Collective agreement

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A collective agreement, collective labour agreement (CLA) or collective bargaining agreement (CBA) is a written contract negotiated through collective bargaining for employees by one or more trade unions with the management of a company (or with an employers' association) that regulates the terms and conditions of employees at work. This includes regulating the wages, benefits, and duties of the employees and the duties and responsibilities of the employer or employers and often includes rules for a dispute resolution process.

Collective bargaining is a process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working conditions, benefits, and other aspects of workers' compensation and rights for workers. The interests of the employees are commonly presented by representatives of a trade union to which the employees belong. The collective agreements reached by these negotiations usually set out wage scales, working hours, training, health and safety, overtime, grievance mechanisms, and rights to participate in workplace or company affairs.

A trade union is an association of workers forming a legal unit or legal personhood, usually called a "bargaining unit", which acts as bargaining agent and legal representative for a unit of employees in all matters of law or right arising from or in the administration of a collective agreement. Labour unions typically fund the formal organization, head office, and legal team functions of the labour union through regular fees or union dues. The delegate staff of the labour union representation in the workforce are made up of workplace volunteers who are appointed by members in democratic elections.



In Finland, collective labour agreements are universally valid. This means that a collective agreement in an economic sector becomes a universally applicable legal minimum for any individual's employment contract, whether or not they are a union member. For this condition to apply, half of the workforce in that sector needs to be union members, thus supporting the agreement.

Finland Republic in Northern Europe

Finland, officially the Republic of Finland, is a Nordic country in Northern Europe bordering the Baltic Sea, Gulf of Bothnia, and Gulf of Finland, between Norway to the north, Sweden to the northwest, and Russia to the east. The capital and largest city is Helsinki. Other major cities are Espoo, Vantaa, Tampere, Oulu and Turku.

Workers are not forced to join a union in a specific workplace. Nevertheless, with 70% average unionization, most economic sectors are under a collective labour agreement. An agreement does not prohibit higher wages and better benefits, but establishes a legal minimum, similarly to a minimum wage. Furthermore, a national income policy agreement is often, but not always reached, which includes all trade unions, employers’ associations, and the Finnish government. [1]

Minimum wage lowest wage which can be paid legally in a state for working

A minimum wage is the lowest remuneration that employers can legally pay their workers—the price floor below which workers may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20th century.


Collective agreements in Germany are legally binding, and this is accepted by the population, and it causes no alarm. [2] [ failed verification ] Whereas in the UK there was (and arguably still is) a "them and us" attitude in industrial relations, the situation is very different in post-war Germany and in some other Northern European countries. In Germany, there is a much greater spirit of cooperation between the two sides of industry. For over 50 years, German workers by law have had representation on company boards. [3] Together, management and workers are considered "social partners", [4] a term that gives rise to bemusement in the UK.


In Sweden about 90 per cent of all employees are covered by collective agreements, in the private sector 83 per cent (2017). [5] [6] Collective agreements usually contain provisions concerning minimum wages. Sweden does not have statutory regulation of minimum wages or legislation on extension of collective agreements to unorganized employers. Non-organized employers can sign substitute agreements directly with trade unions, but many do not. The Swedish model of self-regulation applies only to workplaces and employees covered by collective agreements. [7]

United Kingdom

At common law, Ford v A.U.E.F. [1969], [8] the courts once held that collective agreements were not binding. Then, the Industrial Relations Act 1971, introduced by Robert Carr (Employment Minister in Edward Heath's cabinet), provided that collective agreements were binding unless a written contract clause declared otherwise. After the demise of the Heath government, the law was reversed to reflect the tradition in British industrial relations policy of legal abstentionism from workplace disputes.

The Industrial Relations Act 1971 (c.72) was an Act of the Parliament of the United Kingdom, since repealed. It was based on proposals outlined in the governing Conservative Party's manifesto for the 1970 general election. The goal was to stabilize industrial relations by forcing concentration of bargaining power and responsibility in the formal union leadership, using the courts. The act was intensely opposed by unions, and helped undermine the government of Edward Heath. It was repealed in 1974 when the Labour Party returned to government.

Robert Carr British politician

Leonard Robert Carr, Baron Carr of Hadley, PC was a 20th Century British Conservative Party politician who was the Home Secretary of the United Kingdom from 1972 to 1974.

Edward Heath Prime Minister of the United Kingdom (1970–1974)

Sir Edward Richard George Heath, often known as Ted Heath, was a British politician who served as Prime Minister of the United Kingdom from 1970 to 1974 and Leader of the Conservative Party from 1965 to 1975. Heath served 51 years as a Member of Parliament from 1950 to 2001. He was a strong supporter of the European Communities (EC), and after winning the decisive vote in the House of Commons by 336 to 244, he led the negotiations that culminated in Britain's entry into the EC on 1 January 1973. It was, says biographer John Campbell, "Heath's finest hour". Although he planned to be an innovator as Prime Minister, his government foundered on economic difficulties, including high inflation and major strikes. He became an embittered critic of Margaret Thatcher, who supplanted him as Tory leader.

The law is now contained in the Trade Union and Labour Relations (Consolidation) Act 1992 s.179, whereby In the United Kingdom, collective agreements are conclusively deemed to be not legally binding. This presumption may be rebutted when the agreement is in writing and contains an explicit provision asserting that it should be legally enforceable.

Although the collective agreement itself is not enforceable, many of the terms negotiated will relate to pay, conditions, holidays, pensions and so on. These terms will be incorporated into an employee's contract of employment (whether or not the employee is a union member); and the contract of employment is, of course, enforceable. If the new terms are unacceptable to any individuals, they can object to his employer; but if the majority of workers have acquiesced, the company will be able to sack the complainants, normally with impunity.

The British law reflects the historic adversarial nature of UK industrial relations. Also, there is a background fear by employees that if their trade union sued for breach of a collective agreement, the union could become bankrupt, leaving employees without representation in collective bargaining. This unfortunate situation may be slowly changing, partly through EU influences. Japanese and Chinese firms that have UK factories (particularly in the motor industry) try to imbue their workers with the company ethic.[ clarification needed ] This approach has been adopted by indigenous UK firms such as Tesco.

United States

The United States recognises collective bargaining agreements. [9] [10] [11]

See also

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United Kingdom labour law

United Kingdom labour law regulates the relations between workers, employers and trade unions. People at work in the UK benefit from a minimum charter of employment rights, which are found in various Acts, Regulations, common law and equity. This includes the right to a minimum wage of £8.21 for over 25-year-olds under the National Minimum Wage Act 1998. The Working Time Regulations 1998 give the right to 28 days paid holidays, breaks from work, and attempts to limit excessively long working hours. The Employment Rights Act 1996 gives the right to leave for child care, and the right to request flexible working patterns. The Pensions Act 2008 gives the right to be automatically enrolled in a basic occupational pension, whose funds must be protected according to the Pensions Act 1995.

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A union shop, also known as a post-entry closed shop, is a form of a union security clause. Under this, the employer agrees to either only hire labor union members or to require that any new employees who are not already union members become members within a certain amount of time. Use of the union shop varies widely from nation to nation, depending on the level of protection given trade unions in general.

A union security agreement is a contractual agreement, usually part of a union collective bargaining agreement, in which an employer and a trade or labor union agree on the extent to which the union may compel employees to join the union, and/or whether the employer will collect dues, fees, and assessments on behalf of the union.

Finnish national income policy agreements or comprehensive income policy agreements are tripartite agreements between Finnish trade unions, employers' organizations, and the Finnish government. They are policy documents covering a wide range of economic and political issues, such as salaries, taxation, pensions, unemployment benefits, and housing costs. They represent collective bargaining taken to its logical maximum, reaching virtually all wage-earners. Their enforcement is made easier by the universal validity of collective labour agreements. However, they are voluntary agreements and are not considered government legislation, i.e. they do not represent central planning of the economy.

Trade unions in Malaysia are regulated by the Trades Unions Act 1959

<i>Canada Labour Code</i>

The Canada Labour Code is an Act of the Parliament of Canada to consolidate certain statutes respecting labour. The objective of the Code is to facilitate production by controlling strikes & lockouts, occupational safety and health, and some employment standards.

An Australian workplace agreement (AWA) was a type of formalised individual agreement negotiated between an employer and employee in Australia that existed from 1996-2009. Employers could offer a "take it or leave it" AWA as a condition of employment. They were registered by the Employment Advocate and did not require a dispute resolution procedure. These agreements operated only at the federal level. AWAs were individual written agreements on terms and conditions of employment between an employer and employee in Australia, under the Workplace Relations Act 1996. An AWA could override employment conditions in state or territory laws except those relating to occupational health and safety, workers' compensation, or training arrangements. An AWA was required to meet only the most minimal Australian Fair Pay and Conditions Standard. Agreements were not required to include effective dispute resolution procedures, and could not include prohibited content. Agreements were for a maximum of five years; approved, promoted and registered by the Workplace Authority; operated to the exclusion of any award; and prohibited industrial action regarding details in the agreement for the life of the agreement. The introduction of AWAs was a very controversial industrial relations issue in Australia.

Trade Union and Labour Relations (Consolidation) Act 1992 United Kingdom legislation

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Collective agreement coverage or union representation refers to the proportion of people in a country population whose terms and conditions at work are made by collective bargaining, between an employer and a trade union, rather than by individual contracts. This is invariably higher than the union membership rate, because collective agreements almost always protect non-members in a unionised workplace. This means that, rather than individuals who have weaker bargaining power representing themselves in negotiations, people organise to represent each other together when negotiating for better pay and conditions in their workplace. The number of people who are covered by collective agreements is higher than the number of union members, and in many cases substantially higher, because when trade unions make collective agreements they aim to cover everyone at work, even those who have not necessarily joined for membership.

The union density or union membership rate is the ratio of the number of employees who are members of trade unions to all the employees in a country or population. This is lower than the collective agreement coverage rate, which refers to all people in work places where terms are collectively agreed. Trade unions collectively bargain with employers for improved pay, conditions, and voice at work by means of the increased bargaining power that employees have together compared to what they would have as individuals. The number of people who are covered by collective agreements is higher than the number of union members, and in many cases substantially higher, because when trade unions make collective agreements they aim to cover everyone at work, even those who have not joined a union.

The Employment Protection Act, is a labour-market regulation in Sweden. It was adopted and entered into the Code of Statutes in 1982 and provides extensive protection for employees from termination and regulates some employment contracts. Swedish labour market regulation generally relies heavily on collective bargaining between trade unions and Employers' organizations. Even though several parts of the Employment Protection act can be overrun by collective agreements, it still constitutes an extensive direct state regulation.


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  11. "Collective Bargaining Agreements - U.S. Department of Labor - Collective Bargaining Agreements - Cornell University ILR School".