Labor Arbitration is generally split into two types: Interest and Grievance. Arbitration involves bringing in an objective third-party to help negotiate and settle union/management disputes. Arbitration always acts as an equal representation between parties and is not allowed to favor sides.
Interest arbitration is most commonly used by public-union employees because they have no power to go on strike. It involves negotiating terms for a new contract when the two parties cannot agree on their own; the third-party objectively examines claims from both sides and decides either on one or a fair mix of both. It is also used by private unions to avoid the hassle and lost business of striking.
Grievance arbitration takes place when the union determines that a clause or term of contract has been violated by management. Single employees or the union board bring these grievances to management and attempt to have the offending party punished or the victim compensated; this can be on behalf of one employee or the entire workforce.