What is binding arbitration?

Binding arbitration is a process in which a neutral third party, known as an arbitrator, makes a decision in a dispute between two parties, and this decision is legally enforceable. This mechanism is often used in labor-management disputes, contractual disagreements, or situations where parties have agreed in advance to resolve their issues in this manner. By agreeing to binding arbitration, the parties essentially forfeit their right to seek a different resolution through litigation in court, as the arbitrator's decision becomes final and cannot be appealed.

This process is particularly valuable because it provides a definitive resolution to disputes, helping to avoid prolonged conflicts and litigation. It is different from other forms of dispute resolution like voluntary negotiation, where parties work to find a middle ground, or mediation, where a mediator assists in discussions without the authority to impose a decision. Additionally, it is not related to strikes, which are actions taken by employees as a form of protest against their employer, typically regarding labor conditions or pay. Binding arbitration thus plays a crucial role in maintaining industrial harmony and providing a framework for resolving disputes effectively.