What are arbitration and mediation?

If your company is in a dispute with an employee or another business, you will have to decide between arbitration and mediation. These two conflict resolution processes are similar in that they help solve conflicts. They are also similar in the fact that both are used as a way to avoid litigation, which is when a conflict is brought to the legal system. Litigation is a very lengthy and expensive process, which is why you would want to avoid it.

As discussed above, arbitration and mediation are ways to resolve a conflict between individuals, families, groups or businesses. When disputes come up in the workplace and you are unable to come to a resolution, you can choose between mediation and arbitration in order to find a solution. These two methods of conflict resolution are used instead of taking someone to court, which is a much more extensive and timely process.

In the workplace, most arbitrations and mediations are used when solving issues over contracts between employer and employee. Often which method the organization will use is already outlined in their procedures and policies as companies like employees to know exactly how disputes will be resolved within the workplace. This allows for consistency and no questions as to whether to use arbitration vs. mediation.

Related: How to Write an Employee Contract (With Template)

Mediation vs. Arbitration

Most people have heard of mediation when talking about divorce, but what is workplace mediation? Mediation is a method of resolving an issue within a workplace, with a neutral person managing the process. When looking at mediation vs. arbitration, we see that mediation is more flexible with a less rigid outcome.

A mediator is someone, often a lawyer or law clerk, who is brought in to facilitate the discussion. For workplace mediation, the mediator would start off by speaking to each side of the conflict privately to hear their side of the story. Once this has happened, the two sides and the mediator come together to try to come up with a solution.

The goal of workplace mediation is to come up with a compromise that both sides can agree upon. It is the mediator’s job to facilitate the discussions, listen to what each side is saying and then come up with a voluntary, uncoerced decision. This means that the mediator cannot force or impose their decisions on either side of the conflict.

If both sides are unable to come to a mutually agreed upon resolution to the conflict, then further action will have to take place, often meaning moving to arbitration or litigation.

Arbitration vs. Mediation

When looking at arbitration vs mediation, we see that they are similar in the fact that they both are used when conflicts need to be resolved, but arbitration is a bit more involved.

In arbitration, both parties submit their view of the dispute to an impartial third party, called the arbitrator. Unlike in mediation, arbitration involves a binding solution that is decided upon by the arbitrator. In other words, instead of coming up with a compromise, the arbitrator gets to decide on what the outcome of the conflict will be and both parties have to agree.

The process of arbitration is much closer to a hearing where both sides present their case/ evidence to the arbitrator, except unlike a courtroom, there are no witnesses or testimony. Once each side has presented its case, the arbitrator takes time to go over everything and then makes a final decision that will help solve the problem.

Unlike mediation, arbitration does not need either side to agree upon what the solution will be. They have to simply go with what the arbitrator decides, no matter the outcome. Also in arbitration vs. mediation, once the process has started, neither side is allowed to withdraw. That means that even if one side of the conflict wants to concede to the other, the process of arbitration continues and the settlement has to be respected.

This is why arbitration is considered more formal than mediation. When looking at mediation vs arbitration, we see that mediation allows for other solutions to be brought in by either side, or either side can back down at any time. This is not so with arbitration, so it is best not to choose arbitration unless you are positive the conflict cannot be resolved without it.

Arbitration vs Mediation: Pros and Cons

When trying to decide between arbitration vs. mediation it can be difficult to see which might be better. To help you decide between the two, we have compiled the pros and cons for both procedures.

Mediation Pros

• Lower cost than arbitration
• Faster than arbitration
• Confidential settlements which means that others will not know about the conflict or how it was resolved
• Proposes a creative solution to the conflict, with input from both sides
• Protects the relationship between the two parties, they might still be able to do business
• No outside solution is imposed on either party

Mediation Cons

• The open-ended process can be abused by one side if they do not want to engage in the process.
• May still require the conflict to go to litigation if the agreement is not respected by one of the sides.
• Does not work if the trust has completely broken down between the two sides.

Arbitration Pros

• Streamlined process, which means fewer steps in the procedures.
• Faster resolution due to no need to negotiate
• Binding outcomes, no dispute over what to do afterwards
• Results are normally private or stay between the two parties
• Often conflict is overheard by someone with deep knowledge of the industry the company is in

Arbitration Cons

• Litigation might still be needed if one party refuses to follow the order
• Harms relationship between the two sides
• The arbitrator might have a specific bias towards the industry they represent
• Arbitration can move very quickly which is difficult for complex disputes

By looking through the pros and cons of arbitration and mediation you can get a good idea of which process might suit your needs.

How to decide between mediation vs arbitration

If you are still having difficulty deciding between mediation and arbitration, there are a few questions you can ask about the conflict that could clear up which way to go. These questions are:

• How serious is the issue?
• How long has it been going on?
• Do you think the two parties could agree on a compromise?
• What is your budget?
• Is there a time limit as to when the dispute has to be resolved?

These questions will allow you to see which conflict resolution process would be best as they point to the main differences between arbitration vs mediation. For example, if your conflict has been going on for a long time and the issue is quite serious you might choose to go with the arbitration. On the other hand, if your budget is low, you might need to go with mediation as it is the more costly of the two options.

Deciding between arbitration vs mediation is not an easy task. Both come with their own pros and cons which makes the decision less straightforward than one might hope. By understanding the differences between these two conflict resolution processes, however, you can help your company make this difficult decision. We hope that this article has helped you on your way to the best solution for your company.

Related: Termination Policy Examples: Drafting Letters of Separation