SCOTT ROBBIN: I would love to get a better understanding of your background, your role at EDR Systems and what EDR does.
ROBERT ROARK: I graduated from the University of Kentucky School of Law in 1989, and I’ve been practicing employment law since that time. I am currently a partner with Walter, Roark & Gay based in Kentucky, and I’ve been admitted into numerous federal and state courts as well as the U.S. Supreme Court.
EDR Systems was founded in 1995 and has focused on installing alternative dispute resolution (ADR) programs and creating customized programs for businesses throughout the U.S. I have assisted EDR since their inception on structuring ADR programs for businesses, helping them to install and roll out those programs, and defending those programs when they are challenged in court. Within the past year, I have been named the national program manager for EDR, which is very exciting for me. I have really welcomed the opportunity to use arbitration to help companies save money and protect their brands.
Today’s employees are becoming much more mobile, outspoken and technologically savvy. How does the changing workforce lead to an increased need for ADR programs to be put in place for litigation and to protect the company’s reputation?
Social media, with its proliferation of outlets, has taken on a far more significant role in people’s lives, including the workplace, than it did even five years ago. Employees across the U.S. tweet and post on Facebook about all issues in life, and as the workplace is often one of the most important aspects of people’s lives, it can have both a positive and a negative impact on a company. If employees say or do something inappropriate on social media, other employees may see it and post about it, and before long, it can go viral and lead to some embarrassing litigation for the company. Companies must proactively address these issues, and ADR plans are set up to help monitor those claims or issues when they come up and allow them to be resolved privately, which is a great benefit to companies that have it.
Why can employee class action suits be so difficult for a company?
The cost and time expended on defending employment claims, including class action cases, can present a significant hardship even to large companies, depending on the number of issues and the damages involved. Typically, class action cases can take up many years to resolve and exhaust a lot of expenses, including the time senior management must spend on dealing with those high-end cases instead of assisting the company’s bottom line and profits. I am personally involved in an employment class action case that has been pending since 1999.
What are some of the benefits of employee arbitration? How is it a better choice for the company?
An effective customized ADR plan offers many benefits to companies. The human resources or legal component keeps nearly all employee claims or disputes in private resolution through mediation or private arbitration. While very few matters ultimately go to arbitration, having that plan in place protects the company’s brand and senior management personnel from having embarrassing issues, such as sexual harassment cases, become a publicity nightmare.
Another benefit of an effective ADR plan is business management. Companies with ADR plans can use this system to monitor and weed out problem areas that they oftentimes did not know existed among lower-level supervisors in the field. This program has been very helpful in revealing problems and taking care of them early on.
Cost savings is another benefit of an effective ADR plan, as the cost of installing a customized ADR plan is less than half the cost of defending a single typical employment case that proceeds to a jury trial.
Another, somewhat unintended benefit that businesses have reported to us over the years is that this process fosters a culture of trust among employees, who find that they don’t need to fear retaliation for bringing forth a claim when it is dealt with quickly and administratively or through mediation. They are able to get results much faster and the process is less acrimonious than extensive courtroom litigation.
Can you elaborate a little more on how arbitration can impact a company’s bottom line?
EDR clients have reported significant savings on the defense costs of employment litigation over the years. Many have reported saving more than 50 percent of the fees they normally spend on outside employment defense costs. Just as importantly, the brand or reputation of the company is protected when what could be an embarrassing public lawsuit remains an administrative, private matter. The protection of the brand is of immeasurable value to a company, especially one that is publically traded.
Why is this beneficial on the employee side as well?
An effective ADR plan encourages employees to come forward with issues promptly so that they can be dealt with fairly and quickly. If employees believe that their issue has not been effectively resolved by reporting it and going through an executive review phase, they know that they have a right to proceed to mediation and perhaps, after that, binding arbitration. All of this occurs much more quickly than courtroom litigation, and it creates far less acrimony between the employer and the employee. Everyone who practices employment law knows that when an employee files a large lawsuit in court and a lot of publicity follows, it creates a lot of acrimony between the company and that employee. However, in the private, quick resolution found in an ADR plan, employees don’t feel so ostracized.
While virtually all businesses have reporting requirements in their HR policies, many employees still believe they will suffer company retaliation. They don’t necessarily buy into an HR policy. When an effective ADR plan is rolled out and thoroughly explained from the management level to the employee level, all employees come to understand that the company is being very proactive and wants to resolve any and all issues quickly, including minor ones. This creates a happy, productive workforce that fosters trust with the employees.
Are there any reasons why this system wouldn’t work for all companies?
For companies with collective bargaining units that must deal with unions, these issues would have to be negotiated separately as part of a collective bargaining process. Oftentimes, union representatives are not very receptive to private mediation and arbitration to resolve union member issues. These plans are also not very suitable for use by government employers because there are constitutional issues related to employment issues in that case.
How do you install an ADR plan within an existing workforce?
When a company decides that it wants to develop and implement an effective and customized ADR plan, it first must gather and submit census data and a description of the workforce—i.e., whether the workforce is white collar or blue collar—along with their claims history. Then a customized plan is put together and rolled out first through senior management, then through middle-level management and further down. All employees are required to attend a videotaped session with a question-and-answer period offered as part of the process. There, employees are told that it is not required of them to sign their program booklet; their decision to remain employed with the company constitutes acceptance to be bound by those terms, which has been upheld by courts across the U.S. All new employees will be required to review the program, watch the video and then sign their program booklets.
Under these plans, do all issues proceed to mediation or arbitration?
No, these plans typically involve a four step process, and issues may be resolved at any step in that process. The first step is a communication step, where the employee communicates the issue to a designated supervisor who attempts to resolve it. If the employee believes it’s not resolved there, it proceeds to executive review, where senior management attempts to resolve the issue. If it is a non-legal issue, that’s the end of the process. A non-legal issue would be an employee having a grievance about a work schedule. That’s not a legal claim, so it would end at the executive review phase. However, if there is a legal claim for damages recognized under a particular federal, state or local law, it would go to mediation, if not resolved at executive review. If it is not resolved to the employee’s satisfaction at that point, it moves into binding arbitration.
What happens after you decide to install an arbitration system for employee disputes? Is there anything to consider once the program is in place and employees have agreed to the terms?
An effective ADR plan must be updated to incorporate and accommodate all changes in law, including court decisions that affect the rights and liabilities of arbitration plans. For example, we’ve had to update plans to include the Dodd-Frank Act for our publically traded clients or those who have earnings reported in a public forum. There has to be an inclusion of the Dodd-Frank issues because, otherwise, the entire plan becomes null and void. So once you have a plan in place, the work isn’t done. It has to be constantly monitored and updated to remain current and effective
Why don’t more companies have an ADR plan in place?
All of the business leaders with whom I’ve discussed ADR seem to like the concept of it, but a company’s interest in installing a plan isn’t truly piqued until it gets hit with employment litigation and has to deal with the costs and/or negative publicity associated with that. So when I initially discuss an ADR plan with a company, their response is usually that it’s not high on their radar at that point because they haven’t had to deal with any major employment lawsuits. But I can’t tell you the number of times I’ve received a call from a business or individual I’d previously spoken with—maybe months or even years earlier—who want to roll out an ADR plan within the next two weeks because they’ve just been served a couple of lawsuits. We gladly help those businesses, of course, but I remind them that it’s like trying to buy insurance when the building is already partially on fire.
If a company already has an ethics hotline or a peer review system in place, can an ADR plan still work there?
Absolutely. A customized ADR plan can incorporate the utilization of an ethics hotline as long as that hotline requires the employee to provide their name and the substance of the issue. That could function as the communication stage of the ADR plan. Similarly, the peer review process can be inserted as a fourth step in a customized five-step process. So it’s not necessary for a company to rewrite its entire system.
Can you give us a couple of examples of companies that have used the system successfully?
Sure. Many companies with a lot of turnover or seasonal employment have already taken advantage of this system. Long John Silver’s, for example, is now privately held but was previously a publically traded company. It was paying over a million dollars a year in outside employment defense costs for various employment cases it faced. After the company installed an ADR plan for its company stores, however, those costs fell to less than a hundred thousand dollars a year. Another example is Alltech, a worldwide animal nutrition company and Argyle member. Within the last two years, Alltech installed an ADR plan for all of its business throughout the U.S., and it now saves over $200,000 a year in outside defense costs for employment cases.
How closely do you work with HR departments, or do you mainly work with only the legal side?
No, we work very closely with HR because ADR is essential to an effective HR policy. If they don’t fully understand how the plan works or how it benefits them, then the plan can’t work.
Because of reporting and accountability requirements, these ADR plans require an executive review to be done within 30 days, with a prompt, written response delivered to the employee about his or her issue within that time period. Companies have found that when managers are not doing their jobs by responding quickly and thoroughly and employee morale is weakened, an ADR plan makes it easier for HR to recommend to upper management that something be done with the manager. So, working closely with HR helps us to more effectively implement the plan and monitor its progress.
We’ve seen so many organizations and C-level executives begin to collaborate together. Legal and HR in particular seem to work much more closely together than they did in the past. We’ve also seen a lot of legal executives become heads of HR nowadays, which is an interesting change. Do you think a company should attempt to install their ADR plan in-house, or is this a project that is better outsourced?
If the company wants to draft, install and roll out its own customized ADR plan, there are many pitfalls and issues to consider, and if these plans are not installed and followed effectively, they can be struck down as null and void when challenged in court. Those issues involve what type of notice was given, how long the notice was held, and where it was explained in the program booklet for the employee to review. Due to the mutuality of obligation issues, this must be mutual on both sides of the process, and there are differences in doing this for existing employees versus new employees. You also have to consider how you roll it out to make both management and employees fully understand what this program does, which also requires the company to spend a lot of its own time and resources to get up-to-speed with those issues. So it’s much easier to outsource the work with a company that has years of experience doing this and knows which issues come up and what courts consider to be problems when challenges are made.
The company would also need to constantly monitor the law and the decisions made regarding arbitration plans in order to make changes to its own plan, which also involves using substantial internal resources that could be used to do other things.
Is there anything else you’d like to add?
In today’s litigation and human resource framework, executives are often asked to think outside of the box, to come up with ideas that add shareholder value and protect the reputation of the company and individual officers. I am often asked if an ADR plan is essentially a type of insurance because of its purpose in providing protection. Conceptually, they’re similar, but they have many differences. Unlike the employment liability insurance that most companies have in place, an ADR plan is the only method of keeping nearly all employment disputes out of public courtrooms. As I’ve said, the cost of installing one of these plans is less than half the defense costs of a single employment case that goes to a jury, and the protection of the brand is of immeasurable value to the company. It certainly enhances shareholder value, and those executives who think outside of the box and install an ADR plan before a litigation storm hits are rewarded tenfold for doing so.
More and more companies, regardless of size, are looking to private arbitration resolution to protect their brands and privately resolve disputes. Fortunately, we’re at the forefront of this movement and can help companies protect themselves and their brands.
Robert L. Roark received his B.A. from the University of Kentucky in 1986 and his J.D. from the University of Kentucky College of Law in 1989. Since then, he has practiced in the area of employment law, including class litigation. Beginning in 1994, Mr. Roark co-founded the firm of Walther, Roark & Gay, PLC, of which he is currently a partner in active practice, based in Lexington, Kentucky. Mr. Roark is admitted in many federal courts as well as the State of Kentucky, including the U.S. Supreme Court and the Sixth Circuit Court of Appeals, wherein he has appeared on many occasions. Mr. Roark has tried numerous cases in federal and state courts, as well as administrative forums and arbitrations involving employment claims. Beginning in 1995, Mr. Roark began serving as a consultant to the business known as Employment Dispute Resolution (“EDR”) which began its operations. Mr. Roark has assisted EDR in defending alternative dispute resolution programs before court challenges, as well as other consultations. In 2012, Mr. Roark became the formal National Program Manager for EDR overseeing the implementation and rollout of alternative dispute resolution programs for companies, large and small, located throughout the United States. Mr. Roark has been a speaker at numerous conferences covering employment litigation, class action litigation, and ADR, as well as assisting the co-authorship of chapters on employment litigation.
Scott Robbin is a director at Argyle Executive Forum. In this role, Mr. Robbin manages content development, editorial speaker recruitment and execution for 50+ annual business events. He has over five years of experience working on the production and implementation of senior-level events. He holds a Bachelor of Arts degree from Columbia University, where he was the captain of the varsity tennis team.