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Employment survey says that major companies increasingly use tailored programs and processes.

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Employment Survey Says that Major Companies
Increasingly Use Tailored Programs and Processes
By David H. Gibbs
In a decision having a huge impact on the
resolution of employment disputes, the U.S.
Supreme Court last March in Circuit City
StoresZnc. vAdums, 532 U.S. 105, 121 S. Ct.
1302 (2001), ruled that employees can be
compelled to arbitrate employment disputes,
including discrimination claims, against their
employers.
In Circuit City, the Court ruled that the
Federal Arbitration Act is applicable to employment disputes. The Court also praised
the “real benefits” that mandatory arbitration provisions provide, particularly the avoidance
of litigation costs, a benefit “of
particular importance in employment litigation.”
Growing numbers of U.S.
workers are subject to some sort
ofalternative dispute resolution
policy that addresses employment disputes. The Circuit City decision will
lead many employers to adopt mandatory arbitration or ADR programs.
This article reviews the experiences of
major companies using ADR to resolve employment disputes, based on a survey described below. This article does not address
issues regarding the enforceability of mandatory ADR programs.
nal reported that the estimated cost
of the average single plaintiff employment case was more than $92,000,
and the average class action cost more
than $496,000.
Class actions and large verdicts are
becoming increasingly common:
-One out of every eight plaintiffs’
verdicts in the federal courts in employment discrimination cases is for
more than $1,000,000.
-Almost
EMPLOYMENT
-
ADR
NEGATIVE TRENDS
There are good reasons why employers need
litigation alternatives:
The number of employment discrimination cases has soared in the
1990s. For example, the number of
discrimination cases filed annually in
federal courts increased between
1990 and 1999 to 22,412, from
8,413. With a slower economy, the
number of disputes is expected to
increase.
The cost of investigating and litigating cases also has increased. A recent
issue of the Dispute Resolution lourDavid H. Gibbs is a partner i n the Boston office of
Nixon Peabody LLP. He focuses on litigation, trials,
mediating, and representing clients as an advocate
i n ADR proceedings. He has assisted more than a
dozen companies i n designing, implementing and
communicating employment ADR programs i n the
past year.
one out of everv five verdicts for plaintiffs in employment discrimination
cases includes punitive
damages.
The Wall StreetJournal
reported on Oct. 13,
2000,
that
major
plaintiff‘s securities class
action law firms, such as
New York-based Milberg
Weiss Bershad Hynes & Lerach, have
begun to target major employers for
employment discrimination class-action claims.
Plaintiffs often sue managers and supervisors personally.
Corp.; Halliburton Co.; Lens Crafters, a unit
of the Luxottica Group; Masco Corp.; Northwest Airlines Corp.; Raytheon Co.; TRW
Inc., and many others.
What types ofprograms are companies ming? Nixon Peabody found that companies’
programs tend to be defined primarily by two
variables: (1) whether the program was voluntary or mandatory; and (2) whether the
program was a single- or multiple-step process.
The growing trend, the surveyed companies say, is to adopt mandatory programs that
require employees and the company to use
ADR prior to, and, in most instances, culminating in, binding arbitration. A minority of
companies use voluntary programs, where the
employee can choose whether to participate.
Companies say they are increasing their
use of multiple-step ADR programs before
arbitration. These steps include a combination of one or more of the following as well
as many company-specific processes.
..
..
..
..
..
Functional Review
Human Resources Review
Peer Review
Management Panel Review
Single Manager Review
SURVEY FINDINGS
In order to advise clients concerning ADR
programs’ enforceability, design, methods of
communication and implementation, the
ADR Group at Nixon Peabody, a Bostonbased law firm with 13 U.S. offices, undertook an informal telephone survey of 20
Fortune 500 companies’ ADR programs last
year. This survey was later updated and expanded after the Circuit City decision. The
results were obtained on a promise of confidentiality in order to encourage disclosure.
What companies are using ADR programs
in resolving employment disputes? Many employers, covering an estimated 10% of the
U.S. workforce, use ADR programs, rather
than using dispute resolution processes on a
case-by-case or ad hoc basis. Companies
whose programs are publicly known include
Anheuser-Busch Cos.; Bechtel Corp.; Boeing
Co.; Cigna Cos.; Circuit City Stores Inc.;
Credit Suisse First Boston, a unit ofthe Credit
Suisse Group; Equitable Life Assurance Society of the United States; General Dynamics
Ombudsmen
Open Door Policies
Management Employee Panels
Internal and External Mediation
Factfinding
There were a great variety of steps and
programs. Typical multistep programs were
structured as is depicted in the flow chart on
the next page.
A minority of companies had single-step
programs leading to expedited arbitration. See
the charts on the next page.
The trend for companies is to move toward programs that are mandatory and use
multiple steps. The most frequently used steps
are human resources review, management
panels, and mediation.
DO THE PROGRAMS WORK?
What did the surveyed companies say their
experiences were in terms of early resolution
of disputes and cutting costs?
(continued on following page)
Employment ADR Survey Finds Tailored Programs, Processes
(continued from previous page)
Voluntary programs often were not
successful, and at some companies
were never used. Certain companies
reported that the voluntary programs
were not seriously regarded by management or the employees.
All of the surveyed companies using
mandatory programs reported a high
level of satisfaction and that they
would continue to use a mandatory
program.
Companies reported that 85%-95%
of all claims under mandatory programs were resolved prior to arbitration. Most claims were resolved
internally, without lawyers.
The companies reported that the
great majority of claims were resolved
within 90 days.
* The companies reported that the
costs of handling cases that went to
arbitration were less than one-half the
average of suits that needed to be
defended before the program’s adoption.
Several companies with more than
30,000 employees reported that they
had five or fewer pending employment suits.
One company reported that it had
118 pending employment suits when
it adopted a mandatory program, but
that it had had only four arbitrations
in the past five years under the program.
Mandatory programs that did not use
multistep programs before arbitration
were successful in reducing costs and
the volume of cases, but often resulted in more arbitrations than multiple-step programs.
Programs that restricted employees’
rights or remedies were challenged in
litigation, sometimes successfully.
Companies that adopted programs with a
problem-solving approach and with the active support of senior management achieved
success through mandatory multistep procedures because they were able to address issues as “peopleproblems,” rather than as legal
matters.
Did the adoption of the program lead to
an increase in the filing o f claims?None of
the companies reported that a program’s
adoption led to increased claims. In fact,
(continued on following page)
HOW COMPANIES STRUCTURE TYPICAL MULTIPLE-STEP PROGRAMS
Large Company
Small Company
HOW COMPANIES STRUCTURE TYPICAL ONE-STEP PROGRAMS
Employment ADR
Survey Finds Tailored
Programs, Processes
(continued from previous page)
tion of a program. A minority of companies
reported some employee complaints, and in
one instance a newspaper story was written.
No employer reported any resignations or difficulty in recruiting or hiring as a result of
the adoption of the policy.
...
the majority of companies surveyed reported a decrease.
How dificult and costly was the program
t o administer?The companies were evenly divided between those companies that used
dedicated personnel for their ADR programs
and those that assigned existing personnel.
The programs were typically administered by
the human resources department. Only one
company, which processed more than 2,300
claims, reported an increased administrative
burden.
How was theprogram communicatedt o employees and what was their reaction?There was
no general pattern in the employee communications methods. Companies used a variety of techniques, including introduction
through focus groups, large group meetings,
small group meetings, training for supervisors and human resources personnel, postings
on Web sites, E-mail, brochures, and videotapes, and providing written notice by mail
or hand deliverywith no formal presentation
or notice.
Typically, employers took steps to ensure
that each employee received a copy of the
policy, along with a letter to the employee
and some written explanation. The majority
did not require an employee signature.
The great majority of companies reported
little or no employee response to the adop-
...‘
You need a quick answer about a
consumer ADR policy question.
Here’s how Alternatives can help:
As Carolyn Wheeler, assistant general counsel for the U.S. Equal Employment Opportunity Commission told the Wall Street
Journalon Nov. 3, 2000:
“If the outcome of the Circuit City
0 . .
Go to your bookshelf and check
‘Consumer A D R in the Alternatives
index appearing every February.
...
Log onto the CPR
case is that arbitration agreements are
enforceable, then I don’t know why
everybody wouldn’t adopt them.”
Many companies have successfully adopted
programs to fairly and efficiently resolve
workplace disputes. Mandatory multistep
programs, ofwhich there are many variations,
which culminate in arbitration, have been
successful where employers seek to use the
programs to solve workplace disputes before
they become legal problems.
These programs require the support of senior management, and must be designed to
meet the needs and culture of each company,
with attention paid to how they are communicated to employees, and whether they meet
all applicable legal requirements.
For companies that want to take a problem-solving approach to preventing, managing and resolving employment disputes, these
programs offer a process that may be supe-
@
rior to litigation.
’INEED
INFORMATION ON
Web site, www.cpradr.org.
Click on PUBLICATIONS, then
ALTERNATIVES, then click on
INDEX TO VOLUME 14 (1996),
INDEX TO VOLUME 15 (1997),
INDEX TO VOLUME 16 (1998),
INDEX TO VOLUME 17 (1999),
OR
INDEX TO VOLUME 18 (2000).
You will find entries for
Consumer ADR articles.
...
Go to LEXIS-NEXIS, select the ADR
library, then enter “altern.” Search
“Consumer A D R for all Alternatives
references dating back to 1993 or for
specific titles you found in an index.
...
Go to WESTLAW, enter “db
ALTHCL.” Search “Consumer A D R
for all Alternatives references dating
back to 1991 or for the specific titles
you found in an index.
ABOUT THE C P R I N S T I T U T E F O R D I S P U T E RESOLUTION
ORGANIZED BY PROMINENT CORPORATE COUNSEL,
THE CPR INSTITUTE FOR DISPUTE RESOLUTION has
become a leader in developing uses of private alternatives to
the costly litigation confronting major corporations and public entities. The membership of CPR, a nonprofit organization, consists of more than 500 large companies, leading U.S.
law firms, academics and judges. See “Membership” at our
Web site, www.cpradr.org.
TO ITS MEMBERS, CPR OFFERS EXTENSIVE BENEFITS
AND SERVICES, including research access to CPRs unique
ADR database; training and counseling; a complete library of
ADR practice tools and model procedures; and semi-annual
conferences.
WOULD YOU LIKE FURTHER INFORMATION ABOUT CPR?
See our Web site at www.cpradr.org or complete the following
form:
Name:
Organization:
Title:
Address:
lelephone:
RETURN TO: Membership and Administration, CPR Institute for Dispure Resolution, 366 Madison Avenue, New York, NY 10017. Telephone: ( 2 12) 943-6490. Fax:(21 2 ) 943-8853. Internet: info@cpradr.org
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