Brazil: Law Permits Binding Arbitration for Job Disputes Involving Executives

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By Ed Taylor

Aug. 14—Brazil's congress recently approved legislation that for the first time authorizes the use of binding arbitration to resolve individual labor disputes.

Until now, the country's laws have been silent on the use of arbitration in cases involving individuals, while Brazil's courts have allowed arbitration in disputes pitting labor unions against companies but prohibited it in disputes involving individuals on the basis that individual employees are ill equipped to face employers in an arbitration hearing and that certain labor rights are absolute and cannot be exposed to arbitration.

Confidentiality a Factor

Accepting in part the courts' arguments, legislators limited the use of employer/employee arbitration to cases involving company managers and executives, their logic being that these individuals are more capable of facing employers and that they would not want their labor disputes to be made public.

According to the law, managers and executives can include in their employment contracts clauses specifying that any labor dispute be dealt with through arbitration.

Carlos Alberto Carmona, a professor at the prestigious law school of the University of Sao Paulo and a member of the commission of jurists that drafted the law, said that the legislation is good for companies as well as for executives.

“A company chief executive officer is not going to want to resolve his contractual dispute before a labor court,” Carmona said. “For him an arbitration procedure is safer mainly because the discussion is confidential and is not known to the market.”

To contact the reporter on this story: Ed Taylor in Rio de Janeiro at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For more information on Brazilian HR law and regulation, see the Brazil primer.