Overview: Until last year, businesses in Brazil were not allowed to outsource their core business activities to third party providers. They could only outsource non-core activities such as support services. Not only was this very restrictive, it was also causing uncertainty as to what counted as a core activity and what did not.
In 2017, a new law was passed freeing companies to outsource their core activities, subject of course to detailed rules and protections.
This new law was immediately challenged in various court actions on the grounds that it was unconstitutional. Two of these actions finally reached the Supreme Court.
Law change: In August this year, the Supreme Court held that the new law was constitutional and that businesses were free to outsource their core activities to third party providers.
Action required: Businesses in Brazil can now confidently take advantage of this new outsourcing freedom but need to become familiar with the detailed outsourcing rules, particularly with regard to the employment relationships and continuing responsibilities, that will apply in outsourcing arrangements.