Zuleika Hajli
Lawyer at Marcos Martins Advogados
As if the various challenges to which entrepreneurs are subjected in Brazil were not enough, partly due to the trend of the Labor Law, partly due to the interpretation and application of the Law by the Labor Courts, another one is beginning to take shape in the Labor Courts: it is the condemnation for social dumping. The construction has no explicit legal basis, but comes from judicial interpretation, based on concepts and rules from other branches of law.
The term dumping was first used in business law to label the conduct of an entrepreneur who, in order to control the market or raise barriers to entry, sells a large quantity of goods at a price far below that practiced by the market, causing a serious competitive imbalance, including the possible collapse of competitors who are not capitalized to deal with the extraordinary situation. The Labour Court, by analogy, considers that companies that seek to eliminate competition at the expense of employees’ basic rights commit social dumping, which is characterized by
[…] recurrent conduct by companies that knowingly and repeatedly violate workers’ rights with the aim of gaining commercial and financial advantages by increasing unfair competition in the market due to the low cost of producing goods and providing services. (TST Social Communication Secretariat, 2013)[1]
According to ANAMATRA (National Association of Labour Magistrates), social dumping is characterized by
recurrent and inexcusable attacks on labor rights that cause harm to society, since this practice purposely disregards the structure of the welfare state and the capitalist model itself in order to gain an undue advantage over competitors.[2] This practice favors companies that do not comply with the law.
This practice favors companies that do not comply with labor legislation to the detriment of those that comply with the rules imposed by the CLT and other current legislation applicable to labor law. As a result, the company that defaults on its labor obligations ends up being favored, as it spends less on paying the legally imposed obligations. The fact is that non-compliance with legislation makes their products cheaper, thus generating unfair competition in the face of other companies (CHAVES, 2010)[3].
Social dumping can be caused by repeated non-compliance with labor legislation, such as non-compliance with working hours, non-compliance with occupational safety and medicine standards, anti-union acts, repeated labor claims arising from the same facts, among others. Currently, some companies have been held liable in labor claims for the social damage they have caused to workers.
In view of recent decisions, there is a need to spread the word about dumping in the labor sphere, which aims to punish employers who insist on disrespecting employees’ rights for the sake of economic growth and unfair competition. The subject is still little known by legal practitioners and human resources professionals, but the trend is for it to start being publicized and claimed, in the same way as moral damage was years ago.
It is important to point out that in the labor sphere, companies that practice social dumping are, in fact, making social relations more precarious by repeatedly attacking labor rights. This practice damages society in that the illegal act perpetrated causes harm not only to employees, but also to employers who fulfill their labor duties, as they end up suffering losses as a result of unfair competition. Once the unlawful practice and the damage have been established, the duty to make reparation arises.
It is important to clarify that there is no set parameter for determining moral damage. What has been happening is that the magistrate has analyzed all the facts and grounds for the alleged moral damage and has thus set a value for the conviction that is consistent with the facts involved in each specific case.
Who can claim this compensation?
According to an article published on the Migalhas website on March 26, 2015,
As a rule, the payment of compensation for social damage through individual labor claims is not allowed, and therefore depends on the intervention of a trade union entity seeking redress for the rights of employees in its class. However, some judges believe that social damage can be repaired on an individual basis (NAMURA, 2015)[4].
Another aspect that should be analyzed is that, normally, the plaintiff does not even make a claim for social dumping. Nonetheless, there are judges who rule outside the requests made in the lawsuit (extra petita judgment) and condemn the company for social dumping without at least respecting the companies’ right to defense. In this type of situation, there is a direct violation of a Constitutional article (art. 5, LIV and LV), since, as compensation for social dumping has not been claimed, the companies cannot even defend themselves against this allegation, affecting their rights to a broad defense and an adversarial proceeding.
This position has already been consolidated by the TST in important precedents:
COMPENSATION FOR “SOCIAL DUMPING” GRANTED EX OFFICIO – “EXTRA PETITA” JUDGMENT – ARTS. 128 AND 460 OF THE CPC. (1) The judge shall decide the dispute within the limits in which it was proposed, and shall not render a judgment in favor of the plaintiff of a nature other than that requested, condemn the defendant for a greater amount or for an object other than that demanded of him, or rule on issues, not raised, in respect of which the law requires the initiative of the party. Interpretation of articles 128 and 460 of the CPC. (2) In this case, the Regional Court ordered Atento Brasil to pay, among other sums, compensation for “social dumping”, without such a claim being included in the initial claim. (3) In this way, it can be seen that the judgment extrapolated the limits in which the dispute was proposed, having known about an issue that was not raised, in respect of which the law requires the initiative of the party, which contravened articles 128 and 460 of the CPC. (TST, 7th Panel, PROCESS No. TST-RR-78200-58.2009.5.04.0005, Rapporteur Ives Gandra Martins Filho, emphasis added).
It is of the utmost importance that the company is attentive to the acts it carries out and the labor claims arising from the same facts.
According to our Regional Labor Courts, the company may be practicing social dumping without even knowing it. The financial consequences can be damaging, as the amount can be arbitrated by the magistrate without any parameters (NAMURA, 2015)[5].
Marcos Martins Advogados is always attentive to the understandings and positions of case law in labor matters, maintaining its commitment to excellence in providing legal services to its clients by providing appropriate responses that are perfectly adjusted to the current interpretation of the Laws.
[1] SECRETARIAT for Social Communication. Social dumping – compensation must be requested by the offended party. Available at: < http://www.tst.jus.br/noticias/-/asset_publisher/89Dk/content/dumping-social-indenizacao-deve-ser-requerida-pelo-ofendido.>. Accessed on: June 30, 2017.
[2] ANAMATRA. National Association of Magistrates of Labor Justice. Available at: < https://www.anamatra.org.br/>. Accessed on: June 30, 2017.
[3] CHAVES, Maria Cláudia Gomes. Social dumping as a factor of precarious labor relations. Âmbito Jurídico, Rio Grande, XIII, n. 78, jul. 2010. Available at: < http://www.ambito-juridico.com.br/site/?n_link=revista_artigos_leitura&artigo_id=8087&revista_caderno=25 >. Accessed on: June 30, 2017.
[4] NAMURA, José Roberto. “Social Dumping” – A practice unknown to companies. Migalhas, 2015. Available at: . Accessed on: June 30, 2017.
[5] NAMURA, José Roberto. “Social Dumping” – A practice unknown to companies. Migalhas, 2015. Available at: . Accessed on: June 30, 2017.
