AFTER THE VETO: The Current State of Employment Arbitration in Brazil

By Cristiane Ordonez and Colin McGeough, CPR Legal Interns

According to an article published by José Pastore, a professor at FEA-University of São Paulo, Brazil’s National Congress voted to approve the use of arbitration for the arbitration of employment disputes, but Brazilian President, Dilma Rousseff, reacted to the legislation by banning employment arbitration via her veto power. Pastore and others in Brazil advocate strongly in favor of ADR of employment disputes.

After the initial approval by the National Congress, employment arbitration was limited to directors and managers who agreed to use arbitration as their preferred dispute resolution method; however, according to Pastore, Brazil’s President banned even the limited use of employment arbitration because of the position of the Ministry of Labor. In short, the Ministry of Labor argued that the use of arbitration for some would lead to discrimination against others. Pastore also mentions, in his article, that the Ministry of Labor took issue with the reference to “managers” and “directors” because the Ministry felt those terms were strangers to Brazil’s legislation. In opposition to that, Pastore points out that the Labor Code, Civil Code, and others have those words present within their paragraphs, and any issue with “managers” and “directors” should not have been taken so seriously.

One of the largest frustrations from the veto seems to come from the idea that employment arbitration could have had such a positive effect on employment courts, the parties, and the judiciary system in Brazil. It could have, and likely would have, offered a quicker and more simplified method of dispute resolution than litigation because non-arbitral court disputes often have additional costs and longer proceedings that can span many months or even years.

Another disappointment comes with the veto as well, one that involves Brazil not having the benefit of being on par with so many other developed countries that have laws that use and allow employment arbitration. Pastore discusses the laws of the United States, various countries of the EU and Asia, and Australia and New Zealand. Furthermore, Pastore shows that 97% of collective agreements to settle employment disputes in the US opt for arbitration. Pastore’s theory, as we understand it, is that the use of employment arbitration by developed countries will cause these types of arbitrations to spread to Latin American countries too. Many Brazilians, including Pastore, hoped it would have happened by now, but the President’s veto has delayed such progress.

It must be said that Pastore also stresses the importance of parties having the autonomy to choose arbitration rather than being forced to litigate all employment disputes, or in fact having mandatory arbitrations. Allowing parties to choose between litigation and arbitration affords many more benefits than it does detriments because every dispute is different and party choice allows for different methods of conflict resolution that will best fit the needs of a party’s case. However, Pastore urges the use of arbitration as an option because non-arbitral proceedings are often transactions of “sealed packages.”  In other words, claimants ask for one thing, respondents offer another, and a judge ends up settling the dispute by ordering something completely different.

It is hard to believe, in the eyes of Pastore, that Brazil’s President and Labor Courts would ban an alternative dispute method (arbitration) for employment disputes because the courts are crowded, and both the courts and parties are suffering from high litigation costs. As mentioned earlier, Pastore believes the veto needs to be reviewed and the issue solved as quickly as possible.

Cristiane is a Brazilian attorney serving as a fellow of CPR, a Florida accredited mediator and a mediator and conciliator working in Brazil.  Colin is a summer legal intern at CPR, a rising 3L at New York Law School, and President of New York Law School’s Dispute Resolution Team.

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