The Harvard Negotiation Law Review stated in their article titled, “U.S. Corporations Should Implement In-House Mediation Programs Into Their Business Plans To Resolve Disputes “ that the Toro Company, a manufacturer of professional and homeowner outdoor maintenance machinery, reported that “it had not been involved in a jury trial nor had any discovery of its documents since 1994” because of its mediation approach to conflict management. Before Toro Co. implemented its in-house ADR program in 1992, the cost of the average litigation file to Toro Co. was more than $47,200. After implementation of its ADR program, the 905 claims resolved between 1992 and 2000 were settled for an average of $20,250–and 95 percent of these settled within four months. A significant ancillary benefit to Toro Co. was that during each of the program’s first three years, the company’s insurance premium dropped by $1.9 million.”
An article on www.allbusiness.com reported that Angela Rud, interim vice president of HR for International Dairy Queen Inc., a national ice cream franchisor with 2,400 employees, estimates that, since 2004, the company has saved at least $25,000 in legal fees by choosing to mediate and settle early rather than litigate. In addition, mediated cases generally resulted in lower payouts than those that were vigorously defended, Rud says. It further reported that more and more employers (e.g., CIGNA, Federal Express, McGraw-Hill, Chemical Bank, J.C. Penney) are adopting an internal system aimed at resolving employment disputes. These systems vary in design and content. Some are mandatory, and some are voluntary. Some are wholly internal, and others include external mediation or arbitration after inhouse efforts have been exhausted.
The fact of the matter is that as employees are being laid off, perhaps due to financial considerations and factors given the state of our economy, a disgruntled employee may perceive that his/her job loss is somehow indicative of discrimination (especially if someone of a different age category, race, sex or other status got to keep his/her job). As a result, the U.S. Equal Employment Opportunity Commission (EEOC) saw the highest increase in discrimination charge filings last fiscal year, the largest annual increase (9%) since the early 1990s.
Consider some of these other alarming statistics from various surveys:
• Plaintiffs have won 43% of verdicts in jury trials compared to 22% when heard by a judge.
• U.S. companies spend $20 billion a year on litigation – not including settlements and judgments.
• 78% of employees surveyed believe employers engage in hiring or promotion discrimination.
• Employment litigation in federal courts increased 400 percent in 20 years.
• While the federal civil court caseload increased 125% in 20 years, employee discrimination case filing increased 2,166%.
It can easily cost an employer in excess of $50,000 in attorney fees just to litigate a case through the discovery phase of a lawsuit. These fees will many times eclipse $100,000 if the case goes all the way to trial. As the companies referenced earlier in this post indicate, mediated resolutions can save a company substantial amounts of money. In fact, according to the EEOC, 72 percent of complaints that go to mediation are resolved. Of the employers that have voluntarily participated in the EEOC Mediation Program, 96 percent say they would do so again.
With those success ratios, it is hard to blame them for becoming advocates of the mediation process. Yet curiously, there is a good percentage of employers who continue to resist mediation. Maybe it is to prove a point to other employees (if you sue us, we will fight you to the end). Maybe it is the competitive spirit of the company (after all, to be in business is to always be competitive in order to stay in business). Maybe it is to stand on principle and not reward an ex-employee for simply filing a discrimination charge or lawsuit (this is especially true if the employer thinks the lawsuit has no merit). Whatever the reason, some cases may never become ripe for mediation. But I believe those cases should be the exception, not the rule. After all, we get into business to make money and to save money, not throw it away in litigation, don’t we?!