, to a private legal entity providing services that has economic capacity compatible with their performance."

Thus, the great issue discussed before the STF concerns the legality of the outsourcing carried out before the Labor Reform came into force, when only the dictates of the TST's Precedent No. 331 were applied.

In analyzing the case, most justices on the STF defended the position that perpetuation of the illegality of outsourcing of core activity, as enshrined in Precedent No. 331 of the TST, would violate the constitutional principles of free initiative and free competition. The justices also took into account the violation of the constitutional principle of legal certainty, since there was no law governing the matter.

In this sense, the following theory of general repercussion was set: "Outsourcing is lawful, as is any other form of division of labor between different legal entities, regardless of the corporate purpose of the companies involved, therein maintaining the secondary liability of the contracting party."

For the time being, the written opinion has not yet been published, and the STF has not yet formally ruled on the modulation of its effects. However, since it has general repercussion, the decision has binding effect and applies immediately to all cases pending before the Labor Courts. It is estimated that the decision will "unlock" almost 4,000 stayed appeals that deal with this issue and await a judgment before the STF.

The question now is whether or not there will be modulation of the effects of that decision. The modulation of the effects of decisions handed down by the STF is more commonly discussed in tax matters, in which there is a conflict between Law No. 9,868/99, which provides for the prosecution and judgment of direct suits of unconstitutionality and actions for a declaration of constitutionality, and the Civil Procedure Code of 2015 (CPC).

While article 27 of Law No. 9,868/99 requires a qualified quorum[2] (a majority of 2/3 of the members), the CPC has no provision in this regard. Some scholars maintain that the silence of the CPC in this regard should not be understood as agreement with Law No. 9,868/99, but rather as a sign that the previous law has been overcome and that, now, a qualified quorum is unnecessary in this matter.

The truth is that although the Supreme Court has discussed this issue many times, there is no clear and objective decision to date regarding the quorum needed to modulate the effects of a decision on the constitutionality of laws or normative acts.

One indicator is that justices Roberto Barroso, Celso de Mello, and Gilmar Mendes argued in the past that the quorum required for these cases is an absolute majority, but the debate became moot after seven votes against modulation.[3] Justices Gilmar Mendes, Rosa Weber, and Luiz Fux also defended the absolute majority quorum.[4] At that time, however, the issue was not decided because the petition for modulation was made based on Law No. 9,868/99, which would prevent it from being set aside.

While the publication of the appellate decision is awaited and an analysis of the modulation of effects is pending, the recommendation is that companies move to review their past and possible impacts of the STF’s decision on their day to day. Companies should check whether there are decisions recognizing employment relationships based only on the argument that a core activity was performed that may be reversed at a higher level of appeal, for example.

Another positive impact concerns the possibility of re-discussion of Consent Orders (TAC) signed with the Public Prosecutor's Office that provide for the impossibility of outsourcing core activities.

Therefore, even if the decision applies only to those cases that have not yet reached a final and unappealable decision, that does not mean that companies are prevented from making use of it. Pending modulation of the effects of the decision, the recommendation is that companies conduct a critical analysis of their labor liabilities in search of opportunities.

[1] Affirming the decision were Justices Luiz Fux, Luís Roberto Barroso, Alexandre de Mores, Dias Toffoli, Gilmar Mendes, Celso de Mello, and Cármen Lúcia. Justices Edson Fachin, Rosa Weber, Ricardo Lewandowski, and Marcus Aurelius dissented.

[2] "Article 27. In declaring the unconstitutionality of a law or a normative act, and in view of the reasons of legal certainty or exceptional social interest, the Federal Supreme Court may, by a two-thirds majority of its members, restrict the effects of that declaration or decide that it has only effect as of its final and unappealable decision or some other time that may be set."

[3] RE Judgment 723.651, which discussed the application of the IPI in the importation of vehicles for own use.

 [4] Judgment of the motion for clarification in RE 377.457, which dealt with the Cofins exemption.