Brazilian Supreme Court Partially Lifts Stay in General Repercussion Theme 1,389: What Changes in Practice?

On June 17, Justice Gilmar Mendes issued a significant decision in ARE No. 1,532,603/PR, addressing the controversy surrounding the hiring of independent contractors through legal entities (“pejotização”), which is currently under review in General Repercussion Theme No. 1,389.

The decision does not resolve the merits of the case, as the binding precedent is still pending. Instead, the Brazilian Supreme Court (STF) has adjusted the scope of the nationwide stay that had suspended proceedings across the country.

According to Justice Gilmar Mendes, the indiscriminate suspension of cases that were still in the evidentiary phase or awaiting judgment before the lower courts had created a “significant backlog in the administration of justice,” delaying both the production of evidence and the resolution of factual issues that are distinct from the constitutional controversy itself.

What was decided

• Cases pending before the trial courts and the Regional Labor Courts (TRTs) may now resume their evidentiary proceedings and be decided in the ordinary course;
• The stay will now apply only after the exhaustion of the TRT’s jurisdiction. In practice, proceedings will be suspended only once they reach the Superior Labor Court (TST), where they will remain pending until the STF issues its final binding decision;
• The TST and all Regional Labor Courts have been urgently notified so they can inform the courts under their respective jurisdictions.

Why does this matter?

For companies involved in disputes concerning the recognition of an employment relationship with service providers engaged through legal entities, the decision means that previously suspended cases will begin moving forward again. Hearings will be scheduled, evidence will be produced, and judgments will be issued. Although the STF has not yet established the binding precedent, the lower courts are now free to decide these cases based on their own interpretation of the law, subject to the future binding effect of the STF’s ruling.

This is the appropriate time for companies to reassess their litigation strategy in these cases.

We will continue to closely monitor the STF’s judgment on the merits of General Repercussion Theme No. 1,389.