A collective agreement is a labor contract between an employer and one or more unions. Collective bargaining consists of the process of negotiation between representatives of a union and employers (represented by management, in some countries by employers' organization) in respect of the terms and conditions of employment of employees, such as wages, hours of work, working conditions and grievance-procedures, and about the rights and responsibilities of trade unions. The parties often refer to the result of the negotiation as a Collective Bargaining Agreement (CBA) or as a Collective Employment Agreement (CEA).
One theory suggests that collective bargaining is a human right and thus deserving of legal protection. Article 23 of the Universal Declaration of Human Rights identifies the ability to organise trade unions as a fundamental human right. Item 2(a) of the International Labor Organization's Declaration on Fundamental Principles and Rights at Work defines the "freedom of association and the effective recognition of the right to collective bargaining" as an essential right of workers.
In June 2007 the Supreme Court of Canada extensively reviewed the rationale for considering collective bargaining to be a human right. In the case of Facilities Subsector Bargaining Assn. v. British Columbia, the Court made the following observations:
- The right to bargain collectively with an employer enhances the human dignity, liberty and autonomy of workers by giving them the opportunity to influence the establishment of workplace rules and thereby gain some control over a major aspect of their lives, namely their work.
- Collective bargaining is not simply an instrument for pursuing external ends…rather [it] is intrinsically valuable as an experience in self-government.
- Collective bargaining permits workers to achieve a form of workplace democracy and to ensure the rule of law in the workplace. Workers gain a voice to influence the establishment of rules that control a major aspect of their lives.
Economic theories also provide a number of models intended to explain some aspects of collective bargaining. The first is the so-called Monopoly Union Model (Dunlop, 1944), according to which the monopoly union has the power to maximise the wage rate; the firm then chooses the level of employment. This model is being abandoned by the recent literature. The second is the Right-to-Manage model, developed by the British school during the 1980s (Nickell). In this model, the labour union and the firm bargain over the wage rate according to a typical Nash Bargaining Maximin (written as Ώ = UβΠ1-β, where U is the utility function of the labour union, Π the profit of the firm and β represents the bargaining power of the labour unions). The third model is called efficient bargaining (McDonald and Solow, 1981), where the union and the firm bargain over both wages and employment (or, more realistically, hours of work).
In the United Kingdom collective bargaining has become, and has received endorsement for many years as, the dominant and most appropriate means of regulating workers' terms and conditions of employment, in line with ILO Convention No. 84. However, the importance of collective bargaining in the United Kingdom and elsewhere in the industrialised world has declined considerably since the early 1980s. Its decline in the public sector stems in part from the growth of Review-Body arrangements provided through the Office of Manpower Economics for groups of workers, including for the majority of National Health Service staff.
Despite its significance, in the United Kingdom there remains no statutory basis for collective bargaining in the fields of learning and training, a situation that has attracted the attention of both the Trades Union Congress and members of the Royal College of Nursing. A coalition has formed which actively seeks to remedy this situation by expanding the scope of collective bargaining to encompass learning and training.
At a workplace where workers have voted for union representation, a committee of employees and union representatives negotiate a contract with the management regarding wages, hours, benefits, and other terms and conditions of employment, such as protection from termination of employment without just cause. Once the contract is agreed to by the workers' committee and management, it is then put to a vote of all workers at the workplace. If approved, the contract is usually in force for a fixed term of years, and when that term is up, it is then renegotiated between employees and management. Sometimes there are disputes over the union contract; this particularly occurs in cases of workers fired without just cause in a union workplace. These then go to arbitration, which is similar to an informal court hearing; a neutral arbitrator then rules whether the termination or other contract breach is extant, and if it is, orders that it be corrected.
In the majority of U.S. states, workers who have elected a union may be required to contribute towards the cost of representation (such as at disciplinary hearings) if their fellow employees have negotiated a union security clause in their contract with management. Dues usually vary, but are generally 1-2% of pay; however, this is usually offset by the fact that workers who are represented by unions make, on average, 30% more than their non-union counterparts. Some states, especially in the south-central and south-eastern region of the U.S., have outlawed union security clauses; this is very controversial, as it allows individuals who benefit from the protection of union contracts to avoid paying their portion of the costs of contract negotiation. Though this sort of ban on union security clauses is often advocated by certain business interests attempting to weaken the power of unions, it can easily backfire, as the mandatory open shop, as such arrangements are called, may result in higher rates of unionization as workers no longer may be required to pay dues to be unionized, removing one obstacle to union success in elections, and also the factor that unions in states with the open shop are required to build strong rank and file democracy among their memberships in order to sustain a high number of dues-paying members, rather than relying on the contract to bring dues in, ensuring a more active and responsive union, rather than a complacent one.
The industrial revolution brought a swell of labor organizing in the US. The American Federation of Labor was formed in 1886, providing unprecedented bargaining powers for a variety of workers. The Railway Labor Act (1926)required employers to bargain collectively with unions.
In 1930, the Supreme Court, in the case of Texas & N.O.R. Co. v. Brotherhood of Railway Clerks, upheld the act's prohibition of employer interference in the selection of bargaining representatives. In 1962, President Kennedy signed an executive order giving public employee unions the right to collectively bargain with government agencies.
Several notable collective bargaining agreements (CBAs) in the United States have involved major professional sports leagues, due in part to a history of poor relations and the vast sums of money involved. One half of the 1998-99 NBA season was canceled due to a lockout, as was half of the 1994-95 NHL season. A breakdown in talks caused a cancellation of the entire 2004-05 NHL season, making it the first major North American sports league to lose an entire season to labor issues. Major League Baseball experienced player strikes in 1972, 1981, and 1994. In 2006 the National Football League (NFL) faced the prospect of an eventual strike, but an agreement was reached in March. The NFL did experience season-shortening strikes in 1982 and 1987, the latter of which involved the inclusion of replacement players for three games.
For the trade unions, several sectoral federations are in charge of the collective bargaining for their affiliates.
In some countries, such as Finland, collective agreements with enough support are universally applicable, in a particular field, regardless of union membership. Effectively, the universal collective agreement sets the minimum wages and other benefits, under which no employer may go with any employee, union member or not. Personal benefits can be given regardless. Contrast this with the U.S. labor regulations where in non right-to-work states all employees may be required by contract to join the majority union after employment, and then must be paid a uniform contract wage without variation.