The collective agreement is not made between parties who seek each other out for the purpose of entering into a business transaction and who can shop around among competitors for the best connection. It is made between parties who find themselves already in an agreement already. The union does not choose the employer and the employer does not choose the union. Both are dependent on the same agreement and neither can pull out without destroying it. Even when a dispute between them results in suspension of operations, they must strive so to adjust the dispute as to resume their relationship. When disputes arise there are three procedures that people can follow to come to an agreement on the terms stated by the employer. The first procedure called conciliation and mediation is when a mediator is called upon and studies the situation and suggests a possible move towards settlement. The second procedure is voluntary arbitration. Each party agrees to submit a case to an impartial third party and agrees to abide by the decision of the arbitrator. The last procedure that could be used is called Compulsary arbitration where the government gets a disputing party to submit their dispute to an arbitrator whose decision is binding to both parties. A Strike is a temporary work stoppage by employees who go on strike to force an employer to grant their demands. The employers side of a strike would be a lockout which is a closing of a plant designed to win over a dispute. A lockout is an economic pressure tactic of an employer during negotiations. This happens when the employees are not getting what they want in the negotiation. Lockouts may also be an illegal attempt to discourage union activity. Lockouts are the most visible evidence of labor disputes and are forms of economic warfare. As such, they often bring severe losses to those engaged in them.
There are three basic functions of collective bargaining, a market or economic function.