In certain disputes arising from employment law, going to a mediator before knocking on the court’s door is not a choice but a procedural requirement laid down by the legislation. An action brought without this step is dismissed on procedural grounds without the merits being reached. Mediation is accordingly the first link in the judicial process in employment disputes.
Labour Courts Act No. 7036 makes an application to a mediator compulsory in respect of employee and employer claims arising from legislation or from an individual or collective employment agreement, and in respect of reinstatement claims. The purpose behind the provision is twofold: to allow the parties to consider the possibility of settlement before moving to the litigation stage, and to ease the workload on the courts.
In this briefing note we examine the operation of mandatory mediation and the conduct of the mediation process at every stage.
What Is Mandatory Mediation as a Procedural Requirement?
This institution, which makes an application to a mediator compulsory in certain employee–employer disputes before recourse is had to litigation, is technically in the nature of a procedural requirement. Claims brought before the court without an application having been made are dismissed on procedural grounds; mediation is therefore the first step in the resolution of disputes in employment law.
The concept of a procedural requirement
Procedural requirements are compulsory conditions that must have been fulfilled beforehand for the court to be able to move on to examine the merits of the dispute. Where a procedural requirement is missing, the court dismisses the action on procedural grounds without entering into the substance of the matter at all.
Under Labour Courts Act No. 7036, having applied to a mediator is a procedural requirement in respect of employee and employer claims founded on legislation or on an individual or collective employment agreement, and of reinstatement claims. The court examines of its own motion whether the final minutes have been annexed to the statement of claim.
Where an action is brought without an application
Where the mediation stage is skipped and an action is brought directly, the court dismisses the claim on procedural grounds for want of the procedural requirement.
The practical consequences of this are as follows:
- The merits of the dispute are not examined at all.
- The costs of the proceedings may remain with the claimant.
In practice it is not accepted that this omission may be made good after the action has been brought. The final minutes must therefore have been obtained before the statement of claim is filed.
In Which Disputes Is Mediation Compulsory?
Article 3 of Labour Courts Act No. 7036 lays down an application to mediation as a procedural requirement in actions concerning employee and employer claims and claims for compensation arising from legislation or from an individual or collective employment agreement. Within this framework, the obligation to apply before bringing an action exists in the great majority of actions concerning employment claims.
Actions for Employment Claims
The mediation stage is compulsory in actions concerning the following heads of claim.
Severance pay. As regards severance pay sought upon the ending of the employment contract for the reasons listed in the legislation, a mediator must be approached before proceedings. An action brought without this stage being completed is dismissed on procedural grounds.
Notice pay. Notice pay claimed where an indefinite-term contract is terminated without observance of the notice periods also falls within the scope of the obligation.
Overtime pay. Mediation is a procedural requirement in claims made in return for work exceeding the weekly limit of 45 hours.
Annual paid leave claims. An application must likewise be made before going to court in respect of claims for pay corresponding to leave periods that were not granted.
Weekly rest day pay. Where payment is sought in return for work carried out on a weekly rest day, mediation again applies as a procedural requirement.
National and public holiday pay. Pay claims arising from work performed on official and public holidays are also subject to mandatory mediation.
An important note
The obligation covers not only the employee’s claims; it applies equally to actions for claims and compensation brought by the employer against the employee. The legislature has as a general matter made monetary disputes between the parties subject to the regime of mediation as a procedural requirement.
Reinstatement Claims
In reinstatement actions, an application to a mediator is a procedural requirement under Article 3 of Labour Courts Act No. 7036. An employee whose contract has been terminated is obliged to take this route before bringing a reinstatement claim before the court.
Time limit for the application. The employee must apply to a mediator within 1 month of the notice of termination being served on them. Where this period, which is of a preclusive nature, is missed, the possibility of making a reinstatement claim is removed entirely.
Conclusion of the process. Two possibilities arise at the end of the discussions. If the parties settle, the conditions for taking the employee back into work and the sum of compensation to be paid are set out in the settlement document. If no settlement is reached, final minutes are drawn up and the employee must bring the reinstatement action within 2 weeks of the date on which those minutes were drawn up. That two-week period is likewise preclusive.
Claims Arising from a Collective Employment Agreement
Employee and employer claims founded on a collective employment agreement also fall within the scope of mediation as a procedural requirement. Article 3 of Act No. 7036 makes an application before proceedings compulsory in respect of claims and compensation arising from legislation or from an individual or collective employment agreement.
Collective agreement claims within the scope. Disputes regulated in a collective employment agreement and having a monetary counterpart fall within the scope of the obligation. The following may be given as examples:
- Claims for gratuities
- Differences arising from pay raised by a collective employment agreement
- Differences in supplementary payments
- Bonus or overtime differences arising from the agreement
- Fringe benefits and social allowances
A mediator must be approached before an action concerning these heads is brought.
Disputes as to interpretation. Actions concerning the interpretation of a collective employment agreement, and certain disputes relating to its normative provisions, are assessed separately according to the nature of the particular case. By contrast, in individual employee claims involving a monetary demand, mediation is applied as a procedural requirement.
Which Actions Fall Outside the Scope?
The obligation in Article 3 of Act No. 7036 is confined to monetary claims and claims for compensation between employee and employer. Not every employment law dispute is subject to this regime.
Compensation for occupational accidents and occupational diseases. Mediation is not compulsory in actions for pecuniary and non-pecuniary damages arising from an occupational accident or occupational disease, or in the recourse actions connected with them. These claims are in the nature of tort and rest on the employer’s liability in fault. The legislature has left disputes of this kind outside the obligation; an action may be brought directly on account of an occupational accident.
Actions for the determination of service. The procedural requirement is not sought in actions for the determination of service brought with a view to establishing work that was uninsured or under-declared. Such actions concern public order and serve the protection of the right to social security. Because they are not in the nature of an action for a claim over which the parties may freely dispose, they fall outside the scope.
Social security disputes. Actions brought against SGK procedures — premium debts, administrative fines, retirement procedures and the like — are not subject to mandatory mediation. Such disputes arise not from a private law claim between employee and employer but from administrative acts or from social security law.
How Is the Application Made?
The mandatory mediation application is the first step that must be completed before an action is brought. Where an application is not made in due form, the procedural requirement is treated as unfulfilled and the action brought is dismissed on procedural grounds.
The competent office. The application is made to the Mediation Office within the courthouse. In places where there is no such office, the procedure is conducted through the registry of the civil court of peace designated to act as the mediation office. Following the application, a mediator entered on the register is appointed through the system and notification is sent to the parties.
Jurisdiction as to the place of application. Article 3 of Act No. 7036 provides two options for the application:
- The mediation office at the place of domicile of the opposing party; where there is more than one opposing party, the office at the place of domicile of any one of them
- The mediation office at the place where the work was performed
Given that this provision is in the nature of a rule of optional jurisdiction, making the application in the wrong place may prolong the process and lead to an objection to jurisdiction.
Documents it is useful to prepare. No obligation to submit a comprehensive set of documents has been introduced for the application. In practice, however, having the following to hand makes the process easier:
- The identity and address details of the parties
- The employment contract, if any
- The notice of termination (of particular importance for reinstatement)
- A schedule showing the heads of claim being sought
The subject matter of the dispute and the claims being sought must be set out clearly in the application. Even if the heads are not written with their amounts, each must be stated individually and in a manner leaving no room for doubt. Otherwise claims not included in the form cannot be made the subject of the action, and a separate application must be made in respect of them.
Representation by a lawyer. Representation by a lawyer has not been made compulsory for the application. The parties may make the application themselves and attend the discussions in person. Nevertheless, conducting the process with a legal representative serves a protective function in guarding against possible losses of rights.
How Does the Mediation Process Work?
The process begins with the making of the application and closes with the drawing up of final minutes recording settlement or the absence of settlement. It is conducted within the framework of the provisions of Labour Courts Act No. 7036 and of Act No. 6325 on Mediation in Civil Disputes.
Appointment of the mediator. Following the application, the Mediation Office assigns a mediator through the system. The mediator appointed contacts the parties, fixes the date of the meeting and invites them to negotiate.
The first meeting and the negotiations. The mediator brings the parties together and conducts the discussions directed at a resolution. The process is subject to the principle of confidentiality; statements made there cannot be used as evidence in subsequent proceedings. Meetings may be held jointly, and it is equally possible for the mediator to meet the parties separately. The parties may take part in the process themselves or be represented through their lawyers.
Attendance and its sanction. Attendance at the first meeting is decisive for the effectiveness of mandatory mediation. A party who fails to attend the first meeting without a valid excuse may be held liable for the whole of the costs of the proceedings in any action subsequently brought, even if they succeed on the merits; in addition, no legal representation fee may be awarded in their favour. This sanction is intended to ensure that the process is conducted seriously and effectively.
Duration. Mediation is completed within 3 weeks of the date of appointment. In cases of necessity the mediator may extend this period by at most 1 week. At the end of the process, a settlement document is drawn up if the parties have settled, and final minutes recording the absence of settlement if no settlement has been reached. The final minutes are a compulsory precondition for an action to be brought.
Where a Settlement Is Reached
Where the parties reach a settlement on the subject matter of the dispute, a settlement document is prepared by the mediator and signed by the parties. The document produces binding effect in respect of matters over which the parties may freely dispose.
The legal character of the document. The settlement document has the effect of a settlement agreement concluded between the parties, and the matters signed up to bind them.
The following points must be set out in the text clearly and in a manner leaving no room for doubt:
- The sum to be paid and the date of payment
- Where payment by instalments is provided for, the conditions of that arrangement
- Provisions concerning waiver and release
Provisions that remain incomplete or vague may become the source of fresh disputes later on.
Enforceability. The ability of the document drawn up at the end of the process to be enforced directly, like a court judgment, is subject to certain conditions. Where those conditions are met the document is treated as a document in the nature of a court judgment and compulsory enforcement may be sought without any need to bring an action.
A settlement document bearing a lawyer’s signature
Under Article 18 of Act No. 6325 on Mediation in Civil Disputes;
- if the parties attended the discussions together with their lawyers and
- if the document has been signed both by the parties and by their lawyers,
that document is accepted as a document in the nature of a court judgment of its own accord. In such a case:
- There is no need to obtain a separate annotation of enforceability from the court.
- Enforcement proceedings based on a judgment may be commenced directly.
- The debtor cannot resist the proceedings by way of the classic objection; only limited routes such as a complaint or a negative declaratory action remain open.
The provision takes the scrutiny of a lawyer as an element of assurance.
A settlement document without a lawyer’s signature
Where the document does not bear the signature of the parties’ legal representatives, it does not of its own accord acquire the character of a court judgment. In that case:
- An application is made to the civil court of peace at the place where the mediator performed their duties, and
- an annotation of enforceability is sought for the document.
The court does not here enter into the merits; its examination is confined to two points:
- Whether the dispute concerns a matter over which the parties may freely dispose
- Whether the settlement is suitable for compulsory enforcement and sufficiently clear
With the granting of the annotation the document acquires the character of a court judgment and may be made the subject of enforcement proceedings based on a judgment.
Can an action be brought afterwards? No action may subsequently be brought on the matters settled in mediation; the parties are bound by the text. The route of litigation nevertheless remains open in three situations:
- An allegation that the settlement was concluded through a defect of intent such as fraud or duress
- Claims falling outside the scope of the settlement
- Claims not expressly provided for in the text
The scope of the settlement text must therefore be determined with care.
Where No Settlement Is Reached
Where the parties cannot settle, the mediator draws up final minutes recording the absence of settlement. Those minutes satisfy the compulsory procedural requirement sought for an action to be brought.
After the minutes have been drawn up, the picture takes the following shape:
- The employee or the employer becomes able to bring an action.
- In reinstatement claims the two-week preclusive period begins to run.
- In other employment claims, the limitation period continues to run from where it left off.
Annexing the final minutes to the statement of claim, or expressly stating the mediation file number within the statement of claim, is of great procedural importance. Otherwise dismissal of the action on procedural grounds may arise. In such situations the court gives the claimant a peremptory period for the minutes to be submitted; where they are not submitted within that period, the action is dismissed on procedural grounds.
At stages where the procedural risk is this high, obtaining the support of a legal representative reduces the losses that may arise later.
A critical point in practice
Mediation is not a purely formal stage. It produces strategic consequences, particularly as regards time limits in reinstatement claims and, in employment claims, the starting point of interest and the limitation period.
Limitation and Preclusive Periods
The process does not consist merely of a procedural requirement; it is a stage that has a direct effect on limitation and preclusive periods. Miscalculating the periods may lead to serious losses of rights.
Suspension of the limitation period. Under Article 3 of Act No. 7036, limitation and preclusive periods are suspended upon application to a mediator. Those periods are suspended on the date of the application and continue to run from where they left off as from the date on which the mediation process ends. The date on which the process comes to an end is the day on which the final minutes are drawn up.
Limitation in employment claims. The general limitation period for employment claims such as pay, overtime, annual leave, weekly rest days and national and public holidays is 5 years. Applying for mediation temporarily suspends the running of that period; when the process closes, however, the remaining period continues just as it stood — the period does not begin again. The widespread belief that an application resets the limitation period is therefore mistaken.
Preclusive periods. Preclusive periods operate differently from limitation; when the period expires the right comes to an end entirely. Two periods are of critical importance for reinstatement:
- Applying to a mediator within 1 month of service of the notice of termination
- Where no settlement has been reached, bringing the action within 2 weeks of the date of the final minutes
Both periods are preclusive in nature and are taken into account by the court of its own motion.
Who Bears the Mediation Fee?
In mandatory mediation, the mediator’s fee is borne in different ways according to how the process concludes. The principles of remuneration are laid down in Act No. 6325 and in the Mediation Minimum Fee Tariff.
The first two hours. In discussions conducted within the scope of mandatory mediation in which the parties fail to settle, the fee corresponding to the first two hours is paid out of the budget of the Ministry of Justice. The parties are accordingly not required to make any payment for those two hours. Since in practice a significant proportion of files are completed within one to two hours, in most cases no separate fee falls on the parties.
The portion borne by the State. Where no settlement has been reached and the process has closed without exceeding two hours, the whole of the fee is paid by the State. Where the discussions exceed two hours, the fee relating to the excess is borne equally by the parties. This is recorded in the final minutes.
Apportionment where a settlement is reached. Where the parties settle at the end of the process, the mediator’s fee is determined on the basis of the Mediation Minimum Fee Tariff and is as a rule shared equally between the parties.
Given the voluntary structure of mediation, however, the parties may write a different arrangement as to the apportionment of the fee into the settlement document. For example, it may be agreed that:
- the fee be shared in specified proportions
- the whole of the fee be borne by the employer
- the share falling to the employee be set off against the settlement sum
The Independent Legal Assessment
Mandatory mediation is in practice most often regarded as “a formality to be got past”, whereas the fate of the file is to a large extent determined at this stage. That a head of claim not shown in the application form cannot subsequently be brought before the court, the effect of non-attendance at the first meeting on the costs of the proceedings, and the risk of dismissal on procedural grounds arising from a failure to annex the final minutes to the statement of claim all show that the process calls for technical preparation.
Similar care is required at the settlement stage. Where the scope of release and waiver provisions is drawn widely, it becomes difficult to make claims later in respect of entitlements not separately listed in the text. By contrast, a settlement document bearing a legal representative’s signature offers the creditor party a marked advantage, since it affords the possibility of direct enforcement without any need to obtain an annotation.
The headings to which priority should be given at the outset of the process are as follows:
- Setting out all the heads of claim to be sought individually and in full in the application form
- Establishing from the outset whether the dispute genuinely falls within the scope of the obligation
- Diarising the one-month application period and the two-week period for bringing an action in reinstatement matters
- Ensuring attendance at the first meeting without fail, having regard to the risk as to costs
- Writing the amount, due date, instalments and scope of the release into the settlement text in a manner leaving no room for doubt
- Where no settlement is reached, stating the final minutes and the file number in the statement of claim
Independent Legal acts at every stage of employment disputes, on both the employee and the employer side, from the preparation of the mediation application to the conduct of the negotiations and the subsequent handling of the litigation.