The Value of Voluntary Mediation In Resolving Disputes With Departing Employees of Small
Businesses, by Jeffrey Moeller and Peter Krembs
1. Introduction
While much has been written on the dynamics and value of mediation as a means of resolving traditional
organized labor disputes, or in the context of employment discrimination claims, small to mid-sized
employers sometimes overlook its value in dealing with departing employees. In this article, we examine
the value of voluntary, time of separation mediation to the small or mid-sized business. Cost of legal
services is often of great concern to such businesses, and yet they have as much at stake if not more
when an employee departs under less than ideal circumstances.
2. An Example
Take the following example. Bob has been employed ABC Corporation, a manufacturer of widgets, for 20
years as its director of engineering. Bob has no formal contract; he is an at-will employee. ABC
Corporation only has 25 employees all at one facility in suburban Cleveland. Rumors have been
circulating that Bob has been seen being wined and dined by XYZ Corporation, a competitor on the other
side of Cleveland. One Friday afternoon, Bob sends out an email tendering his resignation without
explanation, and he will not even talk to his closest friends at the office about it.
ABC’s president, your client, is worried. Maybe he could have paid Bob more over the years, but
everybody at the office loves Bob, and he’s afraid that he’s about to have a revolt on his hands. Bob
knows a lot about the business of ABC, and he’s worried that he is in for a long struggle with XYZ.
3. Mediation: control over outcome and cost containment
Most organizational psychologists will tell you that mediation is a particularly effective and appropriate
problem solving mechanism in the context of a departing employee, both from the perspective of the
employer as well as the employee. See, e.g., D. Wood & D. Leon, Measuring Value in Mediation: A
Case Study of Workplace Mediation in City Government, 21 Ohio St. J. on Dispute Resolution 383
(2006); L. Bingham, Mediating Employment Disputes: Perceptions of Redress at the United States Postal
Service, 33 Am. Rev. of Pub. Admin. 423 (2003).
An employee who is leaving a company generally has a few simple goals: leaving as cleanly as possible,
getting on with their lives, and saving face. Employment claims, barring egregious facts buoyed by a
realistic possibility of statutory attorney’s fees, are often uneconomic or marginally economic to pursue for
an employee. Nonetheless, employment claims get filed even though they might not be economic to
bring, because (the organizational psychologists will tell you) the employee sees no other way to save
face. The employee feels wronged, wants to fight back for reasons of self-worth, and may not see any
alternative avenue to a public airing.
Public airings can take many forms, including litigation, the filing of (meritorious or non-meritorious)
administrative complaints, or just going around town badmouthing a prior employer (a particularly costeffective way of venting). They may complain to their friends, complain to their new co-workers, include
gratuitous arguments in unemployment filings, slam the former employer in social media, or file E.E.O.C.
complaints apparently having nothing to do with any protected status. Even calmer employees without an
affirmative axe to grind will save face to an employer’s potential detriment: former clients, customers and
friends will ask why they left, and an angry employee who is not naturally inclined to be combative will
have a hard time passing up some subtle comment that does an employer’s reputation in the workplace
no good.
An employer faced with an unhappy employee on his way out the door likewise generally has a few
simple goals. They do not want their workplace disrupted, either by a loss of customers or by a
shockwave of damaged morale. They want, psychologically, to know why an employee is leaving. They
also want to know what their exposure is to claims arising out of the departure. They want to gain as
much control over the process of departure as they can, while spending as little money as they can to do
so. And they may be worried, as in the case of ABC Corporation, with the business impact of a key
employee like Bob departing.
A prompt mediation session, incident to or shortly following an employee’s separation, is usually
beneficial to both employer and employee for many of the reasons that mediation is generally advisable.
Mediation tends to be less costly both from an alternatives perspective (arbitration, litigation) as well as
from a likely recovery perspective (employment cases often are not worth much, dollar wise, unless
egregious facts and/or attorney’s fee recovery statutes come into play). A resolution can be had, if
possible, at the mediation session itself, and scheduling is simply a matter of finding a mediator.
Specialized mediators are available in the employment field, and they will have both familiarity with and
expertise with the types of issues being wrestled with by the parties.
However, prompt mediation sessions are also particularly valuable in the context of the departing
employee. The employer can obtain prompt peace through enforceable settlement agreements that are
compliant with the various state and federal anti-discrimination statutes, and the morale of other workers
will be buoyed if they have the sense that a departing employee was treated fairly. Recent organizational
psychology studies (including comprehensive studies at the U.S. Postal Service) have emphasized the
value to employee of mediation at little economic cost to the employer: it gives them a needed
psychological benefit of having someone who will listen to their complaints. This prompt opportunity for a
departing employee to vent has well-studied benefits (see ante) in minimizing the number of ensuing suits
or other formal actions, even in the event that mediation is not successful.
The mere provision of an avenue to air grievances makes the employee feel fairly treated, even if they
come away from the process without meaningful compensation. Often (consistent with the psychological
need to get on with their life) a departing employee is more concerned with getting on with their life rather
than reliving the past, and an opportunity to vent plus assurance that the employer will not sabotage them
with poor references in the future directly plays into that goal.
An employer, likewise, has an opportunity to clean up its contract with an employee from whom it has
neglected to obtain non-solicitation and/or explicit trade secret protection agreements while minimizing
the number of people who have an opportunity to review it. One of the problems with trade secret
litigation is that it is sometimes awkward to keep sensitive business information truly secret. In the course
of arguing about how secret the information truly is, in a real world litigation context, people are going to
see the information who are not within the four walls of the employer. There are always protective orders
that can be issued, but experts will still see the information, and heaven help the employer when a court
decides that a particular piece of business information that they feel is confidential is found by a busy trial
judge not to be as secret as they would like.
Finally, even if mediation fails, both sides will (assuming a fair and frank discussion) still have learned
something. They will have learned what the other side’s grievances are, and can then plan accordingly.
These concerns and benefits are particularly heightened for small or mid-sized businesses. If one hears
that one out of 100,000 employees of an international mega-corporation left in a huff with rumors about
gossip worthy matters being involved, it is not likely to deter someone from continuing to do business with
the company. Small and mid-sized businesses, by their very nature, tend to be more associated in the
eyes of the public, the other employees, and customers with a set of particular people. In that case, it is
only natural for people to wonder not just what is “wrong” with ABC Corporation, but what is wrong with
the people who run it. And of course, they are likely less able to withstand the cost of alternative means
of playing out a dispute, such as litigation or wars of words in the court of public opinion.
Indeed, for a small or medium sized business, it can be difficult to achieve truly meaningful relief against a
disgruntled or disparaging employee through litigation. The employee may well be virtually judgmentproof, and there are significant downsides for the morale of the remaining workforce (and hence, the
employer) to spending the money to “defeat” a departed employee in court.
A couple of counter-examples from recent Ohio case law highlight the value of post-employment
mediation from both an employer’s and an employee’s perspective. In James v. Bob Ross Buick, Inc.,
855 N.E.2d 119 (Ohio App. 2nd Dist. 2006), a departing salesman was incensed that his former employer
had been using his name in advertising material after his departure, allegedly to help draw a particular
demographic. After trial court proceedings and an appeal, the employee came away with a ruling that he
had failed to prove any particular quantum of damages, but his claim for nominal damages for
misappropriation of sponsorship would survive for trial on remand. The employee found a way to vent,
but it was an expensive one. The existence of a published appellate opinion does nothing to help the
employer’s cost containment or keeping its dirty laundry private.
Another counter-example can be found in Edwards v. Ohio Institute of Cardiac Care, 868 N.E.2d 721
(Ohio App. 2nd Dist. 2007). Edwards involved sexual harassment allegations of a nature that would surely
offend any employees and create a need to vent. Two individuals allegedly involved in the harassment
mediated early on in the proceedings, but mediation efforts failed with the employer itself. The matter
went to a full-blown trial and on to a published appellate opinion. After her full-blown trial, plaintiff ended
up with a $200,000 judgment, probably a sizeable attorney’s fee bill, and having vented in the public
forum of the law reporters and the Internet. The employer ended up exposed to a $200,000 judgment,
plus its own attorney’s fees through trial and appeal (or the increased insurance premiums associated
with them, perhaps), and a set of sordid allegations about how it does its business a matter of a Google
search away.
4. “That mediation idea was really great. Can I put this in my employee’s manual and make
everyone who quits mediate their disputes with me as they go?”
The possibility of requiring at-will employees to attempt to mediate work-related disputes, via employment
contract, is an emerging area of Ohio law. Several recent cases have explored the ramifications of
having employees sign such an agreement.
In Boggs v. Columbus Steel Castings Co., 2005-Ohio-4783 (Ohio App. 10th Dist.), a temporary staffing
agency required each of its employees to agree to mediate any labor-related disputes that they had
arising out of an assignment with one of the employer’s clients, followed by arbitration if mediation was
unsuccessful. The agreement was upheld and enforced against the employee, who later wanted to file a
workplace intentional tort claim against the factory owner where he had been assigned to work. The
court rejected the employee’s claim that the agreement (at least as applied) contravened public policy,
citing the general public policy in favor of arbitration.
In Redmond v. Big Sandy Furniture, 2009-Ohio-6824 (Ohio App. 4th Dist.), however, the court
determined that an arbitration agreement contained in a personnel policy was illusory and hence
unenforceable. In the view of the court, the employment terms at issue permitted the employer to
unilaterally cancel or modify the obligation to use alternative dispute resolution, rendering the agreement
illusory. (Typical unilateral personnel policies likewise leave the employer with the discretion to amend or
terminate their terms either at any time, or on specified days’ notice). Interestingly, although the court in
Redmond tries to distinguish, and ultimately just disagrees with prior cases, the same employer had its
employment terms upheld against similar challenges in an unpublished opinion out of the Southern
District of Ohio in 2007. Gilbert v. Big Sandy Furniture, 2007 WL 2668137 (S.D. Ohio).
Of course, compulsory mediation is a bit of an oxymoron. Mediation by itself is, by definition, not a
compulsory process. What the employers in Boggs, Redmond, and other such cases try to do is to put
some teeth in the mediation process by also compelling arbitration in the event mediation is unsuccessful.
Whether binding arbitration can be compelled is subject to a large body of case law outlined in Gilbert.
These concerns tend to be driven by concerns such as the unconscionability of an employee waiving, in
essence, their right to sue, which are less present in the context of requiring a good faith mediation effort
prior to suit; and the imposition of alternative dispute resolution costs on the employee as, in effect,
shutting the door to any redress for them. This concern, of course, evaporates if mediation is not at the
employee’s expense.