Collective bargaining agreements (CBAs), are legally binding documents outlining employment conditions like remuneration, working environment, and working hours, result from extensive negotiations between employers and a union representing the employees.
CBAs are essential for organizations as they streamline labor relations, enhance employee satisfaction, and encourage organizational stability, equity, and productivity. The collective bargaining process provides employers and workers a platform to voice their interests and reach a mutual agreement, minimizing conflicts while instilling structure and adaptability for both parties.
In this guide, Payscale aims to enrich your understanding of CBAs, exploring the specifics of a CBA, the bargaining process, and the diverse types of CBAs. Read on to become well-versed in all aspects of CBAs.
What is a collective bargaining agreement?
In law, a CBA cements the employment conditions decided upon through collective bargaining, a negotiation process between an employer and a union representing the employees. Individual employment contracts further enforce these conditions.
The law protects workers' right to unionize and engage in collective bargaining in the United States. Due to the legal nature of CBAs, any deviation from the stipulated conditions by employers or employees is considered illegal.
From a business viewpoint, a CBA is a strategic instrument guiding employees about their rights and responsibilities while promoting organizational success. Typical conditions of employment discussed in collective bargaining include working environment, salaries, work hours, and compensation and benefits packages. Consequently, CBAs impact labor costs, workforce planning, employee engagement, conflict resolution, recruitment strategies, and the overall company culture.
How does a collective bargaining agreement work?
The right to collective bargaining is a fundamental right of all employees. Collective bargaining is central to labor-management relations and is the first mechanism workers have to defend their rights pertaining to working conditions, employee benefits, vacation time, wages, and terms of employment.
If management enters negotiations in good faith, collective bargaining benefits both sides the workers secure more equitable working conditions, compensation, and benefits, and management are able to avoid more drastic labor practices, like lockouts, strikes, and boycott campaigns.
In the collective bargaining process, workers organize into a bargaining unit to voice their concerns to employers and negotiate solutions. Union members democratically elect labor union leaders to represent them in these discussions. CBAs contain the outcomes of these negotiations between the workers' representatives and the employers.
CBAs play a crucial role within an organization, mitigating inequalities and prejudices while safeguarding worker rights. The collective bargaining process is usually activated when employee contracts are due for renewal or when the company introduces changes in the workplace or existing contracts.
The International Labour Organization (ILO) advocates for workers' right to collective bargaining and actively participates in the process, providing guidance and facilitating dialogue among workers, managers, and the government.
Purpose of collective bargaining agreements
The principal objectives of collective bargaining are to refine processes and guidelines for the mutual benefit of employees and organizations. By establishing employment conditions and terms advantageous to both workers and their managers, CBAs create a win-win scenario.
Components of collective bargaining agreements
Collective bargaining typically kicks off when employment contracts are due for renewal or when employers propose changes to the workplace or existing contracts.
Here's a look at six critical elements encapsulated within CBAs:
- Terms and conditions of employment
- Working conditions and workplace rules
- Base salary, wages, and overtime pay
- Working hours and shift length
- Holidays, sick leave, and vacations
- Retirement and healthcare-related benefits
Bargaining agreement process
The collective bargaining agreement timeline generally follows six key steps.
1. The need for negotiation
The journey to a CBA begins with the necessity for contract negotiations. This need often stems from disagreements between employees and managers regarding wage rates, work hours, severance pay, or other employment terms. Conversely, the necessity for a fresh CBA might emerge when employers and employees concur on a proposed change in working conditions.
2. Preparation
Both parties, the employer and the employees, select individuals to represent their interests during the negotiation meetings. For instance, the employer might nominate a company board member, while an employee might opt for a labor attorney or a union representative to negotiate on their behalf. After the negotiation meetings, employees assemble a list of their demands, and employers endeavor to predict these demands to counter them with robust negotiation strategies.
3. Setting the ground rules
Before initiating the negotiation meetings, it is imperative for both parties, the employer's and the employees' representatives, to agree on a set of ground rules to guarantee fair exchanges. These rules typically encompass various aspects of the bargaining process, such as the timing and venue of the meetings, the negotiation tactics permissible for both parties, and response deadlines for queries.
4. Start of the negotiations
The negotiation phase is crucial in the bargaining process as it instigates workplace transformations. Bargaining topics emerging during this phase generally fall into three categories: mandatory, permissive, and illegal.
Mandatory subjects are those that federal law mandates during negotiations. Compensation and working hours are examples of such subjects.
Permissive subjects are discretionary topics included in discussions only if both parties concur. For example, internal company affairs are considered permissive subjects during the bargaining process.
Illegal subjects, as the name suggests, are those topics prohibited by law from inclusion in collective bargaining since these issues are unenforceable even when incorporated into a CBA. For instance, discussing "hiring-hall" provisions that provide referral preference to union members during a company's recruitment process is prohibited.
5. Temporary agreement
An initial resolution comes after the negotiations and the achievement of mutual consensus. This resolution gets documented in the first draft of the CBA, detailing the subjects discussed and the agreed-upon solutions for each one.
Following multiple rounds of negotiations, the employees' union scrutinizes the drafted CBA and decides whether to approve or reject it. If the union approves, the CBA is signed, thereby formalizing it. If the union disapproves, negotiations resume until a revised draft emerges or union members resort to strikes to voice their displeasure about the terms.
6. The union members vote in favor of ratification
With the approval of the CBA by both negotiating parties, the employees' labor union authenticates the document. In some instances, union members engage in a ratification vote to ensure the proposed resolution aligns with the representatives' interests and those of the employees. This ratification vote acts as the final seal of acceptance from the employees.
Common types of collective bargaining agreements
Composite Bargaining
Focusing primarily on aspects unrelated to compensation, such as working conditions, job security, and corporate policies encompassing hiring, termination, and workplace discipline, composite bargaining's primary aim is for employers and employees to agree on terms fostering a healthy, long-term relationship.
Concessionary Bargaining
Concessionary bargaining often occurs in economically challenging times involving union leaders forfeiting certain benefits to safeguard jobs and ensure the company's survival. Although conceding benefits isn't optimal, it might be necessary when employees' job security is at risk.
Distributive Bargaining
In distributive bargaining, one party often the workers typically achieves financial advantages like bonuses or wage hikes at the other party's expense. The efficacy of distributive bargaining hinges on the unions' power, generally linked to a large member base. If the employer denies the workers' demands, the union has the right to resort to strikes to pressure the employer.
Integrative Bargaining
Also referred to as "win-win bargaining," integrative bargaining sees both parties aiming for collective benefits through mutual understanding and compromise. Both employers and employees present issues that hold potential benefits for both sides, and there's a shared understanding that they stand to lose some benefits while gaining others.
An example of a collective bargaining agreement
With so many collective bargaining examples to choose from, let's dive in with the USW and USSC's 2018 CBA.
The United Steelworkers (USW) pressured their employer, the United States Steel Corp (USSC), for an extended period due to stagnant wage growth attributed to low steel prices. Ultimately, in 2018, USW and USSC agreed on a four-year-long CBA.
The CBA, which sought to boost employees' profit share, ensured each union member a signing bonus of $4,000, a wage increase of 14%, and improved pension benefits spanning the four-year term, which is an example of collective bargaining.
Importance of compliance with collective bargaining agreements
Certain legal repercussions bolster the effective enforcement of CBAs if one party violates the agreement. Employees infringing on a CBA often face disciplinary actions such as probation, suspension, or termination. Many companies institute such consequences automatically following a set number of infractions.
Should an employer breach a CBA, the agreement itself outlines the repercussions. Some companies utilize a neutral review board to handle employee grievances and conduct investigations. If the review board validates the employee's complaints, there are two paths to resolution: an internal settlement or a formal legal case.
Collective bargaining laws
In the United States, numerous federal and state laws govern CBAs.
The primary federal legislation concerning CBAs is the National Labor Relations Act (NLRA). It safeguards most workers' rights to participate in the collective bargaining process, form and join unions, and voice grievances about terms such as pay, hours, and strikes. The NLRA, administered by the National Labor Relations Board (NLRB), prevents employees from being terminated for exercising any of these rights. However, it's essential to note that the NLRA does not protect federal, state, and local government employees and agricultural laborers.
State laws also apply to CBAs. Some laws favor unions, while others restrict collective bargaining rights. The nature of these laws varies by state. For instance, Illinois's constitution upholds collective bargaining rights, whereas Tennessee's constitution includes a right-to-work clause curtailing union power.
Advantages and disadvantages of collective bargaining agreements for organizations
Advantages:
- Employees are given a fairer say with collective bargaining
CBAs empower workers by forming a unified group with more significant negotiating clout, making them harder for employers to overlook than individuals.
- It offers all workers equal benefits and opportunities
Through collective bargaining, employees better their workplace conditions, ensuring fair benefits for all workers, such as better wages and vacation benefits.
Disadvantages:
- Collective bargaining is generally time-consuming and can take up to several weeks or sometimes months to conclude
Negotiations between employers and union representatives are protracted processes, in part due to union leaders needing to apprise employees of proposed terms and carry out a vote at each stage. If votes fail, negotiations recommence.
- Both employees and employers may need to take time off work to negotiate, affecting productivity and raising costs
The necessity for both parties to dedicate work time to negotiations sometimes adversely affects productivity. Ultimately, levels of productivity bear a direct influence on a company's financial performance
Last thoughts on collective bargaining agreements
Collective bargaining arises when employees and employers discuss and negotiate employment terms. A collective bargaining agreement or CBA is born if these negotiations prove fruitful. Employers and employees establish groups and choose representatives to facilitate effective bargaining.
Despite its potential for yielding mutual benefits for employers and employees and fostering a fairer workplace, collective bargaining sometimes faces criticism. Critics often suggest that CBAs contribute to excessive compensation, thus leading to high taxes. Advocates, however, argue that such claims lack substance as the wages of public sector employees align closely with those of non-unionized workers.
Many critics suggest the market regulates fair wages and working conditions, rendering organized labor and CBAs unnecessary. However, some economists have understood this idea to be misleading since the 19th century. Indeed, everything from child labor laws, weekends, standard working hours, minimum wage laws, employee healthcare benefits, and basic workplace safety regulations has been fought for and won by organized labor at the expense of employers.
To enhance your collective bargaining approach and draw top-tier talent, consider exploring Payscale's Payfactors Compensation Platform. Don't forget to peruse Payscale's 2023 Compensation Best Practices Report for an insight into the employment terms, notably benefits, currently trending in CBAs.
FAQs around collective bargaining agreements.
Is collective bargaining illegal?
No, collective bargaining is a legally protected right in the United States. Nevertheless, certain negotiation topics are deemed illegal due to their unenforceability in CBAs.
What is the difference between a collective bargaining agreement and a contract?
A CBA is a specialized contract that governs the relationship between employers and employees, specifically concerning employment terms. In contrast, a general contract covers a broader spectrum of issues between both parties.
