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Collective Bargaining in India: Strengthening Workers' Rights and Promoting Industrial Harmony

Collective bargaining is "the technique by which dispute as to conditions of employment is resolved amicably by agreement rather than coercion".[1] The idea of collective bargaining offers several advantages, such as safeguarding the fundamental rights of the working class, protecting them from exploitation, and ensuring the basic principles of equality and justice among the employers and the workers.

To understand the international position, the Supreme Court of Canada in the case of Facilities Subsector Bargaining Assn. v. British Columbia[2] assessed the rationale behind collective bargaining as the human right of workers.

The Court observed that:
  • "The right to bargain collectively with an employer enhances the human dignity, liberty and autonomy of workers by giving them the opportunity to influence the establishment of workplace rules and thereby gain some control over a major aspect of their lives, namely their work."
  • "Collective bargaining is not simply an instrument for pursuing external ends...rather [it] is intrinsically valuable as an experience in self-government."
  • "Collective bargaining permits workers to achieve a form of workplace democracy and to ensure the rule of law in the workplace. Workers gain a voice to influence the establishment of rules that control a major aspect of their lives."

History of Collective Bargaining in India

Sydney and Beatrice are known for inventing the term "collective bargaining."[3] The process of Collective Bargaining in India formally saw the light of the day during post Independence era. During the early 1920s, Mahatma Gandhi launched a similar programme for Ahmedabad's textile mill workers.

The importance of collective bargaining came into existence when the unions realized that settlement of disputes through industrial courts was wasteful in terms of time, energy, and money and also a hindrance to industrial peace and harmony.

The first collective agreement was made by "Dunlop Rubber Company in West Bengal in 1947, then came the Bata Shoe Company and the Indian Alumunium Company made its 5-year agreement with the employees union in Belur. The Imperial Tobacco company joined the concept in 1952. By 1955, many big entities like Tata Iron and Steel Company, Hindustan Lever, etc." By 1961, a huge number of companies involving more than 5 lakhs employees had accepted the practice of collective bargaining as a tool for ensuring security and peace in the industrial setup.

Types of Collective Bargaining Agreements

There are mainly 3 ways of settlement of industrial dispute through collective bargaining agreements:
  • Voluntary agreement or Bi-partite agreement:
    Under Section 18 of the Industrial Disputes Act, such agreements that enforce settlement between the parties through voluntary negotiations under the process of collective bargaining are considered to be binding on the parties to the agreement.
  • Enforcement of Consent Award:
    When the dispute between the parties has been referred to the Court of Law and the decision in underway, the room for negotiation still remains open for the parties. Any agreement reached between the parties hereunder shall form a part of the award delivered by the Court. It, henceforth, becomes a binding decision on the parties.
  • Settlement:
    An out of Court settlement usually involves three parties, with a conciliator officer being the third party. Throughout the process of conciliation, the officer shall endeavor to strike a settlement between the parties at dispute. If the parties agree to reach a common middle ground, then an agreement to effect the same is executed, which thereby becomes binding on all the parties involved in the dispute.

Collective Bargaining: The Process

The term "collective bargaining" does not have any specific definition. Experts have defined it under different approaches. Holistically, it is considered as a method of resolution of employment-related issues, such as conditions of employment, wages, etc. Collective Bargaining aims to resolve such disputes through a peaceful settlement between the conflicting parties, i.e., the management and the labor force. In the following portion, we shall understand the concept of "collective bargaining" through different interpretations.


  • Article 2, Convention 154 of the International Labour Organization ("ILO")[4]:
    • "collective bargaining extends to all negotiations which take place between an employer, a group of employers or one or more employers' organisations, on the one hand, and one or more workers' organisations, on the other, for
    • determining working conditions and terms of employment; and/or
    • regulating relations between employers and workers; and/or
    • regulating relations between employers or their organisations and workers or workers' organisations."
  • Dale Yoder has defined it as: "Collective bargaining is the term used to describe a situation in which the essential conditions of employment are determined by bargaining process undertaken by representatives of a group of workers on the one hand and of one or more employers on the other."
  • In the case of Ram Prasad Vishwakarma v. The Chairman, Industrial Tribunal[5], the Supreme Court emphasized the importance of collective bargaining in the settlement of industrial disputes along with the principle of fair hearing of the parties to the dispute. "It is now well-settled that a dispute between an individual workman and an employer cannot be an industrial dispute as defined in section 2(k) of the Industrial Disputes Act unless it is taken up by a Union of the workmen or by a considerable number of workmen."

This view which has been re-affirmed by the Court in several later decisions recognizes the great importance in the modern industrial life of collective bargaining between the workman and the employers.[6] It is well known that prior to the advent of collective bargaining, labor had significant challenges in negotiating fair terms with his employer for service contracts. As trade unions developed in the country, employers found it practical to deal with labor representatives rather than individual workers as collective bargaining came to be the norm.

Conditions of Collective Bargaining

Before initiating the process of Collective Bargaining, it is important to fulfil some pre-conditions.

The conditions are as follows:[7]
Parity of Power Between the employers and the trade unions:
When it comes to power or strength, management and unions should be about on par in order to get legitimate bargaining power. A weak union cannot even compel management to bargain, much less get meaningful results for its members. Similar to this, ineffective management might give up so much to strong unions that the deal cannot legitimately be described as the outcome of a negotiation.

Bargaining in Good Faith:
The parties at dispute should enter the bargaining agreement with no mala fide intentions. The employers and the trade unions should carry the best interests of the workers and the organization at heart and proceed with negotiations. Any hidden motive can hinder the overall negotiation process, thus defeating the purpose of collective bargaining.

Mechanism to Break a Deadlock:
Bargaining may often result in a stalemate, with neither managements nor unions budging from their respective offers or demands. The breaking of this deadlock can be achieved in two ways, either through an ultimatum like strikes or lockouts, or through third party mediation, like arbitration or conciliation.

These different levels are suited and applicable depending on region to region, industries and unions. Under National Level Bargaining, the mechanism takes place between the employer's organization and the national union. When the bargaining is executed at national level, the agreement of the issues is accepted across the nation, by all industrial workers. Such bargaining sets uniformity and standardization in management of industries and the workers.

At industry level bargaining, the employers from different organizations under one industry come together to bargain with the labor unions. Such labour unions are formed and operate according to different industries. Such type of bargaining instates uniformity in labour costs and working conditions of labourers in a given industry.

At Corporate Level Bargaining, the management of a corporate with multi-plant enterprise bargains with several labor unions for all of its plants. Such bargaining brings uniformity in its various establishments and avoids disputes which arises out of disparity. This is done by organisations such as ONGC, BHEL, etc.

At Plant level bargaining, mostly the private sector enterprises are involved. Such bargaining takes place between management of particular plant or a factory establishment. The issues are relevant to plant or factories only. Such negotiations take place independently.

At Craft level bargaining, enterprises which have many craft unions are active. It takes place between management and the representatives of the craft union. Such type of bargaining is not that prevalent in India.

Validity And Recognition Of Collective Bargaining In India

The Fundamental Rights and Directive Principles of State Policy Chapters of the Indian Constitution establish the legality of the process of collective bargaining. The establishment of labour unions is authorized by citation to Article 19 (Right to Form Association) of the Indian Constitution.

Additionally, a number of Directive Principles support the measures for enhancing working conditions generally, and Article 43-A in particular mandates that States ensure employees' involvement in management. Even if the aforementioned Directives aren't directly enforceable in a court of law, their binding character can nevertheless be proven with the aid of a few Apex Court of India judgements.

The Supreme Court stated in Re Kerala Education Bill case[8], that although directive principles cannot supersede fundamental rights, the court may not completely disregard the directive principles and should instead adopt "the principles of harmonious construction and should attempt to give effect to both as much as possible".[9]

The relevant Statutes are:
  1. Industrial Disputes Act, 1947
  2. Trade Union Act, 1926
  3. The Industrial Employment (Standing Order) Act, 1946

Industrial Disputes Act 1947

The Industrial Disputes Act of 1947 was built on the principle that collective bargaining is the best means for settling industrial disputes and preserving industrial peace. The settlement reached via the process of collective bargaining with the employer has been accorded formal recognition under Section 18 of the Act.

According to Section 18 of the Act, "A settlement arrived at by agreement between the employer and workman otherwise than in the course of conciliation proceeding shall be binding on the parties to the agreement �.".[10] T As a result, any resolution/settlement other than conciliation that may be reached through a legally binding agreement between the employer and the employee is only a consequence of the collective bargaining agreement.

In the case of Workmen of Dimakuchi Tea Estate vs. The Management of Dimakuchi Tea Estate[11], the examination of the salient provisions of the Act shows that the principal objects of the Act are:
  1. The promotion of measures for securing and preserving amity and good relations between the employer and workmen;
  2. an investigation and settlement of industrial disputes, between employers and employers, employers and workmen, or workmen and workmen, with a right of representation by a registered trade union or federation of trade unions or association of employers or a federation of associations of employers;�.and (5) collective bargaining".

Section 19 of the Act defines the duration of operation of such a settlement, among other things, and envisions the continuance of its legality unless it is not replaced by another set of settlements.[12] Section 29 of the Act prescribes the punishment for such a settlement's breach.[13]

The Industrial Disputes Act of 1947 allows for the appointment of Conciliation Officers who are tasked with mediating disputes in order to encourage their resolution. A Conciliation Board made up of representatives of the employers and employees is established in relation to the Conciliation Officer, with the Conciliation Officer serving as its chairman. The conciliation officer is required by the legally executed memorandum of settlement to visit each camp in order to determine the areas of strongest agreement, examine the conflict, and take any other necessary steps to reach a just and equitable solution.[14]

Trade Union Act 1976

The Act establishes the rights, obligations, and privileges of the trade union and allows for their registration. It is widely accepted that one of the ways to control such a relationship between the employer and the workers is through collective bargaining. The main reason why a trade union is formed is to govern the relationships between the employer and employee or among themselves.

In the case of D.N. Banerjee vs. P.R. Mukherjee[15], the court recognizes collective bargaining. The Court held that "having regard to the modern condition of society where capital and labor have organized themselves into groups for the purpose of fighting their disputes and settling them on the basis of the theory that Union is Strength, collective bargaining has come to stay".

The Madras High Court has also accepted that the basis for organized labor theory and the legal acceptance of this theory in industrial law is the uneven bargaining power that exists between the capital employer and the individual worker, or disunited workers. The basis of this movement is collective bargaining, and it is in the interest of labor that Trade Unions receive statutory recognition for their ability to represent workers who are members of such organizations.[16]

The Industrial Employment (Standing Orders) Act, 1946

The employer creates a standing order that outlines the terms of employment. According to Section 3 of the Act, the employer must initially submit the draft standing order to the Certifying Officer, which should, to the greatest extent feasible, comply to the model standing order.[17] After receiving any objections (if any), the said Officer forwards a copy of the proposal to the trade union or the workers for consideration. After giving both parties a chance to appear, the Officer certifies the standing order with the necessary modifications (if necessary) and sends copies to each party.

In the case of Glaxo Laboratories vs. Labour Court[18], Justice Desai assesses the imminent need for the Act in his inimitable style: "In the days of Laissez-faire when industrial relation was governed by the harsh and weighted law of hire and fire the management was the supreme master, the relationship being referable to contract between unequals and the action of the management treated almost sacrosanct.

The Act, as its long title shows, required the employers in industrial establishments to define with sufficient precision the conditions of employment under them and to make the said conditions known to the workmen employed by them. The contract was not left to be negotiated by two unequal persons but statutorily imposed."

Issues In An Effective Collective Bargaining Procedure In India

  • The right of the management is the primary obstacle to the expansion of collective bargaining. A management's prerogative is their right or privilege to use the labour force, raw materials, and financial resources anyway they see fit. The management opposes and does not like the concept of engaging in negotiations on numerous topics with labour unions and their representatives.
  • In accordance with the Industrial Disputes Act of 1947, for instance, the parties to a disagreement may ask the government to send the subject for adjudication, and the government may accept. However, the law does not impose collective bargaining in this way. Government should encourage unions' leaders to have more confidence in collective bargaining.
  • Political parties in India are closely associated with the trade unions, and this strong relationship has deterred them from negotiating contracts through collective bargaining. The general tendency of the political parties is to show their strength and put political pressure rather than collective bargaining and negotiations.
  • The existence of several unions is another issue. Multiple unions lead to internal competition and disputes. The primary negotiating problems are set aside in this trade union competition, and political interest predominates over economic motivation. Trade union conflict offers management the opportunity to take advantage of the circumstance and force workers to accept the conditions that management desires. A weak union may agree to anything that the stronger union rejects in order to acquire more support and to fight the stronger union. Economic concerns are excluded from collective bargaining during the process.

Recommendations of the National Commission of Labour[19]:

The National Commission on Labour recommended that efforts need to be undertaken to promote the practice of collective bargaining among the employers and the workers. The most important among them is statutory recognition of a representative union as the sole bargaining agent.

Collective bargaining cannot exist without the right to strike or lockout, hence it is necessary to define the role that strikes and lockouts should play in the larger picture of labour relations.

Way Forward
Although strengthening the practise of collective bargaining has its challenges, it has made some headway in our nation. D despite the fact that it appears to be an ineffective instrument for preserving excellent workplace relations, there is no substitute for collective bargaining. Employee involvement may be increased, as can their feeling of responsibility, through collective bargaining and worker participation in management.

The act of collective bargaining is frequently seen as a conflict between management and labour, in which the former seeks to provide the least amount of concessions while the latter seeks to obtain the most amount of benefits. The Indian economic, social, and educational environments must be studied, with a focus on collective bargaining to understand the industrial setup.

The issue in the Indian context is that the trade union's negotiating strength is impacted by the lack of any Central Level statutory requirements for the recognition of a representative trade union by an employer. Additionally, despite the fact that unorganised labour is a challenge, unions are typically weak.

Another aspect of Indian Trade Unions that prevents successful collective bargaining is rivalry based on caste, creed, and religion. Additionally, political ideology-based union split and a precarious financial situation impede trade union expansion.[20]

As a result, it is advised that India make provisions for the central level recognition of trade unions, allowing for the maintenance of peace and harmony between management and employees, which in turn can result in better services for the community and subsequently the expansion and development of the economy.

India is required by international law to offer efficient mechanisms for collective bargaining.[21] India can also ratify ILO Conventions No. 87 of 1948 and No. 98 of 1949 in this regard, which guarantee the right to effective collective bargaining. According to Sir Henry Maine, a society that is progressive moves from status to contract.

  1. Karol Leather Karamchari Sangathan v. Liberty Footwear Company, (1989) 4 SCC 448
  2. Facilties Subsector Bargaining Assn. v. British Columbia, 2007 SCC 27
  3. Sydney and Beatrice, Industrial Democracy (1987)
  4. Convention 154, International Labour Organization, art 2
  5. Ram Prasad Vishwakarma v. The Chairman, Industrial Tribunal, 1961 AIR 857
  6. Bharat Iron Works v. Bhagubhai Balubhai Patel & Ors., 1976 AIR 98
  7. Ratna Sen, Industrial Relation in India, Shifting Paradigm, Macmillan, 2003
  8. Re Kerala Education Bill case, AIR 1957 SC 956
  9. Kesavananda Bharti v. State of Kerala, AIR 1978 SC 1461
  10. Industrial Disputes Act 1947, s 18
  11. Dimakuchi Tea Estate vs. The Management of Dimakuchi Tea Estate, AIR 1958 SC 353
  12. Industrial Disputes Act 1947, s 19
  13. Industrial Disputes Act 1947, s 29
  14. Royal Calcutta Golf Club Mazdoor Union v. State of West Bengal, AIR 1956 Cal 550
  15. D.N. Banerjee vs. P.R. Mukherjee, 1 L.L.J. 1951 (SC)
  16. Tamil Nadu Electricity Workers Federation vs. Madras State Electricity Board, AIR 1965 Mad. 111
  17. The Industrial Employment (Standing Orders) Act, 1946, s 3
  18. Glaxo Laboratories vs. Labour Court, 1984 1 LLJ 16
  19. National Commission of Labour on Collective Bargaining (1969)
  20. S.C. Srivastava, Industrial Relations and Labour Laws, 4th Ed., Reprint, 2002, Vikas Publishing House Pvt. Ltd., New Delhi
  21. International Covenant on Economic, Social and Cultural Rights, art 8

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