September 2000


By Robert E. Meade

Increasingly, employers and employees face workplace disputes involving alleged wrongful termination, sexual harassment, or discrimination based on race, color, religion, sex, national origin, age, and disability. To resolve these disputes in a fair, private, and cost-effective manner, more companies are turning to mediation, arbitration, and the full range of out-of-court settlement procedures by incorporating those procedures into their employment contracts, personnel manuals, and employee handbooks.

The Growth of ADR

Nearly 500 large corporations, representing approximately 5 million employees worldwide, have implemented alternative dispute resolution (ADR) programs that require the administrative services of the American Arbitration Association (AAA), and that number is expected to grow exponentially in the coming years. During the past five years, the AAA has witnessed a surge in the number of employment ADR case filings: 1,973 in 1999, up from 575 in 1994. The AAA has a roster of “client-proven” mediators with significant experience and high success rates, with 85–90% of disputes reaching settlement.

An Effective Option

A recent survey of Fortune 1000 general counsel and chief litigators conducted by PricewaterhouseCoopers and Cornell University revealed that 87% had used mediation at least once in the past three years and nearly 79% had used mediation to resolve employment disputes. Eighty percent of the companies reported that mediation saved time, 89% said it saved money, and 83% agreed that mediation allowed parties to resolve the disputes themselves.

Most companies’ ADR programs include internal procedures, such as peer review and internal mediation, as well as external procedures including fact-finding, mediation, and arbitration, which have proved to be fair and cost-effective ways to resolve workplace disputes privately.

For example, an employment lawsuit can cost approximately $30,000–50,000 depending on the complexity of the issues and can often last several years with multiple appeals. By comparison, using a mediator—an impartial individual with whom the parties discuss their dispute and who assists them in reaching a settlement—generally costs $150–250 per hour, split equally by the parties. The mediator may suggest ways of resolving the dispute but cannot impose a settlement on the parties. Because most employment matters can be resolved in one mediation session, the average cost might be only $600–1,000 per party, plus attorney’s fees. As an incentive, at least one major national insurance company offers a refund in deductibles of up to $25,000 for companies that adopt employment ADR programs.

Ensuring a Fair Process

In 1995, the AAA adopted the “Due Process Protocol for Mediation and Arbitration of Statutory Disputes Arising out of the Employment Relationship,” which was developed by a task force of individuals representing management, labor, employment, civil rights organizations, private administrative agencies, government, and the AAA. The protocol seeks to ensure fairness and equity for the resolution of workplace disputes. The following year, the AAA introduced its “National Rules for the Resolution of Employment Disputes,” which encompasses both mediation and arbitration.

Electing Mediation

If two or more parties want to adopt mediation as a part of their contractual dispute settlement procedures, they can insert the following clause into their contracts:

If a dispute arises out of or relates to this contract, or breach thereof, and if the dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Employment Mediation Rules before resorting to arbitration, litigation, or some other dispute settlement method.

Even if there is no pre-dispute agreement to mediate, the AAA encourages parties to use mediation when the case is commenced in accordance with an arbitration clause. Under its mediation rules, the AAA will appoint a mediator, although if the parties’ agreement names a mediator or specifies a method of appointing a mediator, that will be followed. In AAA mediation, the parties can be represented by an attorney or any other chosen individual. The parties and their representatives may also attend mediation sessions, but to ensure privacy, other persons may attend only with the consent of the parties and the mediator.

Copies of Resolving Employment Disputes: A Practical Guide, are available from the American Arbitration Association at (800) 778-7879 or

Robert E. Meade is a senior vice president of the American Arbitration Association and co-chair of the AAA National Employment Steering Committee. This article is the first in a three-part series.

Philip Zimmerman, CPA

Mediator and Arbitrator

This Month | About Us | Archives | Advertise| NYSSCPA

The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.

©2009 The New York State Society of CPAs. Legal Notices

Visit the new