Faculty Post: Arbitration vs. Labor Arbitration

By Roger I. Abrams, Richardson Professor of Law

Recently, the New York Times published a three-day series on the “evils” of arbitration. Many of my colleagues and friends who know that I teach a workshop in arbitration at Northeastern and have served as a labor arbitrator for over forty years have asked me how I could possibly be involved with such a shameful procedure! In fact, I am not. The difference between labor and commercial arbitration is not very well known.

In an organized workplace where the employees are represented by a union for purposes of collective bargaining, the rules of the workplace are the product of negotiation. Because management and union representatives know that disputes will arise during the term of their agreements – typically, three years – they create a procedure to resolve those disputes. That procedure is “labor arbitration.” Virtually every collective bargaining agreement contains an arbitration clause.

When an employee is discharged for poor work performance, or does not receive a promotion although she was the most senior applicant, or is denied holiday pay when he could not work the day before the holiday because of illness, the union will initiate a grievance. The agreement normally contains a grievance procedure where the parties can attempt to reach a resolution of the dispute. If that is not possible, the union may invoke arbitration.

The parties to a dispute select their own arbitrators. Normally, this is done through the offices of one of the two “appointing agencies,” the Federal Mediation and Conciliation Service and the American Arbitration Association. These arbitrators are normally quite experienced and very neutral. (Otherwise, one party or the other will reject that person as a possible arbitrator.) Although there are thousands of arbitrators on the panels maintained by the two appointing agencies, about 300 arbitrators decide 90% of all the cases heard each year. Under the typical collective bargaining agreement, the arbitrator’s decision is “final and binding,” and there is no review in court of the merits of the award.

By comparison, the “arbitration” discussed in the Times articles is not the product of mutual agreement. Companies impose on their employees and their customers’ procedures for resolving disputes that are quite one-sided. Typically, complainants have no say in the selection of the arbitrator, who tends to be Company-oriented. The procedures used in this type of arbitration are not as fair as they should be. The Times is correct.  Such arbitration is a travesty of justice.

By comparison, labor arbitration has served quite successfully as a quicker and cheaper way to resolve disputes than court litigation.  No parties who have lived with arbitration have ever eliminated it from a future collective bargaining agreement.  Labor arbitrators are not perfect, but, as a whole, the system works quite well.

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