TERM PAPER

SUBJECT- INDUSTRIAL RELATIONS

TOPIC-COLLECTIVE BARGAINING

SUBMITTED TO: SUBMITTED BY:

Dr. S.K. KAUSHAL SABA KAZMI

FACULTY, DBA MBA 3rd SEM.

UNIVERSITY OF LUCKNOW
 The making of this term-paper has become
possible due to the guidance, efforts and co-
operation given by many people who have played
an important role however, small or big, in it’s
successful completion.

I wish to extend my humble gratitude to

Dr. S.K. Kaushal for his kind efforts and guidance
for this term-paper, whose ever presence in my
mind with helping attitude encouraged me
complete this term-paper.

I express my deep sense of gratitude to my friends

for their valuable help and continuous motivation
and family members for their co-operation and
support during the making of this term-paper.

SAB
A KAZMI
MBA
3rd SEM.
COLLECTIVE BARGAINING

Definitions-

The I.L.O. defines collective bargaining:

"As negotiations about working conditions and terms of employment between an employer, or a
group of employers, or one or more employers' organizations, on the one hand, and one or more
representative workers' organization on the other with a view to reaching agreement."

This definition confines the term collective bargaining as a means of improving conditions of
employment. But in fact, collective bargaining serves something more.

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.”

“Collective Bargaining is a mode of fixing the terms of employment by means of bargaining

between an organized body of employees and an employer, or an association of employers
usually acting through organized agents. The essence of collective bargaining is a bargain
between interested parties, and not a decree from outside parties”.
- Hoxie.

“Collective Bargaining takes place when a number of work-people enter into a negotiation as
bargaining unit with an employer or group of employers with the object of reaching an
agreement on the conditions of employment of the work-people”.
-Richardson.
POSITION OF COLLECTIVE BARGAINING IN INDIA

Collective Bargaining machinery essentially is a reflection of a particular social and political

climate. The history of the trade union movement shows that union are affiliated to one or the
other political parties. As a result most of the trade unions are controlled by outsiders. Critic says
that the presence of outsiders, is one of the important reasons for the failure of collective
bargaining in India.

Outsiders in the Process of Collective bargaining:-

The Trade Unions Act, 1926, permits outsiders to be the office bearers of a union to the extent of
half the total number of office bearers. So, it permits one to be the leader of the union who does
not actually work in the industry. Sometimes a dismissed employee working as a union leader
may create difficulties in the relationship between the union and the employer. Nevertheless,
experience shows that outsiders who have little knowledge of the background of labor problems,
history of labor movement, fundamentals of trade unionism and the technique of the industry and
with even little general education assume the charge of labor union and become the self-
appointed custodian of the welfare of workers. The employers, therefore, have been reluctant to
discuss and negotiate industrial matters with outsiders, who have no personal or direct
knowledge of day to day affairs of the industry.

Accordingly employees refuse recognition to the unions which are either controlled by the
politicians or affiliated to a particular political party or controlled by a particular individual.
Government cannot morally compel employers to accord recognition to unions without driving
out the politicians from them. The State must outright ban "outsiders" from the trade union body.
Further, provision for political funds by trade unions should be eliminated, since it invariably
encourages the politicians to prey upon them. The National Commission on Labor has
overlooked this aspect. The Commission does not favor a legal ban on non-employees for
holding the union office. It says that without creating conditions for building up the internal
leadership, a complete banning of outsiders would only make unions weaker. The Commission
hopes that internal leadership would develop through their education and training. Accordingly
the Commission suggests proportion of the outsiders and the workers in a union executive. On
realizing the problems of outsiders in the Union, the Industrial Relations Bill, 1988 proposes to
reduce the number of outsiders to two only.
Politicization of Trade-Union Movement in India:-

It is well known that the trade-union movement in India is divided on political lines and exists
on patronage of various political Parties. Most of the trade-union organizations have aligned
themselves with a political party with whom they find themselves philosophically close. It is
because of this that the Indian National Trade Union Congress is considered to be the labor wing
of congress, whereas H.M.S. is considered to be the labor wing of Socialist party. Bhartiya
Majdoor Sangh pledges its allegiance to B.J.P. and C.I.T.U. has the support of C.P.I. (M). It is
also the case with the AITUC which had started as a national organization of workers but
subsequently came to be controlled by the Communist Party of India and is now it's official labor
wing. Political patronage of trade-unions has given a new direction to the movement whose
centre of gravity is no longer the employees or workmen. The centre has shifted towards it
leadership whose effectiveness is determined by the extent of political patronage and the
consequent capacity to obtain the benefit. This shifting centre of power is the necessary
consequence of political parties search for workers votes, which they seek by conferring benefits
on them. Since the public sector which is really the instrumentality of the State, has emerged as
the biggest employer in this country, the collective bargaining -between the union patronized by
the party-in-power and the employer has become an important methodology. It is because of this
process that agreements conferring benefits are signed even in those units where financial losses
are mounting. It is also our experience that in spite of wage increase end improved conditions of
service; there has been no corresponding improvement in production or the productivity. Also,
most of the losses are being passed on to the consumers by increasing prices of the products. It is
in this context that Justice Gupta has, in his, 'Our Industrial Jurisprudence" made the following
observations:“If our experience is any guide, it reveals that Ievel of increase in wages etc., ( in
public sector undertaking )is now decided by the Bureau of Public Enterprises which takes into
consideration only the Political impact and 'Consumer resistence' as two dominant factors. This
is the reason why the prices of almost all products of necessity like coal, iron and steel, cement,
sugar etc. have been constantly increasing. A survey of pending and decided industrial disputes
of the last 10 years reveals that there was virtually no industrial dispute regarding wage structure
or bonus in any industry of some significance.

There are also not many collective bargaining agreements which have tried to link wages with
productivity. Clearly, therefore, the basic idea of ‘sharing the prosperity' which developed
because of our commitment to the cause of 'social justice' is no longer current and the expected
end product of the process of ' social justice ' is no longer expected. "7

The process of collective bargaining is not likely to succeed unless the threat of strike/lockout is
there in the back-ground. Strike and lock-out are the weapons used by both the parties daring the
collective bargaining process. Without having these weapons at hands, neither of the party to the
dispute can defeat the claim of the other. The peculiar feature of our country while compared to
the advanced nations of the world is that the economic conditions of the workers are very poor
and as a result they can not afford a long-standing strike.

Critical Evaluation:-
In Indian labor arena we see, multiplicity of unions and Inter-union rivalry. Statutory provisions
for recognizing unions as bargaining agents are absent. It is believed that the institution of
collective bargaining is still in its preliminary and organizational stage. State, therefore, must
play a progressive and positive role in removing the pitfalls which have stood in the way of
mutual, amicable and voluntary settlement of labor disputes. The labor policy must reflect a new
approach. Hitherto the State has been playing a dominant role in controlling and guiding labor-
management relation through its lopsided adjudication machinery. The role of the industrial
adjudicator virtually differs from that of a judge of ordinary civil court. The judge of a civil court
has to apply the law to the case before him and decide rights and liabilities according to its
established laws, whereas industrial adjudicator has to adjust and reconcile the conflicting claims
of disputants and evolve “socially desirable" rights and obligations of the disputants. In
deciding industrial disputes the adjudicator is free to apply the principle of equity and good
conscience.

However, it is said that the impact of the romantic attitude of the judiciary towards workers has
not proved conducive to the peaceful industrial relations. It is accepted that the end of judicial
proceeding is pain and penalties. It cannot solve the problems of industries. Accordingly it is said
that, “While statutes, rules, regulations, pains and penalties have their place in the ordering of
industry, they do not touch the core of the problems of industrial relations."

Moreover, advocates of adjudication contend that as the collective bargaining procedure might
end in a strike or lockout, which implies a great loss to the parties concerned and the country, so
for the sake of industrial peace, the adjudication becomes necessary.

Industrial peace can be established by the adjudication for the time being. But the conflicts are
driven deeper and it will retard industrial production. In the absence of effective collective
bargaining the anti–productivity tendencies are bound to appear.

Suggestions:-

For an effective Collective Bargaining in India the following suggestions are made :

Ø Recognition of trade union has to be determined through verification of fee membership

method. The union having more membership should be recognized as the effective bargaining
agent.

Ø The State should enact suitable legislation providing for compulsory recognition of trade
union by employers.

Ø Section 22 of the Trade Unions Act, 1926 should be amended.

Ø The provision for political fund by trade unions has to be done away with-since it invariably
encourages the politicians to prey upon the union.

Ø State has to play a progressive role in removing the pitfalls which stand in the way of mutual,
amicable and voluntary settlement of labor disputes.
FEATURES OF COLLECTIVE BARGAINING-

¬ Collective:
o Workers collectively bargain for their common interests and benefits.
o Workers and management jointly arrive at an amicable solution through negotiations.

¬ Strength:
o With industrial democracy at work, both the parties bargain from the position of equal strength.

¬ Flexible:
o CB cannot be rigid or inflexible as its’ aim is to arrive at a consensus.

¬ Voluntary:
o Both the parties negotiate voluntarily in order to have a meaningful dialogue.
o Through negotiations, they try to probe each other’s views thoroughly before arriving at an
acceptable solution.
o The implementation of the agreement resulting from such a bargaining process is also
voluntary.

¬ Continuous:
o This process begins with negotiations but does not end with an agreement.
o Implementation of such an agreement, which is an on-going process, is also a part of CB.

¬ Dynamic:
o The whole process of CB is influenced by the mental make-up of the parties involved.
o As a result, the concept of CB changes, grows, and expands over time.

¬ Power relationship:
o Each party wants to extract the maximum from the other.
o To reach a consensus, both have to retreat from their original positions and accept less than
what is asked for and give more than what is on offer.
o While doing so, the management tries to retain its control on workplace matters and unions
attempt to strengthen their hold over workers without any serious dilution of their powers.

¬ Representation:
o The participants in CB do not act for themselves.
o They represent the claims of labor and management while trying to reach an agreement.
o Each participant is an authorized representative of workers and employers.

¬ Bi-partite process:
o This process does not have third party intervention.

IMPORTANCE OF COLLECTIVE BARGAINING-

Collective bargaining includes not only negotiations between the employers and unions but also
includes the process of resolving labor-management conflicts. Thus, collective bargaining is,
essentially, a recognized way of creating a system of industrial jurisprudence. It acts as a method
of introducing civil rights in the industry, that is, the management should be conducted by rules
rather than arbitrary decision making. It establishes rules which define and restrict the traditional
authority exercised by the management.

• Collective bargaining develops a sense of self respect and responsibility among the
employees.
• It increases the strength of the workforce, thereby, increasing their bargaining capacity as
a group.
• Collective bargaining increases the morale and productivity of employees.
• It restricts management’s freedom for arbitrary action against the employees. Moreover,
unilateral actions by the employer are also discouraged.
• Effective collective bargaining machinery strengthens the trade unions movement.
• The workers feel motivated as they can approach the management on various matters and
bargain for higher benefits.
• It helps in securing a prompt and fair settlement of grievances. It provides a flexible
means for the adjustment of wages and employment conditions to economic and
technological changes in the industry, as a result of which the chances for conflicts are
reduced.

Importance to employers

• It becomes easier for the management to resolve issues at the bargaining level rather than
taking up complaints of individual workers.
• Collective bargaining tends to promote a sense of job security among employees and
thereby tends to reduce the cost of labor turnover to management.
• Collective bargaining opens up the channel of communication between the workers and
the management and increases worker participation in decision making.
• Collective bargaining plays a vital role in settling and preventing industrial disputes.

Importance to society
 • Collective bargaining leads to industrial peace in the country
• It results in establishment of a harmonious industrial climate which supports which helps
the pace of a nation’s efforts towards economic and social development since the
obstacles to such a development can be reduced considerably.
• The discrimination and exploitation of workers is constantly being checked.
• It provides a method or the regulation of the conditions of employment of those who are
directly concerned about them.

LEVELS OF COLLECTIVE BARGAINING-

Collective bargaining operates at three levels:

1. National level
2. Sector or industry level
3. Company/enterprise level

Economy-wide (national) bargaining is a bipartite or tripartite form of negotiation between

union confederations, central employer associations and government agencies. It aims at
providing a floor for lower-level bargaining on the terms of employment, often taking into
account macroeconomic goals.

Sectoral bargaining, which aims at the standardization of the terms of employment in one
industry, includes a range of bargaining patterns. Bargaining may be either broadly or narrowly
defined in terms of the industrial activities covered and may be either split up according to
territorial subunits or conducted nationally.
Company/enterprise bargaining-The third bargaining level involves the company and/or
establishment. As a supplementary type of bargaining, it emphasizes the point that bargaining
levels need not be mutually exclusive.

BARGAINABLE ISSUES-
¬ Any issue relevant to management and workers.

¬ Traditionally:
o Management not too keen on negotiating work methods arguing that is their exclusive right to
decide how the work is to be done.
o Unions do not want negotiations on production norms and disciplinary matters. They believe
that an agreement in this regard would put limits on their freedom to demand at a later stage.
o Wages and working conditions have been the primary focus areas of CB.

¬ In recent times, CB has extended to a lot many areas.

o Examples:
♣ Wages and working conditions;
♣ Work norms;
♣ Incentive payments;
♣ Job security;
♣ Changes in technology;
♣ Work tools, techniques and practices;
♣ Staff transfers and promotions;
♣ Grievances;
♣ Disciplinary matters;
♣ Health and safety;
♣ Insurance and benefits;
♣ Union recognition;
♣ Union activities/responsibilities;
♣ Management rights.
TYPES OF BARGAINING-

¬ Conjunctive/Distributive Bargaining: Here, the parties try to maximize their respective

gains.
In this method, the parties try to settle economic issues through a zero-sum game.
♣ Zero-sum game is where ‘my gain is your loss and your gain is my loss’.
♣ Neither party is willing to yield an inch.

¬ Co-operative Bargaining:
o Both parties are more open to coming down from their high horses and co-operating.
o They are willing to negotiate the terms of employment in a flexible way.
o This willingness is because of recession and the need to be able to survive in such difficult
times.
♣ This would not be possible without each other’s support and hence co-operative bargaining.
o TELCO and Ashok Leyland resorted to co-operative bargaining when the automobile sector
was going through a period of recession.
o Employees may now be willing to accept a cut in wages in return for job security.
o Management may also agree to modernize and bring in new technology and invest in
marketing efforts in a phased manner.

¬ Productivity Bargaining: In this method, workers’ wages and benefits are linked to
productivity.
o Initially, a standard productivity index is finalized through negotiations.
o This index is not fixed at an exceptionally high level.
o Workers crossing the standard productivity norms will get substantial benefits.
o This method of bargaining helps in making the workers realize the importance of raising
productivity for organizational survival and growth.
¬ Composite Bargaining:
o Workers tend to argue that productivity bargaining increases their workload.
o Rationalization, introduction of high technology, tight productivity norms hit the unions and
workers below the belt.
o As a result, workers tend to favor composite bargaining?
o In this method, labor bargains for wages as usual.
o In addition, they also bargain for such issues that, if permitted, may result in lower
employment in some other plant, diluting the bargaining powers of unions.
E.g. Workers demand further equity in matters relating to work norms, employment levels,
manning standards, environmental hazards, sub-contracting clauses, etc.
o We see that workers are no longer solely interested in the monetary aspects to the exclusion of
work related matters.
o Through composite bargaining, unions are able to prevent the dilution of their powers and
ensure justice to workers by putting certain limits on the freedom of employers.
o For the employer, this is the lesser evil when compared to strikes and lockouts.

THE COLLECTIVE BARGAINING PROCESS

Collective bargaining generally includes negotiations between the two parties (employees’
representatives and employer’s representatives). Collective bargaining consists of negotiations
between an employer and a group of employees that determine the conditions of employment.
Often employees are represented in the bargaining by a union or other labor organization. The
result of collective bargaining procedure is called the collective bargaining agreement (CBA).
Collective agreements may be in the form of procedural agreements or substantive agreements.
Procedural agreements deal with the relationship between workers and management and the
procedures to be adopted for resolving individual or group disputes.

This will normally include procedures in respect of individual grievances, disputes and
discipline. Frequently, procedural agreements are put into the company rule book which provides
information on the overall terms and conditions of employment and codes of behavior. A
substantive agreement deals with specific issues, such as basic pay, overtime premiums, bonus
arrangements, holiday entitlements, hours of work, etc. In many companies, agreements have a
fixed time scale and a collective bargaining process will review the procedural agreement when
negotiations take place on pay and conditions of employment.

The collective bargaining process comprises of five core steps:

1. Prepare: This phase involves composition of a negotiation team. The negotiation team
should consist of representatives of both the parties with adequate knowledge and skills
for negotiation. In this phase both the employer’s representatives and the union examine
their own situation in order to develop the issues that they believe will be most important.
The first thing to be done is to determine whether there is actually any reason to negotiate
 at all. A correct understanding of the main issues to be covered and intimate knowledge
of operations, working conditions, production norms and other relevant conditions is
required.
2. Discuss: Here, the parties decide the ground rules that will guide the negotiations. A
process well begun is half done and this is no less true in case of collective bargaining.
An environment of mutual trust and understanding is also created so that the collective
bargaining agreement would be reached.
3. Propose: This phase involves the initial opening statements and the possible options that
exist to resolve them. In a word, this phase could be described as ‘brainstorming’. The
exchange of messages takes place and opinion of both the parties is sought.
4. Bargain: negotiations are easy if a problem solving attitude is adopted. This stage
comprises the time when ‘what ifs’ and ‘supposals’ are set forth and the drafting of
agreements take place.
5. Settlement: Once the parties are through with the bargaining process, a consensual
agreement is reached upon wherein both the parties agree to a common decision
regarding the problem or the issue. This stage is described as consisting of effective joint
implementation of the agreement through shared visions, strategic planning and
negotiated change.

.
Collective Bargaining vs. Negotiation Skills:
CB is a process by which the terms and condition of employment of
¬ workers are regulated by agreements between their bargaining agent and their employers.
Negotiation, on the other hand, is a process of resolving conflicts
¬ between two or more parties wherein both or all modify their demands to reach a workable
compromise.
¬ The process of CB also uses negotiations to reach a mutual consensus.
While negotiating issues, parties shift their stand from an ideal
¬ position to a settlement point, which is mutually agreed upon.
o The position of the settlement point depends on the relative bargaining strength and skill of the
negotiator.
 The sacrifices to be made and the concessions to be yielded, depend to a large extent on the
negotiating skills of the bargaining agent.
If he is powerful, he will have his way. If this power is challenged on justifiable grounds where
other people see reason, he may have to yield his ground.

EVOLUTION OF COLLECTIVE BARGAINING:

¬ CB rose and grew with the trade union movement.
¬ Roots of CB lie in Great Britain where it developed in response to the conditions created by
the Industrial Revolution.
¬ Along with trade unions, the idea of bargaining collectively gained strength in the early part of
the 18th Century.
¬ Initially, the negotiations were carried out at plant level.
¬ By early 1900, industry and national level agreements became quite common.
¬ The idea spread across to France, Germany, and USA.
¬ And today, through the process of CB, organizations have learnt to cope with industrial
conflict.

¬ The Indian Scenario:

o In India, trade unions gained prominence much later – only after 1900.
o In 1918, Gandhiji - as the leader of the Ahmedabad textile workers – advocated the resolution
of conflict through CB agreements.
o But the idea gathered interest only after the Second World War.
♣ The Government of that time took steps like setting up of machinery for negotiations,
conciliation and arbitration.
o The trade union movement and also CB agreements became popular after Indian independence.
Moving from agreements at the plant level, such agreements spread to industries such as
chemicals, petroleum, tea, coal, oil and aluminum.
♣ In ports and docks, banking and insurance, collective agreements were arrived at, right at the
national level.
¬ Assessment of Collective Bargaining in India:
o Other than in Ahmedabad and Mumbai, so far, collective agreements have not made much
headway in India.
♣ Reasons:
¬ Lack of statutory recognition of unions by the country as a whole.
¬ Lack of provisions requiring employers and workers to bargain in ‘good faith’.
¬ The historical problem of ‘lack of trust’ between the parties
Have all stood in the way of collective agreements contributing towards industrial harmony.
Proper conditions have to be created for the success of CB for promoting industrial peace.
♣ Encouragement to strong and powerful trade unions.
♣ Satisfactory arrangements for union recognition by statute.
♣ Creation of conditions in which collective agreements have a chance to succeed.

¬ CAUSES OF LIMITED SUCCESS OF CB IN INDIA:

o Problems with unions:

♣ CB mainly depends on the strength of unions.
♣ Weak trade unions cannot initiate strong arguments during negotiations.
♣ Not many strong unions in India.
Indian unions are bogged down by the problems of: multiplicity, inter and intra-union rivalry,
weak financial position and non-recognition.
¬ So, unanimous decision is unlikely to be presented at the negotiating table.

o Problems from Government:

♣ The Government has not been making any strong efforts for the development of CB.
♣ Imposition of many restrictions regarding strikes and lockouts has removed the `edge` of the
CB process.

o Political interference:
♣ Interference of political leaders in all aspects of union matters has increased over the years.
♣ Almost all unions are associating themselves with some political party or the other.
o Legal problems:
♣ Now that adjudication is easily accessible, the CB process is losing its importance.

o Management attitude:
♣ In India, managements have a negative attitude towards unions.
♣ They do not appreciate their workers joining unions.

¬ SUGGESTIONS FOR BETTER FUNCTIONING OF CB:

 The Indian Institute of Personnel Management has offered the following suggestions:
♣ A progressive and strong management that is conscious of its obligations and responsibilities
to the various stakeholders.
♣A truly representative – enlightened and strong – trade union should come into being and
should function on strictly constitutional lines.
♣There should be unanimity between labour and management on the basic objectives of the
organization and a mutual recognition of their rights and obligations.
♣ When there are several units of the company, there should be a delegation of authority to the
local management.
♣ A fact-finding approach and a willingness to use new tools should be adopted for the solution
of industrial problems.

PRE-REQUISITES OF SUCCESSFUL BARGAINING:

¬ Employer’s recognition of the trade union.
¬ Bargaining must precede other measures:
o Neither party should take any unilateral action. Results of bargaining should be awaited.
¬ Employers’ and employees’ attitude calls for a change:
o The workers and the employers should be quite clear that they are not looking for third party
intervention in the form of litigation and adjudication.
o They want to sort out their differences in a peaceful way.
¬ Top priority to plant level bargaining:
o The representatives of the employees must have a firm resolution to have an agreed solution to
their individual matters.
¬ Negotiations on differences:
o Both the parties should negotiate on their points of differences or demands with the sole
purpose of making an agreement.
¬ Reliance on facts and figures:
o In order to make the negotiations result into success, the workers and the management agents
must rely on facts and figures to substantiate their claims.
¬ Giving up unfair labor practices.
¬ Written agreement:
o The final decisions should be incorporated in a written agreement.
o The agreement should include the validity of the agreed matters as also the frequency of its
review.
¬ Progress review:
o Agreements should not be signed and forgotten.
o During their implementation, regular meetings should be held between the representatives of
both the parties to watch the progress of the implementation.
♣ This way any changes, adjustments and amendments can be effected.
¬ Respect of agreement:
o Both the parties must respect the agreement and see that it is implemented in a fair and
justifiable manner.
¬ Arbitration provision:
o The agreement must include an arbitration clause.
o Whenever the parties have any differences pertaining to the interpretation of the terms and
conditions, the arbitration clause can be resorted to.

Recommendations of the National Commission on Labour: The NCL (1969) offered the
following recommendations.
¬ Gradually, withdraw the easy accessibility to adjudication and shift the emphasis to CB.
¬ Create the conditions to promote CB. How?
o Make the recognition of a representative union as the sole bargaining agent, statutory.
o Define the employees’ right to `strike’ work and place it in the overall scheme of things.
¬ Intensify workers’ education for building up internal union leadership and make workers more
knowledgeable.