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Successful Mediations of Employment Litigation
Have a Smart Strategy
Successful employment mediations require a combination of many factors, most of which have little to do with "traditional" advocacy in the context of litigation. The vast majority of employment lawyers, whether plaintiff or defense, recognize that anywhere from 70 to 90 percent of all cases resolve short of a jury verdict. As such, litigators should be as comfortable and competent with settlement advocacy in mediation as they are in trial advocacy. This article will attempt to outline the factors and strategies that can be used by advocates to more effectively represent their clients in mediation and perhaps achieve more successful resolution for themselves and their clients.
Selection of the Mediator
Different mediators have different styles, depending on their training, expertise and general personality traits. Some mediators fall within the "facilitative" style, which generally means that they do not express any opinions regarding the merits of a case, nor do they suggest proposals for settlement. Rather, these mediators work to address the parties' needs and interests, without directly addressing the legal issues in a case, and they are more likely to keep the parties in joint session throughout the mediation. These mediators may or may not have extensive subject matter expertise in employment law and litigation. On the other hand, many mediators are of the "evaluative" school, and seek to analyze and evaluate the legal strengths and weaknesses of each party's case through reality testing, and also by frequently making recommendations for settlement. These mediators are not at all opposed to separating the parties into caucuses for the majority of the time spent in the mediation.
This comparison is probably elementary to many litigators who have participated in mediation, yet its importance is often overlooked in employment mediation. Each attorney should evaluate which type of mediator is best suited for the interpersonal dynamics involved in the particular case. For example, the plaintiff may be too emotionally fragile to be in the same room with the defendant decision-maker, and/or be intellectually or emotionally unable to understand and appreciate a legal analysis of the strengths and weaknesses of their case. Likewise, the defendant decision-maker may see the resolution solely in economic terms and too quickly become frustrated with a process that focuses on the "soft issues," such as the plaintiff's underlying needs and interests.
A good employment mediator has the capacity to be fluid and exercise either style, both within and across mediations. That mediator should have a basic understanding of workplace dynamics and employment law yet possess the ability to establish trust and rapport, and offer flexible and creative approaches to settlement.
Timing of the Mediation
The timing of a mediation in an employment case is absolutely critical. While an early successful mediation can obviously reduce future litigation expenses, the parties must have conducted enough preliminary investigation and/or discovery to make informed decisions regarding settlement proposals. On the other hand, if too much pre-trial work and discovery have been performed, there is a risk that the mediation will not be successful, because the parties will be seeking to recoup their attorneys' fees in the mediation agreement. Additionally, the process of discovery often has the effect of hardening the parties' positions and emotions, thereby making settlement more difficult.
The key is to find the happy medium. In order to stand the chance of being successful without the hardening of positions and fees caused by extensive discovery, both parties should have completed sufficient investigation to make an informed analysis of their respective case theories. Many such cases can be successfully mediated even at the preliminary stages after an administrative charge of discrimination has been filed with the Equal Employment Opportunity Commission or a state human rights agency. However, if some depositions are necessary in order to make an educated case analysis, it may be advisable to conduct the mediation after a couple of depositions are taken by each side. Even in those cases where it appears that the mediation is premature in light of the need for discovery, the mediation process can still provide some benefit. For example, the mediator can work with the parties to adjourn the mediation temporarily and tailor an agreed discovery plan to specifically address the factual issues that need to be resolved so both parties can make more informed decisions in the mediation. This may reduce the expansive scope, expense, and hardening of positions so often caused by wholesale discovery.
In those cases where a summary judgment motion is likely to be filed by either party (which is often the case in employment litigation) there is no definite requirement that the motion be filed and/or ruled upon prior to the mediation. Rather, the likelihood of a successful mediation in those cases will depend directly on the subject matter expertise and experience of the mediator and counsel for the parties. In other words, skillful and experienced counsel and mediator who have performed the necessary research should be able to forecast the result of the motion with some degree of certainty. As with many components of mediation, each case must be considered on its own.
Participants in the Process
The presence, or absence, of certain parties can either create or derail an otherwise successful mediation. In most cases, all individuals with an interest in the outcome of the mediation should attend and participate. Indeed, for many individuals embroiled in litigation, the ability to discuss their case openly with the mediator and the opposing party is a means of providing their "day in court." Consequently, if a key decision maker " either in the underlying dispute or in the decision to settle " is not in attendance at the mediation, the likelihood of productive settlement discussions is reduced.
For example, if an underlying reason for an employment dispute is that the former employee feels his or her termination was mishandled, it may be necessary to have the supervisor (or human resources representative who implemented the decision) present to discuss the matter with the former employee. By the same token, if the monetary settlement terms are going to have to be approved either by the company owner or insurance claims adjuster, it is imperative that those individuals be present. Otherwise, the aggrieved party is likely to conclude that the opposing party does not consider the case serious enough to warrant their attendance and increase the level of animosity, making settlement less likely. The other risk of failing to have the decision-maker present is that it becomes much too easy for that individual to reject settlement proposals via the telephone, when he or she has not been present to "feel the pain" of those parties who are enduring the mediation process and the recommendations of the mediator. In those cases where an insurance company representative cannot be present, there must be some commitments between the parties and the mediator regarding that individual's availability by telephone, during and after regular business hours.
Many advocates use mediation (rightly or wrongly) as a method to evaluate the opposing party's witnesses, if their depositions have not already been conducted. In order to serve the advocate's desire for mediation, the presence of key decision-makers and witnesses serves as an additional justification for their attendance.
The other component dealing with attendance at mediation that frequently complicates resolution is the attendance of non-parties whom one or both of the parties want to be there. Often in employment litigation, an individual party requests that they be able to bring a spouse, relative, or personal friend to the mediation. This raises not only practical issues that might impair or enhance the possibility of settlement, but also issues of confidentiality. Non-parties can often enhance the possibility of settlement but can just as often impair settlement. In any case where a party requests that a non-party be allowed to attend, the issue must be discussed in advance with the mediator and the opposing party. During these discussions, the requesting party should be prepared to address how the individual's attendance will enhance the possibility of settlement, the ground rules regarding the extent of the non-party's participation, and how issues of confidentiality will be resolved.
Preparation of the Client and the Advocate
The first step in actual preparation for the mediation should be by the advocate. Too many advocates approach mediation as a shot in the dark, during which they will argue the case to the mediator and the other side, and hope the mediator can perform some sort of magic. Truly effective advocates who see mediation as a useful means of advancing their client's best interests, approach it with much the same preparation as litigation. At a minimum, the attorney should have conducted a full investigation of the facts; be familiar with controlling law and relevant jury verdicts; candidly assess the strengths and weaknesses of the case; understand the time frames necessary for final disposition; have an accurate estimate of the range of damages, attorney's fees and costs for both sides; and have determined a best case/worse case scenario for trial if mediation is unsuccessful.
All of these components must go into the preparation of the client as well. The client must understand that mediation is different than litigation, and that the attorney will be exercising different skills at the mediation, both with the mediator and the opposing side. From the attorney's familiarity or research of the mediator's approach, the client should be made aware of how the process will work, what will be expected of the client, and the necessity to be patient during the process. The advocate must also apprise the client of the legal and factual weaknesses of the case, and prepare the client for the fact that those will be discussed openly with the mediator. In order to enhance the possibilities for settlement, the advocate should also discuss with the client those non-monetary interests that might induce settlement beyond the dollars and cents. As for monetary terms, it is advisable to discuss a settlement range with the client rather than a bottom line outside which settlement is deemed impossible. It is a rare case indeed in which both parties do not violate their pre-mediation bottom line, and it is much better to address that possibility before rather than during the mediation. Additionally, the attorney should candidly advise the client of many of the boilerplate terms that may be requested, such as confidentiality, liquidated damages, non-disparagement, and a waiver of re-employment. While these are commonplace to attorneys, they have been known to shock the participants who are experiencing their first involvement in employment litigation.
Making the Negotiation Process Productive
A full analysis of the negotiation tools that can be used in employment mediation to make the process more successful is beyond the scope of this article. However, a discussion of a few suggested strategies may be appropriate. Initially, building on counsel's change in approach as discussed above, it is generally advisable for counsel to approach the process with a strong but not overly aggressive style. Although there are certainly exceptions to this suggestion, there will always be a time and place for an aggressive saber-rattling approach, but mediation is rarely the place for that if settlement is indeed the objective, especially in employment disputes. As painful as it might be for some litigators, they should attempt to allow the opposing party to vent with a degree of patience, and otherwise exercise good communication and listening skills.
Other more dispassionate settlement tools in employment litigation are also worthy of discussion. Of course, given the often protracted nature of mediation, and regardless of how unreasonable one party may appear in the negotiation process, parties should be cautioned not to offer or demand their bottom line too early in the process. Most mediations take longer than the parties expect, and a rush to conclude the process is rarely productive. Along that line, in order to avoid the "boy who cried wolf" syndrome, a party should not give their last, best and final offer unless they mean it and are prepared to unilaterally conclude the mediation if the offer is not accepted.
Additionally, advocates should attempt to avoid surprises to the opposing party at the mediation. While there are certainly cases in which one party is holding a smoking gun that might be strategically disclosed in order to induce settlement, other disclosures may doom a mediation. For example, a previously undisclosed expert's report, a new legal claim arising out of the same facts previously alleged, or regressive bargaining from previously expressed positions will set the process back to a posture that will be difficult for the mediator to overcome.
Although the idea may seem foreign to many defendants in litigation, there are some who subscribe to the theory that the party who makes the first offer incurs some advantage in the end. If the first offer is indeed reasonable and is delivered with the message that the defendant is prepared to negotiate in good faith, that first offer indeed may set a bar for further negotiations that may result in a more satisfactory result at the end of the mediation.
Last but not least, the participants should not underestimate the role of the mediator. The mediator has been retained to do more than shuttle offers and counter-proposals between the parties, and has some subject matter and negotiation expertise that can be brought to bear. The advocates and parties should let the mediator do the job for which he or she was hired. A wise advocate uses the mediator as a negotiation coach and takes seriously the mediator's suggestions regarding the timing and framing of arguments and proposals.
Creative Approaches to Settlement
A period of severe economic uncertainty such as is being experienced today brings significant pressures to bear in attempting to resolve employment litigation. Reductions-in-force, mass layoffs, and plant closings are commonplace. Beyond those separations that are based on alleged business considerations, are those for cause, based on alleged worker misconduct. Unemployed workers, typically without any severance benefits or the real prospect of returning to the workforce in this economy, are increasingly seeking redress through equal employment agencies or the courts. From the employer's perspective, their economic situation has left them in a precarious position, oftentimes unable to authorize monetary settlement on even a "cost of defense" or "nuisance value" basis. However, all is not lost. The current economic downturn offers real opportunities for both parties and their counsel to craft creative options for settlement that might not otherwise be recognized in an expanding economy, although many of these could be used in good times as well. The following is a short list of some creative ideas that may be useful in resolving employment litigation, outside the typical dollars-and-cents bargaining that is so often commonplace in traditional legal negotiations.
Changing Separation Status. In these times it is hard enough for an unemployed worker to find employment, even with an exemplary prior-work record. That ability to find alternative employment is severely limited with an adverse basis for separation from the prior employer. Even in those cases where the prospective employer is not being asked for a reference, the fact that the employee must explain the reason for leaving on a subsequent application is not only embarrassing, but indeed, career limiting. In those cases where the plaintiff employee has filed a charge of discrimination or lawsuit alleging that their involuntary termination was in fact retaliatory or a pretext for discrimination, the defendant employer's agreement to revise its records to reflect a voluntary resignation may go a long way toward resolving the case successfully. It is not uncommon for the parties to agree upon language that will be used in the event a prospective employer does call regarding reference information (or for internal communications within the company), which is consistent with a voluntary resignation status.
Letter of Reference. Beyond the simple record change outlined above, the employer may offer to provide a letter of reference. Although most employers would be reluctant to provide a positively effusive recommendation letter, a neutral letter that simply provides dates of employment, position held, and reason for leaving (e.g., voluntary resignation) may serve as an effective tool in resolving the case. In fact, a sweetener is often provided such that the employee was "qualified" for his or her former job, or was able to perform the requirements of the former position. Admittedly, most employers suggest that this is against standard policy, but such an argument is generally overcome by pointing out that this option certainly carries no monetary component and may indeed be successful in resolving the case.
Outplacement Services. When former employees are out of work, especially in this economy, the inability to find work and provide for one's family can result in a downward spiral during which the employee is unable to focus on what is necessary to even look for work. Many employers have relationships with outplacement services that can assist the employee in his or her job search through resumÃ© preparation, interviewing skills and networking, among other things. The cost for these services is generally not significant (even for a small employer), and when an employer pays for this as part of the settlement, it provides added value at minimal cost. Some former employees may also be interested in vocational training or education, which the employer could agree to fund under certain conditions. Also, the employer can agree to reinstate the employee's voice mail and/or e-mail address in the company's system to assist in the job search, and may even allow the use of a company cell phone, computer and/or printer during this period.
Extended Benefits. Many creative options are available when discussing benefits in employment mediations. Although the option to elect COBRA insurance continuation benefits may have long since passed, if the separated employee has COBRA insurance coverage in effect, the employer could agree to pay for that coverage or reimburse the employee for premium payments during the remainder of the coverage period. This insurance reimbursement option could also be available if the employee has obtained alternative coverage outside of COBRA. Additionally, if the employer is self-insured for medical insurance, it may be possible to reinstate the employee to the employer's plan. (This is unlikely to be available in conventional policies, as the employee would not be actively employed with the employer.)
Additional creative opportunities exist with respect to disability retirement, if the employer's benefits package contains that benefit and the employer has some control over its utilization. Beyond medical benefits, the employer may offer additional monetary benefits in the nature of bonuses or pension contributions. For example, if the timing of the termination resulted in the loss of a bonus payment or pension contribution, the employer might agree to otherwise authorize that payment. This payment could be structured in such a way as to avoid a significant monetary contribution, by basing the pension contribution on a percentage of the employee's earnings during the pension year, by altering the date of termination to allow for vesting, or by calculating the bonus on company profitability.
Stock Options. For mid-level managers and executives, especially those with long-term employment with a growing company, company stock may be important. As part of a settlement, the employer might agree to provide company stock instead of cash, the right to exercise stock options, or on the other hand, an offer to buy back company stock at a premium. Although not directly relevant to the issue of stock, many managers and executives find the concept of a consultancy agreement to be attractive. Recognizing that it is easier to obtain alternative employment while still employed, remaining with the company as a consultant presents an attractive alternative to the former employee and may also provide some real benefit to the employer if the relationship has not been left too acrimonious.
Structured Settlement Terms. A formalized structured settlement, as is often utilized in personal injury cases, is also a possibility. This would generally be used where liability is at least in the six-figure range, where it can be effective in encouraging settlement. The employer gets the benefit of showing an enhanced monetary settlement amount, albeit over time, and the employee gets an increased monetary benefit with deferred tax liability. Obviously, this type of settlement should not be used without the assistance of a qualified insurance professional and will only be successful toward inducing settlement if the plaintiff has some need for a long-term income stream. Beyond this type of formalized settlement structure, the settlement could also be structured less formally, simply by paying the settlement amount in installments, which also has some of the same benefits but without the assurance of the insurance company's solvency.
This article is certainly not intended to summarize all of the strategies in which employment litigation claims can be successfully mediated, but it introduces a few of the tools that have shown to be somewhat effective, especially in a period of economic instability. The methods are only limited by the creative resources of effective mediators, advocates and parties. While no single concept or idea should be considered fail-safe, an approach combining a number of these methods may result in a more successful resolution of these cases for advocates and their clients.
MARK C. TRAVIS is a member of the Labor & Employment Law, and Dispute Resolution Sections of the TBA, and is the immediate past chair of the latter. He serves as the Director of the Tennessee Labor- Management Center and is a contract mediator for the Equal Employment Opportunity Commission and the American Arbitration Association. He can be reached at email@example.com.