In the last plenary session of 2020, on December 18, the Brazilian Supreme Federal Court ("STF") held, in a 6-4 decision, that labor credits and appellate deposits in the Labor Court will be updated by the National Index of Special Extended Consumer Price ("IPCA-E") in the pre-judicial phase, while the basic interest rate of the economy defined by the Monetary Policy Committee ("COPOM"), Selic, will start to be applied after summons.

According to the decision, the IPCA-E will be applied from the event that gave rise to the labor credit up to the defendant's summons in the corresponding labor action, and, from the summons of the defendant, the labor debt will be restated by the Selic rate until full payment of the condemnation.


Historically, Article 2 of Law nº 8,660, of May 28, 1993, had extinguished the application of the Daily Referential Rate ("TRD") for monetary correction, and, consequently, labor debts started to be corrected by the Referential Rate (“TR”) provided for in Article 1 of Law 8,660/1993, which was applied to savings deposits pursuant to Article 7 of the same law.

In relation to arrears interest, Article 39 of Law nº 8,177/1991 established that labor debts of any nature, at the time of default, would incur arrears interest equivalent to the “TRD accumulated in the period between the due date of the obligation and its actual payment.”

However, in 2015, the Plenary of the Superior Labor Court (“TST”), in the Claim of Unconstitutionality nº 479-60.2011.5.04.0231, declared the unconstitutionality of the part of Article 39 of Law nº 8,177/91 that regulates the incidence of TRD.

However, Law nº 13,467/2017 ("Labor Reform"), in force since November 2017, included §7 to Article 879 of the CLT to determine that the monetary adjustment of labor credits must be made by the TR. In addition, Article 899, §4, of the CLT provides that appeals deposits made within the Labor Court have to be corrected with the same savings update index.

Even after the Labor Reform, some Regional Labor Courts persisted in the thesis of the unconstitutionality of the application of the TR, while TST has repeatedly decided to replace the application of the TR by the IPCA-E, maintaining that the declaration of unconstitutionality of Article 39 of Law nº 8,177/1991, by the TST, in 2015 would have implied the “loss of normative efficacy of Article 879, §7, of the CLT."

Controversy over the STF decision

The constitutionality control actions that resulted in the STF judgment did not have the incurring of arrears interest as their subject of discussion but only the application of TR as a monetary correction index, as provided by Law nº 13,467/2017. It is possible to understand that establishing the application of Selic excludes the incidence of interest provided for in Article 39, §1, of Law nº 8,177/1991, which is why STF would have consequently removed the application of this legal provision.

As provided for in Article 39, §1, of Law nº  8,177/1991, arrears interest of 1% per month applies from the date of filing the lawsuit until the date of payment of the due amount. However, according to the vote of Minister Gilmar Mendes, it is possible to interpret that the application of the Selic rate removes the concomitant incidence of arrears interest.

Another controversial point is the applicability of the decision in condemning the Public Treasury in Labor Court since the decision referred to Article 535, §§ 5 and 7, of the CPC on impugnation of the execution by the Treasury Public when it dealt with the modulation of effects. In this interpretation, the decision may determine unequal treatment regarding monetary restatement and interest on labor credit due by the Public Treasury, without a logical justification for the differentiation regarding the monetary restatement and interest on other non-tax credits owed by the Public Treasury for which it was stipulated monetary restatement in accordance with the IPCA-E and for which default interest rates were fixed according to the savings account remuneration.

In view of these controversies, this discussion will likely continue into 2021, with  those opposed to the STF’s decision possibly requesting clarification.

Defense of the decision

Reporting Minister Gilmar Mendes, defending his vote, said that in addition to removing the constitutionality of the TR, TST replaced the legislator and elected a monetary update system, instituting a monetary correction index with arrears interest that has no legal basis.

Additionally, Minister Dias Toffoli argued that the application of the TR for the monetary correction of labor debts is unconstitutional because it does not reflect the purchasing power of the currency, which is why it is necessary to apply the same criteria of interest and monetary correction applied in general civil convictions.

Furthermore, according to Minister Gilmar Mendes, TST uses the IPCA-E improperly and the jurisprudence has become confused to the point of imagining that, in face of the inapplicability of the TR, the use of the IPCA-E would be the only possible consequence.

The STF's decision affects the judicial processes that already have a final decision not subject to appeal as long as they do not have a judicial determination on the application of a certain index of monetary correction and interest rate.

Modulation of the effects

By majority vote, STF modulated the effects of the decision to determine that the judicial payments already made in a timely manner, based on the TR, the IPCA-E or other indexes are considered valid and should not be re-discussed, including arrears interest of 1% per month.

For ongoing processes that are still in the prejudgment phase, the Selic rate, interests and monetary restatement should be applied retroactively from the summons.

Monetary correction indexes comparative table

To help understand the impact of the STF’s decision, please find below a comparative table with the application of each index of monetary correction used so far in the Labor Court.