Some labour contract negotiations involve strikes while most conclude with immediate settlement. This article offers a model of union‐firm negotiation with private information to show that either strikes or immediate settlement will take place in the equilibrium. Different from most signalling literature where the signals are exogenously given, this article endogenizes the choice of signals. We compare two signals, the employment level and the strategic delay. We show that the low‐revenue firm will choose the signal which gives it higher payoff while separating itself from the high‐revenue firm.