The Park Rapids School Board and Education Minnesota-Park Rapids will enter mediation to work toward a resolution for the next two years of the teachers' contract.
The current 2007-09 contract expired in June.
Both parties met Tuesday night and discussed a variety of topics.
"Unfortunately, they were unable to come to a settlement," said Superintendent Glenn Chiodo.
Discussion included the salary schedule, family health care coverage and the 403(b) retirement savings match.
The union's last proposal for salary was 1 percent each year, steps and lanes both years, Chiodo said.
The school board declined that offer. The board offered zero percent for the first year, steps and lanes, and .5 percent for year two, no steps and just lanes.
Steps and lanes deal with years of service and the teachers' degree.
"They felt that it was probably best to go into a mediation process," Chiodo said.
A mediator from the state of Minnesota will sit down with both parties and try to find mutual ground, Chiodo said.
The first date for mediation is set for Oct. 27.