Arbitration and mediation are parts of the labor relations process.

Arbitration is the
procedure by which parties agree to submit their disputes to an independent neutral
third party, known as an arbitrator. Although there are several types of arbitration, labor
arbitration is the dispute resolution procedure used in labor relations. Mediation also
involves the active participation of a neutral third party whose role is to facilitate the
dispute resolution process and to suggest solutions to resolve disputes. The term
conciliation is often used interchangeably with mediation, but conciliation generally
refers to the third party who brings the disputing parties together. While the mediator
suggests possible solutions to the disputing parties, the arbitrator makes a final decision
on the labor dispute which is binding on the parties.

As a process, arbitration predates English common law and has been called the oldest
form of dispute settlement. King Solomon was an arbitrator and arbitration was used to
settle differences during the Greco-Roman period. George Washington was an advocate
of arbitration and, in his will, mandated using the process if disputes arose over his
estate. The use of arbitration in labor disputes was a common practice in the late 19th
century but developed more rapidly after World War II as a substitute for work
stoppages.

During World War II, the National War Labor Board gave great impetus to the use of
arbitration. The board heard over 20,000 labor disputes during the war and frequently
mandated that future cases employ arbitration. The president's National Labor-
Management Conference of 1945 also recommended the application of the arbitration
process to settle labor disputes.

In the collective bargaining process, labor arbitration is generally the final stage of
resolution. Labor unions and management develop a collective bargaining
agreement that details the rights of labor, the responsibilities of management, and the
ultimate relationship between the two. Nearly all (96 percent) of these collective
bargaining agreements provide for arbitration as the final step in dispute resolution.
Arbitration can represent either all employees covered by the agreement or a specific
individual on one side and management concerns on the other. Arbitration holds
advantages over both strikes and litigation as a means of resolving disputes. Even the
U.S. Supreme Court has determined that arbitration is the preferred method of
resolution in reaching a workable solution to labor problems. A major advantage to
arbitration is the cost, especially when compared to the expense of litigation.

There are, several organizations and agencies directly involved in arbitration and
arbitration issues including the National Academy of Arbitrators (NAA), the American
Arbitration Association (AAA), and the Federal Mediation and Conciliation
Service (FMCS). The NAA was founded in 1947 as a nonprofit organization to foster
high standards for arbitration and arbitrators and to promote the process. Through
seminars, annual conferences, and educational programs, the NAA works to attain its
objectives. The AAA is also nonprofit and offers its services for voluntary arbitration to
meet its objective: promoting the use of arbitration in all fields. Meetings and
educational programs highlight AAA efforts, although the organization does not
arbitrate. The FMCS maintains a roster from which arbitrators can be selected and
suggests procedures and guidelines to enhance the arbitration process.

The labor arbitration process involves an arbitrator and representatives of both labor
and management. The arbitrator is either a permanent arbitrator, an independent
arbitrator selected by the two parties to resolve a particular grievance, or an arbitrator
selected through the procedures of the AAA or FMCS. A board of arbitrators can also be
used in a hearing. After selection, the arbitrator then hears from both sides of the issue
with testimony and evidence provided in much the same way as a court proceeding.
Upon completion of the arbitration hearing, the arbitrator reviews the evidence,
testimony, and the collective bargaining agreement, considers principles of arbitration,
and makes a decision. The arbitrator's decision is generally rendered within 60 days,
and, when all parties agree, is submitted for possible publication by one of several
commercial publishers, either the U.S. Bureau of National Affairs (Labor Arbitration
Reports), the Commerce Clearing House (Labor Arbitration Awards), or other sources.
Fewer than 10 percent of these decisions are published. While intended to be binding or
a final decision, arbitration findings can be appealed, but few are overturned.

Labor arbitration is used to describe the process briefly detailed above. There are several
additional types or forms of labor arbitration, briefly defined as follows:
 • Compulsory arbitration is a dispute resolution that is required by law. Widely
accepted in Australia and New Zealand, compulsory arbitration was practiced by
the National War Labor Board during World War II. It is a binding process.

• Expedited arbitration is a process intended to speed up the arbitration process

with an informal hearing and awards generally rendered within five days. It was
first used in 1971 in settling disputes in the steel industry. Expedited arbitration
was als6 designed as a cost-saving method of dispute resolution.

• Interest arbitration is the use of an arbitrator or arbitrator board to render a

binding decision in resolving a dispute over new contract terms (also called
nonjusticiable arbitration).

• Final offer selection arbitration is an interest arbitration process in which the

arbitrator or arbitrator board selects either the union or management proposal to
the solution. There can be no compromised decisions. This process is also termed
either-or arbitration.

• Tripartite arbitration is a process wherein a three-member panel of arbitrators is

used to reach a decision. Both labor and management select an arbitrator and the
third is selected by the other two arbitrators or the parties to the dispute as a
neutral participant.

According to a 1994 study conducted by the Society for Human Resource Management,
88 percent of unionized firms had used arbitration to settle disputes, but fewer than 8
percent of nonunionized companies surveyed used arbitration as a general rule. Of the
firms that had used the arbitration process, more than half had concluded that
arbitration reduced legal fees. In addition, many companies (40 percent) said attorney
fees and settlement costs had been reduced. Other survey findings included that larger
companies were more likely to have used arbitration than smaller firms. Employees had
input into the design of the arbitration system in 11 percent of the surveyed companies,
while 55 percent of the companies reported that arbitration design was included in their
collective bargaining agreements. Nonbinding arbitration was used only 8.3 percent of
the time in union settings but was more widely used in nonunionized firms (30 percent).
The selection of an arbitrator generally involved use of a roster maintained by the AAA,
but other methods included an in-house arbitrator and the use of an in-house panel
selected by the union and management.

In contrast to arbitration, mediation is a process whereby the parties involved have to

solve the dispute, although the mediator does suggest various proposals to help the
parties find solutions. In mediation, the various needs of the conflicting sides of an issue
are identified, and ideas and concepts are exchanged until a viable solution is proposed
by either of the parties or the mediator. Rarely does the mediator exert pressure to
accept a solution. The role, rather, is to encourage communication and exchange in
order to resolve the dispute. The key to the concept of mediation is neutrality.

Like arbitration, mediation is deeply rooted in history. English essayist and scientist
Francis Bacon (1561-1626) advocated the mediation of disputes. Since the essence of
mediation is compromise, it could be said that much of American history is the history
of mediating disputes. As a process in labor disputes, mediation is a basic tenet of the
development of American society in the 20th century. Congress created the Federal
Mediation and Conciliation Service in 1947 to cut down on strikes and ease tension in
labor disputes. Over the last 15 years, the popularity of mediation as a means of dispute
resolution has grown enormously, with mediation increasingly being used to resolve
problems other than labor disputes. In 1980, for example, the state of California
adopted mediation in child custody and visitation conflicts. A disagreement over a
proposed flood control dam in the state of Washington was addressed by mediation in
1983. More than 160 environmental disputes before 1985 involved the use of mediators.
The obvious success of the concept has been cited as the best hope for eliminating racial
violence and lesser crimes. Many police departments and law enforcement agencies now
employ mediators as a regular means of solving disputes. Many attorneys see mediation
as having unlimited potential in what has become a litigious society. Although
mediation's critics have been quick to level sharp barbs at its weaknesses, the process
may well shape the future of conflict resolution on all fronts.

In labor disputes, the terms grievance mediation and preventive mediation are
commonly used. Grievance mediation is an attempt to ward off arbitration generally; it
involves fact finding with the objective of promoting dialogue. Preventive mediation
dates to the Taft-Hartley Act (1947) and is an FMCS program intended to avoid
deeper divisions between labor and management over labor issues. Also termed
"technical assistance," preventive mediation encompasses training, education,
consultation, and analysis of union-management disputes.

In the long and often bitter history of labor disputes in the United States, arbitration
and mediation have been widely used as means of dispute resolution. Unions and
companies hoping to avoid a legal resolution to a labor dispute generally resort to one of
these methods. The processes are now integral parts of the U.S. business environment
and in use far more commonly than the general public realizes.

Other than labor arbitration, there are two other types of arbitration. These are
commercial arbitration, which is used as a substitute for litigation in the settlement of
disputes between businesspeople or businesses, and international arbitration, which
involves the resolution of differences between nations—disputes which, if left unsolved,
could lead to war. Historically, commercial arbitration developed as an alternative to a
court settlement while labor arbitration was used to avoid strikes or work stoppages. In
recent years, international commercial arbitration has become a popular means of
settling disputes between businesses internationally.

Arbitration and mediation are considered alternative dispute resolution (ADR)

methods, but so are conciliation, fact finding, med-arb, med-fact finding, facilitation,
minitrials, negotiation, and the use of ombudspersons. ADR is simply defined as any
process involving a neutral party. The purpose of any of these, like arbitration and
mediation, is to resolve complaints efficiently and avoid litigation. Although many labor
representatives and trial lawyers oppose ADR, courts are generally in favor of their use.

SEE ALSO : Labor-Management Relations

[ Boyd Childress ]
FURTHER READING:
Dunlop, John T. Mediation and Arbitration of Employment Disputes. San Francisco:
Jossey-Bass, 1997.

Elkouri, Frank, and Edna Asper. How Arbitration Works. 5th ed. Washington: BNA
Books, 1997.
Kagel, Sam, and Kathy Kelly. The Anatomy of Mediation: What Makes It Work. Bureau
of National Affairs, 1989. McDermott, E. Patrick. Alternative Dispute Resolution in the
Workplace: Concepts and Techniques for Human Resource Executives and Their
Counsel. Westport, CT: Quorum Books, 1996.

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What is Arbitration?

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At its core, arbitration is a form of dispute resolution. Arbitration is the private, judicial determination
of a dispute, by an independent third party. An arbitration hearing may involve the use of an
individual arbitrator or a tribunal. A tribunal may consist of any number of arbitrators though some
legal systems insist on an odd number for obvious reasons of wishing to avoid a tie. One and three
are the most common numbers of arbitrators. The disputing parties hand over their power to decide
the dispute to the arbitrator(s). Arbitration is an alternative to court action (litigation), and generally,
just as final and binding (unlike mediation, negotiation and conciliation which are non-binding).

General principles of arbitration are as follows:

• The object of arbitration is to obtain a fair resolution of disputes by an impartial third party
without unnecessary expense or delay.
• Parties should be free to agree how their disputes are resolved, subject only to such
safeguards as are necessary in the public interest.
• Courts should not interfere.
Arbitrators, or Tribunal members, are commonly appointed by one of three means:
1. Directly by the disputing parties (by mutual agreement, or by each party appointing one arbitrator)
2. By existing tribunal members (For example, each side appoints one arbitrator and then the
arbitrators appoint a third)
3. By an external party (For example, the court or an individual or institution nominated by the
parties)
Arbitration, while being nicknamed the ‘businessman’s method of resolving disputes’, is governed by
state and federal law. Most states have provisions in their civil practice rules for arbitration. These
provide a basic template for the arbitration as well as procedures for confirmation of an arbitrator’s
award (the document that gives and explains the decision of an arbitrator), a procedure that gives an
award the force and effect of a judgment after a trial in a court. Many states have adopted the
Uniform Arbitration Act, although some states have specific and individual rules for arbitration.
Classifications Of Arbitration.
1. Commercial Arbitration is the most common of disputes. Just as it sounds, it is a dispute between
two commercial enterprises.
2. Consumer Arbitration surrounds disputes between a consumer and a supplier of goods or
services.
3. Labor Arbitration involves the settlement of employment related disputes. This form or arbitration
can be divided into two main categories: Rights Arbitration and Interest Arbitration.
Rights Arbitration (a.k.a. Grievance Arbitration) deals with the allegation that an existing collective
agreement has been violated or misinterpreted. Various legislatures require that the parties who
enter into a collective agreement set out a procedure for the handling of disputes and differences.
The idea is that parties should be obliged to meet at different steps in their own specific grievance
procedure to review and discuss the grievance. However, the fact is that the parties themselves
cannot resolve many disputes and for this reason arbitration is necessary so that the matter may be
determined. Typical arbitration awards deal with a complaint that a specific item in collective
agreement has been violated.
Interest Arbitration (a.k.a. Contract Arbitration) is normally imposed by a statute, and involves
adjudication on the terms and conditions of employment to be contained in a resulting collective
agreement. Since statutes, usually prohibit a legal strike, or lock out, these contract disputes must
be resolved somehow; in this case by interest arbitration. For example, collective bargaining in a
new collective agreement covering a fire force or a hospital may break down into an irresolvable
deadlock. The contractual matters still in dispute between the parties would be put to an interest
arbitrator or tribunal for a ruling and determination, which would then form the relevant provisions of
the collective agreement between the two parties.
The kinds of labor disputes taken to an arbitrator are as many and as different as the wide range of
decisions and actions that effect employers, employees and trade unions. Liability can span from
cents to millions, and there can be a solitary griever or a union of grievers.
It is also worthy to note that some labor disputes employ ‘med/arb’ to resolve their differences as
opposed to straight arbitration. Med/arb takes place when disputants agree from the start that if
mediation fails to result in agreement the mediator, or another neutral third party, will act as arbitrator
and be empowered to reach a binding decision for disputants.
Advantages Of Artbitration
Supporters of arbitration hold that it has a multitude of advantages over court action. The following
are a sample of these advantages.
Choice of Decision Maker – For example, parties can choose a technical person as arbitrator if the
dispute is of a technical nature so that the evidence will be more readily understood.
Efficiency – Arbitration can usually be heard sooner than it takes for court proceedings to be heard.
As well, the arbitration hearing should be shorter in length, and the preparation work less
demanding.
Privacy – Arbitration hearings are confidential, private meetings in which the media and members of
the public are not able to attend. As well, final decisions are not published, nor are they directly
accessible. This is particularly useful to the employer who does not want his ‘dirty laundry’ being
aired.
Convenience – Hearings are arranged at times and places to suit the parties, arbitrators and
witnesses.
Flexibility – The procedures can be segmented, streamlined or simplified, according to the
circumstances.
Finality – There is in general, no right of appeal in arbitration. (Although, the court has limited
powers to set aside or remit an award).
Having cited the above list of advantages, it is only appropriate to mention some of the most
commonly perceived drawbacks of arbitration.
Cost - One or both of the parties will pay for the arbitrator’s services, while the court system
provides an adjudicator who does not charge a fee. The fees for an arbitrator can be hefty. To give
an example, for an amount of claims up to $100,000, the minimum fee for a single arbitrator is
$2,000. The maximum fee can reach ten percent of the claim. However, supporters of arbitration
argue that this should be more than compensated for by the potential for the increase in the
efficiency of arbitration to reduce the other costs involved.
‘Splitting the Baby’ – Thomas Crowley states that because of the relaxation of rules of evidence in
arbitration, and the power of the arbitrator to ‘do equity’ (make decisions based on fairness), the
arbitrator may render an award that, rather than granting complete relief to one side, splits the baby
by giving each side part of what they requested. Thus both parties are leave the table feeling that
justice was not served.
No Appeal – Unless there is evidence of outright corruption or fraud, the award is binding and
usually not appealable. Thus if the arbitrator makes a mistake, or is simply an idiot, the losing party
usually has no remedy.
Narcotic/Chilling Effects – The chilling and narcotic effects are two related concepts, which many
theorists, including David Lipsky, believe to be inadequacies of interest arbitration. Chilling occurs
when neither party is willing to compromise during negotiations in anticipation of an arbitrated
settlement. Two measures most commonly used to weigh this effect are: the number of issues
settled during negotiations versus the amount of issues left for arbitration, and a comparison with the
management’s and union’s initial offers (chilling takes place when the two parties take extreme
positions and are not willing to budge). The narcotic effect refers to an increasing dependence of the
parties on arbitration, resulting in a loss of ability to negotiate. Common methods of assessing the
narcotic effect are: the proportion of units going to arbitration over time and, perhaps more
importantly, the number of times an individual unit returns to arbitration over a series of negotiations.
Typical Steps in an Arbitration
The process of arbitration differs among cases. The following is a list of the main steps in arbitration,
however it should not be viewed as an exhaustive list.
Initiating the Arbitration – A request by one party for a dispute to be referred to arbitration.
Appointment of Arbitrator – Arbitrators may be appointed by one of three ways: (1) Directly by the
disputing parties, (2) By existing tribunal members (For example, each, each side appoints one
arbitrator and then the arbitrators appoint a third), (3) By an external party (For example, the court or
an individual or institution nominated by the parties).
Preliminary Meeting – It is a good idea to have a meeting between the arbitrator and the parties,
along with their legal council, to look over the dispute in question and discuss an appropriate
process and timetable.
Statement of Claim and Response – The claimant sets out a summary of the matters in dispute
and the remedy sought in a statement of claim. This is needed to inform the respondent of what
needs to be answered. It summarizes the alleged facts, but does not include the evidence through
which facts are to be proved. The statement of response from the respondent is to admit or deny the
claims. There may also be a counterclaim by the respondent, which in turn requires a reply from the
claimant. These statements are called the ‘pleadings’. Their purpose is to identify the issues and
avoid surprises.
Discovery and Inspection – These are legal procedures through which the parties investigate
background information. Each party is required to list all relevant documents, which are in their
control. This is called ‘discovery’. Parties then ‘inspect’ the discovered documents and an agreed
upon selection of documents are prepared for the arbitrator.
Interchange of Evidence – The written evidence is exchanged and given to the arbitrator for review
prior to the hearing.
Hearing – The hearing is a meeting in which the arbitrator listens to any oral statements,
questioning of witnesses and can ask for clarification of any information. Both parties are entitled to
put forward their case and be present while the other side states theirs. A hearing may be avoided
however, if the issues can be dealt with entirely from the documents.
Legal Submissions – The lawyers of both parties provide the arbitrator with a summary of their
evidence and applicable laws. These submissions are made either orally at the hearing, or put in
writing as soon as the hearing ends.
Award – The arbitrator considers all the information and makes a decision. An award is written to
summarize the proceedings and give the decisions. The award usually includes the arbitrator’s
reasons for the decision

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