Collective Bargaining in a Difficult Environment – a Regional Perspective

The topic of this presentation is collective bargaining in a difficult environment, and the perspective is regional. All of the other speakers in this excellent program are better qualified than me to comment on collective bargaining in Malaysia, so I will not presume to do so.

Bernard Banks

Bernard Banks delivering his speech in the Labour Law Seminar, held at Concorde Hotel.

This presentation is, as the topic suggests, a regional perspective, which looks at some features of collective bargaining environments in some of the labour markets in parts of our Asia Pacific region. It is acknowledged that the examples include some drawn from labour markets which are plainly different in nature or in size or in other ways, compared to Malaysia. It is also acknowledged that some of the examples are anecdotal, but the topic is one which invites references to practical elements, so it is hoped that even anecdotal references will be of interest.

This paper looks comparatively at aspects of several labour markets but some caution is needed in making direct comparisons. Something that works well in one labour market cannot be assumed to be a certain remedy for a perceived problem if it is simply  transplanted into that other labour market.

This does not imply any dilution of the   international standards, for example those enshrined in ILO conventions which have been almost universally adopted and which set goals to be aimed for. In many cases those goals have been achieved. But where they have not, the means of achieving those goals, and the rate of progress, must be chosen by each country, and consistent with its particular economic, social and cultural circumstances. Accordingly where reference is made to areas of collective bargaining difficulty, no value judgement is made or implied about those labour market features, and the comments are limited only to the perceived practical difficulties for collective bargaining. There may be other justifications for those features arising form particular national contexts, and such issues are beyond the scope of this paper.

Finally by way of introduction, the topic is about difficulty, but difficulty for whom? Bearing in mind the limits of the time available in the session I have chosen to focus on difficulties from the trade union perspective but only because it is usually the trade union which initiates bargaining. I acknowledge immediately that a collective bargaining environment may impose real difficulties for employers, and it is hoped that the session will provide sufficient discussion time for that aspect also.


Context: Collective Bargaining, and Difficulties Generally

Collective bargaining between trade unions and employers is at the core of industrial relations in most developed and developing countries and territories worldwide. Collective bargaining in an environment free from unjustified impediments is and has been the goal of the International Labour Organisation (ILO) for almost 100 years.

The fact that the ILO continues to monitor and report on the collective bargaining environment across the world shows, among other things, that achieving an acceptable climate  for collective bargaining  is a goal which is not easy to achieve, and when achieved, is not always easy to maintain.

Collective bargaining is about rights and interests. Workers join unions which bargain collectively with their members’ employers.  Because bargaining involves the inevitably contentious issues of pay and conditions, changes sought by unions usually mean additional costs to employers and concessions sought by employers mean less favourable terms for workers.

There is nothing new in this. Historically, around the world since the beginnings of organised labour and endeavours to bargain with employers, the ultimate industrial levers, lawful or not, have been strikes by workers and lockouts by employers. The issues in collective bargaining and the ultimate possible activities of last resort to reach a bargain, mean collective bargaining will seldom be easy .The point is simply that collective bargaining will almost always be contentious, with an inherent tension between the interests of trade unions and their members, the workers, on the one hand and their employer’s interests on the other.

In one sense therefore, collective bargaining usually takes place in a difficult environment. This paper looks at difficulty in a different sense, different from the inevitable tensions inherent in collective bargaining.

In examining the difficulties in this sense, it is too limiting to consider only parties immediately involved in the bargaining – that is, the trade unions and employers. Industrial relations including collective bargaining exist in a tripartite context. The third tripartite element is the role of the legislative and administrative authorities. In some countries they may be actively involved in industrial relations in various ways, in others their role may be passive, merely setting the bargaining environment and enforcing it neutrally, and in some lesser developed counties they may have no role at all.  But whatever their role, legislative and administrative authorities are important elements in the collective bargaining environment. So the context incudes trade unions, employers, and the legislative and administrative authorities.

There is an important fourth category, when considering collective bargaining, the environment in which it occurs and whether or not it is difficult. That category is of course the workers: those who are current union members, or would like to become union members, or were but are no longer union members, and workers who choose not to be part of the collective bargaining environment. Workers may be seen as the group most prejudiced by some collective bargaining environmental difficulties. However it is also suggested that by their choices not to join unions, in a broad sense those workers may themselves be seen as a source of collective bargaining difficulty.

Economic climate

The prevailing economic setting, that is the combination of factors including the profitability of the enterprise and the employer’s ability to pay, full employment or unemployment, skills surpluses and shortages, and the rate of inflation and the purchasing power of wages, and the separate economic and policy factors which bear on the public sector workforces will always impact the collective bargaining environment.

In the context of this presentation, the economic climate is more an overall factor, always relevant and having effects which differ in different collective bargaining settings. So in that sense it is not itself a particular source of difficulty in the approach this paper takes to the topic


The legislative and administrative environment

Collective bargaining does not take place in an unregulated environment, and there will always be a statutory framework within which the bargaining takes place. Sometimes it will be facilitative, sometimes neutral and sometimes the environment will be very restrictive, and of course those assessments will be different depending on whether the issue is in the eye of the unions or the eye of employer interests.

A neutral, permissive environment needs;

  • freedom for workers to join a trade union of their choice
  • a neutral administrative regime governing the union’s internal and external relationships
  • no unreasonable impediment to a union wishing to initiating collective bargaining, with associated bargaining process rights and obligations
  • corresponding freedoms for employers to organise and initiate collective bargaining
  • legal enforceability for collective agreements resulting form collective bargaining, and
  • effective enforcement mechanisms

The New Zealand Employment Relations Act 2000[1] provides an example of a simple collective bargaining system which, while it may be the subject of debate, by and large provides a neutral and facilitative collective bargaining environment. Other labour markets have some features which impact differently.  

Exclusion of trade unions

Some labour markets re less facilitative and contain features which lead to various kinds of difficulty for collective bargaining. One such feature is the exclusion of trade unions either directly or indirectly.  For example in Bangladesh a 2010 Act continued a prohibition on trade unions in the Export Processing Zones, (EPZs) with limited rights instead to participate in workers welfare association which do not have a normal collective bargaining role, and these workers welfare associations  are also prohibited from having  links with NGOs.[2]

Fiji’s Employment Relations Promulgation 2007 (which is based on the New Zealand Employment Relations Act 2000 and which has comparable trade union administration and collective bargaining features), is however subject to a 2011 Decree which extinguished a number of collective agreements in specified industries, limited the rights of trade unions to bargain collectively, provided for government resolution of  unresolved collective bargaining issues and effectively excluded public sector organisations from functioning as trade unions.[3]

Samoa currently has no legislative provisions for trade union registration or conventional collective bargaining at all.[4]

Alternative Mechanisms

Some countries have systems which encourage or require other mechanisms. Indonesia has a system which is compulsory, for enterprises of 50 or more workers, to establish Bipartite Cooperation Bodies which comprise equal numbers of workers and employer representatives. Their aim is to resolve industrial relations issues by cooperation and in the interests of the future of the enterprise and its productivity and performance. Where there are trade unions present in the enterprise, the trade unions nominate the workers membership on the bipartite body. But these are not true collective bargaining mechanisms and it may be debatable whether they foster or hinder the ultimate development of normal collective bargaining.[5]

However the situation in Indonesia is complicated because there are also approximately 60 registered trade unions and anecdotally, indications are that there are also a very large number of informal trade unions which are in fact ‘plant’ or enterprise unions and which have formed themselves into confederations of trade unions to increase their bargaining power.

An obvious feature of plant or enterprise trade unions generally is that officials who participate in the collective bargaining are themselves vulnerable because they are also employees of the employer with whom the union is bargaining. They are inherently in a more vulnerable and therefore likely weaker bargaining position than in the case of officials of industry – wide unions. It is perhaps easy to understand the attraction of formation of the confederations on trade unions referred to above in ration to Indonesia, and a similar phenomenon appears to have occurred in the garment industry in Bangladesh at least prior to mid 2013 when the government is reported to have allowed the formation of trade unions by garment workers following the Rana Plaza garment factory collapse in Dhaka in 2013.[6]

Minimum terns and conditions by regulation

Another feature of some labour market legislative frameworks, which may be seen as producing a difficult collective bargaining environment, occurs  where significant terms and conditions can be prescribed by regulation. It is common in many countries for basic minima to be set by legislation –for example annual and public holidays and the pay for them, sick, bereavement and parental leave, and minimum wages. However sometimes this prescription by legislation goes further and in Fiji for example there is provision for Wages Councils to be appointed in industries for which the government considers there is no effective wage bargaining machinery. The government can appoint a Wages Council for that industry, comprising worker and employer representatives and government officials, and after the Council’s deliberations and public consultation the Council can request  the Minister to make a wage regulation order prescribing basic terms and conditions, and the Minister is effectively obliged to do so. There are currently 10 such orders, covering 10 industries. The conditions prescribed for each industry differ but overall they include:

  • minimum rates of pay for different positions in each industry
  • normal hours of work before overtime is payable.
  • subsistence allowances
  • rostered day off,
  • meal allowance
  • night shift and other allowances[7]

Anecdotal indications suggest that there are differing views about whether these Wages Regulation Orders and the practice that leads to them amount to difficulties in collective bargaining environment, or not. On one view they inhibit the progress of formation of viable trade unions which can then engage in collective bargaining, but  an alternative view is that they are part of a developmental process,  a step along the way to full,  orthodox collective bargaining  and therefore a positive factor, especially as they enhance employment terms and conditions at least in the short to medium term.


Restrictions on industrial action

The right to strike is sometimes referred to as the industrial lever  of last resort. It is therefore obviously very important to trade unions and any restriction on it will be seen by trade unions as an impediment to their collective bargaining.

To set the context for discussion of this aspect of a difficult collective bargaining environment, the following summation may be useful:

The ILO Committee of Experts has said:

“..the Committee  confirms its basic position that the right to strike is an intrinsic corollary of the right to organise protected by Convention No. 87. That being said, the Committee emphasises that the right to strike cannot be considered as an absolute right: not only may it be subject to a general prohibition in exceptional circumstances, but it may be governed by provisions laying down conditions for, or restrictions on, the exercise of this fundamental right.”[8]

The ILO regards general prohibitions of strikes as incompatible with Article 3 of Convention No 87,  unless the situation is one of “acute national  crisis and then, only for a limited period and to the extent necessary to meet the requirements of the situation. This means genuine crisis situations,…”[9]   

So merely curtailing the right to strike in some circumstances, in particular those contemplated by the ILO as justifiable, cannot realistically be said to cause a difficult environment. On the other hand, any greater curtailment can be argued as unjustified and therefore as contributing to  a difficult  collective bargaining environment.

Any discussion of the limitation on the right to strike is fraught with controversy, and quite often emotion, because of the widespread effects which can result from strike action. As is of course widely recognised, it can be expensive and disruptive for workers themselves, their employers and the community as whole. And while strike action is not and end in itself in an industrial sense, it is often a symptom of wider and other issues causing such a level of dissatisfaction as to induce workers to take this disruptive action[10]. However this paper limits its consideration only to the directly industrial context of collective bargaining.

For example in New Zealand industrial action affecting essential services, whether it is a strike by workers or a lockout by employer, requires 14 days formal notice if it affects the production or supply of water, gas or electricity, the disposal of sewage, operations of fire brigades, ports or sea passenger or air services or the operations of hospitals or associated services, and 3 days notice if it involves the meat processing industry. Provided such notice is given, strikes or lockouts in support of collective bargaining are lawful.[11]

Provisions covering similar  emergencies,  apply in a number of widely different countries, including Singapore, Fiji and the Australian State of Victoria, although the restrictions  range  from notice requirements which if given correctly can mean the industrial action is lawful, to complete prohibitions for limited periods.[12]

Whatever may be said about the justification or lack of it in these circumstances, they can fairly  be described as   making  the collective bargaining environment ‘difficult’ to use the language of the session topic.

Compulsory arbitration

An arguable example of a difficult environment can occur when the right to take industrial action –strikes and lockouts in support of collective bargaining – is removed and ‘traded off’ against the right to industrial conciliation and ultimately compulsory arbitration. This is another of the many collective bargaining models which have been applied in New Zealand – this one for almost a century from 1894. It was followed by similar Commonwealth legislation in Australia in 1904 and lasted in New Zealand until 1987.[13]

Whatever may be said about this constructive approach –constructive because it was designed to resolve intractable collective bargaining issues neutrally and without industrial action – it certainly deprived the parties of their ultimate collective bargaining leverage and so must in one sense at least, be seen as a difficulty in the collective bargaining environment.


Cultural and social factors, gender and authority issues

Then there is a wide range of social land cultural factors, not necessarily related to the formal bargaining structure, which may militate in many different ways against successful collective bargaining. These can include cultural and social settings which cause reluctance on the part of women workers to challenge male employer representatives which makes it difficult for women to attain senior positons in trade unions. In an environment where the trade unions are plant unions, and the employer is not in favour of the establishment of a union, cultural and social factors can further inhibit not only the  collective bargaining process , but also inhibit the necessary prior step, the freedom of association to form trade unions and recruit members.

Outsourced labour   

Earlier in this paper the significance of the right to strike has been referred to as has the disadvantage for workers if this right has been limited or removed. The effectiveness or lack of it in this lever of last resort in collective bargaining is important in another quite different setting, that is, in a labour outsourcing situation.

Labour outsourcing is an increasingly common phenomenon internationally including in our Asia Pacific region. The terminology can differ but for present purposes it means a situation where the owner of an enterprise does not itself employ its workforce or its entire workforce, and instead contracts with a labour supply company to provide some or all of its workforce needs.

This is done usually for reasons of cost, to enable the enterprise owner to lower its labour costs and/or to avoid compliance obligations and employer liabilities of various kinds. The particular factors which may make this option attractive to an enterprise will depend on the features of the particular country’s labour market framework and the enterprise’s needs.[14]

A common feature in all of these outsource situations is the separation of the enterprise owner, the ‘consumer’ or ‘user’ of the labour from the legal obligations as the employer. In a broad sense the employment relationship is triangular. The parties are:

The worker W

who is employed by a labour supply company LSC,

which has a labour supply contract with the  enterprise or business B .

There are these three parties, not the more normal employer – worker bi-partite relationship but, (unless the arrangement is prohibited by law or fails in another legal sense) the contractual employment relationship is between W and LSC only and there is a commercial contract relationship between LS C and B. But importantly there is no employment relationship or any other contractual relationship between W and B.:

There is normally no reason why workers in the position of W cannot join a trade union and for W’s union to engage in collective bargaining with LSC, and such bargaining does apparently occur.

But the trade union is usually in a weak bargaining positon for several reasons. One is that workers employed by labour supply companies are very likely to be short term workers in temporary employment and therefore it can be uneconomic for trade unions to attract such workers as members.

Another reason is that although such workers can ultimately strike against their employer, their employer is LSC not B, to use the example above. While strike action may cause some   embarrassment to LSC, the workers will likely have no legitimate expectation of carrying out any particular role at  any particular business premises  so are quite liable  to be removed from B’s business premises and replaced.

The Age of individual Empowerment

But the workers themselves may ultimately be the biggest reason why a collective bargaining environment is a difficult environment, at least for trade unions. Workers in large numbers are relinquishing trade union membership, or not joining unions at all when they enter the workforce.

Trade union membership density figures suggest that in most developed countries and many developing countries the density is falling and has been falling over the last couple of decades or so. There are some interesting apparent exceptions – it seems as though trade union density in Singapore, Sri Lanka and Taiwan for example may have increased slightly or at least not dropped or dropped significantly over recent years. But generally speaking the density as of a year of so ago has fallen to around 20% or less.[15]

There are many countries in our Asia Pacific region for which comparable statistics are not available, so there is a question mark over exactly what is happening there. However absent that possible contra-indicator, the broad picture is one of low and decreasing trade union density.

The reasons for it may be matters of speculation and there may be many reasons. They may include perceptions that improvements in protective legislation make trade union membership and the collective protection that goes with it less important, that easier access by individuals to dispute resolution mechanisms enables them to meet their own needs individually, that there is increased preparedness to move from one employer of job to another, or there may be a rejection of the more traditional collectivist approach to determining their employment destiny. Or may be that in an information society with technology giving fast and easy access to vast amounts of information which it was difficult to access earlier has led to a new sense of individual empowerment.


Ultimately it is suggested, this last figure indicating around 20% trade union density speaks volumes. It is not dependent on current economic circumstances because they change from year to year and from country to country. It is not dependent on policy settings in any particular country because the available statistics cover a wide range of countries in many parts of the world. A trade union density figure of approximately 20% and static or falling, and doing so over a significant period is not the sign of an easy and effective collective bargaining environment.

It may be argued that this figure is about union membership and the topic of this session is about collective bargaining. But that distinction is narrow. Trade unions’ primary role is the collective interests of their members, and collective bargaining is fundamental to their role.

This current situation of difficulty for collective bargaining may not continue. The picture is coloured by the situation in a number of mature labour markets, many of them outside our region and very different from many labour markets in our region.

The industrial potential of the Asia Pacific region is huge, and we cannot yet know the future of the collective bargaining environment in our region. A more reliable impression may be possible if or when more information emerges about regional trade union density, and with it the capacity for collective bargaining.


[1] ss12-50KA  Employment Relations Act 2000

[2] Export Processing zone (EPZ) Workers Welfare Associations Act 2010

[3] Essential National Industries (Employment ) Decree 2011

[4] Labour and Employment Relations act 2013

[5] Manpower Act Number 13 2003, Part IV, Art106

[6] The Guardian Website, 13 May 2013

[7] Wages Regulation (Building &Civil & Electrical Engineering Trades) Order 2012, Wages Regulation (Hotel & Catering Trades) Order 2012, Wages Regulation (Garment Industry) Order 2012,  Wages Regulation (Manufacturing Industry) Order 2012, Wages Regulation(Mining and Quarrying ) Order 2012, Wages Regulation (Printing Trades) Order 2012, Wages Regulation (Sawmilling & Logging Industry) Order 2012, Wages Regulation (Security Services) Order 2012, Wages Regulation (Wholesale & Retail Trades) Order 2102, Wages Regulation (Road Transport ) Order 2012

[8] ‘ freedom of Association and Collective Bargaining ‘ Report of the Committee of Experts International Labour Conference 81st Session 1994

[9] Ibid para 152

[10] See ibid para 137

[11] Employment Relations Act 2000, ss90, 91, Schedule 1

[12] Criminal Law(Temporary Provisions) Act Chapter 67, Par III (Singapore), Essential Services Act 1958 (Victoria) Employment Relations Promulgation 2007, s186 and Schedule 7 (Fiji)  (but note the 201 Decree mentioned in note 3 above imposed additional  restrictions)

[13] Industrial Conciliation and Arbitration  Acts 1894 -1954

[14] See Bales, Richard and ors, ‘A Comparative Analysis of Labour Outsourcing” March 24 2014, Arizona Journal of International and Comparative Law Vol 31, 2014

[15] “ILO Industrial Relations Indicators  Union Membership Statistics”  “Last updated on the   14/03/14”

by Bernard Banks

Consultant, Kiely Thompson Caisley, Employment Lawyers, New Zealand

Chair, LAWASIA Employment Law Committee


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