Overview: Alternative dispute resolution (ADR) is a term for both proactive (dispute identification) measures and reactive (dispute resolution) procedures that employers use to identify risk and reduce costs. The earlier a problem is identified in the life of a dispute, the better chance the employer has to address it in a timely, cost-efficient way. HR often has a key role in implementing ADR protocols, receiving complaints from employees and handling grievances.
If disputes progress beyond intra-office matters, ADR also encompasses litigation-prevention tools like arbitration and mediation. Arbitration is a voluntary process between the employer and employees, meaning that both parties have to agree to participate. It is more common in a unionized workforce setting, but is becoming increasingly popular for all employers because it involves a final, binding decision. Mediation, on the other hand, can be voluntary or involuntary, depending on where a claim begins. Some state court systems do not require parties to mediate their claims, while others will direct parties to mediation as a means to determine if the parties can resolve their dispute amicably before proceeding with litigation. The mediator's final decision is hardly ever binding which makes mediation a useful tool for parties to analyze the strength of their positions.
Regardless of the type of ADR, HR plays an active role in promoting the employer's interests, either by acting as an arbiter between disputing parties in the proactive phase, or by supporting the employer's position in the reactive phase.
Trends: Due to the rise in and ever-increasing costs of litigation, employers are increasingly turning to ADR as a solution. Labor disputes, wage and hour, and discrimination claims in particular are increasingly common and employers need to take steps to stem the tide of lawsuits. ADR is a valuable and effective means to accomplish that goal, particularly if utilized in both proactive and reactive ways.
Author: Melissa Boyce, JD, Legal Editor
Updated to include information on a circuit court ruling regarding the National Labor Relations Act and class action waivers in arbitration agreements.
The 7th Circuit Court of Appeals has ruled, in Lewis v. Epic-Systems Corp., 2016 U.S. App. LEXIS 9638 (7th Cir. 2016), that a health care software company's arbitration agreement violates the right of employees to engage in protected concerted activity under the National Labor Relations Act (NLRA) by barring them from participating in or pursuing wage-and-hour class action or collective claims. Because the ruling deepens a split among the circuits on this issue, it could lead to an eventual review by the Supreme Court to resolve the inconsistency.
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A divided Supreme Court ruled that class action waivers in arbitration agreements are enforceable, even if the cost of prevailing in individual arbitration claims is high. Employers should consider using arbitration agreements as a cost-saving measure and should consider including class action waivers in their arbitration agreements as a means to prevent employees from banding together to pursue their claims.
HR guidance on alternative dispute resolution methods, its usefulness in the pre-dispute phase and its usefulness as a means to resolve pending disputes.