Public sector labor relations, the term for the interactions between employees, who are often represented by union leaders, and organizational management, are complex in nature. The largest players in labor relations, outside of the organizations, are unions, which are formally organized groups of employees who rely on their formal organization (the union) to represent their concerns to management. Unions have enjoyed considerable success because they have been able to employ both traditional politics and nontraditional political behaviors in order to outmaneuver organizations. An administrative agency is an impartial organization that helps facilitate labor relations. These agencies can be either governmental or private; the first government administrative agency is the National Labor Relations Board, created by Congress in 1935. The Federal Labor Relations Authority, created in 1978, serves as an administrative agency for federal employees. Administrative agencies oversee a number of different methods of negotiation between unions and management, one of which is collective bargaining.

Collective bargaining is bargaining which represents an entire group. The public sector, however, faces a great deal of fragmentation when it comes to bargaining, and there are no national laws to deal with the problem. Another problem faced during the bargaining process is an impasse, which is the point at which neither party can move any further toward a settlement unless something gives on one side or the other. In this case, third-party mediation can help the parties settle the dispute. While mediation or arbitration is often mandated, such mandates may undercut the effectiveness of bargaining; if both parties know the dispute will be mediated eventually anyway, they are likely not to work as hard to settle the dispute themselves than they would if they had no third-party option.