ILO Helpdesk: Questions and answers on business and collective bargaining

Collective bargaining is a voluntary process used to determine terms and conditions of work and regulate relations between employers, workers and their organizations, leading to the conclusion of a collective agreement. Collective bargaining has the advantage that it settles issues through dialogue and consensus rather than through conflict and confrontation.

Freedom of association and the exercise of collective bargaining provide opportunities for constructive rather than confrontational dialogue, and this harnesses energy to focus on solutions that result in benefits to the enterprise, its stakeholders, and society at large.

Collective bargaining is a constructive forum for addressing working conditions and terms of employment and relations between employers and workers, or their respective organizations. It is often more effective and more flexible than state regulation. It can help in anticipating potential problems and can advance peaceful mechanisms for dealing with them; and finding solutions that take into account the priorities and needs of both employers and workers. Sound collective bargaining benefits both management and workers, and the peace and stability it promotes benefit society more generally. Collective bargaining can be an important governance institution – it is a means of increasing the consent of the governed by involving them in the decisions that affect them directly.

Collective bargaining is a voluntary process used to determine terms and conditions of work and regulate relations between employers, workers and their organisations, leading to the conclusion of a collective agreement. Collective bargaining has the advantage that it settles issues through dialogue and consensus rather than through conflict and confrontation.

Freedom of association and the exercise of collective bargaining provide opportunities for constructive rather than confrontational dialogue, and this harnesses energy to focus on solutions that result in benefits to the enterprise, its stakeholders, and society at large.

A High Level Tripartite Meeting in 2009 identified numerous important benefits of collective bargaining. For the enterprise:

• The process of collective bargaining allows the interests of both workers and employers to be voiced, for common interests to be identified, different interests to be balanced against one another and trade-offs to be negotiated. For example, in respect of working time, collective bargaining has been used in some countries to balance worker interests for work/ life balance with employer interests for flexible working time schedules and a reduction in the cost of overtime. The result of engaging in a process of bargaining in good faith is that the outcomes of collective negotiations are more likely to be perceived as fair and are more equitable than those arrived at through individual bargaining or unilateral contracting. This has positive benefits for enterprises in terms of worker commitment, stability and productivity; and for workers in terms of improved wages and working conditions.
• Through collective bargaining, workers tend to receive a greater share of productivity gains as wages. This can in turn promote cooperation and increase productivity in the enterprise and contribute to higher demand in the economy.
• Collective bargaining improves the labour relations climate by providing an institutionalised and agreed way of managing conflict. Collective agreements may include peace clauses during the duration of a collective agreement and set out grievance procedures for addressing grievances. This can provide for more stable and sound labour relations.
• Collective bargaining gives legitimacy to the rules regulating labour relations. Where the terms and conditions of work and of employment have been negotiated, they are more likely to be complied with.
• Collective bargaining allows the parties to tailor a collective agreement governing the employment relationship to their particular industry or enterprise. It also allows parties to solve problems that may be specific to their industry or workplace. Parties are known to negotiate agreements that may facilitate adaptability of the enterprise during a downturn or the introduction of technological and organizational change in a manner that protects workers against risk and delivers the results desired.

The right of workers to form or join organisations in order to bargain collectively cannot be realised if the employer refuses to recognise the trade union or to engage in collective bargaining.

It is also helpful to provide facilities as may be necessary to assist in the development of collective agreements. This may include affording workers’ representatives the necessary time off work, without loss of pay or social and fringe benefits, for carrying out their representative functions or for attending trade union meetings.

Collective bargaining can function effectively only if it is conducted in good faith by both parties. This includes providing workers’ representatives with information needed for meaningful negotiations. This information should enable workers’ representatives to obtain a true and fair view of the performance of the enterprise.

The right of workers to form or join organisations in order to bargain collectively cannot be realised if the employer refuses to recognise the trade union or to engage in collective bargaining.

It is also helpful to provide facilities as may be necessary to assist in the development of collective agreements. This may include affording workers’ representatives the necessary time off work, without loss of pay or social and fringe benefits, for carrying out their representative functions or for attending trade union meetings.

Collective bargaining can function effectively only if it is conducted in good faith by both parties. This includes providing workers’ representatives with information needed for meaningful negotiations. This information should enable workers’ representatives to obtain a true and fair view of the performance of the enterprise.

Question: How can companies uphold the right to collective bargaining?

Answer: Companies can take action at various levels:

In the workplace:

• Provide worker representatives with appropriate facilities to assist in the development of effective collective agreement. This may include affording workers’ representatives the necessary time off work, without loss of pay or social and fringe benefits, for carrying out their representative functions or for attending trade union meetings.
• Recognize representative organizations for the purpose of collective bargaining. The right of workers to form or join organisations in order to bargain collectively cannot be realised if the employer refuses to recognise the trade union or to engage in collective bargaining.
• Provide information needed for meaningful bargaining. This information should enable workers’ representatives to obtain a true and fair view of the performance of the enterprise.

At the bargaining table:

• Provide trade union representatives with access to real decision makers for collective bargaining.
• Bargain in good faith. Collective bargaining can only function effectively if it is conducted in good faith by both parties.
• Address any problem-solving or other needs of interest to workers and management, including restructuring and training, redundancy procedures, safety and health issues, grievance and dispute settlement procedures, and disciplinary rules.

In the community of operation:

• Take steps to improve the climate in labour-management relations, especially in those countries without an adequate institutional and legal framework for recognizing trade unions and for collective bargaining.

The ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (“MNE Declaration”) states that companies “should contribute to the realization of the ILO Declaration of Fundamental Principles and Rights at Work (FPRW) and its Follow-up, adopted in 1998.”[1] The FPRW address the importance of respect for freedom of association and the right to collective bargaining, as well as the other “core labour standards” regarding child labour, forced labour and non-discrimination. Companies “should also honour commitments which they have freely entered into, in conformity with the national law and accepted international obligations.”[2] Encouraging recognition of the right of collective bargaining in the supply chain can be an effective means of contributing to the realization of the 1998 Declaration.

In the chapter on Industrial Relations, the ILO MNE Declaration explains further the importance of negotiation between the representatives of the enterprise management and representatives of the workers for the regulation of wages and the terms and conditions of employment through collective agreements: “Workers employed by multinational enterprises should have the right, in accordance with national law and practice, to have representative organizations of their own choosing recognized for the purpose of collective bargaining.”[3]

The element of good faith is an important aspect in collective bargaining processes. Bargaining in good faith aims at reaching mutually acceptable collective agreements. Where agreement is not reached, dispute settlement procedures ranging from conciliation through mediation to arbitration may be used.

The ILO MNE Declaration is rooted in international labour standards and reflects the international consensus of workers, employers and governments concerning principles applicable to both MNEs and national enterprises, and is considered good practice for all.[4]

Governments are responsible for protecting the right to bargain collectively: “Measures appropriate to national conditions should be taken, where necessary, to encourage and promote the full development and utilization of machinery for voluntary negotiation between employers or employers’ organizations and workers’ organizations, with a view to the regulation of terms and conditions of employment by means of collective agreements.”[5]

[1] ILO MNE Declaration , para. 8.
[2] Ibid.
[3] ILO MNE Declaration , para. 49.
[4] ILO MNE Declaration , Article 11.
[5] ILO MNE Declaration , para. 50.

A lack of respect for fundamental workers’ rights such as freedom of association and the right to collective bargaining can have a serious impact on the functioning of the enterprise in two ways: on the one hand, it directly affects the climate of the workplace; and on the other hand, it affects the external image of the company.

Workers’ motivation and loyalty: Workers who are denied the exercise of certain rights will certainly be less motivated to do their work and less committed to their employer than those who enjoy these rights.

Industrial relations and productivity: Respecting freedom of association and the right to collective bargaining is important for good industrial relations, and the efficient production of goods and services depends to an extent on the existence of harmonious industrial relations.

Risk management: Predictability is essential to stable and productive business operations. The denial of basic labour rights may lead to labour strife, with the attendant disruption of production and adverse consequences for a firm’s performance and its relationship with the local community.

Reputation & brand image: A company’s image is one of its most valuable assets, and it can be significantly harmed by allegations that fundamental rights have been violated. In the case of multinational enterprises that have extensive supply chains, a violation at just one of its business partners can damage brand image and have strong repercussions on profit and stock value.

Shareholder concerns: These days an increasing number of investors take into account social criteria when deciding in which business to invest. These criteria usually include the fundamental principles and rights at work, including freedom of association and the right to collective bargaining.

The ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (“the ILO MNE Declaration”) provides companies with a very useful framework for development of a mature system of industrial relations.

The MNE Declaration is rooted in international labour standards and reflects the international consensus of workers, employers and governments in areas such as employment, training, conditions of work and life and industrial relations.

The principles contained in the MNE Declaration are applicable to both MNEs and national enterprises, and reflect good practice for all.[1]

The section of the MNE Declaration on industrial relations sets out the five elements of a mature industrial relations system:

• 1. the importance of recognizing freedom of association and the right to organize;
• 2. the promotion of collective bargaining;
• 3. consultation and communication;
• 4. procedures to examine and resolve grievances; and
• 5. procedures to settle industrial disputes.

Each of these areas is further developed below.

1. The importance of recognizing freedom of association and the right to organize

Workers employed in enterprises should, without distinction, have the right to establish and join organizations of their own choosing without interference by either the employer or management, nor by any government authorities.[2]

The right to freedom of association for workers also includes protection from acts of discrimination against them associated with their participation in their union.[3]

Representatives of workers should not be hindered from meeting for consultation and the exchange of views, provided that the functions of the enterprise are not prejudiced.[4]

Workers’ representatives should also be provided facilities to enable them to carry out their functions promptly and efficiently, taking into account the size and capabilities of the undertaking concerned.[5]

2. The promotion of collective bargaining

Consistent with national law and practice, measures should be taken to allow for voluntary negotiation between the representatives of the enterprise and representatives of workers for the regulation of wages and the terms and conditions of employment through collective agreements.[6]

Workers have the right to choose their representative for the purpose of collective bargaining.[7] In order to facilitate genuine participation in the bargaining process facilities should be provided to the workers’ representatives in order that preparations for bargaining can be made.[8]

To ensure negotiations are meaningful they should be conducted with representatives of the enterprise who have the authority to take decisions on the matters under negotiation.[9]

No intimidation or threats should be used during the process of negotiation.

Workers’ representatives should be provided with the information required for meaningful negotiations, including such information that allows them to obtain a true and fair view of the performance of the enterprise.[10]

Collective agreements should include a mechanism for the settlement of disputes arising about their interpretation or application and for ensuring mutually respected rights and responsibilities.[11]

3. Consultation and communication

A mechanism should be agreed between employers and workers and their representatives that provides for regular consultation on matters of mutual concern.[12]

Consultation should not be considered as a substitute for collective bargaining.

Consultation includes a genuine exchange of ideas and information that ensures that there is an opportunity for workers and their representatives to influence the decisions being made within the organisation, particularly where any proposal may affect employment.[13]

Any communications policy should be adapted to the size, composition and interests of the work force.[14]

Communications should be genuine, regular and two-way:

• (a) between representatives of management (head of the company, department chief, foreman, etc.) and the workers; and
• (b) between the head of the company, the director of personnel or any other representative of top management and trade union representatives or such other persons as may, under national law or practice, or under collective agreements, represent the workers at company level.

Where the management desires to transmit information through workers' representatives, these representatives should be given the means to communicate such information rapidly and completely to the workers concerned.

The information to be communicated and its presentation should be determined with a view to mutual understanding in regard to the problems posed by the complexity of the company's activities.

The information to be given by management should, as far as possible, include all matters of interest to the workers relating to the operation and future prospects of the undertaking and to the present and future situation of the workers, in so far as disclosure of the information will not cause damage to the parties.

Concerning the content of communication, management should make available information regarding:[15]

• (a) general conditions of employment, including engagement, transfer and termination of employment;
• (b) job descriptions and the place of particular jobs within the structure of the undertaking;
• (c) possibilities of training and prospects of advancement within the undertaking;
• (d) general working conditions;
• (e) occupational safety and health regulations and instructions for the prevention of accidents and occupational diseases;
• (f) procedures for the examination of grievances as well as the rules and practices governing their operation and the conditions for having recourse to them;
• (g) personnel welfare services (medical care, health, canteens, housing, leisure, savings and banking facilities, etc.);
• (h) social security or social assistance schemes in the undertaking;
• (i) the regulations of national social security schemes to which the workers are subject by virtue of their employment in the undertaking;
• (j) the general situation of the undertaking and prospects or plans for its future development;
• (k) the explanation of decisions which are likely to affect directly or indirectly the situation of workers in the undertaking;
• (l) methods of consultation and discussion and of co-operation between management and its representatives on the one hand and the workers and their representatives on the other.

In the case of a question which has been the subject of negotiations between the employer and the workers or forms part of a collective agreement the information should make express reference to that.

4. Procedures to examine and resolve grievances.[16]

The right of workers to raise grievance or concerns should be respected.

A worker should be able to raise a grievance without suffering any prejudice.

A procedure should be established for raising grievances. The procedure should seek to resolve disputes quickly and at the lowest possible level within the enterprise with the opportunity to appeal to higher levels if the matter remains unresolved.

Further details about the establishment and operation of grievance procedures can be found in the Examination of Grievances Recommendation, 1967 (No. 130).

5. Procedures to settle industrial disputes

Enterprises should join with representatives of organisations of workers to establish voluntary conciliation and arbitration procedures to assist in the prevention and settlement of industrial disputes between employers and workers.[17]

The above five elements provide the framework for the establishment of a mature system of industrial relations.

A climate of mutual understanding and confidence within the enterprise is favourable both to the efficient operation of the undertaking and to the aspirations of the workers.[18] Adherence to these principles cited in the ILO MNE Declaration will help to ensure the industrial relations system accords with International Labour Standards.

Lastly, suppliers may find it very useful to engage with their national employers’ and workers’ organizations, which can provide much more detailed information on industrial relations work in the countries in which they are operating.

[1] ILO MNE Declaration , Article 11.
[2] ILO Convention concerning Freedom of Association and Protection of the Right to Organize,1948 (No.87) , Article 2.
[3] ILO Convention concerning the Application of the Principles of the Right to Organize and to Bargain Collectively, 1949 (No.98) Article 1(1).
[4] ILO MNE Declaration , Article 47.
[5] Workers’ Representatives Recommendation, 1971 (No. 143), paragraph 9.
[6] ILO MNE Declaration , Article 50; ILO Convention No.98, Article 4.
[7] ILO MNE Declaration , Article 49.
[8] ILO MNE Declaration , Article 51; ILO Convention concerning the Protection and Facilities to be Afforded to Workers’ Representatives in the Undertaking, 1971 (No.135).
[9] ILO MNE Declaration , Article 52.
[10] ILO MNE Declaration , Article 55; Recommendation concerning Communications between Management and Workers within the Undertaking, 1967 (No.129).
[11] ILO MNE Declaration , Article 54; ILO Convention No. 135 , Article 2.
[12] ILO MNE Declaration , Article 57.
[13] ILO Termination of Employment Convention (No. 158) and ILO Recommendation (No. 166), 1982.
[14] ILO Communications between Management and Workers within the Undertaking Recommendation, 1967 (No.129)
[15] ILO Recommendation No. 129 , Paragraph 15(2).
[16] ILO MNE Declaration , Article 59.
[17] ILO MNE Declaration , Article 59.
[18] ILO Recommendation No. 129 , Paragraph 2

Collective bargaining should be carried out voluntarily, freely and in good faith. The parties are free to engage in bargaining and there should be no interference from the authorities in their decisions to do so. The principle of good faith implies that the parties make every effort to reach an agreement, conduct genuine and constructive negotiations, avoid unjustified delays in negotiations, respect agreements concluded and applied in good faith, and give sufficient time to discuss and settle collective disputes. In the case of multinational enterprises, such companies should not threaten to transfer the whole or part of an operating unit from the country concerned in order to unfairly influence negotiations.

The right of workers to establish or join organisations of their own choosing in full freedom implies the effective possibility of forming organisations independent of those which may already exist. According to the ILO’s Committee on Freedom of Association, this includes the right of workers to create more than one workers’ organisation per enterprise.

Furthermore, the voluntary negotiation of collective agreements is a fundamental aspect of freedom of association that includes the obligation to negotiate in good faith for the maintenance of harmonious labour relations. Both employers and trade unions should bargain in good faith and make every effort to reach an agreement; genuine and constructive negotiations are a necessary component to establish and maintain a relationship of confidence between the parties.

However, the existence of freedom of association does not necessarily mean that there is automatic recognition of unions for bargaining purposes. Especially in systems where there is a multiplicity of trade unions, there is a need for predetermined objective criteria operative within the industrial relations system to decide when and how a union should be recognised for collective bargaining.

In some systems, this is determined on the basis of a union needing not less than a specific percentage of the company’s workers in its membership. This may be decided by referendum in the workplace, or by an outside certifying authority, such as a labour department or an independent statutory body.

Collective bargaining can take place at the enterprise level, at the sectoral or industry level, and at the national or central level. It is up to the parties themselves to decide at what level they want to bargain. According to the ILO’s Committee on Freedom of Association, the determination of the bargaining level is essentially a matter to be left to the discretion of the parties.

The ILO Committee on Freedom of Association has concluded that wages, benefits and allowances may be subject to collective bargaining.[1]

Concerning good practices for MNEs, the ILO MNE Declaration provides the following recommendations: “When multinational enterprises operate in developing countries, where comparable employers may not exist, they should provide the best possible wages, benefits and conditions of work, within the framework of government policies. These should be related to the economic position of the enterprise, but should be at least adequate to satisfy basic needs of the workers and their families.”[2]

The ILO MNE Declaration encourages home and host governments to promote collective bargaining between MNEs and their workers: “Governments, especially in developing countries, should endeavor to adopt suitable measures to ensure that lower income groups and less developed areas benefit as much as possible from the activities of multinational enterprises.”[3] The MNE Declaration also provides that “measures appropriate to national conditions should be taken, where necessary, to encourage and promote the full development and utilization of machinery for voluntary negotiation between employers or employers' organizations and workers' organizations, with a view to the regulation of terms and conditions of employment by means of collective agreements.”[4]

[1] ILO Digest of decisions and principles of the Freedom of Association Committee of the Governing Body of the ILO, Fifth (revised) edition , ILO, Geneva, 2006. See paragraph 913.
[2] ILO MNE Declaration , Paragraph 34.
[3] ILO MNE Declaration , Paragraph 35.
[4] ILO MNE Declaration , Paragraph 50.

Yes. Collective bargaining is about establishing the terms and conditions of work, including restructuring. The specific terms of any collective bargaining agreement are matters for the negotiating parties. It is common to include provisions concerning processes for consultation, the provision of information and the involvement of workers and their representatives in discussion where a company is considering change that is likely to have an effect on workers, their conditions of employment or their employment generally.

This link provides a comparative table of statutory requirement to consult workers' representatives on collective dismissals: /public/english/dialogue/ifpdial/info/termination/downloads/table4.pdf

Collective bargaining is a voluntary process and must be carried out freely and in good faith. It can extend to all terms and conditions of work and employment, and may regulate the relations between employers and workers as well as between the organisations of employers and workers. It is for the parties engaged in collective bargaining to decide what will be covered by their negotiations. Some of the subjects of collective bargaining identified by the ILO’s Committee on Freedom of Association include: wages, benefits and allowances, working time, annual leave, selection criteria in case of redundancy, the coverage of collective agreement, and granting of trade union facilities.

However, strict limitations on the subject matter of negotiations may be possible in the case of economic stabilisation policies imposed by a government, for example on wage rates. In this case, the restriction should be imposed as an exceptional measure and only to the extent that it is necessary.

The following list provides examples of information that management should share:

• General conditions of employment, including engagement, transfer and termination of employment;
• Job descriptions and the place of particular jobs within the structure of the company;
• Possibilities of training and prospects of advancement;
• General working conditions;
• Occupational safety and health regulations and instructions for the prevention of accidents and occupational diseases;
• Procedures for the examination of grievances as well as the rules and practices governing their operation and the conditions for having recourse to them;
• Personnel welfare services such as medical care, canteens, and housing;
• Social security or social assistance schemes;
• Regulations of national social security schemes to which the workers are subject;
• Explanation of decisions which are likely to affect directly or indirectly the situation of workers; and
• Methods of consultation, discussion and co-operation between management and workers.

The right to strike is not expressly mentioned in ILO Convention No. 87. However, ILO supervisory bodies, including the Committee on Freedom of Association, have frequently stated that the right to strike is a fundamental right of workers and the principal means by which they may legitimately promote and defend their economic and social interests.

The right to strike, however, is not absolute. Legislation may set forth the conditions for the exercise of this right, for example in requirements for a vote to strike, strike notice, prior conciliation procedures, or mediation. Moreover, restrictions on the right to strike may be applied as far as the following categories of workers are concerned and in the following situations:

• In case of acute national crisis;
• For members of the armed and the police forces;
• For the public servants exercising their authority on behalf of the State;
• For workers that are employed in the essential public utilities, such as those whose interruption might endanger the life, security and safety of the whole population or part of it. For instance hospitals, the electrical supply system, the water supply system, the telephone network system and flight controllers provide essential services.

The ILO jurisprudence has defined a service as essential if the interruption of the service would endanger the life, personal safety or health of the whole or part of the population.[1]

The following may be considered to be essential services[2] :

• the hospital sector
• electricity services
• water supply services
• the telephone service
• the police and the armed forces
• the fire-fighting services
• public or private prison services
• the provision of food to pupils of school age and the cleaning of schools
• air traffic control

It is important to consult national legislation because what constitutes essential services depends to a large extent on the particular circumstances prevailing in a country.[3]

Governments can prohibit strikes in essential services,[4] although certain categories of workers within these services, such as gardeners maintaining hospital grounds, should still have the right to strike if their particular functions are non-essential.[5]

The following normally do not constitute essential services:[6]

• radio and television
• the petroleum sector
• ports
• banking
• computer services for the collection of excise duties and taxes
• department stores and pleasure parks
• the metal and mining sectors
• transport generally
• airline pilots
• production, transport and distribution of fuel
• railway services
• metropolitan transport
• postal services
• refuse collection services
• refrigeration enterprises
• hotel services
• construction
• automobile manufacturing
• agricultural activities, the supply and distribution of foodstuffs
• the Mint
• the government printing service and the state alcohol, salt and tobacco monopolies
• the education sector
• mineral water bottling company

However, a non-essential service such as refuse collection may become essential if a strike lasts beyond a certain time or extends beyond a certain scope, thus endangering the life, personal safety or health of the whole or part of the population.[7]

The establishment of minimum services during a strike is also permitted where public services are deemed to be of fundamental importance[8] such as urban transport or ferry services.

Governments should consult the relevant employers’ and workers’ organizations when determining minimum services and the minimum number of workers needed to provide them in order to ensure that the scope of the minimum service does not result in the strike becoming ineffective in practice because of its limited impact.[9] Any disagreement in the determination of those minimum services should be settled by an independent body and not by the ministry of labour or the ministry or (public) enterprise concerned.[10]

In the event workers are prohibited from exercising the right to strike or restricted in exercising this right, adequate, impartial and speedy conciliation and arbitration proceedings should be in place which involve the parties concerned at every stage and in which the awards, once made, are fully and promptly implemented.[11]

[1] The Digest of decisions and principles of the Freedom of Association Committee of the Governing Body of the ILO , para. 576.
[2] Ibid, para. 585.
[3] Ibid. para. 582.
[4] Ibid, para. 576.
[5] Ibid, para. 593.
[6] Ibid, para. 587.
[7] Ibid. para. 582.
[8] Ibid, para. 606.
[9] Ibid, para. 612.
[10] Ibid, para. 613.
[11] Ibid, para. 596.

There are no International Labour Standards that speak specifically to this question.

However, the jurisprudence concerning freedom of association and collective bargaining specifies that “the closing of an enterprise should not in itself result in the extinction of the obligations resulting from the collective agreement, in particular as regards compensation in the case of dismissal.” [1]

Most countries have legislation or regulations covering the continued recognition of the trade union and whether any existing collective bargaining agreements would remain in force in case of closure or transfer of ownership. National practice may provide for some flexibility in application, taking into consideration the conditions surrounding transfer of ownership, such as bankruptcy.

The national employers’ and workers’ organizations in the particular country concerned may be a good source for further information on national law and practice.

[1] Ibid,para.1059.