Arbitration is a system of dispute resolution whereby warring parties voluntarily agree to refer the dispute to an impartial third party for resolution. Both parties agree in advance that the arbitrator’s decision is final and binding. The arbitrator’s determination is based on the examination of evidence and arguments forwarded by the involved parties. Anderson (2013) argues that labor arbitration is widely admired due to the following factors: “finality, obedience, guidance, efficiency, availability, neutrality, conflict reduction, and fairness.” Arbitration follows other steps of collective bargaining since they ensure that process does not become counter-productive. Labor arbitration has two distinct aspects: arbitration of interests which refers to disputes regarding contract negotiation and arbitration of rights which deals with disputes regarding contract interpretation. The former is recommended when parties fail to agree on contract terms after direct negotiation and bargaining. On the other hand, the latter is more common form of arbitration since 90 percent collective-bargaining agreements in the country provide it as the last step (Gilson, Sabel " Scott, 2014). This form of arbitration involves matters such as discipline, working conditions, and discharge.
While labor relations in the US differs from the British variant, labor arbitration experiments in Britain influenced the origin of the practice in America. A process similar to labor arbitration was first adopted in England in the 17th century. Proper statutory recognition only came at the beginning of the 19th century (Holley, Jennings " Wolters, 2011). As collective bargaining spread throughout industrialized England, people became more receptive of arbitration schemes. In the United States, the first example of modern arbitration was in 1761 in Massachusetts. However, arbitration was still more of a theoretical concept than a practical one. During the 1870s and 1880s, however, unions began to advocate for arbitration as labor disputes were brutal. In 1886, President Cleveland even advocated for a national arbitration system. Congress reacted with the Erdman Act of 1898 but it was not until 1903 that voluntary arbitration was first applied successfully (Certilman, 2010).
Impact of Arbitration
As the last step of collective bargaining, arbitration evolved as an important component of organized labor. This way of resolving disputes made the process faster and made it less confrontational. As a group, employees have a better chance of having their demands met when subjected to arbitration. By bringing both parties to an equal standing, issues such as who has money to hire the best lawyers do not apply. The process brings disputing parties to an equal ground where each party has a chance to make their arguments and consider those presented by the other party. Since unionized employees are represented by their respective unions the process is less daunting than a formal trial. Organizational management has also been affected by arbitration over the years. Employers prefer arbitration to formal trials since the process in not only less time-consuming but also more cost-effective. In addition, the rules and procedures in arbitration are straightforward thus less prone to errors than court procedures.
Arbitration has a significant impact on the relationship between employers and employees. The equal audience offered by the arbitration process has helped reduce animosity between disputing parties. Before arbitration was formally accepted as a means of dispute resolution, strikes would get bloody with people losing their lives at times. The introduction of an impartial third party has helped prevent such occurrences by providing advice and alternative action. Since arbitrators are less prone to emotional biases like juries, organized labor and employers see the arbitration process as a fair one. Therefore, if the decision is binding none will have much to complain about. The perception of justice has helped maintain a healthy relationship between organized labor and management even during disputes.
Binding vs. Non-Binding Arbitration
In binding arbitration, the parties involved in the labor dispute surrender their right to a trial and agree that the decision made by the arbitrator will be final and legally binding. This form of arbitration is suitable for business disputes whereby both parties need to resolve a conflict in order to achieve their intended outcomes as fast as possible. The parties cannot appeal against the arbitrator’s decision (Bernardin, Richey " Castro, 2011). Non-binding arbitration, on the other hand, involves the arbitrator making a decision on the dispute at hand but it is not legally binding. Therefore, each party can reject the arbitrator’s decision and instead decide to pursue a formal trial. While this form of arbitration does not make sense, it still has its array of benefits. It helps maintain a healthy working relationship between disputing parties by creating guidelines that help avoid future conflicts. Non-binding arbitration is suitable for cases which are less complex where involved parties are only seeking guidance.
Despite the technical differences between binding and non-binding arbitration, both help maintain a positive working relationship between disputing parties. This is unlike the case in court trials where the loser gains nothing from the proceedings hence consequent animosity. The finality of binding arbitration makes it a trusted alternative to court action thus providing a sense of justice to warring parties in the workplace. The guidance offered in non-binding arbitration helps avoid future disputes since both parties hear the others grievances.
References
Anderson, A. (2013). Labor and Commercial Arbitration: The Court's Misguided Merger. BCL Rev., 54, 1237.
Bernardin, H. J., Richey, B. E., " Castro, S. L. (2011). Mandatory and binding arbitration: Effects on employee attitudes and recruiting results. Human Resource Management, 50(2), 175-200.
Certilman, S.A. (2010). This is a Brief History of Arbitration in the United States. NYSBA, 3(1): 10-13.
Gilson, R. J., Sabel, C. F., " Scott, R. E. (2014). Text and Context: Contract Interpretation as Contract Design. Cornell L. Rev., 100, 23.
Holley, W. H., Jennings, K. M., " Wolters, R. S. (2011). The labor relations process. Cengage Learning.
