How Collective Bargaining Agreements Work

By: Dave Roos
Workers march in support of rights for union members in Los Angeles.
Workers march in support of rights for union members in Los Angeles on March 26, 2011. See more protesting pictures.
Kevork Djansezian/Staff

We often hear about contract negotiations in the entertainment world, as actors, directors and other luminaries enter "talks" to line up their next projects. We hear about them in sports, often in terms of multiple years, millions of dollars and now, looming lockouts. These negotiations may be dramatic, but we often forget that these actors and athletes are laborers governed by unions. As failed contract negotiations in professional sports and attempts to strip bargaining rights from public workers once again make headlines, it's easy to overlook the long and often bloody history of American labor management relations.

For example, 12 men were shot dead in Pittsburgh on July 6, 1892, during a prolonged firefight between organized steel workers and Pinkerton guards hired by management to enforce their lockout of the workers [source: American Experience]. An even more tragic case unfolded in New York City nearly two decades later, as 146 workers -- mostly foreign-born women and girls -- died in a fire that engulfed the Triangle Shirtwaist Factory on March 25, 1911, prompting massive protests calling for safer working conditions and stronger protections for all laborers [source: Cornell School of Industrial and Labor Relations]. The struggle for fair labor conditions continues today; Wisconsin governor Scott Walker's attempt to strip collective bargaining rights from certain public union members -- most notably schoolteachers -- have led to mass protests and recall threats [source: Memoli].


In 1935, Congress passed the National Labor Relations Act (NLRA), legislation that first established the basic rights of private sector employers and employees to fairly and peaceably resolve labor disputes. The NLRA sets the ground rules for collective bargaining, a process by which organized groups of workers and management can negotiate wages, hours, benefits and other terms of employment without relying on litigation or resorting to intimidation. President John F. Kennedy extended the same collective bargaining rights to federal workers in 1962 [source: Woolley]. Most states also have their own labor laws, but no state law can supersede the NLRA.

Under the NLRA, if workers vote to unionize through elections run by the National Labor Relations Board (NLRB), then management is required to sit down with union representatives and hammer out a collective bargaining agreement. This legally binding contract stipulates exactly how much workers will earn, how many vacation days they will receive, how to officially file a grievance and whether or not it's legal to go on strike. When the collective bargaining agreement expires (usually in three years), the parties meet again at the negotiating table to work "in good faith" to establish wages and terms that are fair to both sides. If those negotiations fail, out come the picket signs.

To better understand the role of the collective bargaining agreement, let's start by exploring the larger collective bargaining process under the NLRA.


The Collective Bargaining Process

The 1935 National Labor Relations Act defines collective bargaining as the obligation on the part of both unions and management to bargain in good faith over the initial terms of employment and any disputes that later arise. What does it mean to bargain in good faith? According to the National Labor Relations Board (NLRB), the federal agency that enforces collective bargaining laws, to negotiate in good faith is to "participate actively in deliberations" with the "intention to find a basis for agreement" [source: NLRB]. What does bargaining in good faith look like?

  • Being willing to meet at reasonable times and intervals
  • Sending representatives that have the power to make real decisions
  • Cooperating fully with federal arbitrators and other third-party mediators
  • Refraining from any activity that would constitute an unfair labor practice, such as threatening unionized workers with demotions or making the same threats to non-union coworkers

Once the initial collective bargaining agreement is signed, both parties must adhere to its terms until it expires. If either party wants to renegotiate or dispute one of the terms (to lobby for higher or lower wages, for example), it has to file a formal notice with the Federal Mediation and Conciliation Service (FMCS) at least 60 days before the agreement expires.


Interestingly, the NLRA doesn't require the two parties to come to a resolution over labor disputes, but only to bargain in good faith. If arbitration fails to resolve the conflict, the employees may choose to strike, or stop working, to pressure management to accept their terms. Management could also decide to lock out workers until an agreement is reached. Occasionally, the collective bargaining process fails completely and contract disputes must be settled by the courts.

Next, we'll take a detailed look at the contents of a collective bargaining agreement.


Terms of Collective Bargaining Agreements

Collective bargaining agreements are lengthy, detailed legal documents that cover every aspect of the working relationship between workers and management. Like a standard contract, a collective bargaining agreement is divided into articles and clauses. The following are considered "mandatory" subjects covered by all collective bargaining agreements:

  • Wages and hours -- Unions and management must agree on the hourly wages and overtime rules for each job position covered by the agreement.
  • Fringe benefits -- This section includes, but is not limited to, paid and unpaid vacation days, holidays, sick leave, jury duty, maternity leave, health care coverage, pension and other retirement savings plans.
  • Scope of work -- Many collective bargaining agreements go into great detail to describe the scope and responsibility of each job title.
  • Seniority and promotions -- Workers who have been on the job the longest may be entitled to greater benefits (more vacation time, first to be considered for promotion) and some protections (last to be laid off) defined by the agreement.
  • Grievance procedure -- The agreement outlines the dispute resolution process for matters like unfair firings and pay discrepancies. Grievances typically have to be in writing and arbitration, if necessary, is chosen by both parties or provided by the Federal Mediation and Conciliation Service.
  • Disciplinary measures -- Union membership doesn't mean you can't be demoted or fired. This section details the acceptable reasons and processes for disciplinary action or termination.
  • No strike/no lockout - Many collective bargaining agreements contain a clause preventing either side from participating in a strike or lockout while the contract is active. This clause does not hold in cases where one side accuses the other of unfair labor practices.
  • Union dues - Most agreements allow for dues to be automatically deducted from employee paychecks. In so-called "open shops," where union membership isn't mandatory for employment, even non-union workers pay a service fee, since they're also covered by union negotiations [source: Center for Labor Education and Research].

Keep reading for lots more information about labor relations.


How Collective Bargaining Agreements Work: Author’s Note

The most fascinating thing I learned when researching this article is that the collective bargaining process doesn't require the two sides to come to a mutually beneficial agreement. It only requires that the parties work "in good faith" with the intention of finding middle ground. If the parties fail to reach an agreement in good faith, then -- and only then -- can workers strike or an organization issue a lockout order. I was also shocked to hear about the dangerous working conditions under which men, women and children were forced to labor in the 19th century without any right to bargain for a better life.


  • American Experience. PBS. "The Homestead Strike." (Accessed March 30, 2011)
  • Center for Labor Education and Research. University of Hawaii. "Collective Bargaining FAQs" (Accessed March 30, 2011)
  • Cornell School of Industrial and Labor Relations. The Triangle Factory Fire. "Triangle Factory Fire and the ILGWU." (Accessed March 29, 2011)
  • Memoli, Michael A. "Wisconsin Gov. Scott Walker's standing is eroding, opponents, say, citing poll." Los Angeles Times, February 22, 2011.
  • National Labor Relations Board. FAQs. "How is 'good faith bargaining' determined?"
  • National Labor Relations Board. "Employer/Union Rights and Obligations"
  • Woolley, John T. and Peters, Gerhard. The American Presidency Project. "John F. Kennedy"


Collective Bargaining Agreements: Cheat Sheet

Stuff you need to know:

  • The ground rules for the collective bargaining process were established in 1935 with the passing of the National Labor Relations Act (NLRA).
  • In the collective bargaining process, the parties don't have to come to an agreement, but they are required by law to negotiate "in good faith" toward that goal.
  • Unions typically represent workers during the collective bargaining process, but any group of workers can organize themselves -- with or without a union -- and earn the right to collectively bargain under the NLRA.

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