United, we stand, divided, we fall.
A very famous saying we all have heard, as true as old. We all have heard of
various stories of the strength of Unity. The same thing has been followed by
various people and they achieved their goals. British people knew and ruled us
with the "Divide and Rule" policy.
The concept of unity is nothing new and when a large number of people unite for
protecting their own interests and here comes the concept of trade unions under
labor law. Not only in labor law but various legal concepts encourage the people
to come together and put their collective interests before the authority holding
the power to violate their rights.
Definition Of Collective Bargaining
Collective bargaining is basically an important principle of Negotiation
techniques and is frequently used as a tool for resolving the disputes in a
faster and effective manner.
ILO Convention No. 154 under Article 2 defines collective bargaining as
"all negotiations which take place between an employer, a group of employers or
one or more employers' organizations, on the one hand, and one or more workers'
organizations, on the other, for:
There are various provisions given in various legislations that indicates
towards the use of collective bargaining in various conditions:
- Determining working conditions and terms of employment; and/or
- Regulating relations between employers and workers; and/or
- Regulating relations between employers or their organizations and a
workers' organization or workers' organizations.
- Trade Union Act, 1926
- Code of Civil Procedure, 1908
- Companies Act, 2013
Collective Bargaining in India
Bargaining has been defined by the Supreme Court ("SC") as "the technique by
which dispute as to conditions of employment is resolved amicably by agreement
rather than coercion". It is a process of discussion and negotiation between
employer and workers regarding the terms of employment and working conditions.
Workers are generally represented by trade unions with respect to expressing
their grievance concerning service conditions and wages before the employer and
Refusing to bargain collectively in good faith with the employer is considered
to be an unfair labor practice as per the provisions of the Industrial Disputes
Act, 1947 (IDA) . This is generally an effective system as it usually results in
employers undertaking actions to resolve the issues of the workers. However, the
legal procedure for pursuing collective bargaining in India is complicated.
Stages of Collective Bargaining in India
- Charter of Demands
Typically, the trade union notifies the employer of a call for collective
bargaining negotiations. However, in certain cases the employer may also
initiate the collective bargaining process by notifying the union(s). The
representatives of the trade union draft a "charter of demands" through various
discussions and consultations with union members. The charter typically contains
issues relating to wages, bonuses, working hours, benefits, allowances, terms of
employment, holidays, etc. In an establishment with multiple unions the employer
generally prefers a common charter of demands, but in principle, all unions may
submit different charters.
As a next step, negotiations begin after the submission of the charter of
demands by the representatives of the trade union. Prior to such negotiations,
both the employer and the trade unions prepare for such negotiations by ensuring
collection of data, policy formulation and deciding the strategy in the
After such preparation, the negotiations take place wherein the trade unions and
the employer engage in debates and discussions pertaining to the demands made by
the trade unions. In the event that such demands are rejected, the trade union
may decide to engage in strikes.
The collective bargaining process obviously takes long where the employer has to
engage with multiple unions. In the public sector, it may take months or even
years. For example, the Joint Wage Negotiating Committee for the Steel Industry,
covering workers in four large unions, took more than three years from the date
of the submission of the charter of demands to the Steel Authority of India Ltd.
- Collective Bargaining Agreement
Next, a collective bargaining agreement will be drawn up and entered into
between the employer and workmen represented by trade unions. It may be
structured as bipartite agreement, memorandum of settlement or consent award.
These are discussed below in detail.
If both parties fail to reach a collective agreement, the union(s) may go on
strike. As per the IDA, public utility sector employees must provide six weeks'
notice of a strike, and may strike fourteen days after providing such notice (a
'cooling off period'). Under the IDA, neither side may take any industrial
action while the conciliation is pending, and not until seven days after the
conclusion of conciliation proceedings or two months after the conclusion of
A conciliation proceeding begins once the conciliation officer receives a notice
of strike or lockout. During the 'cooling off period', the state government may
appoint a conciliation officer to investigate the disputes, mediate and promote
settlement. On the other hand, it may also appoint a Board of Conciliation which
shall be appointed in equal numbers on the recommendation of both parties, and
shall be composed of a chairman and either two or four members. No strikes may
be conducted during the course of the conciliation proceeding. Conciliation
proceedings are concluded with one of the following recommendations:
- a settlement,
- no settlement or
- reference to a labour court or an industrial tribunal.
- Compulsory Arbitration or Adjudication by Labour Courts, Industrial Tribunals
and National Tribunals
When conciliation and mediation fails, parties may either go for voluntary or
compulsory arbitration. In the case of voluntary arbitration, either the state
or central government appoints a Board of Arbitrators, which consists of a
representative from the trade union and a representative from the employer. In
the case of compulsory arbitration, both parties submit the dispute to a
mutually-agreed third party for arbitration, which is typically a government
officer. Arbitration may be compulsory because the arbitrator makes
recommendations to the parties without their consent, and both parties must
accept the conditions recommended by the arbitrator.
Section 7A of the IDA provides for a labour court or industrial tribunal within
each state government consisting of one person appointed to adjudicate prolonged
industrial disputes, such as strikes and lockouts.
Section 7B provides for the constitution of national tribunals by the central
government for the adjudication of industrial disputes that involve questions of
national interest or issues related to more than one state. In such a case, the
government appoints one person to the national tribunal and can appoint two
If a labour dispute cannot be resolved via conciliation and mediation, the
employer and the workers can refer the case by a written agreement to a labour
court, industrial tribunal or national tribunal for adjudication or compulsory
arbitration. A final ruling on the industrial dispute must be made within six
months from the commencement of the inquiry. A copy of the arbitration agreement
signed by all parties is then forwarded to the appropriate government office and
conciliation officer pursuant to which the government must publish the ruling in
the Official Gazette within one month from receipt of the copy.
Levels of Collective Bargaining in IndiaIn India, collective bargaining typically takes place at three levels:
National-level industry bargaining is common in core industries such as banks,
coal, steel, ports and docks, and oil where the central government plays a major
role as the employer. In these industries, the CTUO do not typically provide any
guidelines on a charter of demands, including an increase of wage or improvement
of working conditions; instead, both sides – the government and trade unions –
set up a "coordination committee" to engage in the collective bargaining
proceedings. Collective bargaining in the public sector generally suffers if the
position of the state government is different from that of the central
Pay scales for government employees at the national level are revised by Pay
Commissions, and wage increases are determined by Wage Boards for several
industrial sectors, such as journalists and other newspaper employees. Wage
Boards are tripartite organizations established by the government to fix wages.
They include representatives from workers, employees and independents. The SC
recently upheld the Majithia Wage Board's recommendations to raise salaries for
journalists and non-journalists in print media, dismissing challenges by the
management of various newspapers.
Industry-cum regional bargaining is peculiar to industries where the private
sector dominates, such as cotton, jute, textiles, engineering, tea plantation,
ports and docks. Bargaining generally occurs in two stages: company-wide
agreements are formed, which are then supplemented with regional (i.e.
plant-level) agreements. Basic wage rates and other benefits are usually decided
at the company level, while certain allowances, incentives etc., are decided at
the regional or plant level, taking into account the particular circumstances,
needs etc., of the employees. However, such regional agreements are only binding
on company management if the employers' association authorizes it in writing to
bargain on its behalf.
Enterprise or plant-level bargaining practices differ from case to case because
there is no uniform collective bargaining procedure. Typically, the bargaining
council (or negotiating committee) is constituted by a proportional
representation of many unions in an establishment. It is therefore easier for
the management to negotiate with one bargaining agent if multiple unions at the
company can form such a single entity.
If not, the management will then have to
negotiate individually with each registered union. In the private sector,
employers generally press for plant-level bargaining because uniformity of wage
negotiation can be ignored and the bargaining power of trade unions can be
reduced. Also, trade unions insist on plant-level bargaining because the payable
capacity of the company is much higher and because labor issues can be resolved
more quickly and easily. Trade unions can typically face a dilemma in
decentralized plant-level bargaining if the business is having a managerial
crisis from market failures or the management is reluctant to negotiate with the
Collective Bargaining Agreements in India/Types of Collective
Bargaining AgreementsIn India, collective bargaining agreements are divided into three classes:
Bipartite (or voluntary) agreements are drawn up in voluntary negotiations
between the employer and the trade union. As per the IDA, such agreements are
binding. Implementation is generally non-problematic because both parties
reached the agreement voluntarily.
Settlements are tripartite in nature, as they involve the employer, trade union
and conciliation officer. They arise from a specific dispute, which is then
referred to an officer for reconciliation. If during the reconciliation process,
the officer feels that the parties' viewpoints have indeed been reconciled, and
that an agreement is possible, he may withdraw himself. If the parties finalize
an agreement after the officer's withdrawal, it is reported back to the officer
within a specified time and the matter is settled. However, it should be noted
that the forms of settlement are more limited in nature than bipartite
agreements, because they must relate to the specific issues referred to the
Consent awards are agreements reached while a dispute is pending before a
compulsory adjudicatory authority, and incorporated into the authority's award.
Even though the agreement is reached voluntarily, it becomes part of the binding
award pronounced by the authority constituted for the purpose.
Contents of Collective Bargaining Agreements
As a part of collective bargaining mechanism, employers and workmen represented
by trade unions enter into collective bargaining agreements typically structured
as memorandum of settlements which enumerate the various clauses that govern the
relationship between the workmen represented by trade unions and employers.
The IDA, under section 18(1) of the IDA, provides that such settlements entered
into between workmen represented by trade unions and employers would be binding
upon the parties.
Typically, clauses in the memorandum of settlement pertain to the following:
- Term / Duration of the memorandum of settlement as may be agreed between the
- Settlement terms which, typically, maybe with respect to wages, benefits,
allowances, arrears with respect to payment to workers, concessions, works
hours, overtime, etc.
- Conditions with respect to strikes and lockouts by trade unions and employers
- Obligations of workmen
- Obligations of employer
- Penalties with respect to non-compliance of the obligations of workmen and
- Dispute resolution
- Miscellaneous clauses including severability, notice, etc.