Home > Insights > Insights >

Trade Union's Role in the Collective Bargaining Mechanism



Authors: Johnny Xu & Alice Wang

In China, The Collective Bargaining Mechanism (“CBM”) generally means the systems coordinating conflict interests in the labor relations between employers and employees through communication and consultation. It regulates the process and results of collective bargaining, usually including two basic systems, i.e. Collective Bargaining System (“CBS”) and Collective Agreement System (“CAS”). Trade unions, as the representatives responsible for protecting employees’ legitimate rights and interests, play an important role in the CBM. On the one hand, as the mechanism coordinating labor relations, CBS and CAS can hardly be established and operated without the participation of trade unions. On the other hand, CBM is a crucial approach for trade unions to exert the right of representation, negotiation, participation, protection and supervision.

Based on the “dual goal” of CBM to both protect employees’ legitimate rights and stimulate enterprises’ development, it is necessary for enterprises to understand how trade unions participate in collective bargaining and exert all kinds of rights, so that they may take the advantages and avoid the disadvantages, enabling trade unions to play a positive role in protecting and promoting harmonious labor relations. Therefore, we will, revolving around the two aforementioned basic systems, highlight the various roles trade unions may play during the process of collective bargaining, signing collective agreements and settling collective disputes; explain specifically how trade unions play their roles with reference to a real case; and eventually, we will give some practical advice based on previous experience, in order to help enterprises reach the aforementioned goal. The “trade union” discussed in this article only refers to trade unions established internally in an enterprise.

The CBS mainly concerns the negotiation process. It provides the employer and the employees with the principals and procedures necessary to negotiate issues revolving around labor relations. These principals apply not only to the establishment of rules and regulations and the signing of collective agreements, but also in settling collective disputes.

By comparison, the CAS mainly concerns collective agreements. It presents the principals and procedures for the two parties to negotiate labor relations-related issues, to crystallize consensuses in the form of contract, to perform the contract and to settle disputes stemming from its implementation. This system covers offer, sign, ballot, post-implementation supervision and dispute settlements of the collective agreement.

The CBS and the CAS overlap in terms of the procedure of negotiation. Article 4 of the Labor Contract Law prescribes;

provided that the employer formulates, modifies or determines the rules and regulations or other major policies that are directly linked to employees’ vital interests, such as salaries, working hours, holidays, occupational safety and hygiene, insurance and welfare, training, disciplines and production quota, it shall be discussed by the Employees’ Assembly or the entirety of the staff who can make proposals and express opinions, and shall be decided with the trade union or employee representatives via equal negotiation.

In other words, as long as it involves the vital interests of employees, whether it aims at signing the of a collective agreement, preventing or coordinating conflicts of interest arising from labor relations, the procedure of collective bargaining is of necessity. The trade union, as the representative of the employees, is a major subject participating in the process of negotiation. In the following text, we will introduce in three circumstances which roles trade unions may play in the process of collective bargaining.

1. Collective agreements

At the preparatory stage of signing collective agreements, a trade union’s primary role is to organize propaganda, disseminate basic knowledge on collective bargaining and signing collective agreements among employees. Trade unions, which play an active role in propaganda, tends to establish a correct concept of negotiation for employees and promote their adaptability to the bargaining results. Additionally, trade unions may also, on behalf of the employees, draft collective agreements either independently or jointly with the employer.

At the initiation stage, trade unions may act as the offeror and make the collective bargaining offer to the employer in a written form. The employer shall reply also in writing within the statutory period. However, if the employer refuses the offer, the employer shall give due cause.

Entering into the negotiation stage, the law entitles trade unions to select and replace the bargaining representatives of employees. It also prescribes that the president of a trade union shall assume the role of chief representative in negotiations with the representatives appointed by the employer. During the bargaining process, the trade union elaborates upon employees’ requests and supporting argumentation one by one; the employer will then respond to each proposal, either accepting or rejecting.

In the deliberation stage, trade unions are responsible for submitting the draft collective agreement to the Employees’ Assembly or the entire staff for a discussion before convening at the Workers’ Congress. Then, it shall collect and organize employees’ opinions. If substantive issues are raised, the bargaining procedure shall be re-initiated. When the collective agreement is passed, the chief representatives of both parties will sign the agreement; eventually, the signed collective agreement will enter into effect by acquiring the approval of the labor administrative authority.

Coming to the performing stage, trade unions become one of the supervising subjects, overseeing the implementation of collective agreements. It may function through a joint inspection unit composed of tripartite representatives: employer, employees and trade union. They are jointly in charge of the supervision and timely handling of any problems that emerge from the implementation of the agreement. Another way is relatively simple, i.e. through a trade union labor law supervisory commission or team, which only comprises of one party – the trade union.

Last but not least, collective disputes generated from the implementation of collective agreements may be settled through mediation, arbitration and litigation. Under this circumstance, trade unions - as the eligible subject - can apply for labor arbitration and initiate legal proceedings on behalf of the party of employees.

2. Rules and regulations

As was prescribed by the aforementioned Article 4 of the Labor Contract Law, the employer should go through democratic procedures when formulating and modifying rules and regulations. Firstly, it should collect opinions from the entirety of the staff or Employees’ Assembly regarding the exposure draft; and consult the trade union on the given opinions. Similar with the bargaining process of signing collective agreements, the trade union representative shall elaborate employees’ requests and reasons with the employer, making amendment proposals.

Trade unions also play a role in supervising the implementation of rules and regulations. When terminating labor relationships with an employee - by virtue of the rules and regulations - the employer should inform the trade union of the reason for termination in advance. If the trade union expresses an opinion on the termination, the employer should reply to the trade union on the final decision in writing.

3. Collective disputes

The “collective disputes” discussed here can entail a certain number of employees gathering in mass as a result of a contradiction between labor and capital, express requests and release complaints that lack legal basis, sometimes accompanied with verbal or physical abuse, which imposes a negative influence on both production order and social stability. When mass disturbances happen, first priority should be given to restoring the production order through negotiation. Provisions on Collective Contracts (2004) and many local regulations governing collective agreements entitle the party of an employer to make an offer of collective bargaining under the aforementioned circumstances. Regulations on Collective Contracts in Shanghai even specify that when labor disputes lead to collective lockout or petitioning, if one party proposes collective bargaining, the other party shall not refuse. Hence, in confronting the critical need to restore production and to start the collective bargaining processes, trade unions play a pivotal role to keep the communication channel for group interests smooth, so as to avoid disorder and conflict.

Through the following case, we will further examine trade union’s roles as introduced in the above three circumstances.

Mr. Yang and the other 9 employees stopped working during office hours and went on strike on 29 July 2016, 1 August 2016 and 3 August 2016, because they were dissatisfied with their employer, a chemical company who did not pay the mid-year bonus of 2016 as per the Collective Agreement on Salaries in the Year of 2015 (“CA2015”). The company unilaterally terminated labor contracts with these employees in the light of a severe violation of the rules and regulations which influenced the order of production and operation. Mr. Yang and the other employees then initiated the labor arbitration and litigation against the company, claiming the unpaid bonus and compensation for illegal termination. One of the contentions in this case was around the collective agreement. After CA2015’s expiration on 30 April 2016, the employer and the employees failed to reach a consensus on the Collective Agreement of Salaries in the Year of 2016 (“CA2016”) via negotiation. Thus, the company unilaterally released the Announcement of Collective Bargaining Result Regarding the Salaries in the Year of 2016 (“ACBR2016”), which adjusted the standard of bonus. Ultimately, both the first instance and the second instance court recognized the effectiveness of ACBR2016 and the rationality to adjust the bonus based on this instrument. Meanwhile, the courts also confirmed that both the based disciplines and the followed procedures to terminate the labor contracts with Mr. Yang and the others were consistent with the law. Therefore, the employees’ claims were not supported.

This case involved collective agreements, rules and regulations and handling of mass disturbances. The trade union’s functions were reflected throughout the stages.

a) Trade union participated in the bargaining on CA2016.

The company signed the CA2015 with the commission of the trade union on 21 May 2015, which agreed that the standard of the mid-year bonus shall be 1.5 times the individual basic salary. The expiry date of CA2015 was 30 April 2016. The two parties shall enter into the collective bargaining process regarding the salaries again 90 days before the expiry day. Despite that the two parties failed to reach a consensus on the bonus standard in CA2016, the evidence rendered by the company, including surveillance videos, visitor registration form, meeting minutes of the collective bargaining, manifested that the company convened 7 times of collective bargaining between 12 April and 20 May 2016. Both parties attended. In addition, in the ACBR2016, expect for the bonus, the company agreed on the final proposal of both basic salaries and allowances (including positional allowance and night-duty allowance). The president of trade union attended the trial as the witness and testified that the ACBR2016 was the closest scheme to both parties’ expectations; however, the concerned employees did not raise their claims through the trade union, but stopped working immediately after the distribution of the bonus.

b) Rules and regulations were passed through democratic procedures; the terminations went through the procedure of notifying the trade union.

The company terminated their labor relationships with Mr. Yang and the other employees by invoking Article 64 of Employee Handbook which forbade “gathering to make disturbances at the workplace, or inciting strike (including lockout) or go-slow, or joining strike (including lockout) or go-slow”. The judge found out that the Employee Handbook had gone through democratic procedures and been publicized. The company rendered the Trade Union Opinion Regarding Dismissal of the Concerned Employees issued by the trade union on the termination day, in order to prove that the company has informed the trade union in writing of the termination decision, consistent with the statutory procedures.

c) The trade union participated in persuasion and negotiation in the mass disturbances.

During the period of the sit-down strike in the canteen area of the company, the president of the trade union came several times to understand the reasons for the strike with the concerned employees, persuaded them to return to work and suggest them to express opinions through the trade union, so that the representatives can communicate with the company on behalf of the employees. The district labor security inspection group also assigned an inspector to join the coordination meeting with the company and the trade union. The meeting eventually decided that the company and the trade union explained with the lockout employees, respectively. Meanwhile, the company made a proclamation requiring the concerned employees to return to work. In the end, the court considered that the company was able to justify the terminations of the concerned employees’ labor contracts, given that the 10 employees chose the wrong way to express their counterviews against the result of collective bargaining by disturbing the production order of the employer, continuing the lockout and refusing to return to work even though all parties repeatedly persuaded and clarified the effects.

Going through the above case, it is not hard to find that to stimulate a trade union’s active role, enterprises should make good use of the collective bargaining procedure and the “dual goal” nature of CBM. Regarding the enterprises which have not established a trade union, we advise them to understand the active nature and characteristics of the trade unions in China, in terms of forming harmonious labor relations and protecting the stable development of enterprises, instead of blindly opposing its establishment. Whereas for those who have already founded a trade union, we advise to further explore trade union’s function in stabilizing labor relations and promoting enterprises’ core competitiveness, rather than regarding trade union solely as a welfare supplementary provider. When collective disputes or other issues in need of collective bargaining happen, enterprises should make use of trade union’s “lubrication” function and let it play the role as a communicating bridge between the employer and employees, providing a buffer zone, so that the conflicts can be mildly resolved as soon as possible.

Share to

Sina Weibo

Share to


Share to