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Collective Bargaining and Legal Provisions

It is a process in which employers and duly appointed representatives of the employees negotiate an agreement, pertaining to wages, hours, and other terms and conditions of employment.

Scope of Collective Bargaining:

Wages, hours, and other terms and conditions of employment

Three subjects

  1. Mandatory
  2. Permissive
  3. Prohibited

Good-Faith Bargaining

Active participation in deliberations

Intention to find a basis for agreement

Sincere effort to reach common ground

Does not require either party to make a concession


Any concerted stoppage, slowdown, or interruption of work.

Includes sick-outs and organized refusals to work.

Common law prohibited strikes by public utility employees.

Types of Strike

  • Economic Strikes

    • Strikes over economic issues (e.g., wages)
  • Unfair labor practice strikes

    • Strikes over illegal employer actions (e.g., refusal to bargain)
  • Wildcat strikes

    • Strikes not approved by the union
  • Jurisdictional strikes

    • Strikes in a dispute over the ownership of work
  • Sympathy strikes

    • Expressions of support for other unions

Collective Bargaining in Nepal

Formation of Collective Bargaining Committee

The collective bargaining committee is formed by an authorized trade union or by the signature of 60 percent of workers in the absence of any trade union.

Excluded matters from Collective Demand

  • contrary to the Constitution of Nepal,
  • against the interest of others due to being baseless allegation,
  • prejudicial to the personal conduct of any worker or employee;
  • unrelated to the entity,
  • without expiry of the time of the collective bargaining agreement,
  • about the rate and benefit prescribed for social security.

If the dispute is not settled through mediation within 21 days the employees can go to strike giving seven (30) day notice if they do not agree for arbitration. Even the matter is referred to arbitration the employee may go to strike in certain situations as defined in the Labor Act.

Labor Act does not require a secret ballot to go for a strike. They can go for strike simply giving notice to the management and other security agencies.

Mandatory Arbitration for Collective Disputes

The Labor Act requires the disputed parties to settle the dispute by arbitration in certain situations or for certain entities depending upon their nature.

  • providing essential service, or
  • established in Special Economic Zone,
  • state of Emergency declared as per the Constitution.

The Arbitration Tribunal is composed of the Ministry constituting representatives of workers, employers and the Nepal Government. Any agreement between the Collective Bargaining Committee and Employer in regard to collective dispute or award of the arbitration tribunal is binding upon both the parties.

Lock Out

The requirement of Lock Out is mostly similar to that of the Previous Act that the management can lock out the entity in the case of an illegal strike or violent activities in the strike.

Remuneration during Strike and Lock Out

The employees are entitled to half remuneration during lawful strike or lawful Lock-Out. The employees are not entitled to any remuneration for an unlawful strike. Conversely, the employees are entitled to full remuneration during unlawful Lock-Out.

Special Provisions on Collective Dispute

Collective bargaining may be placed and settled not in each individual entity but jointly for all the industries in the same sector at the association level. In the situation, the individual industry is not required to deal with collective demand separately.

Government Intervention

The government has the authority to require the parties to settle any collective disputes at any stage through arbitration if it potentially triggers a financial crisis in the country or the government believes that the dispute should be settled through arbitration.

Composition of Labor Court

As per the Act, the Labor Court shall consist of a chairperson and two members. The jurisdiction of the Labor Court is exercised collectively where the majority opinion prevails.


Any decision or order of the Department of Labor Office can be appealed at Labor Court within 35 days of such order or decision. Any decision of the entity terminating the employment or on disciplinary action can be appealed at Labor Court within 35 days of having obtained the notice of such decision.

Settlement of Dispute: Individual Claim (Section 113-115)

  • Submit a written application to the employer

  • The employer should settle the dispute by negotiating with the employee within 15 days of receipt of application

  • Such time period can be extended on mutual consent or agreement

  • Upon failure to settle the dispute or if the employer does not provide notice for negotiation, an application should be filed to Labor Office.

  • Labor Office should settle the dispute through discussion between the parties within 21 days.

Upon failure to settle the dispute through discussion, Labor Office issues the decision within 15 days of Dispute:

Collective Settlement Dispute

  • Authority to Submit the Collective Claim (Section 116):

Collective Bargaining Committee in an entity with 10 or more employees v- Group of representatives nominated by the authorized trade union of the entity v- Group of representatives nominated in consensus by all trade unions of the entity, where there is no authorized trade union v- Group of representatives supported by 60% or more employees by signing, where there is no group as provided above.

  • Submission of collective claim in writing to the employer

  • Upon the receipt of the collective claim, the employer must provide a notice in writing within 7 days specifying the place and time for discussion.

  • If the employer does not call for discussion or if the dispute is not settled through discussion within 21 days, an application can be submitted to the concerned Labor Office for mediation.

  • The dispute should be settled within 30 days by mediation by Labor Office.

  • Arbitration: Where cannot be settled through mediation, the dispute it is referred to arbitration in following conditions: - if an agreement is done between the collective bargaining committee and employer to settle the collective dispute through arbitration or - in case the collective dispute arises in an entity operating essential services or - in case the collective dispute arises in an entity operating in the Special Economic Zone or -- at the time strike has been prohibited during the time of emergency as per the Constitution.

  • The new Labor Act provides recognition to institutional level collective bargaining which had been in practice before. The trade union federations of the entrepreneurs, service sector, tea estate, travel, tourism, labor suppliers, construction entrepreneurs or industries of similar nature may from an institutional level present collective bargaining demands to the employers’ federation.

Collective Bargaining Agreement

Following arrangements may be done through Collective Agreement:

  • To reduce the remuneration of the employee (Section 34(3))

  • Arrangement for Interim Management during the transfer of ownership (Section 14(2))

  • To agree on certain facilities in lieu of overtime payment (Section 31(2))

  • To determine facilities for which the employer may deduct the remuneration (Section 38)

  • To determine the grounds of transfer of employees (Section 109(1))

  • Determination of rate of remuneration during the period of a legal strike or lockout (Section 127(3))

  • To add the grounds of termination upon misconduct (Section 133(2)

  • To determine the alternative option of retrenchment, and criteria and terms of retrenchment (Section 145(3))

Other Means: Collective Dispute

  • For Employees: Strike

  • For Employer: Lock Out

Strike (Section 121)

  • The Collective Bargaining Committee can strike for the settlement of collective dispute only in the following conditions:

– in the absence of compulsory requirement for arbitration,

  • failure of arbitrators to arbitrate,

  • failure to constitute arbitral tribunal within 21 days after the submission of application to the Ministry for settlement of collective dispute,

  • failure to arbitrate within the prescribed time,
    – rejection to implement the arbitral award by the employer or legally challenging the arbitral award, and

  • disagreement of either of the parties to the arbitral award except where the arbitration is compulsory.

Notice of Strike:
outlining the claims and specifying the date to effect the strike:

  • 30 days in prior

  • Information to Local Administration Bodies & Labor Office

  • Worker appointed or deputed on the duty of control, security and guard of the entity are not entitled to go in a strike during their duty hours.

Lock Out (Section 124)

The entity may declare a lock out after submitting justifications with its rationale and obtaining the approval of the Department when:

  • a strike has been started or continued without giving prior notice, or

  • if the collective dispute is not settled through the process provided in the New Labor Act

Notice of Lock Out:

  • a notice for the information of workers and employees specifying the date of seven days in advance effecting the lock-out and announcing that the entity shall be locked-out if the strike is not called off.

  • If there is a situation with possibility of damage destruction, to the Entity through riot, etc. from the workers and violence, employees during the strike, the lock-out may be declared.

  • In such a situation, the Labor Office or the Department and the Local Administration should be informed about the lock-out with reasons within three days.

  • The Local Administration should arrange for the necessary security arrangement immediately upon the receipt of such information.

Government Intervention (Section 124(5))

  • The Department can declare lockout as illegal at any time if:

  • the lockout appears irrational, or

  • it is likely to cause a breach in peace and security conditions of the country, or

  • it is contrary to the economic interests of country.

Payment of Remuneration during strike or lock out (Section 127)

  • Where the workers go in a strike contrary to the provisions of the prevailing laws, such workers are not entitled to any payment of remuneration.

  • Where the lockout is declared against the provision of the law, the workers are entitled to the full payment of remuneration for the period of such lockout.

  • In legal strike or lockout, the workers are entitled to half the remuneration, unless otherwise agreed in the collective agreement.

Regulating & Adjudicating Authority

  • Labor Office
  • Department of Labor
  • Labor Court

Composition of Labor Court

  • Member: 1 Chairperson and 2 members

  • Qualification of Chairperson & Members:

  • Judge of the High Court, or - Person qualified to be the judge of High Court

  • Tenure: 4 years except when the judge of the High Court are appointed

  • Functions, Duties, and Facilities of Chairperson and Members: Similar to those available to judges of High Court
    Sanctions: Labor Office or Department

  • Supplying Labor without a license and engaging labor in work from such supplier: Fine up to NPR. 200,000

  • Engaging a foreign national in work without a work permit: Fine up to NPR. 200,000 depending upon the number of workers; repetition even after being punished shall be fined with an additional fine of NPR. 5,000 per person per month.

  • Discriminating among the workers: Fine up to NPR. 100,000 and the order to maintain the equality may be given.

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