Alternative Dispute Resolution

Introduction

In the past 20 years there has been a tremendous increase in the amount of employment discrimination litigation.  Anti-discrimination laws — for example, the Americans with Disabilities Act (ADA) and the Civil Rights Act — provide enhanced rights (jury trials) and remedies (compensatory and punitive damages) for plaintiffs, while unlimited awards of damages and attorneys’ fees are available under Section 1981. 

The Equal Employment Opportunity Commission (EEOC) reported that over the past 10 years there has been a dramatic increase in sexual harassment complaints that have raised the consciousness of employees and the ante for employers.  Additionally, over 170,000 charges have been filed under the ADA during the past 10 years.

The employment relationship is changing as a result of these social and legal developments.  To accommodate these changes, many progressive companies have made a commitment to encourage employee involvement and empowerment.  For example, many companies have adopted participative dispute resolution procedures. 

These procedures include a variety of methodologies that are often successfully used in combination.  They include the following:

¨       Arbitration agreements.

¨       Complaint resolution procedures.

¨       Peer review and peer review panels.

¨       Employee involvement groups.

¨       Participative management strategies.

Companies adopting participative dispute resolution procedures have recognized the value of employee input and peer judgment.  Moreover, in a report by the federally funded Commission on the Future of Worker Management Relations the value of employee participation as a vital element in preserving competitiveness in the global marketplace was recognized.  The commission recently reported that private dispute resolution, such as mediation and arbitration, as well as newer, more informal employee participation and alternative dispute resolution (ADR) systems, are not being used to their full potential for dealing with workplace issues.

There has also been judicial approval of ADR procedures to resolve disputes.  In 1991, the U.S. Supreme Court granted approval to mandatory arbitration clauses in the employment relationship in the case of Gilmer v. Interstate/Johnson Lane Corp.  Other federal and state courts have upheld mandatory arbitration outside of a collective-bargaining relationship to resolve claims of sexual harassment; sex, age, and race discrimination; state law discrimination; and wrongful discharge claims.

The ADA, the Civil Rights Act, and other statutes specifically encourage parties to use mediation, conciliation, and arbitration to resolve disputes.  Government agencies, such as the EEOC, are encouraging the use of mediation and arbitration.  For example, the EEOC has established dispute resolution centers to review employment discrimination complaints filed with the commission.  The EEOC has also employed mediation and voluntary arbitration as the cornerstones of the agency’s new case processing procedures.  Additionally, the Department of Labor has adopted an ADR program.  Evidenced by agency policies and procedures, employment discrimination legislation has continuously encouraged employers to implement the use of ADR.

Types of ADR Solutions

Many employers are unaware that they already practice ADR.  The simple principle underlying ADR is that disputes are best settled quickly before they intensify, thus avoiding litigation.  A model ADR program is designed to immediately bring disputes to the attention of key decision-makers in an effort to settle the issue as soon as possible.  The goal of ADR is to provide a forum for the parties themselves to work towards a voluntary, consensual agreement, as opposed to having a judge or other authority decide the case.  Principal ADR solutions include open-door policies, internal mediation, and arbitration.

Open-Door Policies

Open-door policies offer a quick resolution to disputes by encouraging employees to bring grievances to their immediate supervisors.  An open-door policy requires a commitment by managers to listen and react to employees.  Managers must be trained to identify particular problems that may require a particular investigational procedure.  For example, allegations of sexual harassment or safety concerns should be referred immediately to senior management for appropriate investigation and resolution.

When the immediate supervisor is the cause of the problem or lacks authority to resolve the problem, successful open-door policies allow employees to take their grievances to different levels within the organization. 

Open-door policies may prevent litigation by correcting problems before someone is injured or a discontented employee becomes embittered and retains a lawyer.  Should an employee bring suit against an employer, the records from a good-faith open-door policy may demonstrate that an employer was attempting to accommodate employees with a venue to amicably handle concerns and grievances. 

Of course, a disgruntled employee may still pursue litigation after exhausting options within an open-door policy.  Employers should be careful in dealing with chronic troublemakers who may use open-door meetings as a basis for court complaints.

Internal Mediation

A more formal method to resolve complaints is to designate one, specific individual to whom employees submit complaints.  Sometimes called an ombudsman, this type of mediator functions as a go-between in trying to resolve the dispute. 

When a personality conflict exists between the employee and manager or when an employee is embarrassed to submit a complaint, the intervention of a mediator may be more successful than an open-door policy.  A good mediator can help all parties involved in the dispute to view issues objectively and reach a mutually satisfactory solution.

A system of internal mediation will succeed or fail based on the skill and credibility of the mediator.  Careful selection of the individual who will fill the important role of mediator is crucial.  Employees must trust the mediator to keep their confidences and feel that the mediator has enough influence with management to effect change.  Additionally, key decision-makers must publicly support the mediation process so that supervisors will respect the process and the mediator.

Internal mediation also conserves resources better than an open-door policy because only one individual is working on the disputes, rather than several managers.  A mediator may be likely to investigate complaints more promptly and thoroughly due to the mediator’s fewer operational responsibilities in comparison to line supervisors or managers.

At worst, if mediation fails, the employer has the opportunity to clarify an employee’s complaint and assess the merit of the organization’s position.  If the employee chooses to go to court, the employer will already have much of the information necessary to defend itself.

Ombudsman

As previously stated, an ombudsman is a person who is authorized by an employer to confidentially receive complaints or questions about alleged acts, omissions, improprieties, and broader systemic problems within the ombudsman’s defined jurisdiction.  The ombudsman is also charged with the duty to address, investigate, or otherwise examine these issues independently and impartially.  It is essential that the procedures used are fair in order to ensure a just resolution of the matter.

An ombudsman may make formal or informal reports regarding the results of a review or investigation.  They may also make recommendations regarding how disputes should be resolved.  Additionally, based on an agreement with the employer, an ombudsman may go as far as initiating litigation to enforce or protect the authority of the office.

Peer Review

Based on recent surveys, 90 percent of human resource executives report that their companies have adopted an open-door policy as the primary method for handling non-union employee complaints. 

However, these same executives report that 75 percent of the time employees with complaints bypass the open-door policy and consult an attorney, file a discrimination charge, write letters to company executives, contact the press, or seek help from a union.  Realistically, a gap exists between the theory that employees will use the company open-door policy and the path employee’s follow when they have complaints or grievances.  Peer review offers a viable alternative to the open-door policy by providing employees a system that they feel confident will produce equitable results.

An employer may opt to use a peer review panel to review and resolve employee disputes, at least concerning disciplinary action or discharge.  The panel consists of a mix of employees and managers (some employers use peer review panels consisting exclusively of employees) who hear and evaluate employee appeals from disciplinary or other actions. 

While these peer review panel decisions are not final, binding, or a legal deterrent to filing suit, as a practical matter they unquestionably reduce the risk of employment litigation.  The reduced risk is based upon the employees’ perception that the employer has treated them fairly, the fact that employees receive a form of due process in reviewing the disciplinary action, and plaintiffs’ attorneys recognize that a decision by the employees’ peers reduces the sympathy factor in an employment lawsuit.

Although peer review is primarily used for handling employee disciplinary complaints, with properly trained panelists it may also be designed to cover other workplace issues.  However, matters such as compensation, performance reviews, benefits, layoffs, and company policy would normally be excluded from their consideration.  Additionally, groups acting in a true peer review capacity are generally excluded from the National Labor Relations Act’s proscription on dominated labor organizations, which may affect the legitimacy of employee committees. 

Peer review panels do not deal with the employer within the realm of the ban by making proposals to management, which the employer accepts or rejects; rather, they act in a decision-making capacity.  (The availability of further review by top management does not alter the fundamental nature of their role.)

The Elements of an Internal Peer Review System

An employer would determine an employee’s eligibility for peer review.  This determination would be based upon how to maximize the benefits to be achieved from a peer review system.  Many times, employers view employee eligibility for the peer review process in the same way as other employment benefits.  For example, eligibility might include all regular full-time and part-time employees who have completed a specified length of service with the organization, excluding probationary or temporary employees. 

In order to achieve the greatest return for implementing peer review, the option for peer review should be treated as an additional employment benefit.

Peer review should be capable of handling a range of employee complaints from discipline to termination.  With a properly trained group of panelists, it may also be designed to cover discrimination issues, including sexual harassment.  Matters that would probably be excluded from peer review are compensation issues, performance reviews, benefits, layoffs, and company policy.

Initially, employees with a complaint would be encouraged to resolve the dispute by following the existing procedure of using the chain of command, including the open door policy when appropriate.  If the dispute is not resolved at this point, the employee has the options of either bringing the complaint to the attention of a designated senior executive for a final and binding decision or taking the matter to a review panel under the peer review process.

If a review panel is chosen, the employee selects one facilitator from a list of trained facilitators.  The chosen facilitator then coordinates the panel’s selection, meeting, and actions. 

Generally, about 10 percent of the employer’s total workforce should be trained as potential panelists.  The facilitator arranges for the employee to randomly draw names for panelists.  If it is a panel of five, the employee draws six names, keeping three for the panel with one alternate for each panelist.  The employee then draws the names of four management representatives, keeping three for the panel with one alternate.

The facilitator collaborates with the employee focusing on the employee’s presentation and ensures that the employee obtains all appropriate documents for the panel.  At the meeting of the panel, the facilitator plays a significant role in making sure the employee and the panel carry out their respective roles.

The Benefits of Internal Peer Review

Experience shows that peer review has many lasting benefits including, but not limited to the following:

¨       Management Development.  Participation by managers trained to act as panelists and facilitators improves management skills, particularly in the area of problem-solving.

¨       Litigation Avoidance.  Employees refrain from seeking legal counsel, filing a discrimination charge or lawsuit, writing directly to executives, or seeking a union.  Additionally, there is a reduced likelihood that an attorney will take the case if the panel affirmed management’s actions.

¨       Due Process.  Employees have an opportunity to air their grievances.  In addition, peer review instills a perception of fairness in the workplace.

¨       Reduction in Costs.  There is generally a reduction in employee calls and letters to the home office and in discrimination charges and lawsuits, all of which result in a reduction of legal expenses and costs.

¨       Union Avoidance.  A union’s major sales pitch or benefit regarding union membership — a formal grievance procedure — has lost all value.

¨       Employee Development and Empowerment.  Training panelists and involving employees in the implementation of the program enhances their range of skills and promotes the feeling of being able to make a difference.

¨       Training.  Collecting and recording grievances for a library of real-life situations is an effective tool for future training.

Peer review is a valuable resolution program that allows employees to present complaints in a non-threatening forum.  When implemented, peer review has successfully resolved employee complaints, improved morale, reduced legal and operational costs, and avoided employment litigation.

Arbitration

Final binding arbitration is the most formal ADR method.  In an arbitration agreement, employees and employers agree to submit their dispute to a neutral third party, an arbitrator, and agree to abide by the arbitrator’s decision.  While arbitration hearings are not as formal as court proceedings, they usually involve the presentation of witnesses, evidence, and arguments.

Employers may also use non-binding arbitration.  This option is the same as binding arbitration except that the parties may reject the arbitrator’s decision.  Rarely does non-binding arbitration offer more advantages than binding arbitration.

Advantages of Arbitration

Arbitration has several advantages over traditional litigation as follows:

¨       The parties have more influence over the selection of the arbitrator than they would over the selection of a judge.

¨       Arbitrators are less likely to award excessive actual or punitive damages than are judges.

¨       Arbitrators tend to be less influenced by passion or prejudice than are juries.

¨       The discovery process in arbitration is generally more streamlined, thus the administrative cost, time restraint, and inconvenience of preparing for an arbitrated case is less extensive than preparing a case in state or federal court.

¨       Arbitration generally takes less time than a traditional court action.

Disadvantages of Arbitration

Of course, arbitration does have some disadvantages, including the following:

¨       Unlike a trial court decision that can be appealed to a higher court, arbitration decisions cannot generally be appealed on their merits.

¨       Judges dismiss many employment cases based on pretrial motions to dismiss or for summary judgment.  Some cases may proceed further in arbitration than they would in court because arbitrators traditionally reserve judgment until after a hearing.

¨       Because many employers are implementing the ADR process, some arbitrators may be unfamiliar with the exact legal standard to be applied in each employment action.

¨       Traditionally, arbitrators are more lenient in admitting evidence than courts.  Consequently, damaging evidence may come to light in an arbitration that would otherwise be excluded from a court procedure.

¨       Some arbitrators may try to satisfy both sides by issuing split decisions reinstating employees without awarding them damages.

Arbitration to Avoid Civil Litigation

The U.S. Supreme Court has ruled that binding mandatory arbitration is lawful and enforceable as a substitute for civil litigation based on fair employment practice laws.  Employers are including arbitration clauses in employment agreements, requiring the employer and employee to submit any disputes arising from the employment relationship to binding arbitration; for example, wrongful discharge disputes, infliction of emotional distress, discrimination, and harassment. 

The U.S. Supreme Court considered the enforceability of such agreements under the Federal Arbitration Act (FAA) in Circuit City Stores, Inc. v. Adams.  In the case, the Supreme Court held that employment agreements containing arbitration provisions are enforceable under federal law, settling conflicting opinions among the lower courts as to whether employers could require employees to submit disputes to arbitration rather than file lawsuits.  Employers now have a reliable alternative to courtroom litigation as a means to redress employee complaints.

In another recent arbitration case, EEOC v. Waffle House, the Supreme Court found that an agreement between an employer and an employee to arbitrate employment-related disputes does not bar the EEOC from pursuing victim-specific judicial relief — such as backpay, reinstatement, and damages — in an ADA enforcement action.

The court explained that because the EEOC is not a party to the contract and has not agreed to arbitrate its claims, the FAA’s pro-arbitration policy goals do not require the agency to relinquish its statutory authority to pursue victim-specific relief, regardless of the forum that the employer and employee have chosen to resolve their disputes.

Terms of Arbitration Clauses

An arbitration agreement should explicitly set forth certain terms, since the employer must comply whenever the employee requests arbitration pursuant to the contract.  The specific terms should consist of the following:

¨       The kinds of claims required to be submitted to arbitration.

¨       The rules to govern the arbitration.  Various organizations such as the American Arbitration Association and the Federal Mediation and Conciliation Service publish standard rules for arbitration, including the availability of pre-hearing discovery.  These organizations can be used to supply lists of arbitrators and procedures for selecting the arbitrator.

¨       The types of remedies the arbitrator can award.  For purposes of avoiding parallel litigation, the awards should be defined broadly enough to include the kinds of legal and equitable remedies available in a court.  Remedies should include such things as actual damages, including front pay and backpay, as well as punitive damages, attorneys’ fees, and arbitration costs.

¨       The responsibility for the payment of the costs of arbitration.  Employees cannot be expected to bear substantial administrative or arbitrator fees.

In a recent decision, the Supreme Court re-emphasized the rule that arbitration clauses must be particularly clear.  Accordingly, when drafting such a clause, employers should be as detailed as possible.

ADR Advantages and Disadvantages

Advantages to Using ADR

Should ADR fail to avoid litigation, the existence of such a system enhances the appearance and reality of fairness within the organization.  Additionally, the system may deflate a litigant’s chances if the organization’s ADR findings were in favor of management. 

Courts may recognize ADR as final and binding if the system incorporates elements of notice, due process, fact, and issue specificity, finality, and other guarantees of impartiality and fairness.  The evidentiary value of ADR proceedings in subsequent litigation is substantial.  In addition, litigants may be expected to exhaust internal remedies before beginning litigation.  Finally, emotional distress claims may be rebutted based on the availability of a fair and consistent dispute resolution system.

When the subject matter involved in the dispute is sensitive, ADR may protect the privacy interests of the parties and keep the nature of the matter confidential.  For example, the facts and allegations surrounding charges of sexual harassment may be extremely sensitive, and the parties may wish to avoid the public attention that may result from litigation in the courts, where documents and files are matters of public record.  For this same reason, ADR procedures are being used to resolve disputes involving trade secrets and other highly confidential matters.

ADR can also be used to achieve zero-litigation goals.  For example, peer review may be used as an adjudicatory forum similar to a trial by a jury of peers.  Another method to avoid litigation is use of an ombudsman, who functions as a neutral open door option for the resolution of complaints.  Similarly, the mediation process centers around a neutral referee who guides the parties to an acceptable compromise on the issues. 

More formal options such as fact-finding and arbitration present an adjudicatory forum similar to a hearing before a trial examiner who has the responsibility to perform the following:

¨       Gather, evaluate, and weigh evidence.

¨       Analyze issues and applicable rules.

¨       Issue a binding decision on the merits of the case in favor of one of the parties, including remedies and/or penalties.

ADR can also reduce vulnerability to union organizing because a procedure to resolve complaints internally eliminates the need for union intervention.  It also helps to achieve an issue-free workplace.  ADR mechanisms enhance employees’ sense of empowerment, value, authority in the workplace and with management.  Employees also perceive management to be fair, consistent, and respectful to employees.  Moreover, employees have access to a mechanism similar to grievance and arbitration of disputes under a collective-bargaining agreement.

Disadvantages

Of course, arbitration does have some disadvantages, such as the following:

¨       Unlike a trial court decision that can be appealed to a higher court, arbitration decisions cannot generally be appealed on their merits.

¨       Judges dismiss many employment cases based on pretrial motions to dismiss or for summary judgment.  In contrast, arbitrators traditionally reserve judgment until after a hearing so some cases may proceed further in arbitration than would have in court.

¨       Because many employers are utilizing of this form of ADR, some arbitrators may be unfamiliar with the exact legal standard to be applied in each employment action.

¨       Arbitrators are traditionally more lax in admitting evidence than courts; as a result damaging evidence may be presented in an arbitration that would be excluded from a court procedure.

¨       Some arbitrators try to satisfy both sides by issuing split decisions reinstating employees without awarding them damages.

Formal Policy Considerations

Use of employment mediation is increasing rapidly.  Time and again conflicts are resolved promptly, at modest cost, through the intervention of a skillful mediator.

When a terminated or current employee asserts a claim against the employer, it frequently is in the interests of both sides to attempt to resolve the matter early through mediation for a number of reasons as follows:

¨       The procedure gives the employee the opportunity to be heard and vent emotions.

¨       Resolutions are usually prompt, but if the case cannot be settled, other options are not ruled out.

¨       The resolution is likely to be more mutually beneficial than one fashioned by a court or jury.

¨       Lingering animosity is likely to be lessened.

¨       The parties retain control over the outcome.

¨       Legal fees and other costs are modest.

¨       The procedure is private and confidential.

Nevertheless, there are several impediments to the use of mediation in this area, such as the following:

¨       Many attorneys representing employers or employees are still unfamiliar with, and consequently skeptical of, mediation.

¨       Many attorneys are reluctant to be the first to propose mediation for fear that their proposal may be seen as a sign of weakness.

¨       Some employee disputes are not suitable for mediation (for example, disputes involving misappropriation of trade secrets).

¨       Some attorneys are predisposed against mediation until after formal discovery has concluded.

When a former or existing employee first asserts a claim, the employer often believes that the claim is without merit and must be defended vigorously.  Nevertheless with management approval, most lawsuits are settled before they ever reach the courtroom, but only after the costs and burdens of trial preparation have been incurred. 

It is recommended that, at the outset of a case, the employer’s in-house attorney or outside counsel engage in a dialogue with the responsible executive to analyze the case and to reach a well-considered decision as to whether the case must be tried to judgment — at considerable expense — or whether the employer is willing to settle on reasonable terms.  If the case is susceptible to settlement at any stage, serious consideration should be given to proposing mediation in the hope of achieving an early settlement; thus, saving the employer the high costs and burdens of full-scale litigation or arbitration.

Private Arbitration of Employment Disputes Upheld

The U.S. Supreme Court has made it easier for employers to resolve workplace disputes through the use of arbitration procedures rather than the courts. 

In a ruling on March 2, 2001 (Circuit City Stores, Inc. v. Adams) the Supreme Court held that employment agreements containing arbitration provisions are enforceable under federal law.  This decision settled conflicting opinions among the lower courts as to whether employers could require employees to submit disputes to arbitration rather than file lawsuits. 

Employers now have a reliable alternative to courtroom litigation as a means to redress employee complaints.  Among the points favoring arbitration over courtroom litigation are the following:

¨       Disputes may be resolved more quickly and efficiently.

¨       Proceeding through arbitration is generally less costly.

¨       Arbitrators are believed to be expert decision-makers bringing specific knowledge and experience to the table, as opposed to lay jurors.

¨       Arbitration may provide a user-friendly vehicle for both the employee and employer.

¨       Arbitration may provide a system that ensures fairness and due process.

Among the concerns an employer may have about arbitration are the following:

¨       A fear of a rise in employee disputes.

¨       Difficulty in overturning an arbitrator’s unfavorable decision.

¨       A tendency among arbitrators to appease all parties in order to resolve the dispute.

¨       Inclusion of evidence that normally would be excluded from a court proceeding.

Although the Supreme Court has now said that arbitration agreements are enforceable, it did not address the practical issues regarding implementation.  Employers must make certain their arbitration provisions are carefully drafted.

Arbitration Agreement and an EEOC Suit for Victim-Specific Remedies

As previously discussed, in a recent U.S. Supreme Court case, EEOC v. Waffle House, the court found that an agreement between an employer and an employee to arbitrate employment-related disputes does not bar the EEOC from pursuing relief.  The lawsuit must be brought under the EEOC’s own name and pursue victim-specific judicial relief, such as backpay, reinstatement, and damages, in an Americans with Disabilities Act (ADA) enforcement action. 

The court explained that because the EEOC was not a party to the contract and did not agree to arbitrate the claims, the EEOC was in no way constrained by the private agreement.  The Federal Arbitration Act’s (FAA) pro-arbitration policy goals do not require the agency to relinquish its statutory authority in order to pursue victim-specific relief, regardless of which forum the employer and employee have chosen to resolve their disputes.

Although, an employee’s conduct may effectively limit the relief the EEOC can obtain in court.  For example, if the employee fails to mitigate damages or accepts a monetary settlement.  In the EEOC v. Waffle House case the employee had not sought arbitration, nor was there any indication that settlement negotiations were entered into with the employer.

Sample Policies

Communicating New Policies

The presentation of the employer’s decision to implement employment dispute resolution procedures is vital to the acceptance of those procedures by its employees.  Employees as well as management should feel that these procedures are fair and protect their interests.  In addition, both parties must understand the legal consequences of agreeing to a binding arbitration.

In an effort to achieve this end, the sample policy that follows outlines the process and its benefits.

Alternative Dispute Resolution

(Sample Policy)

Policy Statement

When a current or former employee asserts a claim against the employer, it is often in the mutual interests of both parties to avoid the costs, delays, uncertainty of outcome, and animosity of a full-scale litigation.

Policy Overview

Voluntary Mediation Provisions

In most cases, it is the employer’s policy to propose or agree to mediation of an employment dispute.  Mediation can be a highly effective procedure for bringing about settlement for many types of disputes — particularly employment-related disputes.  However, mediation may not be appropriate where the employer has determined the need for a judicial determination to enforce the employer’s rights or to offer protection against unfair competition or misappropriation of intellectual or other property or breach of restrictive covenants.  Mediation also may not be appropriate when the dispute involves a modest amount of money.

The success of mediation depends on the qualifications and skill of the mediator and on the confidence both parties have in that individual.  The mediator will be selected by agreement of both parties.  If they do not agree, both will rank order a list of candidates.  The candidate with the best-combined score will be the mediator.

Normally, the meditation fees are divided equally between the parties.  However, in appropriate cases the employer may agree to bear more than one-half the cost.

To maximize the chances that the mediation will be successful, both the employee and a senior manager of the employer must agree to personally participate in each mediation session, unless excused by the mediator.  Each party may also be represented by an attorney, or other person of their choice, and must voluntarily provide information needed for the mediator to evaluate the claim.

The procedure requires parties to suspend litigation activities while the mediation is ongoing, and each party is free to withdraw from the mediation after the first session.  Additionally, the mediation process may be subject to reasonable time limits.

Arbitration Options

Voluntary Post-Dispute Arbitration

In an attempt to resolve a dispute where mediation is unsuccessful, or in lieu of mediation, the employer will not rule out the binding arbitration of disputes with present or former employees.  On a case-by-case basis, the employer will determine whether to agree to binding arbitration.  

Mandatory Pre-Dispute Arbitration

Although mediation is not binding and the chances of success are high, mediation may still fail to resolve the dispute.  Where mediation fails, it is the employer’s policy to resolve the dispute through binding arbitration.  Upon an employer’s issuance of a policy to resolve employment disputes via arbitration, all employees who remain employed for 90 days or more after its issuance, along with all new employees, will be bound by this policy.

The employer instituting this policy is convinced that the arbitration procedure is evenhanded, fair to both sides, and has significant mutual advantages.  For example, it is likely to be more expeditious, more economical, and less burdensome or adversarial than litigation.  Arbitration is private and the results are final.  Arbitration does not change either party’s substantive legal rights, but merely changes the forum in which those rights are adjudicated.

Addition to Mandatory Binding Arbitration

Employees find arbitration to be much more palatable if they are not bound by an adverse result and are free to go to court after the arbitrator’s award is handed down.  While non-binding arbitration may grant the employee “a second bite at the apple,” in most cases an employee who lost in a fair arbitration proceeding will accept the award.  Additionally, in any subsequent court action the arbitration award may be introduced in evidence.

Dispute Resolution Procedure

Due to the high costs of lawsuits, perpetual life disruptions, and delay of litigation in the courts the employer has advocated the use of negotiation, mediation, and other forms of alternative dispute resolution, including arbitration.  The litigation process is highly unsatisfactory for both the employer and employee as the process is adversarial from the beginning, the outcome of trial is uncertain, and is not final until all appeals are concluded. 

Certainly, most problems are solved through discussions with a supervisor, with a human resources representative, or through other internal procedures.  Where these procedures do not produce a satisfactory result, however, the employer would like to offer a more efficient, less adversarial alternative to filing a lawsuit.  The employer believes ADR to be mutually beneficial in resolving employee disputes that are not solved through other means.  

Adopting a multi-step ADR program offers the possibility of using mediation as a first step to try to find a mutually agreeable way to resolve employment disputes.  If agreement is not reached in mediation, the employer or employee may use arbitration to resolve such disputes.

A brief summary of each procedure follows.  The employee should note, however, that the actual provisions of the procedures, and not any summary, will govern.

Mediation

Although mediation is strongly favored for the most significant employment disputes, this step may not always be suitable.  In mediation, an experienced neutral third party is first selected by agreement and then meets with the parties to help resolve their differences.  The mediator accomplishes this by helping the parties open communications, focusing on the parties real interests, and attempting to find a satisfactory resolution for both participants.  Mediation is a non-binding process — there is no requirement that either party accept any recommendation the mediator might make for settlement.  The settlement and its terms are entirely subject to party agreement.  Both parties are entitled to be represented by an attorney or any other individual of their choice.

Key Advantages of Mediation

Mediation has proven successful in the great majority of cases.  It offers the following advantages:

¨       Provides the opportunity for all parties to narrate their version of the dispute in a non-aggressive atmosphere.

¨       Facilitates listening.

¨       Helps reduce feelings of hostility.

¨       Helps separate emotional issues from factual issues.

¨       Promotes discussion of solutions rather than focusing on one party winning and the other losing.

¨       Aids parties in reaching a resolution on their own rather than letting a third party hand down a finding.

¨       Offers an opportunity for a solution that is agreeable for both the employee and the employer.

While an employer may have a policy to agree to mediation, it is important to remember that mediation is voluntary.

Requesting Mediation

The employee may request mediation orally or in writing if internal procedures have not resolved a dispute.  The employer will generally agree, unless the employer concludes that the dispute is not suitable for mediation.  Any employee may suggest the name of a mediator they consider to be fair, impartial, and experienced.  If the employer does not readily agree with the employee in regard to a mediator, the employer will submit a short list of candidates.  The employer and employee will then either agree on one of these candidates or each party will rank order the candidates.  The candidate with the best-combined score will be the mediator.  Both parties will then sign a submission agreement to begin the mediation process.

Conducting the Mediation

The employee may propose modifications; however the mediation will be conducted under currently accepted procedures.  An attorney or other person of their choice may represent the employee.  If an attorney represents the employee, an attorney also may represent the employer.  The employee and the employer representative must attend each mediation session.

The mediator will guide the discussion and help settle differences.  The mediator is likely to meet privately with each side to develop a better understanding of the problem.

When the employee and the employer agree on the terms of a settlement, both will sign a written settlement agreement.

Expenses of Mediation

Actual mediation meetings frequently take between 6 and 15 hours.  Mediators usually charge between $250 and $350 per hour.  Normally, the mediator’s fee will be divided equally, however the employee may request that the employer pay more than one half.  The employee will typically bear the cost of any attorney or other representative the employee retained.

Arbitration

If either the employer or employee does not agree to or cannot resolve the dispute through mediation, either party may request the other to submit the claim to arbitration.  Arbitration must be used by the parties rather than litigation or instituting an administrative agency’s authority.

The Procedure

Arbitration is a process in which a dispute is presented to a neutral third party, the arbitrator.  The arbitrator makes a decision after both sides present their arguments at the hearing.  There is no jury.  If the employee prevails, the employee can be awarded anything the employee might seek through a court of law.  Though arbitration is much less formal than a court trial, it is an orderly proceeding, governed by rules of procedure and legal standards of conduct.

Advantages

The arbitration process offers several of the following mutual advantages to the employer and to the employee:

¨       Speed.  Court proceedings are cumbersome, lengthy, and frequently leave neither party with an acceptable result.  The arbitration process will normally be completed within a number of months, permitting the arbitrator to resolve disputes quickly and fairly.  If the arbitrator finds that the employee is entitled to compensation or other relief, it is likely to be received much sooner than court awarded compensation.  Although arbitration statutes allow very limited modification for issues, such as bias or fraud by the arbitrator, the ability to appeal an arbitrator’s award is not available.

¨       Reduced Cost.  All parties will save money by avoiding the significant legal fees and other costs of court proceedings.

¨       Experienced Decision-Makers.  Courts do not specialize in resolving employment disputes; however, arbitrators do.

¨       Confidentiality and Privacy.  Claims are resolved in a more agreeable fashion when both sides have the protection of confidentiality.

Requesting Arbitration

An employee must provide the appropriate departmental manager with written notice to initiate arbitration.  Such notice must be provided within the applicable period required by law.  If in doubt, the employee may determine that period by consulting either their or the employer’s representative.  The employee’s notice will state their claim, the relevant facts, and the remedies being sought.  The notice must be accompanied by documents in support of the employee’s claim. 

Selecting an Arbitrator

The employee and the employer will attempt to agree on a neutral arbitrator.  If the employer or employee cannot promptly agree, both may submit a list of qualified candidates from which one may be selected.

Expenses of the Arbitration

The employee’s share of the arbitrator’s fees and related expenses will not exceed two days’ gross compensation or one-half of such expenses — whichever is less.  In case of demonstrated hardship, the arbitrator may relieve an employee of the obligation to contribute to their fee and related expenses.  The employee may voluntarily elect to pay one-half of all such expenses.  The employee will typically bear the employee’s own attorney’s fees and the costs of producing their evidence.

Model Contractual Provision for Mediation

(Sample Policy)

Proposal of Mediation

Any party to an alleged employment dispute may initiate mediation at such time as the party becomes aware there is an alleged dispute.  A party is defined for purposes of this provision as a complainant employee or the employer.  The party initiating the mediation must give written notice to all parties to the mediation.

This notice must indicate that a response — either accepting or declining mediation — must be given within 14 days.  Any party wishing not to mediate must waive, in writing, the right to mediation.  Any party filing an EEOC complaint or Title VII suit will be considered as having constructively waived their right to mediate.

Neither this document nor an agreement to mediate waives any substantive legal right or responsibility of any party.  By choosing to mediate, no party is at any time waiving the right to file suit in court, go to arbitration, or file an EEOC complaint.

The Mediation Process

The mediation sessions will aim to reach an agreement about the future conduct and relationship of the parties.  The mediator’s role is to facilitate agreement; the mediator is not a judge or an arbitrator and does not rule on the merits of this case.  The power to resolve the dispute resides solely with the parties, not the mediator.  Before beginning the mediation session, all parties must read the description of the mediation process accompanying this policy and must acknowledge in writing that they have read the description.

The mediator has complete control over the procedures used during the sessions, including the frequency and duration of caucusing, the use of the initial joint session, and the scheduling of the sessions.

The choice to participate in mediation is voluntary.  Any party may terminate the mediation at any time for any reason simply by giving written notice of the termination to the mediator and to each of the other parties to the mediation.  Filing an EEOC complaint or Title VII suit will be considered termination, for purposes of this policy.

The mediation sessions are confidential.  Neither the mediator nor any party to the mediation may disclose any information about or from the mediation process to anyone.  Each party and the mediator shall sign a confidentiality agreement before the beginning of the first mediation session.

All parties shall attend the mediation sessions and make a good-faith effort to mediate.  At least one of the individuals present on behalf of each party must have authority to settle the dispute.  Each party to the mediation is encouraged to bring counsel to the mediation sessions.  Counsel shall function, however, as advisors rather than advocates.

The parties’ remedies are not limited to cash settlements.  Exploration of other potential remedies is strongly encouraged.

Selection of a Mediator

The mediator must meet the following criteria:

¨       Be neutral and impartial.

¨       Be knowledgeable in the area of sexual harassment.

¨       Be certified by an organization that requires the following:

·    Supervised training in the mediation process.

·    Adherence of the mediator to standards of conduct.

The mediator shall immediately disclose any potential conflict of interest to all parties.

An organization certifying mediators shall provide a list of three suggested mediators who meet the qualifications listed above.  Additionally, any party to the mediation may suggest another qualified mediator, although all parties must be in agreement to utilizing this individual.

If the parties cannot agree on a mediator within 14 days after mediation has begun, the organization supplying the mediator will suggest one appropriate individual.  No party may then object to the suggested mediator unless the mediator has a conflict of interest.

The mediation shall begin within 21 days from the date on which the mediator was chosen.

Costs

The cost of the mediator will be split as follows:

¨         The employer is responsible for 90 percent of the mediator’s fees.

¨         The complainant employee is responsible for 10 percent.

Inability of the employee to pay the 10 percent will not, however, prevent a complainant employee from pursuing mediation.  In such cases, the employer shall pay the full amount and make arrangements with the complainant employee for repayment, up to the 10 percent, on a reasonable schedule.  The human resources department or similar office of the employer shall set the amount to be paid and the repayment schedule.  Furthermore, the employer shall pay the cost of counsel for the complainant employee, up to and including the cost of 25 billable hours or $3,000 — whichever is less.  The complainant employee is responsible for choosing individual counsel.  This counsel, if paid for by the employer, must be present at the mediation.

Settlement

Any settlement reached must contain a liquidated damages clause, providing a set amount to be paid should a party breach the contractual agreement.  Once settlement has been reached, the mediator or counsel for one of the parties shall draft a written settlement document incorporating the terms of the settlement.  If the mediator does not draft the settlement agreement, the mediator shall review the agreement before it is given to the parties for signature.

This draft shall be given to all parties, reviewed, changed if appropriate, and executed.