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Pendulum arbitration, otherwise known as final offer arbitration (or "FOA") or baseball arbitration, is a type of interest arbitration in which the arbitrator chooses one of the parties' proposals on each (or perhaps all) disputed issues. For example, in the case of labor collective bargaining, a trade union may demand a wage increase of 7% and the management may offer 3%. The arbitrator's decision has to choose between awarding a 3% or a 7% increase. This procedure is opposed to conventional interest arbitration, in which the parties present evidence and the arbitrator acts as fact-finder and crafts an award. In disputes over labor contracts, this dispute resolution procedure is known to be a common type of contract arbitration. Perhaps the most well-known instance is salary arbitration in Major League Baseball, where a certain class of players may elect to arbitrate their salary instead of accepting their team's salary offer. Final-offer arbitration is widely used to determine public union contracts in the United States, either as a substitute for collective bargaining or as a mechanism to determine the contract when bargaining has failed.
A primary purpose and effect of FOA is to encourage the parties to arrive at a settlement. [1] Parties who fail to compromise during negotiations risk a total loss on some or all arbitrated issues under FOA. This uncertainty is considered a "cost" of arbitration that the parties can avoid by settling. By contrast, in conventional arbitration, parties are more likely to call on the arbitrator to decide disputed issues, giving the arbitrator the power to craft a "reasonable" award. In addition to promoting settlement, use of FOA leads parties to adopt reasonable positions during the arbitration, because an unreasonable position will almost certainly be rejected in favor of a more reasonable competing proposal.
FOA was first suggested in the 1960s by the labor relations scholar Carl Stevens as a strategy for driving parties to agreement. Conventional arbitration was already in frequent use as an alternative to strikes for resolving disagreements between management and labor. But research showed that parties were remaining far apart in the expectation that the arbitrator would simply split the difference between them. In that case, the more unreasonable your offer, the better you fared. Thus many people questioned the wisdom of arbitration. Stevens created final-offer arbitration to address the problem and to encourage negotiators to solve disputes on their own. [2]
Chile's Secretary of Labor and Social Security José Piñera pioneered the introduction in a national law utilizing this mechanism. In fact, Chile's 1979 Labor Reform mandates pendulum arbitration for special collective bargaining cases. The Chilean law also required the parties to pay the full cost of the arbitrator, another incentive to try to avoid the arbitration and reach bilateral agreements. The law created a register of private arbitrators (economists and lawyers with a solid reputation for expertise and fairness), some or all of whom the parties shall agree to select, to decide conclusively the terms of the contract. There is consensus among experts that this system in Chile has proved very successful, and it has not been disturbed by subsequent governments.[ citation needed ]
Australia will use final offer arbitration to settle disagreements between news publishers and digital platforms in determining compensation for the use of news. [3]
Arbitration, in the context of the law of the United States, is a form of alternative dispute resolution. Specifically, arbitration is an alternative to litigation through which the parties to a dispute agree to submit their respective evidence and legal arguments to a neutral third party for resolution. In practice arbitration is generally used as a substitute for litigation, particularly when the judicial process is perceived as too slow, expensive or biased. In some contexts, an arbitrator may be described as an umpire.
The Major League Baseball Players Association is the collective bargaining representative for all current Major League Baseball players. All players, managers, coaches, and athletic trainers who hold or have held a signed contract with a Major League club are eligible for membership in the Association.
The United States Arbitration Act, more commonly referred to as the Federal Arbitration Act or FAA, is an act of Congress that provides for judicial facilitation of private dispute resolution through arbitration. It applies in both state courts and federal courts, as was held in Southland Corp. v. Keating. It applies in all contracts, except contracts of seamen, railroad employees, or any other class of workers involved in foreign or interstate commerce, and it is predicated on an exercise of the Commerce Clause powers granted to Congress in the U.S. Constitution.
An arbitration clause is a clause in a contract that requires the parties to resolve their disputes through an arbitration process. Although such a clause may or may not specify that arbitration occur within a specific jurisdiction, it always binds the parties to a type of resolution outside the courts, and is therefore considered a kind of forum selection clause. It is also known as the "Scott v. Avery clause."
An arbitration award is a determination on the merits by an arbitration tribunal in an arbitration, and is analogous to a judgment in a court of law. It is referred to as an 'award' even where all of the claimant's claims fail, or the award is of a non-monetary nature.
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995), was a case decided by the Supreme Court of the United States on who decides whether a dispute is subject to arbitration, the courts or an arbitrator.
Arbitration is a form of alternative dispute resolution (ADR) that resolves disputes outside the judiciary courts. The dispute will be decided by one or more persons, which renders the 'arbitration award'. An arbitration decision or award is legally binding on both sides and enforceable in the courts, unless all parties stipulate that the arbitration process and decision are non-binding.
An arbitral tribunal or arbitration tribunal, also arbitration commission, arbitration committee or arbitration council is a panel of unbiased adjudicators which is convened and sits to resolve a dispute by way of arbitration. The tribunal may consist of a sole arbitrator, or there may be two or more arbitrators, which might include a chairperson or an umpire. Members selected to serve on an arbitration panel are typically professionals with expertise in both law and in friendly dispute resolution (mediation). Some scholars have suggested that the ideal composition of an arbitration commission should include at least also one professional in the field of the disputed situation, in cases that involve questions of asset or damages valuation for instance an economist.
A side letter, or side agreement, is a collective bargaining agreement that is not part of the underlying or primary collective bargaining agreement (CBA) but is used by the parties to the contract to reach agreement on issues that the CBA does not cover, to clarify issues in the CBA or to modify the CBA. One may distinguish side letters from "side settlements", or "settlement agreements", which settle a dispute arising from the underlying CBA. In rare cases, bargaining parties may use a side letter to adjust the focus of the contract if the parties are not yet ready or willing to adapt the contract formally.
The 1990 Major League Baseball lockout was the seventh work stoppage in baseball and, at the time, the second-longest since 1972. Beginning in February, the lockout lasted 32 days, virtually wiping out spring training, moving Opening Day back a week to April 9 and extending the season three days to accommodate the normal 162-game schedule.
A labor dispute is a disagreement between an employer and employees regarding the terms of employment. This could include disputes regarding conditions of employment, fringe benefits, hours of work, tenure, and wages to be negotiated during collective bargaining, or the implementation of already agreed upon terms. It could further concern the association or representation of those who negotiate or seek to negotiate the terms or conditions of employment.
Howard Johnson Co. v. Detroit Local Joint Executive Board, 417 U.S. 249 (1974), is a US labor law case that decided that under the Labor Management Relations Act § 301 there can be no obligation on an employer to collectively bargain with employees of a business that has been transferred to him.
Canadian Union of Public Employees v Ontario , 2003 SCC 29, is a leading Supreme Court of Canada decision on arbitration and bias in administrative law. The Court held that it was patently unreasonable for the Minister of Labour to appoint retired judges as arbitrators in labour disputes without considering their expertise in labour relations under the Hospital Labour Disputes Arbitrations Act.
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985), is a United States Supreme Court decision concerning arbitration of antitrust claims. The Court heard the case on appeal from the United States Court of Appeals for the First Circuit, which had ruled that the arbitration clause in a Puerto Rican car dealer's franchise agreement was broad enough to reach its antitrust claim. By a 5–3 margin it upheld the lower court, requiring that the dealer arbitrate its claim before a panel in Tokyo, as stipulated in the contract.
Wilko v. Swan, 346 U.S. 427 (1953), is a United States Supreme Court decision on the arbitration of securities fraud claims. It had originally been brought by an investor who claimed his broker at Hayden Stone had sold stock to him without disclosing that he and the firm were the primary sellers. By a 7–2 margin the Court held that the provisions of the Securities Act of 1933 barring any waiver of rights under that statute took precedence over the Federal Arbitration Act's (FAA) requirement that arbitration clauses in contracts be given full effect by federal courts. It reversed a decision to the contrary by a divided panel of the Second Circuit Court of Appeals.
South African labour law regulates the relationship between employers, employees and trade unions in the Republic of South Africa.
United Steelworkers v Warrior & Gulf Navigation Co363 US 574 (1960) is a US labor law case, concerning arbitration over collective agreements for labor rights.
Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974), is a US labor law case, concerning arbitration with collective agreements for labor rights.
Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. ___ (2019), was a case decided by the Supreme Court of the United States on January 8, 2019. The case decided the question of whether a court may disregard a valid delegation of arbitrability—a contract provision stating that an arbitrator should decide whether a dispute is subject to arbitration—when the argument in favor of arbitration is "wholly groundless." In a unanimous (9-0) opinion written by Justice Brett Kavanaugh, the court sided with petitioner Henry Schein, Inc., holding that the "wholly groundless" exception to arbitrability violates the Federal Arbitration Act, and therefore a valid delegation of arbitrability should be honored even if a court believes the argument for arbitration to be "wholly groundless." It was Justice Kavanaugh's first Supreme Court opinion.
Free agency in Major League Baseball (MLB) concerns players whose contracts with a team have expired and who are therefore eligible to sign with another team. Free agents may be eligible for pendulum arbitration, also called "salary arbitration" or just "arbitration" in baseball circles.