Mediation is an intervention in a dispute where a third-party helps the parties resolve their conflict in a way they can all agree on. It is usually entered into voluntarily as a way of avoiding further expenses and the uncertainties of a trial.
Arbitration, on the other hand, is where a third party makes a binding decision to resolve a conflict. According to Cornell Law School, arbitration refers to “an alternative dispute resolution method where the parties in dispute agree to have their case heard by a qualified arbitrator out of court. Under the Federal Arbitration Act, decisions reached through arbitration are binding just like a court case is and pursuing a claim through arbitration precludes you from also raising it in the traditional court system.” Many companies now force employees and/or customers to agree to mandatory arbitration clauses as a prerequisite for employment, thus limiting the legal options available in the event of a problem. Generally, arbitration is a bad thing for consumers, and we encourage folks to avoid arbitration clauses, if at all possible. (Ask Andrew about how he once walked away from buying a new car because it included an arbitration clause.)