Sectoral Bargaining: What It Is, How It Works, Pro and Con Debate

What Is Sectoral Bargaining?

Sectoral bargaining is a type of collective bargaining in which labor agreements are negotiated to cover an entire industry or a sector of a country’s economy, rather than just a single employer or workplace. Sectoral bargaining is relatively common in Europe and gaining increased attention in the United States, where it has both advocates and critics. It is also known as “multiemployer” or “broad-based” bargaining.

How Sectoral Bargaining Works

In sectoral bargaining, one or more labor unions will negotiate with a group of employers in a particular industry, sometimes with the involvement of a government agency or another third party. The agreement they arrive at will typically apply to union and nonunion workers alike. Sectoral bargaining contracts can be either national or regional in scope.

An example of sectoral bargaining in the U.S. would be if unions representing workers at the major fast-food chains were able to negotiate an agreement covering all of them, regardless of which burger, taco, or chicken chain employed them. Like other collective bargaining agreements, a contract reached through sectoral bargaining might cover such matters as:

• Wages
• Benefits
• Bonuses
• Working hours and overtime pay
• Grievance and arbitration procedures
• Safety and work practices
• Seniority

This formerly hypothetical example became reality on Sept. 25, 2022, in California, when Gov. Gavin Newsom signed AB-257, the Fast Food Accountability and Standards Recovery Act, which establishes a 10-member Fast Food Council within the state’s Department of Industrial Relations “to establish sectorwide minimum standards on wages, working hours, and other working conditions related to the health, safety, and welfare of, and supplying the necessary cost of proper living to, fast food restaurant workers, as well as effecting interagency coordination and prompt agency responses in this regard.” It applies to restaurants that are part of a chain of 100 or more establishments nationally that share a common brand.

Sectoral bargaining is rare in the U.S. today, although David Madland, author of Re-Union: How Bold Labor Reforms Can Repair, Revitalize, and Reunite the United States, and a proponent of sectoral bargaining, has pointed out that “many U.S. television writers, railroad workers, and hotel employees, among others, currently benefit from sectoral or broad-based bargaining, and the U.S. has a long history of this type of bargaining in industries such as auto and steel.” It doesn’t preclude collective bargaining on a smaller scale, such as to address issues at a particular work site.

Even where sectoral bargaining agreements are in place, individual employers are sometimes able to deviate from them, a practice that seems to have accelerated since the worldwide financial crisis of 2007–2008. “The reasoning behind deviations is that they are an instrument that may permit companies to overcome temporary economic difficulties without resorting to (mass) layoffs. This may help prevent workers from becoming unemployed, avoid costly layoff procedures, and preserve human capital for the company,” a 2015 report from the European Foundation for the Improvement of Living and Working Conditions (Eurofound) notes.

In fact, while sectoral bargaining—or at least talk about it—may be on the rise in the U.S., it appears to be in decline in some other countries, as the balance of power between employers and workers there has shifted in favor of the former. “Employer organizations stress that decentralization, relaxing of central coordination, and increasing use by companies of deviation practices from higher-level collective agreements are necessary tools, enabling companies to adapt to the increasing pressure of global competition,” the Eurofound report explains. “In contrast, trade unions have stressed that such changes result in downward spirals in terms of working conditions and wages, a rise in unfair competition, and the loss of the solidarity and social dimension of collective bargaining beyond company level.”

Arguments for Sectoral Bargaining

Advocates of sectoral bargaining in the U.S. maintain that it would benefit workers, unions, and, to some extent, employers. U.S. Sen. Elizabeth Warren (D-Mass.), for example, has written that she sees “two significant benefits. Each individual firm may have a strong incentive to resist collective bargaining if it believes it will raise costs and put the firm in a worse position relative to its competitors. But if every firm is bound by the same bargaining outcome, their relative standing remains. That creates conditions for a more successful bargaining process.”

In addition, Warren says, “Sectoral bargaining also permits tailored standards that build on broad requirements like minimum wage laws or basic worker safety standards. Sectoral bargaining can help ensure that wages and worker safety standards can go above the legal floors created by federal, state, and local law.”

Other proponents argue that sectoral bargaining would help address broader societal problems, such as income inequality and wage gaps based on gender and race.

Arguments Against Sectoral Bargaining

Opponents of sectoral bargaining, meanwhile, maintain that it would do more harm than good. For example, F. Vincent Vernuccio, president of the Institute for the American Worker, an advocacy group, argues that sectoral bargaining would “enhance union power and finances at the expense of workers and job creators.”

In an opinion column for the website The Hill, Vernuccio wrote that “sectoral bargaining would take flexibility and competition out of large parts of the American economy. The likely results: wage stagnation for employees, fewer options for job creators and independent workers, and higher prices for everyone.”

The Bottom Line

Sectoral bargaining has been around for decades, especially in Europe, and it has recently become a hot topic among labor advocates in the U.S. Proponents see it as a way to address the power imbalance between workers and employers in many fields and as a potential solution to the growing problem of income inequality. Opponents characterize it as giving unions too much power. Expect the debate to continue for years to come.