Arbitrability of Labor Disputes: Uruguay’s Supreme Court Reaffirms Arbitral Jurisdiction Over Labor Matters

The arbitrability of labor disputes has long been met with skepticism in many civil law jurisdictions. Employment law is traditionally conceived as a body of mandatory, public-order norms aimed at protecting the weaker party in an inherently asymmetrical relationship. For that reason, labor disputes have often been reserved to specialized labor courts, and arbitration clauses in employment contracts have been challenged and portrayed as incompatible with effective access to justice and with the protective function of labor law.

This article reviews Uruguay’s legal framework on the arbitrability of labor disputes, underscoring the absence of an express statutory prohibition and the General Code of Procedure’s broad authorization of arbitration. It then discusses the Supreme Court’s landmark decisions in 2025 (Uber) and 2023 (AGESIC), contrasting them with the more restrictive stance taken by certain labor appellate courts.

Legal Background

In Uruguay, the arbitrability of labor disputes is not expressly regulated by legislation. The Arbitration Act, No. 19,636, inspired by the UNCITRAL Model Law on International Commercial Arbitration, provides no specific guidance regarding the arbitrability of employment-related disputes. In turn, the General Code of Procedure, approved by Law No. 15.982, establishes that any individual or collective dispute may be submitted by the parties to an arbitral tribunal for resolution, except where expressly prohibited by law. As a result, the determination of the arbitrability of labor disputes has been left to judicial interpretation.

While case law had traditionally supported arbitrability (mainly on grounds that no provision of the law prevented it), this debate came to the forefront in litigation involving Uber, where drivers have challenged the enforceability of arbitration clauses contained in the platform’s contractual framework, including a clause designating a foreign seat.

The Relevant Decisions

In 2025, the Supreme Court of Justice confirmed that the mere characterization of a dispute as “labor-related” does not preclude arbitration, nor does it deprive arbitral tribunals of jurisdiction to determine the nature and scope of the underlying claims. Instead, arbitrability depends on whether the rights at issue are disposable, a criterion that individual labor disputes generally satisfy under Uruguayan law (see Uruguayan Supreme Court of Justice Decision No. 536/2025, Guisado Baldoceda, Cristian v. Uber Technologies Uruguay S.A. and other).

The dispute arose when an Uber driver filed a labor claim before the ordinary labor courts of Montevideo, alleging the existence of an employment relationship and seeking statutory benefits contained in Uruguay’s labor law, such as paid leave and statutory annual bonus. Uber objected to the court’s jurisdiction, invoking an arbitration clause contained in its service agreement, which required that any dispute be resolved through arbitration in the Netherlands.

At first instance, the Labor Court dismissed the claim in its entirety. On appeal, however, the Labor Court of Appeals partially reversed the judgment and awarded certain statutory compensation. The appellate court rejected Uber’s jurisdictional objection, holding that Uber drivers qualified as workers under Uruguayan law and that labor disputes, by their nature, were not susceptible to resolution by arbitration. On that basis, the court declared the foreign arbitration clause unenforceable.

Labor appellate courts have justified this rejection of arbitration on public policy grounds, arguing that labor law forms part of public policy and therefore cannot be displaced by private agreement. In doing so, they have relied on the premise that arbitration entails a waiver of the right to effective judicial protection, an argument that contemporary domestic and international arbitration case law and scholars have largely abandoned (see for example, Uruguayan Labor Court of Appeals, First Division, Decision No. 89/2020, Queimada, Esteban v. Uber B.V. and other).

Uber appealed this decision, arguing, inter alia, that the appellate court had disregarded the principle that contracts are binding upon the parties (pacta sunt servanda) provided for in the Uruguayan Civil Code.

The Supreme Court, without ruling on the merits of the case (namely, whether an employment relationship existed), held that the arbitration clause was fully valid and enforceable, thereby rendering the filing of the claim before state courts inadmissible.

Referring to a prior judgment, the Supreme Court reaffirmed its settled position, stating that, under the General Code of Procedure, any individual or collective dispute may be resolved through arbitration, if the parties have agreed to it in a contract or subsequent agreement. The only exception is when the matter involves issues for which settlement is prohibited, or there is an express legal provision to the contrary. Accordingly, the Supreme Court found no grounds to conclude that individual labor disputes cannot be subject to arbitration.

This conclusion is reinforced by the fact that labor law, as a discipline with a significant negotiating component, has not excluded alternative dispute resolution mechanisms, even if some commentators argue that their use must remain compatible with the protective nature of labor law.

Furthermore, contrary to the premise advanced by certain appellate courts, the Supreme Court emphasized that the mandatory nature, non-negotiability, and protective principles governing labor law are not, per se, incompatible with the resolution of disputes through arbitration.

As previously noted, this was not the first time that the Supreme Court addressed the arbitrability of labor disputes. In an earlier decision, the Supreme Court examined a labor dispute involving IT technicians and engineers who had entered contracts with State agencies to perform projects financed by international organizations, which included a UNCITRAL arbitration clause (see Uruguayan Supreme Court Decision No. 911/2023, Rodríguez, Fernando and others v. AGESIC and others).

Much like in the Uber driver case, the claimants brought judicial proceedings against the contracting entities, the state agency AGESIC, and a foundation, alleging the existence of an employment relationship. While the court of first instance declined jurisdiction based on the arbitration clause, the Third Labor Court of Appeals reversed that decision, reiterating its position that labor disputes are not susceptible to arbitration.

In turn, the Supreme Court overturned the appellate ruling and reaffirmed that, as a general principle, any dispute may be submitted to arbitration unless expressly prohibited by law, and that no such prohibition exists with respect to employment contracts. The Court further held that Uruguayan law allows arbitration in all matters not excluded from settlement, and that individual labor disputes are, in principle, capable of settlement.

Further, the Supreme Court rejected the contention that the inalienability of labor rights and the mandatory nature of labor law are incompatible with arbitration, drawing a clear distinction between waiving recourse to state courts in favor of arbitration and waiving the application of mandatory labor rules. In the Supreme Court’s view, the unavailability of labor norms does not preclude arbitration, but rather limits the arbitrators’ freedom to depart from such norms when rendering their award. Accordingly, the protective function of labor law remains fully safeguarded, as worker protection derives from the substantive labor legislation itself, and not from the identity of the adjudicator, whether a judge or an arbitrator, both of whom are legally bound to act impartially and apply mandatory labor standards.

The divergence between the Supreme Court and the labor appellate courts remains a defining feature of the Uruguayan judicial landscape. While the labor courts of appeals have tended to adopt a more restrictive approach, invoking the protective principle of labor law, the Supreme Court has consistently embraced a broad conception of the arbitrability of labor disputes.

It is worth noting that, pursuant to the General Code of Procedure, the possibility of appealing a decision before the Supreme Court of Justice is quite limited. In particular, labor disputes do not usually reach the Supreme Court, as the amount in dispute must exceed a statutory threshold.

Conclusion

Decisions in which the Supreme Court reaffirms that Uruguayan law imposes no general restriction on the arbitrability of labor disputes are a welcome development. Such decisions enhance legal certainty and confirm that, in Uruguay, labor disputes are arbitrable where the parties have entered into a valid and enforceable arbitration agreement. In doing so, the Supreme Court brings domestic law into alignment with contemporary arbitration principles and reinforces Uruguay’s continued openness to arbitration as a legitimate and effective dispute resolution mechanism.