ARBITRATION TYPES SERIES – 9 / LABOR ARBITRATION

This week, we will discuss the last type of “Labor Arbitration” in our “Types of Arbitration Series” articles.

“Labor arbitration” is an alternative dispute resolution method that aims to resolve disputes arising in labor law without going to court. The parties, usually the employee and the employer, take their dispute to an arbitrator (or arbitration board) and undertake to abide by the decision of this person.

Labor arbitration can take place in two ways:

1. Compulsory arbitration: The parties are legally obliged to go to arbitration. Compulsory arbitration can be applied in some cases regarding public officials in Turkey.
2. Optional (voluntary) arbitration: The parties agree to go to arbitration of their own volition. It is usually carried out with an arbitration clause included in the employment contract.

Advantages:

• • It is faster and usually less costly.
  • Confidentiality is protected.
  • Technical issues are resolved more effectively thanks to expert arbitrators.

Disadvantages:

• • The possibility of appeal (objection) is limited.
  • If one of the parties is clearly in a weak position (for example, the employee), the arbitration clause may not be fair.

The legal framework of labor arbitration in Turkey is determined by various legal regulations such as both the Labor Law No. 4857 and the Law on Public Officials Unions and Collective Agreements No. 4688. In addition, the Code of Civil Procedure No. 6100 and the Law on Mediation in Legal Disputes No. 6325 also contain general provisions regarding arbitration and alternative resolution methods.

Let’s examine the legal basis of labor arbitration in detail below:

1) Optional Arbitration (Voluntary Arbitration) – HMK No. 6100 and Arbitration Law No. 4686

• • An arbitration clause can be included in an individual employment contract between the employee and the employer, however:
  • The application of arbitration in individual disputes between the employee and the employer is limited.
  • According to the Constitutional Court and Court of Cassation precedents, the worker’s consent must be clear and conscious, as it may have serious consequences against the worker.
  • If the arbitration clause is not included in the employment contract later or by free will, it may be deemed invalid.

2) Compulsory Arbitration – Public Officials and Collective Agreements

• • Within the scope of Law No. 4688, if the parties cannot reach an agreement in collective agreements regarding public officials, the dispute is referred to the Public Officials Arbitration Board. This arbitration is mandatory and the decision of the board is final.
  • In addition, within the framework of Law No. 6356 on Trade Unions and Collective Agreements, the High Arbitration Board steps in for certain disputes during strike and lockout processes. This is also a type of compulsory arbitration.

3) Difference Between Arbitration and Mediation

• • Compulsory mediation has been applied in employee-employer disputes since 2018. (Labor Law No. 4857 + Mediation Law No. 6325)
  • A lawsuit cannot be filed before the mediation process is completed.
  • Mediation is different from arbitration because it is based on an agreement between the parties; in arbitration, the arbitrator makes the decision.

Important Jurisprudence and Points to Consider:

• • The Supreme Court emphasizes that in order for the “arbitration clause” written in employment contracts to be valid, the employee must approve this provision with his/her free will and with knowledge.
  • In accordance with the principle of interpretation in favor of the employee, courts can generally consider arbitration clauses invalid in suspicious cases.

Labor arbitration varies greatly from country to country in the world. However, in general, labor arbitration is used as a means of resolution without going to court in both individual labor disputes and disputes related to collective labor agreements.

USA (United States of America)

• • Compulsory arbitration is frequently used by employers. An arbitration clause is added to employment contracts.
  • The US Supreme Court considers arbitration agreements made by employers with employees to be valid within the framework of the Federal Arbitration Act.
  • However, this situation is criticized by unions and employee rights advocates because it limits the right of employees to litigation.
  • In collective labor agreements, disputes between unions and employers are resolved by arbitration; arbitration decisions are binding here.

Canada

• • Arbitration is widely used in both individual and collective labor disputes.
  • In most states (especially Ontario and British Columbia), arbitration is a mandatory dispute resolution method in collective labor agreements.
  • In Canadian practices, there are special regulations protecting the rights of employees; for example, if an arbitration clause creates a clear injustice against the employee, it can be cancelled.

United Kingdom (England)

• • Most labor disputes are resolved through the Employment Tribunal.
  • Arbitration practices exist, but they are more limited. In employee-employer disputes, arbitration can be conducted through ACAS (Arbitration, Conciliation and Advisory Service).
  • The arbitration process conducted by ACAS is faster and more confidential than the court process.

Germany

• • Labor disputes are generally resolved by Labor Courts (Arbeitsgerichte).
  • However, in collective labor relations and industrial disputes, arbitration committees (Schlichtungsausschuss) may intervene.
  • Arbitration plays an important role in collective agreements between unions and employer associations.

International Institutions (ILO, ICSID, etc.)

• • The International Labor Organization (ILO) does not conduct direct arbitration, but supports peaceful resolution of labor disputes.
  • In international labor contracts with multinational companies, arbitration can be conducted through institutions such as ICSID (International Investment Disputes Center); this is generally valid for higher-level (administrative/institutional) disputes.

Sources:

https://pro.bloomberglaw.com/insights/labor-employment/labor-arbitration-law/

https://labourrightslaw.com/blog/what-is-labour-arbitration/

https://www.adr.org/sites/default/files/Labor_Arbitration_Rules_3.pdf

https://www.jamsadr.com/rules-employment-arbitration/english

https://guides.library.queensu.ca/labour-law/labour-arbitration

Zeynep, Derya, TARMAN; “İş Dünyası ve İnsan Hakları Uyuşmazlıklarında Tahkim” “Arbitrating Business and Human Rights Disputes”, Araştırma Makalesi, İstanbul Üniversitesi Yayınevi, 2020.

Canan, ERDOĞAN, Sıdıka BULUŞ; “ARBITRATION IN INDIVIDUAL LABOR DISPUTES” “Bireysel İş Uyuşmazlıklarında Tahkim”, July, 2024.