Alternative Dispute Resolution: Recent Trends And Developments - Part Two of a Two-Part Series
September 11, 2000
Michael J. "Mike" Ranallo- Chicago
Robert W. Vyverberg- Chicago
In the July issue, we discussed the evolution of mandatory alternative dispute resolution (ADR) plans and explained why these plans are so desirable. This article identifies specific guidelines that must be considered before drafting or implementing such a plan.
A Mandatory ADR Plan Should Be Clear and Comprehensive
It is best to have a single document describing everything about the plan. A summary description is also helpful, but it should state that the plan itself controls. If there are separate mediation or arbitration rules, they should be identified and distributed.
Clearly Identify Plan’s Scope
In most cases, employers want their mandatory ADR plan to be as broad as possible. The plan should specify the statutory and common law claims covered, as well as the limited types of claims that are not covered.
Afford Employees Same Substantive Rights and Remedies that Are Available in a Court of Law
The plan cannot limit substantive rights or remedies. For example, if employees would be entitled to compensatory and punitive damages from a jury if successful in a federal lawsuit, the same damages should be potentially recoverable in proceedings under the plan.
Preserve Due Process Rights
The plan should clearly describe the process that employees must follow. It should allow for reasonable discovery. Both sides should be allowed representation. Arbitrators should be required to issue written decisions, which will be subject to review under the Federal Arbitration Act or a comparable state statute. Finally, employers should utilize a well-respected organization such as the American Arbitration Association to further ensure fairness. Many such organizations have their own due process protocols, which facilitate the involvement of neutral and knowledgeable third parties.
Claims Filing Period Fair and Reasonable
By far the safest course is to allow employees the same period of time to file claims under a mandatory ADR plan as they would have under the applicable statutes of limitations in federal and state courts and with administrative agencies.
Employers Should Pay Administration Costs
While courts have approved plans that require modest filing fees (e.g., $100), plans that obligate employees to split the costs of plan administration (including mediator and arbitrator fees) have been successfully challenged.
There Must Be Sufficient Consideration Between Employers and Employees
These plans are not binding unless the employer provides something of value in exchange for the employee’s promise to pursue claims under the plan. For new employees, this rarely presents a problem as long as they understand that the agreement to be bound by the plan is a condition of employment. For existing employees, the safest approach is to tie the employee’s consent to some tangible benefit. Many courts have also found an employer’s promise of continued employment (even at-will employment) to be sufficient consideration. Another form of recognized consideration is the employer’s reciprocal agreement to be bound by the plan.
Limit Modification and Termination Rights
Virtually all plans reserve the employer’s right to make changes. Many courts have stricken plans when this right is unrestricted. Employers should not be allowed to alter or eliminate the plan for a specified period of time, or without advance notice. The plan should also prohibit employers from modifications that would apply to pending claims.
Employees Cannot Be Prohibited from Filing Administrative Charges
While employees should be encouraged to seek relief exclusively under the plan, the plan should expressly advise employees that they are not prohibited from going directly to federal and state agencies.
Notify Employees of Their Rights and Obligations
It is essential that employees are aware of the mandatory ADR plan and its requirements. Specifically, they should be informed that they are waiving the right to file employment-related claims in court as well as their right to a jury.
Have All Covered Employees Sign an Acknowledgment Form
As a final step, all employees should sign and date an unambiguous form acknowledging their agreement to be bound by the plan. This form should be kept in the employee’s personnel file or another central location where permanent records are kept.
Given the ever-increasing costs and the overall dissatisfaction of all parties with the litigation process, it is not surprising that more employers are implementing mandatory ADR plans as a method of resolving employment-related disputes. We expect this trend to continue, absent a significant shift in the attitude of the courts towards these plans or a congressional directive limiting or foreclosing their use. An employer’s adherence to the above guidelines, with appropriate guidance from counsel, will go a long way toward ensuring the success of its mandatory ADR plan.
For more information, please contact Michael J. Ranallo at 1-800-837-5606 or mranallo@hklaw.com, or Robert W. Vyverberg at 1-800-837-5606 or rvyverbe@hklaw.com.