Arbitration for Employment Disputes?
Updated: Feb 13
Employment disputes fall into two broad categories: operational and legal. The latter type can end up in an employment tribunal, but could be resolved much earlier. The former rarely end up in a tribunal since they don’t often involve legal rights.
People at work disagree about a range of matters which are operational in nature, such as: workload, communication issues, responsibility remit, personality clashes. Grievance procedures can be cumbersome and polarising and can even make disagreements worse. Mediation can play a key role, since it allows the staff members significant control over the process, it is flexible and speedy and it can cater for the ever-present human, emotional and psychological aspects of fall-outs in the workplace.
Where mediation does not work (or even where it is not seen as an option), arbitration can play a role.
The benefit of having arbitration as an option where there is a mediation process is that the mediator can then become the arbitrator and proceed to issue a binding decision on the disagreement. Such a decision is enforceable as it is contained in an arbitral award. Arbitration is a private process, and can be used to deal with disputes away from the glare of the public employment tribunal/courts.
Four points about employment arbitration need to be addressed: competency of arbitration, med-arb, remedy, and the basis of the decision.
In the UK, there is a rule against contracting out of a right to make most claims that can be taken to an employment tribunal (Employment Rights Act 1996, s.203). However, that rule is inapplicable where, as indicated above, the dispute is not one which gives rise to a right to a tribunal application.
Even where it does give rise to such a right, there is specific provision for a post-dispute settlement agreement to be reached in which the parties agree that any right to a tribunal claim is waived, as long as certain conditions are complied with (1996 Act s.203(3)(f) and (3)-(4)).
This means that, technically, many employment disputes can be arbitrated.
On med-arb in general (where the mediator becomes the arbitrator following an unsuccessful mediation), some are against it, since the arbitration process can be contaminated by the arbitrator’s attitude to the parties formed during mediation. I don’t think this is as pronounced an issue as it is sometimes claimed, and for most good mediation-arbitration professionals, it is not an issue at all.
After all, judges must put aside material which they have seen and may be highly relevant but is not admissible, and no-one argues that this is an unreliable process.
The mediator turned arbitrator has to do likewise, and decides the dispute only on the evidence and argument made available during the arbitration process.
There are, of course, practical benefits to med-arb, not least familiarity of the arbitrator with the issues, leading to a quicker decision.
It is perfectly possible for the parties to agree to appoint a different person as arbitrator – there is nothing wrong with that.
Any arbitration seated in Scotland is regulated by the Arbitration (Scotland) Act 2010, in England and Wales under the Arbitration Act 1996. These Acts provide all of the rules required for a flexible process, including a wide remedial power.
In rule 49 of the Scottish Arbitration Rules (in schedule 1 to the 2010 Act), the arbitral tribunal is empowered to ‘order a party to do or refrain from doing something (including ordering the performance of a contractual obligation)’. A similar power exists in the 1996 Act, s.48.
This is a very wide power, and would allow an arbitrator in their award to order that a party does or does not do something within the employment relationship. This could include an order that, for example:
The parties communicate in a particular way Workload is to be distributed in a particular way Responsibilities fall on certain parties for the carrying out of certain duties Payment of compensation in appropriate cases
This kind of broad remedial power is not limited to arbitral tribunals – other tribunals already have wide remedial powers, for example education tribunals under the Equality Act 2010: see schedule 17, para 9 to the 2010 Act. This provision allows the Health and Education Chamber of the First-tier Tribunal to ‘make any such order as it thinks fit’ as long as it is exercised, in particular, with a view to obviating or reducing the adverse effect of a matter relating to a claim.
For certain remedies, the employer (if not one of the parties already) may be added as a party to the arbitration, especially where delivery of a remedy will depend on the co-operation of the employer beyond the individuals involved in the dispute. This is not an issue, and can be handled under the powers in the 1996 and 2010 Acts.
The key to any remedies an arbitral tribunal might make is that they should be framed in clear and specific terms, including with timescales, so that it is clear when they have been breached or not implemented.
Basis of the arbitral award
The law can provide this where the decision relates to a legal right. But where the dispute is about the operational side of the employment relationship, legal rules may not offer a suitable foundation for a decision.
In such cases, the principles of fairness, justice or equity can be employed (known as ex aequo et bono, or decision by an arbitrator acting as amiable compositeur). This possibility is explicitly preserved in the Scottish Arbitration Rules, rule 47(2), schedule 1 to the 2010 Act, and falls within s.46(1)(b) of the 1996 Act.
Arbitration of employment disputes is a viable, sensible option within the dispute resolution armoury of any organisation, and can be used on its own or to complement mediation.
It has to be agreed on a case by case basis, but it could be included explicitly as an option within resolution policies of organisations, and can allow disputes to be resolved swiftly, finally, in accordance with the law or the principles of fairness, and in a private arena.