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ASC Proceedings of the 41st Annual Conference
University of Cincinnati - Cincinnati, Ohio
April 6 - 9, 2005         
 
Effectiveness of Construction Labor Dispute Resolution Methods
 
Philip D. Udo-Inyang, Ph.D., P.E.
Temple University
Philadelphia, Pennsylvania
 
Labor-Management relationship in the construction industry is unique because of many factors, including the transient nature of the employment and collective bargaining agreement.  Labor disputes after the agreement should be dealt with in a formal procedure.  Various methods for settling labor disputes concentrating on union and nonunion workers (employees) problems with contractors (employers) were researched. The scope and applications of these methods were compared with respect to the one most selected by disputants and their success rates. It was concluded that, despite its disadvantages, arbitration is the method mostly chosen and has the highest success rate.
 
Key Words: Collective Bargaining Agreement, Labor Dispute, Alternative Dispute Resolution Methods (ADR), Arbitration, Mediation, Negotiation
 
 
Introduction
 
Labor disputes include differences of opinion between employers and employees, or between employers and union or between unions. These differences happen due to friction between the parties who had previously signed an agreement to setup their working relationship. Changes to the agreement, as perceived by the aggrieved party, are manifested by controversies concerning the terms, tenure and/or conditions of employment. When this friction reaches the level where one party can no longer accept it, a complaint is raised and brought to the attention of the other party.  Then, the provisions of the collective bargaining agreement or the employment contract are used to find a way to solve the problem.  There are many methods available to the parties to solve these labor disputes, some of which are stipulated in the labor agreement.  The main objectives of these dispute resolution methods are the final disposition of cases in a speedy and inexpensive way, and therefore prevent the lengthy and costly alternative of litigation. 
 
Efforts to adjust and solve construction disputes may be peaceful or belligerent. The instruments of open combat most frequently employed by labor or employee are strikes, boycott and picketing. Employers may resort to lockout, shutdown, discharge or blacklisting. Parties engaging in open combat in most cases only delay the disposition of their controversies through agreement or award; but they expect the preliminary trial of strength will improve their tactical position at the bargaining table or in the arbitrator’s office. Occasionally, strikes are called merely to make settlement agencies work faster. Sometimes, disputants do not resort to industrial warfare until peaceful procedures failed to bring results. The duty to settle disputes originated from the custom to make things happen according to plan and fairness, through orderly procedure rather than trials of personal or economic strength.  Any group of disputants may choose either one of these methods first depending on the tension between the aggrieved parties and the urgency to get the dispute settle.
 
This paper defines the various methods and compares their procedures. It investigates and analyses results of case studies, surveys and tests using the different methods. On statistical evidence and other supporting information, one method of labor dispute resolution gives a certain advantage over another in most cases.  Some methods are successful in a certain area and some methods are not.  Arbitration is one method that has the greatest impact in the construction industry, not necessarily the best success ratings.  Arbitration is the voluntary submission of a dispute to one or more impartial persons for final and binding determination.  However, some arbitration processes may be non-binding, if so agreed to by the parties involves.
 
 
Literature Review
 
Disputes are an unfortunate reality of the construction industry.  Construction projects normally have numerous contracts and agreements within a single project, which effectively interlock the various parties involved in the project. All contractual relationships have the potential for dispute.
 
After the World War II, constructive and combine efforts by the public and private sectors established the need for Alternative Dispute Resolution (ADR) (Braun 1965). This trend was followed by professional organizations being developed for this sole purpose, and later led to The National Labor Relations Act. Braun’s analysis summarized the history behind the ADR methods and defined them as they were applied immediately after the war and up to the time of their widespread use. Statistics at that time showed mediation and arbitration being the method of choice for disputants on an equal level. There was no mini-trial at that time.
 
The National Academy of Arbitration (NAA) in its transcript of discussion for the annual meeting of 1999 gave numerous statistics (discussed and analyzed in subsequent sections) on the trend of the kinds of disputes in the construction industry and the decline of the academy, but the rise of the American Arbitration Association (AAA). The effectiveness of the arbitration method is emphasized and the reasons why the industry and labor unions have reduced their requests for arbitrators and mediators from the Academy are specified. The transcript also collected and displayed several data on the decline of their membership and the new trend toward open shop by many large multi-state contractors. The NAA document closed with the success rates of the methods and the ones their members were requested to oversee including the statistics of their members’ willingness to take arbitration cases. Statistics from NAA include: 16.2 million labor union members in 1998 compared to 15.7 million in 1990; Union density dropped from 16% to 14%; case load from union shop to AAA fluctuated by 1990, but did not drop as compared to the cases handled by NAA that dropped by 10.5% in the past eight years (1990-1998). The number of panel requests to the Federal Mediation and Conciliation Services (FMCS) fell from more than 27, 000 in 1990 to 19,000 in 1998, down 30% from 1990 and 40% from 1986 peak for union shop disputes.
 
Weinstein (2001) surveyed the number of successes with both mediation and arbitration and the alarming rate by which mediation has improved over the years (increased by 28.8%) compared to arbitration. She also discussed and suggested new methods to make arbitration more workable in the union setting. According to Weinstein, mediation is the method of choice over arbitration in work place and office settings between employee and employer.   She estimated that 20% more union disputes would start to shift from arbitration to mediation due to mediation success rate and arbitration increasing expense.
 
Ray (2000) compared the mini-trial method with the rest of the methods and gave the advantages and disadvantages of each method. He conducted a case study, which resulted in the mini-trial approach being the fastest method but not necessarily the method with the greatest impact. From his analysis, the mini-trial method, although very successful with local union and small open shop projects, enough data have not been gathered to confidently extend its success rating to larger projects.
 
Steen (1994), Fisk (2000), and the report from the National Highway Research Program (NCHRP) (edited by Bamble and Cipollini, 1995), pointed out ways to stop the problems that may cause dispute before they become full-blown disputes. Although, Fisk looked at them from the prospective between contractors and owners, the other authors looked at them from the labor-contractor situation. Fisk stressed the placement of clauses within the various agreements to lower the potential for disputes and claims, and the confusion of responsibility.  He also suggested monitoring by the proper person to ensure that these clauses do what they were intended to do during construction. The NCHRP (1995) did a case study of the trial of new practices during construction, such as dispute avoidance practices, early recognition of disputes, and labor union-contractor partnering. The success rate proved to have reduced disputes on projects where the practices were tried as compared to those projects where the traditional collective bargaining system prevailed. Steen evaluated the effect of building teams (within labor and contractor ranks), inserting dispute clauses and having weekly union-contractor meetings like partnering (between contractor and owner) to discuss possible disputes and good labor practice and job welfare. They concluded that when these practices did not reduce the potential for dispute, the disputants resorted to arbitration and used the operation of these practices as evidence.
 
Hebdon, Douglas and Mazerolle (1999) conducted and analyzed surveys and case studies, and collected data on the implications of all the dispute resolution methods, but their emphasis was on the size of the various representations during the proceeding of each method. Their findings suggested that in arbitration, with small bargaining size units, over 1,000 cases yielded 89% success. Other methods on the average would lead to impasse 54.55% of the time, at approximately 43% of the way into the bargaining or meeting proceedings. In 29.9% of the arbitration cases, where the disputants were dissatisfied and went to litigation, the courts upheld the arbitration awards in 79.9% of those cases and modified 3.4% of the awards but still kept the same position as the arbitration award.  They concluded, essentially like the NAA, that the decline in union density has encourage widespread interest in alternative disputes resolution.
 
 
Methodology
 
The traditional and non-traditional methods of disputes resolution are defined and their mode of operations and procedures are briefly explained in this section. Although these methods can be used on different types of conflicts and disputes, this paper is restricted to the disputes between construction employers and their employees, prime contractors and union employees and/or non-union employees, and conflicts between unions. 
 
Negotiation
 
Negotiation is simply the extension of the original collective bargaining process between the parties when there is some dissatisfaction or observed changes in how the original agreement was expected or intended to proceed. This is the only method when the parties consult one to one without an outsider to intercede. It is normally the first method that the disputants resort to when there is a problem. It is talking and consulting between the parties with differing view points with the hope of arriving at a common understanding through bargaining on the essentials of the original collective bargaining agreement that the aggrieved party has reason to think that operations of the agreement is not as it was intended. They try in good faith to reach mutually satisfying goals. Sometimes, the negotiation involves the local union chapter negotiating on behalf of the workers if they were involved in the original collective bargaining process, hence they are not considered an interceder.  Series of meetings are held to find a common accord. At the end of the negotiation, the parties leave the table with a “give and take” situation, each party getting something out of the process and thus coming to conclusion. If no agreement is reached, they may resort to other methods described below.
 
Mediation
 
Mediation is an attempt to settle disputes with the help of an outsider, who assist the disputants in their negotiations. If voluntary, it takes place at the request and consent of the parties and brings the parties of the conflict to a voluntary agreement. When parties to a collective negotiation cannot agree on all issues involved, they may continue their effort to reach complete understanding with the help of a conciliator or mediator. Mediation comes about when the parties have cleared most of their differences and really want the remaining unresolved issues to be cleared.
 
Mediation is based on philosophies of behavior and problem solving with unique elements. It aims to resolve conflict in the way that satisfies the needs of the individual parties. The parties have a right to self-determination and to view the problem in a way that makes sense to them. Parties usually resort to mediation when there is sufficient trust that they will narrow the gap between the expectations of one group and the inflexibility of the other. The process examines issues, strengthening relationship, and gaining greater understanding, insights, and empathy. It is a learning process, and what is gained can be applied to other relationships and conflict in the future. Sometimes, it can appear to be non-adversarial. The two fundamental elements of a successful mediation are consensus and confidentiality.
 
The procedure for mediation is basically to conciliate the hostile elements, and by imagination and persuasive power, to develop a common ground upon which the parties can agree. The procedure does not follow the rule of law; it is tactical balancing of expediency, if possible, equity rather than legal considerations. It is informal at most and calls for much improvising on the part of the mediator. However, it should follow rules laid down by the parties to avoid arbitrariness. Some sessions are closed and some sessions are open to the rest of the other members of the collective bargaining unit.
 
The parties are first given the option to discuss the controversy without regard to listeners. This is followed by preliminary meeting with the mediator where an agreement on the procedures is drawn up. Written submissions and subsequent scheduled meetings follow this until the issues can be solved. A final agreement on the settlements is then drawn up and formed part of the original collective bargaining documents. Unions are by virtue of submitting their problem to mediation obligated not to cause, or permit their members to cause or take part in any sit down, stay in, or slow down action or any curtailment of the work while the process is ongoing. The findings and conclusion from a settled mediation cannot later be used as evidence in any subsequent litigation or arbitration.
 
Arbitration
 
Arbitration is the submission of dispute to a disinterested person or persons for the final decision. Arbitration has been described as (*Barcon associates, Inc v. Tri-county Asphalt Corp. 430 A.2d 214, 86NJ. 179 (1981)): a substitution, by consent of the parties, of another tribunal for the tribunal provided by ordinary process of law, and its object is the final disposition, in speedy, inexpensive, expeditious and perhaps less formal manner, of controversial differences between the parties.
 
Arbitration is an extra-judicial determination. Most matters are brought to arbitration as a result of the parties having agreed in advance by inserting an arbitration clause in their contract. Where there is an agreement the moving party may file a demand or otherwise initiate the proceedings in accordance with the specific terms of the contract. Where there is no contract stipulation to submit to arbitration, the parties may execute a submission to arbitrate after the dispute arises. In this case, the arrangement or agreement to arbitrate should cover everything that is necessary to give the arbitrators the power to make a binding determination. The parties follow the procedure laid down in their contract to select the arbitrators. If there is no procedure for such, the arbitrators are selected by the courts or by the American Association of Arbitrators (AAA). The AAA maintains a variety of arbitration rules for the conduct of such proceedings, its Construction Industry Arbitration Rules are uniquely applicable to disputes of labor union and engineering nature.  The association does not act as an arbitrator nor give legal advice, but for a special fee it handles the administration of the arbitration process: (1) preparing a list of persons considered competent to act as arbitrators in the type of situation involved; (2) furnishing rules for the guidance of arbitrators; (3) appointing an arbitrator or arbitrators, if this is desired; (4) if agreed to by the parties, structures the various administrative capacities of the process. If the parties elect to conduct the arbitration under these rules, they are binding on both sides throughout the process.
 
Both factual and legal issues can be submitted to arbitration, but illegal transactions cannot, as they are not enforceable. The parties to the conflict or the courts can decide on the authority of the arbitrators, most often attempts are made to give effect to the intent of the parties. The arbitrator must be knowledgeable with respect to the general subject matter. They should also be impartial and financially disinterested.
 
The arbitration agreement states certain rules that the process must follow, if not the arbitrators may have a free hand in establishing the procedures, most often adopting the American Association of Arbitrators rules and regulations. The rules of evidence are not normally followed although the parties give testimonies and submit briefs. The process must be conducted with honesty and fairness.
 
The procedure starts with the appointment to hold a hearing for the submission of evidence. The process may have subpoena power to cite witnesses or documents. The subject matter and the scope of the disputes must be clear from the beginning of the process and no issue outside the particular issue at hand should be brought into the arbitration to cause delay. The process is informal; direct and cross-examination of witnesses may take place; and the arbitrators play the role of judges. Each side is required to present a case in good faith and the arbitrator may reject evidence that they consider not relevant to the issue at hand. All information that is important to the case is required to be given to the arbitrators. They may request additional information from either parties or one of the parties if they consider it important to do so. When a decision (the Award) is rendered, it will normally be considered final under the rules of the arbitration, unless fraud or some other element is present that would support a contention that the award should be vacated or modified.  The award is normally complete and definite, leaving no room for doubt or confusion. Unlike a legal opinion, the award does not have to state a reason for the decision made. Sometimes, the award results in the parties signing an agreement and refraining from that, which brought the claim to arbitration.
 
Litigation
 
Litigation is the final arbiter of the fate of any controversy, construction labor dispute being no exception. It is basically taking a dispute to court by means of a lawsuit. This method is usually resorted to when all other methods fail. Some disputants may choose to go directly to court if their collective bargaining agreement process does not specify that they exhaust other methods before going to court. Under the litigation method, the parties present their case under procedures required by the legal process. The decision of a lower court on the case may be appealed to a higher court until it reaches the United States Supreme Court, whose decision is final and binding.  This method of dispute resolution is very costly and lengthy, and may take up to several years and millions of dollars. Most contractors, labor unions, non-union construction laborers do not favor litigation.
 
Adjudication
 
A latest and fast developing form of speedy alternate dispute settlement under the Housing Grant, Construction and Regeneration act of 1996 in the UK is adjudication. Most British companies doing construction business in the United States are placing this method in their Contract Documents. This method allows any party to the construction contract to refer to the adjudicator any time. His decision is only provisional and allows the work to go on until the dispute can go to arbitration or Litigation. Courts have developed the support to enforce adjudications where equity is shown.  Adjudication begins when one party gives notice to seek adjudication under the contract. An adjudicator is then appointed within twenty-four hours of the notice by a nominating body. Within seven days, the party initiating the adjudication must submit its entitlement, nature of dispute and the desired remedy. After another seven days, the other party makes its reply. The adjudicator will normally hold a one-day hearing and may or may not request additional information from either or both parties. A decision and any order for payment are issued in 14 to 28 days. The process is very rapid and requires the parties to focus on only the issues between them. No outside issues or supplementary evidence are accepted.
 
Mini-trial
 
Mini-trial combines aspects of arbitration and mediation and is usually non-binding. There are no fixed rules and it basically follows the format of a court or arbitration hearing. Most often there is a judge appointed by one of the ADR associations who has some technical knowledge. The critical requirement for this process is that the principals, who are capable of making final decisions, not mere negotiators, are always present. The purpose of the mini-trial is for each party to have an opportunity to present its best case under courtroom conditions, with the principals noting the strength and weaknesses of the arguments. At the end of the deliberations, the judge makes his decision. It is not normally written in the form of an opinion.
 
 
Comparison of the Methods
 
Negotiation has the advantage of being the cheapest method if the parties go to the negotiation table with the thinking of providing a “give and take” situation along with a high degree of tolerance. The advantage that mediation method plays in developing trust and confidence is sometimes defeated by the difficulty in the selection of a competent mediator and most of its decision not being binding. Mini-trial is different from all the other methods because of its inflexible tolerances with respect to the parties’ submission and stiff schedules, but it is also the only method that encompasses part procedure of at least three of the other methods. In the mini-trial, like the mediation, the parties want to settle the disputes but are at odds as to how this can be accomplished. Mini-trial is unlike arbitration. In arbitration, the parties want their injuries redressed but while in the process they also want to settle the disputes with each party collecting some form of compensation.
 
Mediation is the softest method of all the practical methods of disputes resolution. The mediator wants to encourage the parties to challenge their preconceptions and perspectives; they do not alienate or offend. It is not the prerogative of the mediator to decide on the outcome or what should be discussed. The mediator is less a problem-solver and more a facilitator, creating an environment conducive to open communications. Mediation often allows for more creative and satisfactory solution than any of the other methods because the parties are not restricted by rigid rules of procedures.
 
Arbitration, unlike the other methods, which provide for the parties themselves to reach a settlement, voluntarily submits disputes to a third person for decision-making. Most states have recognized arbitration more than any of the other methods. An Arbitrator, like a Judge in litigation, can decide on issues of law, facts and procedures. Unlike litigation, hearsay evidence is allowed in arbitration. All the ADR methods require good faith as a prerequisite to use the method. Litigation is not an ADR method.
 
Mediation and Arbitration share the following: they are private, unofficial, confidential means of settling disputes. Modern law favors both and they generally promise savings in time and costs as compared to civil litigation. But mediation differs from arbitration in the following ways: arbitration has final power of decision, subject only to a limited judicial review; mediation has no power beyond the power of illumination and persuasion. The mediator is an active intervener while an arbitrator listens and makes his decisions. Arbitration information and records may become public record under certain circumstances while mediation records remain locked up. Most important of the comparisons, is that the arbitrator imposes upon the parties a decision that may please neither party; the mediator, if successful, guides the parties to a decision that they have a major role in shaping, and in which they both agreed. Of the two, mediation is normally used first.
 
Adjudication is a form of mini-trial developed as a variance for making available several choices to disputants with the hope that expenses may be reduced and less time served in the process of settling disputes.
 
 
Effectiveness of the Selected Method
 
Arbitration is sometimes almost as costly and time consuming as litigation but many disputants, especially the open-shop laborers select it as their choice of dispute settlement. Many factors are responsible for this. Statistics from the NAA and AAA show that 89.7% of the disputants who were under the process before an award was made said that they believe in the process. The courts overwhelming support for this method in several states is in addition to the National Labor Relations Act and the Taft-Hartley Act, federal statutes that provide judicial endorsement for the method. Section 203(d) of the Taft Hartley act of 1947 stated a public policy that favors grievance arbitration. In deciding the cases, Textile Workers v.  Lincoln Mills and Steel Workers v. American Manufacture Co., the United States Supreme Court empowered federal courts to enthusiastically enforce both arbitration and the awards rendered pursuant to them.
 
Arbitration has developed to have different styles for different kinds of craft, thus making it better for the selected arbitrator who is already an expert in one of the fields before serving as an arbitrator. Such styles include privately arranged expedited arbitration, classification grievance and expedited arbitration, and job classification arbitration.
 
The effectiveness of the selected method could be a function of the fees charged, without the lawyer fees.  This is related to the effort, time and the status of the arbitrator or mediator. In 1998, mediation fee for a mediator from the NAA was higher on the average than that of an arbitrator. The statistics from NAA also showed that the due process nature of arbitration has been favored by most labor unions and hence they have frequently opted to select this method. Most arbitrators who elect to sit on arbitration proceedings are familiar with the due process protocol.  This has increased the use and demand of the arbitration method in recent collective bargaining cases.
 
The willingness of the arbitrator from the AAA or the NAA to sit for arbitration is a function of the increased use of the process. For personal reasons, such as familiarity and predictability of the process with higher authority, neutrals from the NAA or the AAA will take more arbitration cases than mediation or mini-trial cases. Many of these neutrals were willing to practice arbitration over mediation even for cases outside the traditional labor-related matters or labor-management settings.
 
Hebdon, Douglas and Mazerolle (1999) came to the same conclusion for the effectiveness of arbitration when the union representation is small and the union craft size is also small or broken down into smaller units of more specialize crafts.  Statistics: arbitration usage ranges from a low of 28.45% in less than 21 unit size categories to a high of 51.4% in both 150 to 200 and 200 to 300 bargaining unit size categories. The latter result means that in 808 settlements over a ten-year period, the parties used arbitration in an astonishing 413 cases! In contrast with the linear relationship between number of strikes and size of bargaining unit, the association between arbitration and the number of strikes appears to be nonlinear.
 
It is important to note that for most purposes, mediation came second to arbitration in terms of its frequency of use and its settlement success impact rate in the construction labor dispute settlement.
 
 
Conclusion
 
The use of arbitration as a means of settling labor dispute has reduced among union shop employees and increased among open shop employees partly due to decrease in union density and membership, and the trend that large construction companies are resorting to the use of open shop employees.
 
However, the real strength that supports the use of arbitration is the States and professional/technical societies support for the use of this method before an attempt to pursue litigation. Many states are requiring that if arbitration clauses are placed within the collective bargaining agreement as a means of disputes settlement, the court will not disturb the decisions of the arbitrator(s) if the process shows that no fraud was committed. Typical standard forms of agreement developed by professional and technical societies have adopted arbitration as the first significant step in dispute resolution.
 
The ADR national organizations, such as the NAA and the AAA, observed that their members are reluctant to take on many cases that utilize resolution methods other than arbitration. Further, most disputants believed in the arbitration method as the best workable method in terms of expediting disputes economically and speedily, whereby decisions/solutions are binding and conclusive.
 
 
References
 
Bramble, Barry B., and Cipollini, Mark D., (Editors) (1995) “Resolution of Disputes to Avoid Construction Claims” Synthesis of Highway Practice 214. Journal of National Cooperative Highway Research Program. NCHRP report no 212-217. National Academy Press, Washington DC.
 
Braun, Kurt, (1965). Labor Disputes and Their Settlements. , William Byrd Press, Richmond, VA
 
Fisk, Edward R. (2000). Construction Project Administration, 6th Ed., Prentice Hall, Upper Saddle River, New Jersey.
 
Grenig, Jay E., and Briggs, Steven, (Editors) (2000). “Arbitration 1999, Quo Vadis? Proceedings of the fifty-second annual meeting, National Academy of Arbitrators”, Journal of the National Academy of Arbitrators, the Bureau of National Affairs, Inc.  NAA. Vol. 52, BNA Books, Washington DC.
 
Hebdon, Robert, Douglas, Hyatt, and Mazerolle, Maurice . (1999) “Implications of Small Bargaining Units and Enterprise Unions on Bargaining Disputes: A look to the future?” Relations Industrielles. Vol. 54, No. 3, 503-524, Canada.
 
Ray, Michael C., (2000) “Alternate Dispute Resolution: Mini-trail Approach” AACE International Transactions.  Morgan Town, PA.
 
Steen, Richard H., (1994) “ Five Steps to Resolving Construction Disputes- Without Litigation” Journal of Management in Engineering, ASCE, Vol. 10, No 4. 19-24
 
Steen, Richard H., (2000) “Resolving construction disputes out of court” Journal of property Management.  Vol. 65, No. 5, 58-60.
 
Weinstein, Rebecca Jane, (2001). Mediation in The Workplace: A Guide for Training, Practice, and Administration, Quorum Books, West Port, Connecticut.