Arbitration is a method of settling disputes that avoids a formal court proceeding. When two or more parties agree to go to arbitration, an impartial arbitrator or panel of arbitrators is given the power to make what is often a binding decision. The process of arbitration usually involves a hearing with testimony and legal argument, after which the arbitrator renders a decision. This is a commonly used method of resolving disputes between labor and management or between an employee and management.