Commonwealth of Learning Executive MBA/MPA

C3 Human Resource Management

Block 12
Industrial and Labour Relations
Course Developer: Lalith Weeratunga
Senior Consultant
Postgraduate Institute of Management
University of Sri Jayewardenepura
Columbo, Sri Lanka

Copyright Commonwealth of Learning, 2003

All rights reserved. No part of this course may be reproduced in any form by any
means without prior permission in writing from:
The Commonwealth of Learning
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CANADA
e-mail: [email protected]
 Contents
1 Objectives................................................................................................................... 5
2 Introduction to Industrial & Labour Relations ..................................................... 5
2.1 Development of Industrial Relations .................................................................. 6
2.2 Objectives of Industrial Relations (IR) ............................................................... 8
2.2.1 Employer to Individual Employee Relationships ............................................... 9
2.2.2 Labour Management Relations....................................................................... 9
2.2.3 Industrial Peace & Productivity ................................................................... 10
2.2.4 Industrial Democracy ................................................................................... 10
2.2.5 Liaison Functions.......................................................................................... 10
3 The International Labour Organisation (ILO).................................................... 11
3.1 Scope................................................................................................................. 11
3.2 Objectives ......................................................................................................... 11
3.3 Principles........................................................................................................... 12
4 Labour Legislation.................................................................................................. 12
4.1 Types of Legislation ......................................................................................... 13
4.1.1 Working Conditions ...................................................................................... 13
4.1.2 Wages............................................................................................................ 13
4.1.3 Industrial Relations....................................................................................... 13
5 Industrial Disputes/Conflicts ................................................................................. 14
5.1 Nature of Conflicts............................................................................................ 14
5.1.1 Conflict Caused by Unions ....................................................................... 14
5.1.2 Conflict Caused by Management .................................................................. 15
5.2 Types of Disputes ............................................................................................. 15
5.3 Causes of Disputes............................................................................................ 16
5.4 Resolution of Conflict and Settlement of Disputes........................................... 16
5.4.1 Labour Administration.................................................................................. 16
5.4.2 Statutory Measures ....................................................................................... 17
5.4.3 Non-statutory Measures................................................................................ 18
6 Trade Unionism....................................................................................................... 18
6.1 Principles........................................................................................................... 19
6.2 Classification of Trade Unions ......................................................................... 20
6.2.1 Classification Based on Trade ...................................................................... 20
6.2.2 Classification Based on Agreement .............................................................. 20
6.2.3 Classification Based on Membership............................................................ 21
6.3 Evolution of Trade Unions................................................................................ 21
6.4 The Trade Union as an Organisation ................................................................ 22
6.4.1 Why Employees Join Unions......................................................................... 23
6.4.1 Organisation Structure ................................................................................. 24
6.5 Problems of Trade Unions ................................................................................ 24
7 Collective Bargaining.............................................................................................. 25
7.1 The Concept ...................................................................................................... 25
7.1.1 USA ............................................................................................................... 27
7.1.2 United Kingdom ............................................................................................ 27
7.1.3 India .............................................................................................................. 27
 7.1.4 West Germany & Other European Nations .................................................. 27
7.1.5 Sri Lanka....................................................................................................... 28
7.2 The Nature and Scope of Collective Agreements............................................. 28
7.2.1 Plant Level .................................................................................................... 29
7.2.2 Industry Level................................................................................................ 29
7.2.3 National Level............................................................................................... 29
7.3 The Process of Collective Bargaining............................................................... 29
7.4 Collective Bargaining and the Right to Strike .................................................. 31
7.5 Policies for Collective Bargaining and Union- Management Relations........... 32
7.6 Laws of Collective Bargaining ......................................................................... 33
7.6.1 The USA ........................................................................................................ 33
7.6.2 Canada.......................................................................................................... 34
7.6.3 India/Sri Lanka ............................................................................................. 35
8 Summary.................................................................................................................. 35
9 References and Further Reading........................................................................... 37
1 Objectives
When you have studied Block 12 of this course, you will be able to:
• describe the processes of communication and negotiation called Industrial
Relations or Labour Relations
• comment knowledgeably about labour relations issues with references to the
historical background of the field
• perceive, in your environment, factors that affect Industrial & Labour relations
• correctly use the vocabulary of collective bargaining and hold realistic
expectations of its outcomes and processes.

2 Introduction to Industrial & Labour

Relations
As Blyton and Turnbull (1994) note, ‘work dominates the lives of most men and women’
and ‘the management of employees, both individually and collectively, remains a central
feature of organisational life.’ These irrefutable observations, quoted by Salamon (1998),
show why most large organisations depend upon competent work in this field.

Industrial or labour relationsthe terms are often used interchangeablycan be viewed

as the interaction between the various interested parties involved in employment. The
employer and employee are obvious parties. The state, in ensuring a level playing field
for both sides, provides the legal framework within which such relations may take place.
A notable body of thought about labour relations was that of J. T. Dunlop, who applied
the systems concept to industrial relations in 1958. Although over time, Dunlop’s work
has been subject to a variety of interpretations, uses, and criticisms, few writers have
suggested its abandonment. As Salamon states, ‘the criticisms do not themselves
invalidate the systems approach to examining industrial relations but rather highlight the
need for accommodation and refinement’ (Salamon 1998, 13).
Dunlop’s systems approach model sees industrial relations as a subsystem of society
distinct from, but overlapping, the economic and political subsystems. The model has
four interrelated elements:
• Actors – management, non-managerial employees and their representatives and
specialised government agencies concerned with industrial relations.
• Contexts – influences and constraints on the decisions and actions of the actors
which emanate from other parts of society
• Ideology – beliefs within the system, which not only define the role of each actor
or but also, define the view that they have of the role of the other actors of the
system.

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 • Rules – the regulatory framework, developed by a range of processes and
presented in a variety of forms, which expresses the terms and nature of the
employment relationship.
Unions representing workers garner their strength through numbers to influence employer
decisions concerning matters that affect employment, such as pay, working hours and
other terms and conditions of employment. Employers see this as an erosion of their
authority or power to make decisions concerning their businesses. In this tension lies the
essence of labour relations.
Emotion and tension runs high in labour relations. Economic factors through the decades
have determined which side has ‘power’ over the other. Employees have an edge when
the labour market is limited and employers are at an advantage when there is high
unemployment. However, unions are also affected when employers are economically
affected.
While some employers have used their clout or power fairly, some have not. The
economic exploitation of labour and the disrespect shown to human dignity has led to the
formation of unions that can stand up to the economic might and power of employers.
On the converse side, it has been argued that the ability of some unions to win greater
concessions than warranted has contributed in no small way to the loss of jobs in
particular sectors due to the ‘flight of jobs.’
The resolution of this inherent conflict in labour relations is crucial to business survival,
growth and competitiveness. The traditional adversarial concept of win/lose has to give
way to win/win in the current climate where the wants and needs of both sides have to be
met.
A win/win climate requires the accommodation of the other’s needs rather than their
traditional repudiation by each side. Such accommodation can bring about an increase in
productivity and a better quality of life.
Labour relations is a continuous relationship between a defined group of
employees (represented by a union or association) and an employer. The
relationship includes the negotiation of a written contract concerning
wages, hours and other conditions of employment and the interpretation
and administration of this contract over its period of coverage.
-Milkovich & Glueck (1985)

Industrial relations is a set of phenomena, operating both within and

outside the workplace, concerned with determining and regulating the
employment relationship. Salamon (1998)

2.1 Development of Industrial Relations

The nature of industrial relations has evolved from early origins in the master-servant
relationships of the trades when overall power resided with the owner/employer. Many
factors in the changing nature of organisations and society, especially in the last 100

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years, have produced the forms of relationships seen today. Different stages in this
unplanned change are identifiable, but as Salamon (1998) comments, each stage did not
supersede and replace the previous stage but, rather, supplemented and modified it.
In the US, unions go as far back as 1790, when such skilled craftsmen as shoemakers,
tailors, printers, and others organised themselves. From these to the present unions, the
history of the union movement has been one of alternate expansion and contraction. In
the UK, a similar pattern is observed; Salamon argues that during the latter part of the
nineteenth century, trade unionism and collective bargaining were largely confined to the
skilled trades and piecework industries. In the former, the workers had the industrial
strength, through mutual insurance and their control over entry into the trade, to seek
employer acceptance of the union’s rules. The main impetus for the development of
collective bargaining at the national or industry level came during World War I.
In the post-Industrial Revolution period, some welfare-minded employers responded to
the fact that employees looked to the employer to provide them with many of their needs.
This phenomenon of paternalism was the style in an era where individuals or families
dominated various businesses. With the advent, popularity and the more advantageous
form of the corporate entity – the limited liability company – paternalism gave way to
other styles of management.
Until around the ‘60s, the work in the organisational unit called ‘Personnel’ involved ‘file
management’, where the activities typically included screening applications, orientation,
collecting and storing data, and circulating information on policies and organisational
events and news. Personnel departments grew out of the need for businesses to take care
of legal requirements that came about to provide better working conditions and a fairer
deal for employees. Such departments also grew out of a need to have an intermediary
between workers and owners. At times, it was used by the owners to find out what was
‘going on’ at the worker level and as an intelligence-collecting agency that reported on
suspected troublemakers.
According to Salamon (1998) alongside confrontation and increased legislative control,
the period since the mid 1980s has seen significant developments in management’s
approach to industrial relations. No single strategy has been adopted by organisations, but
certain strands are apparent:
• Management initiative: Management has been the prime mover for introduction of
HRM approaches and projects intended to support and be integrated with the
achievement of business objectives.
• Process relationships: The balance has shifted from an emphasis on the
management/union relationship (collectivism) to an emphasis on the
management/employee(s) relationship (individualism). The objective has been to
secure the individual’s identification with and commitment to the organisation
and its goals.
• Structure of bargaining: There has been a continuation of the shift from the
national ‘multi-employer’ level to the ‘single-employer’ organisational level.

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 • Pay and working arrangements: The new emphasis among most organisations has
been on ‘flexibility’ and greater individualisation of the contractual relationship.
More emphasis has been placed on organisational or individual performance in
determining pay and less on a uniform rate for the job.
The post Industrial Revolution era and the post Depression period saw a steep rise in the
strength of unions. The ability of the unions to bring society to focus on the poor living
standards of workers and the large-scale unemployment of youth contributed in no small
measure to the growth of trade unions worldwide. It brought about the ability of workers
to negotiate better terms and conditions of employment and made management more
socially responsible.
The growth of trade unions continued in the USA when a steady decline in membership
was noted elsewhere from the 50s onwards and especially during 1970-1980, when
closures and massive lay offs took place. In India, union numbers peaked around 1920.
The increasing power of trade unions made governments to sit up and take note of the
conditions of workers, leading to the enactment of various laws that forced employers to
provide a fairer deal to their workers.
With the advent of specialists within P/HR functions it was only natural that a specialist
would deal with such matters as group relationships with organised or unorganised
employees, negotiations, contract administration, grievances, arbitration, etc. It not only
gave rise to an extension of the Personnel department to be known as the Industrial
Relations unit but also paved the way to a new field known as industrial relations. This
was a necessary extension of the personnel department to deal with the rising power of
trade unions.

Activity
Discuss the mechanism, organisation and structure for administration of labour matters in
your country. What are the principal legal enactments that enable your country’s labour
administration?

2.2 Objectives of Industrial Relations (IR)

Industrial relations is not an ‘objective’ science. As Salamon argues, there are no simple
objective facts in industrial relations. This is not to deny the presence of important issues
and debates in industrial relations apart from those entangled with the
conflictual/consensual relationship of the participants. The loftier issues centre around
such concepts as fairness/equity, power/authority and individualism/collectivism. You
can infer these topics from at least two of the objectives that Nair & Nair attribute to IR:
• the development of healthy employer – employee relations
• the maintenance of industrial peace and high productivity
• the development and growth of industrial democracy.

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Nair & Nair also cite Kirkaldy (1947), according to whom there are four objectives for
IR:
• improvement of economic conditions of workers
• State control on industries for regulating production and promoting harmonious
industrial relations.
• socialisation or rationalisation of industries by making State itself a major
employer.
• vesting of the proprietory interest of the workers in the industries in which they
are employed.
Given these overall goals and objectives, it is not surprising that the field is engaged in a
number of policy- and operations-oriented activities. Some of these focus on the
relationships between the employer and individual employees, while others deal with
management and organised and other labour groups. Still another area to which industrial
relations activities contribute significantly is that of overall industrial goals such as
productivity, labour peace, and industrial democracy. Your attention is now directed at
some of these.

2.2.1 Employer to Individual Employee Relationships

This relates to the areas of management focus in relation to policies and practices that
ultimately affect the productivity and well being of their employees as individuals. With a
view to optimising the interests of the employer and those of employees, these comprise
fields such as:
• Wages & Salary administration.
• Career prospects inclusive of planning and promotion.
• Retirement benefits and medical benefits
• Discipline & redress of grievances
• Training & Development
• Counselling
• Workers’ Compensation, connected and related issues such as insurance

2.2.2 Labour Management Relations

Distinct from Employer-Employee relations is this area, which relates to relations
between the employer as a management body and its workers as a recognised group or set
of groups. It covers rights, protocols and practices, often regulated by a legal structure,
related to –
• management (with concepts like ‘management rights’)
• formation and recognition of unions to represent the interests of the employees
• collective agreements

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 • the settling of industrial disputes.
Through these bodies, management and labour negotiate and enforce the establishment of
welfare measures and benefit schemes. Another focus of labour-management relations
are health and safety regulations and programmes at work.

2.2.3 Industrial Peace & Productivity

One of the most important aspects of IR is to maintain industrial peace and thereby
increase productivity. It depends on the quality of the union-management relations at
workplaces. In fact, proactive labour administrations of some countries have changed
their focus from being a law enforcer to a facilitator to maintain industrial peace. Rather
than resolving strikes by unions, good IR means averting strikes through proactive
interaction. Productivity is another important area in which IR becomes significant. In the
highly competitive area of global business maintaining high productivity is important for
the survival of organisations. In the Global Competitiveness Report 2001-2002, this fact
is borne out well. A few other areas of focus for Industrial Relations are:
• Upgrading technology and production methods
• Securing employee commitment and cooperation in improving productivity
• Minimising ‘man days lost’ per year
• The retraining and redevelopment of surplus labour

2.2.4 Industrial Democracy

The nature of the relationship between employees and management in the organisation’s
decision making process is central to the character and conduct of the industrial relations
system at the organisational level. Industrial democracy is also known as worker’s
control (Salamon, 1998, p.353). According to Salamon, this is a socio-political concept or
philosophy of industrial organisation, which focuses on the introduction of democratic
procedures to restructure the industrial power and authority relationship within
organisations. He further argues that thereby it creates a system which involves
‘determination by the whole labour force of the nature, methods and indeed purpose of
production. Salamon elaborates that the central objective of industrial democracy is the
establishment of employee self-management within an organisation, whose ownership is
vested in either the employees or the state and whose managerial function is exercised
ultimately through a group, elected by the employees themselves. This group has the
authority over all decisions of the organisation, including the allocation of ‘profits’
between extra wages and reinvestment.

2.2.5 Liaison Functions

In addition to the above, the IR function has also a liaison role to within it. Those who are
responsible for the IR function in an organisation have to play a key and central role in
the formulation of the industrial relation policy of the organisation. This is at a
conceptual and policy level but there are other activities which take IR personnel out of
the organisation in the likes of liaison with government and local government authorities

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such as labour officers/inspectors etc., participation in judicial and semi judicial dispute
settlements, participation in labour conferences and so on.

3 The International Labour Organisation (ILO)

In this era of globalisation, the ILO’s goals have come of age. The ILO Constitution
states that ‘the failure of any nation to adopt humane conditions of labour is an obstacle
in the way of other nations which desire to improve the conditions in their own
countries.’ Always philosophically far-sighted, the ILO constitution is based on an
overarching principle that appeals to many people on either side of the line dividing
owners and workers. The principle is that universal and lasting peace can be established
only if it is based upon social justice. Lofty words, but one need only look at the
economic roots of World War II in Germany to see how labour unrest can make nations
ready to take up arms.

3.1 Scope
The ILO is the international institutional framework which made it possible to address
issues such as the eight-hour working day, maternity protection, child labour laws and a
range of policies that promoted workplace safety and peaceful industrial relations – and
to find solutions allowing working conditions to improve everywhere. No country or
industry could have afforded to introduce any of these in the absence of similar and
simultaneous action by its competitors.

3.2 Objectives
The ILO has four main objectives:
1. To promote and realise standards and fundamental principles and rights at work
2. To create greater opportunities for women and men to secure decent employment.
3. To enhance the coverage and effectiveness of social protection for all
4. To strengthen tripartism and social dialogue.
These objectives are realised in a number of ways:
• Formulation of international policies and programmes to promote basic human
rights, improve working and living conditions and enhance employment
opportunities.
• Creation of international labour standards – backed by a unique system to
supervise their application - to serve as guidelines fro national authorities in
putting these policies into action.
• An extensive programme of international technical cooperation, formulated and
implemented ain an active partnership with constituents to help countries in
making these policies effective in practice.

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 • Training, education, research and publishing activities to help advance all of these
efforts.

3.3 Principles
In 1944, the International Labour Conference met in Philadelphia USA, and adopted the
Declaration of Philadelphia which redefined the aims and purposes of the ILO through
the adoption of the following principles:
• Labour is not a commodity
• Freedom of expression and of association are essential to sustained progress
• Poverty anywhere constitutes a danger to prosperity everywhere
• All human beings, irrespective of race, creed or sex have the right to pursue both
their material well being and their spiritual development in conditions of freedom
and dignity, of economic security and of equal opportunity
In 1988, the ILO Conference adopted the ‘Declaration on Fundamental Principles and
Rights at Work’, which re-affirmed the commitment of the international community to
‘respect, to promote and to realise in good faith’ the rights of workers and employers to
freedom of association and the effective right to collective bargaining.
It also commits member states to work towards the elimination of all forms of forced or
compulsory labour, the effective abolition of child labour and the elimination of
discrimination in employment and occupation.
The declaration emphasises that all member states have an obligation to respect the
fundamental principles involved whether or not they have ratified the relevant
Conventions.

Activity
Search the World Wide Web and find out more about the ILO, its organisational structure
and the concept of ‘decent work.’

4 Labour Legislation
During the last two decades, a large number of labour laws has been enacted, particularly
in the developing world. According to Nair & Nair (1999), India tops the list in amount
of labour legislation. Salamon states that even in the UK, the 1970s saw increased legal
intervention into industrial relations. In the US, until about 1930 there were no special
labour laws (Dessler, 2001). Employers were not required to engage in collective
bargaining with employees and were virtually unrestrained in their behaviour toward
unions. This one-sided situation lasted from the Revolution to the Great Depression

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(around 1930s). Since then, in response to changing public attitudes, values, and
economic conditions, labour law has gone through three clear changes: from ‘strong
encouragement’ of unions, to ‘modified encouragement coupled with regulation,’ and
finally to ‘detailed regulation of internal union affairs.’ (Dessler, 2001)
When you look around the world, particularly the developing countries, you would notice
that labour legislation has been quite influenced by the politics of the day. If the political
party in power is pro-labour, then you will see the government’s labour administration
becoming more and more protective of the country’s labour force. This is done through
the introduction of pro-labour laws into the statute book.
In general legislation introduced by governments throughout the world could be
classified along certain types. Let us see what types of labour legislation exist.

4.1 Types of Legislation

This section discusses the features of four broad areas of labour legislation, each in turn:
• Working conditions
• Wages
• IR
• Social security

4.1.1 Working Conditions

Much of the legislation is sector based, such as factories, and is related to physical and
other working conditions, such as hours of work, minimum lighting and space, overtime,
maximum hours of work, etc., particularly pertaining to work in factories. Many
countries would have a ‘Factories Act’ that deals with all these aspects.
Similarly, there are laws that specifically deal with employment of persons in Shops and
Offices and other sectors of industry.
These types of legislation also may deal with areas such as maternity benefits and the
prevention of child labour. In some jurisdictions, specific legislation covering all or a
range of sectors, may have been enacted to provide for these.

4.1.2 Wages
There are minimum wages and terms and generic conditions of employment (usually of
the labour categories) prescribed in some countries, such as some in the Asian region,
where social security measures are non-existent. Laws may also provide for the period of
time within which salaries/wages have to be paid.

4.1.3 Industrial Relations

Laws may prescribe the whole gamut of industrial relations that includes dispute
settlement, industrial courts/tribunals and their powers, and the ability of the state (in

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some countries, especially the Asian region) to refer such disputes for settlement to
specified bodies. Many countries are likely to have an Industrial Disputes Law that deals
with these aspects.
A country’s laws usually provide for rules and regulations pertaining to trade unions.
They would deal with such areas as the formation and registration of trade unions and the
recognition of such unions by employers, as well the as the rights, powers, and duties of
the unions, etc.

5 Industrial Disputes/Conflicts
No relationship is devoid of difficulties, and an employer-employee relation is no
exception. However good the relationship may be, mistakes and misunderstandings often
take place on both sides. The consequences are disputes or conflicts within the
workplace. Disputes and the resultant conflicts cause losses of production, suffering
among workers and the idling of machines and materials. It also affects the consumer.
However, it must be noted that it was through conflict that workers won for themselves
better terms and conditions of employment. Conflict could also throw up issues that
ultimately get resolved by the intervention of the public and/or the government (e.g., the
enactment of legislation more favourable to the workers).
In the applicable Indian law, industrial disputes are defined rather circularly as:
‘Any dispute or difference between employers and employers or between
employees and employees or between employers and employees which is
connected with the employment or non-employment or the terms and
conditions of employment or with the conditions of work of any person’
(Indian Industrial Disputes Act of 1947)

5.1 Nature of Conflicts

The definition includes three different possible sets of antagonists in industrial conflict.
However, the present discussion is confined to disputes arising between management and
workers. Disputes arise from a variety of sources for a variety of reasons. Some are
innocent misunderstandings of regulations or policies but others are much more
complicated, sometimes with malicious intent. In some cases, the cause lies with the
individual manager or employee but others are due to management union intent. The
following sections review the various causes under two categories: conflicts caused by
unions and those caused by management.

5.1.1 Conflict Caused by Unions

You cannot expect the unions to cooperate with the management all the time. In reality it
doesn’t happen that way. The quality of the relationship also depends on the people who
interact for the two parties, meaning those in the management and the trade union
officials. In some countries the trade unions are also politicised and as a result even if the

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relationship between the management and the unions are free of conflict, political
interference may disturb the relationship and give rise to conflict situations. Some of the
situations that may arise as a result are:
• Non-cooperation
• Arguments and quarrelsome behaviour
• Hostility and irritations
• Stress, strain and anxiety
• Unwillingness to negotiate or participate in discussions
• Resentment or withdrawal
• Absenteeism, alcoholism or a high incidence of accidents
• ‘Work to rule’ or ‘go slow’ tactics
• Demonstrations
• Strikes

5.1.2 Conflict Caused by Management

In a unionised setting, managers can create their share of conflict. An arrogant employee
of the Personnel department can cause a dispute that ends up in a strike. Many are the
court cases that were the result of a heated argument between ‘Personnel’ and workers
over trivial issues. Some of the causes are outlined below. Refusal to discuss or negotiate
a demand by the union is a very common cause resulting in a dispute. Also, a manager
may use derogatory language on an employee resulting in sections of employees walking
out in protest until that manager tenders a public apology. Some causes may emanate
from disciplinary issues that result in suspension, demotion, dismissal etc. A few other
causes are:
• Layoffs
• Lock out
• Termination

5.2 Types of Disputes

The UK’s Code of Industrial Relations of 1972 recognises two types of disputes, namely
a dispute of right, and a dispute of interest
A Dispute of right arises out of the application or interpretation of an
existing agreement or contract. For example – the fairness of standing
orders, denial of awards, non payment of allowances or other breach of
rights contained in collective agreements. As Salamon (1998) points out
that it is the practice in the USA that disputes of right are more suited to
arbitration than the disputes of interest.

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 A Dispute of interest is one that is not anticipated by law but which arises
out of determination of new terms and conditions of employment either
according to claims made by employees or proposals made by employers.
For example, lay offs, claims for wages, bonus etc. may give rise to
disputes of interest.

5.3 Causes of Disputes

Many factors can precipitate disputes. Nair & Nair (1999) have classified them:
• Economic causes – wages salaries, profit etc.
• Social causes – low morale, corruption, pollution, rising unemployment etc
• Political causes – political rivalry, unstable government etc
• Technical causes – fear of losing jobs due to automation, unsuitable technology
etc
• Psychological causes – loss of job, propaganda, instigation etc
• Market causes – competition, loss, recession etc
• Legal causes – court order of closing down factories, shifting (under zoning laws)
Most of these causes would be seen to be at macro level beyond the realm of
management or labour control. However, where managements and workers do have
control is at the micro level (at the organisational level) where the quality of their
relationships, mutual trust and respect enhance the sense of belonging, commitment and
interest in the job. Good industrial relations will thus be seen as the key to greater
productivity on the one hand leading to greater profits for the employer while giving
employees a better quality of life through better earnings.

5.4 Resolution of Conflict and Settlement of Disputes

The need to contain industrial strife has led to many means for resolving disputes, all of
which fall into one of three classifications which are elaborated below:
• Labour Administration by the state
• Statutory measures
• Non-statutory measures

5.4.1 Labour Administration

The state usually provides the machinery by which disputes may be resolved. The Labour
Ministry or Department in some of the Asian countries lays down policy guidelines on
labour matters. The government passes laws enabling government machinery to intervene
in labour disputes. In some countries, provincial governments also have the power to
enact legislation in respect of labour matters in their jurisdictive areas such as states in
India.

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In the US, the National Labour Relations Board (NLRB) administers the law and
regulations in the private and third sectors. Many States also have state boards to
administer state labour laws. A key point here, as with Canada, is that of the level of
government that constitutionally has responsibility for labour relations. In Canada, it is
principally with the provinces, except for federal workers. In Canada, the federal labour
law is administered by the Canada Labour Relations Board for the private and third
sectors. The public sector body is the Public Service Staff Relations Board. The
provinces and territories have Labour Relations Boards.
As far as the US and Canada are concerned, labour relations administrators have two
major duties:
• To supervise representation elections and certify unions as bargaining agents
• To hear appeals of alleged violations of the laws
Although it is widely believed that the boards do a satisfactory job, there has been
criticism that they place too high a priority on maintaining stability and predictability in
collective bargaining at the expense of union democracy, employee free choice and
representational effectiveness.
The Asian labour administrative context is different in view of a different social and legal
regime. The state machinery ensures the implementation of the country’s (or state’s) laws
and intervenes to settle disputes.

5.4.2 Statutory Measures

Most countries also set up statutory bodies to deal with the settlement of disputes. These
are somewhat different from government labour administration agencies such as
departments or ministries of labour or manpower. A few examples are Works
Committees, Conciliation officers, Boards of Conciliation, Mediation Boards, Labour
courts, Industrial tribunals as seen in India and Sri Lanka. These have authority,
conferred by labour laws, to settle disputes. In some disputes the labour department or
ministry may appear before court as a facilitator.
Laws affecting collective bargaining in the US are complicated. The important items of
legislation in this regard are the National Labour Relations Act (Wagner Act), the
Labour-Management Relations Act of 1947 (Taft-Hartley Act) and the Landrum-Griffin
Act of 1959. These acts cover many aspects of labour relations, including the procedure
by which unions come to represent employees in the private sector.
In India & Sri Lanka the principal enactment is the Industrial Disputes Act of each
country. In Sri Lanka however, numerous other laws have added to statutory measures in
the settlement of disputes. Some of them are:
• Industrial Courts
• Labour Tribunals
• Arbitration (both voluntary and compulsory)

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What is to be noted is the nature and scope of statutory measures in the western world in
comparison to those in India/Asia. While in the west statutory measures relate to the
process of collective bargaining between employers and unions, on the Indian
subcontinent statutory measures are much wider in scope and provide for much more
than collective bargaining.

5.4.3 Non-statutory Measures

Most disputes can be resolved short of going before a legally constituted body such as the
labour tribunal or industrial courts. Voluntary arbitration, workers’ participation in
management and collective bargaining are some of the key measures in this regard. One
of the chief measures in this area in India is the Code of Discipline formulated by the
Indian Labour Conference in New Delhi in 1957 for Indian Industries. This code was
developed for the purpose of maintaining discipline both in public and private sector
industries. Managements and unions are mutually agreeing to abide by certain actions,
such as unions agreeing not to strike or stage a lockout without due notice and
managements agreeing not to increase workload unilaterally. There are other areas in
which the two parties agree to maintain harmony. There is also tripartite machinery in
place, such as the Indian Labour Conference (ILC) and the Standing Labour Committee
(SLC) among others to contribute to the settlement of disputes. Worker participation in
management and collective bargaining are the other measures available in India.
In the West, where the focus is on the broadly established practice of collective
bargaining, importance is placed in that process with all other initiatives being
subservient to it.

Activity
In your country, what types of disputes are commonly experienced? What are the causes?
Write a short essay outlining how those disputes can be avoided.

6 Trade Unionism
Trade Unionism has its roots in Marxist dogma. It began as a force to counter the
exploitation of workers by the newly established post Industrial Revolution ‘capitalists’
whose actions widened the gap between the living standards of owners and workers.
Trade unionism can be mutually beneficial if a responsible partnership exists, but can be
destructive and counter productive if both sides consider themselves adversaries to each
other. Here is the definition of a trade union from the Indian Trade Unions Act of 1926:
‘Any combination of persons, whether temporary or permanent, primarily for the
purpose of regulating the relations between workers and employers or between
workers and workers or for imposing restrictive conditions on the conduct of any
trade or business and includes the federations of two or more trade unions.’

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A more recent and non-legislative definition of a union is:
‘An organisation of workers acting collectively who seek to protect and
promote their mutual interests through collective bargaining.’
De Cenzo & Robbins (1993)

As Nair & Nair (1999) point out, from these definitions we can derive the following
characteristics of trade unions
• A union is an association of persons: i.e., employees or independent
workers/tradespersons.
• A union is not casual. Once recognised, it is relatively permanent.
• A union’s main objective is to secure economic benefits for its members. This is
done through a process called collective bargaining.
• A union influences or affects industrial relations. Some unions maintain harmony
with employers through intelligent handling of matters. Others take drastic action
without consulting advisers and applying a long-term perspective.
• A union provides ‘checks and balances’ on the employers and thus may restrict or
reduce the freedoms of management.
• Unions may form federations, and some of these may engage in collective
bargaining for entire industrial or professional sectors.

6.1 Principles
So why do workers form unions? What are the underlying principles of trade unionism?
Today, to a large extent, three maxims quoted by Nair & Nair (1999, 288) provide the
underlying principles of trade unionism.
‘Unity is strength’
The early capitalists were able to exploit workers, as the worker was on an
unequal footing vis-à-vis his employer, i.e., he had no bargaining power. When
workers realised that their strength lay in numbers they were able to win for
themselves concessions that would not have been possible but for their collective
might. This was probably the first principle of trade unionism.
‘Equal pay for equal work’
Unions believe that caste, creed, sex or race should never form the basis of
discrimination against a worker. If equal work is done, then the pay should also be
equal. This also provides for the elimination of any discrimination of workers. In
the past when paternalism was practiced, the owner-employer had his favourites
and they were treated better than others who did the same kind of work. This is
not possible now as trade unions are very vigilant about job contents of its
members and those who haven’t joined the union.

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‘Security of employment’
One of the major principles of Trade Unionism is to safeguard the security of
employment of the members. When employers try to retrench, lay off or
downsize, unions vehemently protest to save the jobs of some of their members.
Such action from a union is somewhat protective of its own membership lists.
There have been instances where members have left one union and joined another
which could put up a better fight for their welfare.

6.2 Classification of Trade Unions

So far, the concept of unions has been discussed as almost a single topic. In actual fact,
there are variations on the theme: unions are of various types and serve various purposes,
as the following three sections describe.

6.2.1 Classification Based on Trade

Many unions have memberships and jurisdictions based on the trades they represent. The
most narrow in membership is the craft union, which represents only members certified
in a given craft or trade, such as pipe fitting, carpentry, and clerical work. Although very
common in the western world, craft unions are not common in countries like India & Sri
Lanka.
At the other extreme in terms of the range of workers represented is the general union,
which has members drawn from all trades. Most unions in India & Sri Lanka are in this
category.
Another common delineation of unions based on trades or crafts is that between so-called
blue-collar workers and white-collar workers. Unions representing workers employed on
the production floor, or outdoor trades such as in construction work, are called blue-collar
unions. In contrast, those employees in shops and offices and who are not in management
grades and perform clerical and allied functions are called white-collar workers
In addition, trade unions may be categorised on the basis of the industry in which they are
employed. Examples of these are workers engaged in agriculture or forestry: hence
agricultural labour unions or forest worker unions.

6.2.2 Classification Based on Agreement

Another basis on which labour agreements are sometimes distinguished is on basis of the
type of agreement involved, based on the degree to which membership in the union is a
condition of employment
Closed Shop: Where management and union agree that the union would have sole
responsibility and authority for the recruitment of workers, it is called a Closed Shop
agreement. The worker joins the union to become an employee of the shop. The Taft-
Hartley Act of 1947 bans closed shop agreements in the USA, although they still exist in
the construction and printing trades. Sometimes, the closed shop is also called the ‘Hiring
Hall.’

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Union Shop: Where there is an agreement that all new recruits must join the union within
a fixed period after employment it is called a union shop. In the USA where some states
are declared to be ‘right-to-work’ states, the union shop is prohibited – i.e., anyone,
irrespective of union membership, has the ‘right to work’.
Preferential Shop: When a Union member is given preference in filling a vacancy, such
an agreement is called Preferential Shop.
Maintenance Shop: In this type of arrangement no compulsory membership in the union
before or after recruitment exists. However, if the employee chooses to become a
member after recruitment, his membership remains compulsory right throughout his
tenure of employment with that particular employer. This is called a maintenance of
membership shop or maintenance shop.
Agency Shop: In terms of the agreement between management and the union a non-union
member has to pay the union a sum equivalent to a member’s subscription in order to
continue employment with the employer. This is called an agency shop.
Open Shop: Membership in a union is in no way compulsory or obligatory either before
or after recruitment. In such organisations, sometimes there is no union at all. This is least
desirable form for unions. This is referred to as an open shop.
The above classifications are more usual in the west than on the Indian sub-continent.

6.2.3 Classification Based on Membership

This type of classification exists mostly in India especially in the states of Maharashtra &
Gujarat. It is based on the Bombay Industrial Relations Act and derives from the
membership on the roll of the union.
A ‘Qualified Union’ is one with less than 5% of the total employees, while a
‘Representative Union’ is one that has at least 15% of the total employees and a ‘Primary
Union’ is one which has more than 15% of the employees on its roll.

6.3 Evolution of Trade Unions

The Industrial Revolution in the 19th century brought about massive increases in output.
It gave the owners of businesses an equally massive increase in capital accumulation. It
did very little to improve the lot of the average worker. Wages were low, working
conditions abominable and hazardous. Labour was considered a commodity that could be
bought or sold.
The political philosophy of laissez-faire (leave things alone) prevented governments from
doing anything to improve conditions of the workers. Realising that they were on their
own, workers organised themselves collectively to obtain improvements to wages and
working conditions.
The first visible union activity in the USA took place in 1794 when the shoemakers of
Philadelphia made an attempt to increase their wages, which had been unilaterally

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reduced by their employers. The shoemakers were not successful and, in 1806, a federal
court fined the union and ruled in favour of the employers, who contented that the
combination of workers was an illegal conspiracy in restraint of trade. However, in a
landmark case in 1842, (Commonwealth of Massachusetts v Hunt) the conspiracy theory
was overturned and the court ruled that unions were not criminal per se as they could
have honourable as well as destructive objectives. The unions’ objective would determine
whether it was legal or illegal.
After the Hunt decision, many unions emerged. In 1886 the American Federation of
Labour (AFL) was organised. It was an amalgamation of national craft unions. It
emphasised craft (rather than industry) and did not take on any particular political
philosophy. Its objectives were more pragmatic than social or political.
In 1935, the Congress of Industrial Organisations (CIO) was formed. Although it was
intended to work within the AFL, many issues forced the two apart. The CIO addressed
all workers, not just those in crafts. However, the AFL and CIO merged later, in 1955,
and became a formidable force in collective bargaining country-wide in the States.
Through this era of the 1940s and 50s, the American public’s identification with union
goals led to a changed regulatory climate and phenomenal growth in union strength. After
that, unions began a long decline through to the 1980s.
Industries that were heavily unionised were typically the ones hit hardest by competitive
pressures in the ‘80s. Foreign competition, deregulation and a changed climate of public
opinion severely weakened unions to the point that, around the mid-‘ 80s, the pay
increases for union members were around 40% less than those given to non-union
workers. These troubles eased slightly around 1986, but high unemployment at that time
restrained unions considerably.
As mentioned above, unions were blamed for the ‘flight of jobs’ due to high wage
settlements. However, it has been said that management historically has exhibited trouble
maintaining the discipline and foresight to deal directly and fairly with employees.
Commitment to employees can be difficult in lean times. History is not on the side of the
employer either. Without unions, the government and the courts could be asked to
increase their intervention in the workplace, an outcome that may not be to the liking of
employers.
It is fair to see unions as a counterbalance, perhaps an essential one, against unbridled
capitalism.

6.4 The Trade Union as an Organisation

Unions are organisations and employers too. Like any other organisations, unions too
have objectives. Their objectives may either be job-conscious or class-conscious.
Job Consciousness leads to relatively limited economic goals pursued through such
mechanisms as collective bargaining. The labour movement in the USA pursues this
objective.

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Class Consciousness, by contrast, seeks fundamental change in the political and
economic system; unions obtain such change through the political arena. Even though in
the US unions may endorse candidates and encourage their members to actively
participate in the political process, their objectives still remain the economic betterment
of their members. They do not seek an alternative economic or political system.
However, such fundamental change may be the objective of the union movement in
European or South American countries.

6.4.1 Why Employees Join Unions

From a practical standpoint, people would join unions if the benefit they derive from
being a member is greater than the cost of being a member. Therefore, potential increases
in wages must be greater than the amount of dues paid. Thomas Kochan et al (1984)
developed a model according to which an individual’s decision to join or avoid a union is
influenced by three critical determinants. They are:
• Perceptions of work environment
Job dissatisfaction
Working conditions problems
Inequity perceptions
(Dissatisfaction with bread-and-butter aspects of the job such as wages and benefits,
dissatisfaction with supervision or with the treatment of one group of employees versus
another can translate into a greater interest in unionism).
• Perceptions of influence
Desired influence
Difficulty of influencing conditions
(This is the desire to participate or influence the job and the employment conditions
surrounding the job. Kochan says the key here is that the lack of other effective
alternatives for influence turns employees to unions).
• Beliefs about unions
Big-labour image
expectations about unions
(Employees who are dissatisfied have certain expectations about what a union can do for
them. When organising efforts predispose or convince them that a union can improve
their situation, employees are more likely to join unions).
There also has been research into the reasons employees give for not joining unions:
• They identify with management
• They do not agree with the goals of unions

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 • They see themselves as professionals and unions as inappropriate for
professionals.
However, what must be noted is that there are no substantial differences between people
who do and do not join unions. Rather, the work situation seems to make the biggest
difference. It is sometimes said that employers’ personnel practices are the unions’
greatest organising weapon.

6.4.1 Organisation Structure

National trade unions show striking similarity although the nitty gritty may vary.
Whether it is the AFL-CIO in the USA or the national unions in India, by and large the
structure comprises four levels:
• Conventions/Sessions
• General Council
• Provincial Bodies
• Local Bodies
National Conventions/Conferences are held either annually or bi-annually. This is the
highest policy making body.
The General Council carries out policy decisions taken by the convention. Various
standing committees are often set up on research, education, lobbying and public
relations services.
State level bodies liaise with the national level organisations, and keep a close watch on
the implementation of labour legislation and practices. They may also assist/influence
state government in the passage of legislation and/or in administrative actions. They are
also involved in collective bargaining and are responsible for the welfare of their
membership and membership drives.

6.5 Problems of Trade Unions

Nair & Nair (1999) showcase the Indian situation quite vividly in presenting the
problems of Indian trade unions. Some of these may also be relevant to other countries
and particularly to the West. Let us look at each of these briefly.
Multiple trade unions: India has a problem in its trade union movement because of the
very large number of unions. It has caused inter-union rivalry and compromised on the
unity of workers. It also leads to fragmentation of the worker population. Some unions
may be more than willing to accede to the pressures of the employers and some others
may be in the hands of the politicians who are behind trade unions purely to expand their
voter base than to look after the welfare of the workers.
Politicisation: In a democracy, political influence on trade unionism cannot be avoided.
(Nair & Nair). In countries such as India and Sri Lanka, the historical development of the

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trade union movement was inseparably attached to the political movement through the
struggle for independence. Although in the beginning it helped the unions to gain
considerable influence on the government in power, in the long run it has become a threat
to the unity of the working class.
Democracy and Leadership: Nair & Nair point out, with particular reference to India,
that the basic objective of trade unions may be to promote industrial democracy but that
in practice, it rarely happens. Union leaders show authoritarian behaviour with less than
optimal participation, openness and transparency.
Lack of adequate finance: Large number of small sized unions find it extremely
difficult to sustain themselves, as their only means of income is membership
subscriptions. Poor finances affect union activities and when members are not adequately
served, they tend to gravitate toward other unions.
Those are the major reasons for failure of trade unions particularly in the Asian continent.

Activity
Collect statistics on your country’s trade unions. On what basis have they been classified?
How different is it from the above classification? Comment.

7 Collective Bargaining
You saw previously that workers united in order to win concessions from owner
employers in the Post Industrial Revolution era. This unity offered them strength, and
probably as a result, they found it very convenient to present their problems to
management through their union. Managers also found it easier to deal with union leaders
to resolve problems common to workers. This led to the concept of collective bargaining
first identified by Sidney and Beatrice Webb in the UK and by Groper in the US.
Collective bargaining grew with the growth of unionism.

7.1 The Concept

Collective bargaining may be defined as:
A method of determining terms and conditions of employment and regulating the
employment relationship which utilises the process of negotiation between
representatives of management and employees intended to result in an agreement
which may be applied across a group of employees. Salamon (1998, 305)

The National Labor Relations Act of the USA reads:

For the purpose of (this act) to bargain collectively is the performance of
the mutual obligation of the employer and the representative of the
employees to meet at reasonable times and confer in good faith with

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 respect to wages, hours, and terms and conditions of employment, or the
negotiation of an agreement, or any question arising thereunder, and the
execution of a written contract incorporating any agreement reached if
requested by either party, but such obligation does not compel either party
to agree to a proposal or require the making of a concession.
Dessler (2001, 566-567)

As Dessler argues, this means in plain language that both management and labour are
required by law to negotiate wages, hours, and terms and conditions of employment ‘in
good faith.’ Bargaining in good faith is the cornerstone of effective labour management
relations. It means that both parties communicate and negotiate. Collective Bargaining
would thus be seen as a process whereby representatives of employers and employees
negotiate, administer and enforce agreements that cover wages, hours of work and other
terms and conditions of employment.
There is more to collective bargaining than the mere getting together of two bodies to
review and agree upon certain terms of employment. Formally, collective bargaining
involves the following:
• Statutory support by legislative measures
• The existence of employee representatives, i.e., the union
• The recognition of the union by the employer as the bargaining agent
• The existence of an industrial dispute
• The threat of economic force in the form of a ‘lock out’ or ‘strike’ to settle an
industrial dispute or to reach an agreement
• Negotiation
• Finalisation of an agreement
• Implementation of an agreement
Collective bargaining can be a stabilising factor in the free enterprise system. The
recognised representation of employees by the union and the prescribed practices of
collective bargaining and is agreements provide an accepted means to solve economic
conflict, a clear legal framework within which the parties negotiate and establishes an
safety valve for psychological and social conflict among the individuals and groups
involved.
To achieve a successful management-union relationship and the acceptance of collective
bargaining protocols, a state of genuine representation and acceptance of the parties must
exist. For such a relationship, what might be called the critical success factors (CSFs) are:
• The bona fide interaction of the two parties
• The union’s understanding that the interests of workers are not superior to that of
the survival and success of the organisation
• Managements must accept and support the rights of trade unions

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 • The union at the collective bargaining process must truly represent a majority of
workers
• The union representatives must be purposeful but reasonable
• Managements must be progressive and enlightened. They must not exploit
disunity among unions to their advantage
• Both managements and unions must be vigilant enough to prevent political
exploitation of conflict for political ends
With these conditions in place, it is the hope of all concerned that timely and peaceful
agreements can be negotiated and that disputes that arise are amicably settled. However,
there are times and circumstances in which this is not the outcome, thereby leading to
escalated conflict and the taking of more extreme measures available to the bargaining
parties.
Let us look at some country examples in regard to collective bargaining and try to capture
the salient features those countries have adopted.

7.1.1 USA
You have seen how trade unionism evolved in the USA and how the AFL-CIO emerged
as a formidable union that now accounts for approximately 20 million members.
American trade unions have strong and effective leadership developed from within the
union. Union leaders are well paid. They have all facilities that top executives of
companies would have and employ skilled staff to assist them in their work.
Each organisation is required to have only one ‘Bargaining Agent.’ In case of dispute the
National Labour Relations Board is empowered to designate the ‘bargaining unit’ in the
interests of business and industry.

7.1.2 United Kingdom

In the UK, unionism has developed along professional lines. It has been estimated that
about 40% of white-collar and 90% of blue-collar workers are members of trade unions.
There is also significant unionisation among professionals. Those in education, health,
government services and even some no-profit organisations are now members of unions.
Collective bargaining seems to be the main purpose of professional in unions and it is
estimated that about 40% of all salaried non-managerial staff are represented by
bargaining agents compared to 25% of the labour force.

7.1.3 India
Indian Trade Unionism though principally influenced by the UK has been considerably
modified by Marxist concepts.

7.1.4 West Germany & Other European Nations

The American concept of industrial relations and a new concept of ‘co-determination’
that began in West Germany spread to other West European nations. Co-determination is

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a tripartite negotiation process in which elected worker representatives sit on
‘Supervisory Boards’ along with representatives of shareholders and those of employers
in equal numbers. There are no strong unions in West Germany as in the USA. The
national average strike level in West Germany has been low in comparison to that of UK
and Italy.

7.1.5 Sri Lanka

Collective bargaining in Sri Lanka is mainly limited to individual unions negotiating with
individual organisations although a few collective agreements cover a number of
employers and employees across many organisations and many categories of employees.
For example: the Collective Agreement between the Employers’ Federation of Ceylon
and the Ceylon Mercantile Union commonly called the EFC/CMU Collective Agreement.

7.2 The Nature and Scope of Collective Agreements

A previous section furnished several definitions of collective bargaining. A better
understanding of the process will come from reviewing some of its critical ingredients:
• It is a group process
• It involves negotiation
• It is a bipartite exercise involving representatives of unions or associations of
employees and employers
• The objective of collective bargaining is to reach an agreement
• The purpose of the process is to improve working conditions for employees while
securing the interests of management
• It is not merely an economic process, it is a socio-economic process (based on the
best of democratic traditions) that involves mutual respect of each other’s views,
aspirations, expectations, and values
• It meticulously follows legislation, rules, regulations, conventions and customs
developed by trade unions, managements, corporations and state and central
governments
What is included in an agreement reached through collective bargaining will depend on
the needs and requirements of the parties to the agreement. They could be industry or
workplace specific. Despite this, the following would be likely topics covered by the
process of collective bargaining:
• Wages, salaries increments and bonus payments
• Hours of work and overtime hours/rates
• Terms and conditions of work, safety, welfare and health care
• Grievance procedures
• Labour productivity, labour standards and modernisation
• Union-management relations including worker participation

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The range of the economy and its institutions that the certifications of the unions or
associations cover also affects the scope of collective bargaining. Most commonly, these
are distinguished as to whether the representation is for an individual plant or employing
organisation, an industry comprising a number of employers, or the economic institutions
of a nation.

7.2.1 Plant Level

In these negotiations agreements are reached between management of an independent
business unit and the union representing the workers of that unit. They are confined to
issues at the business unit level and there is no involvement of other unions in other units
or industries. This is very common in India.

7.2.2 Industry Level

In this process the unions of many business units form an association and hold discussion
with similar associations of owners/managements of such units. Agreements reached are
binding on all such units and implemented accordingly. It prevents different terms and
conditions being applicable to different units in the same industry or across industries.
Sometimes, in certain industries, this level of agreement is negotiated to cover issues of
common interest to the units that comprise it but other contracts are negotiated at the
plant level to cover issues of varying interest to the individual units.

7.2.3 National Level

The issues common to all workers across industries, regions and even sectors are
discussed between representatives of the National Trade Unions and representatives in
industry and the business community. Although rare in India, this is very common to the
USA where the AFL-CIO enters into national level agreements.

7.3 The Process of Collective Bargaining

As noted, collective bargaining is governed and informed by a range laws, rules,
regulations and protocols. Accordingly, the process encompasses the following major
phases:
1. A charter of demands by the bargaining agent
2. Preparation for negotiation
3. Bargaining
4. Collective Agreement
5. Contract administration
A union needs to be registered in order that it may be recognised. A recognised union
could become the bargaining agent empowered to hold discussions with management on
behalf of the employees in the organisation. If there is more than one union, the union
having the majority membership is recognised as the bargaining agent. In some countries,
the legislation allows only one bargaining agent for a defined unit of workers. Many

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employers have several such defined units of workers, differentiated on the basis of
criteria such as the trade or skills involved, that are often represented by different unions.
In these countries, each unit so defined collectively bargains with the employer for a
separate contract. Each union prepares the charter of demands. Where there is an existing
agreement the union will usually raise their new demands a few months before the expiry
of such agreement.
Both managements and unions prepare themselves for negotiations. Management will
prepare by collecting data on employee performance records, labour standards,
productivity, absenteeism, accidents, turnover, profit etc. This data is available internally.
External data gathered would include economic data, cost of living, copies of similar
contracts signed by other unions, terms and conditions of similar employees in other
organisations.
Based on data and analysis, management assesses the expectations of similar unions
elsewhere and the terms of the agreements that have been agreed to. This will help
management decide the percentage increase in wages they ought to consider, balance
viability with labour costs, balance the interests of labour with those of the shareholder,
and consider constraints on pricing with regard to the competition.
Managements would also consider prioritising the demands, the stand they should take
with the union, i.e., whether it should be tough or accommodative, and make decisions
whether or not to avoid or face strikes or lockouts. (Lockout is a refusal by the employer
to provide opportunities to work.)
Similarly, unions collect data and formulate their policies and strategies based on their
negotiating power, market conditions, management’s capacity to pay and general public
support to their cause.
Bargaining usually takes place in a business-like climate. No accusations are made or
each other’s motives questioned. Their respective positions are presented, supported by
facts and figures. Demands may be taken one after the other or on a basis agreed to at the
beginning of negotiations. Some demands may be conceded at the beginning.
Prerogatives of management may be questioned by the unions with a view to enlarge its
scope of influence on management. Managements usually do not allow such
encroachment in to areas they consider as being their prerogative. A total rejection of
demands would certainly lead to deadlock and is certain to lead to a strike/lock out.
Collective bargaining is successful when there is a give and take attitude on both sides,
when communication channels are always kept open, when the both sides have the
capacity to read the other’s true intentions and act ‘win-win.’
The terms agreed to have to be reduced to writing. This writing is variously referred to as
the collective agreement, labour contract, union contract, or labour–management
contract. Companies usually print and circulate them to all relevant parties. The
agreement is binding on both parties, has legal status, and serves as a day-to-day guide
for labour-management relations.

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Once the contract has been ratified, its administration follows. Good practice dictates that
its administration be transparent: clear with respect to the handling of contractual
disputes, and loyal to the spirit of the agreement.

7.4 Collective Bargaining and the Right to Strike

Though precedent setting has made the processes of collective bargaining more and more
predictable, collective bargaining does not always have a smooth flow. Many things may
happen that prevent both sides from keeping the process from moving. In the USA three
things can happen when an impasse develops.
• Conciliation or mediation
• A strike or a lockout
• Arbitration
In India and Sri Lanka, impasses more often lead to strikes than the other two options.
However, trends in recent recessionary times have shown a greater willingness on both
sides to resort to the other two options.
The Canadian Oxford dictionary defines a strike as ‘an organised refusal by employees to
work until some grievance is remedied.’ Such a withdrawal of service to the employer
can be triggered by a variety of causes and circumstances. In the US, a series of
distinctions are made, as follows:
• Contract strike – This occurs when management and the union cannot agree on
the terms of a new contract. In the USA more than 90% of the strikes are contract
strikes.
• Grievance strike – This occurs when the union disagrees on how management
interprets the contract or handles day-to-day problems such as discipline. These
are usually prohibited by about 95% of the contracts in the USA but occur
frequently in some specific industries.
• Jurisdictional strike - This take place when two or more unions disagree on which
jobs should be organised by each union. The Taft-Hartley Act gives the NLRB
power to settle these issues and unions also have their own methods of settling
them.
• Recognition strike – This occurs as a strategy to force an employer to accept the
union. Only 1% of strikes in the US are in this category.
• Political strike – This takes places to influence government policy. Extremely rare
in the USA.
In some countries, a strike is seen as a refusal to fulfil work obligations at best, but in
others only a few categories are outright illegal. Unfair labour practice strikes are aimed
at protesting illegal conduct by the employer. A ‘wildcat strike’ is an unauthorised strike
occurring during the term of a contract. A ‘sympathy strike’ occurs when one union
strikes in support of the strike of another.

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In other jurisdiction, such as India and Sri Lanka, a different taxonomy may be more
appropriate:
• Economic strike – This takes place when employee/union demands on wages,
working hours and terms and conditions of employment are not met.
• Wildcat strike – This is a quick, sudden and unauthorised stoppage of work and is
illegal.
• Sit-down strike – In this type of action, employees get to their places/points of
work but refuse to work.
• Sympathy strike – In this, employees or the union is not connected with the
dispute, but strike in order to show their solidarity with the striking union. In the
USA such a strike is illegal under the Taft-Hartley Act.

7.5 Policies for Collective Bargaining and Union-

Management Relations
There are laws and rules governing the establishment of unions and collective
agreements. However, laws cannot dictate good union-management relations and the
effective administration of jointly negotiated agreements. These outcomes require a
commitment and will of intent from both parties. Collective bargaining can be most
effective when there is evidence of a number of characteristics in the relationship and on
the parts of managements and unions separately.
Collective bargaining should be considered an educational process. It can give
management an opportunity to get to know about suppressed feelings, grievances, wants
and desires of workers. Equally, union leaders can get to know the financial position of
the organisation, and managerial problems of balancing various competing interests to
remain viable.
Collective bargaining must be treated as a form of finding the best solution to a given
problem. This calls for a give-and-take attitude from both sides so that both sides gain.
• The parties must have equal power. As with any situation involving the interests
of two parties, an inequality in the strengths of such parties can lead to ruthless
hegemony, constant conflict and at best a benevolent generosity that the weaker
party recognises can easily be taken away.
• There must be mutual trust and confidence. An absence, or perceived absence, of
goodwill can lead to acrimony and conflict that make it near impossible to
negotiate and maintain mutually satisfying and productive agreements.
• Both negotiating teams should have leadership qualities. During negotiations, it is
essential that the parties know that the commitments being proposed by each
negotiating team have high probability of acceptance by the parties that the
negotiators represent. Their leadership effectiveness in convincing the members is
critical.

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 • The agreement reached must be in conformity with the law of the land.
Obviously, the obvious and accepted legality of the agreement is a fundamental
requirement. The agreement is a legal document, binding on both parties.
Management, as a party to the agreement, can contribute to lasting harmony by
observing a number of practices:
5. Follow a realistic labour policy that is uniform and consistent across all sections
and divisions.
6. Consider the union a partner not an adversary.
7. Monitor rules and regulations continuously and bring about changes if such
changes improve morale and motivation. Do not take things for granted.
8. While being careful not to contravene the terms of the agreement, be proactive
and address the needs of the workers before it becomes a union-management
issue.
9. Consistently recognise the rights and authority of the bargaining unit, i.e, of the
union that represents that group of workers.
10. Give adequate attention to social issues while addressing economic issues.
Equally, the unions have a role to play:
1. Appreciate the financial constraints of an organisation when presenting demands.
Ultimately, the survival of the organisation is more important than gaining all the
demands of the employees.
2. Realise that rights have corresponding duties and not pursue workers’ rights alone
but discharge duties so that the organisation benefits
3. Avoid threats and unfair trade practices to coerce managements into granting
union demands.
4. Be democratic and act with total integrity.
5. Use the strike weapon only as a last resort
So, it is apparent that there is much more to achieving and maintaining strong, productive
and effective union-management relations than simply meeting the minimal legal
requirements of collective bargaining.

7.6 Laws of Collective Bargaining

7.6.1 The USA
Summary of major laws
Law Coverage Trend
Sherman Antitrust Act (1890) Employers and employees in Anti-union
any business affecting
interstate commerce
Clayton Act (1914) Same as Sherman Act Pro-union

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 Railway Labour Act (1926) Non-managerial rail and Pro-union
airline employees
Norris-La Guardia Act (1932) Private sector employers and Pro-union
labour organisations
Wagner Act (1935) Private sector employers and Pro Union
(The National Labour non-managerial employees not
Relations Act) covered by the Railway
Labour Act
Taft-Hartley Act (1947) Same as Wagner Act Balanced the rights
of management and
of the union
Landrum-Griffin Act (1959) Private sector employers and Refined the Taft-
labour organisations Hartley Act
Civil Service Reform Act Non-managerial, non- New Act allows
(1978) replaced by provisions uniformed federal civil service more scope for
of Personnel System Reform employees and agencies collective
Act of 2002 bargaining, but
provisions are not
yet implemented.

7.6.2 Canada
In Canada all jurisdictions have laws regulating labour relations. The federal law is the
Canada Labour Code. Each province has a similar law. The federal act applies only to
industries under federal coverage.
All laws recognise the right of the employee to organise and they require an employer
and a certified trade union to conclude a contract on wages and other terms of
employment (except in Quebec).
A Collective agreement is binding on the parties covered. While in force, strikes are
prohibited and disputes must be settled through a grievance procedure or arbitration.
Under all law, government conciliation services are available to assist the parties to reach
an agreement and strikes or lockout are then prohibited.
In 1975, the Department of Labour (Ottawa) set up Canada Labour Relations Council. It
includes representatives from labour, management and the government and its purpose is
to promote labour peace at the federal level.
In the public sector federal employees’ labour relations are governed by the Public
Service Staff Relations Act of 1967. This law allows federal employees except managers
to join unions and bargain collectively. The law also created the Public Service Staff
Relations Board.
Most public sector agreements require employees to choose ahead of time whether they
will submit to binding arbitration or strike. Canadian leader criticise public sector
employers for this provisions and other shortcomings just as strongly as private sector
employers.

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7.6.3 India/Sri Lanka
There are many laws that deal with all aspects of employment. It has been said that the
economic status of these countries could ill afford the progressive laws that have been
enacted in the interests of the workers. It must be noted however, that these countries do
not have social security and that these laws are an essential ‘cushion’ for employees who
would otherwise have no economic redress.
Most of the laws in the region could be classified under the following heads:
• Factory legislation
• Mining legislation (India)
• Wage legislation
• Trade union legislation
• Industrial disputes legislation
• Social security legislation

Activity
What do you understand by the term ‘collective bargaining’? Is there a law in your
country that provides for collective bargaining? Obtain a copy of a collective agreement
from an organisation where collective bargaining is an industrial relations practice.

8 Summary
Although it may not always live up to its potential, collective bargaining can provide the
forum for a tremendous flexibility in labour-management relations. Contracts make
explicit many of the rights and responsibilities of both labour and management, are
revised on a regular schedule and can be structured to suit the respective interests of the
parties.
Although few employers invite a union to organise workers, most labour-management
relationships evolve to a position of mutual respect. Despite that, managers in some
jurisdictions like the USA have become more active and successful in resisting union
organising activities. This is seen as a major factor in the decline of union membership in
such countries.
If a union is certified, then union and management representatives begin the collective
bargaining process. Collective bargaining includes both contract negotiation and
administration. If the parties disagree during the negotiations, certain conciliatory
processes may help them. If not, a strike or lock out may result. If the parties disagree
about contract administration, arbitration provides the solution.

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Unions affect both efficiency and equity because an effective union can provide
employees a voice to change organisation conditions and enhance equitable treatment of
unionised employees. Efficiency is affected if having a more satisfied, stable unionised
workforce results in higher productivity for the employer. However, unions can have a
negative effect on productivity if work rules hinder performance. Whether or not the
effect on productivity is positive depends on the quality of the employer-employee
relationship.

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9 References and Further Reading
Blyton, P. & Turnbull, P. 1994. The dynamics of employee relations. London: Macmillan.
Cole, G. A. 1991. Personnel management: theory and practice. 2nd Ed. London: DP
Publications.
De Cenzo, D. A. & Robbins, S. P. 1993. Personnel/human resource management. New
Delhi: Prentice-Hall of India Private Ltd.
Dessler, G. 2001. Human resource management. 7th ed. New Delhi: Prentice-Hall of
India Private Ltd.
Dunlop, J. T. 1958. Industrial relations systems. London: Henry Holt Ltd.
World Economic Forum and the Center for International Development, Harvard
University. 2002. Global competitiveness report 2001-2002. New York: Oxford
University Press.
Glueck, W. F. 1982. Personnel: a diagnostic approach. Revised by Milkovich. 3rd ed.
Dallas, Texas: Business Publications Inc.
Kirkaldy, H. S. 1947. The spirit of industrial relations. New Delhi: Oxford University
Press.
Kochan, T., Katz, H. & Mower, N. 1984. Worker participation and American unions:
threat or opportunity. Kalamazoo, MI: W. E. Upjohn.
Milkovich, G. T. & Glueck, W. F. 1985. Personnel human resource management: a
diagnostic approach. Dallas, Texas: Business Publications Inc.
Nair, N. G. & Nair, L. 1999. Personnel management and industrial relations, New Delhi:
S. Chand & Co.
Salamon, M. 1998. Industrial relations theory and practice. 3rd ed. London: Prentice
Hall.

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