A Brazilian labor court has suspended the mass layoffs carried out by Casas Bahia, ordering the struggling retailer to reinstate roughly 1,900 workers dismissed in a sweeping restructuring plan. The ruling by Judge Katarina Roberta Mousinho de Matos of the 11th Labor Court in Brasilia on August 18 came after the National Confederation of Commerce Workers (CNTC) challenged the dismissals, arguing that the company failed to conduct mandatory union negotiations before cutting jobs.
The injunction requires Casas Bahia to restore the workers to the payroll within five days and reactivate their health plans and other benefits within 48 hours. The judge set a penalty of R$500 (about $97) per day for each worker not reinstated, plus R$10,000 for any new mass dismissal carried out without union mediation.
A Retail Giant in Crisis
Casas Bahia, one of Brazil’s most iconic retailers, filed for court-supervised reorganization on August 16 with the Sao Paulo 2nd Bankruptcy Court, listing R$17.3 billion (approximately $3.35 billion) in liabilities and around 28,000 creditors. The filing came after the company reported a staggering second-quarter net loss of R$10.1 billion, compared with R$555 million a year earlier.
The restructuring plan, dubbed the Transformation Plan Phase 2, had included the closure of 298 stores and the dismissal of between 1,900 and 3,000 employees. The company told the bankruptcy court that roughly 3,000 jobs were eliminated during the August round of cuts, while the CNTC counted approximately 1,900.
Two Courts, Two Rulings
While the labor court in Brasilia moved to protect workers, the Sao Paulo bankruptcy court simultaneously ruled on the company’s plea for protection from creditors. Judge Taina Maria Leonardo de Oliveira granted partial emergency relief, allowing Casas Bahia to maintain essential supplier relationships and continue operations, but placed conditions on the use of R$750 million in labor deposits.
The retailer also secured a court order requiring suppliers to continue delivering goods already in transit, with a penalty of R$50,000 per day for non-compliance. The company had previously approached Bradesco and Banco do Brasil seeking up to R$1 billion in credit lines without success, according to Valor Internacional.
The case is now the sixth-largest court-supervised restructuring in Brazilian history. Major creditors include insurer Zurich Minas Brasil with a claim of R$1.97 billion, followed by Samsung’s Brazilian unit at R$937.6 million. Household names such as Electrolux, Whirlpool, LG and Motorola are also owed hundreds of millions of reais.
Shares in Grupo Casas Bahia sank more than 30 percent following the bankruptcy filing. The company has been reporting quarterly losses in 20 of the 30 quarters since GPA relinquished control in 2019, and the combination of high interest rates reaching 13.75 percent and tight credit conditions has squeezed retailers across the country.
Casas Bahia told news outlet Poder360 that it was reviewing the labor ruling and weighing its next steps. An appeal remains available, and nothing so far indicates that a higher labor court has stayed the injunction, meaning the five-day reinstatement clock is running.
Sources: Reuters; Folha de S.Paulo; Valor Internacional; Estadao; Rio Times
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