Binding Mediation Agreements are Enforceable

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By: James M. Reid

 

In Cummings v Cummings (an unpublished decision dated May 19, 2015), the Michigan Court of Appeals confirmed that binding mediation agreements are enforceable since the concept is equivalent to arbitration.  Binding mediation, like arbitration, allows disputes to be resolved without having to follow the formal court rules and procedures.

Mediation is a form of alternative dispute resolution where a third party mediator acts as a neutral person to assist the parties in resolving disputes.  Traditionally, mediation is a non-binding process that creates a forum for the parties to engage in good faith settlement negotiations.  The mediator helps narrow the issues and explores settlement opportunities.  If the matter is not resolved at mediation, the parties are free to file a lawsuit.  However, there is growing trend to make mediation binding in effort to avoid the costs, uncertainties, and delays of litigation.

The benefits of binding mediation over litigation may include, without limitation, being: (1) private (pleadings will not be required to be filed in Court and made available to the public); (2) cheaper, (3) faster; (4) less formal (you are not required to follow the rules of evidence); and (5) more flexible.

The cons of this process may include, without limitation: (1) the mediator tends to assign “some” value to the matter, which could be costly for employers; (2) there is a limited ability to appeal a decision; (3) there is reduced ability to engage discovery (unless the mediation agreement states otherwise); and (4) there is often a lack of transparency (the mediator is not usually required to provide an analysis regarding its findings).  In addition, this process may be seen as a negative from the perspective of employees since the binding mediation provisions are typically drafted by the employer and are not open to negotiation.  In summary, binding mediation is nearly equivalent to arbitration.  The main difference is that a mediator acts more like a neutral person to resolve a matter instead of solely taking on the role of a judge like an arbitrator.

Although this case relates to a divorce proceeding, a binding mediation agreement could be prepared in the employment context.  Employers should seek legal advice of counsel before preparing/implementing binding mediation agreements.  By way of example, failing to include a provision in the binding mediation agreement that prohibits ex parte (meaning without the presence of all parties) communications with the mediator could make the process appear biased.  Likewise, the agreement should identify the process to select a neutral mediator and identify the rules and procedures to be followed.

Lastly, there are benefits to making the mediation process non-binding that should be discussed with counsel.  Non-binding mediation are often used to resolve disputes and allow the parties to discuss the facts and narrow the issues without having to incur the expense of going through extensive discovery.

Since a jury rarely consists of a majority of business owners, I expect employers to continue the trend of implementing mediation and/or arbitration agreements.

This article was written by JAMES M. REID, a member of the Legal Affairs Committee of Detroit SHRM, a Resource Partner Director of MISHRM, and a shareholder of the law firm of Maddin Hauser Roth & Heller PC located in Southfield, Michigan. He can be reached at (248) 351-7060 or jreid@maddinhauser.com.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information, is included in the re-post of the article. May 2015.