Employment Discrimination: Most Private-Sector Employers Use Alternative
Dispute Resolution (Letter Report, 07/05/95, GAO/HEHS-95-150).

Pursuant to a congressional request, GAO reviewed the: (1) extent to
which private-sector employers use alternative dispute resolution (ADR)
approaches in resolving discrimination complaints of employees not
covered by collective bargaining agreements; and (2) fairness of
private-sector employers' arbitration policies.

GAO found that: (1) in fiscal year 1994, the Equal Employment
Opportunity Commission (EEOC) received over 90,000 discrimination
complaints from employees; (2) ADR approaches include negotiation, fact
finding, peer review, internal mediation, external mediation, and
arbitration; (3) almost all employers with more than 100 employees use
one or more ADR approaches to resolve discrimination complaints; (4)
some employers' arbitration policies do not meet the fairness standards
proposed by the Commission on the Future of Worker-Management Relations;
(5) almost 40 percent of private-sector employers use a trained mediator
from within the company to help resolve disputes, and only 10 percent of
these employers use arbitration; (6) firms that have some workers
covered by collective bargaining agreements are more likely to use
arbitration; and (7) arbitration is usually the final step in a
grievance policy, which includes other ADR approaches.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-95-150
     TITLE:  Employment Discrimination: Most Private-Sector Employers 
             Use Alternative Dispute Resolution
      DATE:  07/05/95
   SUBJECT:  Employment discrimination
             Non-government enterprises
             Collective bargaining
             Labor-management relations
             Hiring policies
             Civil rights law enforcement
             Arbitrators
             Labor negotiations
             Administrative remedies

             
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Cover
================================================================ COVER


Report to Congressional Requesters

July 1995

EMPLOYMENT DISCRIMINATION - MOST
PRIVATE-SECTOR EMPLOYERS USE
ALTERNATIVE DISPUTE RESOLUTION

GAO/HEHS-95-150

Employment Discrimination


Abbreviations
=============================================================== ABBREV

  AAA - American Arbitration Association
  ADR - alternative dispute resolution
  EEO - equal employment opportunity
  EEOC - Equal Employment Opportunity Commission

Letter
=============================================================== LETTER


B-257171

July 5, 1995

The Honorable William L.  Clay
Ranking Minority Member
Committee on Economic and
 Educational Opportunities
House of Representatives

The Honorable Major R.  Owens
House of Representatives

In fiscal year 1994, the Equal Employment Opportunity Commission
(EEOC) received over 90,000 discrimination complaints from employees,
almost twice the number filed in 1981 and 10 times the number in
1966.  The number of employment law cases filed in the federal courts
has increased similarly.\1 In resolving these complaints, employers
have become more and more concerned about the costs--in time, money,
and good employee relationships.  In response, some employers have
adopted internal alternative dispute resolution (ADR) approaches,
including arbitration, that is, submitting disputes to a neutral
third person--an arbitrator--for resolution.  Some require their
employees to agree to mandatory, binding arbitration of
discrimination complaints as a condition of their employment, forcing
employees to waive the right to sue. 

To determine the extent to which employers in the private sector have
implemented ADR approaches, you asked us to determine (1) the extent
to which private-sector employers use ADR approaches, especially
arbitration, to resolve discrimination complaints of employees not
covered by collective bargaining agreements\2 and (2) the fairness of
employers' arbitration policies. 

To determine the extent of the use of ADR approaches, we sent a
questionnaire to a stratified, random sample of 2,000 businesses that
had (1) filed equal employment opportunity (EEO) reports with the
EEOC in 1992 and (2) reported having more than 100 employees.  ADR
approaches include negotiation, fact finding, peer review, internal
mediation, external mediation, and arbitration.  The following are
the definitions of these approaches we used in the questionnaire: 

  Negotiation is a discussion of a complaint by the employee and
     employer and, if appropriate, their counsels, with the goal of
     setting the terms of a resolution.  Negotiation does not require
     involvement of a neutral party and could include an open door
     policy, that is, a policy that guarantees an employee the
     opportunity to discuss his or her complaint with a senior
     manager without fear of reprisal. 

  Fact finding involves a neutral person--someone either within the
     company or external to the company--investigating a complaint
     and developing findings that may form the basis for resolution. 
     This would not include formal investigations of charges by
     government agencies, such as the EEOC. 

  Peer review involves a panel of employees or employees and managers
     working together to resolve employment complaints. 

  Internal mediation is a process for resolving disputes in which a
     neutral person--trained in mediation methods--from within the
     company helps the disputing parties negotiate a mutually
     acceptable agreement.  This process does not lead to an imposed
     solution. 

  External mediation is a process for resolving disputes in which a
     neutral person--trained in mediation methods--from outside the
     company helps the employer and employee negotiate a mutually
     acceptable agreement.  This process does not lead to an imposed
     solution. 

  Arbitration involves a neutral person--an arbitrator from outside
     the company--deciding how the complaint is to be resolved.  The
     arbitrator's decision is usually binding on both the employee
     and the employer. 

To obtain more detailed information on ADR approaches, we telephoned
those employers who had reported using arbitration and asked each of
them to send us a description of the arbitration policies used.  As
part of our assessment of the policies, we compared the policies'
provisions with the key quality standards\3

proposed by the Commission on the Future of Worker-Management
Relations\4 as standards for a private arbitration system that
ensures employees a fair and full airing of their complaints. 
Further details of our scope and methodology, including sampling
errors, are discussed in appendix I.  Unless specifically noted,
sampling errors do not exceed plus or minus 5 percent.  Our review
was performed in accordance with generally accepted government
auditing standards between April 1994 and April 1995.  The
questionnaire is reproduced in appendix II, along with a summary of
the responses. 


--------------------
\1 In addition to discrimination cases, employment law cases include
suits filed by individuals under such statutes as the Fair Labor
Standards Act, the Family and Medical Leave Act, the Employee
Polygraph Protection Act, and the Employee Retirement Income Security
Act. 

\2 When unionized employees collectively bargain with employers,
arbitration procedures are strictly controlled by the collective
bargaining agreement.  The employer and the union negotiate the (1)
disputes subject to arbitration and (2) rules to be followed during
arbitration. 

\3 The Commission proposed six standards relating to (1) selection of
the arbitrator, (2) procedures for aggrieved employees to gather
information, (3) payment of the arbitrator, (4) awards and remedies,
(5) final arbitrator ruling, and (6) judicial review.  Although the
Commission recognized a consensus among employers and employees that
a fair system must provide the right to independent representation if
the employee wants it, this was not included as one of the six
standards.  However, we included this feature in our analysis of
policies. 

\4 At the request of the President, the Commission was established in
May 1993 and asked to investigate and report back on three primary
issues:  what changes might be needed in labor-management cooperation
and employee participation to enhance workplace productivity; how the
legal framework and practices of collective bargaining should be
altered to enhance cooperative behavior, improve productivity, and
reduce conflict and delay; and what can be done to enable employers
and employees to resolve workplace problems themselves, rather than
turn to state and federal courts and government regulatory bodies. 
In December 1994, the Commission completed its tasks and issued its
final report, summarizing its findings and recommendations. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

We estimate, on the basis of our questionnaire results, that almost
all employers with 100 or more employees use one or more ADR
approaches.  Arbitration is one of the least common approaches
reported.  Some employers using arbitration make it mandatory for all
workers. 

Employer policies on arbitrating discrimination complaints vary
considerably in form and level of detail.  However, some of these
policies, such as those for employees obtaining information and
empowering the arbitrator to use remedies equal to those under law,
would not meet standards of fairness proposed recently by the
Commission on the Future of Worker-Management Relations, which was
established by the Secretary of Labor and the Secretary of Commerce
at the President's request. 


   BACKGROUND
------------------------------------------------------------ Letter :2

If workers believe that they have been discriminated against in an
employment matter, they may generally file a charge with EEOC, one of
several federal agencies responsible for enforcing equal employment
opportunity (EEO) laws and regulations.\5 Under title VII of the
Civil Rights Act of 1964, EEOC investigates--and may litigate, on its
own behalf or on behalf of the charging party--charges of employment
discrimination because of race, color, religion, sex, or national
origin.  EEOC has similar responsibility under the Age Discrimination
in Employment Act of 1967, which prohibits employment discrimination
against workers aged 40 and older; under the Equal Pay Act of 1963,
which prohibits payment of different wages to men and women doing the
same work; and under the Americans With Disabilities Act, which
prohibits employment discrimination against workers with physical or
mental disabilities. 

In April 1995, EEOC announced changes in the way it processes
private-sector employment discrimination charges.  As soon as
guidance and implementation instructions are issued, EEOC will begin
categorizing charges according to three priorities.  The first
category is for charges that appear more likely than not to involve
discrimination, and these charges will be fully investigated.  The
second category includes charges that appear to have some merit but
will require additional evidence to determine whether a violation
occurred.  The third category includes charges that can be
immediately dismissed without investigation.  EEOC also announced
that it will initiate in October 1995 a voluntary ADR program using
mediation to handle some of its workplace discrimination charges. 
Under this planned program, some employees filing charges and their
employers will work with a neutral mediator to settle discrimination
disputes, rather than go through EEOC's traditional investigative
procedures.  If the employer and employee fail to reach a resolution,
the charge will be returned to EEOC's regular caseload. 

If EEOC investigates the charge, it notifies the employer of the
charge and requests information from the employer and any witnesses
with direct knowledge of the incident that led to the discrimination
charge.  If the evidence obtained by the EEOC investigator does not
show reasonable cause to believe discrimination occurred--for
example, the employee was terminated for poor performance and not due
to discrimination--EEOC dismisses the case after issuing a "no cause"
finding and a right-to-sue letter.  When the evidence shows that
reasonable cause exists to believe discrimination occurred, EEOC
tries conciliation.  If conciliation attempts fail, EEOC may go to
court on behalf of the employee, although it rarely chooses to do so. 
EEOC officials have said that the Commission lacks sufficient legal
staff to significantly increase the number of cases it can litigate
effectively.  When EEOC decides not to go to court, it issues the
employee a right-to-sue letter, which allows the employee to sue. 

While charges filed with EEOC may lead to legal relief for employees
with valid claims, each charge results in costs to the employer, even
though most are found to be in compliance with the law.  Although the
employee does not pay for the EEOC investigation, he or she may incur
psychological costs while pursuing the claim, the average time of
which was 328 days in fiscal year 1994.  The federal government also
incurs costs for each charge investigated. 

ADR approaches are being considered by employers because "almost any
system is quicker, cheaper, and less harrowing than going to court,"
according to an official of the Equal Employment Advisory Council, an
employers' group.  Their concerns have recently increased as a result
of (1) multimillion dollar jury awards to employees and (2) the
provision in the Civil Rights Act of 1991 that permits punitive
damages in cases of intentional discrimination under title VII of the
Civil Rights Act of 1964 and the Americans With Disabilities Act.  In
addition, a 1991 U.S.  Supreme Court decision upholding mandatory
arbitration for statutory claims concerning employment disputes in
the securities industry\6 has led to consideration of arbitration in
particular.  Finally, some employers feel that ADR approaches can
minimize the adversarial relationship between employer and employee
resulting from such complaints. 


--------------------
\5 In some instances, employees of federal contractors can file
discrimination complaints with the Office of Federal Contract
Compliance Programs in the Department of Labor.  Also, 46 states, 40
localities, Puerto Rico, the District of Columbia, and the Virgin
Islands have established fair employment practice agencies to
investigate employment discrimination.  Individuals in these
jurisdictions generally may choose to file charges with either EEOC
or the appropriate state or local agency. 

\6 See Employment Discrimination:  How Registered Representatives
Fare in Discrimination Disputes (GAO/HEHS-94-17, Mar.  30, 1994). 


      COMMISSION APPOINTED TO
      ADDRESS WORKER-MANAGEMENT
      RELATIONS
---------------------------------------------------------- Letter :2.1

The Commission was appointed at the request of the President by the
Secretary of Commerce and the Secretary of Labor to address three
questions: 

  What (if any) new methods or institutions should be encouraged, or
     required, to enhance workplace productivity through
     labor-management cooperation and employee participation? 

  What (if any) changes should be made in the present legal framework
     and practices of collective bargaining to enhance cooperative
     behavior, improve productivity, and reduce conflict and delay? 

  What (if anything) should be done to increase the extent to which
     workplace problems are directly resolved by the parties
     themselves, rather than through recourse to state and federal
     courts and governmental bodies? 

In researching this third question, the Commission considered the
range of federal and state laws regulating the workplace, including
those ensuring minimum wages and maximum hours; a safe and healthy
workplace; secure and accessible pension and health benefits;
adequate notice of plant closings and mass layoffs; unpaid family and
medical leave; and bans on wrongful dismissal, as well as those
outlawing discrimination on the basis of race, sex, religion, age, or
disability.\7

According to the Commission's December 1994 report, both employers
and employees agree that, if private arbitration is to serve as a
legitimate form of private-sector enforcement of public employment
law, arbitration policies must provide

  a neutral arbitrator who knows the laws in question and understands
     the concerns of the parties,

  a fair and simple method by which the employee can obtain the
     necessary information to present his or her claim,

  a fair method of cost-sharing between the employer and employee to
     ensure affordable access to the system for all employees,

  the right to independent representation if the employee wants it,

  a range of legal remedies equal to those available through
     litigation,

  a written opinion by the arbitrator explaining his or her rationale
     for the decision, and

  sufficient judicial review to ensure that the result is consistent
     with employment laws. 

The Commission noted, however, that most experts who had testified
before it agreed that imposition of fairness standards must not turn
arbitration into a second court system. 


--------------------
\7 Employer views on these topics are discussed in Workplace
Regulation:  Information on Selected Employer and Union Experiences
(GAO/HEHS-94-138, June 30, 1994). 


   SOME EXISTING ARBITRATION
   POLICIES WOULD NOT MEET
   COMMISSION'S RECENTLY PROPOSED
   STANDARDS
------------------------------------------------------------ Letter :3

In our review of employers' arbitration policies, we found that some
do not meet the fairness standards recently proposed by the
Commission on the Future of Worker-Management Relations. 

Using the Commission's six standards, we evaluated dispute resolution
policies provided by 26 employers that reported using arbitration to
resolve discrimination complaints by employees not covered under
collective bargaining agreements.\8 \9 Most of these policies, which
are discussed below, are recent:  15 had been implemented in the past
5 years. 


--------------------
\8 From the employers that indicated in their questionnaire responses
that they used arbitration, we excluded employers we could not
contact, employers who said they had no written policy, and employers
who did not use arbitration to resolve discrimination complaints by
employees not covered by collective bargaining agreements (see app. 
I). 

\9 We also evaluated whether the policies permitted employees
independent representation if they wanted it. 


   ALMOST ALL EMPLOYERS REPORTED
   USING ADR APPROACHES, BUT FEW
   USE OR PLAN TO USE ARBITRATION
------------------------------------------------------------ Letter :4

Almost 90 percent of employers that had more than 100 employees and
filed EEO reports with EEOC in 1992 use at least one ADR approach to
resolve discrimination complaints.  The reported use of these
approaches, which ranges from about 80 percent for fact finding to
about 9 percent for external mediation, is shown in figure 1.  Almost
40 percent of these employers use a trained mediator from within the
company to help resolve disputes.  Only about 10 percent of employers
use arbitration.  Arbitration was mandatory for all covered employees
for about one-fourth to one-half of the employers using this
approach.\10

   Figure 1:  Percentage of
   Businesses Using Selected ADR
   Approaches

   (See figure in printed
   edition.)

\a Approaches cited include internal investigation, open door policy,
and using grievance procedures. 

In addition to those firms whose policies include arbitration, 8.4
percent of employers with more than 100 employees that filed EEO
reports with EEOC in 1992 reported that they are considering
implementing a policy requiring arbitration of employee
discrimination complaints. 


--------------------
\10 The percentage of employers using arbitration is 39.0 percent
plus or minus 16.1 percent. 


      ARBITRATION IS FREQUENTLY
      THE FINAL STEP IN A POLICY
      INCLUDING OTHER ADR
      APPROACHES
---------------------------------------------------------- Letter :4.1

A dispute resolution policy frequently has a series of steps, such as
those discussed below, that can be linked to different ADR
approaches.  Usually, a policy that includes arbitration has it as
the final step.  (See fig.  2 for an example of a dispute resolution
system that includes arbitration.)

   Figure 2:  Steps in Example of
   Company's Employee Dispute
   Resolution Policy

   (See figure in printed
   edition.)


         STEPS 1 AND 2: 
         NEGOTIATION
-------------------------------------------------------- Letter :4.1.1

In step 1, an employee with a complaint is encouraged to discuss the
matter with his or her immediate supervisor.  The employee and
supervisor should make sincere, good faith efforts to resolve the
matter.  If the employee prefers not to present the matter directly
to the immediate supervisor or if they cannot resolve the matter, the
employee then discusses the matter with a representative of the
establishment's human resources department and decides whether to
proceed to the next step. 

In step 2, the employee may request that a representative of the
establishment's human resources department conduct an assessment of
the dispute and help the employee and supervisor reach a resolution. 


         STEP 3:  FACT FINDING
-------------------------------------------------------- Letter :4.1.2

If resolution has not been reached, an employee may proceed to step 3
and request an investigation by a representative of the
establishment's human resources department.  The results of the
investigation are discussed with the appropriate senior manager and
the employee.  The senior manager decides how the complaint should be
resolved.  A decision letter is sent to both the employee and
supervisor at the end of this step. 


         STEP 4:  REVIEW BOARD
-------------------------------------------------------- Letter :4.1.3

An employee who is dissatisfied with the senior manager's decision
may request that the problem be reviewed by a review board, which is
composed of an executive, a manager, and a representative from the
corporate human resources office.  The employee may request the help
of an executive adviser in preparing for this step.  At the end of
step 4, the board will make a final company decision on the dispute's
merits, including corrective action, if appropriate. 


         STEP 5:  ARBITRATION
-------------------------------------------------------- Letter :4.1.4

If an employee is dissatisfied with the board's decision, he or she
may submit the complaint to binding arbitration, which is step 5 of
this company's dispute resolution policy.  An employee must give
notice within 20 working days of the date the board reached its
decision.  The arbitration is to be administered in accordance with
the procedures of the American Arbitration Association (AAA), a
nonprofit organization that trains arbitrators and maintains lists of
arbitrators who can be used to resolve different types of disputes,
including labor-management and employment disputes.  The arbitration
will be heard by an arbitrator who is licensed to practice law in the
state in which the arbitration takes place.  Under this company's
policy, the employer and the employee share equally the fees and
costs of the arbitrator, although the arbitrator may order the
company to pay the employee's costs in excess of 2 weeks' salary if
the employee demonstrates a continuing inability to pay his or her
entire share. 


      SMALLER BUSINESSES ARE AS
      LIKELY TO REPORT USING
      ARBITRATION AS LARGER ONES
---------------------------------------------------------- Letter :4.2

Larger employers with larger human resource and legal staffs might be
assumed to be more likely to use arbitration.  However, we found no
statistically significant difference in use of arbitration based on
business size.  Figure 3 shows the percentage of businesses using
arbitration by size. 

   Figure 3:  Percentage of
   Businesses Using Arbitration,
   by Size

   (See figure in printed
   edition.)


      FIRMS WITH SOME WORKERS
      COVERED BY COLLECTIVE
      BARGAINING AGREEMENTS ARE
      MORE LIKELY TO REPORT USING
      ARBITRATION
---------------------------------------------------------- Letter :4.3

Since arbitration has long been a feature of grievance procedures in
the collective bargaining arena, employers that have collective
bargaining agreements with some of their workers might be more likely
to use arbitration with those not covered by collective bargaining. 
Figure 4, which shows that businesses with some union workers are
nearly three times as likely as those with no union workers to use
arbitration, lends credence to this notion. 

   Figure 4:  Percentage of
   Businesses Using Arbitration,
   by Existence of Union

   (See figure in printed
   edition.)

Note:  Confidence interval for businesses with some union workers is
18.4 percent plus or minus 8 percent. 


      SELECTION OF ARBITRATOR
      USUALLY INVOLVES BOTH
      EMPLOYER AND EMPLOYEE
---------------------------------------------------------- Letter :4.4

In its final report, the Commission states that the arbitrator
selection process should allow both the employer and the affected
employee(s) to participate.  The arbitrator should be selected from a
roster of qualified arbitrators who have training and experience in
the area of law covering the dispute being arbitrated and are
certified by professional associations specializing in such dispute
resolution.  The process should ensure that rosters include
significant numbers of women and minorities.  Neither party should be
able to limit the roster unilaterally to avoid the possibility that
the arbitrator selected will be biased in favor of that party. 

While we did not evaluate the qualifications or demographics of the
panels from which arbitrators would be chosen, we noted that in 22 of
the 26 policies we examined, both the employee and employer are
directly involved in selecting the arbitrator.  In 12 policies, this
is done with the help of AAA.  Immediately after the complaint is
filed, AAA simultaneously sends an identical list of people chosen
from its panel of employment arbitrators to both the employer and the
employee.  The employer and the employee (1) strike any names they
object to and (2) number the remaining names in order of preference. 
In a single arbitrator case, the employer and the employee may each
strike up to three names.  AAA chooses an arbitrator from among those
approved on both lists in accordance with the designated order of
preference.  If no agreement is reached on any of the names, AAA
makes the appointment from other members of the panel.  In seven
policies we reviewed, the employer and employee alternate striking
names from a list.  One policy rather vaguely calls for selection
"based on the parties' preferences." In two policies, the employer
selects the names on the list, but the employee is involved in
selecting the arbitrator. 

In one of the remaining four policies, the employer unilaterally
selects the arbitrator, while the other three do not discuss
arbitrator selection. 


      EMPLOYEE ACCESS TO
      INFORMATION IS RARELY
      DISCUSSED
---------------------------------------------------------- Letter :4.5

According to the Commission, employees should have the opportunity to
gather the relevant information they need to support their legal
claims.  Employees pursuing a discrimination complaint, for example,
should be granted access to their personnel files.  Broader access to
personnel files should also be available to employees bringing
systemic discrimination claims.  During arbitration, an employee with
a complaint should be allowed at least one deposition,\11 with a
company official of the employee's choosing.  The arbitrator should
be empowered to expand discovery (pretrial or prehearing procedure by
which one party gains information held by the other) to include any
material he or she finds valuable for resolving the dispute. 

Only three policies we reviewed discuss access to information.  One
policy states that discovery will be allowed and governed under the
discovery rules of the state code of civil procedure unless otherwise
agreed to by the parties; one policy provides for 2 days of
depositions; and the remaining policy limits the taking of
depositions to one company representative, two other persons, and one
expert witness named by the company but also allows requests for
documents related to the complaint. 


--------------------
\11 A deposition is a statement of a witness under oath in which both
parties can be present and cross-examine the witness and which is
transcribed by an official reporter. 


      BOTH EMPLOYER AND EMPLOYEE
      USUALLY SHARE PAYMENT OF
      ARBITRATOR
---------------------------------------------------------- Letter :4.6

To ensure impartiality of the arbitrator, the Commission proposes
that both the employee and the employer contribute to the
arbitrator's fee.  Ideally, the employee contribution should be
capped in proportion to the employee's salary to avoid discouraging
claims by low-wage workers. 

Seven policies do not address cost sharing.  In four policies, the
employer pays for all arbitration costs; costs are to be shared
equally in nine policies; and the employee share is either capped or
limited to less than half the costs in the remaining six policies. 
For example, one employer pays all costs in excess of $50.  Another
firm pays 80 percent of the arbitration costs, while the employee is
responsible for 20 percent. 


      RIGHT TO INDEPENDENT COUNSEL
      GENERALLY PERMITTED
---------------------------------------------------------- Letter :4.7

According to the Commission, both employers and employees agree that
fairness requires the right of independent representation if the
employee wants it.  AAA rules state that "any party may be
represented by counsel or by any other representative."

Twenty-one of the policies we reviewed permit the employee to be
represented by an attorney during arbitration.  Four policies do not
address representation.  Only one policy specifically states that
representation by an attorney will not be permitted. 


      REMEDIES RARELY ADDRESSED,
      BUT NOT SPECIFICALLY LIMITED
      BY POLICIES
---------------------------------------------------------- Letter :4.8

The Commission states that the introduction of a workplace
arbitration system should not curb substantive employee protections. 
This means that private arbitration should offer employees the same
array of remedies available in court.  Arbitrators should be allowed
to award whatever relief--including reinstatement, back pay,
additional economic damages, punitive awards, injunctive relief, and
attorney's fees--would be available in court under the law in
question. 

Eighteen of the 26 policies do not address legal remedies--such as
monetary compensation--available to the arbitrator.  Of the eight
remaining policies, seven state that the arbitrator can use any
remedy available under law, while one policy prohibits the arbitrator
from assessing damages beyond those required to compensate for actual
losses. 


      FINAL ARBITRATOR DECISION IS
      SOMETIMES IN WRITING
---------------------------------------------------------- Letter :4.9

The Commission states that the arbitrator should issue a written
opinion that states the findings of fact and reasons that led to his
or her decision.  This opinion need not correspond in style or length
to a court opinion.  However, it should set out, in understandable
terms, the basis for the arbitrator's ruling. 

Ten policies do not address the form of the arbitrator's decision. 
The remaining 16 policies require the arbitrator to provide a written
ruling, but specific provisions of these policies vary considerably. 
For example, one policy requires the decision to "contain findings of
fact and conclusions of law supporting the decision and the award,"
while another states that the written opinion should not include
findings of fact and conclusions of law unless requested by both the
employer and the employee. 


      JUDICIAL REVIEW IS NOT
      ADDRESSED IN POLICIES
--------------------------------------------------------- Letter :4.10

According to the Commission, judicial review of an arbitrator's
ruling must ensure that the ruling reflects an appropriate
understanding and interpretation of the relevant legal doctrines.\12

A reviewing court should defer to an arbitrator's findings of fact as
long as it has substantial evidentiary basis.  However, the reviewing
court's authoritative interpretation of the law should bind
arbitrators much as it now binds administrative agencies and lower
courts.  For example, if an arbitration decision on a sexual
harassment complaint disregards the standard set for such claims by
the Supreme Court, the reviewing court should have the power to
overturn the arbitration decision as inconsistent with current law. 

No policies require that the arbitration decision reflects an
appropriate understanding and interpretation of relevant legal
doctrines and be reviewable by a court on that basis.  Sixteen
policies call for the arbitration results to be "final and binding."
However, none of these policies specifically provide for judicial
review.  The remaining 10 policies do not address reviewing the
arbitrator's opinion. 


--------------------
\12 Under present law, judicial review of arbitration decisions,
unless explicitly stated otherwise in the arbitration agreement, is
generally very limited. 


   CONCLUSIONS
------------------------------------------------------------ Letter :5

Almost all employers that had more than 100 employees and filed EEO
reports with the EEOC in 1992 have established some sort of grievance
procedure using one or more ADR approaches.  However, relatively few
use arbitration, and even fewer make it mandatory for employees. 

Existing arbitration policies vary greatly.  If expected to conform
with all the criteria for fairness recently proposed by the
Commission on the Future of Worker-Management Relations, most would
not do so.  This is especially true when considering the criteria for
an employee's opportunity to obtain information for empowering the
arbitrator to use remedies equal to those available under law and for
providing that the arbitrator's decision be subject to judicial
review concerning the arbitrator's interpretation of relevant legal
doctrines. 


---------------------------------------------------------- Letter :5.1

We are sending copies of this report to interested congressional
committees, the Chairman of the Equal Employment Opportunity
Commission, and other interested parties.  Please call Cornelia
Blanchette, Associate Director, on (202) 512-7014, or me if you or
your staff have any questions.  Other major contributors to this
report are listed in appendix III. 

Linda G.  Morra
Director, Education and Employment
 Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

We designed a questionnaire to obtain information on the use of
alternative dispute resolution (ADR) approaches by private-sector
businesses to resolve discrimination complaints brought by employees
not covered by collective bargaining agreements.  We discussed
development of this questionnaire with the Equal Employment Advisory
Committee, a nonprofit association of employers; Chorda Conflict
Management, Inc., an Austin, Texas, consulting firm that helps
employers design dispute resolution systems; and the National Task
Force on Civil Liberties in the Workplace of the American Civil
Liberties Union. 

Before mailing our questionnaire, we pretested it with officials of
five employers.  Results of the pretests indicated that questions,
terms, and definitions were generally familiar, clear, and free from
confusion.  During the face-to-face pretest, officials completed the
questionnaire as if they had received it in the mail.  Our staff
recorded the time necessary to complete the survey and any
difficulties that respondents experienced.  Once the questionnaire
was completed, we used a standardized series of questions to gain
feedback on difficulties and questions encountered with each item. 

We surveyed a nationally representative sample of businesses with
more than 100 employees in 1992, the most recent year for which data
were available.  To determine our universe, we used the 1992 EEO-1
data file maintained by the EEOC.  This file consists of reports
required to be filed by all businesses with more than 100 employees
during the reporting period, as well as certain firms with fewer than
100 employees if they are government contractors.  We deleted
consolidated reports\13 and reports from businesses that reported
having less than 100 employees.  This yielded a universe of about
87,500 businesses. 

We sent the survey to a sample of 2,000 businesses.  The sample was
selected from three different strata by size:  100 to 499 employees,
500 to 999 employees, and 1,000 or more employees.  We sent
questionnaires to random samples of businesses in each of the three
strata.  We obtained an overall response rate of 75.0 percent. 
Response rates for individual strata ranged from 63.6 percent to 80.0
percent.  Table I.1 shows the universe of potential establishments,
the sample size, and the number of establishments for which
questionnaires were received by strata. 



                         Table I.1
          
               Universe of Potential Business
              Establishments, Sample Size, and
                   Respondents by Strata

Size of business                                Respondent
establishment               Universe    Sample           s
--------------------------  --------  --------  ----------
100 to 499 employees          75,178       500         318
500 to 999 employees           7,534       500         381
1,000 or more employees        4,785     1,000         800
==========================================================
Total                         87,497     2,000       1,499
----------------------------------------------------------
As agreed with the requesters' offices, we pledged that businesses'
responses would be kept confidential.  A sample questionnaire showing
aggregate responses and percentages appears in appendix II. 

We calculated sampling errors for estimates from this survey at the
95-percent confidence level.  This means the chances are about 19 out
of 20 that the actual percentage being estimated falls within the
range covered by our estimate, plus or minus the sampling error. 
Sampling errors for estimates discussed in this report are shown in
table I.2. 



                         Table I.2
          
             Sampling Errors of Variables Used

                                            Sampling error
                                               (percentage
Variable                         Percent           points)
------------------------------  --------  ----------------
Employer uses at least one ADR      88.7               +-3
 approach
Employer uses negotiation           74.2               +-4
Employer uses fact finding          80.6               +-4
Employer uses peer review           19.9               +-4
Employer uses internal              38.2               +-5
 mediation
Employer uses external               8.6               +-3
 mediation
Employer uses arbitration            9.9               +-3
Employer uses other ADR             19.5               +-4
 approach
Arbitration mandatory for all       39.0              +-16
 it applies to
Employers with 100 to 499           10.2               +-4
 employees using arbitration
Employers with 500 to 999            7.5               +-3
 employees using arbitration
Employers with 1,000 or more         9.4               +-2
 employees using arbitration
Employers with some union           18.4               +-8
 workers using arbitration
Employers with no union              6.7               +-3
 workers using arbitration
----------------------------------------------------------
We weighted the data to account for different sampling rates and
varying response rates among the strata.  Therefore, our data reflect
national estimates for businesses with more than 100 employees and
are based on the assumption that the nonrespondents are similar to
the respondents. 

To obtain more detailed information on dispute resolution policies,
we then telephoned the 132 respondents that reported using
arbitration to resolve discrimination complaints brought by workers
not covered by a collective bargaining agreement.  As shown in table
I.3, we eventually received and analyzed 26 policies. 



                         Table I.3
          
               Results of Telephone Survey of
          Businesses Reporting Use of Arbitration


                                                     Total
                                                  business
Result of telephone survey                              es
--------------------------------------  --------  --------
Could not reach business by telephone                   31
No contact provided on questionnaire           8
Did not respond to our calls                  23
Does not use arbitration for                            34
 employment discrimination complaints
 by nonunion workers
Does not use arbitration                       8
Does not use arbitration for                   1
 discrimination complaints
Arbitration used for union workers            22
 only
Arbitration by securities forums, not          3
 employers
No written policy for nonunion workers                  19
Declined to send policy                                 22
Policy received                                         26
==========================================================
Total businesses telephoned                            132
----------------------------------------------------------


(See figure in printed edition.)Appendix II

--------------------
\13 Headquarters establishments are required to provide reports
consolidating the statistics for all a firm's establishments. 


SUMMARY OF RESPONSES TO GAO'S
SURVEY OF EMPLOYMENT DISPUTE
RESOLUTION POLICIES AND PRACTICES
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


GAO CONTACTS AND STAFF
ACKNOWLEDGMENTS
========================================================= Appendix III

GAO CONTACTS

Bob Sampson, Lead Evaluator, (202) 512-7251
Larry Horinko, Assistant Director, (202) 512-7001

ACKNOWLEDGMENTS

In addition to those named above, the following individuals made
important contributions to this report:  Susan Poling provided legal
advice and analyzed the policies we received; Catherine Baltzell
reviewed the technical sections of the report and wrote the technical
appendix; Susan Lawes designed and pretested the survey
questionnaire; Joel Grossman designed the telephone survey of
employers who reported using arbitration; Patricia Bundy managed the
questionnaire responses and the telephone survey; Joan Vogel analyzed
the questionnaire responses; and Linda Stokes assisted with the
telephone survey. 

