Cutting a deal
City employers are finally getting to grips with ADR as an alternative to costly, time-wasting litigation. But could other sectors catch the bug? By Simon Kent.
Alternative dispute resolution (ADR) techniques are gaining a foothold among financial and City firms in the UK. The City Disputes Panel (CDP), a non-profit organisation which has specialised in commercial disputes, has recently launched a bespoke employment support service to offer employment dispute resolution to members.
Karl Davies, chief executive of the CDP, said the move came as a response to growing interest in ADR and mediation techniques to settle employment disputes, avoiding the huge cost and reputational damage which can occur.
Terry Jones, a director at the Centre for Effective Dispute Resolution (CEDR), confirms this trend, noting banks and financial organisations are developing ADR techniques, sometimes in collaboration with UNIFI, the banking union.
Whether this development has the potential to lead other industry sectors away from the courts has yet to be proved. You only have to look at recent cases such as that of Louise Barton and Investec Henderson Crosthwaite, which have incurred high costs both financially and timewise, to see that the City of London is the ideal environment for proving the worth of confidential and relatively swift resolution techniques.
Jones, a veteran of the Square Mile himself with 35 years experience in commercial banking - including 17 at Barclays - believes the technique has aspects in common with the City's dealing/trading culture. "The culture is about looking for cost effectiveness," he says. "Every firm is concerned about profits, but that's about being cost-effective and managing time productively. You don't want to devote excessive management time to a dispute. There's also a deal-making culture," he adds. "So those aspects work in favour of ADR techniques."
"The message we received from employers is that they are desperately trying not to be combative," adds Davies. The CDP has created a panel of 22 specialists, including HR practitioners and employment lawyers, to handle employment disputes in a similar way. This is a result of companies wishing to transfer their positive experience of mediation in dispute resolution into the employment arena.
ADR's proponents are, however, faced with something of a Catch-22 situation. Those who experience ADR usually have a positive experience and will use it again - the general view is that 85 per cent of cases are resolved to the satisfaction of both parties. But it can be difficult to get employers to take that first step because it is practically impossible to publish any positive results. To do so compromises one of the most valuable aspects of ADR - complete confidentiality.
"Board-level disputes have been handled through ADR," says Allan Connarty, director of operations at the Chartered Institute of Arbitrators. "The press frequently challenge issues such as levels of pay or questions how such figures were arrived at, and sometimes the answer is mediation. Therefore you cannot disclose exactly how and why that figure was agreed. While the figure agreed could seem high, it may have been worth it to avoid certain other issues being made public at a tribunal."
As in the Barton case, matters such as how a bonus scheme operates are often regarded as commercially sensitive information. Indeed, Jones suggests discussing such information can lead to entire teams being poached by competitors, while ongoing disputes undoubtedly undermine morale and consequently the performance of top employees.
Mark Mansell, employment partner at Allen and Overy, notes the confidentiality of ADR also works in favour of the individual. "At the moment, Louise Barton is not known primarily for her skills, she's known as the person making this claim," he says. "Mediation has been used to resolve bonus issues in the City precisely because it protects both parties."
Connarty agrees: "There may be employees who decide they know what the market is for their skills, but realise if they push for that amount and refuse to compromise, they may never work again," he says. "That gives them further impetus to go for broke. Alternatively, they may decide to negotiate, take a lower financial award and recognise that they will work again."
However, practitioners recognise that ADR is not always the way forward. "The Barton case is a justice issue," says Jones. "To some extent it argues against mediation, because if it were resolved in that way, how would anyone else know justice had been done?"
"ADR doesn't work if you have a case where the law hasn't really been tested," says Kathryn Britten, a forensic accounting partner at BDO Stoy Hayward. "In some cases, unless you go to court, you have no certainty and it can be difficult to reach any agreement. One of the ways you mediate is to refer to previous cases and to points of law as tested."
Britten is still quite a rarity as a non-legal professional with mediator training, but it is precisely the combination of her specialist knowledge and mediation skills that makes her so useful. "Mediation works well with complex financial issues when the mediator has been briefed in advance by both parties and can help them reach a negotiated settlement," she says. "The whole process focuses on the future, whereas litigation looks at what happened in the past. That offers far more creative options for resolution."
Davies echoes the need for mediator knowledge of the culture or industry in which the dispute occurs. "There is far more interest in getting a facilitator who understands the business and pressures the parties are under, and so can frame a resolution in that context," he says. "That is of more worth than someone who takes a 'vanilla' approach to every situation and says they don't need to know the details to help resolve the problem." This gives mediation another advantage over tribunals - it is less likely a court will fully appreciate the working culture in which a dispute has occurred.
Though many ADR practitioners are frustrated at the apparent tardiness in taking up these techniques, not all favour introducing legislation to force them on employers. "I think legislation would be useful because the more people go through the process, the more they will recognise the benefit," says Britten. "It would create a learning curve for all involved."
"I'm not a fan of legal compulsion," says Davies. "Essentially, mediation works because it is voluntary. Both parties have chosen to invest time and effort in finding a solution - they have bought into the process and the outcome is going to be consensual. There is always a risk with legislation that it just becomes a process."
That said, ADR has been the subject of legislation in parts of the US, and experience suggests it has played an integral part in organisations adopting ADR as part of their grievance procedures. Having been compelled to explore ADR before going to court, firms now consider it at an earlier stage in disputes.
"Since being exposed to ADR, people have found it works," says Davies. "So it is used long before legal proceedings trigger the requirement." The same pattern has been seen at some US firms where the initial introduction of ADR policy (usually a clause to simply consider/explore ADR techniques for each individual grievance) has removed the knee-jerk reaction to start legal proceedings.
The HR director as mediator
