For more than a year, Brazilian companies that rely on independent contractors had something rare in the country's labor courts: a reprieve.
In April 2025, Justice Gilmar Mendes of Brazil's Federal Supreme Court froze every pending lawsuit challenging the legality of hiring workers through their own legal entities — a practice known locally as "pejotização" — while the full court prepared to issue a binding ruling. That freeze ended this summer, and it ended abruptly.
On June 17, Mendes ordered the suspension partially lifted, allowing lower labor courts to resume hearings, collect evidence, and issue rulings.
The reversal wasn't driven by a change of heart on the underlying legal question. Instead, Mendes cited the sheer backlog the freeze had created — cases stuck mid-proceeding for over a year, unable to move forward or resolve. The Supreme Court still hasn't decided whether the contractor arrangements at the center of these cases are even lawful.
The order only applies to lower courts — the Labor Courts and Regional Labor Courts, or TRTs — where cases can now move forward again. But that's as far as it goes: cases that reach the Superior Labor Court remain frozen until the Supreme Court issues its final ruling.
A Backlog With No Easy Fix
The sheer scale of the frozen lawsuits is part of what makes the reversal notable. More than 74,000 cases nationwide were caught in the suspension, and that's on top of the roughly 300,000 reclassification lawsuits contractors filed in 2024 alone.
Courts have shown a willingness to enforce Brazil's four-part test for employment status — subordination, non-occasional service, personal performance, and payment — aggressively. For example, a São Paulo labor court ordered Uber to register all its drivers as employees and pay 1 billion reais (roughly USD 205 million) in collective damages in 2023. However, a Court of Appeals later dismissed that ruling on procedural grounds.
That combination — a high-volume legal theory, an aggressive judicial track record, and now a green light to resume — is what has employment lawyers telling clients to act now, rather than wait for the Supreme Court's final word, which could still be months or longer away.
No Verdict, But No Waiting Either
The Supreme Court began hearing arguments on the underlying question in November 2025, but the case stalled in December after one justice requested more time to review it. During an August 2026 session, another justice acknowledged the case likely won't be decided before year’s end.
That gap is keeping employment lawyers up at night. A company fighting a contractor-classification claim right now is arguing in front of judges using existing precedent and the four-factor test — with no guarantee any of that reasoning will even apply once the Supreme Court finally weighs in.
Lawyers advising companies employing Brazilian contractors are united in their advice: audit contractor relationships now. Look past the paperwork and at how things actually work day to day — schedules, exclusivity, how embedded someone is on internal teams, how much day-to-day control the company exercises — because that's what determines whether it looks like a services arrangement or an employment relationship, not what the contract says.
Of course, auditing now doesn't guarantee protection once the Supreme Court rules — whatever standard companies apply today might not match whatever the Court eventually sets. But cases are moving again, which means the risk of waiting isn't hypothetical anymore. A company that sits on its contractor structure isn't avoiding a legal fight — it's just as likely to already be in one.
The RemoFirst Advantage for Brazil Compliance
Brazil's contractor-reclassification landscape is exactly the kind of shifting legal terrain that catches even well-intentioned employers off guard — a freeze lifted overnight, litigation resuming before the underlying law is settled, and real exposure in the meantime.
One way to take that burden off your plate? Partnering with an Employer of Record (EOR) like RemoFirst.
When you engage independent contractors through RemoFirst, we take on responsibility for keeping your business compliant with the latest regulations, wherever you're hiring. That includes navigating Brazil's evolving approach to contractor classification, as well as other shifts in Brazilian labor law as courts and regulators respond to cases just like this one.
With RemoFirst, there's no need to track every international legal development yourself. We monitor changes and make the necessary adjustments behind the scenes, so you and your team can focus on finding and managing the best talent in Brazil — and around the globe.
Book a demo today to learn how RemoFirst can help you manage contractors in 150+ countries and hire employees in 185+ countries worldwide.
