Southern District of New York Mandates Early Mediation in Employment Discrimination Cases

The U.S. District Court for the Southern District of New York (“SDNY”) recently issued a Notice to the Bar advising that effective January 3, 2011, all employment discrimination cases, except cases filed under the Fair Labor Standards Act, will be automatically referred for early mediation through the court’s Alternative Dispute Resolution program.

This change in the SDNY’s handling of employment cases appears to be a response to the high volume of incoming employment discrimination claims. As many employers know all too well, there has been a sharp uptick in employment litigation over the past decade. Litigation trends show that employees are heading to the courthouse in record numbers to file employment-related claims against their current and/or former employers. Oftentimes, these litigations are highly contentious and take years to resolve, causing backlogs on judicial dockets across the nation. The volume of employment claims and the duration of these types of cases makes early resolution through mediation a potentially attractive option.

In the SDNY, mediation is a cost-free, confidential process. The mediator is usually an attorney and may have expertise in the area of employment discrimination. The mediator may assist settlement discussions by defining issues, questioning perceptions, diffusing emotions, or making suggestions as to possible resolution, but does not act as a judge or arbitrator, rule on questions of fact or law, hear testimony, or render a decision or award.

The SDNY is not the first court to mandate mediation for employment-related claims. Pursuant to Court Rule 1:40-4, the New Jersey Superior Court similarly requires that all cases alleging claims under the New Jersey Law Against Discrimination be sent to complimentary non-binding mediation after the first answer is filed.

What Does This Change Mean For Employers?

If sued by an employee for discrimination in the SDNY:

• Employers must be ready to discuss the underlying facts and claims from the outset of the case. Pursuant to SDNY Local Rule 83.12, the mediator will schedule the first mediation session for within thirty (30) days of him or her being assigned to the case. Moreover, seven (7) days before the mediation, the employer must deliver to the mediator (but not their adversary) a confidential memorandum, which outlines the employer’s contention as to liability and damages, the status of settlement negotiations, the names of persons with authority to settle, and the employer’s reasonable settlement range.
• Employers must be ready to participate meaningfully in the mediation process and explore the possibility of settlement. Per the SDNY’s rules, parties are required to remain and participate in the mediation until a resolution is reached, subject to being excused by the mediator, or until the mediator has determined that resolution is impossible.
• Employers must continue to meet their discovery obligations. SDNY Local Rule 83.13 makes clear that “in no event is the scheduling of mediation to interfere with any scheduling Order of the Court.” Accordingly, mediation will not stay or delay discovery obligations without further instruction from the assigned judge.

If Mediation is Unsuccessful, How Will It Affect the Underlying Case?

If the mediator concludes that resolution is impossible, within 5 days he or she will file a report with the SDNY declaring an impasse. The identity of the mediator is not disclosed to the assigned judge. Moreover, neither the parties nor the mediator may disclose any information regarding the mediation process, including proposed settlement terms, to the assigned judge unless all parties agree, or unless the assigned judge orders such disclosure. Finally, the mediator is disqualified as a witness, consultant, attorney, or expert in any pending or future action relating to the dispute.

Because of the above precautions, our experience is that an employer’s participation in the mediation process will have little to no effect on the way the case proceeds before the assigned judge. However, in a practical sense, any offers of settlement and/or statements made in connection with the mediation will undoubtedly influence and set expectations for settlement discussions that occur later on. Accordingly, it always in the employer’s best interest to thoughtfully craft any settlement offers made during the mediation process in consultation with employment counsel.

The SDNY covers New York, Bronx, Westchester, Dutchess, Orange, Putnam, Rockland, and Sullivan counties. The attorneys at Gibbons P.C. regularly practice in the SDNY as well as other courts around the country. If you have any questions regarding the SDNY’s Alternative Dispute Resolution program or mediation generally, contact any attorney in the Gibbons Employment & Labor Law Department.