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
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
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 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.
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
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.
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.
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
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.
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.
Stages Of Collective Bargaining
Following are the 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.
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
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.
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.
Legal Boundaries For Collective Bargaining In India
The IDA oversees the rights of employers and employees in the investigation and
settlement of industrial disputes, which includes trade unions.
It allows for collective bargaining through discussion and mediation, or, if
that fails, voluntary arbitration or compulsory adjudication with trade union
involvement. A settlement reached through collective bargaining is legally
binding, according to the IDA, there are two types of settlements recognised:
those agreed via conciliation processes before the authority, which bind members
of the signatory union as well as non-members and all current and future
management workers. The second type of settlement is one achieved outside of
conciliation but signed independently by the parties to the agreement - such
agreements bind just the parties to the agreement.
Even after all the indirect provisions for collective bargaining are there, the
workers or the trae union still faces backlash. There are some legal boundaries
which causes this.
Some of them are:
- There is no ratification of ILO Convention, C-98 and C-87.
- There is a very limited scope collective bargaining under the ambit of
Trade Union Act and Industrial Dispute Act.Both statutes are silent on the
recognition of trade unions, which has serious implications for workers' rights.
- One of the major backlashes is that the right to strike is a legal right
controlled by the Industrial Dispute Act of 1947, rather than a fundamental
right. Strikes or lockouts can be prohibited under Section 10K of Industrial
- Section 22 of the IDA states that there must be at least 6 weeks' notice
before a strike in public utility services.
- Strikes are prohibited during the pendency of conciliation, arbitration,
and judicial processes under Section 23 of the IDA.
- The CRPC does not apply to trade union activity, although it does in the
case of illegal strikes.
Perspective From Industrial Relation Code, 2020 On Collective Bargaining
The notion of unequal negotiating partners, which arises from the class
connection between employers and employees, lies at the foundation of labour
law. In the case of Central Inland Water Transportation Corporaton V Brojo
Nath, Justice DinshaPiroshaMadon expressly recognised this principle, "Trade
unions play a central role through collective bargaining in unequal
relationships, where workers are at a constant risk of unemployment especially
when employers are a large corporation".
According to the Industrial Relations Code, an employer cannot discriminate
between fixed-term and permanent employees. A fixed-term employee's working
hours, salary, allowances, and other perks cannot be less than those of a
permanent worker doing the same or equivalent work. However, with the acceptance
of fixed-term contracts and individual settlements, even permanent workers'
service terms will be determined on an individual basis.
In effect, trade
unions' role in determining wages and service conditions through collective
bargaining would be eliminated. Individual settlements are now included in the
definition of "settlement" in the statute, which goes against the basic
principle of collective bargaining.
Case Laws Related To Collective Bargaining
- 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
- 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
- The decision of whether organisations fit these requirements should be
carried out by a body that provides every assurance of objectivity and
- 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
Historically, the role of trade unions in India was mostly restricted to
collective bargaining for economic reasons.Trade 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.