12/13/22, 11:37 AM Collective Bargaining: Requisites, Steps, Merits and Demerits

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Collective Bargaining
On December 12, 2022 By Adv Hemant More In Corporate Laws

Collective bargaining is a process of negotiating between management and workers

represented by their representatives for determining mutually agreed terms and
conditions of work which protect the interest of both workers and the management.
Collective bargaining has been defined by the Supreme Court as “the technique by
which dispute as to conditions of employment is resolved amicably by agreement
rather than coercion”.

ILO Convention No. 154 defines collective bargaining as referring to: “all negotiations
which take place between an employer, a group of employers or one or more employers’
organizations, on the one hand, and one or more workers’ organizations, on the other,
for:

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

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

(c) regulating relations between employers or their organizations and a workers’

organization or workers’ organizations.” (Article 2)

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In Ram Prasad Viswakarma v. Industrial Tribunal, (1961) I LLJ 504 case, the Court
observed that “It is well known how before the days of ‘collective bargaining, labour was
at a great disadvantage in obtaining reasonable terms for contracts of service from its
employer. As trade unions developed in the country and Collective bargaining became
the rule, the employers found it necessary and convenient to deal with the
representatives of workmen, instead of individual workmen, not only for the making or
modification of contracts but in the matter of taking disciplinary action against one or
more workmen and as regards of other disputes.”

Need for Collective Bargaining:

Modernization, the need for quality, and increased productivity are important for
competing in the international market. Modernization may cause the introduction of
modern automatic machinery and may require high skilled labours. Thus,
modernization results in the displacement, laying off, and retrenchment of workers.
Such condition results in hostility between the workers and the management.  In such a
case, management and workers must come together and use the concept of collective
bargaining. Collective agreements provide the climate for the smooth working of the
business.

An individual worker under financial constraint cannot bargain with the cash-rich
employer. In such a situation, the individual may be tempted to accept undesirable
conditions including low remuneration. Here there is a fear of loss of a job in the minds
of the worker. This fear may be due to the ignorance, illiteracy and industry-specific
skill factors. Sometimes employers are in a position to control the bulk demands for the
labours, and they may through combined action, force the workers to accept low
wages. Collective bargaining allows workers to band together into larger groups like
trade unions, create a louder voice that can help provide the benefits for the workers
and employers.

Objectives of Collective Bargaining:

To foster and maintain cordial relations between the employer/management and

employees.
To protect the interests of the workers and employer through collective action and
by preventing unilateral actions from being taken by either party.
To keep outside the government interventions
To promote industrial democracy.

Characteristics of Collective Bargaining:

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It is a group or collective action as opposed to individual action. It is initiated

through the representatives of the employees (trade union members).
It is two-way give and take process because its outcome is mutually beneficial. The
negotiation arrived at is acceptable to both parties: the employer and the
employees. Hence it creates a stable relationship.
It is a voluntary bipartite and continuous process without any third-party
intervention.
It is a flexible and dynamic process wherein no party adopts a rigid attitude. It
changes as per the conditions prevailing at the time of negotiations.
It ensures industrial democracy in the workplace. Both the employer and the
employees who best know their problems, participate in the negotiation process.
It is a practical way of solving issues between the employer and the employee.
It involves balancing of strength and power.
The decision taken by collective bargaining can be implemented speedily.

Subject Matter of Collective Bargaining:

Rights and responsibilities of the management and of the trade union.

Wages, bonus and other allowances including profit sharing.
Hours of work, rest intervals.
Production norms
Leave and other facilities
terms and conditions of service.
retirement benefits
Grievance redressal system.
The procedure of joint consultation
The procedure of settling disputes.
Purpose, scope and duration of the agreement
Differences in interpretation of the agreement
the definition of important terms.
Annual holidays and pays
Termination, discharge, suspension and dismissal clauses.
Prohibition of strikes and lockouts in the period of the agreement.

Prerequisites of Collective Bargaining:

Right to organize and right to collective bargain: The success of collective

bargaining depends upon the extent to which, the workers enjoy the right to
organize and bargain. 

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Presence of strong independent trade union: If the trade union is weak, employers
can say that it does not represent the workers and will refuse to negotiate with it.
Recognition of trade union:There may be many unions of workers but only one of
them having the majority is recognized by the employer.
Keeping aside prejudice: Both parties involved in collective bargaining must not
have any prejudice about each other. 
The attitude of employers and trade unions: Collective bargaining is impossible
between the parties which are rigid, non-compromising and close-minded. 
A give and take policy: The attitude to give and take should be followed by both the
parties.
A favourable political environment: When the government encourages collective
bargaining as the best method of regulating conditions of employment, then it
guarantees the success of collective bargaining. 
Unfair labour practices: Unfair Labour Practices will restrict the development of
collective bargaining.
Written agreements: The agreement must be observed by those to whom they
apply. 
A suitable framework: The machinery for effective collective bargaining has been
laid down either by the legislation of the country or by mutual agreement.

Steps Involved in Collective Bargaining:

Identification of issue and initiation

Preparation of negotiations
Negotiation 
Implementation of agreement

Advantages of Collective Bargaining:

Collective bargaining gives workers a larger voice: An individual worker under

financial constraint cannot bargain with the cash-rich employer. Collective
bargaining allows workers to band together into larger groups like trade unions,
create a louder voice that can help provide the benefits for the workers and
employers.
It can improve a worker’s quality of life: The collective bargaining agreements
negotiated in good faith often support higher wages for each worker including
additional benefits, such as healthcare access or retirement benefits.
It encourages cooperation: In collective bargaining there is give and take approach.
There must be a balance, where everyone gets something they need, but not

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necessarily everything they want, through a perspective of sincerity or honesty of

intention. 
It creates relationships: There is a need for open lines of communication to be
continually available for both sides to prosper in negotiations. This creates open
lines of communication between all offices and parties involved, which can create
beneficial community relationships over time.
It creates enforcement consistency: Everyone involved has legal standing should
an issue at work come up in violation of the agreed-upon terms. 
It creates a binding result: If one side or the other is not performing to the
stipulations that have been set forth in the contract, then they can be held
responsible to them by the injured party. 
It can be modified: After the date of agreement ends, the agreement can be
eventually changed.
It prevents employees from going on strikes: Collective bargaining will result to an
agreement. And normally, this will also be agreed upon if the negotiations are
beneficial for both parties.

Disadvantages of Collective Bargaining:

Collective bargaining may require everyone to be bound by the contract: New and
non-unionised workers must agree with the terms and conditions of the current
contract to be employed.
It is not always a process of fair representation: Some non-union workers might
find their employment in jeopardy at the cost of unionized workers under some
contracts, depending on local laws and regulations.
It highlights personal differences: The agreement must be approved by workers by
majority. Thus, there are some workers whose aspirations are not fulfilled.
It is not always a process of fair representation: There is a possibility that a
minority can consume a majority of the available resources, which creates the
possibility of the union eventually imploding.
It is used as a political tool: Political parties enter trade unions as collective
bargaining is often associated with fundraising.

Conclusion:

Collective bargaining is a process of negotiating between management and workers

represented by their representatives for determining mutually agreed terms and
conditions of work which protect the interest of both workers and the management.
The top advantages and disadvantages of collective bargaining is to balance improve

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12/13/22, 11:37 AM Collective Bargaining: Requisites, Steps, Merits and Demerits

wages and working conditions with increased productivity and labour security for the
employer. All parties typically give a little to get a little in the final contract,
compromising to create something which is mutually beneficial to everyone. The
benefits often depend on the skills of the negotiators involved and the size of a group
represented, which means some agreements are less beneficial than others.

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