On June 23, 2023, the Federal Supreme Court (STF) resumed the judgment of Argument of Breach of a Fundamental Precept (ADPF) 488, regarding the inclusion of companies from the same economic group in labor executions.
ADPF 488 was filed on October 11, 2017, for which the reporting judge is Justice Rosa Weber. The suit was filed by the National Transport Confederation (CNT) to challenge acts performed by labor courts and judges that include, in the enforcement of judgments or in the execution phase, individuals and legal entities that did not participate in the trial phase, on the grounds that they were part of the same economic group.
The CNT contends that the practice, in addition to not finding support in the current legal system, restricts the fundamental right to an adversarial process, a broad defense, and due process of law for those seeking to prove that they do not participate in economic groups.
This is because the mechanisms for producing evidence and the procedural channels in the execution phase are restricted, given that the labor appeals system itself does not allow infra-constitutional matters to be brought before the Superior Labor Court (TST) in the execution phase.
Among the infra-constitutional matters that should be analyzed in a case like this is the concept and definition of an economic group, based on the interpretation of article 2, paragraph 2, of the Consolidated Labor Laws. Accordingly, the party included only in the execution phase of the proceeding finds a restriction provided for by law with regard to the questioning of what an economic group would be, an essential discussion, since it is on this basis that they are included in the suit.
The CNT argues that the procedural and appellate characteristics of the labor enforcement phase restrict the right of defense, which affects the interest of people who did not participate in the trial phase of the proceeding.
The party included in the execution phase, without any opportunity for prior justification, is not summoned to submit a defense, but only to pay within 48 hours the amount ordered in a judgment handed down in a proceeding of which it was not even aware, and can only put forward its claims in defense after depositing in court the full amount of the execution or naming assets for attachment, which represents a huge obstacle for exercise of the adversarial process.
The practice also violates the fundamental right to due process of law. Execution of judgments against those who did not participate in the trial phase is expressly prohibited by article 513, paragraph 5, of the Code of Civil Procedure.
On December 14, 2021, the reporting judge, Justice Rosa Weber, issued her opinion, with Justice Alexandre de Moraes concurring, without assessing the merits of the issue, voting not to hear the ADPF on the grounds that the claim relates to a consolidated jurisprudential understanding of the TST, without having demonstrated the establishment of a relevant legal and constitutional dispute.
The opinion does not present any position on the merits of the issue, i.e. the possibility or lack of possibility of including companies from the same economic group in executions of labor claims, since it was handed down to the effect of not even hearing the ADPF, due to the lack of suitability of the procedural measure itself.
On that same date, in view of the opinions that have been issued thus far, Justice Gilmar Mendes asked to review the record, suspending the judgment. The ADPF, although a separate procedural measure, is related to Topic 1.232 of the Management by Topics of General Repercussion, leading case of the Extraordinary Appeal (RE) 1.387.795, the case, led by Machado Meyer's labor practice group, discusses the "possibility of including a company that is part of an economic group that did not take part in the trial phase" as a defendant in the labor execution proceeding.”
The judgment resumed on June 23, 2023, after an in limine decision was issued by Justice Dias Toffoli in RE 1.387.795, accepting a prayer for relief submitted by Machado Meyer. The Justice ordered a nationwide suspension of all labor executions that deal with the issue at stake in Topic 1.232, pending final judgment of the extraordinary appeal.
The judgment is expected to conclude on June 30, 2023, if there are no further requests for review of the record.
The debate resumed with the dissenting opinion of Justice Gilmar Mendes, who argued that the action should be heard and, on the merits, partially granted, in order to declare the incompatibility with the Federal Constitution of judicial decisions handed down by the Labor Courts that include, in the execution phase, subjects who did not participate in the trial phase, on the grounds that they are part of the same economic group, despite the absence of effective proof of fraud in the succession and regardless of their prior participation in the trial proceeding or in an incidental proceeding to pierce the corporate veil.
If Justice Gilmar Mendes' opinion is confirmed, the decision will be paradigmatic and will bring about legal certainty and encouragement to companies and investors.
The effect would be especially positive for the M&A and private equity market, whose transactions are often incorrectly interpreted by the labor courts.