Arbitration as a method of resolving individual labour conflicts - International Law Office

The labour courts have recently taken an additional step towards the recognition of arbitration as a means of resolving individual labour conflicts. In ruling on an appeal in which the validity and effects of an arbitration award were discussed, the Superior Labour Court held that the enforcement of arbitration clauses in individual labour contracts was acceptable and, based on that understanding, dismissed the case without prejudice, as the issue had already been settled by an arbitration award.(1)

In Brazil, arbitration proceedings are regulated by Law 9.307/96, which restricts their application to cases involving disposable rights. The debate regarding the application of arbitration to individual labour conflicts stems from the fact that under Brazilian law, individual labour rights are non-renounceable, and therefore the courts have exclusive jurisdiction to hear and decide labour claims. This means that in order to investigate the possibility of validly submitting individual labour conflicts to arbitration, it is essential to analyse the fundamental principles of the Brazilian labour law, such as the principle that an employee cannot simply waive any labour right provided for in the law or contract given the employee's disadvantage in regard to the employer.

In this context, it is important to emphasise that in general, principles have a certain degree of abstraction and therefore are not always applied to their full extent. In some instances the waiver of a labour right is possible, such as where a settlement is implemented before a labour court in which the ability of the parties to waive rights is essential to that settlement. This is an accepted exception to the non-waiver principle.

Moreover, the Superior Labour Court held that non-renounceable rights can be absolute or relative, depending on the nature of the right protected in each case. A non-renounceable right is absolute when it qualifies as a public order right, meaning that there is a guaranteed minimum standard of civility, as is the case with, for example, the right to a minimum salary and the right to protection of workers' health. On the other hand, a non-renounceable right is relative when it does not guarantee a minimum standard of civility – for example, an employee's right to variable compensation. In this case the waiver of a right may be deemed valid provided that certain formalities are observed (eg, settlement before a court, collective bargaining process), so an occasional conflict may be submitted to arbitration without causing any detriment to workers' protection and labour law principles.

In considering that individual labour rights can be renounced, the Superior Labour Court concluded that it was not possible to submit them to arbitration and then later submit the same case to the labour court. Although there is still strong resistance from the labour courts towards recognising the enforcement of arbitration clauses in individual labour contracts, the recent Superior Labour Court decision demonstrates that the discussion must continue, and that there are still issues to be clarified in order to provide security to both employers and employees regarding the application of arbitration in individual conflicts. Using arbitration as an alternative way to resolve individual labour conflicts would help to lighten the heavy caseload of the labour courts.

For further information on this topic please contact Patricia Alves or Luiz Guilherme Migliora at Veirano Advogados by telephone (+55 21 3824 4747), fax (+55 21 2262 4247) or email (patricia.alves@veirano.com or luiz.migliora@veirano.com).

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