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Effectiveness of Construction Labor Dispute Resolution Methods
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Philip D. Udo-Inyang,
Ph.D., P.E.
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Temple University
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Philadelphia,
Pennsylvania
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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.
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Key Words:
Collective Bargaining Agreement, Labor Dispute, Alternative Dispute Resolution
Methods (ADR), Arbitration, Mediation, Negotiation
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Introduction
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- 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.
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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.
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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.
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Literature Review
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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.
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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.
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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.
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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.
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(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.
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(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.
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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.
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Methodology
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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.
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Negotiation
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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.
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Mediation
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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.
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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.
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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.
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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.
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Arbitration
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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.
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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.
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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.
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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.
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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.
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Litigation
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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.
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Adjudication
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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.
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Mini-trial
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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.
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Comparison of the Methods
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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.
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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.
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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.
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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.
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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.
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Effectiveness of the Selected Method
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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.
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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.
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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.
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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.
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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.
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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.
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Conclusion
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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.
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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.
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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.
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References
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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.
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- Braun,
Kurt, (1965). Labor Disputes and Their Settlements. , William Byrd
Press, Richmond,
VA
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- 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.
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- Steen,
Richard H., (1994) “ Five Steps to Resolving Construction Disputes- Without
Litigation” Journal of Management in Engineering, ASCE, Vol. 10, No 4.
19-24
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- Steen,
Richard H., (2000) “Resolving construction disputes out of court” Journal
of property Management. Vol. 65, No. 5, 58-60.
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Weinstein, Rebecca Jane, (2001). Mediation in The Workplace: A Guide for
Training, Practice, and Administration, Quorum Books, West Port,
Connecticut.