Employment & Labor Arbitration Process
Arbitration is defined as a “private informal trial procedure for the adjudication of dispute” (Carbonneau, 2009). Dispute can arise due to doubt of truth, strive or disagreement over something. Recently arbitration has been considered or mandated by many employers in response to increasing cost associated with employment litigation (Shea, 2015). Arbitration in workplace dispute is mostly used to determine bridge of collective agreement and grievances arising from terms and conditions of employment as contained in the collective agreement. HR website provides information that many employers feel that arbitration would help them cut cost in claim that would otherwise have resulted to millions of dollars in verdict. Other issues like cost of organizational attorney and length of time in defending such suits are also considered in making arbitration choice. Shea calculates the average cost of hiring an attorney at $150,000 and above which does not include management time and miscellaneous expenses.
However, as Shea noted, filling workplace disputes like employment discrimination can constitute a distraction to employers. It does not actually help resolve employment disputes, it only awards monetary payments to the party that was in violation of the agreement. Although arbitration can be less expensive and faster than litigation in resolving employee claims, however, it does not provide organizations with that learning experience and relationship restoration that can benefit the organizational growth.
This paper evaluates the benefits of arbitration in workplace dispute in contrast with other ADR like mediation. I argue that arbitration is not the best tool for resolving workplace grievance.
Increased use of ADR as alternative to court litigation
The need for ADR has grown over the years due to the backlog and cost of the court system. The focus of ADR is to help parties settle their dispute through an informal and less expensive process. Depending on the nature of dispute, individuals have the choice of selecting an arbitrator suitable for their need. However, while the goal of mediation or negotiation is to bring parties to settlement through interaction and compromise, “arbitration focuses more on the facts, evidence and law to reach settlement” (Kosofer & Robinson, 2011). Arbitrators reach a justified outcome through the application of state or federal law related to issue of dispute.
Mediation on the other hand is a voluntary process where an impartial third party initiates communication with the aim of helping conflicting parties reach a resolution (Bush & Folger, 2005). Although both processes are different forms of Alternative Dispute Resolution that tend to help parties settle their disputes outside of the court forum, there can be true winners and losers in arbitration. Also while both processes require information gathering, that of arbitration focuses more on evidence, witnesses and law application to reach settlement. While other ADR like mediation seek for compromise and a win-win situation, arbitration seeks to justify a win-lose verdict.
Workplace issues and Labor Arbitration
Congress enacted the Wagner Act in 1935 recognized the role of union in collective bargaining with employers for contracts covering wages, hours, and other conditions of employment (Benneth, 2002). Wagner Act believes that collective bargaining agreement are binding, enforceable, however it does not contain any specific mechanism for such enforcement. Although cases involving labor, employment, consumer and securities arbitration have the same concept and processes that are not different from commercial arbitration, the laws and rules governing the proceedings are relatively consistent.
In 1947, congress enacted Labor Management Relations Act which provides federal court with the jurisdiction of enforcing collective bargaining. Benneth notes that the ultimate source of authority to bind parties of labor arbitration is in Labor Management Relations Act, rather than Federal Arbitration Act (p. 153). Courts have held that the power to enforce a collective bargaining agreement including the power to enforce an arbitration provision in such an agreement.
- Any dispute regarding a working condition will have implication beyond the individual dispute. That is whatever rule is adopted to resolve one dispute regarding one employee become the rule for all, or a larger position of employee represented by the union.
- Arbitration helps apply and establish a system of justice that both labor and union and employer can accept over a course of time for disputes that could result to strike or ties to litigation for years.
- Arbitration process also fills the gap where collective bargaining may have left out details on how to deal some condition of employment. In effect, arbitrators sense as function that government administrative agencies can serve by applying and interpreting the general directions of the legislature.
- The arbitrator applies and interprets the general directions of employer and the union as reflected in the agreement.
Labor Arbitration Process
The union owns the grievance and represents the grievant. They apply counsel and have the ability to compromise claims to advance positions to the interest of their members and individual grievant. The labor conduct is generally in similar proceeding like that of commercial arbitration. Proceeding is very brief, swift and in abbreviated schedule for hearing and decision making. Parties may agree to use labor arbitration rules or procedures of an arbitration sponsor organization. As Benneth noted;
- The Labor Management Act is the legislative authority for labor arbitration. Therefore the process is not guided by Federal Arbitration Act (FAA). An award might be invalidated by dishonesty or fraud which is rare or by insistency with public policy applications. For example State and federal anti-discrimination Act.
Employment Arbitration Process
Unlike Labor arbitration where union represents the grievant, the employment arbitration is not represented by union. Employee and Employer enter Arbitration process in line with the contract agreement between them. In practice, arbitration process is chosen by the employer since the employee might not have negotiating leverage and experience in arbitration process.
The absence of Union Representative and lack of employee bargaining power can mean that Employment Arbitration Clause is one-sided, in favor of the employer. Court might decide to invalidate any arbitration process where the arbitrator was chosen by the employer or where the claim is prohibitively expensive. Inability to Concentrate Dispute Resolution in one forum can be seen as altering (hindering employers from using arbitration as dispute Resolution Mechanism and can prompt EEOC in pursing Discrimination Claim in court even if the employee has signed a valid Arbitration Agreement. Example is the EEOC Vs Waffle House Inc.
Parties can adopt arbitration procedures that meets their need. However, parties are not required to use any particular arbitration. Sponsoring organizations, or set rule, for reemployment arbitration. Unlike the collection agreement relationships that develop between union and employees, non-union employment relationships are not covered by Federal Labor Statutes. Therefore there has been confusion on the sources of law for employment arbitration. The court ruled that FAA coverage is not limited to commercial contract or transportation workers. The Circuit route is applicable to all employment contract
Labor Arbitration involves the settlement of employment related disputes. Mediate.com listed forms of arbitration applied to workplace dispute as divided into two main categories; Rights Arbitration and Interest Arbitration.
- Rights Arbitration – otherwise known as Grievance Arbitration deals with allegations associated with collective agreements that has been violated or misinterpreted. In the Rights Arbitration, parties are allowed to meet at certain steps of the procedure to review and discuss the grievance related to violation of collective agreement. However because parties cannot resolve the dispute by themselves, arbitration is entered to determine the matter. An award is based on whether collection of agreement has been violated.
- Interest arbitration otherwise known as Contract Arbitration is based on disputes arising from terms and conditions of employment that is contained in the collective agreement. Where contractual matters like legal strike or lock-out issues are in dispute, an attained ruling will be updated in the Contract Agreement. Such determination forms part of the collective agreement between the two parties.
However, there are other workplace disputes that are outside of the scope of collective or contract agreement that impact organizational operations. Issues like office politics, group work conflicts due to differences in cultural system, abuse of power, etc. can hinder the flow of information and communication that affect group work. Organization or office politics have been known to influence employees to pursue self-interest and gains that hinder achieving organizational goals. These dispute situations do not require monetary claims or settlement and might not be appropriate for arbitration purposes even though they play viable roles in employee productivity.
Bias in the choice of arbitration that benefit employers
While arbitration might be less expensive and fast, it actually benefits employers due to the nature of its processes.
- Avoidance of Juries/privacy of case;
Many employers view the avoidance of juries as potential for adopting arbitration in workplace dispute. They might feel that the jury could be sympathetic on employees and pass a favorable verdict to the disadvantage of the organization. Moreover, arbitration is usually heard by a single arbitrator or panel of arbitrators that have knowledge and experience in employment related law (Benneth, 2002). Such conservative method and privacy nature of arbitration helps employers avoid the scandals that might arise if they were made public. Employers are also more likely to be predictable on the outcome of the process since they are aware of employee contracts before opting for arbitration process. The employee might be left with the burden of punitive damages and fees.
- Less expensive;
Cases going to arbitration is within certain specified level of amount. Employers have the advantage of settling with lesser amount than could have under normal court proceedings. Moreover award is usually final without giving employee the choice of appeal.
- Potential decline in claims;
A major reason for arbitrating workplace disputes is that employees might not bother pursuing their claims since the verdict amount might not be worth the efforts. HR.com website suggests that if implementing arbitration results to greater number of cases, employees will lose the cost-saving associated with the use of the process.
Collaborative tools of ADR in workplace dispute for improved relationships
While Arbitration might be advantageous for cost effectiveness, privacy, time constraints and other factors, it is not beneficial towards ensuring improved employee relationship for achieved goals. Other ADR processes like the Transformative Model as Bush and Folger, 2005 note has been successfully applied in workplace conflicts like United States of American postal system and Letter Carriers. Employees are given avenues to talk through their issues for improved working relationships without resorting to monetary awards.
- Benneth S., C. (2002). Arbitration: Essential Concepts. ALM Publishing, New York, New York.
- Bush, R. A., & Folger, J. P. (2005). The Promise of Mediation: The transformative approach to conflict. San Francisco, CA: Jossey-Bass.
- Carbonneau T., E. (2012. Arbitration in a nutshell. Thomas Reuthers, USA.
- Shea, R., M. (2015). Should Employers Require that Workplace Disputes Be Arbitrated retrieved 01/30/2015 from http://www.mbbp.com/resources/em.