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Collective Bargaining

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 occupied India.

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/Employees
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 Collective Bargaining.

They are:
National-Level Bargaining
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.

Industry-Level Bargaining
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.

Corporate-Level Bargaining
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 plant level.

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.

Plant-Level Bargaining
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:
  1. 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.
  2. 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.
  3. Negotiation
    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 an accord.
  4. Strikes
    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:
  1. There is no ratification of ILO Convention, C-98 and C-87.
  2. 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.
  3. 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 Disputes Act.
  4. Section 22 of the IDA states that there must be at least 6 weeks' notice before a strike in public utility services.
  5. Strikes are prohibited during the pendency of conciliation, arbitration, and judicial processes under Section 23 of the IDA.
  6. 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

  1. 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 disputes.
  2. 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 independence.
    1. The decision of whether organisations fit these requirements should be carried out by a body that provides every assurance of objectivity and independence.
    2. 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.

  3. 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 prosperity.
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.


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