Collective Bargaining: Definition, Importance and How It Works

By Indeed Editorial Team

Published September 2, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

As a professional, it's important that you receive a fair rate of compensation, adequate benefits and security in your role so you can achieve high-level objectives. Through negotiation processes like collective bargaining, groups of employees can advocate for themselves and work alongside their employers to outline the terms of their employment. If you're a part of a workplace union or have begun the unionization process, it may be helpful to review more information about collective bargaining. In this article, we outline what collective bargaining is, why it's important and how this process works to help you better understand it.

Related: What Is a Union?

What is collective bargaining?

Collective bargaining is a negotiation process that occurs between employers and a group of employees that became a standard practice in the U.S. through the 1935 National Labor Relations Act (NLRA). Through collective bargaining, employees can negotiate the terms of their employment, including factors like workplace conditions, hours, regulations, compensation, overtime protocol, holidays, sick leave, family leave, paid time off, retirement plans and health care. Through collective bargaining, professionals can reach a collective agreement, or a written contract, that outlines and regulates their terms of employment.

Typically, employees participate in collective bargaining through union representation. Through their unions, employees can advocate for themselves, address various workplace issues and introduce solutions—like higher rates of pay, more comprehensive benefits and safer workplace conditions—that allow them to work comfortably, find value in their jobs and succeed in their respective roles.

Related: Union vs. Nonunion Job: Definitions and Differences

Why is collective bargaining important?

Collective bargaining is important because it allows unionized employees to advocate for their needs and define the terms of their employment. Through this process and a resulting collective agreement, employees may gain access to various benefits that allow them to foster more professional satisfaction and focus on producing high-quality work in the long term. Here are a few of those benefits explained to help you understand the value of collective bargaining:

  • Standardized process for negotiation: Collective bargaining allows employees to access a regulated process for negotiation through which they can effectively address workplace challenges and introduce solutions that benefit an organization's workforce.

  • **Resulting contractual agreement:** As stated above, collective bargaining usually results in a contract called a collective agreement that defines the terms and conditions of employment for stakeholders. This agreement is typically binding, and therefore, all parties involved must adhere to its terms until renegotiation occurs.

  • ****Higher rates of pay:**** Collective bargaining allows unionized employees to advocate for higher rates of compensation overall. According to a 2019 report from the U.S. Bureau of Labor Statistics (BLS), union employees earn approximately 19% more in weekly pay than their nonunion counterparts, which is likely a result of collective bargaining.

  • ****Workplace protections:**** Through collective bargaining, employees can negotiate their workplace conditions and achieve protections regarding the number of hours they can work on a daily, weekly or monthly basis, safety regulations and the type of work they can perform. This can help employees establish a more secure work environment.

  • ****Comprehensive benefits packages:**** Collective bargaining and their resulting agreements often provide employees with more comprehensive benefits packages. These packages typically include provisions for benefits like employer-sponsored health care, dental insurance, life insurance, paid time off (PTO), sick leave and family leave.

  • Arbitration provisions: Through collective bargaining, employees and employers can come to an agreement about arbitration, an internal dispute-resolution method that serves as an alternative to standard litigation processes. Arbitration allows for both employees and employers to access a streamlined process for addressing employment issues.

Related: 7 Types of Unions and How They Work

How does collective bargaining work?

There's a standard process most unions use to collectively bargain with management. Typically, union members first appoint a representative who negotiates terms and conditions on their behalf. A union representative assumes the responsibility of negotiating in favor of employee interests. From here, the following process unfolds:

Stakeholders identify the need for negotiation

For collective bargaining to begin, a stakeholder—either an employee or a management team member—needs to identify the need for negotiation. This need may arise from a labor dispute, such as unsafe work conditions, or through the renewal of a collective agreement that has expired. Once stakeholders establish the need for negotiation, both parties begin working toward bargaining.

Representatives prepare for negotiation

As mentioned above, both sides of negotiation—including management—typically select representatives to represent their interests during the bargaining process. These representatives prepare for negotiation by reviewing the existing collective agreement and noting weaknesses that relate to the need for negotiation. Further, union representatives typically survey employed members to identify what their priorities are so they can advocate effectively for their interests.

Related: 5 Ways To Secure a Union Job

Parties establish bargaining rules

During the preparation process, both employers and union employees need to establish rules for bargaining regarding where they plan for negotiation sessions to take place and what bargaining style they can use. Parties can agree to either proposal bargaining or interest-based bargaining. Proposal bargaining comprises both sides drafting proposals for alterations to the agreement. Comparatively, interest-based bargaining comprises both parties introducing issues and resolving them through mutual negotiation.

Negotiation begins

With bargaining rules set, negotiation can begin. The NLRA outlines what bargaining topics are mandatory, permissive or illegal to introduce during the negotiation process. Taking these guidelines into account, both parties negotiate various topics for several rounds until they can reach an agreement.

Parties reach an agreement

After various rounds of negotiation, both parties typically come to a tentative agreement. This initial agreement is considered tentative because union representation must allow employee members to review the agreement and receive their approval to ratify it fully. If both parties can't agree on terms, management can announce an impasse through which they implement the final proposal. If the employees and their representatives don't accept the impasse, they can usually dispute it with the National Labor Relations Board (NLRB) depending on the exact situation.

Related: How To Become a Union Representative

Union members authorize the agreement

If employed members accept the terms of the tentative agreement between both parties, they can vote to authorize it. Typically, union members contribute their votes by secret ballot, but this depends on the union's particular policies. From here, once the union and management ratify the agreement, both parties must adhere to it and abide by its stipulations.

Please note that none of the companies mentioned in this article are affiliated with Indeed.

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