What is Collective Bargaining?

The employment relationship between employers and employees who are members of a trade union is generally governed by collective agreements. Collective agreements result from a process known as “collective bargaining”.  Collective bargaining is the process of negotiation of terms of employment with a trade union, on behalf of the employees represented by the trade union. Unlike employment contracts between individual employees and employers which can be negotiated as parties deem appropriate, collective bargaining is regulated under the Industrial Relations Act 1967 (“IRA”).

This is an overview of the collective bargaining process under the IRA:

Collective bargaining can be done only with a union that has received recognition by the employer.  It is initiated by inviting the other party to commence the negotiation – the invitation may be made by either the trade union or the employer and must be in writing and set out the proposals for a collective agreement. Where there is an existing collective agreement between the same parties still in force, an invitation to commence collective bargaining shall be made only 90 days or less before the expiry of such collective agreement.

Upon receipt of the invitation, the invitee must respond in writing and inform the other whether it accepts the invitation. The reply must be made within 14 days from receiving the invitation.

In the event: 

The invitation is accepted: Parties shall commence collective bargaining within 30 days from receipt of the reply notifying acceptance of the invitation.

The invitation is refused, not accepted within the prescribed period (14 days from receiving the invitation), or where no collective bargaining has commenced within 30 days from receipt of the acceptance of the invitation :  The invitee may notify the Director General (for industrial relations) in writing. Upon receipt of the notice, the Director General may take such steps as may be necessary or expedient to bring the parties to commence collective bargaining without undue delay.

Parties still refuse to commence collective bargaining after intervention by the Director General or where there is a deadlock in negotiation : A trade dispute is deemed to exist and will be resolved under the IRA.

Upon conclusion of a collective bargaining, parties must prepare the collective agreement in writing, sign it and deposit it with the Registrar of the Industrial Court.  The collective agreement has to be deposited with the Industrial Court within 1 month from the date on which the agreement has been entered. Once deposited, the Industrial Court will decide whether to give cognizance to the agreement. The Industrial Court can refuse to give cognizance if it views the collective agreement did not comply with the statutory requirements of the IRA.

When cognizance is received, the collective agreement shall be deemed to be an Award of the Industrial Court and it shall be binding on all parties to the agreement. 

The provisions under the IRA relating to collective bargaining are mainly facilitative – it provides timeframes for different steps in the process so it is carried out without undue delay. The IRA also ensures that no party can act in bad faith and refuse to enter into negotiations – the Industrial Court is empowered to intervene and hear the matter to determine the trade dispute (which is deemed to occur when parties refuse to commence collective bargaining). 


This article was written by Donovan Cheah (Partner) and Adryenne Lim (Pupil). Donovan has been named as a recommended lawyer for Labour and Employment by the Legal 500 Asia Pacific 2017, 2018, 2019, 2020, 2021 and 2022, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.

Donovan & Ho is a law firm in Malaysia. Our practice areas include employment law, dispute resolution, tax advisory and corporate advisory.  Have a question? Please contact us.

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