United States: What Is ADR? Mediation? Arbitration?

What is ADR? What is the difference between mediation and arbitration? Contractors are familiar with arbitration of construction contract claims through the American Arbitration Association (AAA) because of the standard arbitration provision of AIA Document A201. What about disputes between employees and employers? Can they be arbitrated? How does mediation fit into the process?

ADR is an acronym for "alternate dispute resolution," a process that includes both arbitration and mediation to resolve disputes in lieu of a trial in court. There are significant differences between arbitration and mediation. Arbitration is a process that results in a final, binding decision by the arbitrator or panel of arbitrators. The decision may be filed in court and enforced as a judgment. It is in lieu of a trial in court before a judge or jury. Mediation is a settlement conference between opposing parties, such as an employee and an employer, using a third party as a mediator. The mediator is trained to help the opposing parties arrive at a compromise settlement. When a compromise settlement is reached, the agreement is reduced to writing and signed by the opposing parties. If a settlement is reached through mediation, there will be no need for arbitration.

Over the past decade, employment discrimination cases have been the primary cause of the rapid growth in federal court civil filings. The Bureau of Justice Statistics shows that recently more than 42,000 complaints alleging civil rights violations have been filed with the U.S. District Courts, a 125% increase since 1990. Employment discrimination disputes now comprise 17% of all civil filings compared with 9% in 1990. During the same period non-civil rights cases grew by less than 8%. The growth of employment cases is due in large measure to the passage of the Americans with Disabilities Act of 1990 and the Civil Rights Act of 1991 which modified five other federal employment laws, making punitive damages available in certain cases and permitting jury trials.

As a reaction to the phenomenal growth in employment litigation, more and more contractors have adopted ADR to resolve employment disputes. Following the lead of international corporations, such as J.C. Penney, Shell Oil, and Southwestern Bell, contractors such as Brown & Root have adopted ADR plans in various forms tailored to the needs of their specific corporate culture and utilizing the services of the AAA. The companies who have chosen to use the services of the AAA have done so because of its long experience in resolving disputes without having to go to court and because the courts have found the procedures used by the AAA to be fair to employees and employers alike.

The AAA is a not-for-profit public service organization, founded in 1926, dedicated to the resolution of disputes through mediation, arbitration, elections, and other voluntary dispute resolution procedures. Over 4,000,000 workers are now covered by employment ADR plans administered by the AAA. The AAA has developed rules of procedure and a code of ethics for its mediators and arbitrators, which provide safeguards to the parties in order to assure fair, impartial, and informed resolutions of disputes.

Most ADR plans incorporate an open door policy in which attempts are made to resolve disputes within the chain of command. If disputes cannot be resolved internally, either the employee or the employer may first request mediation in an attempt to settle the matter. If mediation is unsuccessful, either party may request arbitration before an arbitrator or panel of arbitrators who will make a decision in lieu of a trial in court.

Companies who have adopted ADR plans usually distribute copies of the plans to all of their existing employees and give each of their new hires copies at the time they are employed. By continuing their employment, existing employees are deemed to have agreed to the ADR plan in lieu of trial in court. New hires will have agreed to the ADR plan by accepting employment. Since both the employer and the employee are required to use ADR instead of going to court, ADR plans give equal rights to both parties to a dispute.

Will an ADR plan stand up in court? An Arkansas federal court says, yes. In McClendon v. Sherwin Williams, Inc., 70 F. Supp. 2d 940 (E.D. Ark. 1999), District Judge Stephen M. Reasoner held that a new compulsory arbitration provision inserted in a personnel handbook, and distributed after employment has begun, can become part of the employee's contract, if the handbook language is sufficiently definite to constitute an offer, and the employee accepts the offer and supplies consideration by remaining in his job. Similarly, the U. S. District Court of Appeals held in Cole v. Burns International Security Services, 323 U.S. App. D.C. 133 (1997), that a compulsory arbitration provision in an employment contract is enforceable because of the safeguards to employees' rights built into the contract, which included utilizing the services of the AAA and providing the following minimum procedural guarantees: (1) a neutral arbitrator who knows the laws in question and understands the concerns of the parties, (2) a fair and simple method of discovery by which the employee can secure the necessary information to present his or her claim, (3) the same types of relief that would otherwise be available in court, (4) a fair method of cost-sharing between the employer and employee to ensure affordable access to the system for all employees, (5) the right to independent representation if the employee wants it, (6) a written opinion by the arbitrator explaining the rationale for the result, and (7) sufficient judicial review to ensure that the result is consistent with the governing laws. It should be noted, however, that as of this writing, the United States Supreme Court has not approved or disapproved a compulsory arbitration provision in an employment contract. See, Gilmer v. Interstate/Johnson Security Services, 500 U.S. 20 (1991).

In addition to the legality of ADR provisions, their practicality is likewise an important consideration. Because of the added speed, confidentiality, and professionalism that ADR and the AAA bring to employment relations, ADR plans should be considered as an additional employee benefit. ADR can be less expensive, faster, less stressful, and more private. It can preserve good relations between employee and employer by airing grievances early, before positions are hardened and emotions prevent meaningful resolution.

Since the roll out of the ADR plans in the companies who have adopted them, feedback from employees and managers has been favorable. Employers have found that after a brief initial surge of complaints following adoption of ADR plans, requests for ADR diminish, and lawsuits are substantially reduced. Perhaps the reduction in lawsuits and claims is a result of improved communications between employees and their supervisors. Perhaps the pro-active approach of effective ADR plans encourages early resolution of disputes by demonstrating the good faith of all parties to the disputes. Whatever the reason, both employees and their employers seem to be happy with a new process to resolve workplace disputes outside the glare of the courtroom and without lawsuit posturing and publicity. ADR of employment disputes appears to be here to stay.