What is the difference between Mediation and Arbitration?

September 26, 2017

Topics: Employment Agreements

Employers sometimes require employees to sign agreements to resolve employment disputes through mediation and/or arbitration.  These alternative dispute resolution forums can be cost-efficient and provide resolutions in a timelier manner than going to court.  But they are not the same.  Rather, mediation and arbitration can be used together for resolving employee claims.

Mediation should be attempted first, with arbitration as a potential next step.  Mediation is a forum where a mediator, who is a neutral third party, helps both sides come to a resolution.  The mediator does not make a decision for the parties and the process is usually not binding on the parties.  In other words, they may be required to use the process (when ordered by the court or under an employment agreement), but are not required to come to an agreement through the mediation process.  The parties only need to make good faith efforts to come to a resolution.  Mediation does not have a “winner” and a “loser.”  The end result is some type of settlement to which both sides agree.

Arbitration is a streamlined adversarial process, similar to a court hearing, where the arbitrator (or a panel of arbitrators) hears evidence from both sides, and then makes a finding on the facts and the law of the situation.  The arbitrator’s findings are usually binding on the parties.  If the losing side does not like the decision, he or she would need to go to court to get it vacated.  Similarly, the winning side can go to court to get an arbitration decision enforced.

When an employee claim will be mediated, the mediator is jointly chosen by both the employer and the employee.  The procedures for mediation can vary, but generally each side provides the mediator with their side of the story before everyone meets.  There’s no formal discovery, as there would be in court, but either side can request information it thinks it needs in advance to help resolve the matter, such as whether the employee has found a new job.  Mediation meetings generally start with a joint session with both sides present, and then the parties are moved into separate rooms with their counsel.  The mediator engages in “shuttle diplomacy,” going between the conference rooms and helping the parties see both the strengths and weaknesses in their side of the case.  The mediator takes settlement proposals back and forth until, hopefully, the parties come to an agreement.

Arbitrators are also mutually chosen by the parties, but the process is more formal.  Attorneys can usually seek some degree of discovery (information and documents) from the other side before the arbitration hearing.  At the hearing, witnesses are presented and questioned by the attorneys to put the evidence before the arbitrator.  The arbitrator also may question the witnesses.  Attorneys may write post-arbitration briefs.  In the end, the arbitrator issues a formal opinion setting out the facts as found by the arbitrator and the applicable law.  The arbitrator can order the same types of remedies as can a judge, such as monetary payments, attorneys’ fees, and equitable remedies as well. The decision is usually binding, but can be challenged as provided by state law.

Employers considering requiring alternative dispute resolution forum agreements with their employees should seek counsel to understand the pros and cons, and to identify the method appropriate for the company that complies with applicable law.