A method of dispute resolution provided by a collective bargaining agreement or other contract, typically with a final and binding decision to be rendered by an impartial decision maker known as an arbitrator. The predominant form of arbitration in labor matters is grievance arbitration, also known as rights arbitration. Another type is interest arbitration, which is used to resolve an impasse or deadlock during bargaining in the formation of a contract or one of its provisions. Arbitration that is not final and binding is known as advisory arbitration.

An arbitration decision includes an award setting forth the specific order of the arbitrator. When upheld in court, an award is confirmed. Under narrow circumstances an award may be vacated or overturned, often with a court deciding to remand the case to the arbitrator for further activity.

The arbitrator may be selected on an ad hoc or case-by-case basis. Or the arbitrator may be selected from a permanent panel of arbitrators agreed to by the parties to a labor agreement. Selections also can be made by parties striking names from a list transmitted by an administrative agency of provider organization such as the Federal Mediation and Conciliation Service or the American Arbitration Association.

Arbitration that is mutually adopted by the parties during collective bargaining differs from mandatory arbitration agreements demanded by some employers for their employees in non-union workplaces as an alternative to civil litigation.