TST: when the outsourced service provider goes bankrupt, the contracting company answers for the outsourced workers' rights

The 3rd Panel of Brazil's Superior Labor Court (TST) ruled on AIRR 0000731-70.2023.5.07.0001, upholding the subsidiary liability of a contracting company in the telecommunications sector for labor amounts owed to outsourced civil firefighters. The service provider, directly responsible for hiring them, had entered court-supervised reorganization and failed to pay wages, premiums, and amounts such as transportation and meal vouchers owed to the outsourced employees.

The legal basis: TST Súmula 331

The panel reaffirmed that the contracting company's subsidiary liability, set out in TST Súmula 331, covers any lawful outsourcing of labor, not just specific contracts for security or cleaning and maintenance services. The service provider's financial instability, culminating in court-supervised reorganization or bankruptcy, does not remove the contracting company's liability. To the contrary, it is precisely in this scenario that the subsidiary guarantee fulfills its purpose, ensuring that the outsourced worker is not left unpaid because of an insolvency he or she did not cause.

What this means for managing outsourced workers

The ruling reinforces a central point of any outsourcing compliance program: the contracted service provider's financial health is a direct risk factor for the contracting company, not merely an internal problem for the supplier. Companies that outsource labor should treat analysis of the service provider's financial risk, not just its documentary and tax compliance, as a permanent part of supplier audits, with labor-liability provisioning proportional to the insolvency risk identified.

Does your company monitor the financial health of its outsourced service providers as often as it audits their tax and labor compliance?