On October 14 2015 the Supreme Court suspended the effects of a Superior Labour Court decision which made the Special Extended Consumer Price Index (IPCA-E) the applicable index to adjust outstanding labour-related debts (for further details please see "IPCA-E must be used for adjustment of labour debts, rules court"). This decision is preliminary and was issued by only one of the Supreme Court's ministers. In accordance with the ruling, the applicable index will be the referential rate (IDTR), as was the case before the Superior Labour Court's decision. The referential rate will apply until all of the Supreme Court ministers reach a final decision.

Labour courts must now reinstate the IDTR index for adjustments of labour debts, which will result in a review of the criteria for accounting provisions regarding labour contingencies. Nonetheless, even after the Supreme Court's ruling, some labour courts may continue to apply the IPCA-E index; therefore, when reviewing the accounting provision criteria, it should be borne in mind that contingencies will depend on:

  • the relevant judge's understanding; and
  • the context of the suit.

Through their associations, companies should continue to discuss the applicable index before the Superior Labour Court and the Supreme Court so that they are aware of the importance of the matter and its impact on society. Companies should also stress that Provisional Measure 687 (which is before Congress) contains a provision on the indexation of labour debts; however, this provision was excluded from the provisional measure's text, as it was rejected by the Senate.

The Supreme Court's final decision on the indexation of labour debts is eagerly anticipated.

For further information of this topic please contact Vilma Toshie Kutomi or Felipe Camargo de Araújo at Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados by telephone (+55 11 3147 7600) or email (vilma.kutomi@mattosfilho.com.br or fcamargo@mattosfilho.com.br). The Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados website can be accessed at www.mattosfilho.com.br.

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