Airline Pilots' Association of South Africa v South African Airways SOC Limited and Les Matuson NO and Siviwe Dongwana NO (2021) 42 ILJ 1087 (LC)
A business rescue practitioner (BRP) may engage in collective bargaining and initiate any legitimate economic pressure to press for proposed changes to employment terms.
A lock-out during business rescue does not constitute a suspension of the employment contracts. It follows that any limitations that the Companies Act imposes on a BRP to suspend any employment contract are not applicable. In any event, section 136 (2A) contemplates that during business rescue, agreed changes to conditions of employment may be secured. Collective bargaining is a legitimate vehicle through which to secure consent to changed terms and conditions. Integral to collective bargaining is the right to industrial action.
Facts:
Negotiations broke down between the SAA, the business rescue practitioners and the Airline Pilots Association of SA (APASA). SAA then locked out employees, and APASA asked the Labour Court to declare the lock-out to be an unlawful suspension of the employment contracts in terms of s 136(2A) of the Companies Act.
The Labour Court found that the prohibition against the suspension of employment contracts established by s 136(2A) did not apply to a lock-out, because s 136(1)(a)(ii) specifically contemplated and permitted changes to terms and conditions of employment in accordance with applicable labour laws. The court went on to endorse the principle that strikes and lock-outs were part and parcel of the collective bargaining process established by the LRA and were essential elements of and integral to collective bargaining.
The court also found that, in any event, the LRA trumped the Companies Act and determined that even if the lock-out constituted a suspension from employment, any prohibition on suspension by a business rescue practitioner of an employment contract in terms of the Companies Act had to yield to the exercise of employer rights under the LRA. The court accordingly found that s 136(2A) of the Companies Act and, in particular, the prohibition on the suspension of employment contracts in s 136(2A)(a)(i), did not have the effect that lock-outs were prohibited during the course of business rescue proceedings.
Extract from the judgment:
Van Niekerk J:
[12] The first issue to be decided is whether a lock-out constitutes a suspension of a contract of employment. If it does, the prohibition against suspension contained in section (2A) potentially applies. SAA submits that a lock-out constitutes a breach of contract, rather than a wholesale or partial suspension of any terms of the employment contract of an employee who is locked-out. In the definition and regulation of the lock-out, the LRA makes no reference to suspension. The definition (in section 213) makes specific reference to a breach of contract. What the definition requires is an exclusion from the employer's workplace, whether or not the employer breaches employees' contracts of employment, in the course of or for the purpose of that exclusion. In other words, an exclusion from the workplace may or may not constitute a breach of the employment contract, but no mention is made of the suspension of any of the terms of the contract. The conception of industrial action having the consequence of a suspension of the employment contract found some support from Lord Denning in Morgan v Fry [1968] 2 QB 710, but has not attracted much purchase. In South African law, a reading of the definitions of 'strike' and 'lock-out' and the protections extended by section 67 to protected strikes and lock-outs, disclose that the model adopted by the legislature is one of indemnity for breaches of the employment contract that a strike and a lock-out respectively occasion.
[13] In any event, in my view, the prohibition against the suspension of employment contracts established by section 136 (2A) does not apply to a lock-out, because section 136 (1)(a)(ii) specifically contemplates and permits changes to terms and conditions of employment in accordance with applicable labour laws. That section provides that 'the employees and the company, in accordance with applicable labour laws, [may] agree different terms and conditions'. The LRA recognises collective bargaining as a means to change terms and conditions of employment, and expressly permits a resort to strikes and lock-outs as legitimate measures to press for agreement to a proposed change. Strikes and lock-outs are part and parcel of the collective bargaining process established by the LRA; indeed, they are essential elements of and integral to collective bargaining (see South African Transport and Allied Workers Union v Moloto N.O and Another 2012 (6) SA 249 (CC)). To the extent that counsel for the association submitted that a conclusion to this effect would undermine the purpose (reflected in section 136 (2A) of protecting the work security of employees engaged in an enterprise that is under business rescue, the protection is self-contained, in the form of the requirement that any agreement to any change in terms and conditions of employment be made 'in accordance with applicable labour laws'. The rights of employees affected by business rescue proceedings to their security of employment and terms and conditions of employment are thus not disadvantaged and enjoy the same rights as any other employee.
[14] Further, on the approach advocated by the association, there would be an inconsistency between the Companies Act and the LRA. The Companies Act itself provides, in section 5, that if there is any inconsistency between any provision of the Act and the provision of national legislation, to the extent that it is impossible to comply with one of the inconsistent provisions without contravening the second, in the case of certain defined statutes, their provisions prevail. Section 5 (4) (b) (i) includes the LRA in the list of statutes that trump the Companies Act. This provision is reinforced by section 210 of the LRA, which provides that if any conflicts relating to matters dealt with in the Act arises between the LRA and the provisions of any other law save the Constitution or any Act expressly amending the LRA, the provisions of the LRA will prevail. In other words, even if the lock-out constitutes a suspension from employment (which I have found that it does not), any prohibition on any suspension by a business rescue practitioner of an employment contract in the terms of the Companies Act must yield to the exercise of employer rights under the LRA.
[15] It follows that section 136 (2A) of the Companies Act and in particular, the prohibition of on the suspension of employment contracts in section 136 (2A) (i), does not have the effect that lock-outs are prohibited during the course of business rescue proceedings.
[16] The second ground on which the applicant attacks the lock-out is that there is no 'workplace' as envisaged in terms of the definition of lock-out. If there is no workplace, there can be no exclusion from the workplace, whether or not that exclusion breaches employees contracts of employment. It is not in dispute that but for limited repatriation and cargo flights, SAA has not operated a commercial flying schedule since 27 March 2020. All aircraft leases have been terminated and the remainder of SAA's aircraft, which it owns, are in storage and not currently capable of being used to conduct commercial operations. Pallets have not been paid since March 2020 and have not flown since April 2020, but for the few pilots that have flown the repatriation and cargo flights. In essence, SAA is under care and maintenance and its operations have been mothballed. It is in the circumstances that the association submits that there is no physical place of work constituted by any physical premises of SA and thus no workplace as envisaged in terms of the definition of lock-out.
[17] A workplace as defined in section 213 to include 'the place or places where the employees of an employer work.' More specifically, the applicant contends that since SAA has ceased all operations and has been under business rescue for a year, there is no 'place or places where [the association's members] work'. Counsel's submission assumes that the reference to the 'employer's workplace in the definition of lock-out necessarily assumes a physical exclusion from a physical workplace. The definition has not been construed in such restrictive terms. For example, in NUCCAWU v Transnet Ltd [2001] 2 BLLR 203 (LC), Waglay J found that the denial of a right to be considered for day-to-day employment constituted a lock-out. It would seem then that the definition is sufficiently broad to extend to breaches of an employment contract (and other acts) that do not necessarily entail a physical exclusion from the employer's workplace. (See Cheadle et al Strikes and the Law (Lexis Nexis 2017) where it is suggested that 'exclusion' can take various forms and is not necessarily confined to physical exclusion (at p 131)). In any event, the reference to 'workplace' in the definition of lock-out must be appreciated in the context of the interpretation afforded that term by the courts. In Association of Mineworkers and Construction Union and Others v Chamber of Mines of South Africa and Others 2017 (3) SA 242 (CC), the Constitutional Court made clear that the notion of a 'workplace is flexible and not geographically bound to a specific place (see paragraphs 24 to 29 of the judgement). In particular, the court found that the focus is on employees as a collectivity, and that location is a relatively immaterial factor. What is primary is functional organisation. In the present instance, the business of SAA continues, and the association's members continue to tender their services. In that sense, the association's members are and remain excluded from a workplace for the purposes of the definition of lock-out.
[18] Insofar as the applicant contends that the lock-out notices are invalid because they did not extend to certain members of the Association, the lock-out notice excludes a number of listed employees. The purpose of this exclusion is not apparent, but the association contends that SAA's failure to lock out all of the affected employees is fatal. The association concedes that section 64 (1) (c) of the LRA does not explicitly preclude an employer from excluding any employees from a lock-out, but submits that this is implicit on account of the fact that a lock-out notice that is selectively applied cannot achieve the purpose of compelling employees to accede to the employer's demand, and because section 64 (1) (c) requires notice of any lock-out to be given to any trade union that is a party to the dispute, or, if there is no such trade union, to the employees that are parties to the dispute.
[19] There is nothing in the LRA which requires an employer to include all employees within the scope of an intended lock-out. It is not uncommon in the case of strikes for strike action to be implemented on a selective basis, by targeting particular operations, perhaps at different times (sometimes referred to as a grasshopper strike). Further, many strikes involve participation only by certain employees and not by the entire workforce. The LRA does not require that a strike or lock-out involved all employees of an employer (or all of those in respect of whom a dispute was referred. The association's approach requires a reading into section 64 (1) (c) which is simply not there.
[20] To the extent that the applicant submits that the lock-out notices are invalid because they contain demands which differ from and which are in addition to the demands contained in the referral of the dispute by SAA to the CCMA, the association complains specifically that the lock-out notice makes reference to the terms of severance payments (a matter not referred to in private correspondence) and that the correspondence makes reference to the retention of terms and conditions of employment for pilots within a new organisational structure, whereas the demand in the lock-out notice refers to new terms and conditions of employment for pilots reflected in a proposed and attached collective agreement. The association submits that the differences are material and that it is inimical to the purpose of lock-out for the lock-out notice to defer, in substance, from the demands of the employer that are the subject of the dispute referred to the CCMA.
[21] What the LRA requires is that the 'issue in dispute' must have been referred to conciliation, and it is only the issue in dispute that may legitimately form the basis of any subsequent strike or lock-out. In the present instance, the issue in dispute is the proposed termination of the regulatory agreement and the negotiation of new terms and conditions of employment for the association's members. That is the dispute that was referred to conciliation, and that is the subject of the notice of lock-out. It is not for this court to adopt a technical, narrow approach and confine legitimate industrial action to bargaining positions as they are recorded in CCMA referral forms. Collective bargaining by definition is a dynamic process, the purpose of which is to engage with bargaining partners and find compromise. It is inevitable that bargaining positions will continually shift in the course of the search for consensus. In any event, in the present instance, the demand for the conclusion of an agreement for new terms and conditions of employment for pilots (the dispute that was referred to the CCMA), included severance pay to be paid to retrench pilots, a provision that is always been the subject of dispute between the parties. In any event, the right to engage in industrial action in pursuit of a permissible demand does not evaporate on the addition of any impermissible demand (see Transport and Allied workers Union of South Africa obo Ngedle and others v Unitrans Fuel and Chemical (Pty) Ltd 2016 (11) BCLR 1440 (CC)). There is no suggestion by the association and none of the demands that fell within the scope of the referral of the dispute to the CCMA can form the subject of a protected lock-out.
[22] Finally, the association relies on the 'resolution of disputes collective agreement' to submit that the demands made by SAA or demands in respect of the issues that ought properly to be resolved in terms of the agreement. The agreement provides that should a dispute arise relating to the interpretation or application of any collective agreement between the parties, that dispute must be resolved by a referral to arbitration and if the dispute remains unresolved after conciliation, by a referral to arbitration. SAA's demand, so the association submits, is for the termination of the regulating agreement and the conclusion of a new collective agreement. In other words, the association submits that the true nature of the dispute concerns the issue of whether the regulating agreement ought to be brought into operational use, i.e. that it should not be applied. That being so, the association submits that section 65 (1) (b) applies and precludes SAA from resorting to any lock-out on the basis that it is bound by a collective agreement that regulates the issues in dispute and which requires the matter to be referred to arbitration.
[23] It is well-established principle that this court will look to the substance of a dispute to determine its true nature (see Coin Security Group (Pty) Ltd v Adams & others [2000] 4 BLLR 371 (LAC)). What SAA seeks, through a process of collective bargaining, is to induce an agreement by the association to cancel the regulatory agreement in its entirety and to secure an agreement on new terms and conditions of employment. SAA does not dispute the validity of the regulatory agreement, nor its application for the period that it remains in force. This is manifestly not a matter that concerns the interpretation or application of the regulatory agreement, and there is thus no merit in this submission.
[24] In summary: the lock-out by SAA of the members of the association does not constitute a suspension of their employment contracts. The exclusion from the workplace in the present instance constitutes a breach of contract. Because the lock-out is protected, SAA is indemnified against any of the legal consequences that would ordinarily flow from a breach of the employment contract. It follows that any limitations that the Companies Act imposes on a business rescue practitioner to suspend any employment contract are not applicable. In any event, section 136 (2A) contemplates that during business rescue, agreed changes to conditions of employment may be secured. Collective bargaining is a legitimate vehicle through which to secure consent to changed terms and conditions. Integral to collective bargaining is the right to industrial action. A business rescue practitioner may therefore engage in collective bargaining and initiate any legitimate economic pressure to press for proposed changes to employment terms. Further, by virtue of section 5 of the Companies Act and section 210 of the LRA, the provisions of the LRA trump any such limitations, and thus entitle a business rescue practitioner to lock out employees in terms of the LRA. The fact that SAA has been placed in business rescue and that its operations have been mothballed does not mean, for the purposes of the LRA, that there is no 'workplace' in respect of which any lock-out can lawfully be implemented. The lock-out notices issued by SAA are not invalid by virtue of their application only to certain of its employees, members of the association, or because they articulate demands that are substantially different to those that were the subject of the referral by SAA of the dispute between the parties to the CCMA. The referral to conciliation and the notice of lock-out reflect the same issue in dispute. Finally, the demands that form the subject of the lock out are, in essence, demands that call for the termination of the agreement and for new terms and conditions of employment to be negotiated. The demand is not one that seeks to interpret or apply a collective agreement. The substantive limitation on a lock-out established by section 65 (1) (b) of the LRA therefore has no application.
[25] The application thus stands to be dismissed on the basis that the association has failed to establish a clear right to the relief that it seeks. In the circumstances, it is not necessary for me to consider the remaining requirements for interdictory relief.
[26] Finally, in relation to costs, neither party sought costs against the other. For the purposes of section 162 of the LRA, the requirements of the law and fairness are best served by there being no order as to costs.
I make the following order:
- The application is dismissed.