Santa Catarina State Bank’s Dismissal Program is upheld by the Supreme Labor Court

On a leading case for Collective Dismissal Programs, the Supreme Labor Court upheld the validity of Santa Catarina’s State Bank (“BESC”) Dismissal Program, recognizing that a collective bargaining agreement may be entered directly by employees, if the Labor Union refuses to negotiate even when the program involves release of all awards due under the employment agreement.

The BESC program is the largest dismissal program to have been implemented in Brazil, having involved approximately 5,000 employees. It was elaborated with the assistance of Felsberg e Associados , as part of the Bank’s privatization.

After examining a group of ten labor claims filed against the program, the Supreme Labor Court ruled that employees may enter into a collective bargaining agreement directly, if the Labor Union refuses to negotiate with the company. Although such provision is provided for by Article 617 of the Consolidation of Labor Laws (CLT), Labor Courts rarely recognize its applicability, especially after the Federal Constitution of 1988, which determines that collective agreements should be entered into by Labor Unions in order to be deemed valid.

Moreover, the Supreme Labour Court upheld the employees’ full acquaintance as to all labor entitlements arising from their terminated employment relationship with BESC, based on the structure of the program and the procedures taken, in direct opposition to the Statement of Binding Precedents (“Orientação Jurisprudencial”) no. 270 issued by the same Supreme Labor Court, which establishes that, unless a judicial settlement is reached, the waiver of labor entitlements is only valid as to the amounts and entitlements expressly stated in the receipt.

Additional information on the above may be obtained directly from our Labor Department at trabalhista@felsberg.com.br.