The Union International des Avocats have hosted the World Forum of Mediation Centres since 2002, and I have attended all but three of their meetings. It is a convivial crowd of well-informed, deeply committed and sociable folks who tend to meet at interesting (mostly European) venues.
The meeting scheduled for Luxembourg on April 22-23, 2016, will feature many of the topics and speakers that make the organization so valuable.
It will be tinged with tristesse on this occasion, however, since it will be the first time that the late Colin Wall, co-President and co-Founder, will not be with us. By way of both honoring and exemplifying Colin’s devotion to sharing insights on mediation, the program designers have asked various speakers to contribute a paper for inclusion in a volume to be published in Colin’s honor, proceeds to go to his designated charity. My topic is systems design for employment dispute resolution, and the article follows.
Designing Employment Dispute Management Systems
Peter Phillips[1]
In 2002, CPR Institute for Dispute Resolution[2] published a compendium of 20 American employers’ internal workplace dispute programs (the “Compendium”).[3] The Compendium also included a comparative analysis of certain attributes of these programs,[4] as well as interviews with six program designers and administrators.[5]
This article summarizes the findings of this study. Some of the concerns addressed by the internal programs are unique to the American context, particularly its regulatory and statutory environment concerning workplace rights and regulations. The overall approach reflected in these programs may nevertheless be of interest to students of workplace dispute resolution in other countries.
Why do companies adopt internal employment dispute systems?
How do they measure whether the systems are successful?
The impetus for most employment dispute resolution programs is usually managerial, and only secondarily legal.[6] Though many companies are prompted to create employment dispute programs because of an adverse judicial ruling involving a class of employees, [7] a systematic managerial approach to workplace conflicts, clearly articulated and neutrally applied, lends consistency and manageability to the workplace. It assists in identifying flaws (including supervisory weaknesses) in the workplace that might otherwise undermine employee confidence and morale. It discourages intuitive, retaliatory, or vituperative managerial response to employee behavior. Corporate policies and interests, rather than individual supervisors’ predispositions, drive company practices in the workplace.
Additionally, there are the benefits of preventive legal exposure. Managerial efforts to identify conditions or behaviors that might ripen into a legally cognizable cause of action, and to create nonlitigious avenues of redress, are clearly economically beneficial.[8] Thus, well-planned and properly administered employment dispute management programs are not only managerially rational, but legally prudent.
The managerial goals of a dispute management program require the adoption of appropriate metrics. That is, companies measure success in this area the same way they measure the success of any organizational system or policy – by a metric chosen for that purpose. The effectiveness of employment dispute management programs might be measured by any of the following criteria:
- How long does it take between the initiation of an employee complaint and its satisfactory resolution? And what resources (person-hours, days, etc.) are expended in that process?
- What are the average costs of internal and external counsel in addressing an employee complaint?[9]
- What is the rate of employee turnover before and after establishment of the program?
- What is the rate of employee complaints filed with external government regulatory agencies?
- What is the rate of employee utilization of the program?
- To what extent are resolutions achieved at a junior management level, without implicating senior management time?
- Are users generally satisfied with the experience of using the program? Would they recommend that peers use it?[10]
These metrics are merely indicative. Each employer may adopt measurements that suit its management goals.[11] The main point is that setting metrics to determine the effectiveness of any program is as important as creating the program itself.
Structural overview
Almost all of the programs in the Compendium were designed with sequential and progressive phases, or steps. Classically, the first step was consultative and informal; the second step was professionally facilitated formal negotiation (such as mediation), and the third step was adjudicative, either public (litigation) or private (arbitration).
Distinctions among the programs were variations on either the details of these processes or their sequence. Some companies allowed mediation without the requirement of prior consultation. Some companies made mediation optional for employees but, once selected, mandatory for supervisors. Some used Human Relation officers as the first consultative step; others had peer review systems or methods to consult with management other than one’s immediate supervisor. In some programs arbitration was binding on both parties; in others it was binding on the company but optionally binding on the employee.
Some companies required employees to use the program; others simply offered it. One company encouraged employees to seek legal advice before accepting a proposal in settlement, and even offered to pay towards the employee’s legal costs for this purpose. One company had no requirement of sequential use of its steps, and offered four rather than three: an “Open Door” or “Hot Line” option, an “Internal Conference” option, a “Mediation Option,” and an “Arbitration Option.” Some companies required employees to waive court redress and agree to final and binding arbitration as a condition of employment; others offered but did not require it.
In designing “stepped” employment dispute management programs, all of the companies studied found it necessary to confront certain considerations. These included:
- Scope: Which employees will be covered by the program, and which disputes are cognizable under the program? Within the program, are some claims included in informal consultations but excluded from arbitration?[12]
- Cost: Should employees be required to contribute to the cost of processes such as mediation or arbitration? Would cost-sharing deter usage, or would it ensure that the employer is not perceived as “owning” third-party neutrals such as mediators or arbitrators?
- Neutrality: Who makes the choice of arbitrators and mediators? How should the program address the risk of the “repeat-player syndrome,” where the same arbitrators are hired repeatedly by the company and are perceived by employees as incentivized to find in favor of the employer?
- Incentives/Rewards: Many managers of well-designed programs are concerned to maximize employee usage. Should the program offer an incentive to prompt employee usage, or a reward as a consequence of usage?
- Collaborative Design: Should the program be designed and then unveiled to the workforce, or should representatives of the workforce be enlisted in the design process? One employer strategically engaged union representatives who were predicated to object to the program, in an effort to co-opt that objection and create “ownership” by trusted members of the workforce.
- Implementation: Even the most sophisticated program is ineffective unless utilized. Who shall the program be communicated to employees? Will junior supervisory management perceive that their authority has been undermined? Should the “C-Suites” be involved in launching the program and making clear the company’s expectations of compliance with its directives?[13]
Skills of consensus-building are particularly valuable in this context. The broader the input in program design, the more likely the program will be effectively implemented. Objections to any program features are best heard early in the design stage, and not only addressed, but seen by the objector to have been addressed, in order to obviate their inevitable airing at a later time in less flexible circumstances.
The challenge of early problem identification
Four attributes of successful internal employment dispute management programs may be articulated as:
- Providing expense-reduction benefits through front-ending resources to address problems before they ripen into more costly disputes
- Encouraging amiable resolution of conflicts while avoiding animosities engendered by litigation
- Building “early detection” mechanisms into the workplace to discover and address issues with supervisory error
- Providing an adjudicatory process – when needed – other than public litigation
There are a variety of ways that the benefits of early detection of workplace problems may be accomplished. One is the establishment of the office of organizational ombudsman. Such an office is a resource to all members of the workforce, including managers and supervisors, and points inquirers to routes for solutions in a confidential atmosphere. The ombudsman office is not part of Human Resources or the Legal Department, and is answerable directly to the office of the president of the organization.
This is an area in which responsible innovation may reap substantial rewards. One program administrator, when asked what types of issues the program would address, replied that he would discuss with an employee concerns about the patterns of the linoleum on the floor, on the assumption that if the employee voiced concern about that, she had a broader concern about something else, and unless he heard about it now he ran the risk of hearing about in later, in the form of a legal filing.
The underlying premise is broadly shared: Allocation of institutional resources to identify problems at an early stage is the most effective way of preventing later, more expensive claims or disruptive incidents in the workplace.[14]
Conclusory Observations
At the time the Compendium was compiled, not all participating companies maintained statistical reports of trends of usage, outcomes and user satisfaction levels. Moreover, many of these programs no longer are in operation, either because of corporate restructuring, program modification, or other reasons.
Nevertheless, certain of the observations drawn in 2002 may still be useful for program designers today. Among the most prominent are:
- Nearly all disputes submitted to systemic employment dispute resolution programs are resolved by agreement, and very few go to arbitration. Halliburton and Johnson & Johnson reported that fewer than 2% if disputes entering their programs proceeded to the arbitration stage. General Electric reported only one arbitration in the 1998/99 period. Shell reported fewer than 1% of the matters entering its program were arbitrated.[15]
- A good mediator can be hard to find. Though the market has likely changed in the 15 intervening years, as of 2002 many program administrators reported that few mediators had a background in employment law and few employment lawyers were trained in mediator skills.
- Many employees are skeptical of company-promulgated employment programs. Many of the administrators were confident of the fairness and efficacy of their programs, but spent a great deal of time trying to convince employees to use it.[16] High employee satisfaction rates reported by those who did use the program seemed to have little effect on others’ usage.
- Reactive response, rather than proactive identification, still predominates management thinking. All programs were designed to respond to employee-initiated complaints and concerns. None was designed to seek out the sources of employee dissatisfaction and prevent such concerns from arising in the first place. Reactive policies have inherent limitations as managerial tools.
- The program does not result in increased employee complaints. None of the program administrators reported any change in the rate of voiced concerns in the workplace. The concern that an institutionalized dispute management system might encourage or invite dispute reportage turned out to be a canard, with no data backing it up
- Cultural and legal assumptions persist. Employers in the United States approach employee conflicts from the assumption that employment is “at will” and the relationship can be terminated for any non-discriminatory reason. By contrast, employees approach workplace conflicts in the context of a matrix of “rights” that legislatively express social values and give rise to legal causes of action. In a given dispute, neither party has reason to reframe their vocabulary to articulate underlying interests. The “rights” rhetoric of workplace conflict is pervasive and undeniable; rights-vindication is frequently the reason the problem is being pressed.
- The unavoidable still needs to be adjudicated. Despite the indications that efficiency derives from reallocating institutional resources from the back-end of a dispute to the less expensive front-end, it does not follow that all disputes will be resolved at the front-end and none will require adjudication. The success of these programs does not imply that arbitration or litigation will one day be obsolete. Rather, these programs address the many organizational benefits of resolving concerns at a very early stage, reserving costly adjudicatory processes for the very few instances where it is needed.
[1] F. Peter Phillips is a mediator and arbitrator in Montclair, New Jersey, USA. His professional website is www.BusinessConflictManagement.com. He is Adjunct Professor and Director of the ADR Skills Program at New York Law School.
[2] Now the International Institute for Conflict Prevention and Resolution. See www.cpradr.org.
[3] CPR Institute for Dispute Resolution, How Companies Manage Employment Disputes: A Compendium of Leading Corporate Employment Programs (2002).
[4] The companies whose programs were included in the Compendium were Alcoa, Anheuser-Busch Companies Inc., Bank of America, CIGNA, Credit Suisse First Boston, General Electric, Halliburton Company, Johnson & Johnson, Masco, McGraw Hill, MG Company, Pfizer, Philip Morris USA, Rockwell, Shell, Texaco, United Parcel Services, UBS Paine Webber, U.S. Air Force and U.S. Postal Service. The programs included were those in effect in 2002.
[5] The Compilation included interviews with Richard R. Ross, Senior Associate General Counsel, Anheuser-Busch Companies, Inc.; Donna M. Malin, Assistant General Counsel, Johnson & Johnson; Wilbur Hicks, Shell Oil Company; Geoffrey Drucker, Chief Counsel, Dispute Resolution and Prevention, U.S. Postal Service; Teri P. McClure, Corporate Counsel – Employment, United Parcel Service; and Elizabeth W. Millard, Director and Counsel, Credit Suisse First Boston.
[6] Richard R. Ross of Anheuser-Busch Companies stated in his interview, “We saw the Dispute Resolution Program as a means to not only provide [a dispute resolution] avenue for employees, but also encourage better management practices.”
[7] Geoffrey Drucker, administrator of the REDRESS program at the U.S. Postal Service, said in his interview that, although “the settlement of the class action [in a Florida lawsuit] was the immediate impetus, behind that was a concern about this rise in complaints and a desire to do something about it.”
[8] Elizabeth W. Millard of Credit Suisse First Boston said in her interview that to some degree the company “saw a dispute resolution program as a way of promoting management accountability, because it can demonstrate to managers that, if they make inappropriate decisions, the company will take employees’ complaints seriously, and support the employees’ efforts to seek redress.”
[9] Donna M. Malin of Johnson & Johnson said in her interview that the primary metrics her office maintained were the number of employee-related lawsuits and the expense of outside counsel. A secondary metric was the time from assertion of the complaint to resolution. Teri P. McClure of United Parcel Service stated in her interview that “[t[he main reason UPS started looking at alternative dispute resolution is because the largest percentage of our legal department budget was spent on labor and employment related matters. We were looking for ways to reduce costs with respect to labor and employment-related litigation.”
[10] Geoffrey Drucker of the U.S. Postal Service notes that the metric chosen has a relationship to the program goal. In his interview he said that the primary purpose of the program was “to improve the workplace environment,” and the program valued information on user satisfaction higher than rates of resolution. “[W]e’re getting about 40% success rate in terms of resolution. And levels of satisfaction with the process are [in the high 90s].”
[11] Wilbur Hicks, who administered the Shell RESOLVE program, said in his interview that the CEO of Shell specifically abjured metrics as a means of evaluating program success. “[H]ow do you measure that – people feeling that they have more of a stake in what happens to them in the workplace? In fact, Phil [Carroll, Shell’s President at the time of the program’s adoption,] would probably say, ‘Gee, if the number of complaints went down, that’s not what I want – I want the number of complaints to increase. I really want people to feel safe bringing forth these issues.” In fact, complaints did not increase.
[12] Elizabeth Millard of Credit Suisse First Boston articulated, in her interview, the rationale behind designing that company’s program to “cover[] everything as well as everyone”: “I think some companies have decided that they are better off in court with some types of claims – bonus claims, for example. Whether or not that is true is not an issue for us. We are committed to the principle of alternative dispute resolution for employment-related claims. And if employment ADR is a good thing, then its benefits should be made available as to all types of claims.”
[13] Richard Ross of Anheuser-Busch Companies stated in his interview, “The only reason this worked was that we had the full support of senior management, including the CEO.” Teri McClure of United Parcel Service said that, “as part of the rollout, we used a videotape that included our CEO and our senior VP of HR, telling people that this program was something that the company takes very seriously.”
[14] Wilbur Hicks, of Shell, said in his interview, “We’re getting these things earlier in the process, when the emotions haven’t ratcheted up. Big lawsuits drag on and on and people perceive that the company is resisting and holding out and they become more and more angry, so the price of resolving it goes higher and higher.”
[15] The overall theme was voiced by Elizabeth Millard of Credit Suisse First Boston in her interview: “I think the information is reliable, and that it convincingly demonstrates that, as a result of the program’s being in place, disputes are resolved sooner and at a lower cost in terms of legal fees and other transaction costs.”
[16] Teri McClure of United Parcel Service said in her interview: “I can’t emphasize it enough – the senior management buy-in and the marketing, the on-going marketing of the program.”