Court of Pendulum Arbitration, also known as Final Offer Arbitration (or FOA) or « Baseball Arbitration », is a kind of interest arbitration procedure in which the arbitrator chooses one of the parties` proposals on each (or perhaps all) contentious issues. For example, in the case of collective bargaining, a union may ask for a 7% wage increase and management 3%. The arbitrator`s decision must choose between a 3% or 7% increase. This procedure is contrary to a traditional interest rate procedure, in which the parties present evidence and the arbitrator acts as a factual and issues an arbitral award. With regard to disputes relating to employment contracts, this dispute settlement procedure is known as a common means of contract settlement. Perhaps the most well-known case is salary arbitration in Major League Baseball, where a certain class of players may choose to arbitrate their salary rather than accept their team`s salary offer. Final offer arbitration is often used to determine public union contracts in the United States, either as a replacement for collective bargaining or as a mechanism for determining the contract in the event of failed negotiations. José Piñera, Chile`s Minister of Labour and Social Security, has done pioneering work in the establishment of a national law using this mechanism. Indeed, Chile`s labour reform of 1979 imposes commuter arbitrations for specific cases of collective bargaining. Chilean law also required the parties to pay the arbitrator`s full costs, an additional incentive to avoid arbitration and to conclude bilateral agreements. The law created a register of private arbitrators (economists and lawyers with a strong reputation for expertise and fairness), some or all of whose parties must agree to determine the terms of the contract.
There is a consensus among experts that this system has proven to be very effective in Chile and has not been disrupted by subsequent governments. [Citation required] During the first three years of service, a player authorized before arbitration will usually earn somewhere the major league minimum wage. However, once the player has accumulated enough service time to be eligible for salary arbitration. This benefits the player, since this player now has some leverage to earn a salary that has at least some basis in that player`s performance. The team benefits, because while the player receives a salary increase, the player will likely still earn a salary lower than his true value in the free agent market. This is important for a team, as the team saves money or uses the savings for other players. From January 12 to February 21, players with a defined service time (i.e. the number of years that play at the MLB level), will enter with their teams in salary arbitration, where the player, probably represented by his agent, and the team will present their case to have the player`s salary determined by a neutral external arbitration tribunal for the coming season. .