In this week’s newsletter, we revisit Theme 1,232 of the Brazilian Supreme Federal Court (STF) in light of the recent publication of the Court’s full written decision, which clarified and consolidated the scope of the ruling.
The STF held that, under Brazilian labor law, enforcement proceedings may no longer automatically reach companies that did not participate in the merits phase of the lawsuit. According to the Court, the claimant must identify, already in the initial complaint, the legal entities allegedly responsible for the labor liabilities, including in cases involving economic groups, as defined by Articles 2, paragraphs 2 and 3, of the Brazilian Consolidation of Labor Laws (CLT).
As an exception, the decision allows the redirection of labor enforcement against third parties that were not part of the merits phase in cases involving business succession or abuse of legal personality. In all such cases, however, redirection is only possible through a formal piercing-the-corporate-veil proceeding, ensuring due process and the right to defense.
Against this background, we highlight 3 key points for preventive legal planning.
1. Ongoing Due Diligence and Structural Consistency:
Companies are advised to conduct periodic reviews of: (i) intra-group service agreements; (ii) organizational charts and functional structures; (iii) situations involving cross-subordination, employee sharing, and financial flows between group companies; (iv) corporate records and any misalignment between the stated corporate purpose and the activities effectively carried out. Maintaining formal and operational consistency across the group is essential to reduce exposure to attempts at joint liability.
2. Governance and Compliance as Risk-Mitigation Tools:
By limiting the scope of labor enforcement, the STF reinforced the role of corporate governance as a key element of legal certainty. Labor compliance programs play a strategic role in: (i) documenting the operational and managerial autonomy of group companies; (ii) identifying and mitigating risks related to business succession; (iii) formally recording corporate decisions that help rebut presumptions of abuse of legal personality; (iv) aligning internal policies and standardizing people-management practices. Robust documentation and governance structures significantly reduce the risk of expansive interpretations of joint liability in labor disputes.
3. Legal Strategy from the Merits Phase:
With this new framework, the focus shifts to the early stages of labor litigation. Preventive legal action allows companies to: (i) challenge broad or generic allegations of economic group status from the outset; (ii) demonstrate, through documentary evidence, the absence of joint liability or commingling of assets; (iii) reinforce the lack of proof of the legal requirements set forth in Articles 2, paragraphs 2 and 3, of the CLT.
In this new context, STF Theme 1,232 shifts the center of gravity from enforcement to prevention and structural organization. Companies that maintain alignment between their corporate structure, day-to-day operations, and formal documentation significantly reduce the risk of improper joint liability and strengthen their defensive position from the merits phase onward.
More than a procedural change, the decision underscores the importance of labor governance as a cornerstone of legal certainty for business groups operating in Brazil.
