Federal employees have long had substantial workplace protections through an administrative redress system that was designed to safeguard them against arbitrary agency actions and prohibited personnel practices, such as discrimination or retaliation for whistleblowing. But the redress system—especially insofar as it affects workplace disputes involving claims of discrimination—has been criticized by federal managers, as well as by employee representatives, as adversarial, inefficient, time consuming, and costly. For executive branch employees, the first opportunity for redress is within their own agencies. For matters that are not resolved at the agency level, or not handled solely under the terms of collective bargaining agreements, three independent federal bodies process employee complaints and appeals. EEOC adjudicates employee complaints of discrimination, which generally are investigated first by the agencies for which the employees work; the Merit Systems Protection Board (MSPB) adjudicates, among other things, employee appeals of firings or suspensions of more than 14 days; and the Office of Special Counsel investigates employee complaints of prohibited personnel practices—in particular, retaliation for whistleblowing. In some cases, a single complaint may be handled by more than one of these agencies, adding to the time and costs involved in its resolution. Finally, the law allows for further review of these agencies’ decisions in the federal courts. The Administrative Dispute Resolution Act of 1990, which required federal agencies to develop ADR policies, charged the Administrative Conference of the United States (ACUS) with (1) assisting agencies in developing ADR policies and (2) compiling information on agencies’ use of ADR. The act sunset in September 1995, and ACUS was abolished in October 1995. The Administrative Dispute Resolution Act of 1996 permanently reauthorized the 1990 act and charged the President with naming a successor to ACUS to facilitate and encourage agency use of ADR. As of July 1997, no successor had been designated. The term ADR covers a variety of dispute resolution techniques, usually involving intervention or facilitation by a neutral third party. ADR methods—arbitration and mediation in particular—date back to the early 1900s. Originally, ADR was used mostly to resolve disputes involving employees who were covered by collective bargaining agreements. More recently, organizations began applying ADR methods to disputes involving other employees as well. Although ADR has been used as a tool—especially in resolving disputes that arise from miscommunication, personality conflicts, or alleged discrimination—many experts and practitioners cautioned that ADR is not appropriate in all cases. Inappropriate situations, they said, include incidents of violence or cases of severe sexual harassment. Under the Administrative Dispute Resolution Act, ADR is also considered inappropriate when authoritative resolution of a matter is required for precedential value, the matter in dispute has significant government policy implications, or it is important to produce a full public record of the proceedings. To provide information on private sector companies’ and federal agencies’ reasons for using ADR, the types of ADR these organizations have made available through procedures other than those under collective bargaining agreements, the extent to which they have put these processes in place, and the results they may have achieved, we spoke with experts and practitioners knowledgeable about the use of ADR in the private and federal sectors, and reviewed the literature about ADR and information available from past reports and surveys. To illustrate private and federal sector organizations’ experiences in planning and implementing ADR processes, the extent to which they evaluated their ADR processes and the extent to which they reported that these processes have been successful in resolving workplace disputes and lessening costs, and the lessons they reported having learned, we judgmentally selected for study five private sector companies and five federal agencies that had some experience with ADR. These organizations reflected a range of ADR practices; had ADR processes in place a sufficient length of time to provide information about use, outcome, and lessons learned; and had at least some use or outcome data available. In the private sector, we studied Brown & Root, Inc.; Hughes Electronics Corporation; the Polaroid Corporation; Rockwell International Corporation; and TRW Inc. In the federal sector, we studied the Department of Agriculture, the Department of the Air Force, the Postal Service, the Department of State, and the Walter Reed Army Medical Center. We also studied the Seattle Federal Executive Board’s Interagency ADR Consortium, a “shared neutrals” program, which provides for the sharing of ADR resources among federal agencies in the Seattle area. In doing these studies, we obtained information about the organizations either on-site or from telephone interviews with responsible officials, from material and data they provided, and from published information. There are limitations to the information we present in this report. First, the case illustrations and the observations that we are reporting only illustrate ADR approaches that have been put into practice and are not intended to be considered “best practices.” Second, organizations identified through literature searches and leads from experts in the field are more likely than not to have reported successful outcomes. Third, the participation of the private sector companies in our study was voluntary, and the companies reserved the right to withhold proprietary information; this limited our ability to analyze their programs with the assurance that we had obtained all relevant data. Fourth, the views we obtained were those of agency and company management and not of employees. Finally, we did not verify the data that were provided to us. We conducted our review between July 1996 and April 1997 in accordance with generally accepted government auditing standards. We sent copies of a draft of this report to the Chairman, EEOC; the Director, FMCS; and the Director, Office of Personnel Management (OPM) for review and comment. In addition, we asked cognizant officials from each case illustration organization to review and comment on a draft of the case illustration describing their respective organization’s ADR experiences. Their comments are presented at the end of this letter. Details of our objectives, scope, and methodology appear in appendix I. According to the ADR literature as well as experts and practitioners in the private and federal sectors, organizations turned to ADR as a means of avoiding more formal dispute resolution processes. Many private sector firms turned to ADR to supplement their traditional ways of handling disputes (e.g., through the chain of command) with the intent of reducing the number of litigations. For federal organizations, ADR offered a way to avoid the burdens associated with both the administrative redress system and litigation by federal employees. Additionally, the use of ADR in the private and federal sectors was spurred in the early 1990s by a dramatic increase in the number of discrimination complaints, along with the costs, time, and frustration involved in attempting to resolve them. Several new laws and regulatory changes made companies and agencies even more likely to develop ADR processes. Moreover, in some quarters—such as EEOC—a recognition emerged that the interest-based approach that is the basis for some ADR techniques can be a constructive alternative to adversarial, position-based processes. Private and federal organizations alike turned to ADR to reduce their involvement in costly and time-consuming processes: lawsuits and—especially in the federal sector—formal administrative redress procedures. In 1995, we reported that private employers were adopting ADR approaches because of their concerns about the costs—in time, money, and good employee relationships—of dealing with employment-related lawsuits and discrimination complaints. Among the five private companies we studied as case illustrations, four cited significant litigation costs as a reason for developing their ADR processes. One of the companies—Brown & Root—turned to ADR after spending over $400,000 to defend itself in a discrimination suit. Although the company prevailed in the case, an official referred to it as “the case nobody won,” because of the human and financial costs it involved. (See app. II.) Among federal agencies, the primary reason officials reported for making ADR processes available has been to avoid the costs—especially those involving time and organizational efficiency—associated with the redress system. For example, according to EEOC data, the average length of time it took for federal agencies to close a discrimination complaint in fiscal year 1995 was 305 days. For cases that involved both a hearing and a later appeal to EEOC, the average processing time was 801 days. As we stated in our November 1995 testimony, the prospect of having to deal with the lengthy and complex dispute resolution system can have a broader impact: it can affect the willingness of federal managers to deal with conduct and performance issues. In both the private and federal sectors, the time and cost pressures that helped spur the use of ADR increased when the number of discrimination complaints rose sharply in the early 1990s. In the private sector, the number of discrimination complaints filed with EEOC grew by 43 percent between fiscal years 1991 and 1994—from 63,898 to 91,189—before beginning to decline. In the federal sector, the increase in the number of discrimination complaints filed with federal agencies was also substantial, rising by 55 percent between fiscal years 1991 and 1995—from 17,696 to 27,472. In December 1994, the Commission on the Future of Worker-Management Relations reported that the rise in complaints lodged with administrative agencies and the increase in employment litigation had led employers, employee groups, and lawmakers to seek alternatives. The increase in discrimination complaints in the early 1990s can be attributed to several factors, according to EEOC, dispute resolution experts, and officials of organizations that we studied. They said that downsizing efforts resulted in a surge of complaints in both the private and federal sectors. In addition, the Americans with Disabilities Act of 1990 established new grounds for employment-related complaints by the disabled. (Federal workers had gained similar protections under the Rehabilitation Act of 1973.) Further, the Civil Rights Act of 1991 allows for the award of compensatory damages of up to $300,000 to employees in cases where the employer has engaged in unlawful intentional discrimination. While monetary damages had previously been available to private sector complainants, under the Civil Rights Act of 1991 federal as well as private sector workers can be awarded compensatory damages, and private sector workers can also receive punitive damages in certain circumstances.