Collective Bargaining

Some words this chapter uses

Collective bargaining is negotiation between an employer and a body representing the workers about the terms and conditions of employment.

Bi-partite means having two sides. A bi-partite forum has the employer on one side and the workers on the other, with nobody from outside. Tri-partite adds the Government as a third party, which is what the ILO is and what the Indian Labour Conference is.

Negotiating union or negotiating council, section 2(z), is the body recognised or constituted under section 14 to negotiate with the employer.

Settlement, section 2(zi), means a settlement arrived at in the course of a conciliation proceeding, and includes a written agreement between the employer and worker arrived at otherwise than in the course of a conciliation proceeding, where the agreement has been signed by the parties in the prescribed manner and a copy has been sent to an officer authorised by the appropriate Government and to the conciliation officer.

Sole bargaining agent is the expression the Supreme Court used in Balmer Lawrie for a union clothed with the exclusive right to represent the workmen.

The three levels at which the Code provides for it

The Code does not use the phrase "collective bargaining" as a heading, and a student should say so plainly rather than pretending otherwise. What it does is provide machinery at three levels.

Level one: inside the establishment, sections 3 and 4

Section 3, the Works Committee. In an industrial establishment in which one hundred or more workers are employed, or have been employed on any day in the preceding twelve months, the appropriate Government may by general or special order require the employer to constitute a Works Committee, in the prescribed manner, consisting of representatives of the employer and of the workers engaged in the establishment.

Two features of section 3 are examinable and both are about balance. The proviso requires that the number of representatives of the workers shall not be less than the number of representatives of the employer, so the workers can never be outnumbered. And section 3(2) requires the workers' representatives to be chosen from among the workers engaged in the establishment in consultation with their Trade Union, if any, registered under section 9, so the union is brought into the process even though the Works Committee is not itself a union body.

Its duty, under section 3(3), is to promote measures for securing and preserving amity and good relations between the employer and the workers, and to that end to comment upon matters of common interest.

Section 4, the Grievance Redressal Committee, is the companion body, and it deals with individual grievances rather than the general relationship. Both are treated fully in Module II's chapter on the bi-partite forums, which is not yet written; they appear here because they are the first rung of the bargaining ladder.

Level two: negotiating with the employer, section 14

This is the level at which collective bargaining proper happens, and it is the subject of [Recognition: The Negotiating Union and Negotiating Council]. In short: section 14(1) requires that there shall be a negotiating union or a negotiating council in any industrial establishment having a registered Trade Union, for negotiating with the employer on such matters as may be prescribed. A union with fifty-one per cent. or more of the workers on the muster roll supporting it is the sole negotiating union; where none has that, a negotiating council is constituted of the unions with not less than twenty per cent., and an agreement is reached if a majority of the representatives in the council agree.

Section 14 is the provision that converts collective bargaining from a practice into a legal process, because before the Code no employer was obliged to negotiate with anybody at all.

Level three: the agreement, and what makes it worth having

The product of successful bargaining is a settlement within section 2(zi). The definition covers two things, and the difference matters.

A settlement arrived at in the course of a conciliation proceeding, that is with a conciliation officer involved.

And a written agreement arrived at outside conciliation, provided it is signed by the parties in the prescribed manner and a copy is sent to an officer authorised by the appropriate Government and to the conciliation officer.

Those conditions on the second limb are the practical point of the definition. A private deal between an employer and a union is not a settlement in law unless it is written, signed as prescribed, and copied to the two officers. Get that wrong and the parties have a contract but not a settlement, and they lose what sections 57 and 58 give: the settlement's binding effect on the persons those sections specify, and a fixed period of operation. Those sections belong to Module II and are treated there.

What the Supreme Court has said about it

Balmer Lawrie Workers' Union v. Balmer Lawrie & Co. Ltd., AIR 1985 SC 311, 1984 Supp SCC 663.

Facts. After a strike the employer settled a number of pending industrial disputes with the union recognised under the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act 1971. Clause 17 of that settlement required the company to deduct 15 per cent. of the gross arrears payable to each employee, members and non-members alike, as a contribution to the recognised union's fund. An unrecognised union challenged clause 17 and the validity of section 20 of the 1971 Act, which gives a recognised union the exclusive right to represent the workmen and denies that right to others except in proceedings concerning dismissal, discharge, removal, retrenchment, termination or suspension. A single judge and a Division Bench had both rejected the challenge.

Held. The appeal was dismissed. Reviewing the scheme of the 1971 Act, the Court explained that industrialisation had concentrated workmen under one employer; that the trade union movement developed as an adjunct of political parties, each party setting up labour wings to control vote banks, so that the multiplicity and fragmentation of parties produced a multiplicity of unions in one undertaking; that the result was inter-union and intra-union rivalry threatening the peaceful working of the undertaking, each union trying to overreach its rival by making occasionally untenable demands, disturbing industrial peace and directly affecting production; and that a need was therefore felt for the concept of a recognised union clothed with the powers of sole bargaining agent, the National Commission on Labour also favouring it, with the union representing the largest number of workmen acquiring that status as being in tune with industrial democracy.

Why it matters here. It is the Supreme Court's own explanation of why collective bargaining in India needed a legally chosen bargaining agent, and it is the authority for the disadvantage listed below: that where several unions compete, bargaining degenerates into rivalry.

All India Bank Employees' Association v. National Industrial Tribunal, AIR 1962 SC 171, worked in [Why Workers Combined: The Historical Reasons], supplies the constitutional limit. The Supreme Court held that the right guaranteed by article 19(1)(c) extends only to the formation of an association or union and carries no concomitant right that it shall achieve its objects, the union's activities and the steps it may take being subject to such laws as may be framed. So there is no fundamental right to bargain collectively in India. Whatever right exists is what the Code gives, which is why section 14 matters so much.

Advantages and disadvantages

MU has set this as a full essay, so it is worth having in an ordered form rather than as a list of adjectives.

Advantages

It corrects the inequality of bargaining power, which is the reason the whole subject exists. The workers negotiate as one body and the employer is dealing with the loss of all his production.

It produces terms suited to the particular establishment. A statute fixes a floor for a whole industry or a whole State; bargaining fixes what this employer can afford and these workers need.

It buys industrial peace for a period. A settlement has a defined life under section 58, so both sides know where they stand and neither has to reopen the question every month.

It is cheaper and faster than adjudication. Litigation before a Tribunal takes years, costs money and produces a decision imposed on both sides. A settlement is made by the parties themselves.

It gives the parties ownership of the result. An award is imposed; a settlement is agreed, and an agreed outcome is far more likely to be observed.

It is a form of industrial democracy, and the Constitution endorses the idea: article 43A directs the State to take steps to secure the participation of workers in the management of undertakings.

Disadvantages

There is no fundamental right to it. On All India Bank Employees' Association, article 19(1)(c) protects only the formation of the union, so bargaining rests entirely on the statute.

It presupposes a union strong enough to bargain. Where the workforce is unorganised, casual, or afraid of dismissal, there is nobody with the strength to sit opposite the employer, and the process is a form without a substance.

Multiplicity of unions turns bargaining into rivalry. This is the disadvantage the Supreme Court itself described in Balmer Lawrie: competing unions overreach each other with untenable demands and industrial peace suffers. Section 14 is the answer, and its own thresholds are criticised in the recognition chapter.

The minority is bound by a bargain it did not make. Where one union is the sole negotiating union, or a council decides by a majority of its representatives under section 14(5), workers who supported neither are governed by the result. Balmer Lawrie upheld exactly that arrangement against an unrecognised union's challenge.

The bargaining power is unequal in a slump. When work is short the threat of withdrawing labour is worth little, so the process delivers most when it is needed least.

And it can settle only what the parties can settle. Matters outside the employer's control, or reserved to statute, are not negotiable however willing both sides are, and section 14(1) itself confines negotiation to "such matters as may be prescribed".

A worked example

The facts. A packaging plant in Wada employs 1,200 workers. Three registered unions function there, with verified support of 610, 300 and 250. The employer wants a three-year wage settlement.

Who does he negotiate with? Not with whichever union writes to him first. Fifty-one per cent. of 1,200 is 612 and no union reaches it, so under section 14(4) he shall constitute a negotiating council of the unions with not less than twenty per cent. support, that is 240. All three qualify, and the council is made up of their representatives, one for each full twenty per cent. and one for the remainder.

Is there also a Works Committee? There may be. The establishment employs more than one hundred workers, so under section 3(1) the appropriate Government may by general or special order require the employer to constitute one. If it does, the workers' representatives must not be fewer than the employer's, and they are chosen from among the workers in consultation with their registered union.

The council and the employer agree terms. Two of the three unions' representatives vote for it and one against. Under section 14(5) an agreement is reached if it is agreed by a majority of the representatives in the council, so there is an agreement. The dissenting union's members are bound by it, which is the minority problem set out above, and Balmer Lawrie is the authority that such an arrangement is permissible.

Is the agreement a settlement? Only if it satisfies section 2(zi). If it was reached with a conciliation officer involved, it is a settlement arrived at in the course of a conciliation proceeding. If it was reached privately, it is a settlement only if it is in writing, signed by the parties in the prescribed manner, and a copy is sent both to an officer authorised by the appropriate Government and to the conciliation officer. If the parties simply shake hands and issue a circular, they have an understanding and not a settlement, and they will not get what sections 57 and 58 give.

Two years later the employer refuses to talk to any union. Section 14(1) says there shall be a negotiating union or negotiating council for negotiating with the employer, so the machinery is compulsory. But note the limit of the answer: the Code obliges him to have a body to negotiate with and to negotiate on the prescribed matters. Neither the Code nor the Constitution obliges him to agree, and on All India Bank Employees' Association article 19(1)(c) gives the union no right to achieve its object.

What this does NOT mean

It does not mean there is a right to collective bargaining in the Constitution. All India Bank Employees' Association holds the opposite.

It does not mean every agreement with a union is a settlement. Section 2(zi) imposes conditions on an agreement reached outside conciliation: writing, signature in the prescribed manner, and copies to two officers.

It does not mean the Works Committee bargains. Its duty under section 3(3) is to promote amity and good relations and to comment on matters of common interest. Bargaining proper is section 14.

It does not mean bargaining is an alternative to the immunities. It depends on them. A union whose officers can be prosecuted for agreeing to act together, or sued for the production a strike costs, has nothing to bargain with.

It does not mean the Code uses the phrase. It does not, and an answer is stronger for saying so and then showing where the machinery actually is.

Limits, criticism and amendments

The single largest criticism is that the Code still does not impose a duty to bargain in good faith. Section 14 requires that there be a negotiating union or council, and prescribes the matters, but it does not oblige the employer to negotiate seriously or to justify a refusal, and it attaches no consequence to bad faith at the table.

The thresholds are high. Fifty-one per cent. for a sole negotiating union means that in a divided workforce the council will be the norm, and twenty per cent. excludes a union that may still represent several hundred people.

Almost everything is prescribed. The matters on which negotiation takes place, the manner of verification, and the facilities under section 14(7) are all in the rules, so the statutory right is only as wide as the rules make it.

Against that, section 14 is a real advance. For the ninety-nine years of the Trade Unions Act 1926 there was no national machinery of recognition at all, and an employer could lawfully refuse to speak to any union. The National Commission on Labour's recommendation, which the Supreme Court recorded in Balmer Lawrie in 1984, has finally been enacted.

Quick revision

• Collective bargaining is negotiation between an employer and a body representing the workers about terms and conditions, in place of a separate bargain with each worker.
• The Code never uses the phrase. Its machinery is at three levels: sections 3 and 4 inside the establishment, section 14 for negotiating with the employer, and section 2(zi) for the settlement that results, with sections 57 and 58 giving it force.
• Section 3: Works Committee where one hundred or more workers are or have been employed in the preceding twelve months; workers' representatives not fewer than the employer's; chosen from among the workers in consultation with their registered Trade Union; duty to promote amity and good relations and comment on matters of common interest.
• Section 14: there shall be a negotiating union or council; fifty-one per cent. for a sole negotiating union; twenty per cent. for a seat on a council; council decides by a majority of representatives.
• Section 2(zi): a settlement is one reached in conciliation, or a written agreement outside it signed as prescribed with copies to the authorised officer and the conciliation officer.
• Balmer Lawrie, AIR 1985 SC 311: multiplicity of unions bred rivalry; the need was felt for a recognised union as sole bargaining agent; the union with the largest number of workmen should have it.
• All India Bank Employees' Association, AIR 1962 SC 171: article 19(1)(c) protects formation only, so there is no fundamental right to bargain collectively.
• Advantages: corrects inequality of bargaining power; terms fitted to the establishment; industrial peace for a fixed period; cheaper and faster than adjudication; ownership of the result; industrial democracy, article 43A.
• Disadvantages: no fundamental right; needs a strong union; multiplicity breeds rivalry; the minority is bound; weak in a slump; only prescribed matters are negotiable.

Test yourself

1. Define collective bargaining and say where the Code provides for it. It is the process by which terms and conditions of employment are settled by negotiation between an employer and one or more organisations representing the workers, the resulting agreement governing all the workers covered by it. The Industrial Relations Code 2020 never uses the phrase, but provides machinery at three levels: sections 3 and 4 establish bi-partite forums inside the establishment; section 14 requires there to be a negotiating union or negotiating council for negotiating with the employer on such matters as may be prescribed; and section 2(zi) defines the settlement that results, with sections 57 and 58 fixing whom it binds and how long it operates.

2. What are the advantages of collective bargaining? It corrects the inequality of bargaining power that makes the individual contract of employment a form without a substance. It produces terms fitted to the particular establishment rather than a statutory floor for a whole industry. It buys industrial peace for a defined period, since a settlement has a fixed life. It is cheaper and faster than adjudication before a Tribunal. It gives the parties ownership of a result they agreed rather than one imposed on them. And it is a form of industrial democracy, which article 43A of the Constitution directs the State to secure.

3. What are its disadvantages? There is no fundamental right to it, since on All India Bank Employees' Association article 19(1)(c) protects only the formation of a union. It presupposes a union strong enough to bargain, which an unorganised or casual workforce does not have. Multiplicity of unions turns bargaining into rivalry, the very phenomenon the Supreme Court described in Balmer Lawrie, where competing unions overreach each other with untenable demands. The minority is bound by a bargain it did not make, whether by a sole negotiating union or by a majority of the representatives in a council under section 14(5). Bargaining power is weakest in a slump, when it is most needed. And only prescribed matters are negotiable at all.

4. Explain the Works Committee and its relation to bargaining. Under section 3(1), where one hundred or more workers are employed, or have been employed on any day in the preceding twelve months, the appropriate Government may by general or special order require the employer to constitute a Works Committee of representatives of the employer and of the workers. By the proviso the workers' representatives shall not be fewer than the employer's, and by section 3(2) they are chosen from among the workers in consultation with their registered Trade Union, if any. Its duty under section 3(3) is to promote measures for securing and preserving amity and good relations and to comment upon matters of common interest. It is the first rung of the ladder rather than the bargaining body itself; bargaining proper is under section 14.

5. An employer and a union sign a private wage agreement and issue a circular about it. Is it a settlement? Not on those facts. Section 2(zi) covers a settlement arrived at in the course of a conciliation proceeding, and includes a written agreement arrived at outside conciliation only where it has been signed by the parties in the prescribed manner and a copy has been sent to an officer authorised by the appropriate Government and to the conciliation officer. An agreement that is not signed as prescribed and copied to both officers is a contract between the parties but not a settlement, so it does not attract what sections 57 and 58 give.

6. "The Industrial Relations Code guarantees collective bargaining." Comment. The statement is too strong. Section 14(1) does require that there be a negotiating union or negotiating council in an industrial establishment having a registered Trade Union, for negotiating with the employer, which is a real advance on the Trade Unions Act 1926, under which an employer could lawfully refuse to speak to any union at all. But the Code imposes no duty to bargain in good faith, attaches no consequence to a refusal to move, confines negotiation to prescribed matters, and does not oblige the employer to agree to anything. And there is no constitutional backstop: on All India Bank Employees' Association v. National Industrial Tribunal, AIR 1962 SC 171, article 19(1)(c) extends only to the formation of a union and carries no concomitant right that it shall achieve its objects.