Dispute resolution may be accomplished in a number of ways, including negotiated settlement and judicial or arbitrator’s ruling. When free to select a resolution procedure, parties generally select the procedure perceived as involving less risk, lower cost, and quicker turnaround. “Baseball arbitration” is often proposed as a means of resolving disputes with these objectives in mind. Under this form of arbitration, each party is required to provide its final offer to an arbitrator. The arbitrator reviews all available information and then must select one of the two offers as the award; he or she cannot select or define any other solution to the dispute.
This winner-take-all procedure derives its name from major league baseball, where it is used to resolve player’s salary disputes. It has also been used widely to settle public labor contract disputes and workers’ compensation claims. Advocates claim that because of the winner-take-all feature, baseball arbitration generates an uncertainty of outcome that causes the parties’ offers to converge as they attempt to reduce the risk that their own offer will be rejected. It is seen as the alternative to traditional arbitration in which an arbitrator may be perceived as simply splitting the difference between the parties’ positions, encouraging each to propose offers at the extreme end of expectations.
Final offer arbitration appears to have worked well for major league baseball, but the results vary when applied in other contexts. If you have a contract dispute, valuation issue or other problem to solve, contact us to review dispute resolution alternatives before you go to bat.