The impossibility of terminating the employment contracts of employees who have retired due to disability has proved to be a major challenge for many companies, as they are forced to keep the contract suspended without the employee providing services. The critical points of this issue stem from mandates contained in the Consolidated Labor Laws (CLT) itself and in Precedent 440 of the TST.
Article 475 of the CLT establishes that the employment contract of an employee who retires due to disability will be suspended for the duration of the retirement, which prevents the company from terminating the contract without cause. In turn, Precedent 440 of the TST guarantees the right to maintain the health or medical assistance plan offered by the company to the employee, even during suspension of the employment contract.
Despite this, it is common for employees who have retired due to disability to want to end their employment relationship in order to receive their severance pay and withdraw funds from their Guarantee Fund for Length of Service (Fundo de Garantia do Tempo de Serviço - FGTS). In this context, the question arises: is there a solution with legal certainty that allows the employment contract of an employee who has retired due to disability to be terminated?
Until the Labor Reform, the answer was no. Over the last few years, especially with the evolution of the issue in the Labor Courts, the execution of an out-of-court settlement between a company and an employee who has retired due to disability, with ratification by the Labor Courts, has proved to be a viable alternative.
This possibility was introduced by the Labor Reform in 2017 and has been increasingly used in situations where the parties wish to agree on issues for which the legislation does not yet provide solutions.
The ratification of an out-of-court settlement, when all the requirements demanded by the Labor Court have been met, results in full discharge of the employment contract between the employee and the company, providing legal certainty for the agreement between the parties. Even more important: in these cases, ratification validates the termination of the employment contract.
The procedure guarantees certainty for the parties and especially for the company, which is freed from the risk of reinstatement of employment or payment of compensation for non-economic damages.
Our consulting and litigation teams have been successful in structuring and obtaining ratification for out-of-court settlements for employees retired due to disability in the Labor Courts, validating termination of their contracts. We are available to answer questions and provide advice on the subject.
