"Pejotização": How Companies Should Prepare After the Nationwide Suspension Ordered by the Supreme Federal Court (STF)

On April 14, 2025, the Brazilian Supreme Federal Court (STF), in the judgment of ARE 1,532,603 (Theme 1389), ordered the nationwide suspension of all lawsuits discussing:

Fraud in civil/commercial service provision contracts,

The lawfulness of hiring through a legal entity ("pessoa jurídica", commonly referred to as "PJ") or as a self-employed worker,

The jurisdiction of the Labor Courts to hear these cases,

And who bears the burden of proof in allegations of fraud.

This decision reinforces the need for strategic legal planning by companies that hire PJ professionals or self-employed workers.

What Companies Need to Know

The STF emphasized that, respecting freedom of productive organization (ADPF 324), hiring through a PJ arrangement is valid. However, the Labor Courts have systematically failed to follow this guidance, creating legal uncertainty and leading to a multiplication of lawsuits.

Thus, even when the hiring arrangement is lawful, a formal or conduct-related mistake can expose the company to the risk of having an employment relationship recognized (in Brazil, this is often referred to as "pejotização", the practice of disguising an employment relationship as a service contract with a legal entity).

How to Protect Your Company

1. Drafting Solid Service Provision Contracts

Clearly formalize the service provider's autonomy.

Avoid any clause that suggests subordination or direct control.

Define objectives and deliverables, not schedules or methods of execution.

2. Precautions in Day-to-Day Practice

Do not control the provider's working hours or workplace.

Allow the provider to work for other companies.

Avoid granting benefits typical of CLT employees (those governed by Brazil's Consolidation of Labor Laws).

3. Ongoing Legal Planning

Periodically review all active contracts.

Conduct internal training sessions for contract managers.

Work with law firms specialized in Labor Law to prevent litigation and properly structure hiring arrangements.

Conclusion

The STF's decision does not prevent companies from hiring PJ professionals, but it does require heightened attention. With well-drafted contracts and ongoing legal guidance, your company can continue using this hiring model while minimizing labor-related risks.