Is Brazil Blazing a Trail on Employment Arbitration?
Adding an arbitration provision to an
employment contract has been a familiar practice for many HR professionals in
the United States. That’s unlikely to change, particularly since the U.S.
Supreme Court recently upheld employment arbitration agreements barring class
actions, see Epic Systems Corp. v. Lewis. But
what about the rest of the world? Although arbitration of commercial claims is
mainstream on the global stage, that’s not the case when it comes to employment
disputes. A recent development in Brazilian law could perhaps start a new
Brazil recently enacted new legislation
permitting the use of arbitration to resolve employment disputes. To enforce an
arbitration provision under Brazilian law, there must be clear consent to
arbitration by the employee and the employee must be earning more than a
specified salary. Although it is limited in scope and unclear how long it will
take to become widely adopted, it is an important development. As is the case
in many countries, Brazil has in the past been reluctant to embrace arbitration
in the employment context out of a concern that it could undermine an employee’s
fundamental rights. A private arbitration process is often viewed with
suspicion, particularly given the unequal power balance between employees and
employers. Brazil’s new law represents a cautious embrace of arbitration in
In the UK, despite there being a growing
interest in arbitration of employment disputes, there remains a widespread
concern that arbitration clauses are unenforceable with respect to statutory
employment rights. As a result, such provisions are very rare in UK agreements.
That might change over time, particularly if there is statutory reform similar
to what has taken place in Brazil. Although
not on the immediate horizon in the UK — we have plenty of other things to
worry about with Brexit! — it will be interesting to follow the law’s
development and to see if other jurisdictions follow Brazil’s lead.
U.S. employers with international offices
should continue to think carefully about including arbitration provisions in
agreements with employees based in foreign jurisdictions. In some cases, they
might not work at all. In other cases, they might only work if certain
requirements are satisfied. Arbitration can be an attractive option — particularly
the confidentiality of the arbitration process — but unless a particular
jurisdiction has a well-established acceptance of arbitration of employment
disputes or a statutory framework that supports it, the litigation around the
arbitration provision itself might be more hassle than its worth.