Interest Arbitration

Posted in Human Resources Terms, Total Reads: 2096

Definition: Interest Arbitration

Interest arbitration is the process in which issues not resolved in the bargaining negotiation between the employer and the labor union may be taken forward to an impartial arbitrator for the final resolution. Interest arbitration is a kind of mechanism that resolves a bargaining dispute.

Arbitrator is the alternative to court action which is considered equally final and binding. One and three are the most usual number of arbitrators. When the organization management and the labor union fail to come to consensus over a mandatory subject of bargaining, then both the parties hire an impartial third party arbitrator. The impartial arbitrator then conducts a formal meeting with both the parties where the parties present their positions. The arbitrator goes through the supporting evidence and the testimony and decides on what the contract should be based on.

General principles of interest arbitration are as follows:-

1. Judicial courts must not interfere.

2. The objective of the arbitration should be to come to a fair resolution which is willingly acceptable by both the parties, i.e., the management and the labor union.

3. The consensus is to be brought by the arbitrator without any unnecessary expenses and delay.

4. Both the parties should be free to agree as to how their dispute is being resolved by the arbitrator.

Following are the types of arbitration-

1. Commercial arbitration is the most common type of dispute, which is usually between two commercial enterprises.

2. Consumer arbitration involves the disputes between the consumer and the goods or service provider.

3. Labor arbitration includes the settlement of disputes related to employment.

Advantages of Interest arbitration:-

1. Convenience- The hearings are arranged as per the availability of the arbitrator, witnesses and the parties to dispute.

2. Privacy- The meetings held are highly confidential where media and members of the public are not allowed. The final decision need not to be published.

3. Efficiency- This method is much more fast and efficient when compared with the court proceedings. The final decision comes out in much lesser time.

4. Choice of decision maker- The parties can choose the arbitrator at their will in case the dispute is over a specific matter.

5. Avoids hostility- Since the parties themselves choose the arbitrator, both the parties willingly support and cooperate with the working of arbitrator avoiding any kind of hostility.


Hence, this concludes the definition of Interest Arbitration along with its overview.

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