Stephen joins Mr. Bounderby, Louisa, Tom, and Mr. Harthouse in the Bounderbys' drawing room. Bounderby demands that Stephen reveal details of the newly formed union. Though Stephen does not believe the union will result in any good, he refuses to act as a spy on the other hands, because he doesn't blame his co-workers for doing what they're doing. Looking around, he senses that the only one sympathetic to him is Louisa.
The contemptuous way in which Mr. Bounderby treats Stephen and his opinions is a condemnation of the manufacturer-work relationship, which is portrayed as abusive and selfish on the part of the manufacturer, Bounderby. The scene also establishes Stephen's inherent decency and dignity and that Louisa has the potential to be compassionate despite what her education did to her.
Stephen goes on to explain reasonably that it's only realistic to expect worker uprisings, because it simply isn't natural for one person to hold power over all the rest. Mr. Bounderby is angered by his words, and fires Stephen, telling him to leave the factory at once.