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Arbitrability of labour disputes in Brazil
Practical Law UK Legal Update 3-502-2236 (Approx. 3 pages)
Arbitrability of labour disputes in Brazil
by Practical Law
| Law stated as at 06 May 2010 • Brazil |
Valeria Galíndez (Partner) and Ana Gerdau de Borja (Associate), Barretto Ferreira, Kujawski, Brancher and Gonçalves (BKBG)
In a decision of 18 March 2010, the Brazilian Superior Labour Court (TST) drew a distinction between collective and individual labour disputes in the context of arbitration. By definition, collective labour disputes involve a group of employees and an employer or a group of employers. In this case, the TST found that an arbitral tribunal lacked jurisdiction to decide upon the rescission of a labour contract in an individual labour dispute, on the ground that it was not arbitrable.
Background
Article 1 of Law No. 9,307/96 provides "Persons capable of entering into contracts may settle through arbitration disputes related to freely transferable patrimonial rights".
Article 14(2) of the Brazilian Constitution expressly provides that parties can submit collective labour disputes to arbitration.
Law No. 7,783/89, which regulates the right to strike, states in its Article 7 that an arbitral award is a suitable instrument for determining rights and obligations during the strike period.
Article 4 of Law No. 10,101/00 provides that collective disputes over workers' share in the profits of a company can be subject to arbitration.
Therefore, Brazilian legislation clearly authorises the use of arbitration in collective labour disputes. That is not, however, the case with individual labour disputes.
Facts
The respondent (Guimarães) had lodged an appeal (recurso de revista) with the TST against a decision rendered by a regional appellate court, on the ground that an arbitral tribunal lacked jurisdiction to rule upon the rescission of a labour contract. The Third Chamber of the TST declared the arbitration agreement void and remanded the case to the first instance court, on the grounds of:
- Inequality between the employee, Guimarães, and the employer, Xerox.
- Protection of the employee as a weaker party.
- Non-arbitrability of individual labour disputes in light of Article 1 of Law No. 9,307/96.
- The principle of access to justice enshrined in Article 5(XXXV) of the Brazilian Constitution.
Decision
When ruling on the embargos, the First Subsection Specialising in Individual Labour Disputes of the TST relied on Article 1 of Law 9,307/96, which limits the use of arbitration to disputes involving "freely transferable patrimonial rights" or "direitos patrimoniais disponíveis". According to the court, individual labour rights did not fall within the definition of Article 1 by virtue of their special characteristics. The TST distinguished individual from collective labour rights in light of express legislation authorising the use of arbitration in collective labour disputes. Referring to its case law, the TST held that an arbitral tribunal could not rule upon the rescission of a labour contract. Rather, the court held that the labour unions and the Ministry of Labour were the sole authorities competent to do that.