Britannica Sources used in this answer

How does labour arbitration help settle disputes between unions and management?

Created from Britannica articles using AI. AI can make mistakes, so verify using Britannica articles.

The Code of Hammurabi diorite stela, with carved figures at the top showing Hammurabi seated with cuneiform inscriptions below. — Labour law Diorite stela inscribed with the Code of Hammurabi, 18th century bce.

Labour arbitration serves as a formal, nonjudicial mechanism for resolving disputes between management and unions by referring them to an impartial third party for a binding decision. It is typically employed as the final step in a grievance procedure after other settlement efforts have been exhausted, functioning as a key technique for settling or avoiding strikes.123

There are two primary forms of labour arbitration:

Arbitration of rights: Focuses on disputes regarding the application or interpretation of an existing collective-bargaining agreement, such as issues involving discipline, overtime, or benefits.31
Arbitration of interests: Pertains to disputes that arise during the negotiation of a new labour contract.1

Arbitrators, often experts in industrial relations, are not bound by strict court procedures and have the authority to subpoena evidence. Their decisions are generally final and rarely reviewed by courts. While arbitration provides a binding resolution, it remains distinct from mediation, where a third party offers non-binding recommendations to help the disputants reach a compromise.32