Latest news with #PracticalLawTheJournal
Reuters
09-04-2025
- Business
- Reuters
Arbitrating Construction Disputes
Construction disputes present unique challenges because they typically arise in the midst of a construction project and can lead to significant project delays and expenses if not quickly resolved. To mitigate these risks and avoid court litigation, the construction industry uses several forms of alternative dispute resolution, including: Mediation. Dispute boards. Arbitration. Although construction arbitration has some attributes of commercial arbitration, it is a distinct practice that requires participants to understand its unique features. With careful planning and thought, parties and arbitrators can readily mitigate the more cumbersome features of construction arbitrations to resolve disputes in an effective and efficient manner. This article explains the factors that parties must consider when preparing for and conducting a construction arbitration. It outlines steps for parties to take when deciding to arbitrate and the process for presenting claims and defenses in a construction arbitration hearing. (For more on construction arbitrations generally, see Construction Arbitration in the May 2023 issue of Practical Law The Journal; for more on international construction arbitrations, see International Arbitration and Construction Disputes on Practical Law.)
Reuters
03-03-2025
- Business
- Reuters
Social Media Influencer Marketing: Managing Risks
Advertisers are allocating increasing amounts of their budget to influencer marketing given its cost-effective digital content and high engagement and conversion rates. Influencer marketing, however, is not without risks. Influencer activities can expose advertisers to false and deceptive advertising claims and lead to reputational damage. The FTC actively enforces its guidance that influencers must disclose their connections to advertisers clearly and conspicuously in their posts. (For more on social media advertising, including influencer endorsements, see Advertising and Promotions on Social Media in the April 2024 issue of Practical Law The Journal.) Legal Framework Influencer marketing in the US is governed and guided primarily by: Section 5 of the Federal Trade Commission Act (FTC Act), which prohibits misleading, deceptive, and unfair advertising (15 U.S.C. § 45). The FTC's Guides Concerning the Use of Endorsements and Testimonials in Advertising (Endorsement Guides) (16 C.F.R. §§ 255.0 to 255.6), which provide guidance on how to avoid misleading and deceptive advertising when using endorsements (with special attention to endorsements posted on social media). The FTC released an updated version of the Endorsement Guides on June 29, 2023. The FTC's Endorsement Guides: What People Are Asking (Endorsement Guides FAQs), a set of frequently asked questions that provides detailed examples on how the FTC applies the Endorsement Guides to social media influencer endorsements. The FTC released an updated version of the Endorsement Guides FAQs on June 29, 2023. The FTC's guidance, Disclosures 101 for Social Media Influencers, directed specifically to influencers to help them comply with the Endorsement Guides. Other relevant FTC guidance, such as: The FTC's enforcement activities also provide guidance on keeping influencer marketing legally compliant. To date, the FTC's enforcement activities have primarily focused on the companies that engage influencers. FTC settlements have mapped out the FTC's expectations for companies using influencer marketing. When the FTC updated the Endorsement Guides in 2023, it clarified that not only can advertisers and influencers be held liable for deceptive endorsements, but also intermediaries, like advertising agencies and public relations firms, can be held liable for their role in creating deceptive endorsements.
Reuters
03-03-2025
- Business
- Reuters
Mediation of Employment Disputes
Mediation is a process of alternative dispute resolution (ADR) where a neutral third party facilitates negotiations among adversaries and seeks, but does not impose, a settlement of the dispute. Parties may be compelled by agreement or by a court or an administrative agency to mediate their dispute, or they may do so voluntarily. Mediation is often an effective tool for resolving disputes between employers and employees (or former employees) because employment disputes are often: This article addresses the key issues and considerations that are unique to the mediation of employment disputes. (For a collection of resources to assist counsel with the mediation and settlement process, see Mediation Toolkit and Settling Employment Disputes Toolkit on Practical Law; for more on the general mediation process, see Complex Mediation: Key Issues and Considerations in the September 2023 issue of Practical Law The Journal.) Mandatory Mediation At times, employees may be compelled to mediate disputes with their employers by: A mandatory dispute resolution procedure included in: an employment contract; an arbitration agreement that requires mediation as a condition to filing an arbitration demand; an employee handbook; or a collective bargaining agreement (CBA). A court or an administrative agency pursuant to a mandatory mediation program. When parties are compelled to mediate, they must participate in good faith and bring to the mediation an appropriate party representative with knowledge of the relevant facts and full settlement authority. However, the mediator is not empowered to unilaterally impose a settlement or make any binding factual determinations. (For information on the potential options available when a party fails to comply with a contractual mediation condition precedent, see Mediation Condition Precedent Clauses in the Fall 2022 issue of Practical Law The Journal.) Voluntary Mediation When parties are deciding whether to voluntarily agree to mediate their dispute, they must consider the benefits and drawbacks of mediation. Benefits of Voluntary Mediation There are many benefits of mediating employment disputes, including that mediation: Affords employees the opportunity to air their grievances and tell their side of the story: directly to their employer; and to an impartial listener (the mediator). May give employees the sense of having been heard, which can have a powerful and cathartic effect, fostering settlement efforts. May provide each party the opportunity to gauge the effectiveness and credibility of the adversary's likely witnesses and to assess the reaction of an unbiased individual (the mediator) to each party's particular facts and arguments, especially where: the dispute involves conflicting accounts of one-on-one incidents without other witnesses, which is typical in sexual harassment disputes; there is little documentary evidence to support either party's claims or defenses; or the outcome of the case may turn on witness credibility. Offers greater confidentiality than in litigation, where court-filed documents are generally publicly available. Mediation allows the parties to avoid unfavorable or embarrassing publicity and disclosure of sensitive information, such as an employee's psychological treatment records. This confidentiality generally extends to settlement terms, alleviating the employer's common concern that settling with one employee will set a precedent for other employees. (For more information, see Mediation: US Privilege and Work Product Issues and Scope of Discovery from Plaintiffs in Employment Discrimination Cases on Practical Law.) However, even if the mediation proceedings are confidential, employers may be limited in their ability to keep confidential the underlying facts and circumstances of sexual harassment or discrimination claims. For example: in the wake of the #MeToo movement, certain jurisdictions have passed laws prohibiting or restricting confidentiality in settlement agreements that resolve sexual harassment or discrimination claims (for more information, see Sexual Harassment Claims in Settlement, Arbitration, and Other Employment Agreements State Laws Chart: Overview on Practical Law); and the National Labor Relations Board has at times scrutinized confidentiality provisions that may violate employees' Section 7 rights under the National Labor Relations Act (for more information, see Separation and Release of Claims Agreement (Long-Form) on Practical Law). Saves the parties litigation costs and attorneys' fees, which may be particularly high if numerous emails and other electronically stored information must be reviewed and produced (for more information, see E-Discovery in the US: Overview, E-Discovery in Employment Cases: Practical Considerations for Employers, and E-Discovery Toolkit on Practical Law). If the dispute involves a statutory discrimination claim, the employer may be liable for the employee's reasonable attorneys' fees and costs in addition to its own litigation costs (for more information, see Discrimination: Overview and Remedies Under Major Federal Employment Anti-Discrimination Laws Chart on Practical Law). Even if the employer prevails in litigation, its attorneys' fees and costs are not generally recoverable, and they may far exceed the substantive amount at stake in the case or the amount for which the case could be resolved in mediation. Offers non-economic alternative remedies may be available in mediation that may not be available in court, such as: neutral reference letters; continued medical benefits; or outplacement assistance. Provides finality and closure. For example: the employer can close the books on potential liability to the employee; and other parties can move forward with pursuing their respective business and personal goals and avoid further distraction from the emotional toll of litigation. Compensates or otherwise satisfies employees without fear (whether founded or unfounded) that publicity regarding their claims will hurt their future job prospects. Drawbacks of Voluntary Mediation Notwithstanding mediation's many benefits, the process may have certain drawbacks that the parties and their counsel should carefully consider before agreeing to voluntary mediation. For example: The employee may be negotiating without the ability to accurately assess the case's strength, especially when: mediation occurs too early in the litigation (see Deciding When to Mediate below); key information, such as employee personnel files or investigative reports, is exclusively in the employer's possession or is claimed to be protected from disclosure by the attorney-client privilege or work product doctrine (for more information, see Internal Investigations: Privilege and Work Product in the January 2024 issue of Practical Law The Journal); or the employer is reluctant to provide free discovery or highlight key, potentially damaging information for the employee. If the mediation is unsuccessful, the parties still incur expenses, such as the mediator's fees, attorneys' fees for drafting and compiling mediation submissions and preparing clients, and costs associated with the time spent in mediation. The mediation may set an artificial floor for the employer's negotiating position or ceiling for the employee's demands in any future settlement discussions, especially if the mediation occurs early in the litigation. In cases where the employee is unrepresented by counsel and appearing pro se, mediation is especially problematic because the employee's ability to make a truly informed decision regarding settlement is limited (see Deciding Who Should Attend the Mediation below). Counsel should be aware that mediation involving a pro se party raises serious ethics concerns for counsel and the mediator (for more information, see Employment Litigation: Pro Se Plaintiff Cases on Practical Law). Choosing the Mediation Forum Once counsel and the parties agree to mediate, they must select an appropriate forum. For example, they may proceed with: Mandatory mediation. If the employer has a mandatory dispute resolution procedure in an employee handbook, an employment agreement, an arbitration agreement, or a CBA, that procedure generally specifies the mediation forum. Equal Employment Opportunity Commission (EEOC) mediation. If the dispute involves a statutory discrimination claim and the employee has filed a charge with the EEOC, the EEOC offers a free, voluntary mediation program that takes place before the agency's investigation phase (for more information, see Responding to Equal Employment Opportunity Commission Charges and Responding to EEOC Sexual Harassment Charges Checklist on Practical Law). Both parties must agree to participate in EEOC mediation. Importantly: in 2020, the EEOC launched a six-month ACT (Access, Categories, Time) Mediation pilot (which permitted virtual mediations, made more categories of charges eligible for mediation, and allowed mediation to proceed throughout the charge process, including the investigation process) and has since announced plans to incorporate into its current mediation program some of the practices it found useful during the pilot, including the use of video technology to hold virtual mediations (EEOC: Press Release, EEOC Concludes Conciliation and Mediation Pilots (Jan. 27, 2021); see also EEOC: EEOC's Pivot to Virtual Mediation Highly Successful, New Studies Find (June 1, 2022)); a study of mediators' perceptions of virtual EEOC mediation proceedings concluded that they are as effective or more effective than in-person mediations (EEOC: Mediators' Perception of Remote Mediation and Comparisons to In-Person Mediation (Feb. 18, 2022)); a study of participants' perceptions of virtual EEOC mediation proceedings reported that nearly 70% of participants would prefer virtual mediation over in-person mediation in the future (EEOC: Mediation Participants' Experience in Online Mediation and Comparison to In-Person Mediation (Feb. 18, 2022)); and it is unclear whether the EEOC's mediation program will change under the second Trump administration. Financial Industry Regulatory Authority (FINRA) mediation. If the dispute involves a registered financial services representative and is subject to arbitration before FINRA, the parties may retain a mediator from FINRA's roster. FINRA mediators are permitted to set their own fees. (For information on FINRA arbitration, see FINRA Industry Arbitration: A Step-by-Step Guide on Practical Law.) Court-annexed mediation programs. Most federal courts have mediation programs for employment disputes that are available once an employee has filed a lawsuit. Some programs are mandatory (see, for example, the US District Court for the Northern District of New York General Order 47, Mandatory Mediation Program (amended Dec. 1, 2023)), some are voluntary, and some are offered at no or reduced cost to the parties (see No-Cost or Reduced-Cost Mediation Programs below). Some programs maintain rosters of mediators but permit the parties to retain private mediators (see, for example, US District Court for the Northern District of New York: ADR Programs). The US Department of Justice maintains summaries of the federal district courts' local ADR rules. (For more on federal court-annexed mediation programs, see Court-Annexed Mediation in the Federal District Courts in Florida and Court-Annexed Mediation in the Federal District Courts in New York on Practical Law.) Several state courts also have mediation programs for employment disputes or commercial disputes that potentially include employment claims, such as claims involving executive compensation or an alleged breach of individually negotiated contracts (see, for example, Commercial Division of the New York State Supreme Court for New York County: ADR Overview). Private mediation. If the parties elect private mediation, they can choose an independent mediator or a mediator from an ADR service provider, such as the American Arbitration Association, JAMS, or International Institute for Conflict Prevention and Resolution rosters. If the parties select an independent mediator, that individual handles the administrative aspects of the mediation directly with the parties. If the parties select a mediator from an ADR service provider, the organization administers the mediation, meaning that it: provides mediation rules; collects the fees; and if requested, may provide a physical space for the mediation. Virtual Mediation Virtual participation in legal proceedings was available before the COVID-19 pandemic, but practitioners, mediators, arbitrators, and judges had rarely used it. During and in the wake of the pandemic, litigants, courts, and ADR institutions have increasingly opted to conduct dispute resolution proceedings virtually. Virtual ADR proceedings are a viable alternative to in-person proceedings, entailing less travel, disruption, and cost. Many neutrals and parties prefer to conduct arbitration or mediation proceedings virtually. Technology companies have simultaneously developed or expanded video teleconferencing platforms (VTC) to accommodate the growing need for virtual proceedings. As with all software-driven platforms, each VTC has its own unique features and limitations. Participants should familiarize themselves with the chosen platform's salient features and limitations so that they can focus their efforts on achieving a mutually acceptable resolution. Virtual ADR proceedings are a viable alternative to in-person proceedings, entailing less travel, disruption, and cost. Many neutrals and parties prefer to conduct arbitration or mediation proceedings virtually. The virtual mediation process generally follows the same path as any other mediation (see The Mediation Process below) but involves unique practical and strategic considerations (for more information, see Virtual Mediation: Key Issues and Considerations and Conducting a Remote Mediation: The Mediator's Perspective on Practical Law). Deciding When to Mediate There is no one-size-fits-all ideal time to mediate an employment dispute. Selecting the optimal time depends on numerous factors that are unique to each case. There are benefits and drawbacks to mediation timed at various phases of the dispute, such as when mediation occurs: Following a demand letter. The level of raw anger felt by either or both parties may dictate the appropriate timing. In cases involving intense emotions, such as sexual harassment or hostile work environment disputes, mediation conducted too soon after the precipitating events is less likely to succeed. Conversely, if the employee's allegations (often summarized in a demand letter) are potentially incriminating or embarrassing to the business or its executives, the employer may wish to mediate before litigation and any ensuing publicity. (For model employee demand letters to an employer, with explanatory notes and drafting tips, see Demand Letter on Behalf of an Individual Employee for Discrimination and Retaliation (Title VII), Demand Letter on Behalf of an Individual Employee for Pregnancy Discrimination and Retaliation, and Demand Letter on Behalf of an Individual Employee For Failure to Accommodate and Retaliation Under the ADA on Practical Law; for a model employer letter responding to an employee's prelitigation demand letter, with explanatory notes and drafting tips, see Employer Response to Demand Letter from Current or Former Employee on Practical Law.) Before discovery. Whether either party needs information from the other to assess the case's value may influence the optimal timing for mediation. Information that the employee typically seeks might include emails available only on the employer's server, personnel records, investigation reports, and documents regarding complaints by other employees. The employer typically seeks: the employee's personal emails sent to friends or family contemporaneously with the relevant events; the employee's social media posts, which may corroborate or contradict the employee's allegations; the employee's medical treatment records, where relevant, such as in cases alleging claims under the Americans with Disabilities Act or emotional distress claims; and information about the employee's efforts to find new employment, where relevant. Before producing key documents or witnesses for deposition. The employer may propose mediation before expending significant sums on discovery or risking exposure of key documents or witnesses in a deposition. Similarly, the employee's counsel (who often works on a contingency fee basis) may be more receptive to mediation before they have invested significant time or money in the case. Alternatively, the parties may choose to take key depositions before mediation to allow each party to gauge the effectiveness of key witnesses. In cases where credibility is critical, such as 'he said/she said' situations, this option, while more costly than pre-discovery mediation, may be especially effective. Parties may also agree to exchange certain key documents before mediating rather than engaging in full-blown discovery. Before a planned or during a pending summary judgment motion. When the parties reasonably anticipate that the employer will file a summary judgment motion, mediating either before the motion is made or after it has been briefed but before it has been decided may be ideal, because both parties are facing potentially game-changing consequences from the motion's outcome. On the eve of trial. Although it is not uncommon, mediating on the eve of trial generally is inadvisable because, by then, both parties will have incurred substantial attorneys' fees, devoted a great deal of time and energy to the litigation, endured the stress of preparing for trial, and are entrenched in their positions. After trial but before appeal. Following a hearing or trial, if the losing party has filed a notice of appeal or moved to vacate an arbitration award, the parties often reach a settlement before the appeal is perfected or the motion is fully submitted. At this stage, the prevailing party from the hearing or trial has stronger negotiating leverage but may be concerned about possible reversible errors or the additional costs of defending an appeal or motion. Deciding Who Should Attend the Mediation When deciding who should attend the mediation, whether in-person or virtually, the individuals with sufficient knowledge of the relevant facts and full authority to negotiate a settlement must participate. For employers, it is useful to know which business units' or supervisors' bottom lines are impacted by the litigation and any potential settlement. The Employee's Mediation Team The employee must attend the mediation with counsel (if represented). In some cases, when permissible under the mediation agreement or program, it may be beneficial for certain friends or family members to attend the mediation. This approach can prevent them from undermining the process behind the scenes or after the fact. If the employee is pro se, bringing a relative or friend is even more important to counterbalance the employer's entourage and the employee's resulting sense of a power imbalance. Some court-annexed employment mediation programs, such as in the Southern District of New York (SDNY), appoint counsel for pro se plaintiffs solely for the purpose of representing them pro bono at mediation (see SDNY: Mediation in Pro Se Employment Discrimination Cases). This benefits both sides, as well as the mediator, in seeking a reasonable resolution of the dispute. Counsel should consider that cases involving multiple claimant employees or potential class-wide claims raise more complex issues relating to attendance, authority to settle, court approval of settlements, and allocation of settlement proceeds among multiple employees. The Employer's Mediation Team Deciding who should attend the mediation for the employer is often more complicated, particularly if the employer is a large entity. Possible participants include one or more of the following: In-house counsel. In-house counsel know the employer's business operations, the players, and the law. A potential disadvantage is that in-house counsel may prioritize saving the company money and potentially bargain too hard for a smaller settlement amount at the cost of reaching no agreement at all. Outside counsel. In-house counsel may represent the company without hiring outside counsel, especially if the mediation arises in the context of an EEOC discrimination charge and before any court litigation has been filed. However, once outside counsel have been retained, they generally take the lead in representing the employer at any mediation or other legal proceeding. The supervisors and managers (potentially defendants) alleged to have mistreated the employee. If supervisors and managers attend, counsel should keep the joint session brief or omit it entirely (see The Joint Session below). Counsel should consider: the benefits of these individuals' attendance, which include that they are familiar with the factual issues and may be able to confirm the accuracy of employee allegations made during the mediation, the employee will have the opportunity to directly confront the perceived wrongdoers, and their presence may be necessary for a full resolution if they are named defendants; and the disadvantages of these individuals' attendance, which include that they likely may be defensive and angry about the employee's allegations and therefore unable to objectively consider the mediator's feedback and litigation risks, and that their presence may inflame the situation, especially in sensitive cases involving sexual harassment or other discrimination. The head of the department whose budget will be affected by a settlement or judgment. People in this position are a good choice to appear on behalf of the employer and usually can analyze the issues dispassionately without their judgment being tainted by emotion. The company's owner. Where a small business is involved, the business owner generally should attend the mediation because the potential settlement directly affects the company's finances. The owner also may be the only individual with sufficient authority to negotiate a full settlement. A human resources (HR) representative. An HR representative commonly attends a mediation, frequently accompanied by in-house counsel or another businessperson. The HR representative is generally very knowledgeable about the circumstances giving rise to the dispute, the employee's performance history, and the alleged unlawful conduct. Another advantage is that HR personnel generally have dispute resolution training or experience, enabling them to listen actively to the employee and respond effectively. A possible drawback arises if the HR representative was involved in making or recommending the adverse employment decision at issue, such as a termination or demotion. In that situation, the HR representative may be defensive and unwilling to acknowledge potential challenges to the decision that the employee raises in the mediation or litigation. An insurance carrier representative. If there is or may be insurance coverage for any claim involved, such as under an employment practices liability insurance (EPLI) policy, then the claims adjuster or other insurance carrier decisionmaker ideally should attend the mediation. However, this is often not feasible due to scheduling difficulties. If so, the insurance carrier's representative should be available by telephone to hear opening statements during the joint session, if used, and to participate in the private caucus sessions (see The Joint Session and Separate Caucuses below). (For more on settling claims with insurance carriers, see Employment Practices Liability Insurance (EPLI) Policies and Coverage on Practical Law.) Allocating Mediation Costs Compared to the cost of litigation, mediation is relatively inexpensive. Nevertheless, unless the mediation is administered by a mandatory court program or the EEOC, mediators typically charge a fee similar to an attorney's hourly billing rate. Determining who pays the mediator's fee is usually a matter of negotiation when the parties agree to mediate, unless previously specified in the employer's mandatory dispute resolution procedures or the parties' employment contract. In some cases, the mediation forum provides a default arrangement for the payment of fees (for example, FINRA Rule 14110). The parties may share the fee equally or the employer may pay the entire amount. Many attorneys believe that sharing the fee equally, or at least having the employee pay some part of it, promotes commitment to the process and makes resolution more likely. If the mediation succeeds, the employee's share is sometimes reimbursed as part of the settlement. The Mediation Process Mediation is a multi-stage process, which typically includes: Mediator selection. Mediation preparation and pre-session tasks. An in-person or virtual joint session and separate caucuses. (For more on the stages of the mediation process, see Complex Mediation: Key Issues and Considerations in the September 2023 issue of Practical Law The Journal.) Mediator Selection Mediators have varied styles and tactics for helping the parties resolve their disputes. Because of the personal nature of the claims involved, the key qualities of an effective employment mediator are: Empathy. The mediator's ability to create a rapport and allow the employee to feel heard and understood is essential for the mediation's success. The employer must also feel that the mediator understands the realities of running a business and its financial and operational constraints. Knowledge of employment law. The mediator must have a solid grasp of the relevant legal issues, which may be quite complex, to ensure the mediator's input is respected by both parties and to establish the mediator's credibility (for more information, see Discrimination: Overview and Employment Litigation: Single Plaintiff Employment Discrimination Cases on Practical Law). Although substantive knowledge is generally considered essential, counsel are often reluctant to choose mediators who exclusively represented either management or employees in their prior litigation careers. Counsel may fear that those mediators are biased in favor of the side they previously represented in practice and potentially carry that bias into mediation. While this concern is sometimes well-founded, mediators with experience litigating employment matters on either side may be most familiar with the vulnerabilities faced by the parties on the side they used to represent. This may result in more pointed reality-testing and ultimately increase the likelihood of settlement. Counsel should seek feedback from other attorneys who have worked with the mediator to address any bias concerns. Persistence. Employment counsel generally value the mediator's persistent efforts to achieve resolution. Counsel should consider allowing the adversary to choose the mediator, provided that the selected mediator is competent. If counsel are confident that a reasonable, objective person would recognize the weaknesses of the adversary's case, then allowing the adversary to select the mediator enhances the likelihood that they will respect rather than distrust the mediator's input. This is especially true of an employee who may feel a power imbalance. Employees may be more likely to accept a negative assessment of their case when they (or their counsel) have selected the mediator. Pre-Session Preparation In employment cases, it is vital to prepare the parties thoroughly for mediation. Unlike commercial cases, where the parties are often sophisticated businesspeople and the issues are unemotional, employment cases are frequently highly charged, and the employee typically has not previously participated in a mediation or other legal proceeding. (For more information, see How to Prepare a Client for Mediation on Practical Law.) Mediation Statement Parties typically prepare a mediation statement outlining the legal theories and facts supporting their positions. The mediator may request that the statement include information about prior settlement discussions, the parties' views about the value of their respective cases, and acceptable settlement terms. Sometimes, these statements are presented only to the mediator. Alternatively, the parties may agree to share their statements with one another in advance of the mediation. In employment cases, counsel should consider a hybrid mediation statement, in which compelling facts and legal arguments are shared with the adversary, while settlement goals and potentially sensitive facts or circumstances are shared only with the mediator. This approach may be particularly beneficial in situations where one party believes that its adversary fails to appreciate key facts or legal principles. Parties generally should attach compelling documentary evidence as exhibits to their mediation statements. When a hybrid mediation statement includes favorable evidence, the adversary has time to review it and potentially adjust their settlement posture before the mediation begins. However, counsel may prefer to withhold key evidence for strategic reasons or only share it with the mediator, especially if the mediation occurs in the early stages of litigation. (For a model mediation statement, with explanatory notes and drafting tips, see US Mediation Statement on Practical Law.) Settlement Proposals Exchanging concrete settlement proposals before the mediation has advantages and disadvantages. Proposals anchor the negotiations and provide some insight into how each party values the case. However, an outlandish proposal from the employee may provoke further ire from the employer, or the employee may view a meager response from the employer as insulting. It then becomes the mediator's job to coax both parties to make more reasonable proposals. The Joint Session Most mediations commence with a joint session attended by the mediator and all parties and their counsel in a conference room (or, for virtual mediations, in a single virtual room). In employment mediations, this joint session can be particularly valuable for both parties. The mediator begins the process with introductory remarks describing the procedure, highlighting its confidential nature and that any settlement must be voluntarily agreed to by both parties, thereby encouraging a problem-solving approach. Good mediators caution counsel against highly adversarial approaches because excessively aggressive advocacy during a joint session may drive the opposing party away from the negotiating table. When that happens, mediators often cut short the joint session. After the mediator's introductory remarks, the parties usually make opening statements. In some cases, the mediator may opt to dispense with the opening statements. Some practitioners prefer this approach. In rarer cases, for example, when the dispute is so emotionally charged that it would not be beneficial for the parties to be in same room, the mediator may skip the joint session entirely and instead begin directly with the separate caucuses. The parties also may mitigate emotional factors by opting for virtual mediation. The Employee's Opening Statement The opening statement allows the employee to present a powerful narrative directly to the employer. While the employee's counsel often make the initial opening statement, the employee may also make a statement on their own behalf, especially if the employee is an articulate or sympathetic witness. The employee's counsel must take the time in advance of the mediation to coach the employee on making an effective presentation, emphasizing the negative impact of the employer's actions on the employee's life, health, and future. Counsel should also carefully prepare their own opening remarks. An effective technique is to underscore the client's desire to resolve the dispute while confidently speaking about the likelihood of success in litigation. For example, counsel may show key clips of videotaped depositions or display enlarged versions of crucial documents or contract language. However, it is important to tell the mediator in advance if counsel for either party intend to use visual aids, so that the adversary does not feel sandbagged or embarrassed by an imbalance in the opening presentations. If conducting a virtual mediation, counsel should understand any requirements or limitations of the virtual platform for sharing documents. The Employer's Opening Statement Counsel typically give the employer's opening statement, although sometimes a persuasive lead witness may also make a brief statement. The employer should not use its opening statement to launch a full-throttle attack on the employee or present an exhaustive list of the employee's shortcomings, as this approach can easily backfire. Rather, the employer should take this opportunity to gain credibility with both the employee and the mediator by: Thanking the employee for presenting the employee's side of the story. Acting empathetically, but not apologetically, so that the employee feels heard. Presenting the factual justifications and legitimate business reasons for its actions. Dispelling the employee's unfounded assumptions or hearsay and setting the record straight as to the facts. Educating the mediator as to the strength of its legal claims. Demonstrating the credibility and strength of key witnesses. Highlighting any key areas of weakness or sensitivity in the employee's case that are relevant to the claims raised (see Ethics Obligations in Employment Mediation below). Conveying any constraints on its financial resources available for settlement. Separate Caucuses During the mediation, most of the time is spent in separate meetings, commonly referred to as caucuses, with the mediator shuttling between private discussions with each party. During these caucuses, each party confidentially discusses the case and develops settlement proposals with the mediator. In employment mediation, confidentiality is often critical because extremely sensitive matters may be discussed. The mediator may speak with counsel alone or may ask permission to speak privately with the client without counsel present, depending on where the mediator perceives that the obstacles to settlement lie. The employee generally makes the first settlement proposal. The employee or employee's counsel may already have sent a demand letter with a settlement amount, to which the employer may or may not have responded. If an earlier proposal is considered unreasonable, the negotiation process sometimes becomes bogged down by debate over who should make the next proposal. An effective mediator works to move the parties past this stalemate, sometimes by encouraging a conditional response or by changing the topic of discussion to other non-monetary issues. The Mediator's Proposal If the parties have reached an impasse, some mediators may suggest, as a last resort, that they each make a settlement proposal. The proposal may be presented during the mediation or later by email. Each party will submit its proposal to the mediator, who will then convey it to the other party, accompanied by the mediator's supporting arguments tailored to each side's circumstances. The key to a mediator's proposal is that the parties are instructed to communicate their acceptance or rejection of the proposal only to the mediator. If one party accepts the proposal while the other rejects it, the rejecting party will not be informed of the acceptance. This protects the accepting party from disclosing its bottom line. Mediators' proposals should only be made when both parties are receptive to the idea and when the mediator senses that one or both parties refuse to move further due to reluctance to concede. Concluding the Mediation If the parties, counsel, and the mediator have prepared thoroughly for the mediation and have listened thoughtfully to the adversary's version of events and to the mediator's input, the likely result is a settlement proposal that each party considers more favorable than proceeding with litigation. Common Settlement Terms While an employment case settlement usually includes a payment of money by the employer, it may also have non-monetary components, such as: Reinstating or transferring the employee to another position. Providing training and job placement assistance. Continuing medical benefits. Making tuition payments. Categorizing the monetary payment to achieve the most favorable tax treatment for both the employee and employer (for more information, see Settlement Payments for Employment-Based Claims: Taxation and Reporting on Practical Law). Providing references (although most employers will only provide a neutral reference). If the case involves a FINRA-registered representative in the financial services industry, agreeing on specific language describing the employee's change in employment status on the employee's Form U5 (the publicly available employment record for FINRA-registered representatives). However, FINRA Rule 2081 prohibits conditioning settlement of a customer dispute on expunging the employee's record of a customer complaint (FINRA Rule 2081). (For more on Form U5 expungement, see Key Employment Law Issues for Financial Services Employers on Practical Law.) Transferring certain intellectual property to the employee. Waiving or shortening the duration of non-compete or non-solicitation provisions (for a model agreement for an employer to use when waiving or modifying an employee's non-compete or non-solicitation obligations, with explanatory notes and drafting tips, see Waiver and Release of Non-Compete Obligations on Practical Law). Issuing a joint press release about the employee's departure if the employment termination was relatively recent. Agreeing not to disparage each other. However, this provision often presents difficulties for a large employer because its employees' actions cannot be fully controlled, and it is reluctant to bind the entire organization. (For information on non-disparagement provisions in settlement agreements, see Settlement and Release of Claims Agreement: Single Plaintiff Employment Dispute (Long-Form) on Practical Law.) Issuing an apology, which may have great emotional value to the employee and imposes no monetary cost to the employer. However, this may not be appropriate in all circumstances. (For more on negotiating settlement agreements in employment cases, see Employer-Side Strategies for Negotiating a Severance or Settlement Agreement Checklist and Plaintiff-Side Strategies for Negotiating a Severance or Settlement Agreement (Individual) Checklist on Practical Law.) Memorializing the Settlement If the parties reach an agreement, counsel should memorialize the settlement terms in a written document signed by all parties before leaving the mediation. This creates a binding agreement that prevents either party from reneging on the deal and avoids second-guessing by the parties, family members, or colleagues. Approaches to memorializing the settlement may include: Briefly summarizing the material terms of the settlement in a term sheet that states that the parties intend to be bound by their agreement pending its replacement by a more detailed and formal settlement agreement (for a model term sheet to memorialize the terms of a settlement, with explanatory notes and drafting tips, see Employment Litigation: Term Sheet for Settlement Conference or Mediation on Practical Law). One of the parties (typically the employer) bringing a prepared form of a settlement and release agreement to the mediation and adding to it the financial and specifically negotiated terms at the mediation (for model settlement agreements in single plaintiff employment disputes, with explanatory notes and drafting tips, see Settlement and Release of Claims Agreement: Single Plaintiff Employment Dispute (Long-Form) and Settlement and Release of Claims Agreement: Single Plaintiff Employment Dispute (Short-Form) on Practical Law). Notably, if the dispute involves an age discrimination claim under the Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, providing specific language in the settlement agreement to ensure the enforceability of a release of those claims (for more information, see Age Discrimination and Employer-Side Strategies for Negotiating a Severance or Settlement Agreement: Single Plaintiff Employment Dispute on Practical Law). For disputes involving claims of sexual harassment, abuse, or discrimination, employers should be aware of potential limitations on settlement terms, such as confidentiality (for more information, see Sexual Harassment Claims in Settlement, Arbitration, and Other Employment Agreements State Laws Chart: Overview on Practical Law). When Mediation Ends in an Impasse Even when the parties are unable to bridge the gap between them, or time does not permit concluding the mediation in one day, parties frequently settle the case at a later date. This is because, for example: A good mediator follows up with the parties and persists in trying to broker a settlement, either over the telephone or by arranging a follow-up mediation session. The parties may reach a settlement themselves once the mediation process has shifted them from adversarial to problem-solving mode and they are invested in getting a deal done. Ethics Obligations in Employment Mediation Virtually every state's rules of professional conduct impose a duty of candor on attorneys, not only in their written and oral statements to tribunals (which do not include mediations), but also in their dealings with others in all professional settings. While it is well recognized that puffery in negotiations does not constitute a breach of counsel's duty of candor, false statements of fact are unethical (see ABA Model Rule of Prof'l Conduct 4.1; ABA Formal Op. 06-439 (Apr. 12, 2006)). Counsel also should beware of conduct that may cross ethics boundaries. For example: Employees in mediation sometimes allude to unlawful conduct of the employer, such as tax or other financial irregularities. Similarly, employers may be aware of skeletons in the employee's closet. Counsel for both parties must avoid using this type of information as leverage to coerce a settlement agreement. To do so may be considered extortion unless those facts bear directly on the elements of a claim or defense (such as in a whistleblower case). If a client makes representations to the mediator that counsel know to be false, counsel are not suborning perjury because the client is not testifying under oath. Nevertheless, it is unethical (and unwise) to leave the misrepresentations uncorrected. If they are material and discovered later, the misrepresentations may destroy credibility with the mediator and provide grounds for voiding the settlement as having been fraudulently induced. Counsel also should be mindful of the mediator's ethics obligations (see, for example, ABA Model Standards of Conduct for Mediators (Sept. 2005); JAMS Mediators Ethics Guidelines). If a mediator is violating ethics rules, for example by giving legal advice to a pro se party, counsel should terminate the mediation. No-Cost or Reduced-Cost Mediation Programs Several mediation programs offer free or reduced-cost mediation services. For example: The EEOC offers free voluntary mediation services for almost all charges if both parties agree to participate (see EEOC: Q&A About Mediation). Several courts, including the Southern District of New York, provide mediators without cost to the parties as part of their mandatory mediation referral programs for certain employment disputes, including a pilot program for Fair Labor Standards Act cases (see SDNY: Mediation/ADR; for more information, see Employment Mediation in the Southern District of New York's Court-Annexed Mediation Program on Practical Law). The Northern District of New York (NDNY) caps mediators' fees at $325 per hour as part of its mandatory mediation program. The rate is fixed at $250 per hour for the first two hours of mediation. For cases requiring substantial preparation, mediators can charge up to four hours at $250 per hour for preparation time. (See NDNY: ADR Program and NDNY: General Order No. 47 (amended Dec. 1, 2023).) Some courts have mediation programs that provide mediators at no cost for a fixed period of time, such as the Commercial Division of the New York State Supreme Court, where the first four hours of mediation are free (see Commercial Division of the NYS Supreme Court (NY County): ADR Overview).
