Mediation & Arbitration Process

Mediation Procedures

Mediation is an alternative to resolving employment disputes via formal litigation or arbitration. A neutral intermediary (the mediator) defines the conflicting interests of the parties, explains the legal implications, and attempts to help the parties reach and prepare a fair settlement. When settlements are achieved, they are typically reached more quickly and cheaply because opposing parties have not hired opposing counsel to fight it out in court. More and more employment-related cases are now being resolved this way. For example:

When an employer alleges it was justified in firing an executive for cause prior to the expiration of the stated term in an employment agreement

When an employer is confronted with a breach of contract or wrongful discharge case

When a worker threatens to file a lawsuit alleging sex harassment

When there is a significant dispute over the terms of an important clause in an employment contract the parties may prefer to work out their problems in the privacy of a business suite instead of a crowded public courtroom and negotiate the terms of a settlement based on their best mutual interests. If a mediator (usually a trained lawyer, businessperson, or retired judge) is hired to assist in the process, he or she will not make decisions for the parties but will help them reach an agreement within the realistic limits of their budget.

Resolving a dispute by mediation requires that both parties agree to mediate the dispute. It also requires a good faith effort by the parties to resolve the dispute, not to determine who is right and who is wrong. Nonbinding mediation may not work when one party strongly believes he or she is entitled to punitive or extra damages that can be awarded only by a judge via litigation.

How it works. Various community associations, private enterprises, and the American Arbitration Association (AAA) offer mediation services. The AAA is often selected to assist parties in the mediation process. It is a public-service, nonprofit organization that offers dispute-settlement services to business executives, employers, trade associations, unions, and all levels of government. Services are available through AAA's national office in New York City and through 25 regional offices in major cities throughout the United States.

A list of various mediation and dispute-resolution organizations is included at the end of this chapter.

Once both parties agree to try to solve their differences through mediation, a joint request for mediation is sometimes made through an AAA regional office. The request identifies the parties involved in the dispute, gives their current addresses and phone numbers, and briefly describes the controversy and the issues involved. The employee and the company should include whatever information is helpful to appoint a mediator.

The AAA assigns a mediator from its master list. The parties are then given information about the mediator. Typically, the mediator has no past or present relationship with the parties. A mediator is free to refuse the appointment or resign at any time. Likewise, the parties are free to stop the mediation or ask for the services of a different mediator. If a mediator is unwilling or unable to serve, or if one of the parties requests that the mediator resign from the case, the parties may ask the AAA to recommend another mediator. The mediator is compensated on either an hourly or daily basis. Both parties are informed of potential mediator fees and are sometimes requested to sign a document evidencing approval of the compensation arrangement and an agreement to share fees.

Before choosing a mediator, inquire if the mediator's approach is suited to your needs. Ask the following questions at the initial interview:

How does the mediator operate?

How much experience and training does the mediator have?

What is the mediator's background?

How many sessions are required?

How much will mediation cost?

After the initial interview takes place and the mediator is found to be acceptable, he or she will arrange the time and place for each conference with the parties. At the first conference, the parties will be asked to produce information required for the mediator to understand the issues. The mediator may require either party to supplement such information. The mediator will explain what the parties should expect. Good mediators explain that the process is entirely voluntary, that they are not judges and have no power to dictate solutions, and that the parties are free to terminate the mediation process at any time.

A mediator does not have authority to impose a settlement but will attempt to help the parties reach a satisfactory resolution of their dispute. Although usually trained in law, the mediator is not supposed to give legal advice. While parties do not have to be represented by counsel at the mediation sessions, most claimants and employers retain attorneys in employment and business disputes.

Conferences are private. The mediator will meet with both parties, and then sometimes with each privately. Other persons including witnesses, may attend only with the permission of the parties and at the invitation of the mediator.

Counsel Comments: The mediator is hired as a consultant, jointly retained, to help the parties work their way through their problems to resolution. At some point the mediator may make a recommendation or proposal. Both parties can agree or disagree or come to a compromise of their own. The mediator will draft a report confirming the agreement. The report is then submitted to the parties for submission to their attorneys for incorporation into a formal document, such as a settlement agreement.

If the parties fail to agree, or do not agree with the mediator's recommendation, they can break off the mediation, consult another mediator, give up, settle their dispute without a mediator, or go to court. The following is a typical mediation scenario from start to finish:

The mediator and parties meet at the initial conference. The mediator's role is explained and the responsibilities and rights of the parties are set forth.

The mediator designs a schedule for the sessions.

The parties sign a formal retainer agreement with the mediator.

A method is adopted for obtaining whatever information is required to understand the parties' problems.

The mediator identifies the various areas of agreement, defines the issues to be resolved, and assists the parties in their negotiations.

A final settlement may be proposed.

The mediator arranges for the terms of the settlement to be transmitted to the attorneys of the parties for filing in court, if necessary.

Counsel Comments: Some mediators do not possess sufficient skills or training to be effective. Others have been criticized for not ending the process when the interests of each party are not receiving balanced treatment. If the mediator is a lawyer, he or she often has to make an adjustment in attitude. Unlike the lawyer, who tells the client what to do, a mediator must allow the parties enough freedom to structure their own unique solutions to problems. Mediation by attorneys has raised the concern of whether one lawyer can adequately advise two parties with opposing interests and whether a mediator can invoke the attorney-client privilege in any future litigation. For example, if lawyers are present with the parties at mediation sessions and incriminating or damaging statements are made by a client, a lawyer may seek to prevent a judge or jury from hearing such statements in court when the mediation fails. A judge may not allow such oral testimony to be admitted in court depending on a number of facts, such as whether the parties formally agreed beforehand that such statements were confidential and could not be introduced in subsequent court hearings.

Tip: To avoid problems, interview the mediator carefully; be sure to hire the mediator only on the basis of a written retainer agreement. If you believe the process is not working or do not feel comfortable with the person hired, terminate the relationship immediately and discuss further options with your attorney or other professional advisor. Understand that mediation will not work unless both parties are willing to cooperate and recognize the savings and other benefits to be achieved versus litigation, such as:

eliminating the anxiety of preparing a case before going to court

avoiding potential poor publicity

maintaining privacy

obtaining a quicker result

eliminating uncertainty as to outcome when the case is tried in court

maintaining a desire to maintain good business relationships

If either party has a great need to even the score, mediation will probably fail. Speak to your professional advisor to determine if mediation is a proper means of resolving any employment dispute before resorting to litigation or arbitration. Once involved in mediation with a company representative, inquire if that person has sufficient authority to resolve and settle the matter on the company's behalf once a resolution is imminent. Finally, since your lawyer may be able to meet and question important witnesses, the benefits of learning more about your adversary's case may make the exercise worthwhile even if a settlement is not forthcoming. (Note: In some employment lawsuits, nonbinding court-ordered mediation is required before a trial begins. Speak to your lawyer for more details if applicable.)