Articles

ADRWorks wants to help you develop effective strategies for dealing with disputes in your business.  Here are some recent articles offering information, ideas and suggestions for better ways of dealing with conflict in your workplace and
to help you stay out of court.
 

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Topics coming soon from ADRWorks
 

Mandatory ADR and Class-action Lawsuits
Washington court says mandatory systems cannot bar
class-action suits
 

Disclose, Discuss and Mediate--A New Program Incorporating Apology
A new ADR process offers the benefits of Sorry Works!

Current articles
(Click on the title to see the full article)

Mandatory ADR and Unions
Do unions have a say in ADR system implementation?

Project Mediation--A New ADR Process for Construction
A new ADR process offers the benefits of Dispute Review Boards at a lower cost
 

Mandatory ADR Has a Place in the US Legal System
A response to “Is the Price of Mandatory ADR Too High?”

 

Is the Price of Mandatory ADR Too High?
An argument that compelling the use of ADR is having a
negative influence on our legal system

Harassment Issues in the Health Care Workplace
Health care providers face added challenges when
faced with dealing with harassment

Project Dispute Resolution Program ^TM
A new program offered for speedy, low-cost resolution of construction disputes

Project ReAlignment™—When Projects Start to Go Bad
A new process makes use of ADR

Mediator and Arbitrator Neutrality--Whose Responsibility Is It?
Users of the process need to do their part

Managing Litigation Risk for Community Banks
How Community Banks Can Guard Against Being
Sued Just Like the Big Guys

"Sorry Works" Comes to Washington
Washington Legislature Incorporates Apologies in Medical Malpractice Reform

Stockmarket Losses?  Arbitration May Be Mandatory
An overview of the securities arbitration process

Making ADR Appealing to Employees
Some ideas for making an ADR system easier to swallow
for your employees

What Are Dispute Review Boards?
A specialized form of early neutral evaluation used in the construction industry is being tried in other businesses

Reference Liability Reduced
A new law in Washington reduces employer liability for employee references

"Say You're Sorry"--Mother Was Right
New movement is encouraging health care providers to apologize for medical mistakes

Mandatory ADR is Official in Washington
Two recent Washington Supreme Court decisions support the use of mandatory ADR by Washington employers

Fighting the "Civil Wars"
Newsweek Magazine features cover
story on “Litigation Nation”

Using Job Analysis to Hire and Fire
A comprehensive job analysis will clearly define job expectations and avoid problems later

9th Circuit Court of Appeals
Rules on Arbitration Costs
If the other side can't pay, you may have to

Why Mediation?
Why does the ADRSystems process use
mediation as a first step?

Why Your Employees Quit
You may be missing important information
to help your company run better

The Job InterviewYour First "Date"
with a Prospective Employee
Too often interviewers ignore that little voice
and hire the wrong person

Using Acknowledgement Forms
to Compel Arbitration
Federal Court holds that no formal agreement
is needed to use arbitration
 

Mandatory ADR and Unions
Do unions have a say in ADR system implementation?
(Published December 2007)

In a recent call, a client asked if the presence of unions in the workplace had an impact on mandatory ADR systems.  He indicated that his business is facing a potential effort to unionize his employees and was wondering if it would impact the mandatory ADR system that he has in place.  The answer is no.  The courts have held that statutory discrimination rights of individuals cannot be co-opted by unions.  In fact, the following article suggests that having a mandatory system in place may serve to discourage unionization efforts.

 A number of cases of dealt with the issue, but the most significant one involved Northwest Airlines.  Richard Faulkner, an attorney/arbitrator/mediator specializing in ADR in Dallas did an analysis of the ALPA v. Northwest Airlines case:

 The Court of Appeals for the District of Columbia Circuit provided a welcome guide for employers throughout America on mandatory arbitration and the union workplace.  This en banc decision by the DC Circuit unanimously held that Northwest Airlines could require individual employees to agree to final and binding arbitration of any claim for discrimination in employment without having first bargained with the union concerning those provisions.  This decision is particularly welcome and useful because it now stands for the proposition that an employer may individually bargain with unionized employees to obtain separate and independent contracts requiring the arbitration of statutory discrimination claims.

The underlying facts of this case are helpful in understanding the origin of this rare unanimous decision by the Court.  Northwest Airlines has for decades required newly hired pilot trainees to sign individual employment contracts called "Conditions of Employment."  In 1995 Northwest added several provisions which included a clause by which each trainee agreed to the binding arbitration of any statutory anti-discrimination claims they may have with Northwest Airlines.  The union filed suit asserting that the carrier violated the Railway Labor Act by requiring the individual pilot trainees to agree to the conditions, including the arbitration provisions, without having first bargained with the union over those provisions.  The airline maintained that it had no duty to bargain over the arbitration of individual statutory claims because a line of cases established that is not a mandatory subject of collective bargaining.  Therefore, Northwest was free to bargain individually with its employees over the arbitration clause.  The union contended that the almost interminable negotiation process required by the Railway Labor Act precluded the airline from unilaterally implementing the arbitration provisions.

The Railway Labor Act requires that all matters "directly related to rates of pay, rules, and working conditions" are considered "mandatory subjects of collective bargaining".  That phrase has been borrowed by the courts from the jurisprudence interpreting the National Labor Relations Act.  When a carrier and a union have a dispute over a proposed change to a mandatory subject of bargaining, the courts have held that the union can get an injunction prohibiting the carrier from unilaterally implementing the change before completing the negotiation process set out in section 6 of the R.L.A..  However, if the dispute is over a nonmandatory subject, then the carrier may unilaterally implement the change unless limited by an existing collective bargaining agreement.  Consequently, this dispute provided a perfect opportunity for the courts to determine whether or not an employer could require potential employees to agree to the arbitration of statutory disputes before they became members of an established union.

The Airline Pilots Association has represented the pilots of Northwest Airlines for six decades.  When a pilot first begins training he is not represented by the ALPA or any other union.  Only upon completion of his training and entry into service as a probationary employee does he become a member of the bargaining unit represented by the ALPA.  Since 1966 Northwest Airlines has required that each trainee pilot agree to the "Conditions of Employment" as part of his employment contract.  A number of the "Conditions" expressly or implicitly continue to apply as long as a signatory is employed as a pilot with Northwest Airlines and even after the pilot becomes a member of the ALPA.  Those "Conditions" have been changed numerous times by Northwest without consulting the ALPA.  In 1995 and arbitration clause requiring employees to submit to binding arbitration all claims against Northwest arising from the employment relationship was added.  Critical to the case, the arbitration clause "specifically requires binding arbitration of statutory employment discrimination claims brought under the Minnesota Human Rights Acts, Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, or any other state or federal law prohibiting employment discrimination".  Certain other changes were also made but do not relate to the arbitration provisions.

While disputing the termination of a probationary pilot the union objected to the "Conditions" and filed suit in federal court.  It sought an injunction and declaratory relief on the grounds that Northwest violated the R.L.A. by unilaterally implementing the "Conditions".  One of the key disputes concerned the arbitration clause.  Northwest maintained that it had the right to insist on the arbitration of non- contract claims as a condition of employment of new hires.  Northwest agreed that the arbitration clause did not apply to claims arising out of the collective bargaining agreement between the ALPA and Northwest.

The District Court held that the arbitration clause dealt with a mandatory subject of bargaining and enjoined Northwest from applying the arbitration clause to any pilot represented by the ALPA.  The issue presented in the Court of Appeal was: "is the arbitration of statutory discrimination claims a mandatory subject of bargaining?"

Northwest Airlines contended that the arbitration of statutory discrimination claims is not a mandatory subject of bargaining because under the Alexander vs. Gardner Denver line of cases, a union can not waive the right of the employees or represents to bring a statutory discrimination claim in a judicial forum.  Therefore, since the ALPA can not agree to such a provision, it cannot be a mandatory subject of bargaining.  Thus, Northwest, and by implication every other employer, is free to deal with its employees directly concerning the arbitration of statutory claims.

The Supreme Court in Alexander vs. Gardner Denver considered whether an employee who had pursued the arbitration of a racial discrimination claim under a CBA was precluded from judicially asserting a Title 7 claim based upon the same facts.  The Court held that "there can be no prospect of waiver of an employee's rights under Title 7."  Because Title 7 provides each individual with the right to be free of discrimination, "the rights conferred can form no part of the collective bargaining process since waiver of these rights would defeat the paramount congressional purpose behind Title 7".  The court was particularly concerned that a union, which ordinarily controls the arbitration of an employee's claim, might, if allowed, compromise the would be Title 7 plaintiff's statutory rights.  "In arbitration, as in the collective bargaining process, the rights of the individual employee may be subordinated to the collective interests of all employees in the bargaining unit."  Id. at 58 n. 19.  The Supreme Court reiterated this viewpoint and Barrentine vs. Arkansas -- Best Freight System, Inc., 450 U.S. 728, infra, when it interpreted employees rights to file suit under the Fair Labor Standards Act after losing the same issue in arbitration.  The Court declared the rights granted by statute to be independent of the collective bargaining process.  Those rights "devolve on petitioners (employees) as individual workers, not as members of a collective organization."  Consequently, the court resolved the tension between collective representation and individual statutory rights in favor of the individual employee exclusively controlling the method of determining their personal statutory rights.

The Circuit Court believed it had discovered a clear rule of law emerging from the Alexander vs. Gardner Denver and Gilmer jurisprudence.  That Rule essentially states that unless the Congress has precluded an individual from doing so, he may prospectively waive his own statutory right to a judicial forum, but a union may not prospectively waive that right for him.  Absent congressional intent to the contrary, a union may not use the employees' individual statutory right to a judicial forum as a bargaining chip to be exchanged for some benefit to the group.  Alexander vs. Gardner Denver, supra, at 51.  Consequently, because the Alexander vs. Gardner Denver jurisprudence precluded the union from agreeing to binding arbitration of the individual statutory claims, the court concluded that the arbitration clause was not a mandatory subject of bargaining.  Thus, the Court held that "only the individual can determine in what forum he will vindicate he is statutory rights, and its choice should not be burdened by the majoritarian concerns that motivate a union.  If a union has a mandatory role in negotiating the terms that will apply to arbitration, then it could also could contrive to discourage the exercise of the employee's right to choose a forum." 

This decision reflects the federal courts continued skepticism that a labor union can be safely trusted to vindicate an employees statutory rights.  It also holds the promise that it employer may directly, and even unilaterally, contract with each individual employee for the arbitration of statutory rights disputes.  Unquestionably, this decision causes great consternation within organized labor.  Since an employer may now directly contract with each employee for the arbitration of their statutory rights, the employees will now be able to better evaluate the "value" of the union grievance procedure.  Where an astute employer arranges a fair and legitimate forum for the arbitration of those statutory claims, it may well not only avoid a multiplicity of procedures but demonstrate its trustworthiness without union interference.  This decision also suggests that a well crafted arbitration agreement can be effectively used to frustrate and defeat union organizing efforts.◘
 

Project Mediation--A New ADR Process
for Construction
A new ADR process offers the benefits of
Dispute Review Boards at a lower cost
(Published May 2007)
 

The following article appeared in the December 8, 2006 issue of Building magazine.  It is an interview by Chloë McCulloch, legal editor of Building with Andy Grossman of the Centre for Effective Dispute Resolution (CEDR), and Nicholas Gould and Simon Tolson of Fenwick Elliott, Mike Spencer of EC Harris, and Tim Tapper of Cyril Sweett.

Building, a weekly publication, is the UKs oldest and best-read construction magazine.  It was launched in 1843 by Joseph Aloysius Hansom architect of Birmingham Town Hall and designer of the hansom safety cab and once counted Prince Albert, Charles Dickens and Florence Nightingale among its readers.  The magazine is read by over 100,000 professionals throughout the building industry, including building contractors, housebuilders, architects, quantity surveyors and building surveyors.

CEDR is an independent non-profit organisation launched in 1990 with the support of The Confederation of British Industry.  Its mission is to encourage and develop mediation and other cost-effective dispute resolution and prevention techniques in commercial and public-sector disputes and civil litigation.

It is reprinted here with permission.

 It’s Like Partnering with Teeth

Brief encounter:  A new form of project mediation was launched this week to nip problems in the bud.  We brought together its inventors and industry experts to discuss the pros and cons.

Chloë McCulloch  Let’s discuss this week’s launch of a dispute resolution technique: project mediation.  The idea, most recently developed by Fenwick Elliott and the Centre for Effective Dispute Resolution (CEDR), is that an impartial project mediation panel is appointed at the outset of the project.  It visits the site periodically and may conduct workshops. The panel consists of one lawyer and one commercial expert who are trained mediators.

It seems the main argument in favour of this process, rather than dispute review boards, is that it is cheaper and can be used on projects around the £10m mark instead of only being suitable for £100m-plus schemes.

 Nick Gould  In terms of cost, it’s much cheaper than a dispute board.  If a dispute arises, a dispute board requires detailed statements of case, evidence, experts’ reports and a hearing.  If a dispute arises on a project with project mediation, the parties exchange position statements and supporting documents.  There would then usually be a one-day mediation with a high chance of resolving the dispute.  The mediators already have valuable knowledge of the project and of the individuals working on the project.

Chloë  So, Nick, given the industry already has a range of dispute resolution techniques, as well as partnering, is this just a variation on what’s gone before?

Nick  It builds on what has gone on before, but is tailored to the needs of the industry.  It is more about dispute avoidance then resolution. The mediators assist with problem-solving during the project. They can’t make decisions, so the power to deal with issues remains with the parties. But they can inject some reality that might otherwise be overlooked. It’s like partnering with teeth.

Chloë  Project mediation is already used by some parties, so what’s new about this form?

 Nick  The new aspect is that the CEDR now provides guidance on how to set up project mediation on a scheme.  They also can provide parties with a project mediation agreement and appoint mediators.  The launch was on 7 December and, after that date, anyone will be able to download for free the guidance and agreement from the CEDR’s website.

 Chloë  Andy, the CEDR will provide the project mediators for an appointment fee.  How much cheaper will the process be than dispute review boards?

 Andy Grossman  The appointment fee is one component of the cost.  A monthly retainer and hourly rate is agreed for each project mediator with the parties.  If a formal mediation is required, where the parties are unable to resolve their conflict through discussions and interventions by the project mediators, a separate daily rate is agreed.  We estimate project mediation will be at least 30% cheaper than dispute review boards.

 Tim Tapper  I understand that FIDIC and the World Bank encourage one-person dispute boards for smaller projects, which means these boards can be suitable for projects worth less than £100m.  Are you saying the saving with a dispute board is at the dispute resolution stage?

Mike Spencer  Savings between project mediation and adjudication at dispute resolution stage must surely be minimal.

 Simon  Agreed, but the time wasted is still likely to be less than with dispute boards. Project mediation is great at heading off things, so parties can focus on the build not the fight.

 Mike  In my view, the benefit of project mediation lies with encouragement of   collaborative working and the use of an effective early warning system.  Such a process would encourage parties to look ahead together and eliminate financial and programme risks.

Andy  Savings are being achieved in the improved management of supplier relations and driving the collaborative effort. Nick used the term “partnering with teeth” and this lies at the heart of project mediation.  In most cases, collaborative working needs to be driven.

Mike  The challenge is to change the attitudes of the contracting parties and to encourage project controls, records management and an early notification process so parties can work together to resolve any problems, which the mediation panel can facilitate.  I foresee two key challenges:  the attitudes of the parties and the way in which they work and the fact that the NEC encourages a similar method of contracting.

Nick  I think it would work well with the NEC approach. It’s a front-end dispute avoidance technique.  The benefit is the interaction of mediators that are removed from day-to-day dealings of individuals.

 Simon  The challenge, as Mike says, is changing attitudes.  I am in a major project battle at present where more exchange and effective project controls might have made the difference, but they were not embraced.  A project mediator would now be a welcome third party to the scene.

Andy  Just going back to the cost. As an indication, the cost of project mediation on a £35m contract lasting 24 months would be in the region of 0.3% of the contract value.

 Tim  Dispute boards have generally been 0.05-0.3% for a three-man board.  This is on major projects, admittedly, so does the process really win on smaller projects or is it also suitable for the big ones?

 Nick  Dispute boards are too expensive for smaller projects, but project mediation isn’t.

 Tim  My concern is that project mediation is straying into “soft” areas such as the promotion of collaborative working and the softer side of risk management.  Is it trying to do too much?

Nick  It is just trying to focus on the part where a difference can be made. It focuses on the people and getting the job done.  The project mediators can test whether the participants are really collaborating or just going through the motions.

 Tim  Project mediation seems to be partly intended to promote partnering.  We have found that partnering only works when there is someone there to train the parties, bring them together with workshops and team building exercises and then to reinforce this throughout the project.  Will the mediator be taking on this role?

 Andy  Project mediation is suited to the big ones as well – even the 2012 Olympics!  Nick’s point is that PM is not out of the reach of smaller projects.  The smaller projects might be highly complex ones where the use of project mediation would be an advantage.  Whether we use the term partnering or collaborative working, project mediation takes on the training role.

 Chloë  We’re out of time. Any final comments about the main selling points or challenges of this method of dispute resolution?

 Simon  The main selling point for will be its ability to fuse team building, dispute avoidance and dispute resolution in one procedure.

 Tim  Taking the ethos of dispute boards and refining the process makes good sense.  However, for me, it appears to be attempting to be all things to all men and strays too far into specialist areas such as risk management and the role of partnering adviser.  This may dilute its effectiveness.

 Andy  Project mediation provides a better response to project finance and risk management.  Banks and funders are increasingly having to look at operational risk and having effective measures available to deal with conflicts.

 Mike  The main challenge is changing the attitudes and encouraging good project controls and records.  The introduction of a project mediator, extended to all contracting parties, may encourage all parties to address the issues on their project before they arise in the form of a dispute.  An independent project mediation panel will also assist the parties in managing their expectations at an early stage and avoid a costly and protracted dispute.

 Find out more at www.building.co.uk/legaltoolkit or  www.cedr.co.uk◘
 

Mandatory ADR Has a Place in the US Legal System
A Response to “Is the Price of Mandatory ADR Too High?”
by
 Professor Corbett Haselgrove-Spurin
(Published March 2007)

 Landsman identifies potential - though not necessarily proven problems with both arbitration and court annexed mediation in the US.  Many of his references relate to bold assertions by commentators rather than proven problems and many of the commentators have their own axes to grind.

Much of the problem with his analysis is that he fails to address potential problems with cost, time, jury time, variable quality of judiciary etc within the US system.  His assumption is that the US legal system is fine - so the problems vest with ADR. 

There is an implicit assertion that commercial enterprises seek to gain an unfair advantage - whereas it may well be that if the US legal system was cost effective, speedy and guaranteed fair outcomes then commerce might not be attracted to ADR in the first place.  The assumption that all this is about David (clients) v Goliath (big business) is misconceived.  Business can be jerked around by clients as much as clients may be bullied by enterprise.

 Secondly, the problems with quality assurance in arbitration lie in the fact that unlike most of the world that follows the Model Law Guidelines US law tends not to mandate reasoned decisions, rendering judicial review virtually impossible.  If arbitrators had to provide reasoned decisions and awards were susceptible to judicial review there would be no need to resort to complicated measures to vet the quality of arbitrators.  The process would become transparent at the enforcement stage without any fancy scrutiny methods.  Biased decisions would automatically be screened out and a culture of accountable decision-making would take hold instantly.

 The proposition that mediators operate in a manner that favors regular clients over consumers and that the lower strata of society and particularly females, etc are vulnerable to coercion may have some basis in fact - I am not in the position to disprove the assertion - but whether or not the courts offer a viable alternative is questionable.  How many of these cases would be undertaken on a contingency fee basis?  Few I imagine unless there is a potential lucrative return for the lawyers.  Can the clients fund litigation? And if so, what is there to indicate that the outcomes would be any different or even better if they went to trial?  For many clients a settlement means they get something, rather than a potential nothing - and costs will have been minimal compared to litigation.

 There is a problem inherent in collating data on mediation settlement satisfaction after the event.  Every mediation involves the parties compromising - so the natural response to "Did you get what you wanted or deserved out of the process?" will inevitably be met with NO.

The party will settle for what they perceived was the best terms available or achievable at the time.

It is hardly surprising that many would later assert that they did not get what they wanted and that the process was not as effective as they would have liked. BUT:  No one made them settle - they did so to avoid the perceived risks of continuing with litigation - a risk which meant they may have done better or alternatively less well if they had continued with the litigation.  Thus any commentary that takes into account such criticisms/complaints is actually meaningless unless it is also backed up with an evaluation of the likely as opposed to desired outcomes of continued litigation.

 It is submitted that Landsman has not established that a significant proportion of those criticizing ADR would in fact have been better off litigating instead.

 There is a problem in asserting that mediation is a profession.  It is not.  It is a vehicle for making business/social choices - a facilitated negotiation mechanism.  The law has legal rules against dishonesty - mistake - misrepresentation - undue influence - all these apply equally to mediation - though as with the general application of these laws, proof may not always be easy to establish.

There is no overarching mediation regulatory body - no equivalent to the Bar or the Law Society - perhaps there should be - BUT the Bar is effectively a monopoly - an aberration - an exception to the rules of open competition - justified on ethical grounds and the special circumstance of legal practice and the protection of society.  The cross over from direct personal negotiations to facilitated negotiation is blurred and making the later subject to professional codes but not the former would involve drawing complex and fine distinctions.

Mr. Landsman is one of those who would regulate the entire spectrum of human existence - an advocate of the Nanny State:  human beings need to be left free to make certain decisions in their lives - with or without assistance from experts where appropriate.

The assertion that mediation does not comply with the Rule of Law is nonsense.  The Rule of Law states that everyone is equal under the law and has equal access under the law. No one makes anyone settle or give up the right to a trial in mediation.  Financial constraints may act as a coercive factor - but that's life - and life can be harsh.  Unless the State is the fund all aspects of litigation (in which case who would need mediation?) nothing can be done about this.  What is does not amount to is an absence of respect for the Rule of Law.

It should be remembered that mediation and arbitration operate within the Law:  if the law could be improved that is another matter - a concern for the legislators - not for the ADR providers.

•••••

 Corbett Haselgrove-Spurin is a Construction Adjudicator, Arbitrator, Educator, Mediator, Scheme Leader, LLM Commercial Dispute Resolution, Senior lecturer, Commercial & Construction Law at Glamorgan University.  He is a visiting lecturer in ADR to Cardiff Law School, the University of Wales, the sitting chairman of the Wales Branch, Chartered Institute of Arbitrators, member of the South Wales Court service mediation steering committee (The Association of Welsh Mediators)  and Her Majesties Court Service mediator coordinator for the Newport Gwent civil court. He is a Construction Law Consultant and Director Nationwide Academy of Dispute Resolution UK Ltd and Middle East Co Ltd.◘
 

Is the Price of Mandatory ADR Too High?
 An argument that compelling the use of ADR is having a
negative influence on our legal system
(Published January 2007)

In our rush to spread ADR to the masses have we become too enthusiastic in using it at the cost of more important values?  In an article entitled “ADR and the Cost of Compulsion” appearing in the Stanford Law Review in April, 2005, the author raises questions concerning whether compelling the use of ADR by corporations and the courts is resulting in unintended, negative consequences.  Written by law professor Stephan Landsman of DePaul University College of Law in Chicago, the article suggests that the practice of requiring the use of ADR should be abandoned.

The article addresses two of the predominant forces at work in ADR—private predispute contracts requiring the use of ADR and court-annexed ADR programs.  In the private contract context, Landsman suggests that the drafters of ADR clauses use those clauses to circumvent existing legislation, and, in some cases, use the clauses to discourage claims.  He also suggests that some ADR providers, in their quest for business, ignore the over-reaching sometimes present in these contract provisions.

As for court-annexed programs, he suggests that users of the court mandated processes are exposed to “wildly varying ADR experiences” along with procedural problems and increased pressure to settle.

Finally, he suggests to ADR providers that we need to learn “humility and respect for the rule of law” or face the real possibility of ADR being discredited and politicized.

The Securities Industry Experience

The article looks to the development of ADR in the securities industry as an example of the over-reaching that can occur in situations where private companies mandate ADR.  (See “Stockmarket Losses?  Arbitration May Be Mandatory—An overview of the securities arbitration process” published in ADReport March 2006)  Beginning in the early 1970s, the New York Stock Exchange (NYSE) and the National Association of Securities Dealers (NASD) mandated the use of arbitration when requested by dissatisfied customers.  Through federal legislation and a number of court decisions culminating in the U.S. Supreme Court’s decision in Gilmer v Interstate/Johnson Lane Corp., in 1991, the use of arbitration was mandated in virtually all disputes including employment disputes.

Following Gilmer the securities industry faced increasing pressure to deal with employment issues including claims of sexual discrimination and harassment against female employees.  The 1990s saw the industry struggling to deal with these claims through mandated arbitration without much success.  Of major concern was the perceived bias of the arbitrators and the fact that, according to a General Accounting Office investigation, 89% were male and 97% were white.

Finally, in 1997, partly the result of intervention by the EEOC, the Securities and Exchange Commission (SEC) and the Securities Industry Conference on Arbitration (SICA), the NASD dropped its mandatory arbitration of employment disputes, and, in 1999, the NYSE followed suit.

Landsman points to a number of lessons to be taken from the experiences of the NYSE and the NASD.  First, the power of requiring ADR “is likely to lead to explosive growth in the number and variety of compelled arbitrations.”  Second, there is a likelihood that where an industry mandates arbitration, the arbitrators will be homogeneous, and different from the claimants whose cases they hear.  Third, claimants are likely to distrust mandatory arrangements created by the industry.  Fourth, mandated, “piecemeal”, private processes are unlikely to effectively deal with deeply rooted problems within an industry such as those encountered in the securities industry.  Fifth, to achieve real social progress and to reestablish trust, mandated processes need to be abandoned.  Finally, outside regulators like the EEOC, SEC and SICA may drive compulsory systems out of existence or, at least, toward improvement.

ADR and Compulsion

The article points to the paradox that, in spite of growth in mandatory ADR particularly involving consumer, banking, securities and employment disputes, ADR has a long history of choice.  The Federal Arbitration Act, that compels courts to honor agreements to arbitrate rather than litigate, was not passed until 1925, after significant debate.  The Model Standards of Conduct for Mediators says, “Self-determination is the fundamental principle of mediation.  It requires that the mediation process rely upon the ability of the parties to reach a voluntary, uncoerced agreement.”

Ironically, Landsman points out that ADR would not be so prevalent were it not for the compulsion to use it, pointing out that “the ADR push is ‘almost entirely a supply side phenomenon’ promoted by a number of interested judges and ADR providers.”

He then points to the two most popular means of achieving compulsion—predispute stipulations or agreements requiring the use of arbitration (characterized as adhesion contracts), and court-annexed programs requiring litigants to participate in ADR processes before being heard by a court.

The Costs

What are the costs of mandatory, predispute ADR?

First, the article points to substantive manipulation.  This manipulation occurs when drafters of mandatory ADR provisions effectively “redraft the law that governs them and the procedures available to redress wrongs committed.” 

As an example, it points to the Truth in Lending Act.  Created to deal with unethical practices in the lending industry, the act contemplated consumer litigation as a key enforcement mechanism, and provides for successful litigants to recover costs and attorneys’ fees associated along with damages.  Lenders have successfully blunted the effects of the act through contractual requirements that require arbitration and that don’t address the issues of costs and attorneys’ fees.

Landsman also points to similar effects concerning the Magnuson-Moss Warranty Act and some consumer protection laws.

The article also addresses procedural manipulations, and points to the use of mandatory provisions to remove the availability of class action lawsuits for those seeking redress.  Some courts have started to look at these provisions and have ruled that a simple arbitration clause does not bar class actions.

Landsman also suggests that the mandatory movement has “undercut” the American legal system moving it toward what he characterizes as the “far less robust” British civil legal system with its absence of juries, limited discovery and losers often paying the winners’ costs.

He also discusses attempts by businesses to place so many obstacles in the paths of potential claimants so as to discourage claims.  As an example, he points to Hooters of America, Inc. v. Phillips, a Fourth Circuit Court of Appeals case where the court held that the system required by Hooters was so biased in favor of the company that the court characterized the process as “a sham system unworthy even of the name of arbitration.”  While admitting that the Hooters situation was an extreme case, he points to numerous other efforts to discourage claims including delays, high costs, and limiting damages.

ADR providers are also at risk as a result of the mandatory movement.  Pointing out that the market for ADR services has not yet proven particularly lucrative, Landsman suggests that providers are often tempted to go along with drafters of agreements that limit both substantive and procedural rights.  He points to cases in Florida, New York and California involving the National Arbitration Forum where the courts expressed doubts concerning its neutrality and costs of its processes.  He goes so far as to suggest the need for more regulation of providers of ADR services particularly those involved in contractually mandated arbitration.

Challenges for Court-compelled ADR

The article cites three areas of fault for court-annexed ADR programs:  lack of uniformity of processes; divergent supervision and compensation of neutrals; and, pressure to settle.

Citing the constitutional requirements of equal treatment and use of fair processes, the articles claims a wide variation in processes used by neutrals conducting ADR in a single court-annexed program.  The result can be widely different treatment for parties using a court program.  One cause of variation is attributed to the limited resources dedicated to the processes claiming that two or three hours is not sufficient to resolve most disputes.

Procedural failings are caused by divergent supervision and compensation of neutrals, and can result in threats to the integrity and consistency of the ADR process.

The article points out that if the services are free, volunteers are often used with varying skills and commitment to the process resulting in challenges for the court administering the program.  Low fees can result in creation of ADR “mills.”  Unrestricted fees can result in high costs and the specter of disputants dropping out of the process.  Negotiated fees can result in the disputants having to reach a deal with the “judge” hearing their case.

Representation by counsel can also be an issue.  In processes where the disputant rather than his or her counsel are engaged directly in the process may result in distrust of the court process.

The pressure to settle can also pose risks.  It can cause resentment on the part of the parties and can result in behaviors by practitioners driven to get settlements that may be considered questionable, and can raise questions of fairness of the process. 

The article goes on to discuss the reactions of those who face compulsory ADR both through predispute agreements and through court mandated processes.

Possible solutions

Landsman recognizes that the elimination of mandatory ADR is highly unlikely.  He suggests three steps to address the challenges:  diversification of the neutral panel, introduction of greater transparency into the programs; and that ADR should be thought of as an adjunct to the courtroom and not a substitute for it.

Pointing out that while most practitioners are white, middle-aged males, the majority of users of the process are women or members of minority groups.  This lack of diversity can influence outcomes and breeds distrust of the system.

Citing the “environment of secrecy” surrounding the ADR process, Landsman urges that rules governing the process should be clear and unambiguous with clearly defined provisions including costs, fees and the rights of appeal.  He also suggests that more information concerning neutrals hearing cases be provided and points to California ethics rules requiring disclosure of conflicts of interest, prior decisions and other matters.  He also urges more openness of the processes themselves.

Finally, he suggests a change in thinking of those involved about ADR and its relationship to litigation.  Rather than being a surrogate for litigation, ADR should be considered as an adjunct to litigation allowing those cases that need to be litigated to go to court.  The result will be less pressure to settle and more cooperation between the courts and ADR providers.  He also suggests that courts take closer looks at mandatory systems in an effort to rein in drafters seeking to overreach.

Conclusion

Landsmen contends that the current ADR movement and resulting privatization of dispute resolution “strikes at the heart of the rule of law.”  He suggests that the effect of ADR’s association with the tort-reform movement has “undermine[d] the system’s ability to convince a large part of the populace that ADR should ever be trusted.”  Finally, he suggests that as those seeking to counter the movement toward compulsion and corporate dominance might very well make ADR a major fatality in the battle.◘

Harassment Issues in the Health Care Workplace
Health care providers face added challenges when
faced with dealing with harassment
(Published November 2006) 

 Title VII of the Civil Rights Act of 1964 is the centerpiece of discrimination law in the United States.  Along with state law, court cases, regulations and other federal statutes, including the Americans with Disabilities Act (ADA), the Age Discrimination in Employment Act (ADEA), the Rehabilitation Act, the Immigration Reform and Control Act, and others, it prohibits discrimination in the workplace because of race, color, religion, sex and national origin.  A recent study shows that health care providers face additional challenges in dealing with the impact of disruptive behavior related to discrimination issues in that such behavior in physicians and nurses not only has a significant impact on job satisfaction and retention of nurses, but also can have an enormous impact on health care delivery and its outcomes.

In addition to outright discrimination in hiring practices by employers including not hiring people or terminating them because of their sex, race, color, religion and national origin, another recognized area of “discrimination” in the workplace covered by Title VII is the area commonly referred to as “harassment”.  By far, most litigation in which employers find themselves concerns this area of discrimination.

 Discrimination and harassment are defined as actions or behaviors directed toward a person within a protected class that negatively affects the terms, conditions and privileges of his or her employment.  The behavior or action must be deliberate or repeated, unwelcome, not asked for, and not returned.  The behavior can be verbal, non-verbal or physical.  While some harassing and discriminatory behaviors are easy to identify, other behaviors are difficult to define.  The key is that the behavior is unwelcome.  This places responsibility on the receiver to tell the sender, a supervisor or a manager that the behavior is unwanted. 

It is important to remember that all harassing behavior in the workplace is not unlawful.  Isolated incidents of harassing behavior may not violate federal law but likely constitute workplace misconduct and require corrective action by the employer.

Recent statistics from the Equal Employment Opportunity Commission indicate a continuing challenge by employers to deal with harassment issues.  In 2004 the EEOC and state and local Fair Employment Practices Agencies around the country received 13,136 complaints alleging harassment.  Although the number of complaints has trended downward since 1997 when 15,889 complaints were received, the number still indicates significant work needs to be done by employers.  The statistics also indicates that the percentage of complaints filed by males has steadily increased from 9.1% in 1992 to 15.1% in 2004.  Monetary benefits resulting from complaints—excluding money recovered through litigation—totaled $37.1 million in 2004, down from $50.0 million in 2003.

For health care providers the challenges are even more critical.  A recent study published in the January 2005 Nursing Management indicates the impact of disruptive behavior—including sexual harassment—by physicians and nurses not only has a significant impact on job satisfaction and retention of nurses—not a minor concern during these times of the nursing shortage—but also has an “enormous” impact on health care delivery and its outcomes.  The study concluded: 

“While the incidence of disruptive behavior in the workplace may be low, such behavior can be an extremely destructive force that undermines employee morale, increases stress and frustration, stimulates staff turnover, and leads to adverse patient outcomes.”

Another concern to health care providers is the increasing view that harassment issues raise ethical concerns and can result in charges of ethical violations by physicians and nurses.  More regulatory agencies are characterizing harassing behavior as ethical violations and are pursuing health care professionals for those violations. 

What is Harassment?

Harassment concerns two types of unlawful activities in the workplace:

Quid pro quo

Harassment defined as when an employer, supervisor or manager conditions the granting of economic or job benefits upon the receipt of sexual favors or adherence to beliefs espoused by superiors (“this for that”).  Mere requests or threats of negative job actions are sufficient for an employer to be found guilty of such discrimination

Hostile work environment

Defined as offensive behavior that permeates the workplace, making it difficult or unpleasant for employees to be productive

It is also important to remember that retaliation against an employee, who complains about discrimination, including harassment, is also a violation of the law.  An employee who opposes an employer’s practices, and makes verbal objections to supervisors, files complaints with governmental agencies, along with other similar activities is therefore protected—no matter if the “practices” being opposed are in fact legal.

DEALING WITH HARASSMENT

Dealing with harassment and hostile work environment issues can be difficult for employers and employees.  Just because management is not hearing about problems does not mean they don’t exist.  Often employers are not aware of such issues because of reluctance on the part of employees to report such activities.  There are many reasons for employees not reporting harassing or hostile work environment issues:

• People are embarrassed to talk about it

• Emotional after-effects are strong and include feelings of loss, grief, anger, depression, guilt and self-blame

• Fear of retaliation, loss of job, loss of promotion, rejection

• Unwillingness to deal with conflict

• It is easier to try to ignore it

 Age and cultural consideration also enter into not reporting issues:

• People from different cultural backgrounds and age groups may react differently to harassment

• Some people may choose to avoid it and not pursue it

• Some may not know the law and their rights

• Some may not understand the language

• Some may not recognize that it is taking place

Any potential harassment or hostile work environment issue brought to the attention of the employer, its supervisors, managers or owners, must be dealt with in a serious and expeditious manner.  In order to avoid liability, an employer must be able to show that:  a) it exercised reasonable care to prevent and promptly correct any harassing behavior, and b) the complaining employee failed to take advantage of preventive and corrective opportunities provided by the employer.

“[R]easonable care to prevent and correct any harassing behavior” means that the employer must establish, disseminate and enforce an anti-harassment policy and complaint procedure and take other steps to prevent and correct harassment including periodic training of staff.  In addition to implementation of policies and procedures, and training, all complaints by employees must be taken seriously and management must investigate those complaints promptly and fully.  If the investigation finds unlawful behavior, the employer must take all appropriate action to see that the behavior stops. 

While it is commonly believed that harassment and hostile work environment issues must involve sexual situations, recent years have seen a move by the courts to include non-sexual matter within the definitions of harassment and hostile work environment.  Thus, the law does not draw distinctions between racial or sexual slurs, pornography, religious or social commentary, jokes, art and other forms of speech.  Courts have held that harassment can be based not just on sex, but on gender, race, religion, national origin, age and disability.  All that is necessary to prove a hostile work environment is that the behavior is repeated and pervasive, not welcome, not returned, and interfering with the employee’s ability to perform his or her job.  Thus, political, artistic, religious and socially themed speech may constitute harassment under the law.  This is especially true of situations involving supervisors, managers and owners. 

Same-sex harassment is also now actionable.  The harasser and victim need not be gay, and the harassment must be “because of gender.” 

Special Concerns FOR HEALTH CARE Supervisors, Managers and Owners

While quid pro quo situations almost always involve employees and superiors holding power to grant or withhold job related benefits, hostile work environment can arise from both fellow employees and from superiors, managers or owners.  The Supreme Court of the United States has held in a number of cases that the employer will be held liable for the unlawful harassment by supervisors, managers, owners, partners and corporate officers of the employer.  

The superior/subordinate situation raises additional concerns and risks of liability because of the power of the superior over the subordinate.  Supervisors, managers and owners who push beliefs and values on those under their chain of command have a captive audience that can give rise to the perception that any perceived negative personnel action is because the subordinate’s beliefs are not in alignment with those of his or her superior’s.  There is also a greater reluctance on the part of employees to complain when potentially harassing behavior is coming from a superior.  It is also likely that rather than going to the employer with a complaint, the employee will go outside the workplace to make a complaint, feeling that if harassing behavior is coming from a superior, manager or owner, the employer will not deal with the problem in an appropriate manner.

Therefore, even if it can be shown that the employer met its responsibility of adopting policies and investigating and handling complaints promptly, if those complaints involve charges against a supervisor, manager or owner, the risk of liability is higher.

Management’s Role

With the above in mind and in view of the large number of claims of harassment and hostile work environment employers must be ever vigilant that the work place be kept free of potential claims.  The following are necessary:

• Model appropriate professional behavior

• Avoid potential quid pro quo social situations  (Dating between owners and management personnel on the one hand and employees on the other creates significant risk of potential problems)

• Educate the work force

• Monitor the work environment

• Investigate all complaints of harassment and hostile work environment

• Be unbiased

• Ensure that any harassment and hostile work environment ceases

• Communicate that harassment and hostile work environment will not be tolerated

• Do not retaliate

• Take all issues seriously

• Use resources

 Employees’ Role

 Employees also have a role: 

• To promptly report harassing conduct to management

• To conduct him/herself in a professional manner at all times

• To support coworkers when they are the object of harassing conduct

 CONCLUSION

 Those in health care face special risks when it comes to dealing with harassment.  Providers not only face potential legal liability for actions rising to the level of harassment under the law like other employers, but face additional challenges dealing with the impact of harassing behaviors by physicians and staff as they affect ethical considerations, nurses’ job satisfaction, morale and retention.  These behaviors also impact communications and collaboration among clinicians, and, most importantly, the role of these behaviors on adverse events, medical errors, patient safety, patient mortality, the quality of care and patient satisfaction.

 Health care providers should assure that they have done everything necessary to prevent harassing behavior in the workplace and to deal with it quickly and efficiently when it happens.◘

Project Dispute Resolution Program^TM
A new program offers speedy, low-cost resolution
of construction disputes
(Published September 2006)

The Project Dispute Resolution (PDR) Program offers low cost, speedy resolution of issues associated with the construction process through pro-active, contemporaneous, on-site procedures designed to quickly and efficiently deal with issues before they become full-blown disputes.  For all types of contractors from home builders to heavy construction, the PDR Program offers cost-effective, on-site support for all project participants in dealing with issues and disputes that arise in construction projects through the use of proven alternative dispute resolution processes while keeping the parties out of court.  The PDR Program offers two different approaches depending upon the size and complexity of the project:

 PDR Small Project Program

 Intended for smaller projects such as homes and commercial complexes, the PDR Small Project Program is designed to encourage early discussion and resolution through a prepaid program that offers analysis and resolution by experts in smaller construction processes and issues.  The PDR Program is incorporated into the contract documents and establishes a process for quickly and effectively dealing with disputes as they arise, not after the project is completed.  The program uses early neutral evaluation, mediation and arbitration, and, if selected, adjudication to quickly deal with issues.

 Once an issue is raised, the program’s first step offers an analysis of what went wrong and how it can be corrected.  Using a specialized form of early neutral evaluation, this process is conducted by an impartial expert whose function is to analyze the progress of the project, work with the participants to address the emerging issue and offer recommendations on resolution.

 If informal discussions fail to resolve the issue, mediation is used to resolve the dispute.  Mediation is a structured process wherein a neutral mediator serves as an impartial facilitator in formal, scheduled negotiation sessions through which mutually acceptable settlement agreements are reached by the parties.  The agreements are then written down and signed by the parties, and are legally binding.

 If all else fails, the issue is resolve through binding arbitration.  Arbitration is a more formal, private, confidential, and binding process for settling disputes.  The arbitrator hears the evidence presented by each side and then render a decision that is binding and enforceable in court.  Arbitration costs substantially less than litigation.  The parties never go to court. 

 The PDR Program also offers an optional process called adjudication.  A new process that is just being introduced in the U.S., adjudication has been used very successfully in Great Britain since 1996.  Adjudication is a quick and relatively inexpensive way of resolving a dispute, where an impartial third party (adjudicator) decides the issues between the parties.  Adjudication is quicker and less expensive than arbitration or litigation.

 Adjudication can be used at any time during the course of the project.  If a dispute is referred to adjudication, the adjudicator is selected within seven days and must decide the dispute within four weeks (subject to any agreed extension).   Once the adjudicator has made his decision, the parties must immediately comply with the decision.  Either of the parties has the right to have the same dispute heard afresh in court or in arbitration following conclusion of the project.  The majority of adjudication decisions are accepted by the parties as the final result.

 The advantages of the PDR Program for small projects are that the process and costs are incorporated into the construction documents and included in the contract price, so that the parties can use the process without additional cost.  It offers speedy resolution of issues so that they are dealt with as they arise, during the course of the project, not later when associated costs have increased and positions of the parties have become entrenched.  By using proven alternative dispute resolution processes, the issue can be resolved—usually in less than 30 days.

 The PDR Program is initiated by inclusion of special language in the project construction documents, including any documents executed between the contractor and the owner; between the general contractor and suppliers or subcontractors; and others.  The language requires the use of the PDR Program as the exclusive method of dispute resolution, establishes the various steps involved in the program and helps keep everyone out of court.

 The PDR Small Project Program fee is 1% of the total contract price of each project.  If the project is successfully completed with no disputes, the fee is refunded—one-half to the owner and one-half to the general contractor—less an administrative fee paid to ADRWorks, the administrator of the program.

PDR Large Project Program

 The PDR Large Project Program is designed for larger construction projects and begins with a 2-3 day Project Issues Management (PIM) program that introduces the PDR Program processes; explains how the project participants will use the PDR Program during the project; introduces the project, addresses potential issues that might be encountered on the project and develops action plans for handling them; and establishes processes, responsibilities and authority for dealing with issues and disputes when they arise.  The goal of the PIM program is to develop a matrix of communication, cooperation, and collaboration made up of management and executives members from the project participants to proactively deal with issues as soon as they arise rather than waiting for them to become disputes.  Additional meetings are scheduled during the course of the project to address the progress of the PDR Program, and .

 The initial PIM program is followed by regularly scheduled PIM meetings (every 30 to 60 days) during the course of the project to review the progress of the project, make necessary changes to facilitate its function and the success of the project, and to raise issues, determine their cause, and develop solutions to deal with them in an immediate and prompt manner in order to minimize their impact on the project and its participants.  This process is conducted by the one- or three-member PDR Board made up of impartial experts whose function is to analyze the progress of the project, attend the regularly scheduled project meetings, work with the participants to address emerging issues and offer recommendations on resolution.

 Should the parties fail to resolve an issue in a timely manner, the PDR Program includes Project Dispute Intervention (PDI) to immediately address more serious project situations in which early attempts at resolution have failed.  Intended for dealing with serious situations threatening the successful conclusion of the project, PDI provides for intervention by the PDR Program team in the form of project “stand-downs” to address the problem, uses various processes for determining the cause and most effective solution to the problem, and development of an agreed plan for dealing with the issue.  The process can involve retained experienced construction professionals with specific expertise in appropriate forensic fields (changed condition, design defects, quantification, scheduling, etc.), and independent legal advisors—third-party construction attorneys—to deal with issues of contract interpretation, entitlement and other legal matters.  The cost of these independent project experts is shared by all of the parties; and they are intended to represent all of the parties to the dispute.  The goal of the PDI process is the development and implementation of a strategy for effectively and immediately resolving the issue to get the project back on track.

 An additional element of the PDR Program is the use of proven ADR processes.  The PDR Program also uses—where appropriate—facilitation, mediation, adjudication, med/arb and final, binding arbitration to resolve disputes that cannot be resolved through other means.

 The final element of the PDR Large Project Program is to analyze the avoided costs—cost savings—realized by the use of the PDR Program instead of use of traditional conflict resolution processes such as litigation.

 Conclusion

 The Project Dispute Resolution (PDR) Program^TM offers contemporaneous, low cost, speedy resolution of issues associated with the construction process through a pro-active, on-site program that quickly and efficiently deals with issues before they become disputes.  For those issues that do become disputes, it uses proven alternative dispute resolution processes to resolve the dispute more quickly and at a lower cost than traditional litigation.◘

 Project ReAlignment™—When Projects Start to Go Bad
A new process makes use of ADR
(Published July 2006)

Project ReAlignment™ is a method of resolving deep-seated construction disputes on large projects, especially those involving multiple parties.  It is used when direct negotiation has failed, and the parties realize that fighting claims through litigation or arbitration is a lose/lose proposition.  It realigns the parties' interests, systems, and resources to Wipe the Slate Clean™ and get the project back on track.  With tens of millions of disputed dollars at stake, Project ReAlignment™ has successfully transformed nearly 40 projects ranging in size from $10 million to over $100 million.  The method is logical and can be applied to any phase of the project.
 
Phase One: Time Out

The project's executives call a one-day “time out” to consider the status of the project.  The project executives (owner, designer, prime contractor and major subcontractors) and their project managers are gathered together to assess the current status of the project, define the extent of the existing problems and explore alternatives to litigation and arbitration.  Various realignment methodologies are discussed with the goal being to achieve an economical, effective agreement within sixty days and for a fraction of the anticipated battle costs.  The Executive Team is called upon to make a “go/no-go” decision as to whether to accept the status quo or explore alternatives.

Phase Two: The Turnaround Plan

If the Executive Team chooses to explore a better course of action, in a separate session the ReAlignment Group's facilitator works with the Project Manager Team to devise a recovery plan, which is proposed to the Executive Team in a follow-up session for a second “go/no-go” decision.

Part of the re-alignment plan involves assessing barriers to recovery: what could keep the group from achieving the goal of realignment.  One typical barrier is the cluster of unresolved disputes between the parties.  The “slate” of delays, cash flow interruptions and general bad feelings which have accumulated during the festering of the disputes must be corrected quickly and efficiently.  The realignment process has a methodology to Wipe the Slate Clean™—a completely unique business process with quantifiable, measurable standards.

Phase Three: Implement the Turnaround Plan

In order to Wipe the Slate Clean™ the parties may retain a Technical Assistance Specialist (TAS), an experienced construction professional with specific expertise in the necessary forensic field (quantification, scheduling, etc.).  The parties may also need an Independent Project Advisor (IPA), a distinguished third-party construction attorney dealing primarily with issues of entitlement and interpretation.  These project experts represent all of the parties to the dispute—and more importantly, the project—equally, fairly and without bias.  The costs for these services are split among the warring parties: typically the owner, the general contractor, and possibly several subcontractors.  Mediation confidentiality laws and specific agreements with the parties allow broad and deep data gathering without fear that party input will be used against them in a subsequent court action or arbitration.  Usually within two weeks the TAS and IPA meet with the Executive Team and PM Team for a Preliminary Assessment—a quick look at the facts of the case and the likely outcome.  The IPA provides independent analysis to allow the team to move away from entrenched positions.  The parties still have their own legal counsel and often have their own expert, but everyone works from the factual report and analysis by the Project's forensics team and Independent Project quick look at the facts of the case and the likely outcome.

Phase Four: Preliminary Analysis

The parties review and comment on the Preliminary Assessment, leading to a fuller gathering of data and analysis by the IPA and forensics team—usually accomplished within another four weeks.  Because the parties are working under the change order process, this “Preliminary Analysis” becomes industrial strength change order backup.  Through it, parties approach settlement with greater confidence in the neutrality of the data and the interpretations (two things that tend to keep parties at bay in any dispute).

Benefits

The method works even on very large projects with strongly adversarial parties deeply entrenched in their positions.  The process generates a number of benefits.

• A separate team (1) avoids ties to past positions and allows a fresh look at the issues, while (2) providing resources to complete the analysis within a short time period (45 to 60 days on average projects, and 90 days on extremely large or complex projects).
• The ReAlignment Group's team building effort with the executives from each of the organizations is key to success.  It reduces the influence of any single obstructive party, so that the Executive Team can move forward together and it brings the decision makers to the table.
• If new problems are encountered during later phases, the executive team has the skill set to maintain the project momentum by preventing the project managers or field supervisors from derailing the process.
• The IPA eliminates unrealistic legal posturing by informing the parties' counsel about the 'facts of life' in construction law.
• The contractor and subcontractors are paid current during the process, eliminating financial pressure on the subcontractors preventing further delay or the poisoning of relationships.
• The process allows the parties to Wipe the Slate Clean™ and resume working together as a team to complete the project without the animosity of unresolved conflict.
• Using the Change Order process instead of the Claims procedure simplifies contract administration and reduces the possibility of unfavorable publicity.
• Coaching is available to assist those parties with dysfunctional attitudes or work habits in correcting their behavior and improving their performance and contribution to the team effort.
• The cost to the parties is a fraction of the cost to carry the claim through to final adjudication.
• Only one set of experts is retained eliminating the disorder caused by the hiring of individual experts for each party.  In addition, the cost is split by multiple parties so that the each party's cost is relatively minor, especially compared to the savings.
• A troubled project is back on track within 45 to 60 days with continuing delays and cost impacts replaced by timely, economical progress.

Project Alignment™ and Project ReAlignment™ rely on a variety of processes aimed at detecting, heading off or settling disputed issues on construction projects. Among those processes are:

• A project neutral or project coach is common to all the processes.  This allows the parties at any stage of the construction project to determine what tools from the ADR toolbox they can use to facilitate a resolution of the problem, discuss project anomalies or plan for the future.
• Each process used revolves around realigning parties into project teams and elevating thinking to Project Level thinking, making parties responsible for project decisions rather than just company or agency decisions.
• All of the processes are voluntary and offer confidentiality to promote candid discussions.
• All the processes develop project information that the parties can trust and provide systems for effectively dealing with the developed information.  The cost of developing this information is shared by the parties, promoting team work and cost savings.
• A great benefit of all these processes for the public owner is that the contract need not be rewritten.  As long as the party stays in the change order spec of the contract, any kind of resolution process can be developed and used without ever invoking any of the specific claims provisions. In this context, lawyers become partners in resolution rather than a warrior setting the battlefield table.
• All of these processes give public officials political cover for decisions that they make. By relying on a project neutral or project coach or an independent project advisor that public officials can rationally defend their decisions to make settlement or resolution options available to make determinations from those options.

Because Project ReAlignment™ encourages the use of every ADR tool that is available rather than pre-selecting just one, it is different than all the other “processes” agencies currently use. Unlike a dispute resolution board, the project coach used in the key processes is proactive and assists the parties in developing issues and responses. Unlike traditional partnering, the project coach continues after the partnering sessions to make sure that there is a process for both raising issues and forming resolution strategies after the initial session.  Using SlateTracker, it develops timely relevant information, judges it against objective standards and provides a system for timely addressing and resolving any kind of controversy or anomaly that appears.  And finally, Project ReAlignment™ specifically uses a project coach to assist the parties in designing the specific resolution process that's going to be necessary (what expert information do we need? what systems of resolution are available? etc.).
      
            What chiefly distinguishes Project ReAlignment™ from other processes available in the marketplace is that it is not hidebound by one kind of process—it uses everything that's been developed in the dispute resolution field and all the expertise available in the construction industry to the extent necessary help resolve the claims of the parties and move the construction project forward without undue delay or expense.◘

For more information about Project Re-Alignment, go to www.projectrealign.com.
 

Mediator and Arbitrator Neutrality--Whose Responsibility Is It?
Users of the process need to do their part
(Published June 2006)
 

An article in the June 18 New York Times* raised some interesting questions about the NASD arbitration program.  The program was the subject of an article by Richard Brady in the March ADReport.  The ADReport article, entitled “Stockmarket Losses? Arbitration May Be Mandatory” provided an overview of the NASD securities arbitration program, and discussed how the process is initiated.

Entitled “Is This Game Already Over?” the New York Times article discusses two recent situations involving NASD arbitrations raising questions concerning the neutrality of some NASD arbitrators.

The first situation involves a Long Island charity that lost $614,036 in the stock market during the Internet bubble, and subsequently filed for arbitration against its former broker contending he churned the account and invested in improper securities.  The problem in this matter concerns the selection of the three-member arbitration panel to hear the case.  According to the article the panel is suppose to be made up of one securities industry representative and two “public investor” representatives.  The charity has taken the position that the so-called “public investor” representatives are not that at all, but rather, all five of the potential panelists assigned to the case by NASD have conflicts of interest and are closely associated with the brokerage industry.  The case was filed 15 months ago and is not yet ready for hearing as the attorney representing the charity struggles to get a neutral panel to hear the case.

The second situation involves an arbitration involving an investor from Colorado who filed for arbitration against Citigroup in 2003.  The case involved a wealthy businessman who sold his interest in a company to WorldCom and then proceeded to lose $900 million when WorldCom collapsed.  An NASD arbitration panel ruled against the businessman, and he appealed to a federal court to overturn the decision because one of the arbitrators who heard the case failed to disclose earlier incidents involving charges of securities fraud by a firm that employed the arbitrator.

The article, and the two cases it discusses, raises questions about the screening processes employed by NASD in determining whether an arbitrator is a “public investor” representative, or is even qualified to serve in any capacity on a NASD panel because of past misconduct.

I asked Richard to read and comment on the article:

“The securities arbitration process works well for investors despite the implications to the contrary in the recent New York Times article.  The fact is, most investors who file arbitration claims recover, at a minimum, at least some of their investment losses, whether by settlement, mediation or award.  Many investors receive all of their money back, plus interest and attorney fees.  These results are far better than would be obtained if these cases had to be tried in court, and are quicker, too.

“Sure, the percentage of cases in which the investor won an award has declined from 2001 to 2005.  But remember, Wall Street has cleaned up its act a lot since 2000.  I attribute the decline to this, rather than increased occurrences of arbitrator bias as the New York Times suggests.

“The main problem I have with the article is that it suggests that arbitration is bad for investors simply because the NASD and NYSE cannot guarantee the neutrality of the thousands of public arbitrators on their panels.  No one can guarantee the neutrality of another person, whether judge, juror or arbitrator.

“The NASD and NYSE screening processes for arbitrators are good, but no process is perfect and constructive criticism is always appreciated.  That’s why, despite my disagreement with much of its message, I applaud the Times for pointing out instances in which mistakes may have occurred.

“[T]he hard truth is that no matter how good the screening process, parties and their attorneys will still have to dig to uncover any bias or potential bias.”

One of the bedrocks of all ADR has always been the concepts of neutrality and impartiality.  All of the classes and seminars that I have taught have always discussed the importance of neutrality and impartiality of whoever is mediating or arbitrating.  Nevertheless, some situations slip through the cracks.

The article seems to raise questions concerning whether an ADR program covering the securities industry should be administered by the securities industry.  It also points to the level of work that needs to be done by any provider of ADR services when it comes to assuring that the mediators and arbitrators are really neutral and impartial, and without conflicts of interest. This issue is all the more important when it involves a mandatory system like the NASD system that preempts the right to go to court.

ADR providers need to work hard to try and assure the neutrality and impartiality of the member of their panels.  However, the job doesn’t stop there.  Users of ADR also need to do more than simply accept a mediator or arbitrator.  They must do their own due diligence to assure that the mediator or arbitrator meets their needs in order to assure their satisfaction with the process, and, more importantly, the outcome.

Users should be satisfied with the mediator or arbitrator going into the ADR process.  The user and/or his or her attorney should carefully investigate the designated mediator or arbitrator to assure that he or she is not only impartial, but experienced and technically qualified both in the process to be used and in the subject matter of the dispute.

Due diligence should include the assurance that the mediator or arbitrator has the following qualifications:

• Total neutrality, impartiality, objectivity and freedom from bias

• Free of conflicts of interest

• Experience, training and and understanding of  the ADR process to be used

• Experience in the resolution of the type of dispute that is the subject of the ADR process

If the user and/or his or her attorney are not satisfied, then the designee should be rejected.  Only if everyone is satisfied with the mediator or arbitrator can the ADR process work.

* The complete New York Times article can be found at www.nytimes.com/ ◘
 

Managing Litigation Risk for Community Banks
How Community Banks Can Guard Against Being
Sued Just Like the Big Guys
(Published May 2006)

One of the challenges for any community bank is managing litigation risk.  Whether from employees, account holders, loan recipients or others with which you do business, there are always potential risks of being sued.  Studies indicate that dealing with disputes in the traditional manner is costly, time consuming, and presents significant business risks.  Unfortunately, your bank’s business decisions are often made based upon litigation risk instead of on good business practices.

Recent statistics from the Equal Employment Opportunity Commission indicate a continuing challenge by employers to deal with harassment issues.  In 2004 the EEOC and state and local Fair Employment Practices Agencies around the country received 13,136 complaints alleging harassment.  Although the number of complaints has trended downward since 1997 when 15,889 complaints were received, the numbers still indicates significant risk to employers.  The statistics also indicates that the percentage of complaints filed by males has steadily increased from 9.1% in 1992 to 15.1% in 2004. Monetary benefits resulting from complaints—excluding money recovered through litigation—totaled $37.1 million in 2004, down from $50.0 million in 2003.

In court, employee plaintiffs win 51% of all employment lawsuits.  Employers lose an average jury award of $875,620.00, in employment suits.  Employers’ average defense costs are over $125,000.00, per case.  Employers’ average "EEOC response" cost is $10,000 to $20,000 per case.

Indirect costs are also of grave concern.  Employers and employees are preparing for court instead of focusing on their jobs. Litigation issues cause loss of productivity, wasted management time and energy.  The costs of replacing an employee are usually between 75% and 150% of the employee's annual salary.  42% of managers’ time is spent on reaching agreement with others when conflicts arise.
There is a way to minimizing your bank’s litigation risk.  As indicated in the Fall issue of the WICBA Newsletter, the Washington Supreme Court has authorized the use of mandatory alternative dispute resolution (ADR) to resolve employment disputes instead of going to court.

ADR can also be used in resolving disputes arising from your bank’s customer accounts and loans.  Like the major credit card companies and large banks, the use of carefully crafted provisions in your documents will help avoid litigation when problems arise by requiring the ADR instead of litigation.

Why the move to ADR?  ADR is cheaper, quicker, fairer and private.  Following implementation, when a dispute arises that the traditional internal process in your bank cannot settle, you then notify the system administrator, which begins the mediation process.  The administrator will appoint a mediator and set up the date, time and location for the mediation and notify all of the parties.  Mediation typically takes less than one day and cost less than the cost of a deposition in a lawsuit.  Experience shows that as many as 92.3% of all controversies will settle in mediation.

In the few disputes that are not settled in mediation, the system requires that they be resolved through final and binding arbitration.  The case will be heard by experienced, expert professionals, selected through a process that includes the parties and ensures complete fairness and due process to everyone.  Arbitration is a more complex process, yet is much less expensive and dramatically faster than a judge or jury trial.  Arbitration will usually take one to three days, and costs substantially less than a trial.  The system should have custom designed rules to limit unnecessary and intrusive discovery and to complete the arbitration within a reasonable time.  A well designed system will provide for mediation within 45 days, and arbitration designed to conclude disputes within 180 days.

In the case of construction loans, Dispute Review Boards (DRBs), a specialized form of early neutral evaluation and another highly successful ADR process can be required.  DRBs started in the Pacific Northwest and are now used on construction projects around the world.  Numerous public owners in the Pacific Northwest including the Washington Department of Transportation, the University of Washington and the Port of Seattle incorporate DRBs into their projects.  With a success rate of more than 90%, a modified form of the process can be used to quickly and economically resolve disputes before they spiral into expensive litigation.

Typically, these systems have an initial implementation cost, with an annual maintenance fee.  If a dispute arises that calls for early neutral evaluation, mediation or requires arbitration, additional charges are made for the expenses of the ADR process used, plus a small administrative fee.

The challenge for small- and medium-sized banks is finding an economical means of taking advantage of ADR in resolving disputes. While large banks can afford the costs of designing custom systems, costs for small- and medium-sized banks can be prohibitive.  A convenient, easily implemented, low cost system can let your bank take advantage of ADR just like the big banks.◘
 

"Sorry Works" Comes to Washington
 Washington Legislature Incorporates Apologies in
Medical Malpractice Reform
(Published April 2006)

In the November ADReport an article entitled “’Say You’re Sorry”—Mother was Right”, discussed a growing movement among health care providers urging full disclosure and apologies when medical errors happen.  The article discussed the Sorry Works! Coalition, a nationwide organization of doctors, lawyers, insurers, patient advocates and others dedicated to promoting these steps as a “middle ground solution” to the medical liability crisis. 

Following the defeat of I-330, last November, the Washington legislature in its recently completed session passed HB 2292.  HB 2292 is the result of a series of extraordinary meetings beginning on January 17, involving Governor Gregoire, the insurance commissioner, the Washington State Medical Association, the Washington State Trial Lawyers Association, Physicians Insurance (the major medical malpractice insurer in Washington), the Washington Hospital Association and the Washington State Bar Association.  The group met five times, and, on February 17, announced an agreement on a new law to address the medical malpractice crisis in Washington.  HB2292 was passed by the legislature and signed into law by Governor Gregoire on March 6.

HB 2292 addresses a number of matters related to medical malpractice including patient safety, insurance industry reform and health care liability reform.

Part I–Patient Safety and the first section of Part I—“Encouraging Patient Safety Through Communications With Patients” specifically prohibits admissibility of evidence of offering to pay expenses caused by an injury or expressions of apology made by a health care provider , provided the offer is made more than twenty days before commencement of trial.

Part III—Health Care Liability Reform addresses a number of elements including limitations on actions against health care providers, expert witnesses, requiring a certificate of merit filed at the time of commencing an action, encouraging offers of settlement and voluntary arbitration.

The arbitration provisions allow the parties to elect to submit a dispute to arbitration following commencement of an action.  The Act specifically prohibits agreements requiring the use of arbitration prior to the commencement of an action.  It therefore appears that a provider may not require the execution of an agreement to arbitrate as a condition for treating a patient.

The arbitration provisions contain specific time restrictions controlling the various steps in the arbitration, and limitations on discovery, including the number of interrogatories and the duration of various depositions, in order to meet the stated policy of the legislature that the arbitration hearing be commenced no later than ten months after the parties elect to arbitrate.  The parties do not have a right to a trial de novo as provide in the Washington Mandatory Arbitration Rules.  The fees and expenses of the arbitrator will be paid by the losing party.

There are many other provisions not discussed here contained in the act, all directed at addressing the medical malpractice crisis. 

The passage of HB 2292 should not be viewed as a complete solution to the problem.  Many programs have been successfully implemented around the country without legislation.  The Sorry Works! Program is not just an effort to exclude apologies and offers of settlement from evidence in trials.  Health care providers need to do more. 

The program requires implementation of a five-step program:

1.  The usual risk management team, medical staff and insurer need to be involved as they normally would in the event of a bad outcome.

2.  Following an adverse event or bad outcome, a root cause analysis needs to be conducted to see if the standard of care was met or not.  The analysis may involve outside consultants or experts.

3.  If the standard of care was not met, the patient/family should be contacted and encouraged to retain legal counsel

4.  A meeting is then scheduled with the patient/family and legal counsel at which time the health care provider should disclose, apologize, admit fault, explain what went wrong and how it will be fixed, and offer fair, upfront compensation as determined by an actuary or other expert.  Negotiation takes place and the matter is settled.

5.  If there was no error, a meeting is scheduled with the patient/family and legal counsel; records are opened for inspection, all questions are answered and the health care provider shows why there is no fault. Avoid any appearance of a cover-up. Don't offer compensation.

 While the passage of HB 2292 is a move toward minimizing frivolous law suits, the greater use of arbitration in the resolution of medical malpractice claims and encouragement of communication between health care providers and patients, providers need to establish protocols for dealing with these situations.  ADRWorks can assist in implementation of a program.

The Sorry Works!Web site—www.sorryworks.net—presents a wealth of information about what is going on around the country.◘
 

Stockmarket Losses?  Arbitration May Be Mandatory
An Overview of the Securities Arbitration Process
by
Richard Brady
(Published March 2006)

 Most broker-dealers require their customers to sign an arbitration agreement as a condition of opening an account.  This precludes the option of filing a lawsuit and provides investors with the only means of seeking recovery for stock market losses.  Claims against financial planners, investment advisors, and money managers may or may not be subject to mandatory arbitration agreements.

 Arbitration has some advantages over filing a lawsuit.  Arbitration is less formal, less expensive, and generally faster.  Depending on the amount of money at issue, one or three arbitrators will hear and decide the outcome.  The parties have some input regarding the choice of arbitrators.  The arbitrators must undergo specialized training and pass an exam that tests for knowledge of issues that form the basis of frequently heard claims, such as churning, unsuitability of the broker’s recommendations, unauthorized trading, breach of fiduciary duty, the firm’s failure to supervise the broker, and outright fraud.  The arbitration results are final, with limited appeal rights.

 The four phases of the securities arbitration process are initiating the arbitration, the pre-hearing process, the hearing process, and the decision and award.  Here I discuss the process as employed by the National Association of Securities Dealers (NASD) as it is the most common.  Other arbitration forums utilize a similar process.  Because the securities arbitration process is standardized, i.e., the same nationwide, and because securities disputes involve a narrow, dense area of law, many attorneys representing parties in these disputes find themselves called upon to represent clients who live in other cities and states. 

Initiating Arbitration 

To begin a NASD arbitration, the investor (referred to as the “claimant” in these disputes) or the claimant’s attorney prepares and submits a Uniform Submission Agreement and a Statement of Claim, and sends a check for fees. The Uniform Submission Agreement identifies the individual stockbroker and/or the broker dealer (“respondents”) and the general nature of the dispute.  The Statement of Claim must describe the dispute with some specificity, the amounts of money involved, and the remedies sought. There is no standard format.  In some cases we opt to provide the bare minimum information, but in other cases the better course of action is to prepare a detailed Statement of Claim that, in addition to the basic information, includes (i) background information about the claimant, (ii) the claimant’s financial condition, risk tolerance and investment experience, and (iii) a review of the claimant’s dealings with the respondents.  The amount of the check is for the total of the Claim Filing Fee and the Hearing Session Deposit.  These amounts are set by the NASD.  For example, the filing fee is $1,000 for claims between $50,000 and $500,000 and is $1,250 for claims between $500,000 and $1,000,000.  The Hearing Session Deposit ranges from $600 10 $1,200 for a three person arbitration panel.  Often these fees are recovered by the prevailing claimant, but if the claimant loses he or she may be ordered to pay the respondents’ fees.

Pre-Hearing Process

The respondents must file a Response to Statement of Claim within forty days. The Response usually includes a denial of liability and affirmative defenses. A list of potential arbitrators is provided to the parties by the NASD and the arbitrators are identified and empanelled. The parties exchange written discovery requests for information and documents.  The claimant usually retains an expert with the assistance of his or her attorney, who substantiates and quantifies the claim.  NASD staff members schedule a telephonic pre-hearing conference, which is attended by the arbitrators, the attorneys and sometimes the parties. At the pre-hearing conference various matters are discussed, including the resolution of discovery disputes, interim scheduling matters, and a hearing date is set.  The length of time between the filing of the Statement of Claim and the hearing date may vary, but is usually about 9 or 10 months.

Hearing Process

The hearing usually lasts one to three days.  The parties, attorneys, witnesses and arbitrators meeting at a predetermined time, date and location, which is usually a major city near the claimant’s residence.  The arbitration is called to order and the Statement of Claim, the Response to Statement of Claim, and accompanying exhibits are admitted into evidence.  The results of all pre-hearing motions are stated for the record, and additional motions are presented for the panel’s ruling.  The claimant’s attorney then delivers an opening statement, which is followed by the respondents’ opening statement. The claimant’s case is then presented by calling witnesses and introducing evidence not previously admitted.  Each witness may be cross-examined by the respondents’ attorney.  At the conclusion of the claimant’s case, the respondents’ case is presented in similar fashion.  Each party may retain expert witnesses and call them to testify, subject to cross-examination by the opposing party. The arbitrators may also ask questions of the parties, and often do. After the claimant’s and respondents’ cases are presented, their attorneys each make a closing argument. The arbitrators then excuse the parties and begin their deliberations.   

The Decision and Award

The arbitrators’ decision is due within 30 days. Unlike a court case in which the judge prepares Findings of Fact and Conclusions of Law, the arbitrators may simply rule for a party without explaining the basis for the ruling.  If the claimant has proven that he or she was harmed as a result of the acts or omissions of the stockbroker and/or the brokerage firm and is entitled to damages, the arbitrators determine the amount of the award. The arbitrators may use various theories on which to base the award, including rescission, “out-of-pocket” damages, or awarding damages on the basis of the “benefit-of-the-bargain”.  The arbitrators may reduce the award based on the claimant’s comparative negligence or other affirmative defenses raised by the respondents.  Depending on various factors, the successful claimant may be entitled to punitive damages and attorney fees. The liable respondents have 30 days in which to pay the award. 

This has been a brief overview of the  NASD’s securities arbitration process.  More information is available at www.nasddr.com.

•••••

 Richard Brady practices law in Tacoma, Washington.  He is a practicing attorney in the area of securities disputes, and has served as an arbitrator for NASD arbitrations.  Prior to becoming an attorney, he worked as a stockbroker for 9 years and a state securities regulator for 3 years.  For more information about securities disputes, see Richard’s website at www.rdbllc.com.◘
 

Making ADR Appealing to Employees
 Some ideas for making an ADR system easier to swallow
 for your employees
(Published January 2006)

As more employers move toward the use of mediation and arbitration to resolve disputes with their employees, they are faced with the challenge of trying to make the change to ADR more palatable to their employees.  After all, a mandatory ADR system usually means that employees will not have the ability to go to court if they become unhappy.

Even though courts have uniformly upheld mandatory ADR, critics have pointed out that these systems strip employees of their access to the courts and their right to a trial by a jury.  They also claim that employers are coercing employees to make a decision between keeping their job or keeping their right to sue.

Keeping employment disputes out of court makes sense.  In spite of what the critics say, these systems save time and money for both employers and employees.  A well designed system uses neutral parties to help the parties reach a resolution through mediation, or, if necessary, in deciding the case through arbitration.

As more employers decide to use ADR, many are attempting to ease the transition through variations on simply imposing the process on a “take it or leave it” basis.  Eastman Kodak established a program a number of years ago for all of its U.S. employees.   It established a special group to administer the dispute resolution process with the power to consult with the parties to the dispute, and to set up mediations or other ADR processes short of arbitration to decide the outcome.  The employee has the right to opt out of the process at any time and to go to binding arbitration or file suit in court.

Aetna established a system that is optional for existing employees but mandatory for new ones.  As an added incentive for existing employees, it established a policy that those existing employees who accepted stock-options must agree to use binding arbitration to resolve employment-related legal disputes.  According to a Wall Street Journal article only a “small percentage” of employees rejected the stock-option arrangement.  New employees must agree to mandatory arbitration whether they accept the stock-option arrangement or not.

Another approach is one adopted by TRW, an automobile parts supplier.  Employees are required to use ADR, including arbitration, for all employment disputes.  However, if the dispute reaches the point that arbitration is used, the decision of the arbitrator—selected by both parties to the dispute—is binding on TRW but not on the employee, who still may go to court.

In 1998, Halliburton launched a program covering all of its employees.  Based on a program created by its subsidiary Brown & Root in 1993, and used as a model for many companies around the country, the program includes independent, confidential assistance to employees by a trained ombudsman who can be contacted by calling a toll-free phone number; a “no retaliation” policy for employees using the system; ongoing conflict management training for supervisors; a variety of speedy, low-cost, impartial processes to quickly deal with disputes; and independent, professional mediators and arbitrators, if needed.

The most significant part of the Halliburton program is a “Legal Consultation Plan” that pays 90% of an employee’s legal fees, up to $2500 per year, after payment of a $25 deductible by the employee if the dispute involves a legally protected right.

Although there is little hard evidence to show that voluntary processes are as effective as mandatory ones, everyone agrees that it is better to get a dispute resolved in months using ADR rather than in years using litigation.  What is clear is that using ADR is less costly and takes less time and resources than litigation.

Voluntary processes may achieve the same result with less “heartburn” from your employees.  Kodak reports that following implementation of its system, 120 employees took advantage of the process with only “a couple” going to arbitration, and none went to court.

While most of the millions of employees in this country covered by ADR processes are mandatory, companies are continuing to develop ways of easing the transition from court to ADR.  ADRWorks has helped a number of companies move from litigation to ADR and can help you develop a system for your company.◘
 

What Are Dispute Review Boards?
A specialized form of early neutral evaluation used in the construction industry is being tried in other businesses
(Published January 2006)

The construction industry has been a leader in the use of ADR processes.  In simplest terms, the industry has moved from one form of dispute resolution to the next as each became "overlawyered", more time consuming and expensive.  The construction industry is increasingly using a new form of contemporaneous, on-site dispute avoidance in a specialized form of early neutral evaluation called the Dispute Review Board or DRB.  The development and use of the DRB process is proving to be one of the most successful means of resolving disputes ever used by the construction industry.  With the success of DRBs others outside the construction industry are now starting to use similar processes, under different names.

A DRB is usually made up of three experienced, respected and impartial reviewers selected and approved by the owner and the general contractor on a project.  The DRB is organized before construction begins and meets at the job site for regularly scheduled meetings.  DRB members are provided with the contract plans and specifications, become familiar with the project procedures and the participants, and are kept abreast of the job progress and developments.  The DRB meets with the owner and contractor representatives during regular site visits and meetings, and promotes and provides assistance in the resolution of disputes at the job level.

When disputes arise that cannot be resolved by the parties, the DRB holds an informal process where the parties explain their positions and answer questions.  The DRB then issues a non-binding recommendation.  The recommendation of the DRB is admissible in any subsequent arbitration or litigation of the issue.

DRBs are a relatively recent innovation in Alternative Dispute Resolution.  The first “official” DRB was used between 1968 and 1974 on the second bore of the Eisenhower Tunnel project by the Colorado Department of Highways.  As a result of the success with that project DRBs were used on the electrical and finish work on the tunnel, two later tunnel contracts and two large bridge projects.  The process was also used beginning in 1980 with the El Cajon Hydroelectric Project in Honduras, and on the Mt. Baker Ridge Highway Tunnel in Seattle, the approaches to the tunnel and the Chambers Creek Tunnel project in Tacoma, Washington.  The DRB process is now being used around the world on all types of construction projects, with many project owners and financial backers mandating their use. 

When used correctly, DRBs can have a success rate approaching 95%.  In 2002, the Florida Department of Transportation Office of Inspector General evaluated the performance of DRBs and assessed their effectiveness.  It found that projects with DRBs experienced percentage of time overruns of 1.84% versus 19.10% on projects without DRBs, and percentage of cost overruns of 12.12% versus 17.89%.

The mere presence of a DRB on a project has been shown to minimize disputes.  A great deal of the DRB’s work is encouraging the parties the get the dispute “out on the table” and supporting the parties in their negotiation of a solution.  When necessary, the DRB can move quickly to recommend solutions, before the parties' positions become entrenched and schedules and costs are impacted.  With costs of 0.1 to 0.3 per cent of project costs, DRBs offer a cheap, effective, contemporaneous means of resolving disputes for the construction industry.

The DRB process has been successfully used by thousands of projects around the world.  Many owners in the Pacific Northwest including the Washington Department of Transportation, the Port of Seattle, and the University of Washington now require a DRB on most projects.  The Florida, California, Idaho and Utah Departments of Transportation are among those who have mandated DRBs on most of their projects.    

The last few years have seen significant innovation in the use of DRBs.  Single-member, regional and standing DRBs are now being used along with the traditional three-member board selected for use on a single project.  Less formal, speedier processes resulting in quicker access to the DRB, and oral, rather than more formal written recommendations, have been introduced and are being used with great success.  Efforts are being made to expand the use of the DRB process to others involved in the construction project including subcontractors, suppliers, utilities and others less directly involved in the construction process.  In addition to the increasing usage of DRBs in complex underground projects, their use has broadened to all types of construction, and from large, complex projects to small, relatively simple ones.

 The use of DRBs is endorsed by the Construction Industry Dispute Avoidance and Resolution Task Force, the CPR Institute for Dispute Resolution, the Construction Industry Institute, the Construction Industry Presidents Forum, the Associated General Contractors of America, the American Underground Association, the American Arbitration Association, the World Bank, the Asian Development Bank, the International Federation of Consulting Engineers (FIDIC), the Institution of Civil Engineers of the United Kingdom, International Committee on Large Dams, International Tunnelling Association, and the European Bank for Reconstruction and Development. The World Bank requires the use of a DRB process on all projects of over $US 50 million.

The use of DRB-like processes are now starting to be used in other industries.  In November, the Institute for Conflict Management announced that “Issues Resolution Boards” are now offered for resolution of hospitality and lodging issues in the hospitality industry. 

 Early avoidance is the key to successful conflict resolution.  The sooner a conflict can be identified and acted on, the higher the percentage of resolution success and the lower the cost.  The real secret is early recognition and action on potential or actual conflicts at their inception before the parties become polarized in their positions, not after the project is completed.  If a dispute cannot be avoided, then a contemporaneous, on- site process of working together in negotiation or through the use of the DRB offers another proven tool to assist the parties to resolve their dispute.

 For more information about Dispute Review Boards, and DRB consulting and training programs contact ADRWorks.◘
 

Reference Liability Reduced
 A new law in Washington reduces employer liability
for employee references
(Published December 2005)

 Clients are always telling me about their frustration in trying to get information from former employers about prospective employees.  How do you assess a prospect when the reference checks are only “Eligible for rehire.”, “Not eligible for rehire.”, or simply dates of employment?

On the other hand, how have you handled calls requesting information about a former or soon-to-be-gone employee?  Most employers have been reluctant to say anything about the employee for fear of being sued.  As a result, some employers will only confirm the employees name and dates of employment.  Others may provide more positive information in an effort to get rid of a poor performer, fearing that to provide any type of negative information may result in being sued.

The result can be you ending up with poor performers and even more tragic situations involving violence, criminal activity or worse.

Washington employers now have protection from being sued by former employees for reference information as a result of House Bill 1625 passed by the 2005 Washington legislature and signed into law by Governor Gregoire.

HB1625 established specific protection for Washington employers.  An employer can now disclose information about a former or current employee to a prospective employer or employment agency, if requested to do so by that employer or agency, and is presumed to be acting in good faith and is “. . .immune from civil and criminal liability for such disclosure or its consequences. . .”.

Under the new law the information disclosed must relate to:

• The employee's ability to perform his or her job

• The diligence, skill or reliability with which the employee carried out the duties of his or her job

• Any illegal or wrongful act committed by the employee related to the duties of his or her job

The employer should keep written records, in the employee’s personnel file, of the person or entity provided with information for a period of two years from the date of disclosure.  The employee or former employee has the right to request inspection the record.

If you follow the law, it is presumed that you were acting in good faith in disclosing information.  You will only be liable if it is shown that the information disclosed was “. . .knowingly false, deliberately misleading or made with reckless disregard for the truth.”

The law became effective July 2005, and provides you with protection from liability so long as you limit yourself to the information set out above and you maintain proper records.  If you are doing reference checks, and you encounter an employer who still wants to limit the information he or she is providing, you might want to point out the new law.

HB1625 should make it easier for you to make good hiring decisions and help you to get the information you really need to find the employee that really meets your needs.

ADRWorks can help you to set up your reference system.◘

"Say You’re Sorry"—Mother Was Right
(Published November 2005)

 I was struck by the news stories concerning Virginia Mason Medical Center in Seattle and its admission that Mary McClinton, a 69-year-old patient operated on for a brain aneurysm, died as a result of being mistakenly injected with the wrong solution following surgery.  It was refreshing to hear the hospital admit that it was at fault in causing her death—and to make the admission publicly and shortly following her death. 

 In researching this situation I came across an organization promoting a movement among health care providers urging full disclosure and apologies when medical errors happen.  The Sorry Works! Coalition is a new, nationwide organization of doctors, lawyers, insurers, patient advocates and others dedicated to promoting these steps as a “middle ground solution” to the medical liability crisis.  This comes at a time when the I-330 debate is about to go to the voters in Washington state.  The Web site—www.sorryworks.net—presents a wealth of information about what is going on around the country and speaks to everyone involved  in the medical malpractice debate who are looking for real solutions.  It provides the tools, information and legislative language necessary to implement successful full-disclosure programs.  The educational, organizational, and legislative efforts of the group are explained in detail.

 While admitting you are wrong goes against most advice you might hear from your lawyer or HR department, it appears to have a positive effect on the ultimate resolution of the problem as well as associated costs.  Pilot programs show that being upfront about mistakes and quickly offering sincere apologies along with reasonable settlement offers have had significant impacts by reducing claims and litigation defense costs.  The program has been successfully implemented by numerous health care providers including the University of Michigan Hospital System, Children’s Hospitals and Clinics of Minnesota, Catholic Healthcare West, Harvard's largest teaching hospitals -- Massachusetts General Hospital, Brigham and Women's Hospital, Beth Israel Deaconess Medical Center, Dana-Farber Cancer Institute, and Children's Hospital Boston, and on a nation-wide basis by Kaiser Permanente and the Navy.

Since the implementation of the new policy in 2001, the University of Michigan Health System has seen the number of malpractice claims drop from roughly 265 per year to 114, levels that the hospital hasn't seen since the 1980s.  Institutions have seen significant drops in costs with the University of Michigan System defense litigation costs reduced from an average of $65,000 per case to $35,000 per case, resulting in a total average annual savings of $2 million.

 Legislation has also been proposed or adopted in a number of states and on Sept. 28, Democratic Sen. Hillary Rodham Clinton, of New York, and Democratic Sen. Barack Obama, of Illinois, introduced the National Medical Error Disclosure and Compensation (MEDiC) Act, designed to move the medical community to universally adopt a policy of disclosure of medical errors, apologies for these errors and early compensation for patient injury.  The MEDiC program would provide grant money and technical assistance to help doctors, hospitals and health systems implement these policies.

 This comes at a time, particularly in Washington, when the debate about I-330 and its proposals to cap damages and limit medical malpractice claims is reaching its peak.  Sorry Works! points out that you don’t need legislation in order to implement this policy.  Mediation offers a safe, secure, confidential setting for saying “I’m sorry.”  It is also important to know that the process is not limited to health care providers and can be used by any business.

 ADRWorks is a member of the Sorry Works! Coalition and would be happy to assist you in development and implementation of an apology program in your business.◘

Mandatory ADR is Official in Washington
Originally published September, 2005

The Washington Supreme Court in two recent decisions has affirmed the right of Washington employers to require their employees to use arbitration to resolve employment disputes rather than going to court.

On December 23, the Supreme Court issued its opinions in Zuver v. Airtouch Comminications and Adler v. Fred Lind Manor.  Both cases were argued before the Court a year ago last June.

The Airtouch case involved an employee, Zuver, hired by Airtouch in 1997.  As part of the offer of employment, Airtouch required that Zuver sign an agreement to arbitrate any disputes that arose concerning her employment.  Zuver was terminated in 2000.  In 2002, Zuver filed an action in superior court claiming Airtouch had violated the Washington Law Against Discrimination (WLAD) by failing to accommodate a disability.  In 2003 Airtouch asked the court to compel arbitration in view of the agreement and the lower court agreed.

Zuver appealed claiming that as a result of the “take it or leave it” position she was placed in when hired, that the agreement to arbitrate was unconscionable and therefore should not be enforced.  The court did not agree, saying that if that were the case, every employment agreement could be held unconscionable.

While upholding the right of an employer to require an arbitration agreement, the court did express concern about some provisions in the Zuver agreement.  Employers should keep these concerns in mind when drafting arbitration agreements and not attempt to include provisions in the agreement that go to the detriment of the employee. 

One concern raised a claim of unconscionability because of a provision of the agreement requiring the parties to split the cost of fees associated with the arbitration.  The Court ruled the issue moot because: “Airtouch has offered to ‘defray the cost of arbitration’ by paying arbitration fees.”  As a result, it is a good idea to include a provision in your agreement that raises the specter of you bearing the entire cost of related fees if the employee can’t afford them.

The Court did have problems with two provisions however.  It held that an employer could not require confidentiality of the arbitration proceedings because to do so:

 “…hampers an employee's ability to prove a pattern of discrimination or to take advantage of findings in past arbitrations.  Moreover, keeping past findings secret undermines an employee's confidence in the fairness and honesty of the arbitration process and thus, potentially discourages that employee from pursuing a valid discrimination claim.”

It also held that a provision of the agreement that limited the employee’s right to seek certain damages while not limiting the employer’s same right was also illegal.

The Court held that a provision allowing the winner to collect costs and attorney fees from the loser was OK.

The Alder case was argued with Zuver and addressed similar questions.  Adler immigrated to the U.S. in 1990 and was hired as a maintenance person by Fred Lind Manor in 1992, a business that provides housing and services to senior citizens.  Two months later, Fred Lind Manor promoted him to maintenance and housekeeper supervisor.

In 1995, Paradigm Senior Living assumed management of Fred Lind Manor and required all current employees to sign an arbitration agreement as a condition of their continued employment.  Adler was later terminated by Fred Lind Manor and he sued.

The Court rejected Adler's claims that the Washington Law Against Discrimination (WLAD) entitled him to a judicial forum, and, that Fred Lind Manor had waived its right to arbitrate the dispute, and that it should be stopped from claiming arbitration. 

The Court did conclude, however, that a provision of the agreement disallowing the awarding of attorney fees and a provision requiring the employee to make a claim within 180 days were illegal.

The Court sent the case back to the trial court for determination of Alder's claims of procedural unconscionability, including whether he implicitly waived his right to a jury trial and the substantive conscionability of a fee-splitting provision.

These two cases confirm the right of Washington employers to require employees to use ADR—specifically, arbitration—to resolve employment disputes instead of going to court.  They also confirm that arbitration can be required for both new and existing employees.  Relatively simple, fair agreements—the Adler agreement was one page long—if presented properly to employees and if not designed to give the employer an unfair advantage will be upheld by the courts of Washington.

ADRWorks maintains mediation and arbitration forms for employers, language for employee handbooks, forms and rules in order for you to require your employees to use ADR instead of litigation to resolve employment disputes.  To put it into practice in your organization or business is easier and cheaper than you think.◘
 

Fighting the "Civil Wars"
Originally published May 2004

The December 15, 2003 issue of Newsweek magazine featured a cover story on the increasing threat of litigation and its impact on business in this country.

Entitled “Civil Wars” the feature talks about the growth of litigation in our society and its impact on everyone from physicians and ministers to school superintendents and municipalities—how fear of litigation is having a dramatic, negative effect on not only doctors, but other professionals as well.

The statistics are staggering.  It is estimated that “doctors waste $50 billion to $100 billion on ’defensive medicine’ to prove that they left no stone unturned, no test untried, no medication unprescribed, no specialist unconsulted.”  The article estimates that the money spent on defensive medicine could buy health insurance for the 40 million people in this country without it.

Education is facing the same challenge. The class room as well as the playgrounds and playing fields have become battlegrounds as parents sue not only for physical injuries but for hurt feelings when their child is disciplined, doesn’t make the team or the cheerleading squad.

Big cities and small towns are facing the same problem.  The article reports that New York pays out $550 million a year in court awards and settlements.

The article shows that the average costs of personal-injury cases has climbed dramatically since 1995, from about $500,000 to over $1,200,000 in 2002.  Now you know why your liability insurance premiums have risen so sharply.

Unfortunately, the article does not provide any easy answers to the problem.  It points out that so-called tort reform is not really working where it has been tried.  “[M]any of these laws have been circumvented by the courts, and most have had little impact.”

The article suggests that the solution is a deeper, more fundamental change that would remove certain types of cases from the court system altogether.  If you thought getting tort-reform passed in the Washington legislature was difficult, try removing education and health care disputes from the courts.  There are no easy solutions to the problem.

“[T]he time may come when ordinary Americans recognize that for every sweepstakes winner in the legal lottery, there are millions of others who have to live with the consequences—higher taxes and insurance rates, educational and medical systems seriously warped by lawsuits, fear and uncertainty about getting sued themselves.”

Taking advantage of your right to require the use of ADR in your business is one step toward a solution.◘
 

Job Analysis--An Employer's Essential Tool
From Hiring to Termination
Originally published May, 2004

On the surface, it seems so easy--either it is time to “come aboard” or “cast off.”  Yet, calls concerning the hiring and termination (voluntary and involuntary) of employees comprise the majority of client calls received by HR On-call^sm.

Savvy employers know that Federal and State laws and regulations impose responsibilities on the employer.  The laws and regulations include, but are not limited to:

•  Title VII of the Civil Rights Act of 1964 as amended

•  ADEA—Age Discrimination in Employment Act

•  ADA—Americans with Disabilities Act

•  WLAD—Washington Law Against Discrimination (RCW §46.60 et seq.)

•  WMWA—Washington Minimum Wage Act

•  WAC—Washington Administrative Code

It is no wonder questions arise.  To navigate successfully though the alphabet soup keep the following in mind:  the laws are designed to benefit both the employer and the employee by creating fairness and equality of opportunity in the workplace.  The employee benefits by having artificial barriers to economic opportunity removed.  The employer benefits by having the most productive and qualified workforce possible.

The laws do not require employers to hire or keep individuals who cannot perform the job.   This leads to a critical point in the hiring process—defining the “essential functions of the job.”

As an employer, you should be very clear not only on what the job entails, but what are the essential functions of the job.  For example, a delivery position may have the employee lifting packages up to seventy pounds on a daily basis or a nurse may have to regularly assist patients on to or off of examining tables.  The ability to perform heavy lifting with or without a reasonable accommodation would likely be an essential function of the delivery or the nursing position.  But would heavy lifting be an essential function of the job for a receptionist who on occasion lifts a heavy box of office supplies?

Most employers do have a job description but fail to distinguish the essential job functions from the non-essential job functions.  This failure places employers at risk particularly when it comes to termination of an employee.

The Americans with Disabilities Act and Washington’s Law Against Discrimination require that employers provide reasonable accommodation to a qualified employee or applicant with a disability who can perform the essential functions of the job.  However, this affirmative duty to provide reasonable accommodation does not arise unless there is:

•  A qualified applicant

•  with a disability as defined under the statute

•  who can perform the essential functions of the job.

So what is an employer to do?

Conduct a Job Analysis

The following comes from the U.S. Department of Labor:

Job analysis provides an objective basis for hiring, evaluating, training, accommodating, supervising and terminating employees and improves the efficiency of your organization.  It is a logical process to determine:

• Purpose--the reason for the job

• Essential functions--the job duties which are critical or fundamental
  to the performance of the job

• Job setting--the work station and conditions where the essential functions are performed

• Job qualifications--the minimal skills an individual must possess to perform the essential functions

A job analysis describes the job, not the person who fills it.

How to Conduct a Job Analysis

The following questions can help you to analyze each job in your organization:

Purpose—What are the particular contributions of the job toward the accomplishment of the overall objective of the unit or organization?

Essential Functions—What are the essential functions of the job?

• What three or four activities actually constitute the job? Is each really necessary? For example an administrative assistant types, files, answers the phone, takes dictation.

• What is the relationship between each task? Is there a special sequence which the tasks must follow?

• Do the tasks necessitate sitting, standing, crawling, walking, climbing, running, stooping, kneeling, lifting, carrying, digging, writing, operating,
  pushing, pulling, fingering, talking, listening, interpreting, analyzing, seeing, coordinating, etc.?

• How many other employees are available to perform the job function?  Can the performance of that job function be distributed among any other employees?

• How much time is spent on the job performing each particular function?  Are the tasks performed less frequently as important to success as those done more frequently?

• Would removing a function fundamentally alter the job?

• What happens if a task is not completed on time?

Job Setting—Where is the job to be performed?

• Where are the essential functions of the job carried out?

• How is the work organized for maximum safety and efficiency? How do workers obtain necessary equipment and materials?

• What movement is required of employees to accomplish the essential functions of the job?

• What are the physical conditions of the job setting (hot, cold, damp, inside, outside, underground, wet, humid, dry, air conditioned, dirty, greasy, noisy, sudden temperature changes, etc.)? What are the social conditions of the job (works alone, works around others, works with the public, works under close supervision, works under minimal supervision, works under deadlines, etc.)?

Worker Qualifications—What particular skills are required of the employee?

• What are the physical requirements (lifting, driving, cleaning, etc.)?

• What are the general skills needed for the job (ability to read, write, add, etc.)?

• What specific training is necessary? Can it be obtained on the job?

• What previous experience, if any, can replace or be substituted for the specific training requirements?

How to Use the Job Analysis

Once the job analysis has been completed you will be in a better position to:

• Develop objective job-related interview questions.
   

• Write current and accurate position descriptions.  Position descriptions should be updated on a regular basis and a job analysis done if any factors outlined above have to be altered.
   

• Perform objective performance appraisals.
   

• Determine if accommodations can assist a person with a disability to perform the job.
   

• Conduct personnel functions in a non-discriminatory manner.
   

• Decided if it is time to terminate an employee.

A thorough job analysis is an essential tool for employers.  A comprehensive job analysis will assist your organization in clearly defining the job expectations and defining the essential functions of the job.◘

9^th Circuit Court of Appeals
Rules on Arbitration Costs
Originally published May, 2004

The 9th Circuit Court of Appeals recently ruled that in situations requiring arbitration, when one party cannot afford to pay its share of the arbitration fees, the other party may be required to advance them.

The case—Lifescan, Inc. v. Premier Diabetic Services, Inc—involved an agreement to arbitrate in the event of a dispute between the companies.  Shortly before the final hearing in the arbitration, Premier announced that it would be unable to pay its pro-rata share of the costs of the arbitration.  Lifescan argued that the court should compel Premier to pay its share of the fees or be barred
from participating in the arbitration.

The Court of Appeals said that the lower court was incorrect in requiring Premier to pay its share of the fees in order to participate in the arbitration.  It held that under the rules that governed the arbitration the arbitrators had the discretion to require the other
party to advance the fees when one party cannot.

What this means for ADRSystems users is that if the other party cannot afford to pay the costs of an arbitration, you may be required to advance those costs pending the outcome of the arbitration.

In effect, one party will not be denied access to arbitration simply because that party cannot afford to pay the fees.◘

Why Mediation?
Originally published August, 2004
 

If you look at the employee dispute resolution plans that most of the major companies are using you will see that they all use arbitration instead of litigation to resolve employee disputes. Few, if any, however, use mediation before going to arbitration to resolve disputes.  Why does the ADRSystems process use mediation as a first step before going to arbitration?

First, some definitions.  I have always defined mediation as “assisted negotiations.”  Mediation uses a skilled neutral to help the parties settle their dispute in a process that the law requires be confidential and private. It is the role of  the mediator to assist the parties in negotiating their own resolution of  the problem. Often called “interest based” conflict resolution, the mediation process is designed to empower the parties to craft a solution that meets their needs.

Mediation succeeds because it opens the communications between the parties by focusing them on their real interests.  This process helps the parties to work around their entrenched negotiation positions.  It is a very effective process designed to help the parties find a mutually agreeable resolution of their dispute with the assistance of an experienced neutral, the mediator.

A settlement can only be reached with the express agreement of the parties and no one is required to agree to anything. Any, or all, or none of the parties may choose to be represented by an attorney, at their personal cost.  However, no one need use an attorney, if they do not wish to. In many cases a settlement is reached without anyone choosing to use an attorney. Since mediation is informal, private and non-binding many people choose to settle their dispute themselves without the expense of a lawyer.

Our experience has shown that from 80% to 90% of all cases that go to private mediation are settled.  Mediation is a required first step in ADRSystems programs because it is a kinder, gentler, less confrontational means of resolving disputes.  It also provides a simple, speedy, low cost method of  resolving conflict and is highly successful.◘

Why Your Employees Quit
Originally published August, 2004
 

Are you loosing employees and don’t know why?  If you don’t do exit interviews with your soon-to-be ex-employees—and even if you do—you may be missing important information that may help your company to run with higher productivity and greater profits.

A recent Gallup poll of more than 1 million U.S. employees found that the No. 1 reason they quit is a bad boss or immediate supervisor.  “People leave managers, not companies. . .in the end, turnover is mostly a manager issue.”  The survey also found that productivity drops by as much as 50% in poorly managed work groups and profits are, on average, 44 percent less than for well-managed groups.

There is a new website called Badbossology.com that has some good information.  (HR.com is another good site).  In spite of the name, it offers valuable tips about managers and supervisors.  It did a recent online survey and found that fully half of employees would fire their bosses.  Thirty percent said they would send their bosses to be seen by a workplace psychologist while only 23% said they would send their boss to management training courses.

How are your managers and supervisors doing?  Did you promote them to their positions simply because of time in service?  Or did you try to determine whether they had any idea of how to manage employees?  Did you get them into management training courses?

Turn-over of employees can be a very expensive proposition for your company.  It has been estimated that the cost to replace an employee can run between 75% and 150% of that employee’s salary. In spite of high unemployment numbers around the country, there are significant shortages in some professions such as nursing.  Unless a departing employee is one that you wanted to get rid of anyway, it makes sense to try to keep him or her if you can.

Do exit interviews with departing employees.  It might give you an insight into why they are leaving, and may give you a hint that you need to work with a particular manager or supervisor.  Another idea is when it comes time to do annual performance evaluations of your employees (you are doing them, right?), how about the employees doing performance evaluations of their immediate managers or supervisors?

By taking these steps, you can uncover poorly performing managers and supervisors and try to get them to a higher level.  Or, it may be time to look at replacing them rather than continually replacing your employees.◘

The Job Interview—Your
First “Date” with a Prospective Employee
by
Carol Bowser
HR On-call^sm Coordinator
Originally published August, 2004

Think about it. When your company announces a job opening, it is in essence putting itself “out on the market,” the business equivalent to the Personal Ad.  Like the hopeful single, the employer attempts—with varying success—to describe its needs and wants usually with vague terms like “self-starter” or “experienced (fill in the noun) wanted” and hopes for the best.

Unlike the person scanning the personal ads, the savvy job hunters will thoroughly research your company and know a lot more about you than you know about them.

The skilled interviewer must be able, in a relatively short time span, to accurately assess the applicant for compatibility with the company and the position while avoiding the legal pitfalls some employers can fall into during the interview process.

During the interview consider these questions:

• Can this candidate perform the essential functions of the job?¹

• Will this candidate fit in to your company’s corporate culture?

• How well does this candidate match your “ideal candidate” profile?

• Is this someone I would want to spend the vast majority of my waking hours with?

• Is there something about this candidate that just doesn’t feel quite right?

Many employers fail to consider the last question.  If there is an indefinable something about a candidate that does not seem right DO NOT HIRE!!  Learn to trust your instincts.

Remember that candidates know more about you and will usually put their best foot forward during the interview.  Too often, interviewers ignore that little voice and hire the wrong person.  Time and again, we get calls from employers about a problem employee who was hired in spite of that little voice. The result is dysfunction in the workplace, decreased productivity, and lower employee moral. Someone said “Hire slow and fire fast.”  If you have any questions about interviewing or wish to improve your hiring as well as your termination skills ADRWorks offers the "Hiring and Termination" Workshop.  If you are interested in attending, let us know and we will organize one.◘

¹ See "Job Analysis--An Employer's Essential Tool From Hiring to Termination"  for more discussion on essential functions of the job.

Federal Court Rules on Use of Acknowledgement
Form to Compel Arbitration
Originally published August, 2004
 

On June 8, the United States Court of Appeals for the Fifth Circuit held that an employee can be required to use arbitration to resolve a claim of employment discrimination without having signed a formal agreement to do so.

Amanda May began her employment with Dillards in 1990. In June, 2001, the company instituted a compulsory arbitration program for most employment disputes.  Two documents were provided to each employee.  One was “Rules of Arbitration” and included the statement that both the company and the employee “agree that the procedures provided in these Rules will be the sole method used to resolve any covered dispute arising between them.”

The second document signed by each employee was entitled “Acknowledgement of Receipt of Rules for Arbitration” and included the statement:  “Employees are deemed to have agreed to the provisions of the Rules by virtue of accepting employment with the Company and/or continuing employment therewith.”

The court held that May must use arbitration and not litigation to resolve her claim with Dillards and that a formal agreement to do so was not necessary.

Although not binding on states outside the Fifth Circuit, the case provides support for employers who adopt new ADR policies, provide copies to all employees and then secure signed acknow-ledgements of receipt of the new policies.◘

© 2006 ADRWorks LLC
Last updated November 30, 2007