The Brazilian Supreme Court (Supremo Tribunal Federal – STF) is about to decide whether companies belonging to the same economic group may be directly included in the labor enforcement phase, even if they were not part of the earlier adjudication phase (known in Brazil as the “cognizance phase,” when liability is determined). The legal thesis under discussion challenges longstanding practices in Brazilian Labor Courts and may redefine the limits of corporate liability, with direct impacts on legal certainty and the management of labor liabilities within corporate groups.
This issue arises in the context of Brazilian labor procedure, where enforcement proceedings (execution phase) aim to satisfy a judicially recognized credit. The controversy lies in whether a company that was not originally sued, and therefore did not have the opportunity to defend itself, can nonetheless be held liable solely because it belongs to the same economic group as the original defendant.
The matter is currently under review in Topic 1,232 (Extraordinary Appeal No. 1,387,795). At its core, the debate involves fundamental constitutional guarantees, such as due process, adversarial proceedings, and the right to a full defense, all of which are protected under Article 5, items LIV and LV, of the Brazilian Constitution.
In the absence of a clear procedural framework within Brazilian labor law for such situations, courts have developed divergent approaches. This has led to legal uncertainty and, in some cases, to the attachment of assets belonging to companies that were neither formally summoned nor properly included in the proceedings.
To address this gap, the reporting Justice of the Supreme Court, Justice Dias Toffoli, proposed an intermediate solution: companies may only be included in the enforcement phase if they participated in the cognizance phase or, exceptionally, if there is evidence of abuse of legal personality, demonstrated through a formal incident of piercing the corporate veil (known in Brazil as Incidente de Desconsideração da Personalidade Jurídica – IDPJ), as regulated by the Brazilian Code of Civil Procedure and applied subsidiarily to labor proceedings.
Another important aspect of the controversy is the distinction between the concept of an “economic group” and the doctrine of piercing the corporate veil (including its reverse application). Although often confused in practice, these are distinct legal mechanisms with different legal grounds. Under Brazilian labor law (Article 2 of the Consolidation of Labor Laws – CLT), an economic group is characterized by a unity of interests and coordinated business activities among companies. By contrast, piercing the corporate veil, particularly in its reverse form, requires proof of asset manipulation or fraud, typically involving a shareholder improperly shielding assets (Article 50 of the Brazilian Civil Code). Therefore, the legal classification does not depend on how the claim is labeled, but on the substantive legal grounds effectively demonstrated.
Recent case law from the Brazilian Superior Labor Court (Tribunal Superior do Trabalho – TST) reinforces a more protective approach to due process. The Court has recognized that companies included only at the enforcement stage, without prior participation, have standing to file third-party claims, under Article 674 of the Brazilian Code of Civil Procedure, to protect their assets. This interpretation aligns with the emerging position at the Supreme Court, which seeks to balance the effectiveness of labor enforcement with the preservation of procedural guarantees.
While the judgment remains pending, some practical recommendations can already be drawn. Claimants should identify, from the outset (in the initial complaint), all entities they intend to hold liable based on the existence of an economic group, and should present robust evidence demonstrating an actual unity of interests. On the other hand, companies should proactively map their corporate structures, ensure clear operational and accounting separation between entities, and adopt preventive measures to mitigate the risk of undue liability.
The outcome of Topic 1,232 represents an opportunity to rebalance labor enforcement in Brazil in light of constitutional guarantees. More than a technical dispute, the decision will define the boundaries of corporate asset liability and reaffirm legal certainty as a fundamental value for the business environment in Brazil.