The impact on corporate finance. Should we think about it?
Many discussions about the new work and employment relationships have come to light, mainly due to the emergence of business models resulting from disruptive technologies, and also due to the change in profile and attitude of workers in general (habits, goals, lifestyle, professional achievement, among other aspects).
However, many have not yet realized that there is a major transformation, not to say disruption, of labor relations, not employment per se.
To this end, it is critical for entrepreneurs, executives, leaders, and labor relations managers to understand and appreciate the (significant) difference between labor relations and employment relations.
Thus, far from what the title of this article may indicate, we are not facing the dismantling of the legal system that governs employment relations, but rather the legitimization of the right to work, i.e., respect for the “constitutional right to freedom in order to achieve the ‘minimum interference in the constitutionally guaranteed economic freedom and to have the degree of certainty to ensure balance in economic and business relations'” in the words of STF Justice Cármen Lúcia, in her vote in the judgment of ADC (Declaratory Action on Constitutionality) 66.
Indeed, labor and employment relations have a distinct legal nature and legal rules totally different from each other, but provided and guaranteed in the Federal Constitution as fundamental clauses – true rights of any working citizen.
Thus, the protection of labor must be combined – to provide a concrete protection, also constitutional, to the economic freedom and free enterprise values.
Therefore, the reality is that we are facing changes – in the way of thinking and looking at the new forms of human work, which go beyond the traditional CLT (Code of Labor Laws) model.
To tell the truth, there is no provision in our legal system that determines the presumption of an employment relationship whenever work is alleged to exist on behalf of another person. This presumption came from a culture that has always seen the employment relationship as the rule, also arising from the culture that this model is the ideal to be pursued for the best protection of workers. (Otavio Torres Calvet is a Labor Judge at the TRT/RJ, MSc and PhD in Law from PUC/SP and President of ABMT – Brazilian Association of Labor Judges).
This is what the Federal Constitution and law 13,874, of September 20, 2019, approved by the National Congress and enacted by the President of the Republic, establish, verbis:
TITLE II – FUNDAMENTAL RIGHTS AND GUARANTEES
CHAPTER I – INDIVIDUAL AND COLLECTIVE RIGHTS AND DUTIES
Art. 5. All are equal before the law, without distinction of any nature, guaranteeing Brazilians and foreigners residing in the country the inviolability of the right to life, liberty, equality, safety and property, in the following terms:
XIII – the exercise of any job, trade, or profession is free, according to the professional qualifications that the law establishes;
Art. 7. The rights of urban and rural workers, besides others aimed at improving their social conditions, are
I – employment relationship protected against arbitrary dismissal or without cause, pursuant to complementary law, which will provide for compensatory indemnity, among other rights;
CHAPTER I – MISCELLANEOUS PROVISIONS
Art. 1. The Declaration of Rights of Economic Freedom is hereby established, which sets forth rules for the protection of free enterprise and the free exercise of economic activities and provisions on the actuation of the State as a normative and regulating agent, pursuant to item IV of the caput of art. 1, of the sole paragraph of art. 170 and of the caput of art. 174 of the Federal Constitution.
Paragraph 1. The provisions of this Law will be observed in the application and interpretation of civil, business, economic, urban and labor law in the legal relations within its scope of application and in public order, including the exercise of professions, commerce, registries of commerce, public registers, traffic, transportation and environmental protection.
Paragraph 2. All public regulation rules regarding private economic activities are interpreted in favor of economic freedom, good faith and respect for contracts, investments and property.
Art. 170. The economic order, based on the valuation of human work and on free initiative, is intended to ensure decent living conditions for all, in accordance with the principles of social justice, observing the following principles:
Thus, the employment relationship is a subspecies of the employment relationship, and exists legally along with other forms of human labor, such as self-employed, cooperative, rural, temporary, and intermittent.
What changes, then, with the recent judgment of the STF? First, the realization that the Supreme Court is ahead of the majority perception in the labor field regarding the development of labor relations. The highest court in the country has already made it clear, more than once, that Labor Law needs to communicate with the idea of freedom in economic activity, either by the analysis made during the judgment on outsourcing in the final activity, which was even mentioned in the vote of Justice Cármen Lúcia, mentioned above, or by the enactment of law 13.874/19 (Economic Freedom Law), which materializes the constitutional value of free enterprise and is of mandatory observance in the application and interpretation of Labor Law (article 1, paragraph 1).
“As a result, it seems that the Federal Supreme Court is ready to accept new forms of regulation of human labor beyond the traditional labor law model, which could already be taken into account for the debate, for example, on the existence or not of employment relationship between app workers and digital platforms. Everything indicates that the STF would tend to allow this new form of organization of an economic activity, without recognizing the employment relationship. Therefore, is it worth insisting for years on this path of jurisprudence or would it be better to build a viable alternative for the protection of these new workers?” (Otavio Torres Calvet is a Labor Judge at the TRT-RJ, MSc and PhD in Law from PUC-SP and President of ABMT – Brazilian Association of Labor Judges. Revista Consultor Jurídico, December 29, 2020, 8:02)
Otherwise, to set the counterpoint in the corporate world, we have the following position:
Hierarchical structures worked very well in a period of slower change. On the other hand, they have created weaknesses such as professional ascendancy meaning more power, rigid controls, and little flexibility for change. They naturally tend to be reactive to change, as any change affects the hard-won power structure.
The hierarchical model is designed to be static. People work within a context of “things were done this way and should continue to be this way”. It is a command-and-control structure, where command is at the managerial levels and execution is at the lower levels, which only carry out tasks, without greater autonomy. The middle management levels function as “buffers”, receiving orders and sending them downwards, filtering the problems that arise down below, passing only some of them on to the top management. (Cezar Taurion is VP of innovation at Cia Técnica Consulting and partner/head of digital transformation at Kick Corporate Ventures. Member of the innovation council of several companies and mentor and investor in AI startups, he is the author of nine books that address issues such as digital transformation, innovation, big data and emerging technologies. He is a guest professor at Fundação Dom Cabral, PUC-RJ and PUC-RS).
Thus, what arises is the following dilemma: should we recognize that workers have a new way of working, or should they be kept within the old, outdated corporate structures?
In an interesting article, Professor Jordi Canais, president of the IESE Center for Corporate Governance at Navarra Business School – Barcelona, when discussing the new attributions of the boards of directors, recognizes that several topics must be considered in the risk analysis of companies, but, on several grounds, argues that we must respect the new work force.
And he recommends the following questions to the C-levels of the organizations:
Experienced CEOs point out that the fight against discrimination is necessary in many countries, but other relevant questions are: Why do people want to work in this company? How does this company attract good professionals? Why do good professionals stay in the company? Why do some professionals leave the company? What capabilities and attitudes will the company need over the next 10 years? Is it hiring people with those capabilities? What is the quality of the professional context that a company offers its own people?
And, at the end of the article, he makes an interesting proposition, creating a new anachronism, to counter the ESG paradigm: ESG shoud be replaced by PESG.
Think about it.