How the Collective Bargaining Process Works

Have you ever tried to negotiate a job offer? If so, you know that negotiating as an individual worker can be frustrating. Collective bargaining, in which workers group together and elect a representative to negotiate on their behalf, is often more effective.

As individuals, workers typically do not hold a lot of power compared to their employers. Economists attribute this to several factors, including declining union enrollment, increased outsourcing, and decreasing real wages (the value of workers’ pay with inflation taken into account).  Even when the unemployment rate is low, workers often need a paycheck more urgently—or at least, more immediately—than employers need staff. This gives employers the advantage in one-on-one negotiations with employees.

When employees engage in collective bargaining, however, they have more power. In fact, research from the Economic Policy Institute shows that when more workers belong to unions, wages are higher even for non-union workers in the same geographic area.

What Is Collective Bargaining?

Collective bargaining is a negotiation process in which a group of workers, often represented by a labor union, chooses a representative to advocate for better terms of employment. This representative undertakes negotiations on their behalf.

The result of this negotiation is called a collective bargaining agreement, which is an employment contract that spells out wages, work schedules, employee benefits, and other terms and conditions of employment.

Collective Bargaining Legislation

The Wagner Act of 1935, also known as the National Labor Relations Act (NLRA), established a framework for collective bargaining in addition to guaranteeing workers the right to organize. The act applied to all employers engaged in interstate commerce except agriculture, airlines, government, and railroads. 

The NLRA also established the National Labor Relations Board, which arbitrates labor disputes. The NLRB’s five-member board and division of judges decide unfair labor practices cases across the U.S. The NLRB also establishes the legitimacy of a “bargaining unit,” which is typically a single work facility. However, unions in some industries such as trucking and telecommunications have won the right to bargain as a national unit.

The Taft-Hartley Labor Act of 1947 amended the NLRA, defining additional unfair labor practices and placed limitations on labor unions. These provisions allowed workers to refuse to participate in union activities (although they could still be required to join a union as a condition of employment.) They also prohibited unions from charging excessive membership fees.

The Landrum-Griffin Act of 1959, also known as the Labor-Management Reporting and Disclosure Act, gave state courts and labor relations boards jurisdiction over cases declined by the NLRB. It also tightened, revised, or instituted several other practices and prohibitions, and repealed the non-Communist affidavit provisions.

The PRO Act, which would revise the definition of “employee” to include many workers who are currently classified as independent contractors, passed the House of Representatives in February 2020, but was not taken up by the Senate.

How the Collective Bargaining Process Works

According to the AFL-CIO, about three-quarters of private-sector workers and two-thirds of government employees have the right to engage in collective bargaining.

The process differs slightly from union to union, but it typically looks like this:

1. There is a need for negotiation. This might be a labor dispute or a need to draft or renew a collective employment contract. Labor and management may also agree to regular meetings to review issues as they arise.
2. Both sides prepare. Management and labor choose representatives to negotiate for their interests. Both sides will review the existing employment contract to identify areas for improvement. Union leadership will often survey its membership to determine which priorities are most important in the upcoming negotiation.
3. The parties agree to ground rules. Early in the process, management and labor agree to ground rules, e.g., when and where bargaining sessions will take place and when all initial proposals should be “on the table.” The parties also agree on the bargaining style—proposal bargaining or interest-based bargaining. In proposal bargaining, both sides write proposals for changes to the contract. In interest-based bargaining, both sides bring issues to the table and resolve those issues by mutual agreement.
4. Negotiating begins in earnest. The NLRA stipulates which bargaining subjects are mandatory, permissive, or illegal. For example, employers must agree to discuss topics like wages and work hours because those subjects are mandatory under the NLRA. On the other hand, they may or may not choose to bargain on subjects like company marketing strategies. Finally, both parties are forbidden from including certain issues, like creating “closed-shop” clauses that would require employers to hire only workers who are already members of the union.
5. Management and labor reach a tentative agreement. After several rounds of give and take, both sides reach a tentative agreement. The union then brings the agreement back to their members. If management and labor cannot come to terms, the employer may declare an impasse and implement the last proposal. If the union disagrees, the NLRB will determine whether a true impasse exists and compel the employer to return to negotiations. The union may implement a strike, in which workers refuse to work until an agreement is reached.
6. The union members vote to ratify the agreement. In some unions, the agreement is tentative until the members ratify it. Members often vote by secret ballot, which may be required by the union’s rules.  

Pros and Cons for Employees and Employers

The aim of the NLRA was to guarantee employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in concerted activities for the purpose of collective bargaining or other mutual aid and protection.” As such, it would seem to be a benefit primarily for employees, not employers. However, the right to collective bargaining is beneficial to both parties.

Pros Explained

Less disruption to business, the economy, and workers’ careers. Collective bargaining allows both sides the opportunity to resolve their disagreements, potentially without resorting to strikes, which could be costly to both parties.

Higher pay. While this would seem like an exclusive benefit for labor, higher pay may be better for business as well. Henry Ford famously offered his factory workers $5 per day—double the standard rate in 1914. The result was a vastly more productive workforce. Profits doubled in less than two years. 

Time savings. Collective bargaining agreements typically set out pay scales, benefits, and other employment conditions for groups of workers, such as all workers with a given job title. This can save large organizations time and effort negotiating contracts on a case-by-case basis, even as it saves individual workers the time and effort of advocating for themselves.

Cons Explained

A less collaborative work environment. Gallup research has shown that unionized workers have a lower Work Environment Index score than their peers who do not belong to a union. They are more likely to say that they consider their supervisor a “boss rather than a partner.” They are also less likely to say that their supervisor creates a “trusting and open work environment.”  

Fewer jobs. Employees who belong to a union are generally better paid than those who do not. However, this benefit can also be a drawback. Some economists point out that higher labor costs can lead to fewer jobs, as businesses outsource to cheaper labor markets or lose market share to overseas competitors.

Less individual choice. The collective bargaining process is necessarily about achieving a good result for the collective, which may occasionally lead to a frustrating result for individuals. In a unionized industry, workers who prefer to work on a different schedule or under different conditions than those agreed upon may find the process and outcomes restrictive.