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.

Collective bargaining is a process in which the workers and the employer of a company sits
together and resolve industrial disputes harmoniously through discussions and settlements.
Collective bargaining is a right of every worker. It includes employee unionisation,
negotiations, administration, and interpretation of collective bargaining agreements governing
pay, hours of work, and other working conditions, as well as contending in concerted economic
activities dispute resolution procedures. It is a bipartite process in which only employee and
employer are the parties. Only these two parties have the power to involve in the bargaining
process. There is no intervention of the third party and the discussion is carried out collectively.
As the industrialisation in India was late, the true sense of collective bargaining gained the
grounds after the independence. Before independence, the first collective bargaining was done
in a textile mill of Ahmedabad when the workers of the factory realised that resolving the
industrial disputes by taking the help of the court is a total waste of time, energy and money in
the British occupied India. After independence, the first case of collective agreement was
between Dunlop Rubber Company in West Bengal, then the Indian Aluminium Company made
its first five year contract with its employees and then many companies adopted the concept of
collective bargaining. As per International Labour Organisation Manual 1960, "Negotiations
about working conditions and terms of employment between an employer, a group of
employees or one or more employers' organization on the other, with a view to reaching an
agreement."

Principles Of Both The Parties

Management/Employers
The management or the employer should be up to date with all the labour laws and should offer
unions unconditional recognition and regard the employees as a constructive and cooperative
force in the organisation. This will increase both their prestige and their responsibilities. To
restrict unions from doing anything drastic which could harm the industrial relations,
management needs to build a strong relationship with the union in order to gain their trust and
maintain a satisfactory relation with the employees. To maintain a healthy relation with the
union, the management needs to take consideration of the needs of the other side as well while
doing bargaining and not think only from the point of economic considerations. The most
important principle which needs to followed by every management is that it needs to
understand and have the willing acceptance to recognise representative union for joint
bargaining efforts and should stablish equal opportunities of employment with a view to avoid
industrial disputes and maintain peace and harmony in the industry.

Trade Union/Employees
Trade Union should understand the economic implications of the collective bargaining and
realise that it should also align with the resources and financial health of the company and that
the company should not feel any undue influence. Unions must have the responsibility and
obligation to assist management in reducing waste and unnecessary expenditures. It should
place a premium on increasing productivity and quality. To boost participation and improve
working conditions, the union should employ the collective bargaining process. They should
not limit collective bargaining to merely monetary gains. In collective bargaining, it is very
necessary to understand that it is not a competition. The needs of one party is the resource of
the other party and thus, it should be two-way settlement.

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.

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.

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

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.

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

Essential conditions for a successful collective bargaining

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

Disputes arise at every level in a company whether it is a craft level dispute or a national level
dispute. The levels of collective bargaining from region to region, union to union etc. When
the industrial disputes of an organisation is classified as per the levels, it becomes more easy
to resolve the issue and determine the behaviour of the industry. Majorly, there are f levels of
Collective Bargaining.

National-Level Bargaining
This bargaining usually takes place with the Management and the National level union. The
major advantage at this level of bargaining is that issues are acknowledged by all industries
and all industrial employees when negotiation takes place at the national level. The benefits of
negotiation at this level are that salaries and wage structures are uniform and standardised. It
avoids disputes and disparities.

Industry-Level Bargaining
On an industry-by-industry basis, these unions are structured as industry federations. Basic pay,
allowances, production capacity, production rules, and working conditions relating to that
industry are all part of the talks and negotiating. In one industry, bargaining at the industry
level ensures homogeneity in labour costs and working conditions. Bargaining at the industry
level might also take the form of a mix of industry and region-based bargaining. Because of
the varying levels of performance, technology, and productivity, industry-level negotiating has
grown less successful over time, and standard pay and allowances are not conceivable as
concerns at industry-level negotiation.

Corporate-Level Bargaining
When the management of a multi-plant firm negotiates a single agreement with numerous
unions for all of its factories, this is referred to as corporate collective bargaining. Corporate
management frequently conducts collective bargaining with representatives from several
factories. The benefit of corporate level negotiating is that it ensures consistency across all of
the company's locations and prevents conflicts that emerge from disparities. When collective
bargaining takes place at the corporate level, with its multi-plant structure, it's easy to overlook
concerns that are critical at the plant level. Furthermore, when this is done for huge public
sector organisations such as HMT, ONGC, or BHEL, the management is limited in their ability
to bargain, particularly in the Indian context, due to political involvement. The Ministry of
Public Enterprises (MoPE) and the Bureau of Public Enterprises (BPE) both have guidelines.
Corporate management is unable to engage in serious negotiations, and many issues pertinent
to various plants may be overlooked.

Plant-Level Bargaining
The majority of India's private sector firms engage in plant-level collective bargaining. Plant-
level collective bargaining takes place between the management of a certain plant or industrial
site. The problems are specific to particular facility or firm. Performance-related or pay
productivity-related discussions are the cornerstone and foundation of such agreements.
Another advantage of plant-level negotiating is that it allows for separate discussions. These
discussions can take advantage of the differences in cost of living from one location to the next,
providing a realistic negotiating ground.
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.

Stages Of Collective Bargaining

Forming A Union
The minimum number of employees required to form a trade union is seven, according to
Section 9A of the Trade Unions Act of 1926. Though joining a union is not required, it does
have its benefits, such as providing proper representation for employees, the ability to use funds
for certain objectives, and immunity from civil claims, among others.

Charter of Demands
At this point, either the union or the company can start the collective bargaining process. After
that, the labour union writes a charter of demands through a series of meetings with all of its
members.

Negotiation
The negotiating process begins with the filing of a demand charter. In most cases, the union is
the one who offers official requests for revisions to current labour agreements during the first
meeting. The management is then given the opportunity to make counter-proposals. This will
continue until they reach an accord.

Strikes
In the event that negotiations fail, the union may call a strike. Employees in the public utility
industry must provide six weeks' notice of a strike and may strike fourteen days after giving
such notice, according to Section 22 of the Industrial Disputes Act. Management and the union
are not allowed to take any industrial action while the conciliation is in progress, and not until
seven days after the conciliation processes are completed, or two months after the legal
proceedings are completed.

Conciliation
When the conciliation officer gets a notice of strike, the process begins. This phase allows you
to choose between two options. The state government may appoint a conciliation officer to
investigate, mediate, and promote settlement during the cooling-off period, according to
Section 4 of the Act. The second option, according to Section 5 of the Act, is for the state
government to form a Board of Conciliation, which would consist of a chairperson and two or
four members. According to Sections 22 and 23 of the Act, strikes are not permitted during the
conciliation procedure. This process finishes with a settlement or a referral to an industrial
tribunal or labour court, according to Section 20 of the Act.

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

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

Different types of collective bargaining

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.

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.

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 percent 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 Related To Collective Bargaining

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. [Link] (1962)

In the case of All India Bank Employees’ Association v. [Link] (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 [Link] 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

This position, which has been reaffirmed by the Court in numerous subsequent cases,
recognises the importance of collective bargaining between workers and employers in modern
economic life. It is generally known that prior to the advent of collective bargaining, labour
faced significant difficulties in securing appropriate conditions for service contracts from his
employer. As the country's trade unions grew and collective bargaining became the norm,
employers found it necessary and convenient to deal with workers' representatives rather than
individual workers, not only when making or amending contracts, but also when taking
disciplinary action against one or more workers, and in all other disputes.

Mrf United Workers Union V State of Tamil Nadu, 2009

Two criteria should be utilised to assess if an organisation has the competence to be the sole
signatory to collective agreements: representativeness and independence.
The decision of whether organisations fit these requirements should be carried out by a body
that provides every assurance of objectivity and independence.
As a result, it was argued on their behalf that it was an international standard that the trade
union serving as the sole collective bargaining agent must be representative and independent.

P. Virudhachalam&Othrs. V The Management of Lotus Mills

It is important to remember that the Act is built on the notion of collective bargaining for the
purpose of settling industrial disputes and sustaining industrial peace. Individual workers must
inevitably fade into the background in all collective bargaining negotiations. The union that
represents such workers takes up the reins of negotiating on his behalf. On behalf of all of its
members, unions advocate for a shared cause. As a result, any agreement they reach with
management will bind at least their members, and if it is reached through conciliation processes,
it will bind even non-members. As a result, settlements are the Act's live wires for guaranteeing
industrial peace and prosperity.
Conclusion
Historically, the role of trade unions in India was mostly restricted to collective bargaining for
economic [Link] unions, on the other hand, currently play an important role in
employee welfare, cultural programmes, banking, and medical facilities, as well as raising
awareness via training and education of trade union members. In recent years, however, due to
increased competition, the dominant managerial objectives in collective bargaining have been
to reduce labour costs, increase production or productivity, flexibility in work organisation
(multi-skilling/multifunctioning, changes in worker grades, etc.), increase work time, reduce
regular staff strength via VRS, stress on quality, and so on. Despite a few recent events that can
mostly be classified as one-off situations, most trade unions have succeeded to create a climate
that allows for a constructive conversation between employees and employers about whatever
requests they may have. Furthermore, over time, Indian trade unions have guaranteed that a
platform exists to support improved industrial relations, industrial growth, and productivity
improvement.