Understanding ADR in the Non-Union Workplace

Zev J. Eigen and Adam Seth Litwin, A Bicephalous Model of Procedural Justice and Workplace Dispute Resolution, Northwestern Law & Econ Research Paper No. 11-21, available at SSRN.

Much has been written about arbitration of employment disputes in the nonunion sector.  Much of this literature is theoretical and declamatory, rarely involving an examination of actual institutional arrangements, outcomes and perceptions.1 Some work has been done on outcomes in nonunion arbitrations, but these are hobbled by the inability to track the path different claims may take, including withdrawal and settlement.2 Employee perceptions have been studied in the union sector, but almost nothing has been done in nonunion companies, and certainly nothing that is able to provide a direct measure of innovations in alternative dispute resolution (“ADR”)  systems in a given workplace.

Armed with a Ph.D. in Management from the Sloan School at MIT, his J.D. degree from Cornell, and management labor-side experience at Twentieth Century Fox and several  law firms,  Zev Eigen of  Northwestern University School of Law is uniquely positioned and likely to improve this state of affairs in the study of the nonunion workplace.   Eigen understands economics and the importance of revealed behavior but he is equally sensitive to the insights of psychologists like my colleague Tom Tyler. Perceptions of fairness affect behaviors, which have feedback effects for each other.

Eigen’s first work as a law teacher built on his dissertation, under Tom Kochan of MIT’s supervision.  It was a study of employee perceptions of the fairness of adhesive contracts, The Devil in the Details: The Interrelationship among Citizenship, Rule of Law and Form-Adhesive Contracts, 41 Conn. L. Rev. 381 (2008).

In the work under review, Eigen and his coauthor, Adam Litwin, have obtained access to a truly remarkable data set spanning more than 100,000 workers and more than 1,000 locations across the United States provided by a large nonunion company, which they have dubbed “Gilda”s, Inc.”   The authors use employee surveys commenced before the company introduced a four-step ADR system and continuing for several years afterwards—permitted ‘before and after” comparisons of employee perceptions.   The four steps of the ADR system were (1) employee initiation of a claim with management, (2) appeal to the HR department, (3) further appeal to either a peer review panel or unilateral determination by higher-level HR management, and (4) if still not satisfied, resort to final, binding arbitration.

Eigen and Litwin are interested in employee perceptions of voice and justice.  “Procedural justice” is a measure of how employees perceive the fairness of the procedures employed in a particular system; “interactive justice,” the authors tell us, is a measure of employee perceptions of how well their interests are being taken into account by management in making decisions. They find that the company’s introduction of a formal 4-step ADR system culminating in arbitration resulted in a decrease in “perceived formal procedural justice” but an increase in “perceived informal procedural justice” as well as an increase in “perceived interactive justice.”

One would expect, in theory, to find all three measures advancing in the same direction.   It is especially interesting that employees are able to distinguish between the quality of the formal procedural justice they are receiving in the employer’s decision-making process from the quality of the informal procedural justice of those procedures, but one would think that the direction should be other way—that perceptions of formal justice are increasing while perhaps the discretion of management and perhaps other informal processes are on the decline.  Moreover, the introduction of the new ADR system has no discernible impact on employees’ organizational commitment—another counterintuitive result.

Explaining these results will take further work. The authors suggest that employees are perceiving a kind of low-level resistance to the new program by their immediate supervisors: “Immediate supervisors might be incentivized to encourage their employees to trust them to resolve claims instead of allowing HR or Gilda’s as a corporate entity to do so.  Perhaps local managers are actively encouraging employees to trust them, which could be interpreted implicitly as being encouraged to distrust Gilda’s DRS or the company writ large.”  (p. 15) This dynamic is consistent with low-level supervision’s disquiet with the formal processes introduced by union contracts.

I applaud the coauthors, and especially Professor Eigen, for an important contribution to our understanding of ADR in the nonunion workplace.  I look forward to further contributions by Zev Eigen.

  1. See Samuel Estreicher, In Defense of Theory : Notes on the Production of Legal Scholarship, 10 The Green Bag 2d 49, 51-53 (2006). []
  2. See Alexander J.S. Colvin, An Empirical Study of Employment Arbitration:  Case Outcomes and Processes; David S. Sherwyn, Samuel Estreicher & Michael Heise, Assessing the Case for Employment Arbitration:  A New Path for Empirical Research, 57 Stanford L. Rev. 1557 (2005). []