ADR/ Neg-Reg Report

Office of the Assistant Secretary for Policy (OASP)

October 31, 1994

Ms. Thomasina Rogers
Chair, Administrative Conference
of the United States
2120 L Street, N.W., Suite 500
Washington, D.C. 20037

Dear Ms. Rogers:

This is in reply to your request for information about the Department of Labor's implementation of the Administrative Dispute Resolution Act and the Negotiated Rulemaking Act.

As you know, the Administrative Conference has been of great assistance to the Department in helping us implement both ADR and negotiated rulemaking. I am pleased to report that the Conference's contributions have helped us achieve great strides in these areas.

In recent years, the Department of Labor has published regulations that provide for alternative "settlement judge" proceedings for cases before our Administrative Law Judges. A pilot test of mediation in grant and contract disputes is underway in the Employment and Training Administration. The Office of Civil Rights has started a pilot test of mediation in equal employment opportunity complaints filed by the Department's employees. A negotiated rulemaking process to establish an OSHA standard for steel construction is underway.

In the labor standards enforcement area, with the Conference's assistance, the Department conducted a pilot test of using our own program managers to mediate cases in the Philadelphia Region. The results of this pilot were so encouraging that the Congress has authorized funding in FY 1995 to begin expansion of this process to the remaining regions.

Enclosed are responses to the questions raised in your correspondence and separate reports on the Department's ADR experience in the areas in which it has been tried. I am also enclosing copies of our report on the Philadelphia ADR Pilot Project, a cost benefit analysis of that pilot, and a copy of the Department's negotiated rulemaking handbook. Any additional information can be obtained from Roland Droitsch, Deputy Assistant Secretary for Policy, at 219-9058.

I hope that the Conference can continue to work with the Department as we expand our use of Alternative Dispute Resolution.

Sincerely,

Robert B. Reich

Enclosures

ADR Questions from ACUS

(1) Efforts to Comply with the Act

Dispute Resolution Specialist - The Department of Labor has designated the Assistant Secretary for Policy and Budget as the agency's dispute resolution specialist. The Solicitor of Labor has lead responsibility for implementation of the Negotiated Rulemaking Act.

Survey of Agency Disputes - In 1991, DOL conducted a survey of all its component agencies to gather information about the types of disputes that arise in their programs, the methods used to resolve them, and any statutory, regulatory or procedural barriers that exist to the use of ADR. The survey, and follow-up meetings with some of the respondents, proved very useful in obtaining information on the enormous variety and complexity of disputes arising in DOL. It also provided important background data on the many formal and informal methods in place for resolving these disputes. A copy of the survey form and a summary of its results are contained in the report on the Philadelphia ADR Pilot test.

ADR Policy - In 1992, after a request for comments in 1991, DOL published in the Federal Register an interim policy on the use of ADR and a subsequent amendment to the policy that expands the potential use of mediation in enforcement cases (copies are included in the report on the Philadelphia ADR Pilot test).

Training - With the assistance of the Administrative Conference of the United States (ACUS), the Federal Mediation and Conciliation Service (FMCS), the Army Corps of Engineers, and the Department of Health and Human Services, national office managers and attorneys received an overview of ADR and its potential applications in the federal sector. With the assistance of ACUS and FMCS, DOL managers and attorneys of the Philadelphia Region received more specific training at a two-day conference at the start of that region's ADR pilot test. FMCS provided classroom and mentoring training to DOL managers who served as mediators in the Philadelphia Pilot. FMCS trained mine safety personnel to serve as settlement officials of penalty cases for the Department's Mine Safety and Health Administration. Additional training is planned for regional expansion of the mediation program and for administrative law judges who will serve as settlement judges.

(2) ADR Programs, Pilot Projects, and Demonstrations

In recent years, the Department has experimented with ADR in a number of areas. Separate reports on each of these areas are attached. DOL has published regulations that provide for alternative "settlement judge" proceedings before the OALJ. A pilot test of mediation in grant and contract disputes is underway in the Employment and Training Administration. The Office of Civil Rights (OASAM) has started a pilot test of mediation in DOL employee equal employment opportunity complaints. A negotiated rulemaking process to establish an OSHA standard for steel construction is underway. In the enforcement area, the Department conducted a regional pilot test of in-house mediation in the Philadelphia Region, and plans are being developed for expanding this pilot test to the remaining regions.

(3) Other Examples of ADR

DOL's interim ADR policy provides a process for the agency to agree to ADR on a case-by-case basis outside the bounds of the regional tests of mediation. For example, a request for a settlement judge process in Denver was accommodated, prior to the issuance of the settlement judge rule and an agreement was reached to use mediation in an enforcement case in California, although that region has not yet instituted a pilot test of mediation. More specifically, the Solicitor's Office has participated in various forms of ADR on a case-by-case basis. A summary of a number of these cases is attached.

(4) Public Information

The Department has made significant efforts to inform the public of the availability of ADR. In May of 1991, DOL invited public comments in the Federal Register on areas of the Department's operations which might benefit from the use of ADR or negotiated rulemaking. A number of press releases have been issued on specific steps DOL has taken to implement ADR. Most importantly, copies of the Department's report on the Philadelphia ADR Pilot, an accompanying cost analysis, and a negotiated rulemaking handbook have been reprinted and widely distributed. DOL plans to conduct an extensive public information program as a part of the ADR expansion effort to be implemented over the next two years. (Copies of the request for comments and several press releases are included in the report on the Philadelphia ADR pilot test).

(5) ADR Evaluation

The Philadelphia pilot test included substantial analysis of the effectiveness of mediation in enforcement cases. The report on the outcome of the pilot test summarizes the findings of this analysis that mediation -- and specifically, the use of in-house mediators -- is effective in at least some kinds of enforcement cases. Also, a separate cost analysis confirmed that mediation reduced the time and resources required to resolve the pilot test cases.

The ADR expansion plan will include provisions for a thorough analysis of mediation in a wider spectrum of DOL programs than was possible in the Philadelphia pilot test.

(6) Problems/Necessary Legislative Changes

The ADR Act has worked well in encouraging agency participation and should be re-enacted in 1995. DOL has not encountered significant problems in implementing ADR, other than those anticipated, such as resource and personnel limitations, and those inherent in starting a program that affects an organization of its size.

In-House Mediation

Philadelphia Mediation Pilot Test

The vast majority of disputes to which DOL is a party cover allegations of labor standards violations (principally OSHA, Wage-Hour, OFCCP, ERISA, OLMS, and MSHA). Historically, most cases are settled without going to a court or ALJ --either by administrative settlement with the program agency or through subsequent negotiations with the solicitor's office. However, many of these cases take years to resolve (during which time the violation may be continuing) and require resources (follow-up investigations, discovery, depositions) that otherwise could be spent on cases that can only be resolved by a court.

In 1992, the Philadelphia Region initiated a pilot test to determine whether the use of in-house mediators, could speed up the resolution of these cases.

The Administrative Conference of the United States (ACUS) and the Federal Mediation and Conciliation Service (FMCS) agreed to participate in the Philadelphia Pilot because of its novel approach and broad scope. ACUS, the agency overseeing federal implementation of the ADR Act, organized an introductory training seminar for about 100 of the region's managers and attorneys. FMCS provided formal classroom and on-the-job training in mediation to twelve experienced DOL managers who volunteered and were selected by the region to serve as the mediators for the pilot.

To provide neutrality, the mediators handled only cases outside their agency's responsibilities (e.g., a Wage-Hour manager would act as the mediator in an OSHA case). The mediators did not serve in any way as arbitrators. Instead, the mediators facilitated the discussions between the parties (agency representative, RSOL attorney, employer, and employer's counsel) as they attempted to reach a settlement.

The region was given very little guidance on what kinds of cases to select, other than to exclude criminal cases. Intentionally, the region was permitted wide latitude to select cases and was given formal reassurance that their judgements on case selection, case settlements, and pilot evaluation would not be questioned. In each case, the RSOL, the program agency and the outside party had to agree to the use of mediation. All DOL and outside party representatives at the mediation sessions had to agree to any settlements.

Of the 27 cases selected from the RSOL's inventory and actually mediated in the pilot, 22 (81%) were settled, and most were resolved in a single mediation session. The various DOL participants independently concluded that the settlements were at least as good as the likely outcomes of litigation. Some cases were very complex and would have cost DOL and the outside party substantial resources and time to bring to trial. Because of the mix of suitable cases available in the brief duration of the pilot, however, the cases mediated could not represent the full range of DOL programs: One MSHA case was mediated, and the remainder were evenly divided between OSHA and Wage-Hour.

Mediation Expansion Plan

The Philadelphia pilot showed that in-house mediators can speed up the resolution of at least some types of enforcement case litigation. Based on this experience, the Secretary made the decision to expand ADR nationwide, and some start-up funding for this purpose is available in DOL's 1995 Appropriation. Planning for the expansion is underway, however, it is likely that the expansion will follow the Philadelphia pilot as a model with some modifications.

Settlement Judge Process

On January 11, 1993, the Department of Labor published a notice of proposed rulemaking in the Federal Register (58 FR 3822-3823) which set forth proposed settlement judge procedures to be offered by the Office of Administrative Law Judges (OALJ) in furtherance of the Administrative Dispute Resolution Act of 1990; Executive Order No. 12778 (October 23, 1991); and the Department's Alternative Dispute Resolution Interim Policy, 57 FR 7292 (1992). After an appropriate notice and comment period, the final rule became effective on August 16, 1993. (58 FR 38498-38501).

The rule is modeled on Recommendation 88-5 of the Administrative Conference of the United States, 1 CFR 305.88-5. It is incorporated into the Rules of Practice and Procedure for Administrative Hearings before the Office of Administrative Law Judges, 29 C.F.R. §18.9. It allows use of settlement judges for mediation in certain proceedings.

To preserve confidentiality, the settlement judge cannot be the judge assigned to hear and decide the case. All discussions between the parties and the settlement judge are confidential. No evidence about statements or conduct in settlement judge proceedings is admissible in any Department of Labor proceeding, unless the parties agree. Documents disclosed in settlement judge proceedings cannot be used in litigation unless obtained through discovery or subpoena. The settlement judge cannot be subpoenaed or called as a witness regarding settlement proceedings in any hearing of the case or subsequent DOL proceeding.

Since the rule went into effect, OALJ has assigned 8 cases to settlement judges, including 3 OFCCP cases, a whistleblower case under ERA, and ERISA penalties case, and a labor standards case. Two of the OFCCP cases are pending old cases sent from the Office of Administrative Appeals to see if they could be resolved without additional litigation. Our successes have included a labor standards case in which Judge Mahoney was the settlement judge, and an OFCCP employment discrimination case in which Judge Barnett was the settlement judge.

We plan to expand the program after training additional judges in mediation techniques. A training program is planned for December 6-7, 1994. Our instructor will be Linda Singer, a noted authority in the field of alternative dispute resolution who has pioneered in the training of mediators for court-annexed mediation programs. We will then include a description of the program and notification of its availability in the Notice of Docketing sent to all parties upon filing of cases with our office.

Employment and Training Grant and Contract Disputes

Based on the results of an internal survey of dispute-related activity, the Employment and Training Administration (ETA) decided to pilot test ADR in the audit resolution and debt collection areas. The pilot is being conducted in ETA's National Office because Grant/Contract Officer authority is centralized there and the National Office has the largest pool of cases. The Department of Labor's (DOL) Office of the Solicitor (SOL), as well as the Office of the Inspector General (OIG), was involved in the development of the plan for the pilot and the pilot procedures provide for the review and approval of the OIG and SOL of each case prior to referral for mediation.

The pilot began in 1992 and is still ongoing. In 1994, ETA expanded the pilot to include contract disputes, i.e., disputes involving a contractor's claim for an equitable adjustment.

As of October 15, 1994, nine cases have been referred for mediation. Additional cases are currently under consideration. Of the nine cases referred, two have settled successfully, one was withdrawn, and six are pending. The prognosis for the cases still in mediation, according to the mediator, is positive. In addition to these nine cases, ETA, through the Solicitor's Office, has participated in the mediation of five cases under review by the United States Court of Appeals. All five settled successfully. ETA also participated in a Settlement Judge Procedure at the suggestion of the Office of Administrative Law Judges. ADR was not successful in this case.

Under the pilot, ADR is provided at various stages in the resolution/appeal process and deals with a variety of issues. The claims being mediated vary in complexity and dollar value. One case involves two separate claims for a total of $6 million. Cases have been mediated by both DOL staff, who were trained as part of the Regional Pilot, and staff from the Federal Mediation and Conciliation Service.

ETA has publicized its ADR program through internal as well as outside meetings. At recent workshops on indirect costs, approximately a hundred non-profit and Indian grantees and contractors were provided information on ETA's ADR pilot. A two-page handout on mediation and the pilot was provided to each participant.

ETA's pilot plan prescribes a strong evaluation component. All participants in the mediation complete a survey form upon completion of the mediation. On completion of the pilot, a comprehensive report will be prepared in order to share the knowledge gained through this effort to test the applicability of ADR in the resolution of disputes involving audit resolution, debt collection and contractor claims.

Early Resolution of EEO Complaints

Within recent years, the Federal Government has been encouraged by Congress to use alternative methods to resolve disputes. The Administrative Dispute Resolution (ADR) Act of 1990 provided flexibility in the implementation of this mandate. In September 1993, the following Accompanying Report of the National Performance Review contained a recommendation geared to swift resolution of employee complaints:

HRM08 - Improve Processes and Procedures Established to Provide Workplace Due Process for Employees

An action item in this report stated that by December 1994, each agency head should make available to all worksites methods and options for resolving disputes that are alternative to established procedures governing EEO complaints, labor disputes, grievances and appeals.

ESTABLISHMENT OF PILOT PROGRAM:

To address this issue the six-month pilot effort, Early Resolution of EEO Complaints (EREC), was implemented on April 1, 1994. Mediation was chosen as the method to resolve disputes during the informal complaint process. This method allowed a neutral third party to assist in reaching mutually satisfactory resolutions of disputes. Employees elected the EREC process by a signed agreement of voluntary participation during the informal complaint stage.

INFORMAL COMPLAINT PROCESS - RESULTS OF SIX-MONTH PILOT PROGRAM:

From April 1 to September 30:

Thirty-eight (38) employees were counseled either by Agency Collateral Duty Counselors or DCR Counselors (includes one non-pursuit).
Twenty-two (22) employees filed informal complaints.
Eleven (11) of 22 employees did not elect the EREC process. These employees were counseled by Agency EEO Counselors. No resolutions were reached for those employees.
Eleven (11) of 22 employees elected the EREC process. These employees were counseled by full-time DCR counselors. Four (4) of the eleven (11) EREC cases resulted in signed settlement agreements. Seven (7) of the (11) EREC cases are pending resolution.

THREE EREC-MEDIATED CASES

Three (3) of the eleven cases reached the EREC mediation process. Two (2) of the three (3) mediated cases resulted in signed settlement agreements. One (1) of the three (3) mediated cases remains unsettled. Settlement of the case is pending the employee's signature.

TWO EREC SETTLEMENTS WITHOUT MEDIATION

Two (2) cases were settled without the DCR-arranged EREC mediation process. One through the efforts of an assigned mediator; the second through a full-time DCR counselor. The mediator and counselor reviewed the facts contained in the summary report submitted by the EEO Counselor and met with employees and settlement officials, outside of the EREC mediation process, to resolve the issues.

SIX EREC CASES PENDING

Four cases were either being prepared for the mediation process, or possible resolution between employees and agencies.
One (1) case did not contain issues that warranted the EREC mediation process. It is anticipated the employee will elect the formal complaint route.
One (1) case had not been assigned to a DCR counselor at the applicant's request.

SYNOPSIS OF PRELIMINARY FINDINGS:

Feedback from individuals involved in the process indicated the pilot program was a successful venture. The three DOL mediators were satisfied with assistance received from DCR staff throughout the mediation sessions. In addition, they believed that this process will continue to work in the EEO arena.

One employee, who received a settlement during an EREC mediation, stated he did not know what to expect, but found the process to be very good. He further stated that the mediator performed in an outstanding manner; and that the process might not work for every case--but worked in his case.

FUTURE ACTIONS:

In order to capture additional data, and fully document, analyze and review the variety of resolutions reached during the mediation process, this pilot effort will be extended through March 31, 1995. A status report on the pilot EREC effort will soon be transmitted to DOL Agency Heads.

Case-by-Case Use of ADR

A recent survey of the Department's Office of the Solicitor disclosed that the Office's Civil Rights Division and Boston region have engaged in a number of ADR efforts.

The Civil Rights Division has been involved in the use of ADR in three cases under Executive 11246. In the first case, a pattern or practice sex discrimination case, the Secretary of Labor issued an Order addressing several procedural issues in the case and invited the parties to engage in mediated settlement discussions. A mediator was provided by the Department of Health and Human Services Departmental Appeals Board. These efforts were unsuccessful. Subsequently, the Secretary issued a substantive Order, after which the parties reached a settlement agreement.

The second case, a class-wide discrimination case, is currently utilizing a Settlement Judge appointed by the Office of Administrative Law Judges, pursuant to a Secretary's Order.

The third case involving the Civil Rights Division is also a class-wide discrimination case. In this case the company requested the appointment of a Settlement Judge by the Office of Administrative Law Judges, and the Department concurred. After a meeting and several conference calls the parties reached a basic agreement in principal. However, despite two time extensions, no formal agreement was finalized and the case was referred back for the litigation to continue. Shortly thereafter, the partes finalized and filed there formal Consent Decree to resolve the case.

The Boston Regional Office has engaged in several ADR efforts in a number of enforcement areas. Prior to passage of the ADR Act, in 1988 this office engaged in the global mediated resolution of all litigation arising from a building collapse in Bridgeport, Connecticut. As part of the global effort, five OSHA cases involving the collapse were mediated. The mediation was conducted by Senior U.S. District Judge Robert Zampano (D. Conn.) and Connecticut Superior Court Judge Frank Meadows. Due particularly to Judge Zampano's remarkable effort, the global settlement of all cases (including payment of over $400,000 in OSHA fines) was effectuated.

The Boston Regional Office has also resolved two complicated Employee Retirement Income Security Act (ERISA) cases through the use of ADR. One case involved fiduciary violations by former trustees of a union local and knowing participation in the breaches by lawyers and other parties. The case was referred for attempted mediated resolution to Senior U.S. District Judge Robert Zampano (D. Conn.). Judge Zampano enlisted the assistance of two other mediation panel members, a respected real estate attorney, and a professor in the law of trusts. The panel held a non-binding three-day "mini-trial." At the conclusion, in response to a request from Judge Zampano, the Department advised that in its view the defendants should pay $1.8 million. The judge then met with the defendants who thereafter agreed, in various proportions, to pay that amount. In 1989, the agreement was reduced to a Consent Judgement which was filed with, and signed by, the U.S. District Judge assigned to the case.

In the second ERISA case, a multi-party case filed in Connecticut in 1991, the Department was ordered to report for a conference before a parajudicial officer as part of a pilot project to target cases for early resolution. The parajudicial officer conducted joint sessions to ascertain the facts and then private sessions with each party. After two sessions the case settled. The mediation was especially helpful in this case because the defendants were also involved in numerous state law cross-claims which had made the allocation of payments particularly complex.

Finally, the Boston regional office has participated in ADR in three Fair Labor Standards Act (FLSA) cases. The first case involved the use of an experimental "Summary Jury" process in the District Court of New Hampshire. This was a non-binding, pre-trial procedure in which lawyers from both sides addressed the jury as to their views of the case. After the jury returned special verdicts in favor of the Department, the case quickly settled.

The second case involved a settlement conference before a U.S. Magistrate Judge subsequent to the filing of a final pre-trial memoranda. The Magistrate met separately with both sides and then strongly recommended back wage payments close to the Department's settlement offer.

The third case involved violations of both the FLSA and Davis-Bacon and Related Acts (DBRA). The ADR effort was an obligatory status conference with a Parajudicial Officer. Prior to the conference, both sides were required to submit confidential memoranda setting forth their positions and factual basis of the claims made, the range of recovery, prospects of success, demands/offers made, discovery time frame and motions contemplated. Parties were required to be represented by someone fully authorized to decide all matters pertaining to the case. Although only the FLSA violations were before the Court (DBRA violations are heard administratively), the issues were so related that the parties were able to come to an agreement which encompassed both cases at this conference. Interestingly, there was pressure on both parties due to the fact that the case was Docketed to go to trial at any time with 24 hour notice. The resolution of this case saved the Department enormous resources since it saved both a trial and an administrative hearing.

Negotiated Rulemaking

Department of Labor Experience with Negotiated Rulemaking

To date the Department has previously attempted two negotiated rulemakings and is currently conducting a third. All three that have been attempted so far have all dealt with OSHA standards.
The first attempt, which took place in 1983-84 and did not result in a draft final rule, concerned a proposed standard for worker exposure to benzene. While the negotiations reached an impasse and a rule was not drafted, the agency was able to use the experience to narrow the issues and a final rule was promulgated through traditional APA processes in 1987.
The second attempt at negotiated rulemaking concerned a standard for worker exposure to an animal carcinogen called MDA (Methylenedianiline) which is used in the manufacture of plastics. The committee was convened in July 1986 and submitted a set of recommendations which were published by the agency in July 1987. A proposed rule based on those recommendations was published in May 1989 and the final rule was published on August 10, 1992. This rule is one of the few OSHA rules not to be seriously challenged in the courts, and, in fact, the industry began voluntarily complying with the standard years before the final rule was published.
In December of 1992, OSHA announced in the Federal Register its intention to undertake negotiated rulemaking to consider revising safety requirements for workers engaged in the erection of structures made of steel and possibly other materials. At this time, a negotiated rulemaking committee has been formed and is meeting to discuss a proposed rule.

The Department's Negotiated Rulemaking Policy

In December 1992, the Department published a policy on the use of negotiated rulemaking by the Department and a Handbook for use by Department personnel to determine if a potential regulation is appropriate for negotiated rulemaking and how to go about conducting one. The handbook has been made available to the public. Several hundred copies have been distributed.
The Department's policy states that negotiated rulemaking shall be actively considered for use by all of the Department's agencies. While no other agencies have to date formally started a negotiated rulemaking, several are considering it in connection with rules currently being considered.