Employment Disputes:   Should your company adopt a mandatory alternative dispute (“ADR”) resolution program?

Many of the nation’s major employers have adopted programs which require employees to mediate and arbitrate all employment claims, thereby by-passing the litigation system.  The U.S. Supreme Court has repeatedly upheld the legality of these mandatory ADR programs despite concerted attacks by unions and the plaintiffs’ bar.

Employers have adopted mandatory ADR programs because the litigation system is perceived as too costly, too slow, too unpredictable and unfairly biased in favor of employees.  Many employers have reported outstanding results, resolving a high percentage of employment disputes in mediation.

Most programs require mediation first.  If mediation is unsuccessful the dispute moves to arbitration, which is final and binding upon both parties. Key definitions:

Mediation:  Mediation is a negotiation process between parties, facilitated by a neutral mediator.  A mediator cannot decide the merits of the dispute but works to assist the parties in reaching a mutually acceptable settlement agreement.

Arbitration:  Arbitration is a hearing before a neutral arbitrator who will decide the merits of the dispute and issue an award or decision which is binding upon the parties.

Is a mandatory ADR program right for your company?  Compare:



1)       Mediation and Arbitration sessions are private and confidential. 1)       Lower entry barriers for employees asserting claims.
2)      Speedier dispute resolution. 2)      Parties cannot appeal an Arbitration decision except in extraordinary circumstances.
3)      Avoidance of runaway jury verdicts. 3)      Employees may resent being barred from access to the court system by the ADR program.
4)      Mediation/arbitration are less costly than litigation. 4)      Employers surrender the advantage of superior resources to litigate in the court system.
5)      A high percentage of disputes are resolved in mediation with a settlement agreement fashioned by the parties. 5)      Employers bear the costs associated with mediation and arbitration.
6)      Current case law holds that ADR programs may even bar employee class actions from the court system 6)      To be enforceable, ADR plans must afford employees full substantive legal right and remedies and not impose unreasonable procedural burdens upon employees.

Bottom Line:      Mandatory ADR programs are being validated by the courts as long as they are carefully established in accordance with prevailing case law.  Employers should seriously consider adopting a mandatory ADR program for all employment claims.  Non-union employers can unilaterally adopt such programs.  If you have a union, ADR programs may be subject to mandatory collective bargaining requirements.

Carl F. Muller, Esq.  cmuller@warrenyoung.com