Jacquelin F. Drucker is a full-time arbitrator of employment, labor, and commercial cases. Her practice spans the East Coast, Northeast, Caribbean, South, and Mid-West. She is listed on the AAA Labor Panel, the AAA National Employment Arbitration Roster, and all other major national and local panels. Ms. Drucker, a member of the National Academy of Arbitrators, serves as a permanent labor arbitrator in numerous industries and, as an employment arbitrator, has handled cases involving the full range of statutory and contract claims under in-house employment ADR systems and pursuant to individual employment contracts.

Ms. Drucker is on the faculty of Cornell University School of Industrial and Labor Relations and the Cornell Institute on Conflict Resolution, where she teaches programs on employment arbitration, labor arbitration, employment mediation, sexual harassment, and employment law. Ms. Drucker also is associated with the W. J. Usery, Jr. Center for the Workplace in Atlanta, Georgia. She was the designer of and lead instructor for the AAA’s 1999/2000 nationwide training program for its Employment Arbitration Panel and is a lead trainer for the AAA’s nationwide advanced employment arbitrator training program.

During her 25-year career in employment law and labor relations, Ms. Drucker practiced labor and employment law on the management side, spent several years as a union lobbyist, and, before relocating to New York in 1990, served as the General Counsel, Vice Chair, and Executive Director of the then newly formed Ohio Employment Relations Board. She was instrumental in the development of Ohio’s collective bargaining law, the formation of its adjudicatory and impasse-resolution board, and the operation of the state’s labor mediation service. While in the private practice of law, Ms. Drucker litigated employment discrimination cases on behalf of management and handled traditional labor relations matters. She also served as counsel to the Governor’s Task Force on Collective Bargaining.

Ms. Drucker is the author of numerous articles on labor and employment law. She is sole author of the treatise Collective Bargaining Law in Ohio (788 pp, West Publishing, 1993), which frequently is cited by Ohio’s highest courts and is regarded as the definitive work in the field of labor law and impasse resolution in the state. She is associate editor of Discipline and Discharge in Arbitration (ABA/BNA, 1998) and is a contributing editor of Public Sector Labor and Employment Law, Second Edition (NYSBA, 1998). Her recent articles include the following: “The Evolving Role of Arbitration in the Workplace,” Proceedings of the University of Louisville 2001 Carl Warns Institute (forthcoming 2001); “Manifest Disregard of the Law: Why Reasoned Awards Are Preferred in Employment Arbitration,” Conflict Management, Spring 2001 (ABA Litigation Section, ADR Committee); “Employment Arbitration and Labor Arbitration: Comparisons, Contrasts, and Concerns,” Proceedings of the ABA Labor and Employment Law Section ADR Committee 2001 Mid-Winter Meeting (ABA, 2001); “Arbitrating and Mediating Wrongful Termination Claims: Practical Considerations,” Handling Wrongful Termination Claims, (Practising Law Institute, 2001); “Arbitrating Employment Claims: Tips for Advocates,” The Effective Use of ADR in Employment Disputes (NYSBA CLE Programs, 1999); and “Is There a Wright Way? Arbitration of Statutory Claims under Collective Bargaining Agreements,” Proceedings of the American Bar Association 1999 Annual Meeting (ABA, 1999).

Ms. Drucker is the neutral chair of the ABA Labor and Employment Law Section’s Committee on ADR in Labor and Employment Law. She serves as CLE Chair for the NYSBA Labor and Employment Law Section, is a former co-chair of that Section’s Committee on ADR in Employment, and is a past secretary of the Section. She also has served as neutral chair of the ADR Advocacy and Development Subcommittee of the ABA Labor and Employment Law Section’s ADR Committee and is a past chair of the New York County Lawyers Association’s Committee on Labor Relations and Employment Law.

Ms. Drucker is admitted to the bars of Ohio, New York, and various federal courts, including the Supreme Court of the United States.

August 20, 2001

Alternative Dispute Resolution

The United States Supreme Court and other courts across the country appear to becoming more favorably inclined toward enforcing mandatory arbitration agreements. In addition to evaluating mandatory arbitration provisions, many employers also are considering other forms of alternative dispute resolution (“ADR”), such as formalized employee grievance procedures, open door policies, and the like.

To assist your analysis in determining whether your Company should adopt a binding arbitration process or some other form of ADR, we are providing a review of the current state of the law governing arbitration agreements. SUPREME COURT APPROVES MANDATORY PRE-DISPUTE ARBITRATION On March 21, 2001, in Circuit City v. Adams, the U.S. Supreme Court made it easier for employers to require non-union employees to arbitrate employment disputes instead of filing lawsuits in court. The decision gives broad protections to arbitration agreements under the Federal Arbitration Act.

1. The Federal Arbitration Act

Congress passed the Federal Arbitration Act (“FAA”) in 1925 in response to judicial hostility towards arbitration. Section 1 of the FAA clearly states the courts must enforce private agreements to arbitrate.

[a] written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

The FAA also contains an exception to the enforcement of arbitration agreements:

[N]othing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.

2. The Law Prior to Circuit City

In the 1980s, the U.S. Supreme Court decided a series of cases under the FAA, holding that parties could agree in advance to arbitrate disputes even before they arose. The Court made clear that by agreeing to arbitrate, a party does not forego a legal right, but rather picks a different forum-arbitration instead of court. None of these cases, however, addresses whether the exception to arbitration clause in the FAA applied to all workers or just those involved in the interstate transportation industry.

In 1991, the Supreme Court decided Gilmer v. Interstate/Johnson Lane Corp. In Gilmer, the Supreme Court held that an arbitration agreement contained in a New York Stock Exchange registration statement was enforceable under the FAA. The Supreme Court, however, avoided the issue of whether the FAA applied to all workers. The Court did not have to decide that issue because the contract in Gilmer was between a stock exchange and Mr. Gilmer; it was not an agreement between an employer and employee. The Supreme Court’s decision in Circuit City put that issue to rest.

3. The Issues In Circuit City

St. Clair Adams worked as a sales counselor at a Circuit City store in Santa Rosa, California. When he was hired, Circuit City required Adams to sign an employment application that contained the following provision:

I agree that I will settle any and all previously unasserted claims, disputes or controversies arising out of or relating to my application or candidacy for employment and/or cessation of employment with Circuit City exclusively by final and binding arbitration before a neutral Arbitrator. . . . Two years after he was hired, Adams filed a civil complaint in California state court against Circuit City, alleging claims for discrimination under the California Fair Employment and Housing Act and various state tort claims. The Ninth Circuit Court of Appeals held that the dispute was not arbitrable under the FAA because Adams worked in interstate commerce.

The Supreme Court reversed the Ninth Circuit and decided the FAA requires courts to enforce arbitration agreements in all employment contracts, except for employees working in interstate transportation, such as seamen and railroad workers. Adams was not involved in interstate transportation. The FAA therefore applied and the arbitration agreement he entered into was enforceable under the FAA.


Circuit City continues a trend by the Supreme Court–to provide employers with incentives to implement proactive preventive human resource strategies. In 1998, the Supreme Court decided Faragher v. City of Boca Raton and Burlington Industries v. Ellerth. These cases reward employers with comprehensive policies and procedures to prevent and respond to sexual harassment. In brief, an employer with a meaningful complaint resolution procedure may avoid liability for sexual harassment if the employee unreasonably failed to utilize that procedure.

Then, in 1999, the Court decided Kolstad v. American Dental Association. In Kolstad, the Court established a defense to punitive damages in federal discrimination claims. This powerful defense to punitive damages liability is available to employers that make good faith efforts to comply with civil rights laws such as Title VII of the Civil Rights Act of 1964. These efforts include preventive strategies such as a comprehensive, anti-discrimination policy.

As mentioned, the Circuit City case continues this trend. After Circuit City, employers will find it easier to use well-drafted arbitration agreements to avoid complicated, expensive litigation in court and the uncertainty of jury trials in favor of a more streamlined and informal method of dispute resolution. Thus, the Supreme Court’s recent decisions enable employers investing in preventive measures to significantly reduce their exposure to the costs and uncertainties of employment discrimination litigation.


The Circuit City decision will enhance the enforceability of mandatory arbitration agreements between employers and their employees. Among other things, the FAA

  • imposes a strong presumption in favor of arbitrability;
  • provides for streamlined enforcement of agreements and confirmation of awards;
  • authorizes courts to stay lawsuits when an issue in the case is subject to arbitration; and
  • preempts state laws aimed at limiting or restricting arbitration agreements.
  • This last factor perhaps is the most important one for multi-state employers that desire to implement uniform arbitration agreements. For example, in a 1996 decision, Doctor’s Associates v. Casarotto, the Supreme Court held the FAA preempted a Montana law requiring contracts to include any arbitration clauses on the first page of the agreement and in underlined capital letters.


    The Circuit City decision did not resolve all of the outstanding legal issues relating to the enforceability of mandatory, pre-dispute arbitration agreements. A brief discussion of some of the remaining questions follows.

    1. Open questions under federal law regarding mandatory arbitration of discrimination claims

    a. The Civil Rights Act of 1991

    At least until the Ninth Circuit Court of Appeals has the opportunity to consider the Supreme Court’s decision in a later case, discrimination claims brought under Title VII still may be exempt from arbitration in California and other states covered by the Ninth Circuit. In 1998, in Duffield v. Robertson Stephens Co., the Ninth Circuit held that under the Civil Rights Act of 1991 pre-dispute arbitration agreements are unlawful. To date, the Ninth Circuit is the only appellate court to adopt this view. One federal district court in California already has decided that Circuit City indirectly overruled Duffield. The EEOC, however, continues to take the position that mandatory, pre-dispute agreements to arbitrate discrimination claims are unlawful under Title VII, the ADA and the ADEA. Over the course of the next year or so, it is likely the courts will more definitively decide whether Duffield and the EEOC’s position remain valid after Circuit City.

    b. The Older Workers’ Benefits Protection Act

    The Older Workers’ Benefits Protection Act imposes a number of requirements on waivers of substantive rights under the Age Discrimination in Employment Act. Courts have not fully resolved whether a pre-dispute mandatory arbitration clause is subject to this law.

    c. The National Labor Relations Act

    Courts also remain divided over whether a union contract can require arbitration of statutory claims, such as for employment discrimination. In the Alexander v. Gardner-Denver case, the Supreme Court held that a general arbitration clause could not be used to compel arbitration of statutory discrimination claims. In a more recent decision, Wright v. Universal Maritime Services Corp., the Supreme Court held a collective bargaining agreement requirement to arbitrate statutory rights must be “clear and unmistakable” to be enforceable. The language at issue failed to meet this standard. Finding no waiver had actually occurred, the Court declined to resolve the more fundamental question of whether a clear and unmistakable union-negotiated waiver can be enforceable.

    2. Open questions under state law regarding mandatory arbitration of discrimination claims

    The Supreme Court held in Circuit City that even though pre-dispute mandatory arbitration agreements will be enforced under the FAA, employers still must draft contracts for arbitration which comply with and are subject to state contract law requirements. Therefore, even after Circuit City, multi-state employers wishing to adopt a uniform arbitration agreement still must take into consideration individual states’ laws applicable to any contract.

    a. Offer, Acceptance, and Consideration

    State law determines the validity of a contract. Enforceable contracts require a valid offer, acceptance, and “consideration.” Consideration means some sort of value conferred in exchange for the contractual provision. Consideration may involve payment of money, but it also can involve a promise to do something or to give up the right to do something.>

    States are free to apply their own legal standards to these elements. The most variable issue among the states is what constitutes sufficient consideration. For new hires, the employer’s job offer at a given wage generally will be sufficient consideration for the employee’s promise to arbitrate any employment-related claim. State laws may vary considerably, however, regarding what consideration must be furnished to current employees in exchange for an arbitration agreement. For example, in some states, the employer’s permitting the employee to continue working in exchange for the employee’s agreement to arbitrate will be adequate consideration. In other states, however, the employer will have to provide a financial inducement to the employee in exchange for his or her promise to arbitrate. In these latter jurisdictions, the employer may wish to condition eligibility for a bonus or salary increase on the employee’s assent to the arbitration agreement.

    The employer alternatively may elect to pay the employee a financial incentive to sign the arbitration agreement. The amount of the incentive need not be large, but it must be sufficient under the particular state’s standards for valid consideration.

    b. Defenses

    The FAA expressly provides it does not preempt traditional contract defenses under state law, such as unconscionability, fraud, and duress. State courts’ interpretations of these defenses vary considerably from state to state.

    For example, in Armendariz v. Foundation Health Psychare, the California Supreme Court held that pre-dispute agreements to arbitrate statutory employment discrimination claims were “unconscionable” unless they complied with certain requirements, including the following:

    • the employer agrees to bear the costs of arbitration
    • the agreement must require both the employer and employee to arbitrate claims.
    • neutrality of the arbitrator
    • provisions for adequate discovery
    • written arbitrator’s decision permitting judicial review

    In April 2001, after the Circuit City decision, the Washington court of appeals decided the application of compulsory arbitration agreements to retaliatory discharge and overtime claims violate public policy. Other states’ courts may follow suit in an attempt to come within the FAA’s preservation of state law contract defenses. In addition, states may respond to Circuit City by legislating that certain statutes may not be resolved via arbitration.

    It remains to be seen whether the state court decisions such as Armendariz are attacked as “end runs” around FAA preemption. At present, employers seeking to enforce arbitration agreements should ensure they comply with state law. Multi-state employers desiring uniform agreements will have to draft them to comply with the most demanding standards.

    c. Blue Pencil

    In some states, courts have the power to strike or modify illegal provisions in contracts to make them enforceable. This is referred to as “blue penciling” the agreement. However, other states do not permit application of the blue pencil and a court will strike down the entire unlawful section of the contract without attempting to modify it.


    1. What Are the Benefits?

    Your Company should evaluate the pros and cons of requiring its employees to execute arbitration agreements. Advantages of arbitration include:

    • potentially quicker and more efficient dispute resolution;
    • arbitration generally is less costly than court litigation;
    • some argue awards by arbitrators are (or will be) lower than jury awards for comparable claims;
    • arbitration usually is procedurally simpler and less costly than going to court;
    • arbitrators are believed to be “expert” decision-makers bringing specific knowledge and experience to the table, as opposed to jurors, who are not;
    • similarly, it is assumed arbitrators are not as easily swayed as juries by passionate arguments and sympathy;
    • employers may benefit from being “repeat players” before arbitrators;
    • the lower costs of arbitration may mean lower employment practices liability insurance premiums; and
    • access to a dispute resolution procedure such as arbitration can lower the risks of unionization.

    2. What Are the Risks?

    Some of the potential concerns surrounding binding arbitration include the following:

    • easier access to arbitration may mean a proliferation of employee disputes over relatively minor matters;
    • courts have given arbitrators virtually unrestricted discretion to decide issues of law, including evidentiary rulings, without interference by courts. Under the FAA, appeal of an award is very limited: the limited grounds include corruption, fraud, actual bias, violation of public policy;
    • arbitrators generally do not dismiss claims on motions;
    • arbitrators also are known to “split the baby,” appeasing both sides of a dispute by awarding part of the relief requested;
    • arbitrators are not accountable to the electorate, the press, or politics. While federal judges have life tenure, most state court judges do not. Additionally, court proceedings are subject to appellate review;
    • the EEOC continues to take the position that mandatory arbitration agreements are unlawful with respect to federal discrimination claims; and
    • political or public relations concerns as arbitration is viewed negotiations by some civil rights groups.


    We generally recommend that employers should thoroughly analyze their history of employment disputes over a three to five year period in order to decide whether the advantages of requiring arbitration outweigh the risks. The review should include the following

    • defense costs;
    • the number of lawsuits and discrimination charges;
    • the number of settlements and settlement value;
    • the cost of implementation of the program, including administering the agreement and cost of consideration for current employees; and
    • the effects implementation will have on employee morale and public relations.

    In deciding whether to enforce an arbitration contract, courts will consider whether the agreement provides employees with adequate “due process.” Some of the factors a court will consider and you should evaluate before implementing a mandatory arbitration process include whether:

    • The agreement requires both the employer and the employee to arbitrate;
    • costs are borne by the employer or shared;
    • any limitations on discovery and remedies that would be available in court;
    • the arbitrator is independent; and
    • the arbitrator’s decision is in writing and provides a sufficient basis for court review in limited circumstances.


    The Equal Employment Opportunity Commission in 1997 issued a report on “Best Employment Practices of Private Sector Employers.” The report outlines the programs the EEOC believes comprise the “best practices” in alternative dispute resolution. Not surprisingly, mandatory arbitration programs are not included in the EEOC list. Instead, the EEOC focuses on formalized programs providing means for employees to resolve disputes by open door policies, peer review programs, employee hot lines, mediation with minimal cost to the employee, or arbitration where the employee may elect whether or not the decision will be binding. We suggest that you review the “best practices” list with an eye toward determining whether such programs might be more appropriate for your Company than binding arbitration.


    The Circuit City decision has opened the door for employers to consider arbitration, as well as other forms of alternative dispute resolution. Arbitration may or may not be efficient and appropriate way to minimize the risk and cost of employment litigation. Jackson Lewis has assisted a wide array of employers in developing arbitration and other forms of alternative dispute resolution programs. We would be pleased to assist you in analyzing or developing a mandatory arbitration program or other form of alternative dispute resolution. Members of our Alternative Dispute Resolution group can be reached at our website, jacksonlewis.com or by calling Marty Payson at (914) 328-0404.


MARTIN F. PAYSON is a Partner in the national labor, employment, benefits and immigration law firm of Jackson, Lewis, Schnitzler & Krupman. Since joining the firm in 1967, Mr. Payson has specialized in the practice of employment and labor law representing the interests of management.

Mr. Payson received his undergraduate degree in Personnel Management and Industrial Relations from the City University of New York, and obtained a Juris Doctor degree from Brooklyn Law School in 1966. He is admitted to practice before the Supreme Court of the United States, the Circuit Courts of Appeals and is admitted to the Bar of the States of New York and Pennsylvania. Mr. Payson is a member of both the American and New York State Bar Associations, serving as an active member of their respective Labor Law Sections.

An experienced practitioner, Mr. Payson has represented the interests of management in federal and state courts, before federal and state fair employment practice administrative agencies, and before the National Labor Relations Board. He has extensive experience in the representation of management faced with union organizing drives and National Labor Relations Board elections. He has placed special emphasis on assisting clients in the development and implementation of preventive workplace practices, procedures and programs, most recently focusing on the use of Alternative Dispute Resolution mechanisms as both a litigation avoidance and union avoidance strategy.

Based upon his extensive experience, Mr. Payson has frequently spoken on a variety of contemporary workplace issues. He has appeared on NBC and CBS news shows and has co-hosted a series of programs on personnel issues and the law. He recently has been interviewed by both the BBC and ITN Channel 4.

His insightful remarks have been quoted in The New York Times, Wall Street Journal, Fortune, Business Week, Industry Week and in numerous professional journals and management publications. He has published a wide variety of articles in such publications as Nation’s Business, Personnel Journal, Trial Magazine, and is a contributing editor to the text, Winning NLRB Elections: Management Strategy and Preventive Programs. He serves on the Editorial Board of the Journal of Alternative Dispute Resolution in Employment. He is listed in Who’s Who In America.

Mr. Payson has served as faculty for the Young President’s Organization, Executive Enterprises Institute, Advanced Management Research and the American Management Association. He held the position of adjunct professor of labor and employee relations at the University of Rochester and was visiting lecturer at Cornell University’s School of Industrial and Labor Relations.


The Supreme Court held that where the commission of supervisor harassment does not culminate in a “tangible employment action” (as in both Faragher and Ellerth), the employer may raise as an affirmative defense to liability or damages that it (a) “exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and (b) that the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise.” Faragher v. City of Boca Raton, 524 U.S. 775, 807 (1998); Burlington Indus., Inc. v. Ellerth, 524 U.S. 742, 745 (1998).

     What is an employer’s reasonable care to prevent and correct any sexually harassing behavior?

Whether the employer exercised reasonable care to prevent any sexually harassing conduct will be determined based on what actions the employer took prior to receiving a sexual harassment complaint to prevent such behavior in its workplace. Since Faragher and Ellerth, courts generally have found that employers exercised reasonable care to prevent harassment where they are able to show that they adopted and distributed a policy that clearly communicates that harassment is not tolerated, and that they have a complaint or grievance procedure in place. Proof that its employees received the policy is also effective in establishing the first prong of the affirmative defense.
Whether the employer exercised reasonable care to correct promptly any sexually harassing conduct will be determined based on what actions the employer took after receiving a sexual harassment complaint to remedy such behavior.

     The employers in the following cases successfully established that they exercised reasonable care to prevent and correct promptly the alleged harassment:

In Dayes v. Pace Univ., No. 98 Civ. 3675 (WHP), 2000 WL 307382 (S.D.N.Y. Mar. 24, 2000), aff’d, ___ F.3d ___, No. 00 Civ. 7641, 2001 WL 99831 (S.D.N.Y. Jan. 19, 2001), the employer met the first element of its affirmative defense, and the court granted summary judgment, because it was undisputed that the employer had a grievance procedure set forth in its employee handbook, along with the employer’s policy of prohibiting sexual harassment. The record also established that the employer responded promptly to plaintiff’s complaint of harassment. After plaintiff complained about the alleged harasser, the alleged harasser was told that plaintiff was uncomfortable with his behavior. Thereafter, plaintiff concedes that she experienced no further incidents of harassment. Thus, the employer acted reasonably to prevent and correct harassment in the workplace.
In Coates v. Sundor Brands, Inc., 164 F.3d 1361 (11th Cir. 1999), the court affirmed summary judgment for the employer because it had an effective sexual harassment policy which called for employees notifying designated managers of any alleged incidents of harassment. Plaintiff failed to notify any of these managers, and instead, notified a co-worker of the alleged harassment. Further, she asked that a non-managerial employee confront the harasser. This was arranged by the employer. Thereafter, the plaintiff never again complained to management about the continuing harassment. The court noted that while delegating the tasks of confronting the harasser to a non-supervising employee is not appropriate, it was in line with the plaintiff’s wishes. Further, since she failed to bring the continuing harassment to management’s attention, it was reasonable for the employer to conclude that no further action was necessary.
In Madray v. Publix Supermarkets, Inc., 208 F.3d 1290 (11th Cir.), cert. denied, 121 S. Ct. 303 (2000), a hostile work environment case, the court granted summary judgment for the employer holding that plaintiff’s failure to notify designated managerial employees of her claimed sexual harassment failed to put the employer on notice. The plaintiff told midlevel managers who were not designated to receive complaints of the alleged harassment. But see, Breda v. Wolf Camera & Video, 222 F.3d 886 (11th Cir. 2000) (reversing district court’s grant of summary judgment for the employer, and finding that where the employer’s policy provided that store managers were to refer complaints to the district manager and plaintiff reported harassment to a store manager, who failed to refer the complaint, the employer had actual notice of the harassment)
In Farley v. Am. Cast Iron Pipe Co., 115 F.3d 1548 (11th Cir. 1997), the plaintiff alleged that she had been subjected to five (5) years of unwelcome sexual advances and remarks. During the period, the employer had an effective anti-sexual harassment policy which it communicated to employees. The plaintiff received training on the policy three years after the alleged harassment began and more than two years before she used the procedures to inform management. The employer raised the Faragher affirmative defense. The court affirmed summary judgment for the employer, holding that “once an [employer] has developed and promulgated an effective and comprehensive anti-sexual harassment policy, aggressively and thoroughly disseminated the information and procedures contained in the policy to its staff, and demonstrated a commitment to adhering to this policy, it has fulfilled its obligation to make reasonably diligent efforts to ‘know what is going on’ . . . beyond this point, it is incumbent upon the employees to utilize the procedural mechanisms established by the company specifically to address problems and grievances.” Id. at 1554. See also Guerra v. Editorial Televisa-USA, Inc., No. 97 Civ. 3670, 1999 U.S. Dist. LEXIS 10082 (S.D. Fla. June 2, 1999) (noting that while the fact that a plaintiff did not receive a copy of the employer’s policy or handbook might be fatal to an employer’s motion for summary judgment, where the plaintiff testified that she knew to whom she should complain, the fact that did she not receive the policy was immaterial).
In Caridad v. Metro-North Commuter R.R., 191 F.3d 283 (2d Cir. 1999), cert. denied, 120 S. Ct. 1959 (2000), the court found that the defendant exercised reasonable care to prevent and correct sexually harassing conduct because it had an anti-harassment policy with complaint procedures in place, and there was undisputed evidence that it endeavored to investigate and remedy problems reported by its employees.
In Savino v. C.P. Hall Co., 199 F.3d 925 (7th Cir. 1999), the court found that the employer established the first prong of the affirmative defense where it posted an anti-harassment policy with instructions for reporting harassing behavior, and the employer had promptly investigated and acted reasonably to remedy the harassment which plaintiff reported. Successful prevention of subsequent harassment was not required to establish the first prong of the defense.
In Brown v. Perry, 184 F.3d 388 (4th Cir. 1999), the employer satisfied the first element of the affirmative defense by having an anti-harassment policy in place, including a complaint procedure, to deter sexual harassment. Where, like here, there was no evidence that the employer adopted or administered the policy in bad faith or that the policy itself was defective, the existence of such a policy “militates strongly in favor of a conclusion that the employer ‘exercised reasonable care to prevent’ and promptly correct sexual harassment.” Id. at 396 (citation omitted). The employer satisfied the corrective prong of the affirmative defense by offering immediate, unconditional support to the victim and suggesting that the she pursue her EEO remedies. The court held that these actions constituted reasonable efforts to prevent further incidents of harassment, regardless of whether the effort was ultimately unsuccessful. The employer also took reasonable corrective action by issuing a restraining order against the accused harasser from having contact with employees in plaintiff’s department.
The court in Meadows v. County of Tulare, 191 F.3d 460 (9th Cir. 1999), found the employer met the first prong of the affirmative defense by having a policy prohibiting harassment and an established complaint procedure in place, and acting promptly to correct reported harassing behavior. The court implied that the employer’s response may vary depending on specific circumstances, like whether the plaintiff/employee complained specifically about the harassing behavior and whether the plaintiff/employee refused to assist the investigator in the investigation.
In Barua v. Credit Lyonnais-U.S. Branches, No. 97 Civ. 7991 (JSR), 1998 WL 915892 (S.D.N.Y. Dec. 30, 1998), the court concluded that the employer exercised reasonable care to prevent harassment because its employee handbook included a policy prohibiting discrimination and retaliation, and had a complaint procedure with several avenues for grievances. Moreover, the court found that the employer exercised reasonable care to correct harassment because shortly after the plaintiff first complained to the Human Resource Department, the employer met with the harasser and reprimanded him. Shortly thereafter, the harasser was removed as manager of the plaintiff’s department and transferred to a non-supervisory position in a different department. Furthermore, no further harassment occurred after plaintiff complained.

     In some cases, courts have refused to find that an employer exercised reasonable care to prevent or correct promptly alleged harassment where:

  • The employer had prior knowledge of the harasser’s history of inappropriate behavior, but took no action to prevent its reoccurrence.
  • The employer had no policy against harassment in place.
  • The employer had no complaint procedure in place.
  • The employer’s complaint procedure was ineffective because, for example, employees were directed to complain only to one person such as their supervisor, or it contained strict time limits within which a complaint had to be filed.
  • An investigation was not commenced until some time after the employee complained.
  • The employer’s decision to designate a particular person to receive complaints was questionable in light of the complaint-receiver’s inappropriate response to complaints.
  • The employer failed to take any (or effective) action to discipline a harasser after an investigation revealed that an employee’s complaint had merit.

     Cases holding employer failed to exercise reasonable care to prevent or correct promptly alleged harassment:

  • In Ponticelli v. Zurich Am. Ins. Group, 16 F. Supp. 2d 414 (S.D.N.Y. 1998), the court found that a factual dispute existed as to whether the employer prevented and promptly corrected harassment because although there was an anti-harassment policy and an avenue for complaint, the plaintiff’s allegations of inappropriate behavior by Vice President of Human Resources, the manager designated by the employer to hear such complaints, called into question whether the employer exercised reasonable care in its designation. The plaintiff alleged that the Vice President made inappropriate comments when she complained (e.g., commented that she was very attractive and suggested that she should enjoy herself a little). The court also found that there was a factual dispute as to whether plaintiff’s complaints of harassment were adequately investigated and promptly corrected. Id. at 431.
  • In Meng v. Ipanema Shoe Corp., 73 F. Supp. 2d 392 (S.D.N.Y. 1999), the court denied summary judgment where there was a question of fact as to the timing and circumstances under which the plaintiff/employee received the Employee Handbook that contained the employer’s sexual harassment prevention policy. The employer alleged that the Handbook was distributed to all new employees, and that employees including plaintiff attended a seminar on sexual harassment. However, the plaintiff testified that she did not receive a copy of the Handbook until late in her employment, that she never read applicable parts until after her termination, and that the seminar she attended included a discussion of sexual harassment, but there was no distribution of the sexual harassment policy or instructions for reporting incidents of harassment. Thus, whether the employer’s actions were reasonable is a factual question for the jury.
  • In Hurley v. Atlantic City Police Dep’t, 174 F.3d 95 (3d Cir. 1999), cert. denied, 528 U.S. 1074 (2000), the court noted that “Ellerth and Faragher do not, as the defendants seem to assume, focus mechanically on the formal existence of a sexual harassment policy.” Id. at 118. Rather, the employer must enforce its sexual harassment policy in order to prevent and correct sexual harassment. Finding that employer’s policies were ineffective and unimplemented, the court held that the defendant could not have satisfied the first prong of the defense.
  • In Smith v. First Union Nat’l Bank, 202 F.3d 234 (4th Cir. 2000), the court noted that a defective or dysfunctional policy does not necessarily negate an employer’s affirmative defense. However, where the plaintiff’s supervisor and the supervisor’s boss both may have told plaintiff not to complain, there was a genuine issue about the policy’s effectiveness, such that the employer could not establish the first prong of the defense for purposes of summary judgment.

     What is reasonable plaintiff’s conduct?

Generally, a timely complaint of actionable harassment by an employee will defeat the affirmative defense.

Courts have found that the plaintiff/employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise where:

  • The plaintiff failed to complain to his or her employer, despite there being no evidence of threatened retaliation.
  • The plaintiff failed to follow the procedures provided for in the employer’s established harassment policy.
  • The plaintiff refused to cooperate with the employer’s investigation of the plaintiff’s harassment complaint.
  • The plaintiff failed to notify the employer of the harassment in a timely fashion.
Cases holding plaintiff was unreasonable in failing to take advantage of any preventive or corrective opportunities provided by employer or to avoid harm otherwise:

  • In Patterson v. CBS, Inc., No. 94 Civ. 2562 (KTD), 2000 WL 666337 (S.D.N.Y. May 22, 2000), the employer met the second prong of the affirmative defense because the plaintiff did not report acts of alleged work place harassment. Although plaintiff cited “conclusory assertions of generalized fear of repercussions,” as the reason for not complaining, the court held that such general fear of retaliation, not based in any statement or representation made by the employer, is not a reasonable ground for failing to complain. Id.
  • A significant delay in complaining about alleged harassment may be considered “unreasonable” as a matter of law. In Dayes v. Pace Univ., No. 98 Civ. 3675 (WHP), 2000 WL 307382 (S.D.N.Y. Mar. 24, 2000), aff’d, ___ F.3d ___, No. 00 Civ. 7641, 2001 WL 99831 (S.D.N.Y. Jan. 19, 2001), the employee alleged that she was initially harassed in February 1995, but she did not complain to Human Resources until one year later, after the harasser “touch[ed]” her back. Id. at *6. The court held that plaintiff’s one-year delay establishes that she unreasonably delayed in availing herself of the employer’s available corrective procedures, and thus, the employer established the second element of the defense.
  • In Fierro v. Saks Fifth Ave., 13 F. Supp. 2d 481 (S.D.N.Y. 1998), the court held as a matter of law that generalized fears of retaliation or futility can never constitute reasonable grounds for an employee’s failure to complain to his or her employer. According to the court, “employees must be required to accept responsibility for alerting their employers to the possibility of harassment.” Id. at 492. Plaintiff failed to (i) specify the repercussions he feared other than his general statement that it would lead to unpleasantness if he complained; (ii) cite to other employees who were subjected to retaliation because they availed themselves of the complaint procedures; (iii) mention the alleged harassment to his wife; or (iv) make any mention of it when informed that he was about to be terminated, “any perceived harassment during [the plaintiff]’s employment was so only by reason of its potential utility for this litigation.” Id. at 492-93. See also Madray v. Publix Super Mkts., 30 F. Supp. 2d 1371, 1375 (S.D. Fla. 1998), aff’d, 208 F.3d 1290 (11th Cir.), cert. denied, 121 S. Ct. 303 (2000) (finding that “[a]n employee’s generalized fear of repercussions cannot form the basis for an employee’s failure to complain to his or her employer”).
  • In Caridad v. Metro-North Commuter R.R., 191 F.3d 283 (2d Cir. 1999), cert. denied, 120 S. Ct. 1959 (2000), the plaintiff unreasonably hesitated in coming forth with her allegations. The court ruled that for an employee’s reasonable apprehension in coming forth with allegations of harassment “must be based on an apprehension of what the employer might do, not merely on concern about the reaction of co-workers.” Id. at 295.
  • In Brown v. Perry, 184 F.3d 388, 397 (4th Cir. 1999), the employer proved the second element of the affirmative defense by demonstrating that the plaintiff “‘unreasonably failed . . . to avoid harm otherwise.'” (Citation omitted) In this case, the plaintiff was allegedly sexually harassed twice by the same person in similar situations. The first occasion was at a conference, where the plaintiff voluntary stayed in her supervisor’s hotel room late at night. Less than six months later, the plaintiff unnecessarily put herself in the same situation that lent itself to the same kind of advances, as the plaintiff voluntarily remained alone with her supervisor in his hotel room at night, accepted his invitation to visit a pub and a bar, and then went back again to his hotel room at midnight. The court held that “[i]n light of her previous history with [this supervisor], no reasonable factfinder could reach any conclusion other than that [the plaintiff] ‘unreasonably failed . . . to avoid harm.'” Id.
  • In Shaw v. AutoZone, Inc., 180 F.3d 806, 813 (7th Cir. 1999), cert. denied, 528 U.S. 1076 (2000), the court held that “subjective fears of confrontation, unpleasantness or retaliation do not alleviate the employee’s duty under Ellerth to alert the employer to the allegedly hostile environment.” In so holding, the court rejected plaintiff’s argument that she acted reasonably, even if she was legitimately uncomfortable discussing the offensive sexual conduct to which she was subjected.
  • In Montero v. AGCO Corp., 192 F.3d 856 (9th Cir. 1999), the court found that the plaintiff unreasonably failed to take advantage of the preventive and corrective measures provided by the employer where she waited nearly two years to report the alleged conduct (despite the fact that she did eventually complain). Plaintiff knew about knew about the employer’s policy prohibiting sexual harassment, had received several copies of it, and knew whom to contact if she was being subjected to sexual harassment, and when plaintiff reported the conduct, the employer’s reaction was “swift and certain.” Id. at 863. See also Madray v. Publix Supermarkets, Inc., 208 F.3d 1290, 1299 (11th Cir.), cert. denied, 121 S. Ct. 303 (2000).
Cases holding that the plaintiff was not unreasonable in failing to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise:

  • In Seepersad v. D.A.O.R. Sec., Inc., No. 97 Civ. 2086, 1998 WL 474205 (S.D.N.Y. Aug. 12, 1998), the court found that plaintiff’s “near-daily” complaints of harassment for almost a week constituted reasonable behavior under the circumstances.
  • In Greene v. Dalton, 164 F.3d 671 (D.C. Cir. 1999), the court explained that to prove the affirmative defense, the employer had to show not merely that the plaintiff inexcusably delayed reporting the alleged rape, but that a reasonable person in the plaintiff’s place would have come forward early enough to prevent the harassment from becoming severe or pervasive, reasoning: the “‘failure to avail’ standard is not intended to punish the plaintiff merely for being dilatory. Rather, it ‘reflects an . . . obvious policy imported from the general theory of damages,’ namely, that the victim has a duty to mitigate her damages. ‘If the victim could have avoided harm, no liability should be found against the employer who had taken reasonable care, and . . . no award against a liable employer should reward a plaintiff for what her own efforts could have avoided.'” Id. at 674 (quoting Faragher v. Boca Raton, 524 U.S. 775, 807 (1998)).
  • In Watts v. Kroger Co., 170 F.3d 505 (5th Cir. 1999), the court rejected the defendant’s argument that the plaintiff acted unreasonably because she waited to complain, stating that although the harassment intensified in the spring of 1994, a jury could find that waiting until July of that same year before complaining was not unreasonable. The court also rejected the defendant’s contention that because she filed a union grievance, rather than going through the company’s sexual harassment policies, the plaintiff acted unreasonably, explaining “[Plaintiff]’s filing of a union grievance comports with the Burlington/Faragher rubric. The affirmative defense allows the Plaintiff employee to take corrective opportunities provided by the employer ‘or to avoid harm otherwise.’ Taking advantage of the union grievance procedure falls within this language because both the employer and union procedures are corrective mechanisms designed to avoid harm.” Id. at 511 (citation omitted).

     What Happens When Employee and Employer Act Reasonably?

There is an open issue, highlighted by Justice Thomas’ dissent in both Faragher and Ellerth, regarding the application of the affirmative defense when an employer satisfies the first prong by acting reasonably, but the plaintiff also acts reasonably by making a timely complaint. The Faragher and Ellerth affirmative defense would seem to require an employer to prove both that it acted reasonably, and that the plaintiff did not, but arguably does not address the situation where a complaint is made and proper remedial action was taken. Several courts have refused to impose liability on an employer that was able to show that it exercised reasonable care to prevent and correct promptly the alleged harassment, despite its inability to satisfy the second prong of the test because the plaintiff did in fact complain. See Indest v. Freeman Decorating, Inc., 164 F.3d 258 (5th Cir. 1999). Nonetheless, other courts have found the employer liable in circumstances where the plaintiff complained and the employer responded reasonably. See DeWitt v. Lieberman, 48 F. Supp. 2d 280 (S.D.N.Y. 1999) (finding genuine issue as to the applicability of the affirmative defense where the first prong was undisputed).

     Who is An Immediate Supervisor?

  • In enunciating the new standard of employer liability, the Faragher and Ellerth Courts did not distinguish between a high level supervisor and a low level supervisor, nor did it address when a harasser will be considered a “supervisor with immediate (or successively higher) authority over the employee.” Faragher, 524 U.S. at 777; Burlington Indus., Inc. v. Ellerth, 524 U.S. 742, 745 (1998). Post-Faragher courts have addressed whether the harasser at issue should be viewed as an “immediate supervisor” such that the employer should be subjected to vicarious liability, and, in the absence of a tangible employment action, permitted to use the affirmative defense. Specifically, courts have found that harassers were immediate supervisors where they had the power to make or influence employment decisions, and, particularly, the terms and conditions of the plaintiff’s employment, took actions that could only be taken by those in supervisory roles, or had special authority enhancing their ability to harass.
  • Cases finding that plaintiff was harassed by an “immediate supervisor”:
    1. In Ponticelli v. Zurich Am. Ins. Group, 16 F. Supp. 2d 414, 430-31 (S.D.N.Y. 1998), the court applied the Faragher/Ellerth analysis to alleged harassment by the Vice President of Human Resources who was “neither [plaintiff’s] co-worker nor her ‘immediate’ supervisor” because of “his station,” to the underwriter who supervised the plaintiff’s work for him and thus, arguably was her “supervisor,” and to her immediate supervisor.
    2. In Durham Life Ins. Co. v. Evans, 166 F.3d 139, 154 (3d Cir. 1999), the court found that the harasser should be considered plaintiff’s immediate supervisor because he was part of a three-person team that convinced the plaintiff’s direct supervisor to strip the plaintiff of her office and to instigate the employer’s lawsuit against her — despite the fact that the harasser did not have complete authority to act on the employer’s behalf without the agreement of others. The court declined to decide what it termed an “interesting claim” by the employer — that the affirmative defense should apply because the plaintiff had some “non-tangible notice of discrimination” before the adverse action was taken against her. Id. In other words, the employer argued, the first time someone made a discriminatory remark to her, if plaintiff had reported it, the employer would have investigated and stopped the problem before the tangible action occurred, and, thus, the employer should be permitted to assert the affirmative defense.
  • Cases finding that the harasser was not the plaintiff’s “immediate supervisor”:
    1. In Summerville v. Ross/Abbott Lab., No. 98 Civ. 3517, 1999 WL 623786 (6th Cir. Aug. 10, 1999), the court held that the alleged harasser was not a supervisory employee because he did not exercise significant control over the plaintiff’s hiring, firing or conditions of employment. In applying this standard, the court was not persuaded by plaintiff’s conclusory assertions that the alleged harasser was her supervisor. In fact, the record indicated that, at her deposition, when asked if the alleged harasser was an “hourly co-worker” that worked with her, she responded “[y]es,” and indicated a different person to be her “direct supervisor.” Id at *3. Moreover, while the alleged harasser had the title of “[c]rew [l]eader,” the record reflected that the title pertained to a position of leadership in an employee “peer group,” not a position with power to affect the terms and conditions of the plaintiff/employee’s employment. Id. Thus, the court found no evidence in the record that the alleged harasser had any supervisory power over the plaintiff/employee.
    2. In Mikels v. City of Durham, 183 F.3d 323, 334 (4th Cir. 1999), the court held that an alleged harasser who was a “superior” in rank but actually had no power to take tangible employment actions against the plaintiff/employee was not a supervisor for the purposes of discovering an aided-by-agency relationship. While the alleged harasser could direct the plaintiff’s operational conduct while on duty, the plaintiff was not isolated from the continuing protective power of higher management. Additionally, the plaintiff thought that a different person was her direct supervisor, and she had immediate access to him without going through the harassing employee. Further, the court noted that the plaintiff did not indicate any sense of “special vulnerability or defenselessness deriving from whatever authority [the harassing employee’s] rank conferred,” as she rebuffed him sharply after his unwelcome conduct. Id. The plaintiff’s profanity-laced and obscene reaction to the harassment was natural for one who regards her harasser as a co-employee, not a supervisor.
  • What does and does not constitute tangible employment action?
    1. According to Faragher and Ellerth, when “tangible employment action” is taken by a harassing supervisor with immediate authority over the plaintiff, the defending employer is strictly liable for the supervisor’s actions. In such cases, the employer is precluded from raising the affirmative defense to liability. Consequently, whether the commission of supervisor harassment culminates in a “tangible employment action” has been a key issue addressed by many of the post-Faragher/Ellerth courts.
    2. Case finding that a “tangible employment action” was taken where plaintiff were subjected to discharge, demotion, or undesirable reassignment (e.g., with significantly different job responsibilities):
      1. In Hasbrouck v. BankAmerica Hous. Servs., Inc., 105 F. Supp. 2d 31, 35 (N.D.N.Y. 2000), the court held that the supervisor’s actions in removing two of sales employee’s major accounts was a “tangible employment action” for purposes of employee’s Title VII harassment action. Loss of the accounts could have a very significant effect on the employee’s earnings through the bonus or commission structure of the employer.
      2. In Poole v. Country Club, 129 F.3d 551, 553 (11th Cir. 1997), the court held that a plaintiff “[s]tripped of all responsibility, given only a chair and no desk, and isolated from conversations with other workers” had a legitimate claim that she was constructively discharged.
  • However, courts seem unwilling to expand the concept of “tangible employment action” broader than the concept of discharge (constructive or actual), demotion, or undesirable reassignment. Cases finding “no tangible employment action” was taken:
    1. In Rainey v. Miami-Dade County., No. 99 Civ. 1815, 2000 U.S. Dist. LEXIS 2508 (S.D. Fla. Jan. 13), the court rejected plaintiff’s claim that she suffered a tangible employment action where she claimed that she was given extra work, and was moved from her office for a short period of time while her sexual harassment claims were being investigated, aff’d, 237 F.3d 636 (11th Cir. 2000). See also Guerra v. Editorial Televisa-USA, Inc., No. 97 Civ. 3670, 1999 U.S. Dist. LEXIS 10082 (S.D. Fla. June 2, 1999). In Guerra, the court allowed the employer’s assertion of the Faragher affirmative defense, finding no tangible employment action where plaintiff’s claim was that her job duties increased after her harasser was fired, and not as a direct result of the harassment.
    2. In Pritchard v. Earthgrains Baking Co., No. 7:98 Civ 0536, 1999 WL 397910 (W.D. Va. Mar. 5, 1999), the court found no tangible employment action where plaintiff was terminated for a legitimate, non-discriminatory reason. Further, plaintiff’s pre-termination job reassignment from “bun seeder” to “depanner” did not involve a significant change in responsibilities or benefits, and therefore was not serious enough to qualify as a tangible employment action. Id. at *8. Likewise, plaintiff’s reduction of hours, which resulted in a wage decrease, was not a tangible employment action because there was evidence that other employees’ hours were also cut. Thus, the court held that there was no tangible employment action that would bar a Faragher/Ellerth defense.
    3. The court found no tangible employment action in Watts v. Kroger Co., 170 F.3d 505, 510 (5th Cir. 1999), stating, “[s]imply changing one’s work schedule is not a change in [plaintiff’s] employment status. Neither is expanding the duties of one’s job as a member of the produce department to include mopping the floor, cleaning the chrome in the produce department, and requiring her to check with her supervisor before taking breaks.”
    4. In Meadows v. County of Tulare, 191 F.3d 460 (9th Cir. 1999), the court held that the plaintiff’s transfer from one position to another, where plaintiff continued to receive the same pay and benefits, did not constitute a tangible employment action. The court noted that plaintiff did not argue that she experienced economic harm, or that her reassignment is undesirable or that her responsibilities changed significantly, facts which may bear on whether a transfer is a tangible employment action.


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Raymond Salomone P.O. Box 230132 New York, NY 10023 (917) 885-5399 [email protected]

Relevant Experience:

1998-2001 Vice President of Operations, Colton Consulting NYC

Reported Directly to Managing Partners of $8MM Technology Recruiting Firm. Thoroughly versed in candidate sourcing, qualifying and interviewing. I quickly develop positive rapports with clients and candidates. Managed staff of 11, including Junior Recruiters, Salespersons, Telemarketers and College Interns. Directly responsible for generating over $1MM in revenue per year. Worked closely with many Fortune 500 and Wall Street Investment clients. Developed strategic alliances with software and hardware vendors. Also responsible for managing budgets relating to advertising, training and procurement.

1993-1998 Technical Recruiter, Velocity Staffing NYC

Began as a cold caller. Prospected potential clients and technical job seekers. Developed and fine-tuned business skills with respect to: introductions, sales pitches, negotiations and closings. Developed skills at analyzing and drafting RFP’s (Request for Proposals) which lead to several long term staffing contracts. Bid on and was awarded several large software and telecommunications projects for Fortune 500 firms. I was also instrumental in the successful opening of a second office in Miami Beach, Florida. Learned to quickly develop marketing abilities to suit a variety of corporate and personal cultures.

1993 Rental Agent, Elias-Bernstein Realty NYC

Without any formal training, began interacting with clients and working through the entire rental process. Qualified clients. Evaluated client requirements/requests. Conducted apartment showings and organized open houses. Presented potential renters to landlords. Assisted in the preparation and execution of leases. Developed positive working relationships with landlords, superintendents and doormen. Used my superior knowledge of Manhattan to increase productivity.

1990-1993 Rental Manager, Ruffino Realty Oneonta, NY

During college I was responsible for all the rental activities of a 12 unit, 4 story building. Duties included qualifying potential renters, contacting and researching guarantors and securing leases. Direct liaison between tenants and landlord. Education:

1993 State University of NY at Oneonta Major: Speech Minor: Marketing

1995-1999 New York University Graduate level courses in Marketing, Communications and eCommerce.


1982-1989 United States Army, Military Policeman

is a partner at Jackson Lewis, a preventive labor, employment, immigration and benefits law firm representing management exclusively. Mr. Lotito is a graduate of Villanova University and Villanova Law School. He was named by Villanova as their Top Human Resources Alumnus of the 20th Century. He has devoted his entire professional career to representing management interests in labor and employment law. He is a member of the California and American Bar Associations. Mr. Lotito has received professional accreditation in the human resources field by achieving the SPHR designation for life. He is listed in “Who’s Who in American Law”, “Who’s Who in California” and is a Life Member of the National Registry of Who’s Who. Mr. Lotito was the first non-practitioner to Chair the Society For Human Resource Management, the largest human resource association in the world. He has traveled the globe for SHRM making presentations from Juneau, Alaska to Johannesburg, South Africa and many places in between. He is a past chairman of SHRM’s National Legislative Affairs Committee and served on its Employee and Labor Relations Committee. In these capacities, he has influenced legislation such as the ADA and has testified before the United States Senate and the House of Representatives. A frequent workshop presenter, Michael is noted for his wit, insights and practical solutions to workplace issues. He is a resource for TEC Worldwide, an international organization of company presidents. He has given numerous presentations before TEC groups and was named TEC’s Most Outstanding Resource. Most recently, he was honored as a member of TEC 200, a designation which places him among the top 1% of all TEC presenters from the many thousands who have participated in a TEC program. Mr. Lotito has appeared on PBS’ “NewsHour with Jim Lehrer”, Fox TV’s “The Schneider Report”, CBS Radio’s “Gil Gross Show”, frequently appears on National Public Radio, and was quoted in The New York Times and The Wall Street Journal regarding the EEOC’s guidelines on mental disabilities. He is regularly quoted on a variety of employment law topics in major publications including Forbes, Business Week, the Washington Post, the Wall Street Journal, the Boston Globe, USA Today, the Los Angeles Times, the San Francisco Chronicle, The Sacramento Bee, The National Law Journal, Nation’s Business, and The Conference Board’s magazine, Across The Board. Most recently he has been published by the Harvard Business Review.


Linda R. Singer ADR Associates, L.L.C. Washington, D.C.

In my practice I have seen a dramatic change in the way many labor and employment lawyers approach representing their clients in mediation. What are the differences between those advocates who go through the motions of mediation as if it were merely a judicial settlement conference or a negotiation between attorneys on the courthouse steps and those who make sophisticated use of the mediator and the occasion to persuade the other party – and often their own clients – to enter an advantageous settlement? The differences lie in preparation, presentation, focus and strategy.

Before the Mediation Getting the Other Party to the Table Some attorneys, although interested in an early settlement, hesitate to suggest mediation to the other party for fear of appearing weak. The easiest way around this problem is to adopt a policy of offering to mediate in every case. For a corporate client or other organization this is an obvious course; for others, including the individual employee, the attorney’s firm can have a pro-mediation policy. Once there is a policy, no matter how flexible or informal, offering mediation in a particular situation says nothing about your opinion of the merits. Where there is no policy more creative methods may be needed. Perhaps the other party has such a policy. Most Fortune 1000 corporations have signed the ADR pledge promulgated by the CPR Institute for Dispute Resolution, for example; a list is available from CPR. Having checked you may call opposing counsel and suggest that you would rather mediate sooner than later. The same strategy may be useful where there is a court-based ADR program. You may call opposing counsel (or an unrepresented party) and suggest that, since it is inevitable that a mandatory court program or a judge who is known to favor mediation will land you in mediation at some point, you would prefer to do so early, particularly if you thereby would retain the ability to choose your own mediator. With the EEOC now offering mediation by internal staff or generally inexperienced (because underpaid) mediators, the same approach may apply there as well. Finding Out How the Mediator Works All mediators are not alike. Some of us do most of our work in separate caucuses; others try to keep the parties in the same room for as long as feasible. Some of us focus first on non-monetary interests, such as continued employment, business relationships or reputation; others move quickly to valuing a claim and offering opinions concerning the likely court outcome if the case does not settle. Some move back and forth among approaches depending on the situation. How can you know which type of mediator you have selected (or had assigned to you), in order to prepare yourself and the client to get the most out of the opportunity mediation offers? First, do not hesitate to question the mediator, whether in a joint conference call with opposing counsel or in a separate pre-mediation call to the mediator to inquire about the process. Most mediators are open to such contacts, believing as I do that there is no such thing as a forbidden ex parte communication in mediation. My only concern about such a contact would be the appearance it might present to the other side if its counsel is a neophyte about mediation. Alternatively, do not hesitate to ask the mediator for the names of lawyers for parties in similar situations who have used the mediator. Not only should you be able to call such people for references; you can ask them about the mediator’s general approach and any tips they may have about working with us. For example, is this a mediator that treats clients with respect or attempts to browbeat them into accepting a settlement? Can this mediator deal with a lurid story of sexual harassment by empathizing with the apparent victim while maintaining a balanced view of the possibility of miscommunication or exaggeration? Will your client like and trust this mediator? Will the decisionmaker on the other side? If not, how can you use the occasion to attempt settlement without relying heaving on the mediator to get you there? Writing the Story It is almost always helpful to give the mediator a brief synopsis of your client’s story in writing before the day of the mediation. (Those of us who mediate most days particularly appreciate receiving the statements a week to ten days in advance.) I use the word “story” advisedly to mean a narrative version of the events that precipitated the dispute, rather than a series of legal claims or defenses. The exceptions may be class actions, where there are many stories, if those stories have been detailed fully in a complaint or answer. In general, complaints and answers make dull reading and often lose what I consider as the three most important threads of a pre-mediation statement: 1. What happened to precipitate the dispute? 1. What are your client’s goals looking forward? 1. What should the mediator be thinking about in the way of potentially creative approaches to resolution? My usual preference is to keep the pre-mediation statements in confidence, in the hope that advocates will share with me any sensitive information about the parties or precipitating events, as well as genuine interests and possibilities. I do not expect to be given “bottom lines” and would not take very seriously any statement that purported to draw a line in the sand concerning any issue before a face-to-face meeting. In order to be able to assure the parties of confidentiality for any documents provided before the mediation session begins, it is my practice to ask the attorneys to fax me a signed copy of my standard Agreement to Mediate before sending me their statements; I then get original signatures on the agreement from everyone who attends the mediation. The law regarding confidentiality in mediation is in flux. Be sure you may want to assure yourself that the mediator’s proposed agreement affords sufficient confidentiality under whatever law applies. If not, now is the time to propose any needed revision. The exception to my usual preference for confidential statements is in situations where there has been little or no prior exchange of information between counsel, whether in the form of informal conversations, negotiation, or discovery, and each party’s version of their history may come as news to the other side. In that event I may suggest that most of the statement be exchanged but that a confidential addendum might suggest to me any sensitive information I should have at the outset or potentially productive avenues that might be pursued at the mediation. If the mediator’s agreement form contains a waiver of liability for any negligence on the mediator’s part, you should consider carefully whether you are prepared to sign it (or, in fact, whether you wish to use that mediator). Mediators’ immunity (unlike arbitrators’) has developed in the context of court-connected programs that rely on volunteer mediators. Many mediators see no justification for requiring such immunity for professional mediators who charge fees at professional rates. Malpractice insurance is readily available to us. Developing the Guest List Even before drafting the mediation statement advocates should be focusing on the appropriate cast of characters to attend the mediation. If this is an individual case, my operating assumption is that we should attempt to settle it in one day. It may be a long day, but I attempt to keep up the momentum and focus the parties on their responsibility to make decisions at the table that are in their own or their companies’ best interests. That means that the people at the table must be able to make decisions. On the employee’s side I often suggest that if a spouse or other person with a close relationship to the employee will influence the client’s final decision about whether to settle, that person should be at the mediation. No one wants to deal with second-guessing at the end of a long, hard day. The additional person may help to remind the employee of the value of settling and moving on. Spouses frequently do so, as did an employee’s mother, who attended a recent mediation and expressed her strongly-held belief that it was time for her daughter, who had been terminated, to stop obsessing about past wrongs and get on with her life. Even if a relative argues against settlement, the more obstreperous the voice, the more important it is to have it in the room where the mediator can confront it directly. On the employer’s side the decision may be more complicated. Unless the dispute involves a likely continuing relationship with the manager or supervisor whose alleged behavior prompted the dispute in the first place, it is almost always more productive to leave that person at home. He or she is not required as a witness; a mediation is not a fact-finding expedition. If the case settles, generally it will do so despite the parties’ continued disagreement about what happened in the past. The presence of the alleged discriminator or harasser in all likelihood will serve as a lightening rod to the employee. More importantly, it can present a constraint on the employer’s ability to settle the case. For example, a manager who terminated an employee may view a significant monetary settlement as a failure to vindicate the manager’s handling of the situation and hence a vote of no confidence. What I have found works best on the employer’s side is a fairly small team that will not overwhelm the employee, especially if the employee is bringing a single lawyer. The team should be headed by a company representative who is far enough up the corporate ladder to demonstrate to the employee that the company is giving serious, high level attention to the matter. Ideally, the official will have the interpersonal communicative skills to present the employer’s perspective to the employee and the mediator in a credible, humanizing way. If at all possible, the employer’s management representative should be able to make the final decision on whether to settle on the spot or to reach someone promptly by telephone who can do so. In situations where such instant authority is impossible to obtain, as where a government employer cannot legally or practically delegate the authority to settle or a settlement must be approved by a board of directors, the preferable solution is to get the needed authority immediately by telephone wherever possible; the fallback is to explain to the employee’s counsel before the mediation whatever approval process must be followed and give as much assurance as you can about the seriousness with which recommendations from the team at the table will be treated. In addition to the corporate decisionmaker it is often helpful for the employer to bring someone who is knowledgeable or creative about putting settlement packages together. In a dispute with a current employee that might be someone who is aware of placement or promotional possibilities; with a former employee it could be an expert on augmenting benefits, such as enhancing pensions or insurance coverage. Often these resource people can be consulted by telephone during the day; be sure you know where to find them after hours, particularly if they are in a different time zone. If the dispute involves proposed policy changes or comprehensive injunctive relief – often ingredients of settling class actions – different people with different areas of expertise may be required at different mediation sessions, which probably will stretch over an extended period of time. Ensuring some continuity in such situations becomes critical if all possible. At least one corporate representative should be a constant at each session, and all agreements reached should be documented contemporaneously and shared with the broad range of managerial officials whose cooperation will be needed to implement any changes in policy. I have mediated a class action where a company’s entire legal team, both inside and outside, changed during the course of the mediation before the parties had reached written agreements in principle. Consequently, members of top management later questioned whether they had assented to the changes and, even if so, whether it was feasible to implement them. Preparing the Client Both the employee and the corporate representative should be prepared to speak during the initial joint mediation session. In the case of a professional manager and/or a repeat player at mediation, it should be sufficient to go over the substance of the presentation with the manager in advance. If the employer regrets what has happened, an apology, stated sincerely and without prompting, can be enormously effective. (Obviously, the apology need not accept legal responsibility for whatever happened as long as it expresses empathy and concern for the employee’s welfare.) In the case of the employee, who very well may be very emotionally involved in the dispute as well as new to mediation, it is important to be crystal clear about what your client will say to the other side. This is the opportunity to make a sympathetic case; saying too little may be as detrimental as saying too much. The employer and its lawyer will be assessing your client’s credibility. And the client will have the opportunity– critical to some — to describe the dispute and its effect to the employer and to a neutral. Such an opportunity, and the emotional catharsis it can present, may be critical to settlement. One way to avoid surprises is to ask the client to write a narrative about what has happened and what the effect has been on the employee and the employee’s family. You then can edit it, attempting to remove personal attacks, which can be counter-productive, and making it as sympathetic as possible. Suggest that the client memorize it or, if necessary, read it at the mediation. Even with a relatively sophisticated employee, extemporizing generally should not be encouraged; there is too much at stake. Whoever the client, if mediation is a new experience, it is useful to explain the basics in advance, emphasizing that sensitive information may be shared with the mediator at the appropriate time and that there will be ample time when the mediator is meeting with the other party to consult with counsel and reassess strategy in light of new information. Stress the importance of keeping an open mind and responding flexibly as a team to opportunities for creative solutions that may present themselves during the mediation. If nothing else, the day of the first mediation session is an event. View it as such and encourage your client to do so as well. If you and the client use the opportunity to reflect on the matter at hand, analyze the client’s interests and priorities, learn more about the other party(ies) and develop creative possibilities, it will be a day well spent. At a minimum you should learn more about your own and the other side’s interests and arguments; at best, you will resolve the dispute. What I Want to Hear at the Mediation: Your Focus Different strategies make sense for the initial presentation, which, as mentioned above, should be prepared carefully in advance. The most important thing to remember about the opening presentation is that it presents an opportunity- perhaps the only opportunity in the life of the dispute – in the words of mediator Michael Lewis, “to make a pitch to the principals on the other side.” [fn: “Advocacy in Mediation: One Mediator’s View,” ABA Section on Dispute Resolution, Dispute Resolution Magazine, Fall 1995, p. 7] Generally the lawyer begins with a summary of events to date, a brief discussion of the legal situation and an expression of a willingness to listen and a desire to settle if possible. Alternatively, the client begins with a narrative (the employee) or an expression of regret that events have brought us here and a hope that the situation can be resolved to the satisfaction of all concerned (the employer). Although both lawyer and principal should speak, consider whether it makes sense to have the client begin. Displaying such openness and self-confidence may prompt the other party to respond in kind. Make the presentation as economical and as compelling as possible. Outline your legal theories very briefly; this is not the time for detailed analysis. If there is a timeline, an organizational chart or a map that can depict graphically your view of past events, by all means use it. One of the more effective presentations I have seen involved a presentation by counsel for a former employee charging sexual harassment of a ten-minute series of excerpts of videotaped depositions of the employers’ managers attempting to explain what had happened, replete with contradictions and weak excuses. Clearly the presentation caused the employer’s representative to view the case in a new way. The most important thing to remember during the opening statement is who the primary audience should be. You will have ample opportunity to talk to the mediator in caucus. For now focus on -and look at – the decisionmaker on the other side. Attempt to walk the fine line between confidence in your legal position if the dispute should fail to settle and the hope that, if everyone has an open mind and sufficient creativity and flexibility, the matter can be resolved today. If litigation-related or other events make it an especially propitious time to discuss settlement (if, for example, expensive, time-consuming or potentially embarrassing discovery is scheduled for the near future, the court is expected to rule on a motion for summary judgment or an administrative agency is about to begin an investigation), you might emphasize the fact that there is a narrow window of opportunity, after which resolution will become more difficult. The Lawyer’s Role During the Mediation: Your Strategy In addition to preparing the client and focusing on the other side during the opening statements, there are a number of strategic decision for counsel during the course of the mediation. Once the parties have made their opening statements, questions to clarify any ambiguity may be in order. Save probing or hostile questions for another time. (You may wish to discuss them with the mediator.) Some mediators will attempt to summarize what they have heard and ask for correction if necessary. Be alert to any reframing of positions by the mediator; it may contain implicit suggestions about how the mediator intends to structure the ensuing discussion. Correct any misstatement; this may be the last chance you will have to speak directly to the other side. Some mediators will wait for the private sessions to summarize and clarify the issues, not wanting to emphasize areas of disagreement this early in the process. In the initial private meetings with each party I look for three things: 1. Interests: What are the most important considerations for each of the principals? Can the interests be prioritized at this point? 2. Constraints: What do I need to know about limitations on your ability to settle based on time, resources, need for ratification or linkage to other negotiations? 3. Options: What has occurred to you so far about settlement possibilities, and what information do you need me to obtain from the other side that will help you to craft possible resolutions? In all of these areas, be careful to flag for the mediator any statements that should not be transmitted to the other side. At the end of each private session, go over any items to be sure that the mediator has understood. Avoid any ambiguity on this subject. Most mediators would greatly prefer to have you err on the side of openness with us and then discuss what it makes sense to share with the other party and how and when we should communicate any offers. The more trust you develop in our judgment, the greater latitude you may be prepared to give us in deciding when to reveal information to the other side. Whatever the particular approach, one thing stands out as the critical ingredient in the initial private sessions: this is the client’s chance to say to the mediator whatever it is that she did not say to the other party. It may be repetitive, it may not put the case or the client in the best light. Sort it out later. Obviously, it is the advocate’s chance as well. Yet the most frequent mistake that I have seen in the early stages of a mediator’s private caucuses is a lawyer who attempts to interject herself between the mediator and a principal (generally an individual), preventing the client from speaking. There can be two consequences – neither of them good. The first is that the client becomes frustrated with the lawyer’s controlling behavior. In one such instance a plaintiff pulled me aside to ask me privately, after her lawyer had interrupted her for what must have been the tenth time, whether I thought she should fire him on the spot. In such a case, when you need the client to listen to your advice (generally later in the session), which may be difficult for the client to hear in any event if the advocate’s analysis is less rosy than the client’s, the client turns you off. The second possible consequence of attempting to block communication between your client and the mediator is that it is likely to turn the mediator off. Instead of viewing you as an ally in attempting to achieve a beneficial settlement, the mediator starts to treat you as a hindrance. Although I try to work just as hard to achieve settlements for lawyers when I think that they are themselves becoming barriers to agreement, I cannot say that I am as effective. I do my best work when we are able to function as a team, both of us trying to craft the best possible agreement. Even though your role is to protect your client’s separate interests and mine to attempt to bring about a mutually acceptable settlement, our interests usually overlap almost completely. Both of us want to create as much value as possible and both of us want to paint your client and your cause in the best possible light to the other side. Think about enlisting the mediator to help you gain information or develop ideas. How much do you know about the other party’s interests and priorities? Would it make sense to develop a non-monetary option to meet some of those interests? Is there information about how the other party is thinking that will help you to evaluate its last offer or to craft your next one? How is a particular idea likely to be received? Listen attentively when we transmit information or opinions to you; we try to choose our words carefully. Does the mediator have ideas for breaking an apparent impasse? (I reject nothing out of hand as a last-ditch approach. If there has been little or no movement, this might be the time to discuss a risk analysis or a mediator’s proposal. (“If they would, would you”?) Most of the time it is useful for the mediator to communicate ideas and offers without attributing them to the other party, thus avoiding what psychologists call “reactive devaluation:” an idea is dismissed or an offer devalued if it comes from the other side. Occasionally you may want to communicate offers yourself, however, in order to develop options collaboratively, to gauge the reactions around the table or to be sure that you are being clear about particularly complicated ideas. This your call. In an ongoing mediation, encouraging direct contact with the other side may establish a good negotiating relationship. The down side is that you lose some ability to float ideas through the mediator in order to minimize reactive devaluation. Do not hesitate to suggest one approach or the other; mediators should be flexible enough to adapt different strategies and modest enough not to think that our words are the only ones that count. (We are immodest enough, on the other hand, to think that it makes sense to seek our advice on what strategy may be the most helpful.) As the mediation progresses the caucuses are likely to become shorter and more focused. The mediator may become less tolerant of a client’s rambling or focusing on past injustices and more insistent on looking towards the future and on what is likely to work as a settlement package. As mediator Michael Lewis has written, “A good mediator will pick up signals from an advocate that he or she believes the client is not acting out of his or her own self-interest. A good mediator will not permit a party simply to assert that he or she wants this or that. The mediator will return again and again to what the client and the advocate have identified as the core interests. The mediator can then explore whether the possible settlement meets those interests and what the likely litigation outcomes might be in a manner that provides the maximum amount of freedom for the client’s decision, but assures as much as possible that whatever decision the client makes will be an informed one.” [p.8] This narrowing of focus and greater discipline is intentional. You may need the mediator to help you deliver bad news. If you believe that a mediator is being too harsh on your client, however, it is your role to step in and be protective. There may be a fine line between discipline or focus and browbeating. You are the counsel and your client will look to you for cues. If, on the other hand, you believe that it might be helpful for your client to meet alone with the mediator or with the principal on the other side, with or without the mediator, feel free to discuss the idea with the mediator. (I almost never initiate such a discussion, believing that the lawyer is in a better position than I to know whether it would be helpful.) Sometimes a meeting without counsel helps a client to get a fresh view, which may buttress what the lawyer has been saying all along. Alternatively, on occasion a meeting between the mediator and one or all counsel, without principals, may be useful. During the mediation you can expect significant periods of down time while the mediator meets with the other party. Think about using at least some of this time to enlist your client in the effort to settle, to consider new information, and to be as creative and flexible as possible. If you are representing a plaintiff, you may decide to discuss some adjustment of your fee arrangement with the client based on what happens during the mediation. You also may have to deal with someone who has lived with a sense of victimization for so long that the case has become her whole life and it is extremely difficult to let go. When negotiating over monetary amounts, whether the money is for back or front pay, damages or attorneys’ fees, advocates frequently ask how much information they should share with the mediator. The answer depends on how well you know the mediator and how much you trust her, not only to keep information confidential but also to continue to work to achieve a settlement that meets your client’s needs. If you are comfortable with the mediator, you may save time by discussing financial goals and possible settlement ranges fairly early in the process. Be sure to differentiate between your goals and the mediator’s authority to convey particular offers to the other party. In a single-plaintiff dispute the mediation may last many hours. (Class action or other settlements involving substantial injunctive relief generally require multiple sessions, many of which may be shorter.) Most mediators dislike postponing the conclusion of the mediation until another day, except as a last straw, for fear of losing momentum. You and your client will grow tired. Where a client is disabled in some way and cannot retain the capacity to negotiate through a marathon session, you should alert the mediator in advance and make different arrangements. Through a long day you may need to bolster the client’s spirits and emphasize the progress that has been made; the mediator should help you to do this. Most mediators are optimists. We have seen persistence pay off enough times to give us faith in the process even though the parties may find it difficult to detect progress. If nothing else, you should be learning much about your own case and the other party’s view of it. Very few lawyers have found such knowledge not to be worth the effort. Reaching Agreement Ideally, you will create options and narrow differences until you reach an agreement in principle. Then what? All of us have horror stories of agreements we thought we had made only to have them crater because of last minute misunderstandings or demands. In order to prevent such mishaps it is the best practice to ask the mediator to go over the terms of agreement with both parties together to be sure that everyone has agreed to the same set of terms. The only remaining question is how much must be written down and signed before you leave the mediation. The extent to which an entire agreement must be reached and signed at the mediation varies with the circumstances: the complexity of the eventual agreement, the lateness of the hour, the efficiency of counsel, and the trust level between the parties and (perhaps more importantly in this instance) between counsel. Some lawyers recommend finalizing the agreement before leaving any mediation. Mediator and advocates Jim McGuire and Diane Kenty for example, advise lawyers to “document the deal on the spot. Too often a tentative deal unravels when the parties wait until later to reduce the understanding to a writing. Misunderstandings at that point may lead to charges of bad faith and, at a minimum, cost both sides additional time and money. The mediator can help smooth over language problems and ensure that the deal as documented fairly reflects the understandings that were reached.” “Practical Tips For Lawyers/Advocates Representing Clients In Mediation,” Massachusetts Lawyers Weekly, October 17, 1994). At a minimum if you have any doubts about the reliability of the lawyer or client on the other side, get something on the record that at least outlines the terms to which you have agreed. “On the record” does not necessarily mean a formal document; in fact, I have seen employees’ counsel revolt when the attorneys for the employer download twenty-page documents from their computer and present them at the eleventh hour. In order to avoid this eventuality some plaintiffs’ lawyers start to draft brief agreements, with blanks for the final terms, early in the mediation. The shorter the draft, the less likely it is to produce a negative reaction on the other side. The idea is to get the principals to signify their agreement to the essential terms of the agreement in some way that is meaningful to them. Whether such an agreement would be enforced by a court may matter less than that the principals believe that they have reached a final agreement and thus that the inevitable afterthoughts are just that. This goal can be accomplished in a number of ways: 1. You or the mediator can write a short agreement in principle, either on a computer or by hand, pass it around for corrections and have it signed. 1. You can do the same on a flip chart. Then use a copying machine to reduce the size. 1. I have recited agreement terms into a tape recorder and asked everyone present to identify herself and signify agreement orally. I keep the tape. When you Fail to Reach Agreement at the Table A long day ends; the parties are tired and out of sorts; no one has had a creative idea for hours; impasse appears inevitable. Although it makes sense to adjourn at this point, I always encourage participants to leave the door open. I cannot tell you how many times I have gotten calls from counsel the next day (or even driving home) with further thoughts. Sometimes the mere act of leaving the mediation and contemplating the no-agreement option causes people to rethink their positions; sometimes it is new information or an idea on the part of the mediator or one of the participants that comes only after a day or two of thought. Do not be afraid to suggest new possibilities for fear of appearing too eager to settle; if appropriate, the mediator can broach them as her own. If it is not new ideas but new information that is required, think through with the mediator how it can be obtained and what will happen as a result. Do not hesitate to call the mediator after you have left the table. Although most mediators believe fervently in face-to-face contacts early in the process, I have completed many agreements through telephone conversations after a mediation session. If the parties have opposite ideas about how a preliminary court ruling will turn out, perhaps it makes sense to ask the court to rule before resuming the mediation. Occasionally, a case evaluation by an expert or even by the mediator may be useful. If all else fails, you may want to consider whether another process, such as arbitration or final-offer arbitration would meet the parties’ needs better than a public trial. If not and it is early in the litigation process, you may want to consider the possibility of returning to mediation when you are further down the litigation road.


     Allen Fagin, a partner in and currently Co-Chair of Proskauer’s Labor and Employment Law Department, represents employers in all types of employment litigation, including claims alleging age, race, sex and national origin discrimination; breach of contract; defamation; and wrongful discharge. He has litigated matters single as well as major multi-plaintiff or class action litigations in the state and federal courts of New York as well as a number of other jurisdictions, including New Jersey, Pennsylvania, Georgia, Florida, Texas, California and Maryland. In addition to traditional litigation, Allen has handled dozens of employment-related disputes on behalf of insurance and financial services industry clients before arbitration panels of the National Association of Securities Dealers.

     Allen also has an extensive client counselling practice aimed at litigation avoidance. He provides advice and guidance to clients, on an ongoing basis, on such matters as employee discharge and discipline, the development of company personnel manuals, downsizing and reductions in force, early retirement programs and severance plans, employee privacy issues, drug testing and affirmative action obligations.

     Among the clients Allen has represented are major American and foreign-based corporations in such diverse fields as telecommunications, transportation, health care, insurance, legal services, utilities, financial services, entertainment and manufacturing.

     Allen received his B.A. from Columbia College in 1971, summa cum laude. He graduated with honors from the Harvard Law School and holds a Masters Degree in Public Policy from the John F. Kennedy School of Government, Harvard University. Allen joined Proskauer in 1976, following a clerkship with Judge Robert L. Carter of the United States District Court for the Southern District of New York.

Labor Economics and Unions By Bob Delaney

This article is courtesy of HR.com, a website committed to making the lives of HR professionals and business managers easier.

The topic of unionism is always hotly debated. There doesn’t appear to be much in middle of the road when discussing unions. The emotions that are conjured up on both sides of the fence are often based on irrational arguments that cloud the debate and entrench the discussant in their long held beliefs.

The purpose of this article is to put forth a rational discussion on some of the issues.

When we think of unions we often think in terms of the image portrayed in the movies: labor thugs that prevent firms form implementing change that may benefit the all constituents.

What we need to appreciate is the fundamental human right of freedom of association. Since America values individualism, we must respect the fact that individualism allows independent choice.

There may appear to be a contradiction between individual choice and a person’s decision to join a union, thereby abdicating their right to negotiate independently with their employer. The perception is that there is a balance of power between the employer and their organization and an individual. Perhaps this perception stems from the legal status of corporations as entities that have certain rights and obligations, similar to the status of individuals.

The above perception of power is to me obviously distorted. When offered the choice between having all decisions made for you unilaterally by a more powerful entity, or having some form of codetermination through collective representation, I think anyone would choose the latter.

If we value freedom of association, what is the difference between seeking union representation and joining a community service club?

Union Objectives
Unions are political organizations whose objective is to represent its members in collective bargaining activities. Collective bargaining activities can be separated into several areas of interest including wages, employment (number of employees) and conditions of work. Usually the importance of these activities is decided democratically by the union membership.

There is a classic trade-off between wages and levels of employment. What this implies is that if unions attempt to maximize wages they may limit the number of members (firm employees). If the union attempts to maximize employment (members) they may limit wages. An alternative objective may be to maximize the wage bill by placing somewhat equal weight to both objectives.

Union objectives are influenced by:

  • Degree of homogeneity of the membership
  • Differing cohorts may have different objectives (e.g. older workers and younger workers)
  • Political structure of the union
  • Availability of information
  • Desire of union leaders to remain in office
  • Labor market conditions
  • Skill levels
  • Availability of labor
  • Availability of substitutes for labor
  • Product market conditions
  • Declining/ accelerating industry
  • Ability to pass on price increases to consumers
  • Individual employer
  • Ability to pay
  • Ratio of labor costs to total costs

Union Wage/ Benefit Differential Unions have been successful in negotiating higher then market wages and benefits for their members. The wage differential (premium) lies between 10% – 20% in the United States. There are naturally some variances across firms, industries, and between the public and private sector. Differentials also exist between union and non-union workers when it comes to the following:

  • Fringe benefits
  • o Better at unionized workplaces
  • Working conditions
  • More structured at unionized workplaces
  • Job control is union’s response to management’s rights
  • Turnover
  • Lower at unionized workplaces

Union Spillover Effect
Unions can have a spillover effect on the wages and benefits of non-union workers, whether they are at the same work location, or in the same industry. For example, blue-collar union wages may have a positive influence on the white-collar wages at the same employer. There are also inter-industry, intra-industry, and public-private sector spillover effects. Negative (lower wage) spillover effects may result from former union workers (who become unemployed due to the rational response of employers) looking for work in the non-union sector, thus increasing the supply of non-union workers at all wage levels.

Rational Employer Response

Inputs To Production
Given the higher cost of labor in the presence of a union, employers may respond in a rational way. If we treat labor simply as an input to production (remember we are thinking rationally not altruistically), we should respond in the same way that we would if any other input’s price increased.

Depending on the ability to use, and the availability of substitutes for labor, a rational employer response may be to replace expensive labor with a relatively cheaper substitute such as machinery (otherwise known as capital). This results in the use of less labor (unemployment in the unionized sector).

An analogy is the current price of gasoline. If gasoline was an input to producing your good or service, given the recent price increases, you may be looking to convert to a cheaper source of energy such as natural gas.

Since most firms operate on a given budget, it is necessary to balance the costs of inputs, through trade offs, in order to meet budgetary objectives


Recruitment and Selection
Since unionized wages are generally higher, a rational response would be to recruit and select higher quality labor. For example you may look for individuals who have several years of experience in an attempt to reduce your training cost and other fixed costs of hiring.

Due to higher union wages, there is an inherent cost to union members if they lose their job. This cost is measured in regards to their ability to find comparable wages and benefits in a non-union setting.

Another rational response would be to try to amortise your fixed costs of labor over a shorter time period through the use of overtime. Also, by working your existing unionized employees longer hours, you reduce the need to hire additional workers thereby avoiding additional fixed cost of hiring.

Your more expensive labor may require more talented supervision. Through the use of higher quality supervisors, who have industrial relations training, you may be able to reduce the inherent conflict in the union-management relationship.

Labor Economics and UnionsThrough the use of higher quality labor and supervision, it is rational to seek out and develop processes that improve the productivity of your workforce. Since you may be paying a premium for the input, you should attempt to make it more productive in an effort to remain competitive.

Management’s Rights
Management retains the right of unilateral control over most aspects of the workplace that are not contained in a collective bargaining agreement.

Unionization has long been viewed as a negative reflection on management. I have said in the past that any management that has a union deserves a union. One of the reason’s why people choose to unionize is the perceived arbitrary nature of management decision-making. Unions attempt to formalize process and remove the arbitrary-ness of decision-making.

It is rarely a single incident that stimulates interest in unionization. Often it is management behavior over time, which highlights the negative aspects of arbitrary decision-making. As I mentioned above, I think any one given the (free) choice would opt for some form of “voice” in determining (bargaining) wages, employment, and conditions.

Though mismanagement and abuse of power may be a stimulus for the demand for unionization, I have matured in my outlook in regards to laying blame on management. It is a common human frailty, which has been exposed in numerous psychological and sociological studies that “power corrupts and absolute power, corrupts absolutely.” How then can we blame anyone for simply being human?

The rational response to a power imbalance is to restore some form of equilibrium. Workers rational response is to seek (demand) union representation.

Given budgetary constraints and the need to remain competitive, management will respond rationally to the rising cost of inputs to production.

When viewed from an economic point of view, unionization can lead to positive benefits to all constituents. Higher wages, better working conditions, high quality labor and management, lower turnover, increased productivity, increased employment due to higher demand for equipment (capital), ect.

One of the problems is: unionism that is achieved in an adversarial atmosphere fosters bad feelings between the parties. If unionism was viewed in a positive light, and codetermination was the norm in the workplace, then much of the fear and loathing between the parties would not exist or develop.

Bob Delaney is a Knowledge manager at HR.com. Concurrent with his responsibilities at HR.com, Bob is an Academic Instructor in a Post-graduate Diploma Program in Human Resources Management. His academic credentials are separately in Economics and Industrial Relations, Human Resources Management, Business Administration and Alternative Dispute Resolution

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