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Worklaw subscribers receive a monthly newsletter containing commentary on the latest labour law cases and trends. This newsletter contains an article on 'getting more from conciliation'.

We also look at four new cases: The first deals with when trade union behaviour becomes insubordination. The second, takes a further look at the test for reviewing an arbitrator's award. The third and fourth cases consider whether the implementation of an arbitrator's award can be lost over time by prescription, if the employee does not take steps to enforce the award.

This public newsletter is a free edited version of the subscriber newsletter.


Insubordination or legitimate trade union activity?

One of the fundamental rights in the LRA is that an employee should not be victimised or prejudiced for engaging in legitimate union activities. In fact it is an automatically unfair dismissal to dismiss an employee for participating in proceedings anticipated in the LRA, such as representing, bargaining or striking. Cases have recognised that shop stewards can participate robustly to protect the rights of their members. But when does robustness turn into insubordination? The SCA recently had to consider this in National Union of Public Service and Allied Workers obo Mani and others v National Lotteries Board (576/12) (2013) ZASCA 63.

Facts of the case: 41 employees of the National Lotteries Board, including three shop stewards, addressed a letter to their employer in which they submitted a 'vote of no confidence' in the CEO (Professor Ram) and urged the Board 'to ensure that June 30th, 2008 is the last day of his employment'. The employees said in that letter - 'we are no longer prepared to spend a day with Professor Ram in the same building with him at the helm of this organisation'.

An opportunity was given to employees to retract their comments. When this was not done, a notice of a disciplinary enquiry was sent to each of the employees who had signed the petition and who had not retracted. The charges were (1) insubordination and disrespectful behavior making the continued employment relationship intolerable; (2) bringing the name and integrity of the NLB and the CEO into disrepute and making the continued relationship intolerable; (3) breaching the general duty to act in good faith, to cooperate with and the refusal to work under the supervision and control of the CEO.

The chairperson said insubordination occurred 'when an employee refuses to accept the authority of his or her employer or of a person in a position of authority over an employee'. The chairperson found that the employees, by their statements in the letter that they "were no longer prepared to spend a day with Professor Ram in the same building with him" and that the Board is urged "to ensure that June 30th, 2008 is the last day of his employment", were guilty of insubordination and disrespectful behaviour. The chairperson also found that by making public their grievances against Professor Ram, the employees associated themselves with a campaign designed to bring the Board and its CEO into disrepute.

As regards sanction, the chairperson afforded all 38 of the employees found guilty of misconduct, the opportunity to sign a formal acknowledgement and undertaking in which they (i) dissociated themselves from the letters; (ii) accepted their wrongdoing, (iii) apologised to Professor Ram, (iv) undertook in future to use the applicable grievance procedures and (v) agreed to receive a 12 month final written warning. Of the 38 affected employees, 28 signed the acknowledgement and received the warnings accordingly.

The 10 remaining employees relied on a 'collective submission' recorded in writing which was handed to the chairperson after the deadline, in which they recorded that 'we sincerely apologise insofar as our actions constituted misconduct of insubordination and brought the name of the Board and its CEO into disrepute'.

The chairperson imposed the sanction of dismissal on those 10 employees. In his written reasons, the chairperson said that 'the belated statement of apology proferred in the submissions, qualified as it is, is too little, too late and the question of sanction must necessarily be addressed in the absence of a sincere and timeous apology.'

After an unsuccessful conciliation at the CCMA, the matter was referred to the Labour Court. The LC found that the dismissals were both substantively and procedurally fair, and this was taken on appeal to the SCA.

The SCA dismissed the appeal, and in doing so confirmed these principles:

  • A threat to wilfully defy an employer and its CEO constitutes insubordination. Neither the Constitution nor the LRA protects employees from dismissal for insubordination. Trade union activities which constitute unlawful acts of insubordination are not protected.
  • As regards the different sanctions, the SCA held that there is no inconsistency in giving, on the one hand, written warnings to those who acknowledged their wrongdoing and, on the other, dismissing those who did not.

The SCA has accordingly confirmed the common law understanding of insubordination - which, while of comfort to employers, makes trade union activity rather difficult. Even in pre-1995 days the Industrial Court held that normal rules about insolence are relaxed in the case of shop stewards (FAWU v Harvestime Corporation (Pty) Ltd (1989) 10 ILJ 497 (IC)), recognising that a shop steward wears two hats in his relationship with senior officials and management. This is not 'a licence to rudeness, disrespectfulness or insolence'. There are definite limits: where a shop steward demonstrates an attitude of militancy and open defiance, inciting and encouraging fellow employees to disobey instructions, dismissal may be fair (SACTWU & another v Ninian & Lester (Pty) Ltd (1995) 16 ILJ 1041 (LAC)).

This recent SCA judgment does mean that shop stewards need to tread cautiously between robust and legitimate representation and, on the other hand, behaviour which is dismissive of managerial authority.

The unreasonable arbitrator as a ground for review

The idea behind arbitration under the LRA is that it is should be a relatively informal, time-efficient, cost-effective and fair process to achieve finality of a workplace dispute. No appeal is allowed, although the Labour Court can review the arbitration process and award. Section 145(2) gives limited grounds for review: misconduct by the arbitrator, gross irregularity in the arbitration process, exceeding the arbitrator's power, and an award that was 'improperly obtained'. Courts later said that the award could not be 'unreasonable'.

The test for unreasonableness is the Sidumo test: that the decision falls outside a range of reasonable outcomes ('Is the decision one which a reasonable arbitrator could not reach?'). This can be tested by asking this question: if the arbitrator had applied her/his mind to the facts / considerations which s/he ignored, may s/he have come to a different conclusion? If so, then the award should be reviewed.

Recently the SCA has had an opportunity to comment on the implementation of the Sidumo test. In Herholdt v Nedbank Ltd (701/2012) [2013] ZASCA 97; 2013 (6) SA 224 (SCA); [2013] 11 BLLR 1074 (SCA) (5 September 2013) Nedbank dismissed a financial planner for dishonestly for failing to disclose a conflict of interest arising from being appointed a beneficiary in the will of a client. He was aware of bank policy which required disclosure by employees when this happened; he wilfully concealed his appointment as a beneficiary. He successfully challenged his dismissal in arbitration proceedings at the CCMA. The Labour Court and the LAC upheld a review of the arbitrator's award and set it aside. The SCA agreed with the LC and LAC that, while the arbitrator understood the nature of the inquiry, the finding that the employee had been unfairly dismissed was one that a reasonable arbitrator could not reach.

The SCA took the opportunity to state these as the appropriate principles:

  • A review of a CCMA award is permissible if the defect in the proceedings falls within one of the grounds in s 145(2)(a) of the LRA.
  • For a defect in the conduct of the proceedings to amount to a gross irregularity as contemplated by s 145(2)(a)(ii), the arbitrator must have misconceived the nature of the inquiry or arrived at an unreasonable result. A result will only be unreasonable if it is one that a reasonable arbitrator could not reach on all the material before the arbitrator.
  • Material errors of fact, as well as the weight and relevance to be attached to particular facts, are not of themselves sufficient for an award to be set aside. They are only of consequence if their effect is to render the outcome unreasonable.

What this means is that the threshold for review remains high - there is no intention to make the Labour Court the watchdog of every mistake that arbitrators make. The ruling reinforces that labour arbitration is quick and robust and that in the interests of finalising large numbers of disputes and achieving an effective dispute resolution system, awards will not necessarily be perfect.

Can arbitrators' awards prescribe?

'Prescription' is a legal word to describe a process through which you can either gain or lose rights because a certain period of time has passed. For example, if you peacefully and openly occupy property for 30 years, you could acquire it by 'acquisitive' prescription. If you do nothing about a contractual claim for 3 years, you lose the right to enforce it by 'extinctive' prescription.

Section 14 of the Prescription Act 68 of 1969 provides as follows: 'The running of prescription shall be interrupted by an express or tacit acknowledgement of liability by the debtor'. When an employer takes a CCMA award on review this is not an 'acknowledgement of liability'; rather a review application tells us that an applicant disputes liability for any payment or performance in terms of an award.

What if the review process takes more than three years? Does this mean that the employee's claim for compensation or reinstatement prescribes? These questions arose in two recent Labour Court judgments. In the first, Circuit Breakers Industries Ltd v NUMSA obo Hadebe and Others (JR 1958/08) [2013] ZALCJHB 286 (1 November 2013), the arbitrator's award ordering retrospective reinstatement without loss of earnings, was handed down on 11 August 2008. The employer applied on 9 September 2008 to have the award reviewed and set aside. On 5 July 2012, the employer filed an application seeking an order that the underlying reason for the review application (the arbitrator's award) had prescribed and accordingly the review application had become academic. Its main argument was that the employee had failed to take any steps to enforce the award or to claim payment of a 'debt' in terms of the Prescription Act.

The Labour Court confirmed that extinctive prescription applied to employment law - and that the filing of a review application does not interrupt prescription. Prescription can only run against a 'debt' as defined in the Prescription Act. A compensation award, the court said, would be considered a debt in terms of the Prescription Act. But was a reinstatement award a 'debt' for the purposes of the Prescription Act? The court held that an award for reinstatement (with or without back pay) creates a right in favour of the employee that stems from the right to fair labour practice. This was the primary remedy in the case of an unfair dismissal. The court held that the legislature could not have intended that a reinstatement award could be undermined by prescription.

The first lesson of this case is a reminder that the filing of a review application does not on its own interrupt prescription, unless the employer makes application under s145(3) of the LRA to suspend the enforcement of the award pending the outcome of the review. An award of compensation constitutes a debt for the purposes of the Prescription Act and would be subject to the three year prescriptive period. Where no s145(3) application has been made, the claim for compensation accordingly prescribes if the employee has taken no steps to enforce that debt within three years.

This unsatisfactory position will be addressed in the pending amendments to section 145 of the LRA, which provide as follows:
"(9) An application to set aside an arbitration award in terms of this section interrupts the running of prescription in terms of the Prescription Act (Act No.68 of 1969) in respect of that award."

The second lesson of this case is that where an award of reinstatement is granted, this does not constitute a "debt" for the purpose of prescription and the right to reinstatement will not prescribe after 3 years. The longer an employer takes in prosecuting the review, the more potential exposure to risk there is for such employer if the reinstatement order is coupled with back pay from the time of dismissal.

There was a second aspect to the procedural unfairness: the court said there was a duty on the employer to afford the affected employees an opportunity to be heard before a decision to dismiss them was taken. The employer's failure to do so rendered its decision to dismiss the affected employees procedurally unfair.

Although the employer was found to have acted in a procedurally irregular way, it is interesting that the LAC reserved particular criticism for the striking employees. It was because of their actions that the dismissal was held to be substantively fair.

Strikes are, to put it simplistically, very stressful, and it is easy for both employers and employees to act illegally and unwisely. This case is a reminder that an unprotected strike does not relieve the employer - before dismissing - of the obligations (a) to contact a union (b) to issue a reasonable ultimatum and (c) to give an opportunity to the strikers to be heard before a decision to dismiss them is taken. The case is also a reminder to employees that they will not be protected from dismissal if they act rashly, without using grievance and collective bargaining procedures.

The second recent case on prescription - which has taken 10 years to be finalised - is NUMSA and Others v Hendor Mining Supplies a Division of Marschalk Beleggings (Pty) Ltd (JS 794/03) [2013] ZALCJHB 293 (5 November 2013). The employees were dismissed by the company on 18 August 2003 but reinstated on 16 April 2007 in terms of a LC judgment, retrospective to 1 January 2007. On 23 April 2007, the employees tendered their services to the company. That tender was rejected because the company elected to take the matter on appeal, first to the LAC and thereafter to the SCA. The order of the LC was suspended pending the appeals to the higher courts.

On 19 June 2009, the LAC dismissed the company's appeal against the LC judgment, and the same fate met its application for leave to appeal to the SCA on 15 September 2009. It was on that date, according to the company, that the order of the LC became immediately enforceable and so too any claim for wages which had fallen due since 1 January 2007. The company proceeded to re-employ the dismissed employees on 29 September 2009, although there were some employees who were deceased by that date. The company however refused to reinstate their wages or pay them any back pay.

The company's refusal to pay the back pay was based on a contractual defence to the claims coupled with its reliance on section 11 of the Prescription Act 68 of 1969. The company argued that the employees had to plead and prove their contracts of employment, the wages and benefits to which they were entitled and the basis on which they calculated arrear remuneration. This contractual defence was rejected by the LC. The LC also rejected the attempt to impose a prescription period on any claims arising from the court order. Unlike what happens when an arbitrator's reinstatement or compensation order is taken on review, an order of the Labour Court is suspended pending an appeal to a higher court, and prescription of the judgment debt is interrupted until the appeal is decided.

The court said it was illogical on the part of the company to accept that the order of the Labour Court (reinforced by the order of the SCA) is effective and binding on the parties, but to contend that the financial part of that order could not be executed upon unless a properly constituted contractual claim was instituted within three years of the SCA order.

The Court said that when an employer processes an appeal to higher courts, it does so with full knowledge that such an approach carries with it the risk of additional financial obligations which become payable when the highest court finalises the matter, as a judgment debt rather than a contractual claim.

The lessons of this case are the following:

  1. An order of the Labour Court is suspended pending an appeal to a higher court, and prescription of the judgment debt is interrupted until the appeal is decided. This applies to both the 'retrospective' award (wages from dismissal until the Labour Court's judgment) and the 'prospective' claim for wages (from the Labour Court's judgment until all appeals are decided).

  2. The beneficiaries of deceased employees may not be deprived of the benefits of a judgment handed down by the Labour Court simply because the employees pre-deceased that judgment.


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Bruce Robertson
December 2013 / January 2014
Copyright: Worklaw