Mediation and “Bad Faith” Bargaining

I remember, during my mediation training, asking for a clear definition of “bargaining in bad faith” and being disappointed not to receive one. Having now myself done a little research I can understand why the concept is so hard to define, despite many people’s claim to “know it when they see it.”

Most of the legal discussions of bad faith bargaining that I have seen come from the area of labour relations. For example, the Alberta Labour Relations Board advises that, “parties must make every reasonable effort” to reach an agreement. They also list some examples of bad faith bargaining techniques, including refusing to meet the other party, refusing to respect the other party’s representatives, reactivating proposals that have already been settled, adding new areas of discussion late in the dispute, and “surface bargaining.” I would guess that “surface bargaining” is what most people have in mind when they think of bad faith bargaining. It is basically a form of stalling. In surface bargaining one of the parties “goes through the motions” of bargaining, but has no intention of ever coming to an agreement. The BC Labour Relations Board defines bad faith bargaining somewhat more strictly, saying that it is the “deliberate strategy by either party to prevent reaching an agreement.”

Bargaining in bad faith is not the same as “hard” bargaining, but the two can be very difficult to tell apart in practice. Imagine a dispute in which party “A” has made what they consider a reasonable offer to settle. Party “B” refuses to accept it and has not moved very far from their opening position. Did party B never intend to settle, or are they simply convinced that party A’s offer isn’t yet good enough? How would a mediator (or anyone else) be able to tell, short of a private confession by party B? Or imagine a dispute in which party A spends a lot of time going over relatively trivial yet highly detailed matters. Is party A deliberately stalling, or taking reasonable care to protect their interests? And who is to say what counts as a “trivial” issue?

Yet despite the difficulties in characterizing bad faith bargaining, it represents a real problem for mediators and for the mediation process. It is a particularly troubling possibility when one of the parties has greater resources (time, money) than the other. The more powerful party can stall, drawing out the process and using up the other party’s time and money. When the mediation process is declared a failure, the stronger party is in an even more favourable position. The weaker party, having depleted their resources, may agree to an unreasonable offer because they no longer have the money to defend their rights in court.

What should you do as a mediator if you suspect that one of the parties is bargaining in bad faith? I don’t think that there is any way to be sure that parties intend or do not intend to come to an agreement, and it is important not to jump to conclusions. If one of the parties won’t move from what looks like an unreasonable position, try to find out why. Their view of the dispute may be such that their own position is reasonable. How does it differ from your view, and from the other party’s view? But there may come a point in a mediation when the mediator begins to suspect that the process is not serving either party and that prolonging it would not be a good use of their time or money. In this event, the best thing for the mediator to do may be to explain their concerns and then exercise their right to end the mediation.

How to Write a “Code of Conduct”

Recently I’ve been working with a client on a project that involves codes of conduct, and I’ve reviewed a number of such codes within a specific industry. A “code of conduct” is a set of rules or proper practices that regulates behaviour within an organization. Many large businesses and organizations have codes of conduct, as do armies, street gangs, criminal conspiracies, and groups of professionals. Even pirate ships, often a byword for lawlessness, had codes of conduct to regulate discipline, division of spoils and compensation for the injured.

Here are some of the things I have found about crafting an effective code of conduct, no matter what kind of behaviour or organization is to be regulated:

Purpose: It is worth spending some time thinking about why you need a code of conduct before starting to write. What kinds of activities need to be regulated and why? What values do you want to promote? What kinds of practices do you want to discourage?

Content: The most effective codes I have seen contain both abstract language about values and some clear, concrete guidelines. It is fine to say something along the lines of: “Members of the organization will be honest and scrupulous in financial dealings.” But you might also want to say, “Employees will neither accept nor offer bribes.”

Scope: Don’t try to be exhaustive. The idea is not to regulate every aspect of an individual’s life, or even every aspect of working life. Focus on what you believe is most important.

Consult: Talk to the people who will be using the code. What kinds of ethical challenges do they face? Which work-related situations do they find most troubling? If the code is to be effective it has to be relevant to the experiences of those who are expected to abide by it.

Length: If you want the code to be a document that people refer to and consult on a regular basis, it should not be too long or complex. A good length to aim for is one page, maximum.

Style: I’ve seen several codes of conduct that were all too obviously written by lawyers. While it is a good idea to have a code vetted by a lawyer, it should not require a law degree to understand it.

Keep it current: As your organization develops and grows, members will face new challenges. And technological advances bring their own ethical challenges. Ten years ago, no one needed a company policy about employees’ Twitter activity. Today, it might be quite relevant. Be sure to review and update your code of conduct periodically.

Cohabitation Agreements

In my previous post, I mentioned a recent decision by the Supreme Court of Canada that is likely to change the way that the courts deal with support and property conflicts between unmarried partners. There’s speculation among lawyers that the decision will lead to an increase in cohabitation agreements. So I thought it would be useful to say something about them here.

A “cohabitation agreement” is a contract between unmarried partners who live together, and it can be signed before the couple move in together or after. It usually specifies things like the rights and obligations of each party during the cohabitation, and what will happen if the relationship ends. For example, who will own property acquired during the relationship? Will one partner be obliged to support the other, and for how long? Who will move out of the shared residence, and how soon after the relationship ends should that person be expected to find a new home? For a cohabitation agreement to be legally binding the parties must sign it in front of a witness (who also signs); each must make a full and frank financial disclosure; and the parties must sign voluntarily.

There are good reasons for couples to work out a cohabitation agreement before moving in together. Working together on a cohabitation agreement can give each person some idea of how the other deals with conflict, and if they are able to have together what mediators like to call “difficult conversations.” For example, many couples avoid talking about money and realize only too late that they have different values around it and different spending habits. Having an open and honest discussion about each other’s financial situation and financial goals early in the relationship can help avoid conflict and misunderstanding later on. Another good reason to have a cohabitation agreement is that, if the relationship does break down, a legally binding agreement can provide some predictability about property rights, and it can help protect against unnecessary cost and litigation.

But do you really need a cohabitation agreement? A lawyer who specializes in family law can advise you about your particular situation. Likely, the answer depends on how much property you own, and how complicated your life is. If the only discussions you and your partner need to have are over who unloads the dishwasher and who pays the extra cable charges, probably a formal agreement isn’t necessary. But if one or the other owns a home or other substantial assets, or has children, a cohabitation agreement might be a good idea. Another factor to consider is whether the shared living arrangement is meant to be temporary or long-term. If the arrangement is meant to be long-term and indeed to take the place of a marriage, then having a formal agreement is probably advisable. I should also note that, ordinarily, a cohabitation agreement remains valid if the couple marries.

If you do decide that you and your partner would benefit from having a cohabitation agreement, then do it properly. Meet with a mediator if you find it difficult to discuss money or other sensitive subjects. Most importantly, each person signing the agreement needs independent legal advice. That means that both you and your partner should go over the agreement with your own lawyer. It is better to spend the money at the outset to make sure that you have a durable agreement, than to find out later (and at much greater expense) that your agreement won’t hold up in court.

Marriage, Cohabitation, and the Law

When a couple moves in together, along with good wishes, they are likely to receive misinformed advice. Contrary to what many seem to believe, there are important legal differences between living together and being married. Just what these differences amount to depends on where the couple lives. (I will avoid using the term “common law marriage.” Not all jurisdictions recognize common law marriage, so using the term where it may not be appropriate is misleading.)

Below I’ve outlined some of the main differences between married and cohabitating couples in Ontario. The key difference is that married couples are treated as an economic unit, while cohabitating couples are not.

Primary Residence: When a married couples divorces after three years or more, both have an equal claim to live in the family home. This is regardless of whose name the property is in. Cohabitating partners do not automatically have this right.

Other Property: Unless they have previously agreed to do otherwise, married couples who divorce share the value of the property acquired during the marriage, as well as any increase in the value of the property they brought into the marriage. For example, Jim has owned a vacation cottage since before he married. If it goes up in value by $20,000 while he is married to Jane, then Jane is legally entitled to $10,000 upon divorce. If Jim and Jane were cohabitating, she would not be entitled to any increase in the value of the cottage. Similarly, cohabitating partners do not share any property that either acquires during the time of cohabitating. If Jane buys an artwork while living with Jim, she does not have to share it with him if their relationship dissolves. If they were married, Jim would be entitled to half of the value of the artwork. But note! Even if they are not married, if Jane contributes financially to the upkeep of the cottage, or Jim contributes some funds to purchase the artwork, the situation may be different.

Child Support: Children have the right to a relationship with both of their parents, and children have a right to be financially supported by their parents. This is true whether their parents are married or not. In some cases, the courts have ruled that if a cohabitating person has treated a partner’s child as his or her own, the child may be entitled to support from that partner.

Spousal Support: This is probably the trickiest area of all. Both married and cohabitating partners who break up may be entitled to support. A recent decision by the Supreme Court of Canada has set out a new framework for resolving property and support disagreements between formerly cohabitating partners. The case in question centered on a woman who moved out of the province to be with her partner and left a job to raise their children. Although the couple was not married, the court decide to treat their economic activities as a “joint family venture.” She was found to be entitled to half the increase in value of the couple’s assets, which amounted to about $1.5 million. (You can read the details of the case here.)

Inheritance: If a married person dies without a will, the surviving spouse is ordinarily entitled to part of the estate. If the couple is not married, the surviving partner does not have an automatic claim on his or her partner’s estate. If the surviving partner has helped pay for property that is in the deceased partner’s name, he or she may have to go to court to prove this before the estate can be settled.

I have taken most of this information from What You Should Know About Family Law in Ontario, a publication of the Attorney General’s Office. I am not a lawyer, and I don’t intend for this posting to be taken as legal advice! Family law is incredibly complicated. I’m told that even lawyers who work in other areas of the law find family law to be difficult. To find information relevant to your particular situation, you must consult a lawyer.

Next time: I’ll write about “cohabitation agreements” for unmarried couples.

Conflict Resolution and Business Ethics

Photograph by Mike Smail

Conflict resolution is an ethical issue because how we treat one another, including how we treat others with whom we are in conflict, involve ethical considerations. In business, conflicts and the ethical and management challenges they present can arise in a number of areas:

Between two or more organizations: Between a business and its suppliers – who absorbs the extra cost when a shipment is delayed because of an unexpected storm?
Between a business and its sub-contractors – what to do when the terms under which contracts were written no longer apply?
Between business competitors – how to resolve intellectual property disputes?

Within an organization: Between employees and management – over wages, benefits, working conditions, and everything else.
Between different divisions of an organization – what should be done when the “creatives” disagree with the “suits” or when the sales team is frustrated with the software engineers?
Between two or more employees. (See my earlier post on microwave ovens as a major cause of inter-employee strife!)

Between a business and its customers: What counts as a “fair” policy in the case of unsatisfactory products? Does caveat emptor apply across the board?

Between a business and the community: What is adequate compensation for environmental damage? (Remember the BP oil spill?)
How much should a profitable company give back to the community?

For many of these issues, the initial response might be, “Call in the lawyers. Find the extent of our legal liabilities or entitlements.” Or: “Look up the company policy. What are rules around this?” For some issues, this kind of information will be crucial. But what an organizations does with this information and the response it makes will be crucially important. For some, the default response is an adversarial, hard-nosed, “take no prisoners” approach. What are the likely consequences? One of the parties in the dispute might win big; the other might have to make concessions. It is more likely that neither of them will get everything they sought. In any case the relationship is probably finished. Each party will then have to expend time and effort building new relationships, probably at great cost.

A less adversarial approach to conflict resolution can help preserve and even strengthen relationships. A great example of this was the intellectual property dispute between Digital and Intel back in the late 1990’s. Digital filed a patent infringement suit against Intel; Intel filed a lawsuit seeking the return of crucial documents from Digital. Claims and counter-claims went back and forth and both companies saw their share prices fall. Luckily, while lawyers for both companies were preparing to bring the various matters to court, the directors of Digital and Intel kept meeting and talking. Eventually, working together, Digital’s president Robert Palmer and Intel’s COO Craig Barrett worked out a preliminary agreement that was acceptable to both companies and advantageous to both. I believe that the case is still studied in business school as an example of creative problem-solving and skillful management.

There’s a saying in business that, relationships are worth more than gold. I think that sums up why effective conflict resolution in the business context is both an ethical issue and a management issue.

No Girls Allowed?

Recently a Florida lawyer has been getting attention because he refuses to represent female clients. Kenny Leigh built his practice, now employing ten lawyers, with the slogan: “Men only. Family law only.” Mr. Leigh does not have anything against women, he says. The problem is that Florida family law is systematically biased against men. The Florida bar association, which must approve legal advertising, has asked him to drop the “men only” slogan, but it won’t take action against him unless someone files a discrimination suit. (Ontario lawyers who advertised their refusal to represent clients based on sex would likely run afoul of the Ontario Human Rights code, not to mention the Law Society of Upper Canada).

I can’t comment on the fairness of of Florida family law. All too often when someone claims that the law is unfair or that a particular judge is “biased,” what they really mean is, “I’m unhappy that I didn’t get what I wanted.” Some of Mr. Leigh’s critics were particularly upset by his admission that not all of the fathers he represents are “good dads”. He explains, “If I had to base my practice on just good dads, I'd be broke.” It strikes me as misguided to criticize Mr. Leigh for his willingness to represent “bad” fathers. We don’t expect criminal defense lawyers to represent only the innocent. Anyone in family court who needs a lawyer, “good parent” or not, should have access to one.

Mr. Leigh may be a particularly assertive “single sex” lawyer, but he isn’t the only one. David Pisarra is a California lawyer who also focuses on male clients, but for different reasons. Pisarra noticed that men and women approached legal issues differently. When he represented female clients in family law cases he found that they required a lot of emotional support. Meetings would go on for hours because he spent so much time discussing his clients’ personal problems. He found it uncomfortable to be pushed into a therapeutic role. Men, in contrast, didn’t expect their lawyers to be a source of emotional support. Pisarra found he could be blunt and direct with his male clients, and focus on legal tactics. And that is how he prefers to work.

I think that there are good reasons why a lawyer (or other professional) might want to create a niche for themselves working only for a specific clientele. Both Leigh and Pisarra claim that their specialization allows them to be more effective at what they do. What I found more disturbing about Leigh than his sex discrimination were the attitudes he conveyed about family law: "It's gloves off. It's nasty stuff." So divorce and family breakdown – already very difficult times in the lives of families and children – are characterized as a sport and (worse) as a violent contest. Now, I can imagine situations where family law disputes call for aggressive tactics. But we’ve seen again and again that hostile legal proceedings can make bad situations worse. They make it difficult or impossible for divorced couples to co-parent their children, they cost families a great deal of money, and they prolong emotional turbulence. Aside from the lawyers, does anyone benefit from drawn-out and antagonistic court proceedings? These are just some of the considerations in favour of mediating rather than litigating family law disputes.

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