The recent labour and employment reform enacted in Brazil has introduced important changes to labour and employment relations. One of the principal changes is the introduction of arbitration for the resolution of employment disputes.

Overview

In order to resolve employment disputes through arbitration, the law now requires employees using such recourse to earn a monthly salary higher than two times the benefits cap paid by social security. Today, this figure is close to $3,500.

In addition, in order to arbitrate, consent for arbitration must be obtained either in the employment contract or through the terms of arbitration.

However, the law does not clearly set out whether the parties can change an employment contract during the employment relationship, either to include or exclude an arbitration clause. This issue may be resolved by the labour courts during the coming months.

Controversies

Before the reform, the labour courts were disinclined to accept arbitration as a means to resolve employment disputes, as it could compromise employees' fundamental rights. The law had no provision in this regard. Moreover, the law was insufficient to encourage the labour courts to apply it to all types of employment dispute. It permitted arbitration only if no fundamental employment rights were involved; however, the classification of fundamental and non-fundamental was – and continues to be – controversial.

Employers may still face these controversies following the labour reform. The courts may rely on the following to invalidate arbitration agreements:

  • the imbalance of power that exists between employers and employees;
  • the controversial classification of fundamental versus non-fundamental employment rights; or
  • the belief that arbitration tribunals have no jurisdiction to resolve employment disputes.

Comment

Despite these uncertainties, employers should have confidence in the new law, which should help to reduce expenses incurred during employment disputes. Further, it may streamline the dispute resolution process, considering that arbitration proceedings are shorter and more informal and that arbitration awards are more convenient and particular to each employer's industry.

The call for employment arbitration has already started. In the past month, some commercial chambers have issued their first procedural rules for employment arbitration. Although the changing law requires a change of mindset, employers should take advantage of it and begin to consider the possibility of instituting arbitration for certain employment contracts.

For further information of this topic please contact Cleber Venditti da Silva, Roberto Nasato Kaestner, Marília Veiga Ravazzi or José Daniel Gatti Vergna at Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados by telephone (+55 11 3147 7600) or email (venditti@mattosfilho.com.br, roberto.kaestner@mattosfilho.com.br, marília.ravazzi@mattosfilho.com.br or jvergna@mattosfilho.com.br). The Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados website can be accessed at www.mattosfilho.com.br.

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