Arbitrating Employment Disputes: New Arbitration Law and Employees’ Concerns

Ethiopia enacted an arbitration and conciliation working procedure proclamation on 2 April 2021. This piece discusses the proclamation from the employment arbitration angle.

Arbitration is one means of dispute settlement that has gained worldwide attention mainly in commercial and investment disputes. Cases are decided by (a) third party(ies) appointed by the parties formally known as arbitrator(s). The decision of the arbitration tribunal is binding, final, and enforceable with small differences depending on the laws of the country. In Ethiopia, arbitral decisions (awards) are binding, final, and enforceable according to the newly enacted arbitration and conciliation, working procedure proclamation number 1237/2021. But, arbitral awards may be reviewed by the Federal Supreme Court Cassation Bench unless parties agree otherwise. It has to be noted that there are also narrow ways of challenging arbitral awards across the world.

Consent of the parties is a central element in arbitration. In order to settle a dispute through arbitration, the parties should agree, either before or after the dispute arises, to take their case to an arbitration tribunal. In the absence of an agreement, parties can only take their cases to the courts or an administrative tribunal depending on the nature of the case.

People choose arbitration as their dispute settlement mechanism for many reasons, and these reasons are mainly related to the problems of regular courts. Firstly, judges of the regular courts are generalists; they handle a variety of cases from criminal to civil, from family to business disputes. Thus, they are not experts in a certain area. A complex commercial or construction case may be allotted to a judge who has no knowledge of the construction industry and commerce. In such instances, justice may not be rendered. In arbitration, however, arbitrators are appointed by the parties. This gives parties a chance to search and appoint a person with the knowledge and experience in the area. Hence, expertise is an advantage of arbitration over litigation in courts. Secondly, it takes years to settle a case in a court as judges have backlog cases. But in arbitration, arbitrators work on that specific case and decide within a lesser time than the regular courts. Thirdly, courts have fixed procedures, and parties do not have the autonomy to decide on the procedure. Arbitration, however, is flexible which allows parties to skip some procedures. Fourthly, courts have a fixed place. In arbitration, on the other hand, parties can choose any convenient place for a meeting. And, fifthly, arbitration is confidential and helps parties to keep secret any information that may harm their business if disclosed. These and others are the benefits of [domestic] arbitration.

However, not all disputes can be settled through arbitration. For policy reasons, countries keep away some disputes from the reach of arbitration. For example, Ethiopia prohibits arbitrating administrative contracts under article 315 of the Civil Procedure Code save for the exceptions. Furthermore, the new arbitration and conciliation, working procedure proclamation lists matters that cannot be entertained by arbitration. Accordingly, matters of; divorce, adoption, tutorship, guardianship, succession, criminal, tax, a decision on bankruptcy, a decision on dissolution of companies, lease, and other land issues, administrative contracts unless permitted by other laws, trade competition, and consumer protection issues, administrative issues bestowed to administrative tribunals, and other issues prohibited by other laws are non-arbitrable. 

Across the globe, there is no consensus as to whether employment disputes should be arbitrated. Some countries, such as India, France, and the Netherlands, prohibit arbitrating employment disputes, especially individual employment disputes, and others, such as the United States allow arbitrating employment disputes. In fact, even in the US, some types of claims are not arbitrable.

Are Employment Disputes Arbitrable in Ethiopia?

Employment disputes are arbitrable in Ethiopia. The Labor Proclamation allows arbitration under article 144. This provision states that “…parties to a dispute may agree to submit their case to arbitrators or conciliators of their own choice for settlement in accordance with the appropriate law”. Further, the new arbitration and conciliation proclamation did not include employment disputes in the list of non-arbitrable matters.

The labor law provision does not provide as to when parties may agree to submit their cases for arbitration. Is it when a dispute arises or during the employment contract? In the absence of any qualification, it is possible to argue that this arbitration agreement could be made during the employment stage.

What Concerns an Employee?

The employment law of Ethiopia, like in other countries, is enacted with the purpose of protecting employees. This is manifested by its protective provisions such as maximum working hours, different types of leave, the employer’s obligation to convert oral employment contracts into writing, limits on temporary employment, and other entitlements during termination.

Moreover, the law does not accept agreements that provide less favorable conditions than those provided by the law or waive right guaranteed under the law. All these provisions show that the law wants to protect the employee. The employer’s obligation to contribute to social security also backs this idea.

Be that as it may, the following are issues that concern an employee:

Firstly, the bargaining power of an employee is not the same as the employer. Employees are hired on the terms of the employer. Hence, employees will be forced to waive their right to take their case to the regular courts, and agree to arbitration.

Secondly, although the labor proclamation prohibits agreements to waive the right of an employee, the arbitration and conciliation proclamation allows parties to enter into agreements that waive their right to request a review of an arbitral award by the Cassation Bench.

Thirdly, unlike the labor bench of Ethiopian courts, arbitration tribunals require administration and arbitrators’ fees. As employment disputes are of a small monetary value, employees may not be able to cover the costs to secure their rights. Consequently, employees may choose not to claim their rights due to a lack of funds.

Fourthly, class actions would be difficult in arbitration. Due to differences in drafting the arbitration agreements, employees may not be able to bring a class action against an employer as is usually done in court litigation.

Fifthly, the labor proclamation, in its article 144/2, states that parties aggrieved by the decision of an arbitration tribunal may appeal to the board or a court. This right to appeal, however, does no longer exist as the new arbitration and conciliation working procedure proclamation has repealed it. So, employees, with no real consent and no knowledge of arbitration, may face the challenges.

Sixthly, arbitration is confidential. As a result, there is no public scrutiny, and decisions are passed in a closed-door and leave no public precedent.

To sum up, arbitration, in general, has its own benefits. From the employment disputes perspective, however, there are some issues that should be considered.

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