Cutting a deal

City employers are finally getting to grips with ADR as an alternative to
costly, time-wasting litigation. But could other sectors catch the bug? By
Simon Kent

Alternative dispute resolution (ADR) techniques are gaining a foothold among
financial and City firms in the UK. The City Disputes Panel (CDP), a non-profit
organisation which has specialised in commercial disputes, has recently
launched a bespoke employment support service to offer employment dispute
resolution to members.

Karl Davies, chief executive of the CDP, said the move came as a response to
growing interest in ADR and mediation techniques to settle employment disputes,
avoiding the huge cost and reputational damage which can occur.

Terry Jones, a director at the Centre for Effective Dispute Resolution
(CEDR), confirms this trend, noting banks and financial organisations are
developing ADR techniques, sometimes in collaboration with UNIFI, the banking
union.

Whether this development has the potential to lead other industry sectors
away from the courts has yet to be proved. You only have to look at recent
cases such as that of Louise Barton and Investec Henderson Crosthwaite (News,
May), which have incurred high costs both financially and timewise, to see that
the City of London is the ideal environment for proving the worth of
confidential and relatively swift resolution techniques.

Jones, a veteran of the Square Mile himself with 35 years experience in
commercial banking – including 17 at Barclays – believes the technique has
aspects in common with the City’s dealing/trading culture. "The culture is
about looking for cost effectiveness," he says. "Every firm is
concerned about profits, but that’s about being cost-effective and managing
time productively. You don’t want to devote excessive management time to a
dispute. There’s also a deal-making culture," he adds. "So those
aspects work in favour of ADR techniques."

"The message we received from employers is that they are desperately
trying not to be combative," adds Davies. The CDP has created a panel of
22 specialists, including HR practitioners and employment lawyers, to handle
employment disputes in a similar way. This is a result of companies wishing to
transfer their positive experience of mediation in dispute resolution into the
employment arena.

ADR’s proponents are, however, faced with something of a Catch-22 situation.
Those who experience ADR usually have a positive experience and will use it
again – the general view is that 85 per cent of cases are resolved to the
satisfaction of both parties. But it can be difficult to get employers to take that
first step because it is practically impossible to publish any positive
results. To do so compromises one of the most valuable aspects of ADR –
complete confidentiality.

"Board-level disputes have been handled through ADR," says Allan
Connarty, director of operations at the Chartered Institute of Arbitrators.
"The press frequently challenge issues such as levels of pay or questions
how such figures were arrived at, and sometimes the answer is mediation.
Therefore you cannot disclose exactly how and why that figure was agreed. While
the figure agreed could seem high, it may have been worth it to avoid certain
other issues being made public at a tribunal."

As in the Barton case, matters such as how a bonus scheme operates are often
regarded as commercially sensitive information. Indeed, Jones suggests
discussing such information can lead to entire teams being poached by
competitors, while ongoing disputes undoubtedly undermine morale and
consequently the performance of top employees.

Mark Mansell, employment partner at Allen and Overy, notes the
confidentiality of ADR also works in favour of the individual. "At the
moment, Louise Barton is not known primarily for her skills, she’s known as the
person making this claim," he says. "Mediation has been used to
resolve bonus issues in the City precisely because it protects both
parties."

Connarty agrees: "There may be employees who decide they know what the
market is for their skills, but realise if they push for that amount and refuse
to compromise, they may never work again," he says. "That gives them
further impetus to go for broke. Alternatively, they may decide to negotiate,
take a lower financial award and recognise that they will work again."

However, practitioners recognise that ADR is not always the way forward.
"The Barton case is a justice issue," says Jones. "To some
extent it argues against mediation, because if it were resolved in that way,
how would anyone else know justice had been done?"

"ADR doesn’t work if you have a case where the law hasn’t really been
tested," says Kathryn Britten, a forensic accounting partner at BDO Stoy
Hayward. "In some cases, unless you go to court, you have no certainty and
it can be difficult to reach any agreement. One of the ways you mediate is to
refer to previous cases and to points of law as tested."

Britten is still quite a rarity as a non-legal professional with mediator
training, but it is precisely the combination of her specialist knowledge and
mediation skills that makes her so useful. "Mediation works well with
complex financial issues when the mediator has been briefed in advance by both
parties and can help them reach a negotiated settlement," she says.
"The whole process focuses on the future, whereas litigation looks at what
happened in the past. That offers far more creative options for
resolution."

Davies echoes the need for mediator knowledge of the culture or industry in
which the dispute occurs. "There is far more interest in getting a
facilitator who understands the business and pressures the parties are under,
and so can frame a resolution in that context," he says. "That is of
more worth than someone who takes a ‘vanilla’ approach to every situation and
says they don’t need to know the details to help resolve the problem." This
gives mediation another advantage over tribunals – it is less likely a court
will fully appreciate the working culture in which a dispute has occurred.

Though many ADR practitioners are frustrated at the apparent tardiness in
taking up these techniques, not all favour introducing legislation to force
them on employers. "I think legislation would be useful because the more
people go through the process, the more they will recognise the benefit,"
says Britten. "It would create a learning curve for all involved."

"I’m not a fan of legal compulsion," says Davies.
"Essentially, mediation works because it is voluntary. Both parties have
chosen to invest time and effort in finding a solution – they have bought into
the process and the outcome is going to be consensual. There is always a risk
with legislation that it just becomes a process."

That said, ADR has been the subject of legislation in parts of the US, and
experience suggests it has played an integral part in organisations adopting
ADR as part of their grievance procedures. Having been compelled to explore ADR
before going to court, firms now consider it at an earlier stage in disputes.

"Since being exposed to ADR, people have found it works," says
Davies. "So it is used long before legal proceedings trigger the requirement."
The same pattern has been seen at some US firms where the initial introduction
of ADR policy (usually a clause to simply consider/explore ADR techniques for
each individual grievance) has removed the knee-jerk reaction to start legal
proceedings.

The HR director as mediator

Sarah Jones is head of HR at WWF UK
(formerly the World Wildlife Fund). She ‘stumbled across’ a course on mediation
through Peter Shore, an HR consultant and mediator on the CDP. "Since the
technique requires the individual’s agreement, we have used mediation to
resolve disputes where appropriate rather than creating a definite
policy," says Jones.

Having undertaken training, Jones acts as mediator within the
company to handle disputes and issues when they arise. While appreciating the
value of external mediators, at this point there has been no clash of interests
in the cases she has handled. Indeed, Jones feels she has been welcomed as an
internal resource for resolving disputes: "We have a good reputation as an
HR department and so we can be objective and neutral," she says. "The
technique is empowering because it means the individuals concerned decide the
outcome, rather than me. At the same time, the process is completely
confidential and nothing goes on the employee’s record."

An intensive CEDR five-day training course will give Jones
official accreditation as a mediator and offer her the chance to work as an
external mediator in the future. While looking forward to this, Jones does not
believe legislation is a constructive way to increase the use of ADR: "The
danger is that it would just become accepted practice and therefore lose its
uniqueness," she says. "It’s far better if it remains outside
employment law."

City firms count the cost

2003

Investec Henderson Crosthwaite continues its legal battle with
former media analyst Louise Barton over claims it discriminated by paying her a
smaller bonus than two of her male colleagues (£300,000 compared with £1m and
£600,000). The EAT has sent the firm back to the employment tribunal for the
second time in a year to prove it did not discriminate against her.
Compensation could run into seven figures, not to mention the legal bill for
such a protracted case.

2002

Cantor Fitzgerald and ICAP emerged from a lengthy legal spat
with reputations in tatters following press reports of senior executives’ lap
dancing R&R, aggressive bully-boy tactics, obscene language and generally,
as one judge put it, "disgraceful behaviour" during ICAP’s attempts
to poach three brokers and Cantor’s efforts to keep them. But can anyone
remember the verdict?

2002

Schroder Securities paid a whopping £1.4m compensation to Julie
Bower after she left her £120,000 job claiming male managers were trying to
wreck her career. She received a ‘lousy’ £25,000 annual bonus while male
colleagues received between £440,000 and £650,000.

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