Alternative Dispute Resolution (ADR) refers to any means of settling disputes outside of the courtroom. Arbitration and mediation are the two major forms of ADR. Voluntary ADR mechanisms provide ways of resolving conflicts outside the court system when the business and the consumer/employee agree to do so after a dispute arises.
In mediation, an impartial person called a mediator helps the parties try to reach a mutually-acceptable resolution of the dispute. Mediation leaves control of the outcome with the parties; the mediator helps the parties communicate so they can try to settle the dispute themselves.
In arbitration, an arbitrator hears arguments and evidence from each side and then decides the outcome of the dispute. Arbitration is less formal than a trial, and the rules of evidence are often relaxed. Voluntary arbitration may be either "binding" or "nonbinding." Binding voluntary arbitration means that the parties waive their right to a trial and agree to accept the arbitrator's decision as final. Generally, binding arbitration gives no right to appeal an arbitrator's decision. Nonbinding voluntary arbitration means that the parties are free to request a trial if they do not accept the arbitrator's decision. (When arbitration is required in a consumer contract, then it is not voluntary; for information on this, see this chapter's section on Pre-Dispute Mandatory Binding Arbitration).
VOLUNTARY POST-DISPUTE ALTERNATIVE DISPUTE RESOLUTION: Policy
Voluntary post-dispute alternative dispute resolution
Options for alternative dispute resolution should be available. These include mediation and arbitration. They should be voluntary and nonbinding.
Policymakers and the private sector should ensure the process is fair. This includes putting in place the following protections:
- Parties must receive clear notice of the alternative dispute resolution (ADR) process, an explanation of its rules and consequences, and an opportunity to decline to participate in any ADR processes.
- Arbitrators and mediators must be qualified and independent.
- Consumers and employees should only pay reasonable costs, and ADR access should not be denied on the basis of ability to pay.
- Parties must have the right to counsel.
- Mediation procedures should ensure confidentiality for both parties, and arbitration decisions should be in writing and subject to court review.
- Proceedings should be held reasonably near the location of the consumer or employee.