Alternative Dispute Resolution ( ADR

Alternative dispute resolution (ADR) is a process designed to resolve disputes without going to court. The two most common types of ADR are mediation and arbitration. Alternative dispute resolution (ADR) is an umbrella term embracing various processes principally designed to overcome some of the alleged weaknesses in litigation. For instance, ADR is generally cheaper, less adversarial, and simpler than litigation, and ADR techniques offer a greater range of remedies than the courts. Contracts can be renegotiated and settlements can include nonlegal concessions such as providing a reference where there is an employment dispute. Moreover, ADR is generally speedier than litigation. First used extensively in the United States in the 1970s, ADR then spread to other common law countries and is used in many situations; for instance, where there are commercial, accounting, construction, employment, and family disputes. It ranges from morally (and sometimes legally) binding decision making by a third party, such as arbitration, to nonbinding processes such as mediation and conciliation. These processes, which are court annexed in some jurisdictions in some countries, are described below. Arbitration is probably the oldest of ADR processes and can best be described as noncourt adjudication. Procedurally, an arbitration hearing is less formal than a court hearing; for example, the former normally has no formal rules of evidence. Further more, arbitration is private unlike a court, and there is finality. Appeals from an arbitrator’s decision are severely limited, essentially to questions of procedural fairness and the arbitrator’s conduct. Also, arbitration is generally speedier than litigation, and normally the parties choose the arbitrator as well as the time and place. Arbitration can take various forms. In the most common variant, the arbitrator chooses anywhere between the limits (offers) set by the parties. Alternatively, the arbitrator is restricted to opting for either one party’s final offer or the other party’s final offer, but nothing in between. This final offer arbitration is sometimes called flip flop arbitration. A third

variant is where the arbitrator makes a decision and then the offer of the party closest to the arbitrator’s decision is the formal arbitration award. Mediation and conciliation and the terms are often used interchangeably are becoming increasingly popular. Both mediation and conciliation are voluntary, nonbinding, confidential, without prejudice, and without precedent processes. Their aim is to assist people to talk to each other in a rational and problem-solving way and to bring realism and objectivity to a dispute. Whereas lawyers focus on rights, mediators/conciliators focus on interests and the needs of the parties and act as a catalyst to enable the parties to communicate with each other and identify common ground, essentially assisting negotiation. Mediators and conciliators, however, vary in the extent to which their main aim is therapeutic or their main aim is to obtain a settlement and how interventionist they are. Some are mainly messengers, shuttling back and forth with offers. Others not only seek to persuade the parties to settle by giving opinions on facts, law, and evidence but also make recommendations. Although arbitration, mediation, and conciliation are the most common ADR processes, there are others including med-arb, ombudsmen, and mini trials. In the United States and South Africa, med-arb is practiced: with the consent of the parties, the same person mediates and, if that is unsuccessful, then arbitrates. Ombudsmen, increasingly available in the United Kingdom, deal with complaints from individuals about public bodies and private sector services such as insurance, banking, and rentals. Once the organization has had an opportunity to deal with the complaint, the complainant can then go to the relevant ombudsman who will investigate the matter and suggest a resolution. As with mediation, the ombudsman procedure does not prevent complainants from entering another ADR process or embarking on litigation. Mini trials are formalized settlement conferences where representatives of the disputants make short presentations and adjudicator(s) give a decision that, however, is not binding on any party, unless or until they agree to settle. Although ADR has advantages compared with litigation, it also has disadvantages. First, because there are no precedents, the parties may not be able to weigh accurately the strength of their case. Second, because ADR processes are private, there is no wider message, for instance, about what practices can be viewed as discriminatory on

grounds of race or sex or the extent of the duty of care owed by the employer to the worker. Third, a party might embark on conciliation or mediation to buy time, as a party can walk away without reaching a settlement at any time. Nevertheless, ADR is an attractive option for people who are unwilling to risk the complexity and financial reefs of litigation. Alternative dispute resolution (ADR) is a term that refers to several different methods of resolving disputes outside traditional legal and administrative forums. These philosophically similar methodologies, which include various types of arbitration and mediation, have surged in popularity in recent years because companies and courts became extremely frustrated over the expense, time, and emotional toll involved in resolving disputes through the usual legal avenues. "The adversarial system is expensive, disruptive, and protracted. More significantly, by its very nature, it tends to drive the parties further apart, weakening their relationship, often irreparably" pointed out Whayne Hoagland in Business Insurance. ADR programs emerged as an alternative, litigation-free method of resolving business disputes. Analysts also trace the rise of ADR methods to changing attitudes within the American judicial system. Business Horizons contributor Stephen L. Hayford observed that until the 1980s, "attempts by business firms to avoid litigation … were frustrated by a longstanding hostility on the part of the courts toward any devices that infringed on their jurisdiction." But during the 1980s, Hayford noted that a new body of case law emerged that sanctioned the use of binding arbitration provisions in commercial contracts between companies, business partners, employees and employers, etc. This body of law continued to evolve in the late 1990s. For example, the Alternative Dispute Resolution Act of 1998 extended ADR mechanisms throughout the federal district court system. As Simeon Baum stated in CPA Journal, "the act recognizes that ADR, when properly accepted, practiced, and administered, can not only save time and money and reduce court burdens, but also 'provide a variety of benefits, including greater satisfaction of the parties, innovative methods of resolving disputes, and greater efficiency in achieving settlements.'" Today, legal and corporate acceptance of alternative dispute resolution as a legitimate remedy for addressing business disagreements

is reflected in the language of business contracts. ADR contingencies have become a standard element in many contracts between companies and their employees, partners, customers, and suppliers. As U.S. News & World Report noted, "virtually every state has experimented with some form of ADR." With the growth of ADR has come a growing number of organizations and associations designed to assist commercial entities in the use of these alternative dispute resolution methods. Problems happen, even to the most well-meaning of non-profits. Problems with vendors, contractors, employees, clients, board members, donors… you get the idea. Sometimes an intermediary is necessary to help solve issues. A lawyer or court is not always necessary. Here are two popular alternatives: Arbitration.mediation,ombuds, neutral evaluation and utilizing ADR.

a. Arbitration Arbitration is a type of Alternative Dispute Resolution in which a neutral person (called the arbitrator) listens to all sides of a dispute and then becomes the judge and jury. The decision of an arbitrator is usually final. The typical traits of arbitration are: • It’s fast. Arbitration is a process that is generally much quicker than going to court. This is due to the fact that courts are usually congested and it can often take months, if not years, before the parties get to present their case to a judge. An arbitrator can hear the parties’ arguments much quicker and with fewer bureaucratic hoops. And, unlike with mediation, an arbiter will reach a decision. • It’s binding. Not only is the ultimate decision of an arbitrator final, but testimony given to an arbitrator is usually under oath and can be used against a person or organization later.

It’s specific. Arbitrators often know more about the issues in dispute than a judge would because they have specialized in certain types of disputes. This could lead to better informed decisions.

Mandatory Arbitration
Many types of contracts contain what are usually called “mandatory arbitration clauses”. These clauses state that if either party to the agreement has a complaint, then that dispute be resolved through arbitration. Mandatory arbitration clauses often also include provisions: • • • allowing the party that wrote the contract to choose the arbitrator and the rules that will govern the arbitration process gagging either party from talking to the press about the dispute making the arbitrator’s decision binding, meaning it is final and cannot be overturned by a court There is little a person can do about a mandatory arbitration clause – short of refusing to sign a contract. Courts generally refuse to overturn a mandatory arbitration clause, but exceptions are sometimes made if the clause seems to be “unconscionable”. A judge might find a clause unconscionable if: it appears that the parties did not have equal bargaining power. For example, a company might not be able to enforce a mandatory arbitration clause against an employee that lacks the ability to advocate for him or herself, perhaps because of insufficient education. the clause was written in fine print instead of being prominently displayed in the contract. the losing party must pay arbitration costs that exceed what they would have had to pay to file the same claim in court.

Arbitration Associations and Organizations
There are several U.S. organizations and agencies that are directly involved in arbitration and arbitration issues. These include the National Academy of Arbitrators (NAA), the American Arbitration Association (AAA), and the Federal Mediation Conciliation Service (FMCS). The NAA was

founded in 1947 as a non-profit organization to foster high standards for arbitration and arbitrators and to promote the process. The NAA works to attain these objectives through seminars, annual conferences, and educational programs. The non-profit AAA offers its services for voluntary arbitration as part of its mandate to promote the use of arbitration in all fields. The FMCS, meanwhile, maintains a roster from which arbitrators can be selected and champions procedures and guidelines designed to enhance the arbitration process.

Arbitration is the procedure by which parties agree to submit their disputes to an independent neutral third party, known as an arbitrator, who considers arguments and evidence from both sides, then hands down a final and binding decision. This alternative, which can be used to adjudicate business-to-business, business-to-employee, or business-tocustomer disputes, can utilize a permanent arbitrator, an independent arbitrator selected by the two parties to resolve a particular grievance, or an arbitrator selected through the procedures of the AAA or FMCS. A board of arbitrators can also be used in a hearing. After the arbitrator is selected, both sides are given the opportunity to present their perspectives on the issue or issues in dispute. These presentations include testimony and evidence that are provided in much the same way as a court proceeding, although formal rules of evidence do not apply. Upon completion of the arbitration hearing, the arbitrator reviews the evidence, testimony, and the collective bargaining agreement, considers principles of arbitration, and makes a decision. The arbitrator's decision is generally rendered within 60 days. Hayford noted that "[binding arbitration] minimizes pre-hearing machinations with regard to discovery, motion practice, and the other preliminary skirmishes that extend the time, expense, and consternation of court litigation. In exchange, the parties to a contractual binding arbitration provision agree to accept the risk of being stuck with an unacceptable decision." Other forms of arbitration include the following: Expedited arbitration is a process intended to speed up the arbitration process with an informal hearing. Under this process, decisions are generally rendered within five days. It was first used in 1971 in settling disputes in the steel industry.

Interest arbitration is the use of an arbitrator or board of arbitrators to render a binding decision in resolving a dispute over new contract terms. Final offer selection arbitration is an interest arbitration process in which the arbitrator or board of arbitrators selects either the union or management proposal to the solution. There can be no compromised decisions. This process is also termed either-or arbitration. Tripartite arbitration is a process wherein a three-member panel of arbitrators is used to reach a decision. Both labor and management select an arbitrator and the third is selected by the other two arbitrators or the parties to the dispute as a neutral participant. b. Mediation Mediation is a type of Alternative Dispute Resolution in which a neutral person (called the mediator) helps the people who have a dispute talk to each other. The mediator makes no binding decisions and the individuals themselves ultimately determine whether the process results in a resolution of the dispute. The mediator is only there to help the disputing parties communicate with each other in the hope that they can find a way to work out their disagreements. Mediation generally has the following traits: • Confidentiality. Not only is mediation generally a confidential process, but unless the parties agree otherwise, information disclosed in mediation is not admissible in court. • Nothing to Lose but Time. Nobody is penalized in mediation if the process fails to result in an agreement. Unlike in arbitration, the parties may then choose to make any agreement reached binding. In contrast to arbitration, mediation is a process whereby the parties involved utilize an outside party to help them reach a mutually agreeable settlement. Rather than dictate a solution to the dispute between labor and management, the mediator—who maintains scrupulous neutrality throughout—suggests various proposals to help the two parties reach a mutually agreeable solution. In mediation, the various needs of the conflicting sides of an issue are identified, and ideas and concepts are exchanged until a viable solution is proposed by either of the parties or

the mediator. Rarely does the mediator exert pressure on either party to accept a solution. Instead, the mediator's role is to encourage clear communication and compromise in order to resolve the dispute. The terms "arbitration" and "mediation" are sometimes used interchangeably, but this mixing of terminology is careless and inaccurate. While the mediator suggests possible solutions to the disputing parties, the arbitrator makes a final decision on the labor dispute which is binding on the parties. Mediation can be a tremendously effective tool in resolving disputes without destroying business relationships. It allows parties to work toward a resolution out of the public eye (the courts) without spending large sums on legal expenses. Its precepts also ensure that a company will not become trapped in a settlement that it finds unacceptable (unlike an arbitration decision that goes against the company). But Hayford commented that "mediation only works when the parties employing it are willing to go all out in the attempt to achieve settlement," and he warned that "the mediator must be selected carefully, with an eye toward the critical attributes of neutrality, subject matter and process expertise, and previous track record." Finally, he noted that with mediation, there is a "lack of finality inherent in a voluntary, conciliation-based procedure." Other forms of mediation often employed in labor disputes include "grievance mediation" and "preventive mediation." Grievance mediation is an attempt to ward off arbitration through a course of fact-finding that is ultimately aimed at promoting dialogue between the two parties. Preventive mediation dates to the Taft-Hartley Act (1947) and is an FMCS program intended to avoid deeper divisions between labor and management over labor issues. Also termed technical assistance, the program encompasses training, education, consultation, and analysis of union-management disputes. Mediation is adaptable to anticipate problems, grievances and difficulties between parties before the conflict may arise. This has potential applications in large and private sector organisations, particularly where they are subject to excessive change, competition and economic pressure. A key way mediation is used to prevent these conflicts is complaint handling and management. This is a conflict prevention mechanism designed to handle a complaint effectively at first contact and

to minimise the possibility of it developing into a dispute. According to Charlton (2000, p. 4) a person who undertakes this role is commonly known as a “dispute preventer”. While the corporate sector may provide one area in which to use the mediation process for preventing conflicts, dealing with everyday life’s disputes provides another. This is no more evident in neighbourhood conflict. One's behaviour affects one's neighbours, just as what they do affects you. The key way to prevent conflicts with neighbours is to behave as a good neighbour oneself. Spencer and Altobelli (2005, p. 17) believe simple consideration and conversation with neighbours helps achieve a peaceful coexistence, making it easier for you to live as privately or as sociably as you wish. Ideal suggestions for consideration in preventing conflicts between neighbours include:
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meeting one's neighbors keeping one's neighbors informed awareness of differences appreciation consideration of one's neighbors' points of view showing candidness communicating demonstrating respect

c. Ombuds An ombudsman is a high-ranking company manager or executive whose reputation throughout the company enables him/her to facilitate internal dispute resolutions between the company and employees. Hayford points to several benefits of ombud-based ADR: "It provides a confidential, typically low-key approach to dispute resolution that keeps conflicts 'in the family.'…. Properly effected, the ombuds mechanism can do much to enhance the perception that the company is concerned and eager to address the problems of its employees by providing them with an accessible, nonthreatening avenue for seeking redress when they believe they have been wronged." The primary drawback of ADR by the ombud process, however, is that many companies—whether large or small—do not have an individual equipped with the reputation, skills, or training to take on such a task.

d. Neutral Evaluation In neutral evaluations, a neutral individual, with a background in ADR, listens to each party lay out its version of events. After their perspectives have been considered, the neutral evaluator offers his/her opinion on the disagreement. This opinion is not binding in any way, but if the neutral party is respected and trusted by both sides, it can help the parties reassess their negotiating positions with an eye toward finding common ground. e. Utilizing ADR The popularity of alternative dispute resolution has increased dramatically in recent years. Small- and medium-sized businesses have contributed to this surge in use, drawn by the promise of cost and time savings. But ADR provisions need to be weighed carefully before they are incorporated into any business agreement with partners, employees, vendors, or clients. The questions to ask are: when is an ADR resolution method preferable to litigation; when is it to be avoided; and, if ADR is preferred, what form of ADR should be pursued? Legal assistance is particularly vital for small business owners who wish to fully answer these questions and incorporate ADR provisions into their contracts and agreements.


Disusun oleh : Anjar Putri Utami Akuntansi A


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