What does the term 'arbitration' imply in the context of labor agreements?

In the context of labor agreements, 'arbitration' is defined as a process where a neutral third party is brought in to resolve a dispute between two parties, usually an employer and a union representing employees. The decision made by this arbitrator is binding, meaning that both parties must accept and adhere to the outcome. This method is utilized to efficiently resolve conflicts in situations where negotiations have failed, ensuring that there is a definitive resolution to the issues presented.

This process is essential in labor relations as it provides a structured approach to resolving disputes, offering a solution that is legally enforceable. It contrasts with other options such as a mutual decision, which implies collaboration without external intervention, or a casual discussion, which lacks the formal structure needed for binding resolutions. Moreover, while a preliminary agreement may outline initial terms, it doesn't carry the binding authority that arbitration decisions do.