In Nepal, Collective Bargaining Agreements (CBAs) are legally recognized instruments that play a crucial role in regulating the relationship between employers and employees. These are formal agreements concluded between an employer (or a group of employers) and a trade union or a committee that legitimately represents the workers within an enterprise. CBAs are primarily governed by the Labour Act, 2074 (2017), which provides the legal framework for their formation, enforcement, and review.
Under this Act, workers may form or join a trade union, and once a union gains official recognition as the authorized representative of the workers, it may enter into collective bargaining with the employer. The resulting agreement typically outlines terms of employment, including wages, working hours, overtime, benefits, leave policies, occupational health and safety standards, and grievance-handling procedures.
CBAs are binding on both parties for the duration stipulated in the agreement, usually ranging from one to two years. These agreements are instrumental in promoting industrial harmony, as they establish a structured process for dialogue and negotiation, reduce the likelihood of labor disputes, and help resolve existing conflicts through peaceful and institutionalized means. In cases of disagreement during negotiations, the law also allows for conciliation and mediation processes under the supervision of the Labour Office.
Thus, CBAs are not merely administrative tools but are central to creating a cooperative and productive working environment, ensuring that both employers’ and workers’ interests are fairly represented and protected in Nepal’s labor market.
Legal Basis for Good-Faith Bargaining in Nepal
The principle of good-faith bargaining is not only a best practice in industrial relations but is also a legal requirement under Nepali labor law. According to Section 129 of the Labour Act, 2074 (2017):
(1) The trade union or collective bargaining committee or employer shall, in making a collective bargaining or collective agreement, do so in good faith.
(2) Other provisions relating to the collective bargaining or agreement shall be as prescribed.”
This legal provision mandates that both employers and employee representatives (either a trade union or collective bargaining committee) must enter into collective bargaining with honesty, transparency, and a sincere intention to reach an agreement. The parties are expected to engage in meaningful dialogue, avoid delaying tactics, and treat each other with mutual respect during negotiations.
Although the law does not force either party to accept proposals or make concessions, it requires active participation and genuine effort to resolve disputes and improve working conditions. Violating this duty such as refusing to meet, ignoring proposals, or using threats may amount to an unfair labor practice under the law.
Thus, Section 129 of the Labour Act, 2074 serves as a foundation for ethical and constructive labor relations in Nepal, reinforcing the importance of dialogue, cooperation, and lawful negotiation in the workplace.
Scope of Collective Bargaining in Nepal
The scope of collective bargaining in Nepal is comprehensive and focuses on matters that directly affect the working lives of employees. According to the Labour Act, 2074 (2017), collective bargaining can cover a wide range of employment-related issues. The core areas include:
- Wages and salary structure: Negotiations may involve setting minimum wage levels, criteria for pay increments, bonuses, allowances, and other monetary benefits.
- Working hours: CBAs may determine daily and weekly working hours, rest periods, shift arrangements, and conditions for overtime.
- Leave and holidays: The agreement can outline entitlements such as paid leave, sick leave, maternity/paternity leave, and public holidays.
- Employment conditions: This includes job classifications, promotion criteria, probationary periods, transfer policies, and contract types (permanent, temporary, or part-time).
- Occupational health and safety: Provisions may be made for workplace safety standards, use of protective equipment, medical checkups, and emergency response.
- Grievance handling and disciplinary procedures: CBAs may establish mechanisms for raising complaints, dispute resolution, and disciplinary actions in case of misconduct.
- Social security and welfare: Bargaining may also include matters like provident fund contributions, insurance, retirement benefits, and employee welfare programs.
- Job security: Protection against unfair termination, retrenchment, and conditions for layoffs or redundancy may be part of the negotiations.
Through collective bargaining, workers and employers come to mutual agreements that balance the needs of both parties, ensuring fair labor practices and industrial peace. These agreements are legally binding and enforceable, promoting long-term stability and trust in the workplace.
Procedures and Legal Framework for Collective Bargaining in Nepal
The Labour Act, 2074 (2017) provides a structured legal process for initiating and resolving collective claims and bargaining in enterprises employing ten or more workers. As per Section 116, a Collective Bargaining Committee (CBC) must be formed to represent workers. This committee can be constituted through an authorized trade union, mutual agreement among all unions, or, in the absence of both, by representatives supported by more than 60% of workers’ signatures.
The CBC can submit collective claims or demands in writing on issues related to the interests of labor. However, certain matters such as those unrelated to the enterprise, personal allegations without evidence, or demands against the Constitution cannot be raised through collective bargaining.
Under Section 117, once demands are submitted, the employer is required to initiate negotiations within 7 days, specifying the date and venue. If an agreement is reached, it becomes legally binding on both parties.
If negotiation fails, Section 118 allows either party to approach the Labour Office for mediation, which must be concluded within 30 days (extendable with mutual consent). If mediation is unsuccessful,
Section 119 provides for arbitration, especially in essential services, special economic zones, or during a state of emergency. Arbitration can also be ordered directly by the Ministry to prevent economic crises. The arbitrator is empowered to conduct hearings, examine evidence, and issue a binding decision within a specified timeframe.
Additionally, under Section 120, the Government of Nepal may establish an independent Labour Arbitration Tribunal to handle mediation and arbitration proceedings in complex or large-scale disputes.
These provisions collectively ensure that collective bargaining in Nepal is transparent, time-bound, participatory, and legally enforceable, helping to foster industrial harmony and protect both labor and employer interests.
Collective Bargaining and Dispute Resolution Framework under Nepali Labour Law
The Labour Law of Nepal incorporates strong legal backing to ensure that outcomes of collective bargaining and arbitration are enforceable and standardized across industries. Sections 122 and 123 provide crucial insights into how disputes are settled and collective agreements are institutionalized. Key provisions include:
1. Legally Binding Arbitral Awards
- If a dispute is settled through compulsory arbitration under Section 119(1), the arbitral award is binding on all parties involved.
- If any party fails to record written disagreement within 5 working days from the award date (as per Section 119(2)), the award becomes binding by default.
- Both collective agreements and arbitral awards must be registered for official recognition and enforcement.
- Such agreements remain valid for two years, unless otherwise amended or repealed by a new agreement or award.
- Even after the expiry of two years, the provisions remain effective until replaced or nullified by a new collective arrangement.
2. Special Provisions for Sectoral Collective Bargaining
- Trade unions in specific industries (e.g., tea estates, carpets, construction, labor providers, transport, or other similar sectors) may form group-level collective bargaining committees.
- These committees can submit collective claims to the employers’ association of their industry group, enabling sectoral-level negotiation rather than enterprise-level.
- Once such a sectoral collective agreement is in force, no individual enterprise within that group may separately submit new demands under the same chapter.
- The Ministry has the authority to order that collective bargaining must occur within a specific timeframe, even overriding the standard timelines in Section 122(4).
Categories of Collective Bargaining Subjects
In the context of collective bargaining, negotiation topics are generally classified into three categories: mandatory, permissive, and prohibited subjects. These classifications help define what issues must be discussed, what may be discussed, and what cannot be included in bargaining, ensuring clarity and legality in the negotiation process.
1. Mandatory Subjects
Mandatory subjects are those that the employer and the employee representatives are legally required to bargain over. These topics have a direct impact on terms and conditions of employment. If either party refuses to negotiate these subjects, it may be considered an unfair labor practice. Examples include:
- Wages, salary scales, and bonuses
- Working hours, rest periods, and overtime pay
- Leave entitlements (sick leave, annual leave, maternity/paternity leave)
- Health and safety conditions
- Grievance and dispute settlement mechanisms
- Job classifications and employment types
Under Nepal’s Labour Act, 2074, these matters fall within the essential scope of collective bargaining and must be addressed in good faith by both parties.
2. Permissive Subjects
Permissive subjects (also called voluntary or optional subjects) are those that the parties may choose to bargain over, but are not obligated to. These matters may relate to operational or managerial decisions that are not strictly employment conditions. Including them in a Collective Bargaining Agreement (CBA) is acceptable only if both sides voluntarily agree. Examples include:
- Internal company policies (dress code, uniform, etc.)
- Use of company facilities for union meetings
- Performance incentive schemes not mandated by law
- Management rights clauses
- Procedures for introducing new technology
While these topics can enhance employer-employee cooperation, they are not enforceable if one party refuses to negotiate.
3. Prohibited Subjects
Prohibited subjects are issues that cannot be included in a CBA under law because they violate existing legal provisions, public policy, or constitutional rights. Attempting to bargain over these topics may render the agreement void or attract legal penalties. Examples include:
- Discriminatory provisions (based on gender, caste, religion, etc.)
- Violation of minimum labor standards guaranteed by law
- Waiver of statutory rights (e.g., denying maternity leave or minimum wage)
- Compulsory union membership or political affiliation
- Provisions contradicting the Constitution or other prevailing laws
Good-Faith Bargaining
One of the foundational principles of effective collective bargaining is the requirement of good-faith bargaining. This principle ensures that both the employer and the workers’ representative (such as a trade union) engage in the bargaining process with honesty, fairness, and a genuine desire to reach an agreement.
Good-faith bargaining involves the following key elements:
- Active participation in deliberations: Both parties must attend negotiation meetings, respond to proposals, and engage meaningfully in discussions rather than merely going through the motions.
- Intention to find a basis for agreement: The parties must come to the table with a serious commitment to resolving issues and reaching a mutually acceptable agreement.
- Sincere effort to reach common ground: Even when differences exist, both sides are expected to show flexibility, listen to each other’s concerns, and explore reasonable solutions.
- No obligation to concede: Importantly, good-faith bargaining does not mean that either party is required to agree to a proposal or make concessions. It only requires that they consider proposals seriously and negotiate with an open mind.
Under Nepal’s Labour Act, 2074, bargaining in bad faith such as refusing to meet, delaying negotiations unnecessarily, or rejecting all proposals without discussion can be considered an unfair labor practice. Therefore, good-faith bargaining is essential for building trust, preventing labor disputes, and achieving a stable industrial environment.
Conclusion
Collective Bargaining Agreements (CBAs) in Nepal serve as a vital mechanism for ensuring fair and equitable labor relations between employers and employees. Backed by the Labour Act, 2074, they provide a structured and legally binding framework for negotiating terms of employment, addressing grievances, and promoting industrial harmony. With clear classifications of bargaining subjects and a legal mandate for good-faith negotiation under Section 129, CBAs help foster mutual respect, trust, and cooperation in the workplace. Additionally, understanding the different types of strikes and their legal implications is essential for both workers and employers to engage in responsible and lawful labor activism. Ultimately, effective collective bargaining not only improves working conditions but also strengthens Nepal’s broader labor and economic environment.