On the next November 11th, the provisions brought by Law No. 13467/17 shall become effective. Commonly known as “Labor Reform Law”, it has made some important changes to the Consolidation of Labor Laws (CLT), and one of its major innovations is the possibility of inclusion of arbitration clause in employment agreements upon acceptance of both employee and employer. Said institute was not applicable to labor litigation due to the absence of legal provision and to repeated decisions of the Superior Labor Court (TST) accordingly.
The understanding of the TST to forbid arbitration in employment agreements lays on the protection of workers’ rights, once said party is considered more fragile in a negotiation – and the principle of non-waiver of labor rights, once they are not subject to waiver.
The possibility of inclusion of arbitration clause in employment agreements is provided in article 507-A of the CLT (with wording brought by Law No. 13467/17), but this inclusion shall only be possible to individual employment agreements in which the employee’s compensation is superior to two times the maximum limit established by the Social Security general Regime – which today is of BRL11,062.62. In addition to the criterion related to compensation, it is mandatory for the arbitration clause to be proposed by the employee or that the employee’s express consent is present.
The explanation for using the criteria provided in the new wording of article 507-A of the CLT is that the employee with compensation higher than the maximum limit established is not a weak party and does not suffer from the lack of balance existing between an employee who receives a low salary and its employer. It’s a fact that, before accepting an office of direction or management, high executives are fully free to negotiate with the company their compensation package, advantages and benefits, and even a directors and officers’ liability insurance. Moreover, it is not rare for employees to be assisted by lawyers during the prior negotiations with the companies, in case of big corporations. The Labor Justice has been slowly walking towards different solutions of cases, acknowledging the existence of a broad prior negotiation – and not an imposition of rights -, and many times acknowledging the flexibility of the prior negotiations instead of limited and restricted clauses.
The possibility of using arbitration as means to solve matters derived from employment relations represents a major improvement for Labor Law, with benefits to the parties with respect to the speed of the procedure, thus complying with the principle of reasonable duration of the procedure, which is a guideline for the labor procedure. However, arbitration tends to be used basically to employment agreements of high executives who own direction and management positions, because said agreements are more complex and sophisticated, and involve significant amounts and specific benefits. The use of arbitration in conflicts involving small amounts does not seem to have a practical sense due to the significant cost involved.
The innovation brought by the reform is based on three great cornerstones: the use of arbitration is optional; the arbitration is applicable to agreements which employees receive a more significant compensation, thus reducing the employee’s weaker position; and the arbitration brings speed to the solution of matters. These three principles, in addition to statistics that demonstrate that the Labor Justice is loaded with claims, are enough for labor judged and courts, public prosecutor’s office and ministry to start seeing arbitration as a viable means to provide Justice, convinced that the arbitration procedures are trustworthy, specialized and fast.