Labor reform generated savings of R$15 billion between 2022 and 2024, study reveals

The 2017 labor reform resulted in savings of approximately R$15 billion for Brazil between 2022 and 2024, according to a study released this Friday (3) by the National Confederation of Industry (CNI), Movimento Brasil Competitivo (MBC) and Fundação Getúlio Vargas (FGV). The drop in the number of new labor lawsuits was the main reason for this result, but the pace of gains shows signs of exhaustion.

In 2022, the estimated savings were R$8 billion, followed by R$6 billion in 2023. In 2024, with the increase in litigation, the amount fell to R$699 million. According to the researchers, this figure highlights a slowdown in the benefits generated by the modernization of labor laws.

"We compared our caseload, which in 2024 was 9,961 per million inhabitants, with the OECD average of 3,486. This difference is a clear indicator of how much litigation still puts pressure on our economy," said Rogério Caiuby, executive advisor of the MBC.

The organizations emphasize that the increase in judicialization increases the so-called "Brazil Cost," a set of structural and bureaucratic obstacles that undermine national competitiveness. In 2016, the country registered 2.76 million new labor lawsuits, a number that fell after the reform took effect. However, the trend has since risen again, rising from 1.65 million in 2022 to 2.1 million in 2024.

"The 2017 labor law modernization made it possible to reduce bureaucracy and reduce operational and litigation costs. The reduction in labor legal uncertainty due to greater clarity in labor relations rules leads to a more competitive and efficient business environment for the production sector," said Alexandre Furlan, president of the CNI's Labor Relations and Social Development Council.

Among the factors explaining the recent increase in lawsuits is the relaxation of free legal aid following decisions by the Federal Supreme Court (STF) and the Superior Labor Court (TST), which reduced the risk of claimants incurring court costs and fees if their case is unsuccessful, if they are beneficiaries of free legal aid. In recent years, says Furlan, Brazil has seen an increase in the filing of mass lawsuits, often with standardized petitions and generic allegations.

“This practice, known as predatory litigation, overloads the system and harms those who really need the Judiciary,” he warned.

According to the study, if the country manages to resume the trajectory of reducing litigation observed after the reform, the economy could reach R$10.9 billion in 2027. Caiuby explains that each step backward in the modernization of laws “represents a direct cost to society, which translates into less investment and less job creation.”

Despite the increase in disputes, the reform brought positive impacts in specific areas, such as outsourcing. With the elimination of the distinction between "core activities" and "support activities," new lawsuits on this topic fell by 99% between 2017 and 2024. Meanwhile, the prevalence of "negotiated over legislated" cases fell from 25,000 in 2018 to just over 1,500 in 2024.

"Being able to adapt labor laws applicable to a given company or sector is essential, especially when we can be certain that those laws will be respected and considered valid by the courts. This means cost predictability and legal certainty," Furlan concluded.