Supreme Court denies employment relationship with transportation app

In an unprecedented decision, Minister Alexandre de Moraes overturned a labor ruling and ordered the case to be referred to the ordinary courts.

Justice Alexandre de Moraes of the Federal Supreme Court (STF) denied an employment relationship between a driver and the ride-hailing app Cabify, which has ceased operations in Brazil. The ruling, a single justice, is the Court's first on the matter. He overturned a Labor Court ruling and ordered the case to be referred to the ordinary courts.

In the decision, the minister highlights precedents from the STF that recognize the legality of other forms of employment relationships other than those governed by the Consolidation of Labor Laws (CLT), such as outsourcing (ADPF 324), civil contracts, such as those signed by self-employed freight drivers (ADC 48), or even partnership contracts between beauty salons and professionals in the sector (ADI 5625).

The precedent is important, according to Daniel Chiode, a lawyer who advises Cabify, of Chiode Minicucci Advogados, and also applies to cases involving delivery drivers.

Today there are at least 1.5 million app drivers, delivery people and motorcycle taxi drivers in the country, according to the Institute of Applied Economic Research (Ipea).

The Labor Court has already received 21,700 lawsuits on this matter, with a total value of R$2.47 billion, according to the legal metrics firm Data Lawyer Insights. In most cases, the outcome, for now, is unfavorable to drivers and delivery workers. There are 4,300 unfounded decisions, compared to 2,700 successful ones.

The Supreme Federal Court should not anticipate an issue of this importance and complexity” — Eymard Loguercio

Approximately 5,900 cases are pending, and 6,200 have resulted in settlements—a measure considered strategic by experts to prevent the formation of unfavorable case law. Only 123 cases have been finalized so far (no further appeals are possible).

The minister's decision was made in response to a complaint filed by Cabify. Cabify appealed to the Supreme Federal Court after being convicted by the 11th Panel of the Regional Labor Court of Minas Gerais (TRT-MG).

The company alleged that the regional court had disobeyed binding Supreme Court precedents that allow for other forms of hiring, other than the employment relationship established by Article 3 of the Consolidation of Labor Laws (CLT), including outsourcing (ADPF No. 324 and RE No. 958,252 – Topic 725 of General Repercussion). In the 2018 ruling, the Supreme Court ruled that outsourcing is lawful for all activities.

It also highlighted that, in April 2020, the STF declared constitutional the legal framework for self-employment of cargo drivers, owners of their own vehicles and who have a commercial relationship (ADC No. 48).

Cabify further argued that the work performed by the technology platform could not be classified as a CLT (Brazilian Labor Code), “as the driver can decide when and if he will provide his transportation service to Cabify app users, without any minimum work requirement, minimum number of trips, minimum revenue, without any oversight or punishment for the driver's decision.”

Para o ministro Alexandre de Moraes, a decisão do TRT-MG realmente teria contrariado as decisões do Supremo. A relação estabelecida entre o motorista de  aplicativo e a plataforma, segundo ele, mais se assemelha com a situação do transportador autônomo, que tem relação de natureza comercial.

Chiode states that taking the matter to the Supreme Court, through a complaint, was the solution found to resolve the situation, since there is no specific rule on the matter. "When the Legislature fails to do its job, the Supreme Court ends up filling this void, based on other labor precedents," he says.

There are over a hundred bills in the National Congress creating rules for app-based work. However, only 24 address the legal nature of this relationship, and most go against the business models adopted by companies—which consider workers independent contractors and pay them based on tasks.

According to research by the Center for Teaching and Research in Innovation (Cepi) at FGV Direito SP, 14 projects make hiring through the Consolidation of Labor Laws mandatory, which imposes on the company the obligation to collect INSS and the FGTS quota, in addition to guaranteeing unemployment insurance and sickness benefits, for example.

Two others classify drivers and delivery drivers as intermittent workers, a category that guarantees rights similar to those established in the Consolidation of Labor Laws (CLT). Five proposals classify app workers as self-employed, and six as individual microentrepreneurs (MEI). Three of the 24 provide for two possible relationships: MEI and self-employed.

Mauricio Corrêa da Veiga, of Corrêa da Veiga Advogados, had been expecting a Supreme Court ruling along these lines. "We've long seen the Supreme Court validate entrepreneurial freedom, stating that it's possible for different forms of work to coexist within the same legal system."

The lawyer asserts that Constitutional Amendment No. 45 of 2004, which expanded the jurisdiction of the Labor Court, establishes that judges must analyze employment relationships, not just those governed by the CLT. "The Labor Court, however, has maintained the mindset of applying only the CLT. Until it understands that other forms of work exist, it will continue to face these attacks," he says.

He points out that, in a recent survey of app drivers, 75% stated they don't want to be employees under the CLT. He believes these workers should be provided with social security and insurance protection, but they shouldn't be restricted to the CLT.

Meanwhile, Eymard Loguercio, a lawyer who advises workers at LBS Advogadas e Advogados, states that the Supreme Federal Court (STF) has been ruling on cases that undermine the jurisdiction of the Labor Court, on issues that are still under debate in the Judiciary and in society. "This hinders the consolidation of the issue, to the detriment of people who work in these regimes without social protection."

For Loguercio, the Supreme Federal Court (STF) should not preempt an issue of this importance and complexity by issuing a single-judge ruling (just one justice) on a constitutional complaint. "That's bypassing the system," he says, adding that Moraes used similar precedents, but they don't address the same situation as the app-based driver.

"This isn't a case of outsourcing, nor is it a specific case of legislation previously examined. The use of a complaint in this case makes the mishandling of facts even more evident," the lawyer states.

Article originally published in the newspaper Valor Econômico on May 24, 2023