Arbitration utilizes a neutral third party to hear a dispute between parties. The hearing is informal and the parties mutually select the arbitrator. The Arbitrator is retained to decide how to settle the dispute and the decision is final and binding on the parties. Arbitration is more cost efficient and quicker than litigation but it is the Arbitrator, not the parties, who renders the terms and conditions of the dispute resolution.
Mediation is a much quicker process than litigation or arbitration. The parties also have more control over the final resolution. The parties mutually select the mediator and the mediator helps the parties resolve the dispute in a cost efficient manner. For example, in the state of Michigan, employment dispute mediators are provided for free by the Bureau of Employment Relations.
Litigation is the process of going to court in order to solve a dispute. Going to court is usually very costly and time-consuming process. The longer a dispute lasts, the more the parties pay in legal fees. Also, because litigation is heard by a judge and/or jury, it is considered a public matter and is open to the public. The judge and/or jury make the decision that resolves the dispute not the parties.