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To What Extent are US Firms Conflict Management Innovators?

Alex Colvin, Cornell UniversityESRC Seminar Series – Belfast

Apr. 18, 2013

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Conflict Management Fields in the U.S.

Unionized workplace procedures

ADR as an alternative to litigation

Nonunion workplace conflict management systems

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Unionized Workplace Procedures

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Union Workplaces: Historical Context

• Strong distinction in law and practice between union and nonunion workplaces – exclusive representation system.

• Declining levels of unionization – below 7 percent in the private sector.

• Labor arbitration a central component of workplace dispute resolution in unionized sector since 1940s.

• Still virtually universal in unionized workplaces.

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Key Characteristics of U.S. Labor Arbitration

• Privatized system of conflict resolution.• Well developed professional cadre of neutral

labor arbitrators. • Parties pay for arbitrators.• Strong legal support for enforceability. • Quid pro quo for no mid-contract strikes.• Final stage of grievance procedures.

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Concerns about Labor Arbitration?

• Tendency to formalization and legalization.• Increased use of lawyers as representatives

– increased # of arbitrators are lawyers. • Delays in obtaining arbitrators: often takes 9-

12 months to get a hearing date.• Cost of arbitration:

– FMCS: average arbitrator cost $5,000 ($1,000/day).

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Grievance Mediation as an Alternative

• Best known example developed in high conflict unionized workplaces: coal mines in 1970s.– Ury, Brett, Goldberg, “Getting Disputes Resolved”.

• Mediation before arbitration:– High resolution rate; – Faster and lower cost than arbitration.

• Successful in context, but not widely copied.• Suggests robustness of labor arbitration in most

settings.

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ADR as an Alternative to Litigation

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Rise of Employment Litigation

• Expansion of substantive protections: – Title VII of Civil Rights Act; ADEA; ADA; etc.

• U.S. litigation system:– Complexity of civil court cases: average case

takes 2+ years to trial.– Potential for large damage awards:

• $176K median; $394k mean in Federal Courts.• 270% increase in cases in 1990s.

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Employment Arbitration

• Historically rare in nonunion workplaces. • In 1991 U.S. Supreme Court decides Gilmer

case, allowing arbitration of statutory claims.• Now widespread, quarter or more of nonunion

employees covered by arbitration.• Private ADR system, substitutes for and bars

access to the courts for employment statutes.

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Mandatory Arbitration Controversies

• Arbitration required by employer:– Employer designates the procedure.– Damages and win rates lower than in litigation.– Indications of repeat player bias.

• Arbitration in other contexts, individually negotiated and labor, popular and uncontroversial.

Employment Arbitration and Litigation(Colvin, Journal of Empirical Legal Studies (2011))

Employment Arbitration

Federal Court litigation

State Court litigation

Employee Win Rate

21.4%(n=1213)

36.4% (n=1430) 57% (n=145)

Median Damages

$36,500(n=260)

$176,426 $85,560

Mean Damages

$109,858(n=260)

$394,223 $575,453

Mean w/zeros

$23,548(n=1213)

$143,497 $328,008

Time to Trial

361.5 days 709 days 723 days

Danger of Repeat Player Bias in Privatized Employment Arbitration

One-Shot Pairing Repeat PairingRepeat pairings amongst repeat employers

(n=722) (n=123)

Employee win rate 17.9% 11.4%+Damage awards $18,370 $3,009+

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Conflict Management in Nonunion Workplaces in the U.S.

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Factors behind the Growth of Nonunion Conflict Management

• Companies’ desire for protection from litigation and unionization:– All or nothing U.S. union representation.– Low rights but intense conflict of U.S. litigation.

• Efforts to enhance workplace conflict management as part of high commitment human resource strategies:– Interaction of internal HR strategies and external

pressures on organizations.

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Wide Variation in Conflict Management Practices

• Lack of specific legal or public policy guidance. • Experimentation in forms of ADR:

– Who decides grievances: experimentation with non-managerial decision-makers.

– Form of resolution process: determination (arbitration-like) versus facilitation (mediation-like) procedures.

– Stand-alone versus integrated conflict management.

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Peer Review Example

• Developed by nonunion firms looking to substitute for union grievance procedures.

• Panel of 3 peers and 2 managers sitting as a “workplace jury” to decide grievances.

• Also part of high commitment HR strategy.• Frequently used and effective, but requires

organizational commitment.

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Conflict Management Systems

• Growth of integrated conflict management systems with multiple ADR elements.

• Typically including interest and rights based procedures.

• Mixed motivations and impacts.• TRW example: adopted arbitration to avoid

litigation, but mediation more widely used. – Blue collar peer review/white collar arbitration.

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No One Type of ADR in the U.S.

• High variety of dispute resolution procedures in U.S. workplaces.

• Ranging from the simple, e.g. open door, to elaborate multi-element systems.

• Form following function in ADR design:– High conflict union => grievance mediation.– Legal protection =>employment arbitration.– High road nonunion => peer review.

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U.S. Exceptionalism or Universal Lessons?

• Some U.S. ADR innovations a response to unique U.S. problems: litigation system.

• Illustrates strengths and weaknesses of privatized conflict management: – Success of bilateral labor arbitration.– Dangers of unilateral employment arbitration.

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Conclusion: Lessons from the U.S.

• Elements that can be adapted:– Success of interest based methods.– Value of comprehensive, integrated conflict

management systems.– Importance of integration with HR system.

• Elements to avoid:– High inequality across firms.– Lack of public policy framework and guidance.