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ADR: The Halliburton Experience

by William L. Bedman
September 2002

As Halliburton's in-house labor counsel for the last 24 years, I have had the benefit of experiencing many changes in the workplace and in employment law. Halliburton is an energy services company which serves primarily the petrochemical industry on a global basis. In addition to the most comprehensive array of oilfield services, its operations include engineering, project management, construction, and logistical services for diverse customers ranging from the British Royal Navy to the meat packing industry. Accordingly, our employees and their employment relationships with the Company are the organization's most important assets.

Beginning in 1992, it became clear to me that there was something inherently wrong with the litigation process as it was applied to employment cases. Like most major companies, Halliburton won most of the employment cases filed against it or settled the claims for modest amounts. The amounts we spent on outside lawyers exceeded several times what we paid out in settlements. However, the money Halliburton spent for the privilege of winning most of its cases had little tangible impact on the Company or its employees. Most of the cases were litigated years after the events giving rise to the cases occurred. By that time, the terminated employee was usually working somewhere else, many of the managers and co-employees were gone and there was little institutional value in the events that transpired in the litigation.

What brought about the real need for change in the process was a sexual harassment and tort claim trial which took place in 1992. The facts arose from the Brown & Root business group of Halliburton (now Kellogg-Brown & Root). The case had been around as an EEOC charge or lawsuit for almost five years by the time it reached trial. The Company obtained favorable verdicts for the sexual harassment and state tort claims. However, the case cost almost $450,000 in legal fees, and permanently altered the careers of several employees and former employees including the plaintiff. Apparently, she believed she would be hitting the lottery right up until the time the jury came back and gave her nothing. The financial and human cost associated with that kind of litigation was so high that we began a concerted effort to examine alternatives to the litigation system for resolving employment matters.

At that time, we did have some prior ADR experience; in 1990 we had implemented a binding arbitration program for some of our ERISA benefit plans which was also tied to a more formalized appeals process. One thing that was observed after we adopted this arbitration program, was that the incidence of litigation dropped close to zero. More matters were actually being brought to and resolved in the internal administrative process than previously, largely because the employees were now aware that there was a more formal structure in place for their complaints.

Building on this experience, in the summer of 1992, a series of task forces were established to study and evaluate existing systems within one Brown & Root group for handling employment problems. These task forces were given the responsibility of reviewing options and concepts which ranged from no change to radical change. The task forces included senior operations management, representatives of the Legal and Employee Relations Departments, outside legal experts, representatives from the American Arbitration Association, outside consultants in conflict management design (Chorda Conflict Management, Austin, Texas), and experts in employee relations communications (Sheppard Associates, Glendale, California). As part of the development process, about three hundred Halliburton employees from all levels of the Company were interviewed individually and in focus groups to determine their opinions and impressions of the existing company attitude on conflict in the workplace. Additionally, their reaction to different design concepts were catalogued.

The final approval of the Program occurred in February, 1993 with formal implementation in June, 1993. The program is a comprehensive employment dispute resolution program for all employees in the United States from the Brown & Root chief executive officer to the entry level employee. The key features of the Dispute Resolution Program are:

* The DRP was designed with input from employees at all levels - from field employees to senior management.

* The DRP is a four-option program - it provides multiple processes, both inside and outside the company, for resolving disputes.

* In keeping with employee input and expert opinion, the DRP encourages collaborative approaches to dispute resolution by offering multiple channels for direct talk, or negotiation, and for both informal and formal mediation.

* The DRP promotes the resolution of disputes at the lowest possible level through in-house options. This is in keeping with the views of those we surveyed. Most disputes are resolved within a month through in-house options.

* The DRP provides some options that offer very high standards of confidentiality, and prohibits retaliation for use of the system.

* As an employee benefit designed to ensure fairness, the DRP offers to each employee access to legal counsel of the employee's choosing.

* To ensure its independence, the DRP reports to a Dispute Resolution Policy Committee composed of senior executives, rather than to a department or a single individual.

* The DRP routinely collects and analyzes data in order to evaluate utilization, cost benefit and employee satisfaction.


In the process of developing the Dispute Resolution Program, we spent some time trying to understand how the present system evolved and what are the main factors causing its inefficiency and negative effects when it is applied to employment matters.

The present heavy dependence on the judicial system to resolve employment disputes is probably the result of convergence of a number of factors. These factors include the civil rights movement and the expansion of tort law. Before World War One, the principal use of the legal system in employment matters seems to have been the trial of personal injury actions related to the workplace. Then, as now, a consensus developed that the costs, delays and inefficiencies of the judicial system made it unsuitable for employment matters. With the widespread adoption of workers' compensation systems in the early decades of this century, this practice died out.

The period between the two World Wars, particularly the New Deal period, was characterized by active distaste for the judicial system in employment matters. The Norris-LaGuardia Act of 1932 went perhaps as far as constitutionally permissible in withdrawing federal court jurisdiction over "labor disputes". The National Labor Relations Act of 1935 created an administrative body, the National Labor Relations Board, to resolve the most significant labor issues of the time. Even the Fair Labor Standards Act of 1938, which does provide for private enforcement through the court system, delegated significant enforcement powers to the Department of Labor.

Finally, growing labor organizations increasingly pressed for private, nonjudicial dispute resolution as an alternative to contract litigation. Labor organizations had split over support for the Federal Arbitration Act of 1925. However, by the 1950s, organized labor heavily promoted nonjudicial remedies. This effort culminated in the Supreme Court's "Steelworkers Trilogy" of 1960, in which the Court ceded widespread authority to labor arbitrators. This trilogy consists of Steelworkers v. American Mgf. Co., 363 U.S. 564, 46 LRRM 2414 (1960), Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 46 LRRM 2416 (1960), and Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 46 LRRM 2423 (1960).

On the other hand, beginning in the 1940s, the civil rights movement pioneered the use of the federal courts to overcome discriminatory practices. This effort was increasingly successful during the 1950s and early 1960s. Thus, when the Civil Rights Act of 1964 was adopted, it seemed natural to turn to the federal courts for enforcement of these individual employment rights. This use of the courts was enormously productive, particularly during the late 1960s and throughout the 1970s.

Because of the success of the 1964 Act, with its emphasis on individually litigated employment rights, subsequent labor legislation adopted the same model. That is, federal labor policy began to be implemented in terms of individual rights against "discrimination", designed to be enforced primarily by individual plaintiffs in federal court. Examples include the Age Discrimination in Employment Act and the Americans With Disabilities Act. Not surprisingly, state employment legislation since the 1970s has followed the federal model.

It is widely believed that the designers of the 1964 Civil Rights Act feared that the legislation would be undone by hostile local juries. Accordingly, litigation under the Act was designed to be tried without a jury. This feature limited the damages recoverable to traditional equitable remedies. In the meantime, however, tort law and tort damages were expanding rapidly in state courts. These cases were tried to state court juries which, by the 1980s, could no longer be perceived as being hostile to discrimination claims. Thus, employees increasingly began to bring cases under state law, using tort concepts to avoid federal limits. The Civil Rights Act of 1991 reflected the shift to this paradigm of employment dispute resolution, expanding the remedial options to include tort-like damages and introducing trial by jury.


What the preceding discussion demonstrates is that the present reliance on tort-like litigation to resolve individual employment disputes is not a matter of logical necessity. Rather, it is the result of legal and historical forces which developed outside the employment context. However, American employees, lawyers and managers have become so used to this mechanism that we seldom appreciate that this is a fundamental design characteristic, one that separates American practice from most other national systems of employment regulation.

Most of the world manages employment by direct government regulation of management, direct political involvement of trade unions as political parties, and specialized, quasi-political labor tribunals. In this model, resolution of employment disputes is part of the political and legislative process. By contrast, the American model requires individuals to vindicate broad, rights-based policies through litigation, usually in independent courts of general jurisdiction. American labor regulation is thus made part of the judicial process and, more specifically, the tort law aspect of that process.

Recent statutes, such as the Americans with Disabilities Act and the Family and Medical Leave Act operate in a similar fashion. Not only does such legislation suit our history and national character; it is undeniably inexpensive for the government to impose. Rather than creating expensive bureaucratic controls paid for in tax dollars, the system places the cost of regulation on employers and employees. Further, these costs are imposed by a court system with little political accountability to the legislature. This system does, however, have the virtue of allowing thorough investigation and individualized determinations.

The problem is that the labor litigation system and federal agencies set up to assist in the investigation and adjudication of labor matters are becoming unmanageably slow, expensive and cumbersome. The Equal Employment Opportunity Commission now has the highest backlog it has had in many years. The creation of new rights and the passage of federal legislation has done nothing to ease this burden. A simple employment dispute, involving no more than $5,000 in lost wages and benefits, can easily cost several times this much to resolve -- no matter who prevails. Furthermore, administrative investigation and litigation may take years to complete. By the time of trial, the perceptions of the parties and witnesses have been irreversibly colored and polarized by years of conflict. Relatively cost-free remedies, such as reinstatement, have often become impossible. Emotional and economic damages which did not exist at the time of the dispute have accumulated, compounded, and assumed an importance far out of proportion to the nature of the dispute.

To a significant degree, these economic and emotional costs are products of the system itself. An employee who has recently been terminated may be shocked and depressed. These conditions are directly related to the termination. However, these difficulties are normally neither devastating nor permanent. But, a former employee who has spent several years in the litigation system is in an altogether different position. This individual has spent years building mistrust and suspicion, locked in conflict and absorbing the financial and emotional impacts of litigation. Quite often, because of the long-term alienation from former co-workers, he or she has lost an important part of the network of acquaintances that support any career. Further, he or she may become strongly focused on past wrongs, at the expense of present and future career. Naturally, the larger the potential damage award, the more this is likely to occur . Inevitably, earning capacity and employment skills suffer.

Such economic losses are not a natural result of the wrong suffered. They are a natural result of a litigation-based dispute resolution system. What converts this from a highly arbitrary tax on employers to an economic tragedy is that employees do not obtain substantial recoveries with any great frequency. Reliable statistics are not readily available, but practical experience shows that, in the great majority of cases, the employees lose or must settle for far less than what they think they are entitled to receive. Actual large recoveries are quite rare. This is not a defect in law or procedure. It simply reflects a fact of life: the judicial system does not provide ordinary employees who must work for a living any real hope of obtaining significant economic relief in any time period that is realistic from the employee's standpoint. In short, litigation, as a system of employment dispute resolution, is highly inefficient, both economically and morally. It wastes time, money and careers. This is true even if, as assumed here, the end result is always correct . To the extent that the results through litigation are wrong, the social loss can only be greater.

These observations do not prove that contractually resolved disputes are better decided, or even that contractual dispute resolution is more efficient. However, this discussion should dispel any illusion that private litigation has any automatic claim to historical, legal, moral or economic merit.

Before turning to existing alternatives in detail, including Halliburton's experience, the following two sections discuss the state of the law with regard to the enforceability of arbitration agreements in the employment context and the policy framework for other types of dispute resolution.


Federal law, as well as the common law of most of these states, embraces the principal that arbitration of disputes should be encouraged. As a general proposition, this policy favoring arbitration applies equally in the employment context. Thus, where the agreement satisfies basic principals of contract formation, e.g., consideration, and is not subject to any contract defense, e.g., duress or unconscionability, most courts will enforce the agreement. The exception to this rule is in the context of civil rights claims. While all but one federal appeals court, and the vast majority of state courts, have concluded that such claims are arbitrable, this view is not universal. Specifically, the Ninth Circuit, which encompasses among other states California, Arizona, Oregon, and Washington, has refused to enforce a plaintiff's written agreement to arbitrate employment disputes. In Duffield v. Robertson Stephens & Co., 144 F.3d 1182, 1187 (9th Cir.), cert. denied, 119 S. Ct. 465 (1998), the court held that arbitration agreements signed as a condition of employment are not enforceable with respect to either Title VII or Fair Employment and Housing Act (the comparable California state law) claims. Therefore, an agreement to arbitrate is unlikely to be enforced by federal courts within the Ninth Circuit with regard to claims arising under federal civil rights statutes.

As a consequence of the holding in Duffield, federal courts within the Ninth Circuit are unlikely to enforce arbitration agreements between an employer and its employees where the employee asserts federal civil rights claims Supreme Court recently rejected the holding in Duffield and refused to apply its analysis to arbitration agreements encompassing state civil rights claims sought to be enforced in California state courts. In Armendariz v. Foundation Health Psychcare Servs., Inc., 99 Cal.Rptr.2d 745 (Cal. 2000), the California Supreme Court held that arbitration agreements that encompass state civil rights claims are enforceable in state court as long as the employee may effectively vindicate her substantive rights and the agreement binds both parties to arbitration. Id. at 757-78. A California appellate court has already held that Brown & Root’s DRP complies with these requirements and is therefore enforceable. Craig v. Brown & Root, Inc., 100 Cal.Rptr.2d 818 (Cal. Ct. App. 2000).

Thus, notwithstanding the Ninth Circuit's antagonism to the arbitration of employees’ civil rights claims, it appears to be relatively isolated in its approach to arbitration agreements between employers and employees.


The Federal Arbitration Act ("FAA") has carved out a relatively litigation-free zone around arbitration that has, particularly in recent years, allowed arbitration to develop and flourish. The "halo effect" of the FAA has also tended to protect other forms of dispute resolution, which are probably not "arbitration" under the FAA. This trend has been hastened by recent, strong state legislative and judicial initiatives toward alternative dispute resolution of litigated matters. The United States Supreme Court has also weighed in on the desirability of arbitration agreements in the employment context, most recently in Circuit City Stores, Inc. v. Adams, 121 S. Ct. 1302 (2001). In Circuit City, the Supreme Court noted that arbitration of employment disputes reduces litigation costs for both parties, which is particularly beneficial because of the smaller damages at issue in employment litigation. The post-Circuit City commentary confirms that the case likely has encouraged many of the nation’s employers to consider implementing arbitration programs.

The trend toward arbitration has also been reinforced by experience with the EEOC and analogous state agencies, whose principal function has been to attempt to "conciliate" (mediate) employment disputes. Indeed, this is one of the ironies of the resistance to employer-initiated dispute resolution procedures. If the case is litigated, one of the first steps the court or agency is likely to take is to pressure the parties to undertake an alternative means of resolution. This procedure, typically mediation, is likely to be less well adapted to the particular employment environment than the system the employer would have adopted if left to its own devices.

This versatility is one of the principal advantages of a private dispute resolution mechanism. The particular method adopted can be adapted to fit each individual corporate structure. Indeed, Halliburton's DRP looks unlike other systems, although many of them share common features.

In addition to avoiding the one-size fits all approach typical of litigation (and perhaps required by Due Process), private mechanisms avoid most of the other inherent problems with the litigation system. Even the most complex private dispute resolution systems are usually substantially faster than litigation, and are almost always cheaper, at least for the employee. Because the principal social costs of litigation derive from its delay and expense, private systems offer a greater advantage.

Litigation is, or at least is assumed to be, extremely good at finding the truth. However, important as this function may be to resolving disputes, it is also a weakness. Litigation's single-minded search for complete disclosure and legal correctness short-changes other, equally valid goals of a dispute resolution system.

One of these objectives is reconciliation, which is best achieved by early mediation where each party retains some level of credibility with the other. Another is the opportunity to "tell one's story" to an outside decision-maker. Many social scientists believe that this is an important act of catharsis, even if the teller loses. In litigation, the opportunity comes only years later and is hemmed in by elaborate and expensive trial procedures. The litigation process is also largely inscrutable to the average citizen. Americans have always felt that even a confessed criminal is entitled to understand what is happening to him and why he is being punished. Yet, litigated employment matters are governed by procedural and substantive rules which are rarely understood by the parties, other than the most sophisticated employers and litigants. Arbitration cannot completely avoid substantive complexity, but it can radically simplify the procedural rules of the road.

Despite these advantages, arbitration and other dispute resolution mechanisms are sometimes criticized for denying employees important substantive rights. We believe these criticisms to be unfounded as applied to a properly designed and managed dispute resolution system which preserves the substantive employment rights of the employees, while providing increased procedural benefits through expedited resolution and cost efficiency. This allows the parties to reach closure on the matter while the events are fresh and the employee can still pursue his career. By a properly designed and managed system, we mean one that includes such features as the key characteristics of our system listed above. It is critical to note that under a system with such characteristics, few disputes reach adjudicatory mechanisms such as arbitration or the courts; the vast majority are resolved by the mutual agreement of the parties, achieved through collaborative processes.

Ultimately, the greatest beneficiary of a private employment dispute resolution system, if it is allowed to flourish, may be the court system itself. Many federal courts are today awash in paper generated by relatively small cases. The Southern Districts of New York, Florida, Texas and California are cases in point. The greatest contributors to the problem are federal drug cases and prisoner habeas petitions. However, federal employment cases probably run a close third. The courts have responded to this crisis by restricting and formalizing discovery, pressuring settlements, placing arbitrary limits on trial time, and developing ever more rigid and complex procedures designed to increase paper flow and decrease the time judges (but not lawyers) spend on each case.

In short, the court system, with regard to employment cases, is being stifled by overload. Its primary virtue, careful and deliberate reconstruction of the past, is becoming a casualty of the pressing need for judicial efficiency. Yet, unlike private dispute resolution, the sacrifice is not offset by any substantial progress toward other legitimate objectives of the litigants, for example, reconciliation, catharsis, closure or comprehension. Certainly there are more settlements of litigated cases than in times past. But these settlements are not driven by reconciliation. They are, as often as not, driven by the litigants' dawning realization that one's day in court may be too long in coming, too short to tell the story, too expensive to afford, and too hard to understand.


Private employment dispute resolution has enormous promise. There is every reason to believe that it will deliver superior justice, superior speed and reduced cost. Yet the field is quite new. Not only are employers just beginning to implement ambitious, sophisticated systems of dispute resolution, but dispute resolution, as a field of serious academic study, is in its infancy. The hard data have yet to be gathered, and perhaps the hard questions have yet to be asked - about both litigation and private methods.

A few observations can be made with a high degree of certainty. First, the litigation system has no special claim to delivering justice, or even truth. Second, the litigation system is, even assuming perfect efficiency in achieving the "right" result, an extremely slow, expensive device imposing heavy monetary and non-monetary costs on the participants. If another system is available, it ought to be given a chance to succeed. Third, as stated above, we have little concrete information on the vast array of alternatives. The existing studies do not contain sufficient statistical data from which to draw reliable conclusions.

In its first seven years, over 4,000 employees utilized some aspect of the DRP Program. Of these 4,000 matters, over 75% were resolved within 8 weeks of the employee's initial contact. The vast majority were resolved within the Company. The overwhelming majority of these cases were resolved through collaborative, in-house processes such as informal or formal mediation. About 400 have gone to mediation, both internal and external, and about 100 have gone to final outside arbitration. While the Company has not prevailed in all the arbitrations, its win/loss record is similar to its previous experience in the litigation forum with similar cases.

Even with an employee benefit plan which compensates employees for their legal expenses, fewer than 400 employees have requested the assistance of counsel over the first five years. In many of the arbitrations which have occurred, the employees have elected to proceed without the use of legal counsel.

While the total cost of this Program is still being analyzed, it is clear that the annual expense for this type of Program is substantially less than what a large, litigated employment case can cost both the company and the employee in legal expenses, while doing a much better job of delivering justice in the workplace to the average employee.

The Halliburton DRP provides the employee four options for the resolution of a dispute. These options may be employed or bypassed for another option at the employee's discretion. The options are:

A. The Company's Open Door Policy -Under this option, the employee may speak to his or her immediate supervisor or to a higher level manager in the chain of command.

B. A Conference -Under this option, the employee meets with a company representative from the DRP office to talk about their dispute and to choose a method for resolving it. One method available is an internal, informal mediation involving the use of a Halliburton advisor.

C. A Formal Mediation -This option involves the use of a neutral third party using an AAA mediator.

D. A Formal Arbitration -This option involves the use of the AAA's arbitration program.

One of the most utilized and cost-effective parts of the Halliburton's DRP is the Ombudsman Program. The program is generally structured to provide a confidential outlet for current and former employees who have employment-related problems, primarily through informal mediation.

The actual task the ombudsmen perform varies greatly from one case to the other. They may act as mediators, as fact-finders, or both, or may practice collaborative techniques -- all in an effort to obtain resolution at the earliest phase of the dispute. In some cases they may give advice to the employee as to what avenues may be opened within the organization to assist them. They never serve as an advocate for the employee, and in many situations never actually contact anyone within the company.

Along with the Ombudsman Program, the DRP places a heavy emphasis on mediation. In the first four years, the resolution rate of mediated disputes exceeded 75%. Resolutions reached in the mediations ranged from a simple apology to reinstatement and substantial monetary damages. The mediators' common link is confidentiality, consistent with the expectations of the parties. Furthermore, the resolutions come very rapidly when compared to either litigated determinations, or even mediated resolutions after matters go to litigation.

The timely resolution of the disputed matter is one of the most powerful attributes of the advisor and mediation functions of the Halliburton Dispute Resolution Program.


Even though the Halliburton Program has been in effect for over five years, it still remains somewhat unique because of its comprehensive scope in applying to virtually all employment disputes (except workers' compensation and unemployment claims), and binding all employees from senior executives to entry level employees. We have also developed several training programs for supervisors which provide them with conflict management skills to try to handle employment problems at the lowest possible level. We believe that the equitable and uniform nature of our Program, together with reinforcement of its conflict management purpose through comprehensive and consistent management training are keys to the long term success and viability of any dispute resolution program. Additionally, the DRP Program was developed largely by employees of the company with appropriate external help, but the principle focus was to integrate a new system into the existing processes while maintaining organizational cultural values and norms. By most measurement parameters, the Program has succeeded in both bringing quicker resolution to problems and substantially reducing the Company's transaction expenses and legal fees while preserving employment relationships.

These must be basic and fundamental goals of any dispute resolution program.

William L. Bedmanis Assistant General Counsel of Human Resources, specializing in labor and employee relations, for Halliburton Company and has been with that company for the past 25 years. He is the legal architect for the Halliburton Dispute Resolution Program and is involved with the administration of the Program. He received a Bachelor of Arts in History in 1973 from Tulane University and earned his law degree from the University of Texas School of Law in 1976.