Can ADR cut legal costs?

Why has alternative dispute resolution (ADR) never really caught on in the employment field?.

With tribunal applications having risen so steeply over recent years, you might think employers would be interested in anything that could keep them out of tribunals. Not so, it would appear. The story of alternative dispute resolution in employment is not a spectacular one. According to the Centre for Dispute Resolution, requests for mediation in commercial matters rose by 141 per cent last year. Of these, employment accounted for just four per cent.

Part of the reason for this is that in Britain, Acas, the conciliation service, attempts to broker agreements between parties before a dispute comes before a tribunal. “If a case is capable of being settled, the chances are it will be,” says Ben Wood, employment solicitor at Lupton Fawcett. “With Acas and the tribunals, it is questionable whether there is any need for further outside processes.”

And then there is the small matter of feeling. Some employment relations observers wonder if the intensity of emotion involved in workplace disputes squares with ADR’s emphasis on reason, compromise, moderation and workable settlement.

“Employment can be a very bitter arena,” says Wood. “Once relationships have broken down, as they invariably have by the time issues get to tribunal, neither side is likely to be at their most flexible.”

ADR – a term which covers all forms of dispute resolution outside litigation and negotiation, but most commonly refers to mediation – has simply never really caught on in employment.

As well as scepticism as to how it can work in fraught situations – especially from employees if the suggestion comes from management – there are questions of cost. Half a day’s mediation with a trained specialist typically costs £500 per party – a cost equivalent to hiring a barrister for a day at tribunal. For low-level employment disputes, it is a questionable calculation.

Yet for senior staff, who do not want a tainted reputation from pursuing a tribunal claim and who may not want to see their employer’s name dragged through the mud at tribunal, it can be a viable option.

Michael Lind, head of case management at ADR group, an independent mediation organisation, says: “The beauty of mediation is the flexibility is offers. A tribunal’s room for manoeuvre is very small. Mediation, especially if it is done early enough, can identify a creative range of different remedies and actually get to the root of the problem at far less of a cost than going to tribunal. The reluctance is often based on ignorance.”

A further reason why ADR techniques may arouse more interest in future is that courts and tribunals are increasingly keen that every avenue is explored before coming before a judge. It may be in a company’s interest to incorporate various of ADR in a procedure beyond standard grievance routines (see case study). At present, according to CEDR, mediation is used mostly in professional negligence cases in the construction, engineering and property fields, where 80 per cent of cases result in a settlement.

In mediation, the mediator is not looking at legal entitlements, but at interests, and seeking to find a solution both parties can live with. Mediation is concerned with preserving and repairing relationships. After establishing both party’s essential positions and the nature of the dispute, the mediator wants a range of options, movement. Mediators have no power to say what is right and wrong, nor have they any powers of compulsion. The mediator’s job is to try and get an agreement, with the disputing parties deciding the terms. However, once agreed, the settlement is legally binding.

Professional mediation can come cheaper than the figures referred to above by using non-legal specialists. There are two schools of thought. One says that being a good, creative mediator is essentially about personality, not legal training. Yet the other argues that experienced employment specialists are needed to handle various issues that might arise. For example, what if information is disclosed during mediation that might furnish one party with a stronger legal case against the other, despite the confidentiality of mediation.

So far, ADR in employment has tended to have a far higher profile in litigation-hungry USA. Throughout the 1990s, there have been legal arguments been about whether ADR techniques such as arbitration can be binding – whether it is fair for mandatory arbitration clauses to be inserted into employment contracts. Different courts have given contradictory views.

The Equal Employment Opportunity Commission, the fair employment watchdog, has campaigned vigorously against binding arbitration. Its view of a fair ADR scheme is that it should be voluntary, neutral, confidential and enforceable.

To counteract the high volume of employment litigation, the EEOC has been promoting voluntary mediation since the middle of last year. But, just like the UK, it is debatable whether it has ever really caught on. Employers do not appear to relish third party interference in managerial prerogative.

According to EEOC chair Ida Castro, employers have not been especially keen: just 36 per cent agree to voluntary mediation, in comparison to 81 per cent of applicants who were previously pursuing claims.

Different forms of ADR

Arbitration: parties agree to appoint and abide by decision of independent third party

Expert Determination: expert helps parties determine a procedure Adjudication: used mostly in construction, adjudicator is appointed to give opinion on disputes as they arise during a contract

Early Neutral Evaluation: independent third party gives non-binding opinion on the merits of each side. Parties agree the extent of material to show evaluator

Executive tribunal (also known as mini trial): a form of formalised mediation, involving an independent chair and executives from both disputing parties

Ombudsman: official empowered to investigate complaints. In original Swedish, means “the grievance man”.

By Stephen Overell

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