Mediation or Arbitration – What is Best?

Involved in a Difficult Situation?  Need a Solution?

There are still many people out there that are not aware of the positive potential of mediation as a way to deal with difficult situations.  Be it a union/management matter, a dispute between neighbors, or a customer who is not happy with the product or service received, mediation is a potentially quick and cost-effective way of resolving an issue.  By way of example, we have the case of an employer and a union who have found themselves in a battle over the termination of an employee.  Let’s look at their two main options, mediation versus arbitration.  For readers in non-union workplaces, substitute litigation for arbitration, and you will be able to follow along.

Firstly, let’s look at what mediation and arbitration are.

Defining Mediation and Arbitration

Mediation is the process whereby a third party, jointly agreed upon by the parties, and without decision making power, assists the parties in identifying their real issues and interests, resulting in the identification of a common ground that can lead to settlement of an issue.  If both parties are willing, and have some room to compromise (often identified during the mediation process if it was not their prior), mediation has an excellent success rate, as it results in agreements made by the parties themselves.  As a process, it is relatively informal, as it is up to the parties, guided by the mediator, to determine its flow.  Mediations can often be successfully concluded within a day or two, with mediator costs in the range of $500-$2,000 per day, depending on the issue and the mediator selected.

Arbitration is the process where the parties engage the services of a third party, usually agreed upon by the parties, who will hear the cases put forward by the parties and then render a final and legally binding decision.  Arbitration hearings are very legalistic in process, with the parties usually represented by legal counsel.  Legal arguments and techniques are used throughout, and decisions are often based on previous legal precedents.  Arbitration hearings often are days in length, with each date based upon the availability of the arbitrator, resulting in dates often weeks or months apart.  As a result, an arbitration that requires five days of hearing may often take six months or longer to be concluded, to which is added the time the arbitrator may take to write the decision.  Costs vary significantly, but it is not uncommon for an arbitration, based on the arbitrator (or arbitrators, as some collective agreements call for arbitration boards of three) and legal counsel selected of anywhere from $10,000 to $100,000+.

Now let’s return to our situation.

Mediation or Arbitration- What is Best?

A unionized employee has been terminated and has filed a grievance through his union.  The mandatory grievance hearings have taken place and the grievance has been turned down by the employer.  The union has notified the employer of its desire to proceed to arbitration.  Both parties know that, as this is a termination case, the arbitration will be lengthy and therefore costly.

While this may seem a fairly black and white situation, it may not be.  Both parties have to take into consideration issues such as their legal responsibilities, the strength of their case, and the importance of the reason for the termination before determining first whether or not to go to arbitration or how to deal with the situation once arbitration has been requested.  In most cases, this is something that is often discussed between the parties and their legal counsel.

The union may have proceeded with arbitration not because it believes that it has a strong case, or even because the reason for the termination is potentially precedent setting, but because of what is known as ‘the duty of fair representation’ under the Ontario Labour Relations Act.  Simply put, if a union member does not feel that he or she is being fairly represented by his or her union, a complaint can be filed against the union with the Ontario Ministry of Labour.  Most unions seek to avoid such complaints, but such complaints are becoming a growing possibility for unions.  To avoid them, they have to be seen as doing what is in the best interest of the employee.  As a result, to avoid the potential of a complaint, they will proceed to request arbitration, hoping that the matter can be resolved prior to the arbitration actually taking place.  This is one instance where mediation can be of assistance.

From management’s perspective, while the union’s request for mediation may have been inevitable, it may be in the employer’s best interest to attempt to avoid it.  If their case is weak, if the costs of a potential arbitration are seen as potentially prohibitive, management may seek an alternative to arbitration.  Here is a second instance where mediation can be of assistance.

Before either party suggests mediation, it is important for them to review their situation and what they want to accomplish.

In some cases, the union is caught in a difficult situation.  While the union may understand, and in some cases secretly agree, with the termination, the duty of fair representation may stand in the way of their withdrawing the request for arbitration.  Even if they do not agree with the termination, the strength of their case and even their financial situation may dictate that an alternative resolution method should be sought.  Similarly, and as referenced earlier, management may have come to the same conclusion.

Both parties may also need to reflect on what they really want.  In some cases, the reflection may lead to the realization that what they really want is the terminated employee gone permanently, at a cost substantially lower than arbitration.  This may be the case even when the employer has a strong case, but even more so when the employer’s case is week.   Any solution that will accomplish these goals would be seen by the parties as a good one.

If both management and the union see early on that it would be in their mutual best interests to settle this matter prior to arbitration, they may see the need to meet again.  While it is unlikely that the parties would agree to reinstate the employee (although that may be possible), the discussion may resolve around a financial package in exchange for the employee’s resignation and the withdrawal of the grievance by the union.  This may have been the real goal of both parties throughout the process, it may be difficult to obtain if the employee is not in agreement.  These discussions may have taken place during the grievance hearing(s), with the employee wanting more than the employer is offering, or wanting his or her job back.  This complicates the issue for the union, as usually unions will not or cannot agree to such a deal without the agreement of the employee.  Sometimes, it will take the intervention of a third party to help all parties, including the employee, see the best solution for all.  A third instance where mediation may be of assistance.

What is the Right Answer?

Should mediation be considered for all such situations?  Considered yes, but there are situations were mediation is not likely to help.  If there are concerns that, in our scenario, the rationale behind the termination is potentially precedent setting and needs to be clarified legally, or where there is no potential for agreement between the parties, mediation may not be the best course of action.  In some cases the parties want or need specific clarification from an arbitration on an issue, particularly those related to policies.

As mentioned earlier, for those with non-union work forces, or on matters not employee related, if you substitute litigation for arbitration, the arguments for and against mediation still hold.  A non-union employee may, if terminated, sue for wrongful dismissal.  Mediation prior to court, mandated for some jurisdictions and some matters, is often a good idea.  In both union and non-union situations, experience shows that in some cases the terminated employee only wants to vent or be heard prior to accepting a package that, often with the help of the mediator, is now seen as acceptable.

Mediation, as a process or as a solution, is not perfect.  It is, however, a proven alternative to more formal, time consuming and expensive processes.  When faced with a difficult dispute, doesn’t it make sense to consider all alternatives?

If you would like to discuss mediation as an alternative, I would be happy to chat with you.  As a Mediator, I admit to bias in favour of the process, but each situation is different and requires the consideration of all alternatives.  Contacting me at john@jmboxconsulting.com or at 519-903-5634 can be part of your consideration process.

Please comment below if you have any questions about Mediation or the Mediation process.