Arbitration, governed by Law 9,307/1996 (Arbitration Law), is increasingly used to resolve disputes in labor contexts – especially in employment contracts of senior, highly compensated professionals with greater autonomy – provided the requirements in Article 507-A of the Consolidation of Labor Laws (CLT), introduced by the Labor Reform (Law 13,467/2017), are met. Arbitration does not replace the Judiciary; it is an alternative for disputes involving freely disposable property rights. An arbitral award is equivalent to a court judgment and is directly enforceable.

Under Article 507-A, an arbitration clause is valid when agreed with employees earning more than twice the ceiling of the General Social Security Regime (RGPS) – BRL 16,314.82 as of July 2025 – with the employee’s express consent, in writing and specifically highlighted. Only disputes involving freely disposable property rights may be submitted to arbitration, and the employee must have full legal capacity.

These safeguards uphold the protective principle of labor law by confining enforceable arbitration clauses to employees with greater bargaining power and legal awareness of its effects. As a best practice, draft the clause prominently and have it executed in a separate, clearly labeled signature block to document the employee’s unequivocal assent.

Choosing the arbitral institution warrants the same care as adopting arbitration itself. Companies should select recognized, transparent, and impartial institutions; otherwise, the proceedings and any award risk annulment. Validity also hinges on selecting a reliable institution that ensures impartial arbitrators, the right to be heard, equal treatment of the parties, and orderly proceedings by qualified professionals. Before agreeing to arbitration, review the institution’s track record, the roster and qualifications of arbitrators, and its compliance with applicable legal requirements.

When validly adopted, arbitration can be a fast, specialized, and confidential forum for work-related disputes—particularly those involving senior executives or sensitive corporate matters. Advantages include:

• faster resolution of complex disputes.
• decisions aligned with industry realities (subject-matter arbitrators).
• confidentiality.
• procedural autonomy (choice of seat, language, and arbitrator profile).
• potential reduction of labor liabilities.

Even so, misuse can trigger adverse court rulings, invalidate the clause, and harm corporate reputation. Irregular use is often viewed as evasion of labor law and a violation of the right of access to justice. We recommend a careful legal assessment and specialized oversight before implementation to mitigate risk and improve certainty in employment relationships.

Glossary:

Arbitration Law (Law 9,307/1996): Brazil’s statute governing arbitration proceedings and the enforcement of arbitral awards.

Labor Reform (Law 13,467/2017): 2017 legislation that amended the CLT and, among other changes, authorized arbitration for high-earning employees under Article 507-A.

Consolidation of Labor Laws (CLT): Brazil’s labor code; Article 507-A sets the requirements for arbitration clauses in employment contracts.

Article 507-A: CLT provision allowing arbitration when the employee earns more than twice the RGPS ceiling and gives express, written, prominently highlighted consent; requires full legal capacity.

Arbitral Award: Final decision issued by arbitrators; directly enforceable in Brazil as a court judgment.

Freely Disposable Property Rights: Patrimonial rights the parties may freely dispose of or settle; only these may be arbitrated in labor disputes.

General Social Security Regime (RGPS): Brazil’s general pension system; its “ceiling” serves as the salary threshold referenced in Article 507-A.

RGPS Ceiling: Maximum monthly earnings level under the RGPS used for eligibility (twice the ceiling equals BRL 16,314.82 as of July 2025 in this newsletter).

Protective Principle: Labor-law principle favoring the employee in cases of doubt; underpins limits on enforceable arbitration clauses.

Arbitral Institution: Arbitration chamber administering the case; must be reputable, impartial, and compliant with legal requirements.

Seat Of Arbitration: The legal place of arbitration, which anchors procedural law and court supervision of the proceedings.

Right Of Access To Justice: Constitutional guarantee of access to the courts; irregular use of arbitration may be viewed as violating this right.

Labor Liabilities: Potential financial obligations arising from labor claims and disputes; may be reduced through valid arbitration when appropriate.