Contracts: Staying Out of Court

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Forward Shove. For the winner, arbitration has the added beauty of being final in the great majority of cases. The A.A.A. takes on a case only if both sides agree in advance to abide by the arbitrators' decision. Even without such agreements, arbitration rulings are enforceable under law, and they are much harder to overturn than court decisions —an aspect that troubles some lawyers. In all but a few states, courts follow a doctrine laid down by the New York State Court of Appeals back in 1902: "The award of an arbitrator cannot be set aside for mere errors of judgment, either as to the law or as to the facts. If he keeps within his jurisdiction and is not guilty of fraud, corruption or other misconduct affecting his award, it is unassailable."

While commercial arbitration is growing fast, it is not nearly as widespread as labor arbitration, which got a great shove forward during World War II, when the U.S. Government required compulsory arbitration of labor-management disputes. Today more than 90% of all labor contracts contain clauses calling for arbitration of conflicts over interpretation.

Labor arbitration differs from its commercial counterpart in that a lone arbitrator, rather than a three-member panel, sits in judgment, and he gets paid for his work—a minimum fee of $100 a day.