The social role of companies is becoming increasingly important, extending beyond the traditional employee-employer relationship.
It is worth noting the reputational impacts resulting from the discovery of slave labor in supply chains, as well as the growing demand from investors and business partners for practices aligned with ESG criteria.
The global economy has profoundly transformed the mode of production. Stages that were once concentrated within a single company are now distributed among suppliers, subcontractors, logistics operators, and business partners. According to the International Labour Organization, nearly 80% of world trade now operates within global value chains, structured as fragmented and interdependent production systems.
Each link in the supply chain has its own tax ID number, contracts, and accounting system. Even so they are all part of the same production process. It is precisely this disconnect between legal separation and economic integration that gives rise to a recurring question in brasilian labor law: who is liable for labor court judgments in the most vulnerable links of the supply chain?
According to recent analyses released by the Superior Labor Court, holding the company at the top of the production chain liable depends primarily on demonstrating effective control over the workforce, interference in operations, or the functional transfer of the production unit. Case law has reaffirmed that mere economic integration between companies is not sufficient to establish liability.
In recent decisions, the Superior Labor Court has distinguished between situations where there is merely a commercial relationship between independent companies, such as in supply or subcontracting agreements, and those involving actual outsourcing of services, where the contracting party directs or controls the activity. The established legal principle regarding subsidiary liability set forth in Precedent 331 applies only in the latter case.
This issue is likely to become even more significant given the growing demand for traceability and compliance in international supply chains, particularly as the trade agreement between Mercosur and the European Union moves forward. Exporting companies may increasingly be required to demonstrate that their suppliers meet minimum standards for labor rights and decent working conditions.
In this context, well-structured contracts, periodic audits, compliance clauses, and supply chain monitoring mechanisms become important tools for mitigating labor risks (the focus of this newsletter) and reputational risks.
For companies operating within long supply chains, particularly in sectors such as agribusiness, the issue is no longer merely a legal matter but has become an integral part of corporate governance itself. Effective supply chain management provides a competitive advantage in accessing markets and investors.
