This article is written by Nishka Kamath. This article mainly focuses on the concept of collective bargaining from an academic point of view. It includes all the details regarding the right to collective bargaining, the origin of collective bargaining, the main objectives and goals of collective bargaining, the process of collective bargaining, the essential features of collective bargaining, the steps of collective bargaining, and the advantages and disadvantages of collective bargaining, inter alia. It also talks about different levels of collective bargaining and how this process is different from other modes of settling industrial disputes. Further, at the very end, some FAQs and MCQs on the process of collective bargaining are discussed; a student may expect them in their exams, that if the exam follows such a pattern.

Introduction

Before we start to read about the nitty-gritty of collective bargaining as a process, let us have a look at this short story, which will help us understand the concept of collective bargaining in a better manner.  

Once upon a time, in a bustling industrial town called Quahog, there stood a brewery company named Pawtucket Brewery. This brewery served the best beverages in town and was quite famous both inside and outside the city of Quahog. It provided employment opportunities to several workers who worked day and night to keep the brewery running in the best possible shape. However, the workers and employees in the brewery always felt overworked and underappreciated. Long working hours and no growth or increment in salaries and wage rates had eroded their job satisfaction. On the other hand, the management and the employers of Pawtucket Brewery were hogging away a huge amount of profit. 

Agitated by all this, one fine day,  Peter Griffin and Lois Griffin, old employees of the brewery, decided that it was time for a change in the situation. They started gathering their coworkers and together formed a union, which they named “The Clamion”. The main object of this union was to engage in collective bargaining with the authorities in managerial positions to address concerns related to both- the employees and the company. After numerous rounds of discussions and negotiations, both sides reached a historic agreement. After the agreement was signed, there was a noticeable improvement in: 

1. Working conditions,
2. Wage rates, 
3. Salaries and increments, 
4. Job security, 
5. Increased productivity, 
6. Open communication, etc. 

Over time, the brewery’s profits only soared higher and higher. The city of Quahog witnessed a whole new level of employee morale, profits, and productivity, along with a harmonious relationship between the employees and employers (or management), all thanks to Peter Griffin and Lois Griffin, who finally decided to voice their opinions against the atrocities and unjust treatment.

To sum it all up, the process of collective bargaining not only helped the employees work in better working conditions, but also helped the company reach new heights for, the employees were more happy, motivated, loyal, and had all the skills and zeal to work for the betterment of the brewery. Pawtucket Brewery became one of the shining examples of how cooperation and compromise can lead to prosperity in the world of labour and industry.

Now that we know how fruitful the process of collective bargaining can be, let us have a look at what exactly this process is and the minute details of it from an academic point of view.

What is collective bargaining

Collective bargaining is one of the methods of negotiation between two parties, the employees and the employers.  The main aim of such a process is to reach an inference and an agreement eventually that would help regulate working conditions at the workplace. In simple words, collective bargaining can be defined as a process where all the workers (or employees) of a company or an organisation try to ensure their terms and conditions of employment are met through negotiations. 

The right to collective bargaining

The right to collective bargaining can be regarded as one of the basic rights of workers in India. It is governed by the Industrial Dispute Act, 1947. This Act gives the workers the right to form trade unions and engage in activities like collective bargaining with their employers. The Act also has provisions for registering trade unions that allow them to represent the collective interests of all their members in negotiations with employers. Generally, in India, collective bargaining involves negotiations over the following topics:

1. Wages,
2. Number of working hours,
3. The working conditions, among other matters related to employment.

The process of collective bargaining is usually initiated by trade unions that represent the workers, the employer, or its representatives. If the negotiators of trade unions do not succeed in producing an agreement, either party has the right to refer the matter to a conciliation officer; such an officer will be appointed by the government. Further, if the conciliation does not succeed, then the dispute can be referred to a labour court or an industrial tribunal for adjudication.

Example of collective bargaining

In 2021, there was a company named Hippo Factories International Ltd., wherein the employees made an attempt to negotiate a favourable contract with the agricultural equipment manufacturer. However, during the period of high profits for Hippo Factories International Ltd. and higher labour demand during the COVID-19 pandemic, many workers were of the notion that they deserved a higher amount of wages and retirement benefits in comparison to what the company first offered.

Considering the above belief, workers at Hippo Factories International Ltd. rejected the first tentative proposal and authorised strike action against the company. One fine day, the workers started picketing the company and its headquarters, thus causing some companies to bring in profit from the harvest that year. After tremendous pressure from politicians, workers, and the public, Hippo Factories International Ltd. came up with a new contract that was in accordance with the worker’s demands. The strike finally ended after a whopping one month.

Origin of collective bargaining

The term “collective bargaining” was probably first used in 1891 by Sydney Webb, an economic theorist, and Beatrice Webb (in their celebrated treatise on the History of Trade Unions). This movement started in Great Britain and traces of its usage were found as early as 1874 among coal miners. 

Further, the process of collective negotiations and agreements between employers and their workers has existed since the rise of the 19th century, when workers started raising their voice for their employment rights at the workplace. Further, many skilled labourers started using their skills and expertise as a way to convince their employers to fulfil their workplace needs and demands, whereas, other workers depended on nothing but sheer numbers, creating general strikes to raise their voices against deteriorating working conditions. Also, various labour pioneers began to set up a collective bargaining system for negotiations to run in a smooth and efficient manner.

Generally, the employees are represented by a union. The initial step since the advent of collective bargaining is actually joining a union, giving consent to obey and accept the rules set forth by that union, and electing some union representatives to solve grievances that may occur during the course of employment. In other words, skilled individuals from the union help the employees in drafting a contract, thus enabling them to present their grievances and recommendations to the employer. Further, before the parties reach an inference, multiple meetings between the representatives of the employer and his employees are carried out. Such meetings usually continue until the parties jointly agree to the terms of the contract. Meanwhile, as the contract is being negotiated, the employees also have input on it via their union officers; accordingly, the agreement reflects the combined desires of all the employees, along with limitations that the employer wishes to put in place. All this results in a powerful document, which usually reflects cooperative effort. 

Yet, in some instances, the union of the employer may turn to using unpleasant tactics like that of going on strike, declaring a lock-out or the like so that the agreement can be pushed through.

For employees, workers, and labourers, the method of collective bargaining is an excellent tool for effective negotiation. Many organisations and companies benefit from unionisation, which in turn helps workers raise their voices together and assert their rights unitedly. Also, the employers benefit from this process, as such a process helps in establishing a clear list of expectations from both parties.

Furthermore, such an experience (that of collective bargaining) can also work as a learning experience for both parties, as it helps the employees and the employers understand each other’s point of view and thus consider each other’s positions.

Introduction of collective bargaining in India

Since the process of industrialization began considerably late in India, the history of collective bargaining as a negotiation process is not very big in comparison to developed countries like Great Britain or the USA. Collective bargaining became popular in India only after independence, however, it started years ago (around the 1920s) in the textile mills of Ahmedabad and was initiated by one of the most known leaders across the globe – Mahatma Gandhi. The significance of such a process surfaced when the union realised that settling disputes through industrial courts was not so fruitful in terms of time, energy, and capital and also posed a hindrance to industrial peace and harmony. 

The concept of a collective bargaining agreement was first introduced by the Dunlop Rubber Company in West Bengal in 1947. Then came the Bata Shoe Company in West Bengal. Later, in 1951, the Indian Aluminium Company made its five year agreement with the employees union in Belur. Later, the Imperial Tobacco Company adopted this concept in 1952, and by 1955, several well-known companies like Tata Iron and Steel Company, Hindustan Lever, and many small companies too had started with this concept of collective bargaining. Before the beginning of 1962, around 49 companies, involving around 4.5 lakh employees, started the practice of collective bargaining as a tool for maintaining peace and harmony in industrial organisations and to resolve industrial disputes.

From the aforementioned history of the process of collective bargaining in India, we can safely infer that collective bargaining in its true sense was only practised in the private sector, and there was no real attempt to implement the same in the public sector except in the case of the Indian Railways. Later, in 1978, Bharat Heavy Electricals Limited experimented with bringing workers’ representatives into play.

Moreover, there has been very little legal support for this process. Even after India became independent, no explicit laws were enacted for this process. To date, there is no law that specifically mentions or promotes the use of collective bargaining as a tool for maintaining peace and harmony in industrial relations and to resolve industrial disputes.

Interesting fact : Convention No. 98 of the ILO (International Labor Organisation) gives major importance to the rights of collective bargaining.

Introduction of collective bargaining in courts of India

Collective bargaining, as a process, was introduced in the courts by the Supreme Court in the landmark case of  Karnal Leather Karamchari Sanghatan v. Liberty Footwear Company (Regd.) and Ors. (1990).  In this case, the Apex Court held that the Industrial Disputes Act, 1947, was laid down for the purpose of securing social justice by means of collective bargaining. 

Definition of collective bargaining

There are various definitions given by various organisations and scholars, some of which are as follows:

According to Dale Yoder, “Collective bargaining is the term used to describe a situation in which the essential conditions of employment are determined by the bargaining process undertaken by representatives of a group of workers on the one hand and of one or more employers on the other.”

In the words of Flippo, “Collective bargaining is a process in which the representatives of a labour organisation and the representatives of business organisation meet and attempt to negotiate a contract or agreement, which specifies the nature of employee-employer-union relationship.”

The I.L.O. defines collective bargaining as “the negotiations about working conditions and terms of employment between an employer, or a group of employers, or one or more employers’ organisations, on the one hand, and one or more representative workers’ organisation on the other with a view to reaching agreement.“

Further, ILO Convention No. 154 defines collective bargaining as referring to:

“All negotiations which take place between an employer, a group of employers or one or more employers’ organisations, on the one hand, and one or more workers’ organisations, on the other, for:

(a) determining working conditions and terms of employment; and/or

(b) regulating relations between employers and workers; and/or

(c) regulating relations between employers or their organisations and a workers’ organisation or workers’ organisations.”

Similarly, according to Ludwing and Teller, collective bargaining is “an agreement between a single employer or an association of employers on the one hand and labour union on the other hand which regulates terms and conditions of employment.”

The Webbs describe collective bargaining as an economic institution, with trade unionism acting as a labour cartel by controlling entry into the trade.

Further, Prof. Allan Flanders claims that “collective bargaining is primarily a political rather than an economic process.”

Furthermore, Perlman aptly stated, “Collective bargaining is not just a means of raising wages and improving conditions of employment. Nor is it merely democratic government in industry. It is above all technique, collective bargaining as a technique of the rise of a new class is quite different … from the desire to displace or abolish” the “old ruling class”…to gain equal rights as a class … to acquire an excessive jurisdiction in that sphere where the most immediate interests, both material and spiritual, are determined, and a shared jurisdiction with the older class or classes in all other spheres.“

Moreover, the Supreme Court, in the case of Karol Leather Karamchari Sangathan v. Liberty Footwear Company, (1989), defined the process of collective bargaining as“the technique by which dispute as to conditions of employment is resolved amicably by agreement rather than coercion”.

Main objectives of collective bargaining

The main objectives of the process of collective bargaining for both parties are as follows:

For the employees

The main object of the process of collective bargaining for the employees is their representation.

For the employer

The main object of the process of collective bargaining for the employers is to reach an agreement on the terms of employment. This agreement is referred to as a collective bargaining agreement or contract that includes the conditions of employment and the terms that benefit both parties involved.

Goal of collective bargaining

The main goal of collective bargaining is to get into a collective bargaining agreement. This collective bargaining agreement is meant to set some rules and provisions of employment for a set time period (usually, the time period is in years). Further, the cost of such a representation is incurred by the Union members in the form of union dues. Also, it must be noted that if the parties have trouble reaching an inference, there could be the involvement of antagonistic labour strikes or employee lockouts.

Process of collective bargaining

As you must be aware, the International Labour Organisation (ILO) states the process of collective bargaining to be a fundamental right available to all workers of any organisation, meaning all the employees working in a company are entitled to submit their grievances to their employers and to be able to negotiate for such grievances. Further, as per the ILO, the process of collective bargaining helps reduce inequalities in the workplace while providing workers with labour protection.

Generally, collective bargaining occurs between members of a company and labour union leaders. Usually, these union leaders are elected by workers to present their grievances and to represent them and their interests. The process of collective bargaining is involved when an employee’s contracts are to be renewed or when employers make any modifications to the workplace or any terms of the contract. These modifications include, but are not limited to:

1. Employment conditions,
2. Conditions of work,
3. Rules related to workplace,
4. Matters related to base pay, wages, and overtime pay,
5. Holidays, sick days and vacations,
6. Benefits related to issues like that of retirement and health care. 

The aforementioned issues fall into three categories, let us have a look at each of them in brief:

Categories of issues under collective bargaining

There could be several issues arriving at the workplace that can be resolved through the process of collective bargaining. Mentioned below are some of the issues:

Mandatory subjects

Mandatory subjects include:

1. Salary,
2. Overtime, and 
3. Workplace safety.

Voluntary subjects

Voluntary subjects include issues that can be negotiated, like-

1. Union issues, and
2. Decisions regarding employer board members.

Illegal subjects

Illegal subjects include anything that is a violation of law, like

1. Discrimination at the workplace.

Top ten essential features of collective bargaining

A pro tip to remember these features is to use the sentence – 

“Please Issue Summons Coz Cesare who is BalD Flipped Ice in ColumBia on a CAt”.

The top ten essential ingredients of the process of collective bargaining are as follows:

1. Parties to the negotiation
2. Intention to reach an agreement
3. Subject matter of collective bargaining
4. Collective nature of the negotiation process
5. Continuous nature of the negotiation process
6. Bipartite nature of the negotiation process
7. Discipline
8. Flexibility
9. Implementation
10. Collective bargaining and collective agreements are different 

Let us take a look at each of these features in detail.

Parties to the negotiation

The negotiations that go around in the process of collective bargaining involve two parties, namely:

Employers

This party may either have the involvement of employers, a group of employers, or an organisation of employers.

Employees

This party may either have the involvement of employees, a group of employees, or one or more employee unions or organisations.

Intention to reach an agreement

One of the most fundamental features of the process of negotiations and discussions involved in the process of collective bargaining is the serious intent of both parties to reach an agreement; however, this, in no way means that in every case the parties reach an agreement. But it does imply that a negotiation and discussion were carried out between the two parties with the aim of reaching an agreement, irrespective of the fact whether the parties were ultimately able to arrive at an agreement or not.

Subject matter of collective bargaining

Even though, usually, the process of collective bargaining concerns itself with the terms and conditions of employment like daily wages, number of working hours, grievance procedures, etc., in some cases it may also have an involvement in issues related to:

1. Recognition or non-recognition of  a particular union,
2. Arbitration or  conciliation procedures to settle differences between the employer(s) and the employee(s),
3. Limitations imposed on workers by setting up a joint commission, and other such similar issues.

Collective nature of the negotiation process

As the name suggests, the procedure of collective bargaining is a collective process. It does not have any sort of involvement in the interactions between employer(s) and employee(s) on a one-to-one basis, instead, it is a process in which the representatives of either side of the parties meet up to reach an agreement that is mutually accepted by all of them.

Continuous nature of the negotiation process

Collective bargaining is a continuous process that aims at building a stable relationship between the employer(s) and the employee(s). It is not a process that works in fits and starts. Further, even if the agreement between the parties is signed on a periodic basis (say for instance, once in a year or once in every two years depending on the company’s policy) the cords underlying collective bargaining make themselves visible on a perpetual basis. 

Bipartite nature of the negotiation process

Generally, as you must have noticed, the process of collective bargaining is a bipartite process between the employer(s) on one side and the employee(s) on the other. Yet, in some nations, the State plays a vital role in helping the parties reach a settlement, perhaps an agreement. The role of the State becomes more apparent in instances where the parties are not successful in reaching an agreement, and in case if it does, the agreement would possibly contradict any policy set forth by the government of that particular state. 

Discipline

The process of collective bargaining intends to achieve discipline in the industry. Initially, such discipline may first be witnessed only in one factory or a group of factories, but ultimately, the discipline spreads throughout the whole industry.    

Flexibility

Flexibility is one of the most important ingredients, and without it, it is nearly impossible for collective bargaining to function efficiently. It is significant that both parties adopt a flexible approach to reaching a settlement. If either of the parties or both parties are stubborn and stick firmly to their demands and refuse to revise them, collective bargaining can’t succeed, no matter what. Willingness to make some adjustments on both sides is the secret of a successful collective bargaining process.

Implementation

Obviously, the process of collective bargaining, the negotiations, and the discussions carried on to reach a settlement are not only to arrive at an agreement, but also to enforce and execute the agreement, thence. If either of the parties to the agreement is not serious about enacting the duties enforced in the agreement, the situation will be like a person entering into a solemn contract with the aim of breaching it ultimately. In such cases, unpleasant litigation would be the only consequence.

Collective bargaining and collective agreements are different 

Although the terms “collective bargaining” and  “collective agreements” are at times used interchangeably, there is quite a difference between these phrases. While collective bargaining refers to the process or means, a collective agreement is the effect of the process of a successful collective bargaining. Needless to say, the process of collective bargaining will not always result in having a collective agreement to be reached at.

Essential conditions for a successful collective bargaining

In order for the process of collective bargaining to work efficiently,  the following conditions need to be fulfilled:

Favourable political climate

The process of collective bargaining will work effectively only when there is a political climate wherein both the parties, i.e., the government and the public are of the belief that this process is the best way to resolve grievances and that they are genuinely convinced that this process is the best method of settling industrial disputes. 

Freedom of association

The process of collective collective bargaining became popular only after workers, labourers and employees started to realise that individual bargaining was futile. The freedom to form a union and to represent themselves as trade unions is an essential precondition of a successful collective bargaining. If such freedoms are not guaranteed to the employees and employers, the chances of collective bargaining to succeed are that of zero to none.

Stability of workers’ organisations

At times, the freedom and opportunity given to workers to form their own trade unions are not enough;  thus, for successful collective bargaining, it is crucial that the workers of the organisation form strong and stable trade unions. In case there is an absence of such a union,  it is highly unlikely that their issues will be resolved; thus, the management has more power in its hands.

Willingness to give and take

Like any other type of bargaining, collective bargaining, too, is a process of mutual benefit and is advantageous to both parties. It will only be successful if there is an attitude of willingness and compromise on the part of both parties. If one of the parties only wants to “take” and does not want to “give”, in such circumstances, collective bargaining as a process cannot be efficient or fruitful. 

Absence of any unfair, unhealthy or unfair practises

As mentioned above, both parties have to have an attitude of fair play and “give and take” for collective bargaining to succeed. It can only have a positive outcome if the process is based on mutual respect and both parties consider the position of the other instead of being stubborn about their needs and wants being fulfilled. If any of the parties resort to unfair or unhealthy means like delay in submitting work or victimisation of trade union leaders on the part of the employer, we can’t expect the process of collective bargaining to succeed. Additionally, if the employer resorts to a lockout or the workers announce a strike as a result of violating an existing contract that took place between the parties, the concept of collective bargaining suffers in the process. 

Principles followed by parties to resolve industrial disputes via collective bargaining

Management or employers be updated with labour codes

In order to carry out effective collective bargaining, it is crucial for the management or employer to be updated with all the labour laws. Further, it is important that the management offer unions unconditional recognition and consider the employees’ grievances as a constructive and cooperative force in the organisation, as doing so will in turn boost the employer’s prestige and responsibilities and make the employees feel heard. Moreover, it is important that the management or the employers build a strong relationship with the unions in order to restrict them from taking any drastic measures (like strikes) that would cause harm to the industry or their relations. Additionally, they (employers or management) must maintain a cordial relation with the unions and try to gain their trust. Also, employers and management must maintain a satisfactory relationship with the employees.

In order to maintain a healthy relation between the union and the employers (or management) during the process of collective bargaining, the management or employers have to take into account the point of view of the other side, too, and not only consider one’s own point of view or economic consideration. The management or employers of the organisation have to understand and must have the willing acceptance to recognise representatives for collective bargaining and should establish equal employment opportunities with an aim to stay away from industrial disputes and maintain peace and harmony in the industry. 

Trade unions and employees should be considerate

In order for the process of collective bargaining to be successful, it is important that trade unions also understand the economic situation of the employers and must ensure that their demands are in alignment with the resources and financial health of the company and that the company does not feel discouraged. Further, it is the responsibility, obligation, or duty of every trade union to assist management in reducing waste and expenditures that are quite not necessary. The trade unions should act as a medium to boost productivity and quality of the workplace, like working conditions, and to improve them, they should employ individuals to carry on the collective bargaining process. Further, the union should not limit the process to just economic gains, but rather understand that this process is not a competition. The needs of one party are the resources of the other party, and thus, the process should be regarded as a two way settlement process.

Different levels of collective bargaining

It is quite common for disputes to arise in a company, be it at a higher or lower level, be it a craft level dispute or a national level dispute. The collective bargaining levels keep changing from region to region, from union to union, and from one company to another, amongst other factors. When the disputes are classified according to the levels, it becomes easy for everyone to get to the solution of the dispute and determine the behaviour of the industry, thus helping the parties reach a settlement quickly. The four main levels of collective bargaining are as follows:

National-level bargaining

National-level bargaining generally occurs between management and the national-level union. The major advantage of this level of bargaining is that all the industries acknowledge the issues and consider all the industrial employees when the process of negotiation begins. This definitely leads to several benefits, like-

1. Salaries and/or wage rates are uniform, 
2. No disputes, disparities, etc.

Industry-level bargaining

In industry-level bargaining, trade unions are structured as industry federations. In this level of negotiation, the following subjects are covered:

1. Basic, standard pay,
2. Allowances,
3. Production capacity,
4. Production rules, and 
5. Working conditions related to that industry.

Bargaining at an industry level ensures there is homogeneity in labour costs and working conditions. However, if we see, every organisation or company has different levels of performance, usage and access to technology, productivity, etc., this has made industry-level bargaining not so successful.

Corporate-level bargaining

When the management of a multi-plant company carries out negotiations and discussions over a single agreement with multiple unions representing different factories of the same organisation, it is referred to as corporate-level bargaining. Such negotiations are frequently conducted by corporate management. The advantages of corporate-level management are-

1. Ensures there is consistency and uniformity across all the factories and offices the company or organisation holds. 
2. Since there is uniformity, there is no chance of conflict that takes place due to differences in pay scale across locations. 
3. When collective bargaining takes place at the corporate-level, with its multi-plant structure, it becomes easy to bypass apprehensions that are integral at the plant level.

Additionally, when such a level of bargaining is practised for huge public sector organisations like HMT, ONGC, or BHEL, the ability of the employers and management to bargain, especially in India, is limited considering the political involvement. The Ministry of Public Enterprises (MoPE) and the Bureau of Public Enterprises (BPE) both have set instructions and guidelines.

Plant-level bargaining

In India, the majority of private sector organisations engage in plant-level collective bargaining. This type of bargaining takes place between the management of a certain plant or industrial site. The issues and grievances are quite specific to a particular facility or firm. Matters that involve discussions on performance-related or pay productivity-related are the foundation of such agreements. An advantage of such a level of bargaining is that it allows for separate discussions. Here, matters like differences in the cost of living from one location to the next, providing a realistic negotiating ground, can be discussed separately.

Collective bargaining steps

The process of collective bargaining can be intense and may also cause a bit of stress and complication for all the parties involved. This process often involves a lot of discussion, repetitive offers, and counteroffers, with the main motive of reaching an agreement. However, this process involves a lot of steps, and they are as follows:

Identifying the issues and making preparations of the demands

The first step includes determining the issue and preparing for the demands of the employees. This may include a list of grievances like abusive management practices or low wages or salaries.

Forming a union

Forming a trade union to carry out discussions and negotiations is yet another crucial step for carrying out the process of collective bargaining.

Charter of demands

At this point, one of the parties (either the union or the company) initiates the process of collective bargaining. After this, the labour union notes down a charter of demands through a series of meetings with all its members.

Negotiation

Usually, for this step, the trade union appoints a team of professional negotiators to help employees reach an agreement with the employer. Similarly, the employer, too, appoints a negotiator, and the two parties would continue to meet and have discussions until they reached an inference and entered into a satisfactory agreement.

Strikes or lockouts

In case the negotiations fail, the union has the right to call a strike. Under Section 22 of the Industrial Disputes Act, 1947, employees have to give a six weeks’ notice before calling out a strike. 

Further, under Section 22, no employer carrying on any public utility service shall lockout any employee without giving notice period of six weeks before locking out.

Conciliation

When the conciliation officer is informed about the strike via a notice, the process of conciliation begins. This process allows the parties to choose between two options, namely-

State government may appoint a board

Under Section 4 of the Industrial Disputes Act, 1947, the state government may appoint a conciliation officer to carry out the following duties:

1. Investigate the matter,
2. Mediate between the parties,
3. Encourage settlement during the cooling off period.

State government may form a Board

Here, under Section 5 of the Industrial Disputes Act, 1947, the state government can form a Board of Conciliation, that would consist of:

1. Chairperson,
2. Two or four members. 

As per Section 22 and Section 23 of the Industrial Disputes Act, 1947, strikes are not allowed during the period of conciliation. 

Submitting a tentative agreement

Once the parties reach an agreement, both parties to the negotiation process have to submit an agreement to their constituents. During this period, last-minute issues will also be brought into consideration as the minute details are hammered out.

Accepting and ratifying the agreement

After the aforementioned step, the agreement will be submitted to union members, who will then have the chance to vote either in favour of or against the new proposed contract.

Administration of the agreement

Even after the agreement is made final, workers and shop stewards continue monitoring the process in order to make sure the company is adhering to all the obligations stated in the agreement.

A point must be taken into consideration that there are several instances where it becomes difficult for the parties involved to reach an agreement. So, if the negotiation period expires without the process of collective bargaining being completed or the agreement is not reached at, in such cases, union representatives may advise that workers go on a strike until their demands are met. Also, employers may also consider locking out their employees until they reach a suitable agreement; however, in case the employees are locked out, they have the right to picket. These measures are drastic and should be used only as a last resort.

Laws related to collective bargaining : an Indian perspective

The process of collective bargaining in India is controlled by a set of complex rules and regulations. These laws protect  the rights of the employees of an organisation and act as a framework of guidelines for employers. The key laws and regulations related to collective bargaining in India include:

The Trade Unions Act, 1926

The Trade Unions Act, 1926, has provisions for the protection of trade unions. It also has a set framework for rights and responsibilities and some rules that are to be followed by a trade union. The rights of members are discussed in detail, and these rights also include the right to participate in the process of collective bargaining. Furthermore, it also discusses the procedure for registration of a trade union.

The Industrial Employment (Standing Orders) Act, 1946

The term ‘standing orders’ under Section 2 (g) of the Industrial Employment (Standing Orders) Act, 1946, is defined as the “rules relating to matters set out in the Schedule“. These matters include:

1. Classification of workmen,
2. Attendance,
3. Conditions of providing leaves,
4. The way workers are intimated about work and wage-related details, etc.

Further, under Section 3 of this Act, employers are obliged to submit the draft of standing order to the Certififying Officer and must also confirm to the model set for the standing order. After this, the Officer will forward the draft to trade unions or workers. If there is no trade union involved to raise any objections, the officer has to provide a just and fair opportunity to both the parties to address their concerns and then certify the standing order with essential amends and then share the copies with both the parties, thus acting as a negotiator.   

The Industrial Dispute Act, 1947

This law mainly specifies the legal terms and conditions for settling industrial disputes and also has provisions relating to the formation and registration of trade unions. This Act also has provisions relating to:

1.  The appointment of conciliation officers,
2. Boards, and
3.  Courts

to enable the resolution of disputes between the employees and the employers.

The Constitution of India

There are several provisions enshrined under the Constitution of India, especially the Fundamental Rights and Directive Principles of State Policies that talk about the concept of collective bargaining. The most important, Article 19(1)(c) of the Constitution, permits every Indian citizen to form an association, which apparently  covers the rights to form trade unions, too. In accordance with Article 43A, the state is authorised to enact and implement laws that encourage workers to take part in management.

Other laws

Besides the aforementioned laws,  there are some relevant laws that have an impact on the process of collective bargaining, namely:

1. The Minimum Wages Act, 1948, 
2. The Payment of Bonus Act, 1965, and 
3. The Factories Act, 1948.

These laws establish minimum wage standards, provide for the payment of bonuses, and establish workplace safety standards, respectively.

Collective bargaining and the Industrial Relation Code, 2020

The main notion behind implementing labour laws is to prevent the unequal negotiation partners that arrive from class connection between employers and employees. Justice Dinsha Pirosha Madon, in the case of Central Inland Water Transportation Corporation v. Brojo Nath (1986), stated that trade unions play a major role through collective bargaining in unequal relationships where workers are under a constant risk of unemployment especially when employers are large corporations.

As stated in the Industrial Relations Code, an employer cannot be prejudicial between a fixed term employee and permanent employees, thus, the fixed-term employees working hours, salary, allowances, and other such perks and benefits cannot be less than those of permanent workers that carry on the same or alike work. Having said that, even the progress of permanent workers will be ascertained on an individual basis just like that of fixed-term employees.

In effect, the role of trade unions in discerning the wage rate and service conditions via collective bargaining will be eliminated.  

Laws related to collective bargaining : a global perspective

Generally, most of the industrialised countries across the globe have laws incorporated to protect the rights of employees and employers and have provisions that enable them to engage in the process of collective bargaining and form unions, even though there may be limitations on certain industries. 

United States

In the United States, the rights of most workers are safeguarded by the National Labor Relations Act (NLRA). It also has provisions that enable the workers to engage in collective bargaining activities. The activities include:

1. The right to form and join unions,
2. The right to discuss fair pay,
3. The right to address grievances, 
4. The right to strike,
5. The right to not be fired (for some activities).

Please note, some of the categories of employees, like federal, state, and local government employees and agricultural labourers, are excluded from the list of those protected under the NLRA.

There is a government body named the National Labour Relations Board (NLRB) that looks after labour practises and collective bargaining under the NLRA. This Board is also responsible for governing union elections and ensuring that workers are not pressured to vote one way or the other.

State wise provisions in the United States

In the United States, many states have their own set of laws regarding collective bargaining. Say, for instance, in 2022, during the midterm elections, Illinois voters gave their approval for an amendment that would enshrine collective bargaining rights in their state’s Constitution. 

Moving in the opposite direction, Tennessee voters approved a referendum that would add a right-to-work law provision to their state Constitution, thus, restricting the power of unions.

United Kingdom

In the United Kingdom, there is no collective bargaining law per se; however, the Trade Union and Labour Relations (Consolidation) Act, 1992, covers workers rights to associate and negotiate collectively.

China

In China, under China’s Labour Contract Law, the employer and the employees have the permission to enter into a “collective contract”. This contract has provisions on matters relating to:

1. Remuneration,
2. Work hours,
3. Social security, amongst other things.

In such circumstances, trade unions can negotiate the contract with the employer on behalf of the employees.

Saudi Arabia

There is no single trade union law in Saudi Arabia for industrial dispute resolution. The laws there do not authorise anyone to have such set rules and regulations.

Different types of collective bargaining

There are different methods involved in the process of collective bargaining, some of which are as follows:

Composite bargaining

Composite bargaining does not have anything to do with remuneration; instead, it mainly has its focus on the following issues:

1. Working conditions,
2. Job security,
3. Well-being of the employees of the company and
4. Other corporate policies.

The policies may include appointing and dismissing employees of the company as well as maintaining discipline at the workplace. The main object of composite bargaining is to reach a suitable agreement that would cause a lasting and harmonious relationship between the employees and employers.

Concessionary bargaining

As the name suggests, this type of concessionary bargaining has its focus on union leaders making concessions in the trade of security at the workplace. This method is quite common and is used especially during a company’s financial downturn or recession. At times, union leaders might agree to sacrifice some benefits to ensure the survival of the employees and, ultimately, the business.

Distributive bargaining

Distributive bargaining is referred to as the process of benefiting one party financially at the expense of the other party. This can be in the form of:

1. Bonus,
2. Raise in salaries, or
3. Other such financial benefits.

Please note: Distributive bargaining favours employees more than that of employers.

Further, unions have to have a higher degree of power in order for the process of distributive bargaining to work efficiently. Higher membership means more power, so, if an employer is not willing to agree to a union’s demands, it has the authority to call for a strike.

Integrative bargaining

In this type of collective bargaining, each party tries to benefit itself through integrative bargaining. This is the reason  integrative bargaining is oftentimes considered to be a form of win-win bargaining. Under this method, both parties make an attempt to take into consideration the position of each party and address issues and provide solutions to such issues in a manner that is beneficial to both parties. In this way, both the employees and employers stand a chance to gain and lose at the same time, thus playing a fair game.

Productivity bargaining

Productive bargaining is yet another type of collective bargaining that involves compensation and the productivity of employees of a corporation. In this method of collective bargaining, the labour union leaders often use higher salaries and compensation as a means to boost employee’s productivity, thus causing higher profits and value for the employer. In order to make productivity bargaining work, it is important that both parties are in agreement with the financial terms, thus boosting productivity. 

Interesting fact : Unions represent different types of workers, including employees or workers of a grocery store, airline company, professional athletes, teachers and professors, autoworkers, postal workers, actors, farmworkers, daily-wages workers, amongst other employees.

How is collective bargaining different from other modes

As discussed in the aforementioned passages, collective bargaining is the process of eventually negotiating and settling industrial disputes through discussions that lead to a mutual agreement between the employer(s) and his employee(s). Nevertheless, a point must be noted that it is one of the different forms of settling industrial disputes and disagreements. The other methods include settling industrial disputes via conciliation or by arbitration, which could either be compulsory or voluntary.

During the process of collective bargaining, there are voluntary meetings of the parties are held without the interference of a medium or a third party. Whereas, in conciliation, a conciliator often uses his good offices to bring about a mutual understanding between the parties. This is one of the basic differences between the aforementioned forms of dispute settlement.

Further, in some cases, there might be a situation where the parties do not reach an agreement and then decide to refer the issue to an arbitrator to resolve the issue. In arbitration, no matter if it is voluntary or compulsory, the dispute is referred to a third party (known as the arbitrator). Here, the decision taken by the arbitrator will stand final and is binding on the parties. The outcome of such a process is often a win-lose situation and could also be displeasing and even improper  to one of the parties to the dispute. Furthermore, there are some instances where both the parties were not happy with the outcome of the process of arbitration. At times, it becomes mandatory for the parties to refer a particular type of dispute to an arbitration officer for a tribunal) as stated in the law. This is known as compulsory arbitration or adjudication and has the same shortcomings one would find in voluntary arbitration.

Further, some laws have a separate provision that states that parties to industrial disputes have to first go through the process of collective bargaining; it is as per the government’s discretion to decide whether the parties underwent this process in a sincere manner or not. The government will also consider other aspects, like:

1. Whether the parties have tried to avail themselves of themselves of all the potentialities to get to a solution, perhaps, a settlement or an agreement: and
2. Whether they have exhausted all the benefits of collective bargaining as a process.

If the government is of the opinion that the parties did not consider the aforementioned points, it has the authority to then refer the matter for compulsory arbitration or adjudication. Such a method has been quite fruitful for years now and has also played a major role in preventing strikes and lockouts in case the parties do not reach an agreement by following the process of collective bargaining.

Collective bargaining agreement

When both the parties agree to the terms and conditions of each other, a collective bargaining agreement is entered upon between the employer and the workmen (represented by trade unions) or the employees themselves. This could be in the form of by bipartite agreement, memorandum of settlement or consent of award. Let us take a look at each of these in detail.

Types of collective bargaining agreement

Bipartite (or voluntary) agreements

Such agreements are brought out after the employer and trade unions have voluntarily carried out negotiations and reached a settlement. According to Section 18 of the Industrial Disputes Act, 1947, such an agreement is binding on both the parties. Further, the implementation of such an agreement is usually not that hard considering both parties have agreed to such a settlement voluntarily. 

Memorandum of settlements

Settlements are tripartite in nature as there is an involvement of employer, trade union and conciliation officer in settling such an agreement. Such agreements stem from a particular dispute which is then addressed to an officer for the purpose of recognition. During the reconciliation process the officer has an instinct that the parties have indeed decided to reconcile and leave the dispute behind, and that an agreement is possible, he may withdraw himself. Further, if and when the parties finalise such an agreement after the officer has withdrawn, the acceptance of both the parties to the agreement is reported back to the officer within a stipulated time period and the matter is thus settled. A point should be noted that such an agreement has quite a limited scope in comparison to bipartite agreements as tripartite agreements are only restricted to specific issues that are referred to the conciliation officer.

Consent awards

Consents awards are those agreements that are reached at when there is an ongoing dispute pending before a compulsory adjudicatory authority. Even though the agreement is reached voluntarily, the agreement becomes a part of the binding award pronounced  by the authority formed for the objective.

Contents of a collective bargaining agreement

During the process of collective bargaining, numerous matters are involved, which require numerous discussions and negotiations. Once the parties reach an inference, an agreement is signed between them, and all the points on which the parties have mutually agreed upon are mentioned in the agreement. The terms of a collective bargaining agreement fall into two main categories, namely:

1. The standards of agreement which are directly applicable between the particular employer and his employees of the organisation, and 
2. The topics that regulate the relationship between the parties and which have no bearing on the individual relationship between that employer and his employees.

Let us take a detailed look at both categories.

First category

The following matters fall under the first category, i.e., the standards of agreement that are directly applicable between the particular employer and his employees of the organisation, are as follows:

Wages

Terms related to the wages or salary that may be in the form of a fixed monthly wage or a time-rate (say, for example, an individual is getting paid ₹250 per hour for adding some phone cases into plastic covers, irrespective of the number of phone cases he/she successfully adds within that hour), or a per piece rate (for example, ₹250 for adding 30 phone cases in plastic cases, irrespective of the time taken are all included in the agreement. There may also be other incentives and added bonuses for the individual paid as a part of exemplary performance, like productivity linked bonus, etc. in the agreement, there could also be a provision added to implement the necessary steps one must take while fixing rates for a new job or a different position.

Increments

Terms related to the increments or raises in salary of the workers or employers of the organisation are all included in the agreement. Additionally, whether such increments would be on a fixed basis or based on the following categories will also be mentioned in the agreement:

1. Rates of inflation, 
2. Cost of living index, etc.

Duration of work

All the provisions related to the duration of work, including:

1. Overtime work,
2. The compensation a worker or employee would get for overtime hours he/she worked for,
3. Regulation of shifts and working hours,
4. Night shifts and the pay related to night shifts,
5. Rest period,
6. Provisions and facilities the employer would provide during night shifts, etc.,

are all mentioned in the agreement.

Holidays 

All the details regarding the holidays are mentioned in the collective bargaining agreement,t they include but are not limited to:

1. Annual number of holidays,
2. Paid and unpaid holidays, and
3. Compensation and payment of work done on holidays.

Leave

All the details regarding the leaves are mentioned in the collective bargaining agreement,t they include but are not limited to:

1. Privilege leave,
2. Sick leave, and
3. Leave of absence (for other reasons).

The third type of leave is for employees who might have to carry on official duties outside the workplace and outside the course of their employment, for instance, an employee, who is also an office-bearer of a trade union may have to take leaves to be a part of legitimate trade union activities, amongst other things.

Provisions added by the employer

Terms related to the health and safety of an employee are also added in the collective bargaining agreement. These provisions are especially designed by the employers for the wellbeing of the employees in the organisation.

Rights

The terms related to the rights attached to positions of seniority and the principles and procedures one must follow in case of a lay-off and re-hiring of employees are all included in the agreement.

Principles

All the principles an employee must follow in case of probation and confirmation of workers, the duration of probation, etc., are mentioned in the agreement.

Laying off workers and other punishment

Provisions related to sacking of workers and other disciplinary actions relating to wrongs committed at workplace or for indiscipline at workplace and the system of investigating such acts, etc.

Number of apprentices and procedures for training

All the terms related to the number of apprentices and procedures for training are included in the agreement.

Fringe benefits

All the fringe benefits made available to employees like:

1.  Living quarters,
2. House rent allowance,
3. Retirement plans,
4. Allowances for hospitalisation,
5. Schooling, etc.

Please note: The meaning of the word fringe means, “an extra benefit supplementing an employee’s money, wages or salary. For instance, a company car, private healthcare facility, travelling allowances, etc.)

Second category

The following matters fall under the second category i.e., the topics which regulate the relationship between the parties and which have no bearing on the individual relationship between that employer and his employees are discussed below. Usually, this matters do not have any applicability on the individual employer-employee relations per se, but seek to regulate the relationship between the employer and the employees, for instance:

Prohibition

Every term related to the ban of carrying out strikes and lockouts during the course of reaching a settlement or an agreement via the procedure of collective bargaining will be added here.

Duration

The duration of the agreement thus arrived, either by negotiations and discussion as a procedure of collective bargaining and the possibility of them persisting even after the expiry of the agreed period will be mentioned here. 

Methods

Any sort of methods relating to resolving disputes, if any, as regards to the significance and interpretation of the terms of such an agreement will be included here.

Procedure for a new agreement

The procedure to be taken on in order to negotiate a new agreement after the cessation of the existing agreement shall be discussed here.  

Fair procedure

Establishment of fair procedural norms and methods to be adopted for boosting production and ameliorating waste are all talked about under this category.

Procedures for joint consultation

The procedures and strategies  thus carried on for joint consultation are discussed here.

Advantages and disadvantages of the process of collective bargaining

Advantages of collective bargaining

Settlement

One of the biggest advantages of the process of collective bargaining is settlement via dialogue and consensus, instead of having conflicts and confrontation. It also differs from arbitration, where the solution is based on the decision taken by a third party, usually referred to as the arbitration officer. Also, the process of arbitration may not satisfy either of the parties or even displease both parties, as it involves a win lose situation.

Agreement

The employees and employers are usually aware of their rights and responsibilities that are stated in the collective bargaining agreement. Once the terms and conditions of employment are discussed and negotiated, a contract is signed. Under this contract, both parties agree to comply with the terms that are explicitly mentioned.

Institutionalised dialogues for reaching an agreement

More often than not, the presence of collective bargaining often institutionalised settlement through dialogue which helps the parties finally reach a collective bargaining agreement. For example, through a collective argument, the parties may have methods by which the grievances between the parties may reach a conclusion; and that, in such cases both the parties are aware that if they are not agreeing to the points mentioned in the collective bargaining agreement, there is an agreed method that will help resolve such a disagreement.

More power to negotiate

As the name suggests, employees, workers, and labourers have a larger voice via the process of collective bargaining. Being together, in a group with the same goal(s) gives employees an edge over their employers to put forth their demands and negotiate to reach an agreement. Companies and organisations might be able to shut out the voices of one or two employees, but it is highly unlikely that they do the same with larger groups of unified individuals.  

Encourages participation

Collective bargaining is a way of encouraging the participation of both parties to decide how much benefit each party should have. It is a form of participation as it involves the authority of rule making power being shared between employers and unions in fields like-

1. Transfer,
2. Promotion,
3. Redundancy,
4. Discipline,
5. Modernisation,
6. Norms related to the production, etc., 

which were regarded as management prerogatives in olden times.

Interesting fact : In countries like Singapore and Malaysia, subjects like- transfers, promotions, retrenchments, layoffs, and work assignments are considered to be beyond the scope of the collective bargaining process.

Improved workplace conditions

With the process of collective bargaining, the workplace conditions have to be seen to have made considerable improvements and also guarantee all workers the same protections. These improvements, amongst other things, include-

1. Improvement in policies related to health of employees,
2. Safety checks,
3. Salaries,
4. Overtime pay, and
5. Vacation time.

Sets limits on settlement of disputes

At times, collective bargaining restricts or sets a limit on the settlement of disputes via trade union action and mentions the same in the agreements. By entering into such agreements, industrial peace is guaranteed at least until the duration of the agreements thus signed upon.

Social partnership

The process of collective bargaining is one of the fundamental features of the concept of social partnership, a concept towards which labour relations should strive.

Valuable by-products

The process of collective bargaining has some precious by-products that are relevant between the two parties. Say, for instance, suppose there were a series of successful and bona fide dealings between two companies thus leading to building a relation of trust between them. This also plays a role in contributing towards mutual understanding by establishing persistent associations.

Improves industrial relations

Collective bargaining also has the effect of improving industrial relations. These improvements can be at various levels. Considering the continuous dialogue that takes place between the parties, which eventually helps improve relations between both the parties and also aids in building a productive relation between the union and the employers’ organisation.

High performance workplace

Usually, labour and management collectively engage in solving issues in the process of collective bargaining, this can lead to a high performance workplace, thus boosting productivity and profit. 

Bilateral relationship

The process of collective bargaining also helps in providing a legally based bilateral relationship. 

Protection of rights of employees and employers

Employer

During the process of collective bargaining, the management’s rights are clearly voiced out, and this is definitely an advantage to the employer.

Employee

Whereas, the employees’ rights are also safeguarded by a binding collective bargaining agreement with which the employer has to adhere to.

Benefiting from multi-year contracts

If parties decide to enter into multi-year contracts or agreements, such contracts may help the employees predict salary and also help them ascertain other issues related to compensation and remuneration.

Advancement in employment policies

Generally, the process of collective bargaining helps in promoting fairness and consistency in employment policies and personnel decisions within and across institutions and organisations.

Choice of union representation

Collective bargaining also gives the option to the employees to choose whether or not they want to have union representation. They may also choose the option of representing themselves on their own.

Workforce development

Workforce development that is necessary to engage in the technology revolution can also be promoted through a strong labour management partnership.

Voicing out grievances

The process of collective bargaining acts as an open ground for addressing grievances in an orderly manner. Employees of an organisation who have issues regarding certain aspects of their work can address the issues in a calm and collective manner via the process of collective bargaining.

Redresses the imbalance of power

In an organisation, employers have a major power within society, and carrying out negotiations and discussions via collective bargaining helps restore the balance between the employees and the employer.

Manages conflicts

All the conflicts and disputes between the social partners can be handled through the process of negotiation, which eventually helps bring about harmony in society.

Encourages peace

The process of collective bargaining plays a major role in averting strikes, thus, promoting industrial peace and harmony and thereby creating a suitable environment for FDI (foreign direct investment).

Disadvantages of collective bargaining

As witnessed above, the process of collective bargaining has numerous benefits; however, these benefits come with a price. The disadvantages of the process of collective bargaining are listed below:

Restricted freedom

After reaching a successful settlement as a result of collective bargaining, management authority and freedom are oftentimes seen to have been restricted or compromised by the negotiated rules.

Potential of polarisation

The process of collective bargaining lays the groundwork or has quite the potential for polarisation between employees and employers.

Disproportionate effect

Oftentimes, it is seen that there is a disproportionate effect of the relatively few active employees on the vast majority of the employees.

Leads to bureaucratisation and delayed decisions

The process of collecting bargaining is often seen to have created bureaucracy. Further, it also takes a long time to reach a settlement, considering the numerous negotiations and discussions taking place while following the collective bargaining process.

Increase in external participation

In some instances, collective bargaining has increased participation by external entities like:

1. Politicians,
2. Arbitrators,
3. State Labour Relations Board, etc.

These entities have played a major role in taking final decisions.

Restrains innovation and change

At times, collective bargaining has protected the status quo of the organisation,  thereby restricting innovation and change at the workplace. This is particularly the case when the change pertains to the privatisation of an industry. 

Difficulty in voicing opinions for small organisations

While following the process of collective bargaining, it becomes slightly difficult for employees belonging to small organisations and campuses to have their voices heard. 

Higher management expenses

The management costs related to negotiations and the administration of agreements are often on the higher side. 

Restricts management from making unilateral changes

The process of collective bargaining generally restrains the ability of the management to make unilateral changes in-

1.  Wages, 
2. Hours, 
3. Other terms and conditions of employment. 

The case will not be different in the case of genuine cases too.

Restrictions on dealing directly with individual employees

Collective bargaining often meddles with the management’s ability to deal directly with individual employees. 

Increased dependence on private sector

Often, collective bargaining results in an increased dependency on the private sector for some services,  especially those that need technological competence.

Difficulty in contract administration

The ultimate result of collective bargaining – contract administration, often becomes quite tiresome to handle. Additionally, it also changes the skills required of managers and supervisors to a huge extent. 

Inadequate skills

At times, employees in Indian organisations lack the capacity or skill necessary to make good bargains in the procedure of collective bargaining. This could be the case, as at times the employees are ignorant, illiterate, or the like. In such cases, employees are forced to accept unfavourable conditions and go about working in the workplace.

Lacks public interest representation

No doubt,  collective bargaining is one of the excellent solutions for labour disputes, but it does not have the capacity to involve the interests of the general public at the bargaining table. When unions, companies, and organisations agree on huge wage increases, there is a possibility that the cost of the product/commodity rises, and the consumer ultimately has to bear the weight of the increased wages as per the agreement. 

Wage and grade drift

In a capitalist society, collective bargaining may cause wage and grade drift. A wage drift results in higher inflation within the economy, which in turn leads to a higher interest rate and lower investment.

Lengthy process

Collective bargaining is quite a lengthy process, and it takes employees and employers weeks or even months to reach an agreement or a settlement. In order for both parties to reach a settlement on employment terms, employers and labour union leaders have to go back and forth. During the process of collective bargaining, union leaders have to update employees and put the employment terms to vote; here, if the employees vote to not accept the contract, then the negotiation process starts from scratch all over again.

High cost

The process of collective bargaining often comes at a high cost.

Time consuming

Employees and employers have to take time off from work to negotiate employment terms, this means less time on the job, thus causing less productivity in the workplace. In other words, lengthy negotiations can often affect a company at the base level.

Considered to be biassed, at times

The process of collective bargaining is oftentimes considered biassed. At times, as employees of a company join hands and come under a single union to negotiate employment terms, employers have no option but to accept unfavourable terms in order to keep the business running without much disarray, thus being biassed against the employers.

Challenges faced in collective bargaining process

Even after the right to collective bargaining is recognised in India there are several challenges faced by Walkers and trade unions during the process of negotiation with their employers on management. These challenges include the following:

Low rate of unionisation

One of the main challenges faced in the process of collective bargaining in India is the low rate of unionisation. In India, only 10% of the workforce is unionised, reason being, India has a large informal sector which employs a significant proportion of the population and where many workers do not have the legal protection nor are they unionised.

Lack of equality in bargaining power

Another challenge the collective bargaining in India is facing is the lack of equality of the bargaining power between the employees and the employers. This is the case in sectors where employers have a major bargaining power. More often than not, employers have the power to resist demands put forth by the employees for better wages and enhanced working conditions thus leading to prolonged disputes and industrial action. Furthermore, many employers do not recognize the concept of collective bargaining or trade unions and refuse to engage in collective bargaining, thus alleviating workers’ power to bargain and negotiate.

Lack of legal protection for informal sector workers

Informal sector workers, who make up a major proportion of the Indian workforce, oftentimes do not have the legal protections and are not unionised. Subsequently, they are more vulnerable to exploitation and unfair labour practices. Moreover, many informal sector workers do not have access to social security benefits like:

1. Healthcare, 
2. Pensions, etc., 

thus making them more financially unstable. 

Case laws on collective bargaining

There are several famous case laws on the process of collective bargaining, some of them are as follows: 

Ram Prasad Vishwakarma v. Industrial Tribunal (1961)

In this case, the Supreme Court’s bench consisted of Justice Gupta and Justice K.C. Das, observed that the labourers found it very difficult to negotiate the terms and conditions of their contracts. However, after the concept of trade unions and collective bargaining was brought into play, the situation changed and employees got the chance to voice out their opinions in a better manner.

All India Bank Employees’ Association v. N.I.Tribunal (1962)

In the case of All India Bank Employees’ Association v. N.I.Tribunal (1962), the Supreme Court dictated the rights of the members of the trade unions in accordance with the Fundamental Right to Freedom of speech and expression under Article 19(1)(c), and started the following to be the rights:

1. The rights of the members of the union to meet,
2. Then right of the members to travel or move from.one place to another,
3. The right of the members to discuss and address their problems and share their point of view and opinions, and
4. The right of the members to hold property.

Further, this case also stated that strikes by trade unions may be controlled or restricted by appropriate industrial legislation.

Bharat Iron Works v. Bhagubhai Balubhai Patel (1976)

In the case of Bharat Iron Works v. Bhagubhai Balubhai Patel (1976), the Supreme Court via the Bench of Justice Goswami and Justice P.K. stated that the concept of collective bargaining is a part of the modern-day concept of the welfare state and that such a method should be exercised in a healthy manner and in a way where there is cooperation and respect between employees and employers. Further, the justices also claimed that negotiation between the management and the trade union aids in reaching a settlement in matters of several industrial disputes.

B. R. Singh v. Union of India (1989)

In this case, the Supreme Court recognized “strike” to be a mode of resolving disputes and grievances of the workers.

Hindustan Lever Ltd. v. Hindustan Lever Employees Union (1999)

The Courts have from time to time reiterated the importance of collective bargaining between workers and employers in modern economic life and so is the same in the case of Hindustan Lever Ltd. v. Hindustan Lever Employees Union (1999). Labourers, workers and employees faced significant hardships like poor work conditions, low wage rates, etc., before the advent of the process of collective bargaining; however, as the country’s trade unions developed and advanced, collective bargaining started becoming the norm. Further, the case also points out that employers found it easy to deal with the representatives of workers rather than individual employees themselves and this helped them in multiple ways like amending contracts, taking disciplinary action against one or more workers, and in resolving other industrial disputes.

Key takeaways

1. Collective bargaining is the process of negotiating employment terms between an employer and a group of workers.
2. This process takes place between company management and a labour union.
3. The matters that may be discussed in this process include 

1. working conditions, 
2. salaries,
3. compensation, 
4. working hours, and 
5. benefits.

4. The goal of collective bargaining is to come up with a unanimous agreement or contract.
5. There are numerous types of collective bargaining, including:

1. composite concessionary, 
2. distributive, 
3. integrative, and 
4. productivity bargaining.

Important points to be followed

Important points to be followed : collective bargaining

1. The process of collective beginning plays a crucial role in settlement and prevention of industrial disputes. It has become an important tool for maintaining peace and harmony in industrial relations, and thus, the responsibility of proper implementation of this process is in the hands of both the parties, i.e., the employer as well as the employees. 
2. Furthermore, collective bargaining should authorise the union leaders to voice out to the management the demands and desires of the employees and should also create a ground for the management to explain to the union leaders the problems and difficulties the management or the employer has to meet or fulfil such desires or demands. 
3. There must also be an honest attempt to resolve matters and the solutions should be feasible for both the parties (and not biassed) for such problematic issues. 
4. In order to make the process of collective bargaining work efficiently, faith and confidence in each party should be developed by both the employer and the employees (or the management). 
5. Both the parties should respect each other equally. 
6. The representatives of labour and management have to be honest and behave with proper responsibility.

Important points to be followed : management

1. The management should periodically have a look at the rules and regulations that govern the labour force and industrial relations. This will make the employees feel heard and the employers or management will gain the goodwill and trust of the employees.
2. The management should provide recognition to the unions without any reservations. They must also consider that the workforce is a constructive and cooperative force in the organisation. This in turn will help upgrade their status as well as their responsibility.
3. The management must also formulate and follow a realistic labour policy that should it only be accepted at all levels of the organisation or the company, but also be enforced in order for collective bargaining to be efficacious. 
4. Management should work efficiently to establish a strong and satisfactory relationship between the employees, union and the representatives in order to win the confidence of unions. This will restrict the union(s) from taking any drastic measures like that of declaring a strike or any other measures that would disturb industrial relations.
5. Management should also put efforts to elucidate the unions or its members on the significance and usefulness of the concept of collective bargaining. They should make an attempt to explain to the employees that collective bargaining is not just a bargaining process but also a means to bring about flexibility and understanding between the parties.
6. The management should by themselves try to recognise, notice, understand and resolve the problem and grievances of the employees as soon as they get to know about it, instead of trade unions bringing it to their attention. Such a step will not only save industrial relations from getting complicated, but also will save one’s time and energy by avoiding the long, time consuming process of negotiation.
7. While carrying out the process of negotiation with the union, the management should not only think from an economic point of view but also must consider social aspects. Considering economic as well as social points of view will help the management to have a more rational and balanced negotiation.

Important points to be followed : trade unions

1. Trade unions have to be considerate about the economic implications of collective bargaining and realise that the demands of the unions must be met from the profit and resources of the organisation. Union should not put a lot of pressure on the management for such matters.
2. If the trade unions want to have a look at the complete promotion of collective bargaining, it has to put in complete efforts to eliminate undemocratic practices within their organisation.
3. The trade unions must also consider it their responsibility and/or obligation to help the management reduce waste and wasteful expenses. Unions should give major importance to improving the productivity and quality of production at the workplace. The union should also make use of the process of collective bargaining to boost participation of workers and to make the working conditions better at the workplace. Unions should not confine the process of collective bargaining only to increase the monetary outcome or for economic gains only.
4. Trade unions have to keep in mind that the process of collective bargaining is a two way street and that there has to be mutual give and take between both the parties rather than take it or leave it method.
5. Trade unions should not consider the process of collective bargaining as a competitive process, instead, they should think of it as a complementary process. In other words, trade unions and management both have to understand that each party needs something the other party has and that each party has to give something which the other party needs.
6. Moreover, as a general principle, trade unions must refrain from putting forward additional and exaggerated demands of employees in front of the management and must consider this process as one that involves compromise and flexibility instead of being stubborn. Learning and implementing to adjust and accommodate is more constructive than having conflicts and disputes.
7. Unions should resort to strikes and other drastic measures only when all the other methods of settling disputes have failed to be fruitful or provide a satisfactory outcome.

Collective bargaining : the way forward

Despite the numerous challenges collective bargaining as a process faces in India, they can always be improved. Mentioned below are some of the ways to make better this process:

Increase unionisation rates

One of the best ways to enhance the process of collective bargaining in India is to boost the rates of unionisation in India. This object can be accomplished by founding trade unions in the informal sector and by giving legal protection to informal sector workers. Furthermore, efforts should be put into promotion of advantages of unionisation among workers and to motivate employers to recognize trade unions and engage in the process of collective bargaining. 

Encouraging dialogue and cooperation

Another method to strengthen the process of collective bargaining in India is to encourage dialogues between the employees and employers. This goal can be attained by forming dispute resolution mechanisms, like conciliation and mediation, as well as having a provision of training and support for both, the employee and the employer on the main advantages of collective bargaining and the significance of fair labour practices.

Enhancing legal protection for workers

Further, enhancing legal protections for workers, especially those coming from the informal sector, can help strengthen the process of collective bargaining in India. This objective can be attained through the implementation of laws and regulations that protect the rights of the workers to form trade unions and engage in the process of collective bargaining, as well as make provision of social security benefits to informal sector workers.

Conclusion

Collective bargaining can be defined as the process where workers, labourers and employees come together to demand improvements in workplace conditions, higher amounts of wages or salaries, better benefits, etc. By coming together and standing united, workers, labourers, and employees can negotiate with much more leverage than they would do alone. Further, employers, too, can voice their opinions and address the whole set of workers, labourers, and employees, instead of dealing with each of them separately. This process has been quite fruitful for resolving industrial disputes.

Has collective bargaining really worked

As per a survey conducted by the Bureau of Labour Statistics of the government, on average, union workers enjoy a total of 36.4% greater wage and benefit package in comparison to unorganised workers. Further, in wages alone, workers that belong to a particular trade union, enjoyed an average of 21.4% better paychecks in comparison to unorganised workers. At the end, it is important to remember that-

When workers act together, they win. When they do not, the employer wins.

Frequently Asked Questions (FAQs) on collective bargaining

What is collective bargaining? Give an example.

Collective bargaining can be defined as an official process through which employees of an organisation or trade  unions on behalf of such employees negotiate with employers or management of that organisation with regards to employees’ terms and conditions of employment.

An example of collective bargaining could be the negotiation carried on by a trade union of an organisation to discuss the pay scale or change the duration of working hours.

What are the main types of collective bargaining?

The main types of collective bargaining are as follows:

1. Composite bargaining, 
2. Concessionary bargaining, 
3. Distributive bargaining, 
4. Integrative bargaining, and 
5. Productivity bargaining.

For more information on the main types of collective bargaining, please refer to this section.

Is collective bargaining illegal in any way?

As per the International Labour Organisation (ILO), employers have the right to form unions to represent their terms and conditions as part of their right to collective bargaining. Further, union leaders have the authority to negotiate and discuss employment terms with employers and monitor them through employment contracts. So, to sum it all up, collective bargaining is not an illegal process.

What is the scope of collective bargaining?

The process of collective bargaining has the scope of addressing concerns that affect employees and their conditions at the workplace. These issues may include:

1. Compensation,
2. Working conditions at the workplace,
3. The environment at workplace,
4. Benefits,
5. Company policies and procedures.

Further, collective bargaining also provides methods to resolve disputes that may occur between employers and their employees.

What are the main objectives of collective bargaining?

The main objective of collective bargaining is-

1. The representation of employees and the employer,
2. To reach an agreement on terms of employment.

This is referred to as a collective bargaining agreement or contract that includes employment terms and conditions that would benefit both parties involved.

What are the key benefits of collective bargaining?

Collective bargaining is the process of solving workplace disputes. It is also considered one of the best methods for raising wage rates in countries like the United States of America. With this process, working people in unions have higher wages, better benefits, and safer workplaces.

What is collective bargaining in India?

Collective bargaining enables workers, labourers, and employees to discuss and negotiate with their employers the terms and conditions of their employment, thus making sure their needs are met. In India, the process of collective bargaining is referred to as one of the basic rights of workers, and these rights are protected under the Industrial Dispute Act, 1947.

What is the first step in collective bargaining?

The first and initial step in the process of collective bargaining is the preparation of both parties. The parties have to have an understanding of each other’s conditions, the employer must understand the working conditions and dissatisfaction of the employees and the workplace; and the employees should understand the condition of the management or the employer. Each party should think from the other party’s perspective to reach an effective inference. Thus, preparation is the first and foremost step to reaching an effective collective bargaining settlement. 

What is the right to collective bargaining and action?

In accordance with the union law and national laws and practices, workers and employers of all the organisations have the right to negotiate their terms of employment and eventually reach a settlement, which is then turned into a collective bargaining agreement after both parties agree to the terms of each other. In some cases, when the parties do not agree with the terms or see eye to eye and there is conflict of interests, the other party may take collective action to defend their interests, like strikes, layoffs, lockouts, etc.

Who can participate in the process of collective bargaining?

Collective bargaining, a voluntary process that encourages workers and employees to discuss and negotiate their relations, especially those involving workplace conditions, amongst other things.

Who introduced the concept of collective bargaining in India?

1. The concept of collective bargaining agreement was first made by Dunlop Rubber Company in West Bengal in 1947. 
2. Then came the Bata Shoe Company in West Bengal.
3. Later, in 1951, the Indian Aluminium Company made its five year agreement with employees union in Belur.

What is the importance of collective bargaining in industrial relations?

There are several benefits to using collective bargaining as a process of negotiation between the employee and employer to enhance the word place conditions; however, the following are the major benefits one can derive from the process of collective bargaining:

1.  improvement in wages and working conditions,
2.  equality between all the people working for the organisation of the company,
3.  provides a stage for both parties to voice their grievances, i.e., management and workers are considered to be on the same level at the negotiation table as a  procedure for the process of collective bargaining.

Multiple Choice Questions (MCQs) on collective bargaining

The term used when an employer refuses to give work opportunities to someone?

1. Injunction
2. Lock out
3. Grievance procedure
4. Strike procedure

Answer: (b)

What is the term used when there is a combined denial of buying products of employers, union members, as well as employees?

1. Impasse boycott
2. Boycott
3. Picketing
4. Strike

Answer : (b)

The types of third party negotiation, known as arbitration, include which of the following terms: 

1. Binding arbitration
2. Non-binding arbitration
3. Interest arbitration
4. All of the above

Answer : (d)

In accordance with a business perspective, employees carrying sign language to depict their concerns, are termed as

1. Picketing
2. Strike
3. Impasse boycott
4. Boycott

Answer : (a)

The kind of union security wherein organisations can hire current union members is referred to as

1. Closed shop
2. Agency shop
3. Union shop
4. Preferential shop

Answer : (a)

Collective bargaining is defined under which of the following acts?

1. National Labour Relations Act
2. Occupational Safety and Health Act 
3. Civil Rights Act
4. Fair Labour Standards Act

Answer : (a)

When an employer refuses to bargain or carry out a negotiation with the employees’ representative, it is called:

1. Executive proceeding
2. Economic strike
3. Arbitration proceeding
4. Unfair labour practices

Answer : (d)

The parties engaged in a collective bargaining process involve

1. Employee representative and the employer
2. Employee and the employer
3. Employer and the labour inspector
4. Labour inspector and an employee

ANSWER: (a)

Which of the following is an outcome of the process of collective bargaining?

1. Arbitration award
2. Award of Tribunal
3. Award of Labour Court
4. Consent award

Answer : (d)

References

• 3rd edition on the Maharashtra Recognition Of Trade Unions And Prevention Of Unfair Labour Practices Act, 1971, and Principles Of Collective Bargaining by Prof. H. D. Pithawalla, Chapter 11 (Collective Bargaining), C. Jamnadas & Co. Production, Pg- 42 to 57.
• https://www.investopedia.com/terms/c/collective-bargaining.asp 
• https://taxguru.in/corporate-law/collective-bargaining-india.html
• https://www.mlsu.ac.in/econtents/1197_Collective%20Bargaining%20.pdf
• https://www.caclubindia.com/articles/understanding-collective-bargaining-in-india-legal-framework-process-and-case-studies
• https://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/India-Trade-Unions-and-Collective-Bargaining.pdf