May 2009

Creative Cost Control in Contentious Times: Implementing an ADR Program

“I don’t agree with your decision and I have an attorney.” If you are a seasoned Human Resources professional, you might think (to yourself, of course, never out loud), “go ahead, make my day” with your best Clint Eastwood imitation. Or, if you have heard that threat too many times lately because of the high rate of lay-offs that never seem to end, you may think (to yourself again), “the line forms over there.”

What you may say out loud is, “I wish we had an alternative to litigation when confronted with an employee dispute.” With a little creative problem solving and program development, you can avoid some of the time and costs associated with the increase in employment-related claims that some companies are experiencing and others anticipate. This article discusses alternative dispute resolutions (ADR) and the questions you should ask, and answer, as you craft a program for your organization.

First, you will need some additional background that will be helpful when you go to sell your ADR proposal to your management team. Discrimination claims filed with the U.S. Equal Employment Opportunity Commission (EEOC) last year rose to the highest in the agency’s 44-year history, after a Supreme Court ruling that changed the way complaints may be filed.1 A record 95,402 claims were filed during the year ended Sept. 30, 2008, a 15 percent increase over the 2007 filings. More than 25 percent of claims filed contained an allegation of age discrimination while more than 34 percent of the filings included complaints of retaliation, according to the agency.2 The costs an employer will incur to resolve an EEOC charge can easily exceed $100,000. Any alternative that might reduce the number of claims proceeding to an EEOC charge or legal claim is well worth exploring. 

Good, Fast, Cheap and Questions to Ask

I have a good friend who is an architect. When I wanted to renovate my house, I asked him to draft some plans. As I began to tell him what was important to me in this project, he interrupted me and jokingly told me, “good, fast, cheap: pick two.” I think ADR can be all three. A good program will be one that is impartial, timely and inexpensive. To meet the needs of your organization, an ADR program should include a process that can proceed quickly and efficiently, and should not cause you to incur extensive expenses. Some of the questions to ask before introducing ADR include:

• Is my organization ready for this type of program? Will the employees embrace and trust it? Let’s be honest – if you can’t persuade your employees that the ADR program you are introducing will be faster, cheaper and better than other ways of resolving a dispute, it may not be worth it to invest the amount of time necessary to develop a good ADR program. You should envision how you will market and brand the program, including practical considerations like, “what will we call this program?” Are there other programs or practices in your workplace which will nicely dovetail with this initiative, giving you an opportunity to package the marketing initiatives?
   
• Are there currently any obstacles to introducing an ADR program? Is some form of a program already in place? Are there constraints on introducing a program at my company? If you are working in the securities industry, a large percentage of your population may already be compelled to submit employment-related disputes to arbitration before an organization called FINRA. Unionized workplaces will be constrained from unilaterally introducing ADR that is designed to cover the employees who are members of the union. For these reasons, and many more, it is important to consult with legal counsel or an ADR expert before implementing your program. One thing you definitely don’t want is for the program itself to be the subject of litigation.
   
• How much of this program should be internal, and how much should be external? Depending on the number of layers you want or need, and the roles already being filled internally in an ADR program, you may want or need additional external support, either in developing or establishing your program, or maintaining it. Internal roles may include Employee Relations Specialists or Ombudsmen, as well as Employee Review Panels. External support may be sought from experienced investigators, mediators, arbitration services or employment attorneys. Whichever resources you use, it is important to make sure it will be a good fit, stylistically and culturally, for your organization. Every step of the way, you need to be evaluating the component pieces of your program to insure its success.
   
• How many levels do I need in my ADR to have a successful program? The answer to this question is very much dictated by several factors, including the size of your organization, the “state of your union” or, in other words, the number of disputes that typically arise, and resources you have available to support the ADR program, both financial and personnel. I would not recommend a multi-level ADR for a small organization, but it may be very appropriate for a large, international company.

A Model Program

An ADR program is a bit like a cafeteria plan – you need to look at each component piece described and determine what, if any, work for you and your organization. Should your investigations be conducted internally or externally? Should arbitration, if not already required for some or all of your employees, be added as an option? Should employees be required to participate? The answers to these questions can best be answered by you in consultation with your employment counsel. But here are some of the factors to be considered as you develop the organizational plan.

Conducting the Investigation

The outcome of employment litigation can frequently hinge on the quality of the investigation conducted immediately after a complaint is received and, most importantly, whether the investigation was fair, impartial and timely. Evaluate your current investigation process – is it respected and trusted by your employees and managers? Whether your organization utilizes dedicated employee relations investigators internally, or outsources investigations to qualified and experienced workplace investigations experts, such as EPS, it is essential that the investigation plan, investigative process, and results are thorough, timely, and defensible. The foundation of any successful dispute resolution process is a quality investigation. 

Interpreting the Investigation Results and Decision-making

In the traditional model of dispute resolution in the workplace, Human Resources, or maybe Human Resources working with members of the management team, reach a recommendation and implement it. In an ADR program, you might implement a Review Panel, consisting of HR, management and employees, depending on the subject-matter of the complaint, to evaluate the investigation and make a recommendation on appropriate next steps. It is essential to carefully craft the selection process, responsibilities, time tables for managing complaints and obligations regarding confidentiality, among other things, for individuals asked to serve on the Review Panel.

Appeal Process

The appeal process may consist of an internal review of the Review Panel’s determination by the Head of Human Resources and a member of the organization’s senior management team, such as a Chief Administrative Officer, or some other combination of individuals who are appropriate for your organization. Responsibilities, timetables and obligations regarding confidentiality are important for these individuals, similar to those established for participants in the Review Panel. 

Mediation and/or Arbitration

If the aforementioned steps have not led to a successful resolution of the dispute, then it is time to consider an outside arbiter of the dispute. Mediation is a voluntary, informal, private means of dispute resolution, where a mediator brings the parties together to discuss the dispute and, hopefully, reach agreement on a resolution. Importantly, the parties craft the agreement. Arbitration is a more formal means of dispute resolution, which may include as many as three arbitrators listening to the dispute and rendering a decision. One way to approach an ADR program is to commit to employees that, in exchange for agreeing to participate in the ADR process, the company will pay the costs associated with mediation. Because the costs are usually limited to the mediator’s fee, this can be a cost efficient means of resolving a dispute.

Diagram 1

Complaint Received
By
Human Resources
Employee Relations
Manager/Supervisor
Anonymous Hotline



        Internal Investigation            External Investigation



Panel Review and Recommendations



Appeal Process



Mediation and/or Arbitration



Litigation

Additional Questions to Answer

As this article has probably introduced more questions than it has answered, this seems a good point to add a few more questions you should ask yourself, and establish the answers for, prior to introducing an ADR program into your workplace. 

• At what point should you allow employees participating in your ADR program to be represented by counsel? As with so many aspects of ADR program development, that answer depends on a number of factors but, generally, I would suggest that part of the commitment to participate in the program would be an agreement to not have counsel present until after the internal process, up to and including the internal appeals process, is concluded.
   
• Should you include mediation, arbitration, both or neither? Some disputes lend themselves very well to one or the other of these dispute resolution methods. You need to think about the kind of disputes that occur in your workplace, and the kind of disputes you will permit in your ADR program.
   
• What will your appeals process look like? The process needs to appear to participants to be fair, impartial and timely. Choose your appeals panel and process with that goal in mind.
   
• What constraints, if at all, should you impose on potential litigation if all steps of the ADR program fail to resolve the dispute? Make sure you consult with employment counsel before attempting to include any provision in an ADR program that attempts to limit employee rights to pursue litigation.
   
• What kinds of disputes are appropriate for the ADR program? Not every complaint or issue is appropriate for an ADR program, and so you shouldn’t attempt to construct a “one size fits all” program. The type of claims that wouldn’t work in this process that immediately come to mind are class actions or multiple-complainant situations.
   
• What records should you maintain? You need to decide how you will document each step in your program, and where records will be maintained.
   
• Should you still pursue a negotiated resolution to this issue? At any step in the process, you can’t be afraid to step back and negotiate a resolution if you have the opportunity to do so and it is in the best interest of the organization and its employees to do so. Having said that, you may want to make it a requirement of participation in the ADR program for participants to suspend negotiations until the Review Panel has made a recommendation, or the Appeals Panel has delivered their determination.
   
• Who should be my mediator? Volumes have been written about selecting a mediator. Make sure your mediator is someone who can impartially and fairly review disputes in your workplace in a timely manner.
   
• Can I use this program globally to resolve disputes? Because of the vagaries of local law around the globe, make sure you consult with counsel before proceeding with a global implementation of your ADR program. 

Some Final Thoughts

As you begin to develop your ADR program, you should also be developing your marketing plan. Make sure the program you propose is marketable and will be embraced by the employees in your organization. An unused ADR program does not help you or the employees raising complaints in your organization. Once you have determined how to market it, and have developed the program details, it is time to operate a pilot for six (6) months or more, to identify kinks you need to work out of the program prior to going “live”. Last, but not least, make sure you are consulting with an ADR expert before rolling out your program to maximize your potential for success.
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¹  Federal Express Corporation v. Holowecki , 552 U.S. ___ (2008).
² http://www.eeoc.gov/stats/charges.html; http://www.eeoc.gov/press/3-11-09.html.

About the Author

Kyle Maldiner, Esq., is a renowned expert in Employee Relations and a former employment attorney. She is recognized both internally by senior leaders, where she has handled the most complex and sophisticated employee relations matters and externally, by her selection to serve on prestigious committees and as a sought-after speaker and panel facilitator. Kyle has spent her professional career directing and managing all aspects of the Employee Relations function in the financial services, manufacturing and hospitality industries with special emphasis on investigations, policy development and implementation, training and reductions in headcount.

Kyle spent 24 years in executive roles in Human Resources, including 17 years at Fortune 100 investment servcies firm, Lehman Brothers, Inc., in New York. During most of her tenure at Lehman Brothers, she served as the global Director of Employee Relations.

Kyle is admitted to practice law in New York. She received her B.A. from Wells College in 1980, and her J.D. from the State University of New York at Buffalo in 1989. In addition, she was a member of the SIA Diversity Committee for seven (7) years and its chair for three (3), as well as a member of the SIA Human Resources Committee for two (2) years. She served as the Treasurer from 2003-2007 for the SEC-Securities Industry Committee on Equal Opportunity. She volunteers at the American Red Cross of Greater New York and does pro bono work for the New York Women’s Foundation.