Med-Arb: A Bad Approach for Resolving a Dispute
There are so many ways to resolve a legal dispute: a negotiated settlement prior to the start of a lawsuit; a settlement during a lawsuit (with or without an outside mediator); an arbitration; a full trial, in which a jury decides who wins; or even an appeal following a trial. There are advantages and drawbacks to every approach, and sometimes only one path is available to get to a resolution.
From time to time, someone tries to develop a new approach to solving legal disputes. One solution that pops up occasionally — especially in labor and employment law disputes — is a “Med-Arb.” A Med-Arb is a hybrid proceeding, in which the parties hire a Neutral Third Party to help them reach a negotiated solution (the “Med” phase), but if their negotiations stall, then the Neutral becomes an arbitrator who issues an award to resolve the dispute (the “Arb” phase). The parties are bound by the process, with virtually no right to appeal.
In my view, a Med-Arb is a dreadful idea, at least for most employment disputes. I worry that, during the “Med” stage, the parties are not likely to speak candidly or confidentially with the Neutral, because they will fear that any admission could boomerang on them during the “Arb” phase. During the “Med” phase, the parties are not fully committed to bargaining to their last and best offer, because everyone knows that the “Arb” phase is looming at any minute. Throughout the “Med” phase, both sides might worry about how the other side is swaying the Neutral. And I am not at all convinced that a Med-Arb is quicker or cheaper than a traditional mediation would have been.
On November 11th, I will be speaking about Med-Arb as part of a Panel Discussion at the American Bar Association’s 11th Annual Labor and Employment Law Conference in Washington, DC. (The conference brings together more than 1,000 Labor and Employment lawyers and judges, from all practice settings.) The Panel is entitled “Med-Arb: Can We Do Better Than ‘Everyone Walks Away Unhappy’?”, and we will discuss when a Med-Arb might make sense, and when it is a bad fit. I wrote a paper in connection with the Panel, collecting some of the research regarding how Med-Arb works. In my paper I conclude that a Med-Arb is worse than a traditional mediation, at least for most employment disputes.
To me, a Med-Arb is not a miracle cure, and parties should think long and hard before heading down that path.