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When Anastasia Kelly became GC of Sears, Roebuck and Co. nearly three years ago, one of her top priorities was to find a way to stanch the river of red ink flowing from employee legal disputes. Her response is now ready for the red carpet. After a year of planning and research, Hoffman Estates, Ill.-based Sears is rolling out a pilot alternative dispute resolution program for two of its businesses — hardware stores and The Great Indoors home decor stores — that will be available for nearly 16,000 employees. The program, which will be fully operational by March, will be mandatory for new applicants and existing employees, except those already working at The Great Indoors stores, who will have the option not to use it but are “strongly encouraged” to sign on. Employees who do agree to participate give up the right to sue. “This is not only a cost-cutting measure, it’s also a way to improve morale among employees,” says Kelly. The ADR program covers a wide range of claims, including discrimination, layoffs, and promotions. The process begins with a step called “Let’s Talk,” in which employees are encouraged to settle their differences with local management or human resources. If the employee fails to find a solution, he can take the case to a peer committee, which employees help select. Mediation comes next if the employee does not agree with the committee’s decision. At that point a third-party mediator paid by Sears intervenes to find a settlement. If the employee is still unhappy, he or she can advance to arbitration, the last stage, in which a professional arbitrator’s decision is final. With more than 300,000 employees and a high turnover rate, Sears spends more legal dollars on battling its own people than anything else, according to Kelly, who estimates that each litigated case with an employee costs between $50,000 and $75,000. “There’s a compelling reason to get out of those cases,” says Kelly. David Ross, a mediator with Judicial Arbitration and Mediation Services, who has helped build employment ADR programs for The McGraw-Hill Companies Inc., Alcoa Inc. and UAL Corporation, says the potential for emotional cost-saving should not be taken lightly. “Less litigation means more harmonious resolution [to disputes],” he says. Sears’ move to ADR will mean more business for Ross’ organization and the American Arbitration Association — which it has designated for its pilot programs. But what about the law firms that defend Sears? Washington, D.C.’s Wilmer, Cutler & Pickering, for one, supports the program — but then again, says Wilmer’s Paul Mode Jr., who specializes in ADR, the firm doesn’t handle routine litigation. Among the law firms Sears uses for employee disputes are White Plains, N.Y.-based Jackson Lewis Schnitzler & Krupman, San Francisco’s Littler Mendelson and Chicago’s Seyfarth Shaw. All either declined to comment or could not be reached at press time. It’s too early to predict the program’s cost-effectiveness, but Kelly’s optimistic about savings. And, if it’s successful, it could draw more crowds than a January white sale.

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