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  4. Remarks of F. Peter Phillips(1) Senior Vice President, CPR Institute for Dispute Resolution

Remarks of F. Peter Phillips(1) Senior Vice President, CPR Institute for Dispute Resolution

The U.S. Equal Employment Opportunity Commission

Meeting of the U.S. Equal Employment Opportunity Commission
EEOC Mediation Program and the Workplace Benefits of Mediation
December 2, 2003

Implications of Private Sector Corporate Employment Dispute Management Programs on Public Enforcement Efforts

In 2002, CPR Institute for Dispute Resolution published a compilation of 20 leading companies' internal employment dispute management programs, as well as an analysis of those programs and interviews with six persons charged with developing, implementing and/or administering those programs (2). These are not simply arbitration programs they are multi-stepped administrative tools to identify, manage and resolve employment disputes on terms consensually agreed to by all parties. Indeed, one of the least-known and most compelling facts about these systems is that the companies who adopt and diligently administer them tend to resolve these disputes early and therefore seldom, if ever, engage in binding arbitration with their employees. These companies' experience with these programs have interesting implications for public enforcement agencies.

The Business Rationale for Systematic Management of Employment Claims

Employment dispute resolution programs must, of course, comply with local, state and federal law. However, legal compliance is not the goal or the effect of most private sector employment dispute resolution programs. Such programs add value to the corporation because they:

  • Lend consistency (and therefore manageability) to the handling of employment workplace disputes
  • Enhance employee confidence and morale
  • Serve the long-term economic interests of the employee and employer, rather than individual short-term vindication or punishment
  • Identify, and encourage early assessment of, conflicts in the workplace as foreseeable recurring contingencies
  • Permit assessment and improvement of company procedures or supervisory skills
  • Avoid misinterpretation of employer motive in offering to resolve a particular dispute at an early stage

Many companies realize that skilled management of conflict and mediation of conflicts that have ripened into disputes saves money. But cost savings do not always tell the whole story, and are not the only ways companies measure the success of their programs. Companies competing for skilled labor often place a premium on reducing turnover and enhancing employee morale, and they adopt employment dispute management systems in order to create a more satisfied and more stable work force. For similar competitive reasons, many companies seek to provide employees with such a program as a tangible funded benefit, an alternative to employees' incurring the expense of hiring a lawyer when a problem arises at the workplace.

The various goals of different systems translate into standards to measure success. System designers and administrators measure system success in a variety of ways, including:

Cycle Time: How many days, or person-hours, elapse between the initiation of the employment dispute process and the resolution of the issue?

Management Time: Measured in a manner that "weights" the value to the company of the manager(s) involved, how much management time was devoted to resolution of the issue?

Legal Costs: Over a period of time, how much money was spent on legal fees to address employee disputes?

Rate of Litigation: Has the number of private and governmental charges been reduced?

Employee Turnover: Has the rate of employee turnover been reduced?

EEOC Charges: Has the rate of charges brought before state and federal employment agencies changed?

Utilization: Over a period of time, have more or fewer employees availed themselves of the program? That is, is the program gaining trust?

Rate of Resolution at Various Levels: Over a period of time, have issues been resolved more frequently at lower (i.e, less expensive) levels of management?

Junior Management Satisfaction: Are the members of the immediate supervisory level satisfied with the outcomes of disputes, and do they perceive that their own career paths are enhanced by using the system?

User Satisfaction: Are employees and other stakeholders satisfied by the process and the outcome of disputes taken through the program? Would they recommend that their peers use it?

Structures of Private Employment Programs

The classic employment ADR system has three parts: (1) internal efforts at resolution through discussion, negotiation, peer review, ombuds facilities, "open door" policies, "800" numbers, or other advisory and facilitative techniques; (2) intervention by a third, neutral, party using non-adjudicative tools such as voluntary mediation or advisory merits evaluation; and (3) adjudicative intervention in the form of final and binding arbitration.

Many employers find that company culture, the sophistication of the human resources department, or other considerations counsel more varied approaches to managing workplace conflict. For example, United Parcel Service (UPS) offers a five-step program: (1) "Open Door," in which employees, while encouraged to bring problems to their supervisor, "have the right to bring your concerns to anyone you choose"; (2) "Facilitation," to ensure on a Regional Manager level that Open Door options have been explored, to help to resolve the dispute internally, and otherwise to facilitate satisfactory closure; (3) "Peer Review," where the employee and a company representative present both sides of the dispute to a panel of three employees two selected by the complainant and one by the company who then recommend a non-binding solution; (4) Mediation, which is mandatory; and (5) final and binding Arbitration, which is optional.

Many companies have designed their unique approaches to these issues. UBS PaineWebber's "FAIR" program offers four options; the U.S. Postal Service offers a unique single-step mediation program; prior to its merger with Chevron, Texaco's program culminated in arbitration that was binding on the parties at the employee's option.

The variations include ERISA-governed employee legal assistance programs. GE Corporate "will reimburse the employee up to $2,500 for attorneys' fees incurred for mediation, provided that a complete settlement of all claims is reached at mediation." Halliburton provides a monetary benefit up to $2,500 per 12-month period for use by employees in obtaining legal assistance. Shell, too, offers a Legal Assistance Plan, featuring modest deductible and co-payment requirements to be applied for employee's legal costs.

Most of these programs call for the employer to pay all or almost all of the costs of the program, so that the employee has no greater financial hurdle to access the program than to access a courtroom. Once again, although such a feature is consistent with the requirements of the law in several of the Circuits, it is more commonly included as a means of increasing trust, and therefore usage, and therefore resolution of conflicts before they ripen into disputes.

Empirical Results

One trend is clear: nearly all disputes submitted to systemic employment dispute resolution programs are resolved by agreement, prior to the arbitration stage and usually prior to formal mediation.

  • Halliburton and Johnson & Johnson each report that fewer than 2% of the disputes that entered their programs proceed to the arbitration stage.
  • General Electric notes that in 1998/99 few disputes went to formal mediation and only one went to arbitration.
  • The U.S. Air Force reports that, during fiscal year 2000, 6200 disputes were identified, 44% of them were subject to ADR, and 79% of those were resolved without arbitration.
  • The U.S. Postal Service's mediation-only program reports that, since 1997, formal complaints to the EEO have decreased by 26%, 76% of the claims addressed resolved or were not pursued; and participant satisfaction on a variety of parameters measured, on average, substantially over 90%.
  • The Equal Employment Opportunity Commission reports similar success and a very high rate of user satisfaction.

In light of this experience, it is ironic that employers, attorneys and courts have devoted so many resources to ideological debates concerning the "back end" of the employment dispute resolution system mandatory, final and binding arbitration when so few disputes ever survive to that stage. It is also regrettable that many employee and employer advocates evaluate entire employment dispute systems on the attributes of this one, last, least used stage.

Implications for Enforcement Agencies

There is abundant evidence that, the earlier and lower-down in management structure a dispute can be resolved, the faster, less expensive and more satisfactory is the outcome to all parties concerned. And this experience reflects not so much the efforts of private employers to comply with statutory or regulatory expectations, as the employers' response to independent pressures of social and economic forces. That is to say, they don't devise employment dispute management systems to obey the law they do it to run a better company.

Far too much dialogue and public policy debate focuses on what to do about adjudicative processes such as arbitration, agency determination and lawsuits. In fact, employment claims are seldom adjudicated. Indeed, the overall goal of any employment dispute system is to avoid the need to adjudicate problems. For each intractable employment dispute that must be adjudicated to yield a "winner" and a "loser," there are hundreds of disputes that are consensually resolved though, unfortunately, far later in the process than they might have been. And reverse-engineering the few intractable disputes looking back on them in "20/20 hindsight" often supports the conclusion that no amount of managerial attention or skill could have resolved them.

The experience of the companies in the CPR study supports the conclusion that, the earlier conflicts are identified and managed to satisfaction, the more nearly the economic and reputational interests of all parties are served, and the better the concerns that underlie public policy are advanced. Thus, the resources available to the dispute resolution manager (including, I suggest, the public policy enforcer) are best placed in the managerial and non-adjudicative stage. It is at this level that employee satisfaction will be generated, resource efficiencies will be realized, the positional distractions of lawsuits and arbitrations will be avoided, and the long-term interests of the private parties will be best served.

If these trends are recognized, then not only should the EEOC be encouraged to pursue its mediation program for matters filed with the agency it should defer to private sector employment systems that have certain critical attributes (such as professionalism, fairness and consistency with the law), allowing those private systems to attempt to resolve conflicts that are essentially private in scope, scale and consequence. And by "defer" I mean not simply encourage the complainant to resort to the company's dispute resolution methods, but to really allow those methods the time to do their work. The employer's interests are seldom served by intentional delay, and the company in its private resolution efforts is motivated the same way as it is when engaged in public enforcement proceedings by a recognition that the consequences of failure to satisfactorily resolve these disputes can be very costly indeed.

I would even take it a step further: The Commission should consider using its stature and authority to encourage the development of such systems by private employers. The Commission can make a signal contribution by promoting and educating employers on the business rationale of dispute management and avoidance, and not limiting its activities to the management, resolution and adjudication of the individual cases submitted to it.

In any event, in light of the results of the programs in the CPR study, attorneys seeking to deliver client satisfaction whether the client is an employee, an employer, or an agency sensitive to both their interests -- may be better advised to hone their skills in counseling and problem-solving, rather than their skills at "winning" arbitrations, trials and administrative proceedings.

Footnotes

1. Senior Vice President, CPR Institute for Dispute Resolution. CPR is a nonprofit coalition of corporate law departments, law firms, academics and agencies, whose mission is to spearhead innovation and quality in the avoidance, management and resolution of complex commercial and public disputes Information about CPR, www.cpradr.org.

2. How Companies Manage Employment Disputes (2002), available at www.cpradr.org

This page was last modified on December 2, 2003.