Outsourcing relationships upheld in 64% of labor lawsuits, study shows

Outsourcing or self-employment arrangements are upheld in more than half of constitutional challenges judged by individual justices of the Federal Supreme Court. This is one of the findings of a study titled Outsourcing, Self-Employment and the Federal Supreme Court: Analysis of Constitutional Claims, launched on November 23 during an event called Labor Law and the Federal Supreme Court: Present Situation and Future Prospects. The event looked at the Federal Supreme Court’s understanding of constitutional complaints about the possibility of hiring workers through outsourcing and self-employment arrangements.

The researchers analyzed 841 decisions by individual justices between January 1 and August 20, 2023. In relation to outsourcing or self-employment, it was found that 43% of decisions permitted outsourcing of core activities, 21% permitted self-employment and 1% authorized the outsourcing of intermediate activities. The other decisions refused such arrangements for formal reasons.

“We initially tried to separate the analysis of cases involving outsourcing from those involving self-employment. However, this was not possible because in some situations, the decisions did not differentiate between the terms or did not clarify the type of employment they were dealing with. We therefore opted for a joint analysis,” explains Olivia Pasqualeto, the study’s coordinator and a professor at the FGV Sao Paulo Law School.

Premises

The large number of decisions in response to constitutional challenges in this area was noteworthy, raising the question of how common it is to discuss this issue through this type of action. To answer this question, we plotted the number of decisions by individual Federal Supreme Court justices in constitutional cases related to outsourcing and the total number of lawsuits filed with the Federal Supreme Court, as shown in the graph below.

The new Code of Civil Procedure added a new possibility for constitutional claims to be filed with the Federal Supreme Court. According to the main section of Article 998 and paragraphs 4 and 5, complaints may now be filed against decisions that violate theses established by the Supreme Court in general precedents and extraordinary appeals, either because they do not apply the understanding defined by the court or because of an improper application that distorts the content. Previously, Law 8,038 of 1990 established that a constitutional complaint could generally be filed to preserve the court’s jurisdiction or guarantee the authority of its decisions.

At the same time, the new Code of Civil Procedure also added new conditions for complaints to be filed, establishing that a claim may only be filed if the decision being challenged has not yet become final and provided that the ordinary channels have been exhausted. The addition of these requirements may also explain the increase in decisions by individual justices, especially those rejecting complaints on the grounds that these formal requirements had not been met. Despite this factor, which may have led to more constitutional complaints, it is important to note that, in proportion to the total number of constitutional complaints in the period, there was also an increase in the number of complaints related to outsourcing. In other words, there was an increase in total complaints, but there was an even greater increase in complaints related to outsourcing in the period.

Thus, issues related to outsourcing represent an important portion of everything that is discussed through constitutional claims in the Federal Supreme Court (which not only involves labor issues, but also issues in any other area).

Methodology

The research methodology was based on jurisprudential research in the Federal Supreme Court’s repository of decisions. Initially, we mapped the judgments and, later, decisions by individual justices in the context of constitutional complaints.

In looking at the judgments, we searched in all procedural classes. The keywords used were outsourcing, self-employment and uberization, including mentions of the keywords in the full text. We only looked at decisions published up to August 20, 2023. The search returned 134 results, of which only 14 were relevant. Reading the rulings, we concluded that discussions of outsourcing and self-employment might actually be more relevant in decisions by individual justices, which apply the precedents of rulings with a varying degree of flexibility. So, after analyzing the joint decisions, the research moved on to study decisions by individual justices.

In the case of individual decisions, we conducted a search based on the keywords outsourcing, self-employment and uberization, including mentions of the keywords in the full text. The closing date restricted decisions published up to August 20, 2023. The search for outsourcing returned 1,646 judgments and 8,653 individual decisions. The search for uberization returned 2 individual decisions, which had already appeared in the search for outsourcing. The search for self-employment returned 61 judgments and 177 individual decisions.

We then proceeded to exclude duplicate results (108 cases). In two cases, the decisions were not available and so these complaints were excluded from the set. After these exclusions, a set of 8,543 individual decisions was obtained. The researchers opted to carry out a separate search for keywords and then manually exclude duplicates in order to specifically count which keywords were mentioned in each decision (and identify which ones mentioned self-employment and which only mentioned outsourcing). In order to check the reliability of the results, a new search was made for the keywords “outsourcing or self-employment or uberization,” using the “or” function in the Federal Supreme Court portal’s advanced search engine. This operation identified 43 judgments that had not appeared in the original search. These 43 judgments were added to the set, resulting in a final group of 8,586 results, of which 6,893 were constitutional complaints.

From this group of decisions, only constitutional complaints judged in 2023 were selected (889 complaints). From this group, only decisions on the merits were selected. Therefore, 48 decisions on provisional remedies or decisions on interlocutory appeals and motions for clarification were not analyzed. This restriction resulted in a database with 861 individual decisions. These decisions were then read, which led to the exclusion of another 20 results due to irrelevance. In these cases, the word “outsourcing” appeared without a firm connection to labor law. In fact, these decisions dealt with the allocation of public funds. After this last exclusion, the final research set contained 841 individual decisions on the merits of constitutional claims.

Based on these decisions, we set up a database containing the following variables: full decision; operative part; parameter; what the contested judgment did; thematic classification; type of activity (if available); intermediate or core activity; facts of the case; what the Federal Supreme Court’s decision did; and main argument (reason for decision). The thematic classifications were drawn up inductively, based on the content and above all the type of activity present in each of the analyzed disputes.

To see the full study, click here.

You can watch a recording of the launch event here.