Rodrigo Seizo Takano, Caroline Marchi, Andrea Giamondo Massei, and Daniel Antonio Dias

When the lights went out on 2020, the plenary session of the Federal Supreme Court (STF) completed on the 18th the judgment of the lawsuits that debated the constitutionality of the application of the TR index in the updating of labor debts (ADCs 58 and 59 and ADIns 5,867 and 6,021).

Concurring with the opinion of Justice Gilmar Mendes, the court decided, by a majority, to rule out application of the TR in the updating of labor debts, defining that, as long as there is no specific legislative solution, the updating should be done as follows:

  • Pre-judicial phase: IPCA-E
  • Judicial phase, as of the service of process on the defendant: Selic

In the same judgment, the plenary session also softened the way in which adjustment for inflation is applied in existing court cases:

  • The following shall not undergo any change: judicial payments already made, in due time and manner, and final decisions, which have defined the types of adjustment for inflation;
  • A new rule should be applied retroactively: cases under discussion, that have not become final and unappealable, and decisions that have already become final that did not define the form of adjustment for inflation.

The content of the decision has not yet been made public, but there is already a great deal of debate among jurists as to whether the application of Selic will replace not only the TR, but also the application of interest on arrears of 1% per month, or whether it will be cumulated with the interest on arrears cited. However, from an analysis of the proposed opinion of Justice Gilmar Mendes, which will be confirmed when the ruling is published, the reporting judge makes clear in his reasoning that the Selic rate will replace the adjustment for inflation and default interest currently applicable:

"In addition, I believe that we should appeal to the Legislator to correct the issue in the future, equalizing interest and adjustment for inflation to market standards and, as for past effects, order application of the Selic rate, in substitution for the TR and legal interest, to calibrate, in an appropriate, reasonable, and proportionate manner, the consequence of this judgement.


On the other hand, ongoing cases that are stayed in the cognizance phase (regardless of whether they have been decided, including in the appeal phase) must be subject to retroactive application of the Selic rate (interest and adjustment for inflation), at risk of a future claim of unenforceability of judicial instrument based on an interpretation contrary to the STF's position (article 525, paragraphs 12 and 14, or article 535, paragraphs 5 and 7, of the Code of Civil Procedure).”

Once the understanding is confirmed, the new rule for adjustment for inflation will have positive implications for companies, since the annual interest rate on labor debts is 12% per year, while the Selic rate is currently below 4% per year. There will also be benefits for workers with the application of the IPCA-E in the pre-judicial phase, as the TR has been at 0% since 2018.

The decision stabilizes the numerous judicial debates on the issues in question, but will also have great impact on companies, which, after publication of the STF’s decision, will have to adapt their contingencies to the new rules.