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DOES MEDIATION-ARBITRATION REDUCE
ARBITRATION RATES? EVIDENCE FROM A
NATURAL EXPERIMENT
MICHELE CAMPOLIETI AND CHRIS RIDDELL*
To study the effect of the introduction of mediation-arbitration as a
dispute resolution procedure on interest arbitration, the authors
exploit a natural experiment in the arbitration institutions for
police and firefighter sectors in the Canadian province of Ontario.
They obtain estimates using a difference-in-difference estimator.
Results show that the introduction of mediation-arbitration is significantly associated with increased use of arbitration by firefighters
relative to the police. The article also draws on interviews with stakeholders to help explain the mechanisms that contribute to the
increase in arbitration rates.
M
ediation-arbitration (med-arb) is a hybrid dispute resolution process
that includes a mediation stage, in which a third-party attempts to
resolve a bargaining impasse, and, if an impasse remains after mediation,
an arbitration phase, in which an arbitrator issues a binding award that
resolves the bargaining impasse. In collective bargaining, med-arb involves
the neutral party (hereafter, neutral) playing both roles, the mediator and
the arbitrator, a feature that helps give med-arb one of its nicknames, ‘‘mediation with a club.’’ Legislators have introduced med-arb as a dispute resolution procedure because it has been perceived as addressing some of the
limitations of conventional interest arbitration without a mediation stage. In
particular, researchers have hypothesized that stronger incentives for settlement will be present at the mediation stage since both parties will want to
be seen as reasonable to the neutral since that same neutral will act as the
arbitrator if necessary. Much like some of the theory behind final-offer
*MICHELE CAMPOLIETI is a Professor at the University of Toronto. CHRIS RIDDELL is an Associate Professor
at the University of Waterloo. An Online Appendix is available at https://uwaterloo.ca/scholar/c2riddel.
For information regarding the data and/or computer programs utilized for this study, please address
correspondence to the authors at c2riddel@uwaterloo.ca.
KEYWORDs: public sector, collective bargaining, interest arbitration, mediation-arbitration, difference-indifference estimator
ILR Review, 73(1), January 2020, pp. 211–235
DOI: 10.1177/0019793918810219. Ó The Author(s) 2018
Journal website: journals.sagepub.com/home/ilr
Article reuse guidelines: sagepub.com/journals-permissions
212
ILR REVIEW
arbitration, med-arb may therefore reduce extreme positions in bargaining
because parties could be concerned that the arbitrator will view them as
uncompromising and thus craft an award that favors the other party.
Moreover, since the arbitrator would have been involved in the mediation
stage, it has been hypothesized that awards (when necessary) may be more
firmly grounded in the facts and circumstances of the case, which could
reduce longer-term reliance on arbitration (i.e., the narcotic effect).
A great deal of debate surrounds the perceived merits of med-arb. Some
legal practitioners and scholars have raised concerns that med-arb may
involve coercion, and that awards, when necessary, may be unfair (see, e.g.,
Bartel 1991). Although there may be merit to both sides of the debate, it is
not clear whether the perceived disadvantages of med-arb outweigh its perceived benefits on arbitration rates without considering empirical evidence
on the effects of med-arb on bargaining behavior.
Unfortunately, very little research has been conducted on the effects of
med-arb that could inform the debate. The research that has been undertaken tends to be more qualitative or to rely on specific case studies (Lester
1984; Stern 1984). On the one hand, Lester (1984) concluded that, for
police and firefighters in Wisconsin, med-arb was more successful in facilitating voluntary settlement compared to final offer arbitration because the
arbitration rates were lower in med-arb. On the other hand, Stern (1984)
concluded that the med-arb system in Wisconsin was not very successful in
producing voluntary settlements (since only 50\% of disputes were settled in
the mediation stage and this rate was lower than the benchmark set by mediation in other sectors). These conflicting conclusions make it difficult to
determine the effects of med-arb on arbitration rates based on selected
cases or qualitative evidence. Nonetheless, many observers view med-arb as
an effective procedure for reducing arbitration rates (e.g., Lester 1984;
Landry 1996; Devinatz and Budd 1997) and facilitating constructive labor
relations (Lester 1984; Devinatz and Budd 1997).1
We provide empirical evidence on the effect of the introduction of medarb on interest arbitration rates using contract data from the Canadian
province of Ontario for firefighting and police bargaining pairs. Our data
comprise a census of all contract settlements for police and firefighters in
Ontario from 1981 to 2015, so unlike earlier research our analysis is not on
select cases. Our study focuses on a natural experiment created by a legislative change in Ontario. In particular, we exploit a major change in the collective bargaining legislation for firefighters—the Fire Protection and
Prevention Act of 1997—that introduced med-arb as the dispute resolution
procedure. Using police bargaining units, which were unaffected by this legislative change, as a comparison group, we adopt a differences-in-differences
approach to estimate the effects of these reforms on the likelihood of
1
Both Fuller (1962) and Devinatz and Budd (1997) wrote that med-arb is most effective when the
mediator and arbitrator are not the same individual.
DOES MEDIATION-ARBITRATION REDUCE ARBITRATION RATES?
213
requiring arbitration. Our research design includes a control group and has
greater internal validity (Shadish, Cook, and Campbell 2002) than some of
the before–after comparisons in the existing literature (e.g., Lester 1984)
that do not have control groups. Finally, we provide qualitative evidence
based on interviews of various stakeholders in the police and firefighter sectors to help interpret our quantitative findings.
Institutional Background: Interest Arbitration for Police and
Firefighters in Ontario
Bargaining pairs for both police and firefighters use binding interest arbitration as the dispute resolution procedure if the parties reach an impasse
when bargaining. In this section we focus on the legislation itself and the
dispute resolution procedure. We discuss the broader policy environment
later in the article. The overall legislative environment during the period of
our study was complex, with a newly elected Conservative government making sweeping changes (most going into effect in 1997); see the Online
Appendix for additional details.
Collective bargaining for police has been essentially stable since the
Police Act was amended in 1972, which created the Ontario Police
Arbitration Commission (hereafter the Commission). The Commission’s
role is to oversee the dispute resolution process, including retaining the services of conciliators, maintaining a register of arbitrators, handling administrative matters, and maintaining a database of awards. The Commission is
independently appointed and is responsible for both rights arbitration and
interest arbitration. We emphasize that firefighters do not have an analogous institution. A key reason police were largely unaffected by the 1997
reforms was that the Commission was already established and its pivotal role
in police collective bargaining was re-affirmed by the government.2
The original legislation covering collective bargaining for professional
firefighters in Ontario was the Fire Department Act (FDA), which was
enacted in 1949 and remained largely intact until the Fire Prevention and
Protection Act (FPPA) of 1997. Under the original FDA, the dispute resolution method was conventional interest arbitration. No formal conciliation
or mediation stage was specified. While not specified by the statute, firefighters typically adopt arbitration by tripartite panel.
The FPPA introduced med-arb as the preferred dispute resolution
method. Specifically, the new statute stated that if the parties could
not agree on an arbitrator, the Minister of Labour would appoint an arbitrator (or, in the case of a tripartite panel, a chair), and the dispute resolution
process would be either med-arb or mediation-final-offer selection.
Although the final-offer threat was widely discussed in the literature (both
2
As stated by the Minister of Labour (Hon. Elizabeth Witmer) in the Standing Committee: ‘‘Also, our
changes will ensure that police retain a separate and distinct arbitration regime.’’ We also note that the
Police Act was not changed.
214
ILR REVIEW
practitioner and scholarly) at the time and may have influenced behavior in
the short to medium run, to date it has never been chosen as the dispute
resolution procedure. Many of the early appointments made by the
Minister of Labour were former judges and not traditional arbitrators from
previously established lists of neutrals. These appointments were challenged
through the legal system, and ultimately the Supreme Court ruled in 2003
that such appointments were patently unreasonable.3 The FPPA also made
conciliation mandatory (as is the case under the Ontario Labour Relations
Act) before arbitration can commence.
Although med-arb appears, on paper, to be an option for resolving interest disputes for police because of the broad 1997 reforms, interest arbitration for police has largely remained unchanged. In particular, police were
affected by these legislative changes only if they could not mutually agree
on an arbitrator, and, as noted, the reforms stressed the Commission’s
unique role in police collective bargaining. Arbitrator selection in the police
sector was also unchanged. For example, the process of arbitrator selection
for police is that if the parties cannot agree on an arbitrator, the chair of
the Commission (as opposed to the minister) will appoint one. Our interviews reveal, however, that the reality of an impasse for police is that the
parties simply appoint an arbitrator from the Commission’s list based on
who is available at the earliest date (and that conventional interest arbitration continues to be used to settle these impasses). The list contains approximately 30 arbitrators whom the parties (the local police services board and
the union) have already agreed upon, and has been in effect, with the occasional addition or subtraction, for decades. We discuss additional details in
our Online Appendix.
Theoretical Considerations and Empirical Methodology
The reforms mandated by the FPPA were viewed as highly controversial and
were widely criticized by firefighters (Cole 2007). Here, we present a brief
discussion of the reforms from a theoretical perspective as well as the
intended effects of the policy. We then outline our empirical approach to
estimating the effects of the reforms on arbitration rates.
The first phase of med-arb involves mediation, in which the bargaining
parties caucus privately with the mediator in an effort to reach a voluntary
settlement. We note that neither the statute nor the regulations give guidance as to how mediation should take place. Based on our interviews, it
appears that the norm in Ontario for firefighters is private caucus, though
some scholars have suggested joint sessions for mediation would be more
fruitful (Program on Negotiation [PON] 2010). Although no regulation
states this, we also discovered in our interviews—and as supported by
3
Given the uncertainty around legal challenges, and the fact the original appeal was dismissed by the
Divisional Court, this change may have influenced behavior for some years. We return to this issue later
in the article.
DOES MEDIATION-ARBITRATION REDUCE ARBITRATION RATES?
215
evidence in the awards—that the government’s practice was to mandate a
minimum one-day mediation session.
If an impasse remains after the mediation stage, the parties proceed to a
binding arbitration hearing. Under the FPPA, the mediator and arbitrator
(the neutral in the tripartite board) is the same individual, as is the nearuniversal practice in a collective bargaining context. In addition to the basic
incentives to move the parties toward an agreement, med-arb has been
argued to be attractive principally because: 1) mediation offers another
opportunity for the parties to resolve the dispute and reach voluntary settlement; 2) if the mediator is trusted, the parties may view the award as
‘‘fairer’’ in the event arbitration is necessary; and 3) the time spent in mediation may—by giving the neutral the information they would normally
need to compile in a hearing—reduce the time spent in the arbitration process. Elliot (1995) provided a review and legal analysis focused on the
Canadian experience with med-arb, and reviews and commentaries on the
US experience are provided in Henry (1987), Bartel (1991), and Vorys
(2007).
Some possible disadvantages of med-arb have been noted in the literature as well. Most of these disadvantages relate to the hybrid nature of medarb, and thus the inherent conflict between the role the neutral plays in
each stage. Most (industrial relations) criticisms of med-arb revolve around
the following: 1) incentives to share information—with the neutral playing
both roles, there may an incentive to withhold information at the mediation stage if a party believes it will weaken its case in arbitration; 2)
coercion—any settlement suggestion by the mediator may be perceived to
be an imposed one thereby casting doubt on the ability of the mediator
to mediate in the true interest of assisting with a voluntary settlement
(i.e., the notion of med-arb being ‘‘mediation with muscle’’ or ‘‘mediation with a club’’); and 3) confidentiality—the notion that awards may be
deemed as unfair if the neutral is perceived to utilize confidential information obtained in caucus (as would not occur under conventional arbitration). In the legal literature, perhaps the most significant concern
comes from a natural justice perspective. For instance, in mediation the
neutral privately caucuses with each side; in conventional arbitrations this
action would typically result in the decision being overturned. If the neutral plays both roles, how can they not, by definition, incorporate private
information into the arbitration?
A few conceptual and theoretical frameworks may be used to consider
the effects of med-arb on arbitration rates. The Farber and Katz (1979)
model of arbitration offers some insights on the effects of med-arb on arbitration rates. More specifically, as noted by Devinatz and Budd (1997), since
mediation requires the parties to share information with the arbitrator prior
to an arbitration hearing, they may become more familiar with the arbitrator’s decision-making processes. Using Farber and Katz’s model, an implication of this familiarity is that it can remove some of the uncertainty
216
ILR REVIEW
associated with the arbitration phase and thus increase arbitration rates.4
More recently, Ross and Conlon (2000) argued in their theoretical framework for hybrid dispute resolution procedures that med-arb could make the
parties less cooperative if the neutral plays both roles. That is, the parties
would reveal less information during private caucus with the mediator, and
this could contribute to increases in impasse rates. Thus, both of these
frameworks suggest that the introduction of med-arb would be associated
with an increase in arbitration rates.
Note that these theoretical predictions were not the hypothesized effects
of the reforms from the perspective of the Ontario government. The
changes in the FPPA were expected to decrease arbitration rates. Certainly,
the threat of mediation-final-offer early on in the reforms and the uncertainty around arbitrator selection were part of the policy tool. Indeed, the
Minister of Labour stated in the Standing Committee proceedings:
The idea here is to create deliberately some uncertainty for the parties as they
enter into this process to encourage them to negotiate an outcome rather than
to rely on arbitration. The idea here is that both parties should face some risk if
they enter into this process, if they give up on negotiation, in a sense, and turn
to the interest arbitration system for resolution of their collective agreement,
that they should face some uncertainty as to how exactly it would be resolved.
(Legislative Assembly of Ontario 1997)
The government’s view was that mediation in general, and med-arb in
particular, would play a key role in decreasing reliance on interest arbitration to resolve negotiating impasses. A priori, there are arguments in both
directions as to the hypothesized effects of med-arb on the use of arbitration. Consequently, the effect of med-arb on arbitration rates is better determined by an empirical analysis of the data.
We estimate the quantitative effects of these changes in the FPPA on the
firefighter sector using the police sector as a comparison group. As discussed earlier, Cole (2007) noted a high degree of similarity in bargaining
between police and firefighters historically in Ontario. The two sectors
tracked each other in terms of bargaining outcomes—especially on wages
and benefits—and multiple arbitrators over several decades have written
that it is appropriate to consider the two sectors as close comparators (e.g.,
see the discussion in Cole 2007). Furthermore, because the two sectors are
so highly regulated, they both have few non-economic issues on the bargaining table. We acknowledge from the outset that our analysis of the effects of
the FPPA reforms are designed to estimate the effects of the entire reform
package; for example, we cannot separate the immediate impact of the
4
Another view with the opposite prediction, based on the early economic models of strikes such as
Hicks (1963), is that if there is certainty about the outcome under disagreement (a strike in the classic
model but under arbitration in our setting) then disagreement should not occur; it is only under information asymmetries that disagreement emerges as an equilibrium.
DOES MEDIATION-ARBITRATION REDUCE ARBITRATION RATES?
217
change to med-arb from the arbitrator selection issue. Note, however, that
the length of our sample period allows us to distinguish between short-run
effects and longer-run effects. In particular, we make some efforts to exploit
the change in the arbitrator selection issue in 2003 when the Supreme
Court ordered (as part of their ruling on the broader reforms) that the
Minister of Labour refrain from appointing individuals (such as former
judges) who were not on the established list of neutrals.
To estimate the effects of the FPPA reforms on the use of arbitration, we
consider the standard difference-in-difference specification:
ð1Þ Arbit = a + bFirefighteri + gAfterPolicyChanget + dFirefighteri 3 AfterPolicyChanget
+ Xit0 X + mit
where Arbit is a dummy variable that indicates whether arbitration was used
to settle the contract; Firefighteri is a dummy variable for firefighters;
AfterPolicyChanget is a dummy variable that takes the value 1 after the
changes in legislation; X 0 is a vector of control variables for bargaining unit
characteristics; mit is a residual; and i and t index bargaining units and time,
respectively. The control variables we include in X 0 include dummy variables controlling for bargaining unit size (since dispute costs can fall as bargaining unit size increases, e.g., Ashenfelter and Currie [1990] and Currie
[1989]), type of workers in the bargaining unit (part-time, full-time, seasonal) as well as dummy variables for regions, since there can be regional differences (urban versus r ...
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