Section : Module 2 - The Collective Bargaining Process
 
Objectives
  1. To define collective bargaining
  2. To examine the stages in collective bargaining

2.1 What is Collective Bargaining

Collective bargaining is a process whereby trade unions, representing workers, and employers through their representatives, treat and negotiate with a view to the conclusion of a collective agreement or renewal thereof or the resolution of disputes.

A collective agreement is usually an agreement in writing between an employer and a union, on behalf of workers employed by the employer. It contains provisions reflecting terms and conditions of employment of the workers, and conferring to them their rights, privileges and responsibilities.

Sometimes the terms “bargaining” and “negotiating” are used to describe the same process. Theoretically, the term bargaining is probably better used to describe the economic interaction between an employer and an employee which is finalized in the individual contract, whether written or unwritten. When an employer hires a worker, he can demand labour, and agree on a price for that labour. The offer, acceptance, consideration, and intention to create a legal relationship constitutes a bargain to which compliance can be sought in law.

When trade unions negotiate a collective agreement with employers, the process and the outcome are somewhat different. In the first place, trade unions do not sell labour to employers, unlike individual workers. Likewise, employers do not pay trade unions for work done. Trade unions use collective bargaining as a means of setting the rules by which labour in the workplace will be regulated and remunerated.

The process of collective bargaining is in reality a series of negotiations, diplomatic and political manoeuvres, with the influence of economics. The

ILO Convention No. 154
The Promotion of Collective Bargaining
Article 2

For the purposes of this Convention, the term “collective bargaining”  extends to all negotiations which take place between an employer, a group of employers or one or more employers’ organizations on the one hand, and one or more workers’ organizations, on the other, for

  1. determining working conditions and terms of employment; and/ or
  2. regulating relations between employers and workers; and/or
  3. regulating relations between employers or their organizations and a workers’ organization or workers’ organizations.

trade union negotiator has to negotiate with his or her principals, the general membership, as well as with the union’s negotiating teams, even as the negatiator negotiates with the employers. The employers’ negotiator is often in a similar situation.

Voluntaristic vs. legal industrial relations systems

In an industrial relations’ system that is predominantly voluntaristic, collective bargaining processes such as recognition, the collective agreement and industrial action are likely to be based on a gentleman’s agreement made acceptable by custom and practice. Gradually voluntarism has lost ground in the Caribbean and most industrial relations system have legislation covering recognition, the collective agreement, the formation and structure of bargaining units and the management of industrial action.

In countries such as Trinidad and Tobago and Antigua and Barbuda, Industrial Courts play a major role in industrial relations. In Jamaica, the Industrial Disputes Tribunal is very influential. Barbados is still unusual in that there is little or no regulation relating to core collective bargaining processes.

Over time, Caribbean States have ratified the main International Labour Organization’s Conventions on collective bargaining. These include:

  • Convention No. 87, concerning Freedom of Association and Protection of the Right to Organize;
  • Convention No. 98, concerning the Application of the Principles of the Right to Organize and Bargain Collectively; and
  • Convention No. 151, concerning the Protection of the Right to Organize and Procedures for determining conditions of Employment in the Public Sector.

All Caribbean countries have developed a legislative and institutional framework supportive of collective bargaining.

2.2 Stages in Collective Bargaining

The first step in the collective bargaining process is that of organizing a group of workers, gaining recognition and developing a body of proposals to submit to the employer as the basis of a collective agreement. The development of proposals to be submitted on behalf of workers is a delicate process over which great care has to be taken.

Trade union leaders are required to meet with the general membership and seek a clear understanding of the changes in their contracts which they require. Such a meeting may demonstrate differences among the members on serious issues, such as levels of remuneration. The submission of many issues, including levels of compensation and conditions, will have to be examined against market considerations. The role of a research facility within a union is thus very important.

Elements of submissions

Negotiators recognize that the submission must encompass various elements. Industrial relations existed at the workplace before the entry of the union. A pattern of benefits, conditions, rules and regulations is usually in place. The negotiator must make an assessment of those provisions that are already adequate and those where improvements can be made.

In terms of wages/salaries and other areas of remuneration, the first agreement is for setting a schedule in place, and must not be confused with a revision. In a situation where wages/salaries are very far below the market value in circumstances that cannot be justified, trade unions can sometimes achieve significant improvements for workers. In some cases, wages/salaries may already be competitive in the market and the union may focus on conditions and other benefits.

Traditionally, the trade union submits a list of changes which forms the agenda for negotiations. In recent times, the list may be enclosed in a draft collective agreement which helps to ensure that a collective agreement is signed early after the closure of negotiations.

With recognition agreed, and proposals submitted, the union will usually inform the employer of the names of the shop stewards at the workplace, and request the extension of courtesies in the performance of their functions.

Composition of negotiating team

In some instances, union negotiations are led by paid professional staff members and in others, by shop stewards from the workplace. In many instances, the manager, the human resources manager, and the financial officer or accountant may lead the management’s team.

Many trade union negotiating teams are led by generalists who have to develop expertise on a wide area of subjects such as compensation practices, benefit schemes, pensions and safety and health conditions. They must also have some legal training for drafting language in agreements.

There is a growing tendency for specialists to sit on negotiating teams. Thus one person will deal with pension issues, another with health care and so on.

In large companies with Human Resource Management Structures, there are officers who specialize in different areas of industrial relations such as counselling, training, safety and health, negotiations, benefits, management and personnel matters.

An Eight (8) Step Approach to Collective Bargaining or Negotiating

With the proposals submitted, and the team selected, the chief negotiator/ leader may recognize the importance of the following phases of negotiations:

  1. Preparing
  2. Arguing
  3. Signalling
  4. Proposing
  5. Packaging
  6. Bargaining
  7. Closing
  8. Agreeing.

Negotiation has already been described as a process involving diplomacy. Some claim that the negotiations forum is a ‘contested terrain’, that the process is akin to an act of war, where words, wit and logic take the place of lethal weapons.

A simple definition of negotiating is a process through which parties move from their divergent positions to a point where agreement may be reached.

This model suggests that the union will submit a set of proposals which it considers as an ideal. However, it may be willing to settle for less than the ideal. At some point between the ideal submission and the settlement, the union will resist any pressures by the employer to go below the resistance point. The employers are in a similar position. Ideally, they may not wish to make any improvements, but they will establish a mandate for settlement, and also have a resistance point.

This model can be problematic. If the ideal positions of the two sides, and the likely settlement position diverge greatly, the chances of an impasse, breakdown and subsequent industrial action looms.

Clearly also, no negotiator wants his position to be known by those on the other side! In the case of the trade unionist, his members may feel that they have the right to set his target, and that he cannot settle other than at the mandate they have given. Such an inflexible position may be difficult to maintain, as the more persons who are aware of the mandate, the more likely it is that it may reach the ‘other side’.

Trade union negotiators must be adept at handling meetings and at communicating with the membership to ensure that their goals and objectives are congruent.

1. PREPARATION

Preparation for any serious negotiations would be incomplete without a thorough examination of factors external and internal to the workplace which has a bearing on the negotiations.

Examining external factors - the macro-economic environment

Part of the ‘mental’ preparation of the negotiator is to be in tune with the environment impacting on industrial relations. The formation of a Caribbean Single Market and Economy, the existence of trading blocs, the imminent formation of the Free Trade Area of the Americas and the Cotonou Agreement all have implications for areas of economic and industrial life in the Caribbean, and for the Caribbean workplace and the Caribbean worker.

Trade unionists are very aware that productivity and competitiveness are key issues at the workplace. Workplaces are in competition with each other within territories, across territories, and indeed, across the globe. Those which compete successfully will survive, those which fall behind will disappear. Labour productivity is an important factor in competition and part of the negotiator’s task is to examine the productivity of the workplace.

Preparation for negotiations will include an examination of macro-economic factors such as employment levels, the rate of inflation, the foreign reserves, investment, interest rates, and growth in the economy, among other things. Where the macro-economic situation appears stable and there are signs of prosperity, employers are more likely to make reasonable settlements. A major difficulty in the Caribbean is that there is a great divergence in macro-economic performance. Some countries have also performed in such a way that even in years of solid growth, the benefits have not accrued to the mass of workers.

Examining internal factors - enterprise performance


An examination of the internal performance of the business enterprise is even more important than information on the macro-economic environment. The sharing of business information is critically important for effective negotiations. In too many instances management refuses to provide vital information to trade unions. This is especially so where there are single owner proprietorships, partnership, and private limited liability companies. Branch plant operations of foreign-owned companies also often refuse to share information.

Trade unions should be aware of the profit and loss statements, balance sheets, notes and other information provided in the Financial Reports of companies with whom they are negotiating. They also benefit from awareness of the companies’ budgets and strategic plans.

Analysis of financial information can be useful in providing information on the company’s history and its present status, but will not necessarily point accurately to its future performance.

The profitability, liquidity, leverage and activity ratios shown in Table 1 are useful in examining the performance of a company. The ratios are best applied to a manufacturing plant but some have relevance to other business units.

Such information, along with intelligence provided by the workforce on recruitments, expansions, purchases, investments and other details can assist in the type of settlements one can realistically expect from an enterprise based on its capacity to pay.

Another aspect of preparation for the negotiations relates to physical arrangements including ensuring that meeting rooms are adequate, with room for the occasional caucus, and that seating arrangements are adequate.

2. ARGUING

Negotiators are expected to argue effectively in support of their submissions. Negotiations are not discussions, and they are not consultations. They are about persuasive arguments that can win over a case. Negotiators are expected to argue rationally, reasonably, and to use reliable information in support of a claim. Negotiators use a blend of logic, emotional appeals,

Table 1. How to Calculate Profitability, Liquidity, Leverage and Activity Ratios

RATIO HOW IT IS CALCULATED WHAT IT SHOWS
PROFITABILITY
Net profit margin Profits after taxes / Sales After tax profits per dollar of sales
Returns on total assets Profits after taxes / Total Assets Returns on Total Investment
LIQUIDITY
Current Ratio Current Assets /Current Liabilities Cash coverage of short-term creditors
Acid Test Current Assets-Inventory /Current Liabilities Coverage of short term without selling inventory
LEVERAGE
Debts to Assets Total Debt / Total Assets Use of borrowed ratio  funds for financing
Debt to Equity ratio Total Debt / Total Stockholder’s Equity  Funds created by owners to handle debt
ACTIVITY
Inventory turnover Sales / Inventory of Finished Goods Is inventory over or under stocked?
Average Collection Period (Accounts Receivable / Total Sales) *365 Time after making a sale to receive a payment

persuasion, humour, analogies and pleadings in furtherance of their claims. Argument can become heated, and may even become acrimonious and hostile. This is usually a clear sign of the need for a break or for conciliation.

3. SIGNALLING

Negotiating is interactive and dynamic. Active listening is a skill which has to be developed. Also, negotiators have to be able to ask questions to elicit useful responses. Negotiators send signals through words, some plain and easily apprehended, others are more obtuse. Negotiators also send signals through body language. For those who are adept at receiving signals, the process of moving negotiations onward becomes less onerous. It is through signals that a negotiator begins to perceive:

  • proposals that will meet with little resistance;
  • those that can be accepted with some modification; and
  • those that have low chances of success in the current round of negotiations.

4. PROPOSING

Armed with the reading of signals, a negotiator will then know which proposals can be prioritized with almost certain chances of success.

5. PACKAGING

The negotiator may then decide to package proposals, making concessions and linking strong winners with others with less chances of success. A total package proposal is placed on the table with an agreement of all elements crucial for settlement.

6. BARGAINING

At this stage, it is likely that both sides will be proposing packages, each with a core that signifies ‘the irreducible’ that is required by each for settlement. At this stage, negotiators might be suggesting that their proposals are the ‘last, last’ that they will be making.

At this stage, each negotiator is searching for an advantage, while helping the opponent to feel a winner. It is often wise to break out of formal negotiations and engage in creative scenario building on a menu of options that may provide a settlement. Negotiators talk about taking “pens off the table”, instructing the takers of minutes not be record the creative exercise in problem-solving. In case the creative efforts fail, the negotiators can return to formal discussions at the level of their last formal submissions. Bargaining in earnest can be a painstaking and lengthy exercise with all of the features of an Olympic exercise between formidable contestants.

7. CLOSING

Expert negotiators develop a sense of when it is best to close negotiations. Closing too early or too late can lead to the loss of the strategic moment when greatest success can be reached. In assessing the best time to close, consideration must be given to issues such as the mood of the workers and the prevailing economic climate.

At the end of the bargaining session, negotiators should be able to walk back over the negotiations and summarize all of the positions. They should note the agreements reached, issues that are withdrawn and others that are deferred.

Ambiguities should be cleared up and joint language discussed.

8. AGREEING

The final stage in the formal negotiation process is reached when the draft agreement has been vetted, and has been produced in a formal form by the negotiators.

Discussions are then held about issues such as the starting date for the payment of new salaries/wages; issues related to retroactive pay, where relevant; the timing of the introduction of new benefits; and indeed, areas of housekeeping and tidying up the business of the table. The discussions are then closed with appropriate addresses, bringing a  civilized end to a round of negotiations.

Communicating with the union membership

Mention has already been made of the fact that negotiation leaders must always keep their principals informed and seek their support in reaching acceptable settlements. To this end, they should hold a general meeting to get workers to vote for the settlement they propose to close on.

A negotiator can receive a shock if his tentative agreement at the table is met by a refusal from his principals, and this can happen if they have not been included throughout the various stages of the process.

Meetings, circulation of minutes and the use of position summaries can all help to ensure the smooth process of collective bargaining.

A skilled negotiator has little difficulty in having a vote at the end of the negotiation process and getting majority support for his agreement. He should not however, be unduly concerned if support is not unanimous. He should be wary, nevertheless, if there is resistance from a substantial minority of his principals.

Breakdown in Collective Bargaining

Trade unions have traditionally recognized the value and importance of industrial action when there is a failure to reach agreement through the established procedures. Industrial action can take many forms:

  1. work-to-rule
  2. go slow
  3. strike

In some countries the strike is highly regulated through statutory provisions.

In most countries Essential Services are clearly defined and industrial action in these areas is circumscribed.

EXERCISE

  1. Why would trade unions prefer voluntaristic, rather than regulated collective agreements?
  2. Is a skilled negotiator born, or can he/she be trained?
  3. Suggest reasons why negotiations breakdown.
  4. Should trade union negotiators be considered as ‘experts’?
  5. Discuss the sick-out as a form of industrial action.
  6. What are the essential services in your country?
  7. Under what circumstances can industrial action be legally conducted in your country?
  8. Can industrial action take place in the essential services in your country?