What is the difference between mediation and arbitration?

Mediation

A neutral facilitates negotiation, often shuttling between parties in separate rooms. Nothing is decided unless everyone agrees; the settlement becomes binding only when it is signed. Discussions are confidential and, in most states, inadmissible if the case later goes to trial. Many courts order mediation before a contested hearing, particularly in family and civil matters, and a large share of cases settle there.

Arbitration

A private adjudicator, or a panel of three, hears the case under agreed rules — AAA, JAMS or an industry body — and issues an award. In binding arbitration that award is final: the Federal Arbitration Act allows a court to vacate it only on narrow grounds such as fraud, evident partiality or an arbitrator exceeding their powers. A plain legal or factual error is not enough.

The practical trade-offs

• Cost. Mediation is usually the cheapest route. Arbitration avoids some litigation costs but the arbitrator's fees are paid by the parties, and in complex cases the total can approach litigation.
• Speed. Both are faster than court; arbitration awards commonly come within months.
• Privacy. Both are private; court filings are public.
• Appeal. Mediation leaves rights intact until you sign. Binding arbitration removes the appeal you would have had.

Where it usually comes from

Not from choice, but from a clause signed long before the dispute — in an employment contract, a consumer agreement or a nursing-home admission packet. Reading that clause is the first step in any dispute, because it decides the forum, the rules, the seat and whether class claims are waived.