When labor disputes occur, arbitration and mediation are two potential options to resolve them.
Arbitration has become the favored method of resolution since World War II. Essentially, under arbitration, both labor and management agree to submit their case to an independent, neutral third party, and agree beforehand that the decision of the arbitrator will be mutually binding. Arbitration is usually the final stage of the collective bargaining process, a step resorted to if the two parties cannot reach a voluntary resolution. Arbitrators are usually specialists in labor disputes, often vetted by independent organizations.
Mediation also involves an independent third party, but their decision is not final. Rather they suggest possible resolutions, and the two parties agree to come to a mutually satisfactory resolution. Mediation is viewed as a much more desirable and amicable method of negotiation than arbitration. Ultimately, both mediation and arbitration have the same goal. They are both intended to avoid strikes, which both sides generally regard as counterproductive.