What Is in a Labor Contract?

by Ruth Mayhew; Updated September 26, 2017

A labor contract can also be referred to as a collective bargaining agreement. Labor contracts are the result of negotiations between management and the labor union that represents workers within an organization. Negotiators for each party meet to discuss working conditions, wages, benefits and payment of union dues. Finalizing a final labor contract can take several days to many months, depending on the level of cooperation between management and organized labor, as well as the concessions either party is willing to accept.

Parties and Contract Dates

The preamble of the labor contract contains the parties' names and the contract effective dates. The parties include the employer's name and the name of the local union and its affiliation, such as the American Federation of Labor-Congress of International Organizations (AFL-CIO). If the labor contract involves more than one employer and union, all the parties' names are listed. The order of the names of the parties may be alphabetical or in order of priority, such as the largest employer and union first, followed by secondary parties. Contract effective dates are extremely important, therefore, they should be clearly stated in the first paragraph of the labor contract.

Management Rights Clause

Within the context of collective bargaining, management retains the right to operate the business with respect to general business decisions. General business decisions include matters such as employment, financial, executive leadership and organizational structure. This section of the labor contract is called the management rights clause and it is a non-negotiable section of a collective bargaining agreement. Labor unions must accept the employer's right to operate the company in the best interest of the organization.

Wages and Increases

The labor contract section that contains information about wages and periodic wage increases is the section many union members immediately turn to upon ratification of their collective bargaining agreement. Labor contracts contain wage rates and corresponding increases for each year of the contract. This section also happens to be one of the most common points of contention during contract negotiation sessions.

Employee Benefits

Employee benefits comprise another section within the labor contract that may be heavily debated during contract negotiations due to the cost of health care and other workplace benefits. The final agreement contains specific employee benefit choices, including employee contribution amounts for each level and type of coverage. Information about insurance coverage comes from management's negotiations with its group health plan provider. The terms and conditions for group health care insurance are generally guaranteed for a certain period of time; that information is then supplied to the labor union for inclusion in the labor contract.

Grievance Process

When employee issues arise, union members are entitled to representation from a union steward or another labor union leader. Resolving workplace matters that involve union members is referred to as a grievance process. The first attempt at settling a grievance typically involves discussion among the employee, the union steward and the employee's supervisor. A series of steps ensue if the grievance is not settled during the first step. Details of the grievance process are clearly stated in the labor contract.are clearly stated in the labor contract.

About the Author

Ruth Mayhew began writing in 1985. Her work appears in "The Multi-Generational Workforce in the Health Care Industry" and "Human Resources Managers Appraisal Schemes." Mayhew earned senior professional human resources certification from the Human Resources Certification Institute and holds a Master of Arts in sociology from the University of Missouri-Kansas City.