Arbitration, Mediation, Conciliation, Ombuds — Dispute Resolution Options to Promote Healthy Organizational Culture

05-01-2019

In today’s #MeToo era, progressive human resources departments and innovative organizations are reconsidering traditional conflict resolution methods. Employers are facing a cultural push to reevaluate how to best serve organizations, employees, contractors and third-parties affected by business practices with respect to solving conflicts, disputes and ethical challenges that arise in and around our work groups. As more organizations are reconsidering mandatory arbitration policies and with federal legislation being pushed to prohibit mandatory arbitration in the employment context or end forced arbitration of sexual harassment claims, employers need to reevaluate their own dispute resolution programs and options. 

So, What’s an Employer to Do? Alternative Dispute Resolution (ADR) Options

Several possibilities exist to build a best practice dispute resolution program in organizations, and often a combination of approaches works best to resolve disputes and preserve goodwill and fairness.

Arbitration

The historic rise of arbitration in American business:

The Federal Arbitration Act (FAA), established in 1925, set a foundation for employers including enforceable arbitration clauses and mandatory arbitration agreements as a condition of employment. While some believe it was never Congress’s intent to include employment disputes in the FAA, the Supreme Court has interpreted it as such.¹ In an employment context, these agreements customarily require employees to bring disputes and potential legal claims against the employer into an arbitration forum and outside of the court system. The concept of mandatory arbitration flourished. The Economic Policy Institute study suggests that more than half of non-union private sector employers have mandatory arbitration procedures and that is even higher for larger (1,000 or more employees) businesses.² Eighty of America’s Fortune 100 companies have used arbitration to resolve employment disputes since at least 2010. Of that 80%, over half of the companies appear to impose forced mediation and half contain class or collective waivers,³ meaning workers are prohibited from banding together to challenge employment practices that may impact groups of workers and forced to bargain individually.

The benefits of arbitration were seen to favor the parties because typically arbitration could proceed in a more expeditious manner than legal court proceedings. Moreover, employers often prefer arbitration to litigation because of the confidentiality clauses that limit or prevent public disclosure of private proceedings and settlements, resulting in less reputational damage in the community. However, what the #MeToo era has highlighted is that by keeping these arbitration results private and by preventing employees from bringing collective actions, the public has been kept in the dark with respect to organizational culture, repeat offenders, and toxic and illegal treatment that might make employees and applicants rethink employment in those cultures. 

Where are we today?

The tides are shifting and several large notable businesses (e.g., Google, Microsoft, Uber, and Facebook) have recently reconsidered the content of their arbitration agreements or are scrapping the processes altogether. The reconsideration stems from a cultural shift condemning agreements that would stifle victims of employment law violations from sharing their experiences and permit offenders of harassment and discrimination to maintain secrecy. While some of these prominent organizations are voluntarily, albeit under public pressure,⁴ eliminating mandatory arbitration, federal legislation is also being rapidly introduced to prohibit mandatory pre-dispute arbitration and/or in sexual harassment and discrimination claims in employment.⁵ 

For the time being, and likely while Republicans control the United States Senate, legislation banning mandatory arbitration procedures will not be successful forcing employers to change current practices.⁶ Social pressure may be the more likely impetus for reconsideration of dispute resolution processes. While arbitration is still a preferred method of employment dispute resolution for employers, the protocols may have to be scaled back to remove mandated use, eliminate full confidentiality clauses and/or lessen gag orders on victims.

Mediation

Mediation is a way to resolve disputes within an organization without the need to file a complaint outside of the work setting. It generally involves a voluntary and confidential process of shared decision making in which one or more impartial mediators facilitate the parties (individuals, organizations and communities) in conflict to work toward mutually-agreed upon goals. Mediation in work settings often succeeds because it allows the parties to be heard and understand each other’s views, proving to improve chances for an amicable solution. Mediation also provides a more expeditious and cost-effective means for resolving conflict, without the burden of preventing a party to go outside the organization to a legal venue, should the mediation fail. Mediation can often work well when dealing with organizational issues such as conflict between employees, harassment complaints, performance issues and a parting of ways/termination.⁷  

Successful mediation programs allow all parties to participate in the selection of qualified mediator(s); follow a set of standard of behaviors and protocol that allow the parties to feel that they are on a level playing field; issue identification and agenda setting; impartial and non-judgmental brainstorming and solution finding; optional caucusing, or confidential, individual break-out sessions between the mediator(s) and one of the parties to allow for rapport building and sharing of sensitive information; and, a written agreement, written in plain and understandable language that details the agreed upon outcomes and action steps.⁸

The benefits of a successful mediation indicate that once an agreement is finalized, there is ownership and buy-in of the outcome and the parties were empowered to resolve their problems. 

Conciliation

Conciliation is the action of informally mediating between two disputing people or groups. Conciliation differs from arbitration in that the conciliation process, by itself, has no legal standing, and the conciliator usually has no authority to seek evidence or call witnesses, usually writes no decision, and makes no award.⁹ Conciliation differs from mediation in that in conciliation, often the parties are in need of restoring or repairing a relationship, either personal or business. The conciliation process is intended to be flexible and informal. The conciliator may give advice on the case management processes, offer opinions as to the issues of factual or legal dispute between the parties, give advice about the cost implications and other non-legal consequences, and ask parties to explain any decision-making constraints.¹⁰

Conciliation may be used by employers as an internal dispute resolution tool, likely managed by human resources or management. Employers must be careful, however, when giving advice to employees because of the conflict it may cause if the situation becomes litigious. Interestingly, European businesses focus more heavily on compulsory, early conciliation. France, Spain and the UK all have compulsory conciliation prior to making an employment tribunal or labour court claim, along with the possibility of conciliation and/or judicial mediation during the litigation.¹¹ In France, for example, employment tribunal judges have a conciliation responsibility pursuant to law, and conciliation is mandatory before claims can be submitted (with certain exceptions), although less than 10% of judicial conciliations result in a conciliation agreement.¹²

Ombuds Programs

In today’s “highly competitive, global and ever-changing business environment, business leaders and boards are striving to enhance governance, risk mitigation and business ethics in order to protect organizational reputation and assets, comply with legislation and regulations, ensure trust of employees, customers, shareholders and the community, and provide an ethical work environment.”¹³ It is essential that organizations have a complete system for resolving ethics problems. Best practices combine “formal channels such as hotlines and compliance policies with the informal channel of an Ombuds office, which remains independent of the company’s management structure.”¹⁴ Ombuds programs should complement, and not supersede, other formal complaint mechanisms. The differences are that effective ombuds programs afford anonymous reporting and complete confidentiality, provide unfiltered information to senior management and/or the board of directors, permit the reporter(s) to maintain complete control to determine resolution options, remain independent of company management, operate as an informal entity and maintain neutrality. Ombuds programs do not set or enforce organizational policy, do not keep records or provide official reporting on behalf of a company, nor do they perform investigations, strategize with management on resolution or report to any formal management channel.¹⁵ In short, an ombuds program serves as an “independent, informal, off-the-record confidential resource that has a holistic purview in the organization and is not limited to a specific strategic mission.” The ombuds office’s mission is “to assist in surfacing and resolving workplace issues in a timely manner and identifying changes that will prevent” recurring or escalating problems. The ombuds program does not serve as formal notice to a company.¹⁶  

Examples of issues raised through ombuds programs and then successfully resolved through the organization include safety issues, misleading financial reporting, sexual harassment, discrimination or other employment law issues surfaced, code of ethics challenges, fraudulent or inappropriate vendor relationships, and inappropriate treatment of employees. Properly run ombuds programs, while a different approach for employers because it is non-binding and non-confrontational, can be an effective issue resolution tool for forward-thinking employers who want to nip issues in the bud.

A multi-national law firm study identified a strong preference by employers and employees for a flexible ADR approach involving a mixed model of adjudicative and non-adjudicative approaches to conflict resolution in the work setting, with the importance of efficiency identified as the key driver in choice of resolution method and a desire for collaboration over representation.¹⁷ Whatever your organization’s approach, consider employee accessibility, trust, access to justice, and how your dispute resolution practices will support attracting and retaining talent.