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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 that discusses 'When is it fair for an employer to trap an employee?' We also look at three new cases: The first case deals with an employer's refusal to bargain with a minority union. The second case, a LAC decision, brings finality to the disputed issue of whether arbitration awards prescribe if not enforced within 3 years. The third case looks at a not much used section of the LRA - section 197A, which regulates transfers in the context of insolvency.

The subscriber newsletter also provides a legislative update with regard to the validity of traditional healers' sick certificates and the new revised Disability Code of Good Practice that has recently been published.

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


Refusing to bargain with a minority union

One of Transnet's divisions, Transnet Port Terminals (TPT), employed approximately 537 employees at the Ngqura Container Terminal, a small part of the TPT division. NUMSA asserted that it had 220 members at Ngqura while Transnet contended that it only had approximately 100 members. NUMSA's members at Ngqura were former members of SATAWU.

NUMSA endeavoured to secure recognition at Transnet nationally and at Ngqura. It wrote numerous letters to Transnet in this regard, to which Transnet responded that it would not process payment of union dues in favour of NUMSA until it had achieved the threshold or representativeness as prescribed by the recognition agreement entered into between Transnet, SATAWU and UTATU SARHWU.

SATAWU and UTATU SARHWU (the recognized unions) were the only recognised trade unions and therefore the only recognised bargaining agents on behalf of employees within the agreed bargaining unit. There was a valid written collective agreement between Transnet and the recognised unions. This established certain thresholds: a trade union had to represent at least 30% of the bargaining unit employees across Transnet and 30% in an operating division in order to enjoy recognition and organisational rights. Transnet and the recognised unions were the only parties to the Transnet Bargaining Council. NUMSA was not a party to the collective agreement or the Bargaining Council.

During the latter part of 2013, Transnet proposed a change in the manning ratios at Ngqura (manning ratios are the number of employees assigned to a machine or item of equipment per shift within a port terminal). It engaged in negotiations with the recognised unions, and implemented the new manning ratios during December 2013. On 14 January 2014, approximately 68 employees at Ngqura went on an unprotected strike demanding that Transnet revert to the manning ratios which were in place prior to December 2013. Some of the employees heeded an ultimatum to return to work whilst others continued with the industrial action. Those who continued with the industrial action were suspended pending a disciplinary hearing. Various disputes were referred to the bargaining council for conciliation.

On 17 April 2014, no conciliation had taken place and NUMSA issued a strike notice indicating that a strike would commence on 25 April 2014. It further indicated that its demands were the restoration of the manning ratios. After attempts to avert the strike failed, Transnet gave notice on 24 April 2014 that it intended to institute a lock-out with effect from 28 April 2014.

The Labour Court found that the strike, which was embarked upon by members of NUMSA was unprotected because it, firstly, concerned a refusal to bargain and no advisory arbitration award had been made and secondly, that the vast majority of the employees were bound by a collective agreement that regulated the issues in dispute. NUMSA appealed this decision because it asserted that the reason for the strike was not the refusal to bargain but the dispute about manning ratios.

The LAC in National Union of Metal Workers of South Africa and Others v Transnet Soc Limited (JA96/2014) [2015] ZALAC 46 (6 November 2015) confirmed the judgment of the LC. Even though NUMSA regarded the strike to be about manning ratios, the actual dispute was about a refusal to bargain. Where a dispute concerns a refusal to bargain, a union can only embark on industrial action after obtaining an advisory arbitration award, as provided in s 64(2) of the LRA.

This dispute turned on a technical requirement - an advisory arbitration award - which is a pre-requisite for a protected strike in such circumstances. The judgment shows that courts will investigate the nature of the true dispute between the parties (in this case, a refusal to bargain rather than the manning ratios) and require strict compliance with the LRA.

Prescription of arbitration awards

Prescription (which can be described as gaining or losing a right through the passage of time) can be about 'you snooze, you lose' - not that any court has quite put it like that. Rather courts would say that the main object of prescription is to create certainty and finality in parties' relationships after the lapse of a period of time. Where a claim has become stale it becomes unfair to require a party to defend him/herself against it. Because the claimant is responsible for enforcing its right timeously, it must suffer the consequences of failing to do so.

The Prescription Act generally puts a 3 year limit on debts. So if the party owed money does nothing to assert his / her rights within the 3 year period, the claim prescribes. The question then arises about the extent to which prescription operates in the labour law field? Three matters on the issue of prescription heard by the Labour Court during 2014 and 2015 were appealed to the LAC. They were all argued in one session of the LAC because there have been differences in opinion concerning the applicability of the Prescription Act in respect of arbitration awards made under the LRA.

The LAC in Myathaza v Johannesburg Metropolitan Bus Service (Soc) Limited t/a Metrobus; Mazibuko v Concor Plant; Cellucity (Pty) Ltd v CWU obo Peters (JA122/14) [2015] ZALAC 45 (6 November 2015) set out these principles: Any arbitration award that creates an obligation to pay or render to another, or to do something, or to refrain from doing something, meets the definitional criteria of a 'debt' as contemplated in the Prescription Act. A three year prescriptive period is applicable to such arbitration awards (i.e. the debts embodied in them) generally. Certification of the award therefore has nothing to do with whether the award is due or not, but is part of the process of executing an award as if it is an order of the Labour Court.

In terms of recent amendments to the LRA, section 145(9) now specifically provides that a review interrupts the running of prescription in terms of the Prescription Act - ie the review period will not be included for the purposes of calculating the 3 year prescription period. What this means is that a tactical use of a review of a CCMA award to drag the matter out will not help, if the aim was to claim prescription as a means of avoiding the debt. At the same time, an employee who is successful in the CCMA must act reasonably promptly to enforce the award.

Section 197A: Insolvency, smoke and mirrors

The LRA aims in different ways to protect employees in businesses that are sold and transferred to a new owner. Section 197 establishes a default position that the new owner 'steps into the shoes' of the old owner, and contracts of employment are automatically transferred to the new owner.

Section 197A was added in 2002 to provide a way around the Insolvency Act 24 of 1936 which provided that the sequestration of the estate of an employer terminated contracts of service. The effect of this was that an employee's contract of employment came to an abrupt end when the High Court granted an order of provisional liquidation of the employer's estate. Section 197A applies to an old employer which is insolvent or "if a scheme of arrangement or compromise is being entered into to avoid winding-up or sequestration for reasons of insolvency". The effect of s 197A is that unless otherwise agreed by a scheme of arrangement or compromise, suspended employment contracts will be resuscitated in the event of a transfer of a business in accordance with s38 of the Insolvency Act.

The two sections appear to be parallel - both offer protection for employees at the time of the transfer. But there is a difference - s197(2)(c) offers additional protection to employees dismissed before the transfer, whereas s197A(2)(c) does not provide similar protection. So what if an employee was dismissed by a business before the transfer, and which then becomes insolvent? What is the liability of the new owner?

In a recent case an employee was dismissed for operational reasons in April 2010. In September 2010, the employer, Atlas Carton, concluded a business sale agreement with Stylianos Palierakis. In August 2011 Atlas Carton was placed into voluntary liquidation which was later converted into compulsory liquidation in September 2011. It was contended that, although the transfer of the business from Atlas Carton took place as a going concern, the provisions of s197 of the LRA do not apply, as the dispute is governed by s197A of the LRA. The significance of this argument is that, in the event that s197A of the LRA is found to be applicable, the dismissed employee would have no claim against the new owner of the business.

The Labour Court did not agree with these contentions, and dismissed the argument that s197A applied. The matter was then taken on appeal to the LAC in Atlas Packaging (Pty) Ltd v Palierakis; In re: Palierakis v Atlas Carton and Litho CC (In Liquidation) and Others (JA108/14) [2015] ZALAC 43 (21 October 2015).

The LAC held that for an arrangement or compromise to fall into s 197A, it must have as its primary purpose the avoidance of a winding up order. In this case the court held that the purpose of the arrangement was not to nurse Carton Atlas back to commercial health so that it could avoid an order of winding up. The purpose was an attempt to circumvent the provisions of s197 of the LRA and was an 'asset stripping' exercise. The transaction was a sham. It could not, in any way, be characterised as one which falls within the scope of s197A of the LRA. The appeal was accordingly dismissed with costs. What was of significance in this case is the principle that a court is entitled to examine the substance and purpose of an agreement in order to determine its true nature.


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Bruce Robertson
November 2015
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