Lufil Packaging (Isithebe) (A division of Bidvest Paperplus (Pty) Ltd) v Commission for Conciliation, Mediation and Arbitration and Others (DA8/2018) [2019] ZALAC 39 (13 June 2019)

Principle:

The LRA requires unions to determine in their constitutions which employees are eligible to join them, and by necessary implication precludes them from admitting as members' employees who are not eligible to be admitted in terms of the trade union's registered constitution.

Facts:

The employer, Lufil, manufactures printed and plain paper bags and associated paper or paper-derivative-based packaging products.The core business of Lufil Packaging falls within the definition of the Printing and Packaging Sector and it does not form part of NUMSA's revised scope that was approved by the Department of Labour. Lufil falls under the ambit of the Statutory Council for the Printing, Newspaper and Packaging Industries ("PNPI"). NUMSA is not a member union of the PNPI and does not participate as such in the PNPI.

On 27 January 2015, NUMSA wrote to Lufil asking it to provide stop orders for the deduction of union fees for its (alleged) members who were employees. Lufil responded to this letter stating it did not believe that NUMSA's constitution allowed it to organise within the operations of the business, as it fell outside the scope of the Union.

Chapter 2(2) of NUMSA's constitution provides: 'All workers who are or were working in the metal and related industries are eligible for membership of the Union subject to the discretion of the relevant Shop Stewards Council ...' Annexure B of NUMSA's constitution deals with "the scope of the Union" and provides that "the Union shall be open to all workers employed in any of the following industries". The annexure lists 21 different industries but does not include the packaging industry.

NUMSA conceded in an affidavit in the initial proceedings before the CCMA that the nature of Lufil's operations are not specified in the scope of the Union. It argued, however, that such did not preclude NUMSA from organising or representing its members who fall outside its specified scope.

Lufil filed an application alleging that because the members NUMSA claimed to have in Lufil's employ were not eligible under NUMSA's constitution to become members, NUMSA did not have the requisite locus standi to refer the dispute to the CCMA ("the jurisdictional application"). The CCMA concluded that a union has standing to seek organisational rights in workplaces that are not included within the scope of its constitution. The commissioner found that as NUMSA had as members approximately 70% of Lufil's employees, that NUMSA's application for organisational rights should be granted. The commissioner directed Lufil to grant the union access to the canteen hall on 72 hours' notice to Lufil and to deduct union fees from members and pay such dues to NUMSA with immediate effect. He ordered additionally that NUMSA shall be entitled to three trade union representatives, who shall cumulatively be entitled to six days of paid time off and that NUMSA was entitled to disclosure of information in terms of section 16 of the LRA.

The Labour Court dismissed the employer's application to review the CCMA's award.

On appeal at the Labour Court the appeal was upheld. It was held that the LRA requires unions to determine in their constitutions which employees are eligible to join them and by necessary implication precludes them from admitting as members' employees who are not eligible to be admitted in terms of the trade union's registered constitution. If it is shown that the persons concerned are precluded by the union's constitution from becoming its members, any purported admission of such employees as members is ultra vires the union's constitution and invalid.

A union acts ultra vires its own constitution when it allows membership of individuals who are not allowed to be members of that union in terms of the union's own constitution. A trade union cannot create a class of membership outside the provisions of its constitution, and if they purport to do so they act in excess of their powers and the act has no validity. A purported decision by a union to admit a member who is not eligible under its constitution to become a member is not a mere internal decision which is immune from attack by an affected employer. Such a decision is ultra vires and invalid and, as such, susceptible to challenge by the employer from whom organisational rights - based on the membership concerned - is sought.

The CCMA could not impose upon Lufil its coercive power, in granting NUMSA the organisational rights it sought, if the basis for seeking these rights (the employees' purported membership) was not legally valid (because the union acted ultra vires its own constitution in allowing these employees to be its members).

The correct legal position is that NUMSA had to show that it was sufficiently representative. The employees on which it relied in alleging it was sufficiently representative could not be and thus were not, in law members of NUMSA, as they did not fall within the scope of the union in terms of NUMSA's constitution. As such, NUMSA was not sufficiently representative of the employees at the workplace and therefore was not entitled to any organisational rights. The commissioner erred in not coming to that conclusion and committed a material error of law, which resulted in an unreasonable decision. The Labour Court erred equally in not setting aside the award on that basis.

Extract from the judgment:

Murphy AJA:

[22]   An element of confusion was introduced in this matter early on by Lufil's challenge to NUMSA's locus standi. The commissioner correctly held that the point was more akin to a preliminary point requiring determination of whether the union could organise employees of the employer if the activities and operations of the employer do not fall within the registered scope of the union, as stipulated in its constitution. The subsequent arbitration proceeded on the common assumption that in terms of the preliminary ruling NUMSA was entitled to count as its members all the employees who had purported to join it, regardless of the fact that this was not permitted by NUMSA's constitution. The Labour Court also accepted that "the crisp issue to be decided .... was whether the LRA entitled the third respondent to represent its members in an application for organisational rights and whether it was entitled to those rights."

[23]   Lufil correctly concedes that it may have been inaccurate for it initially to have characterised the question as being whether NUMSA had locus standi to apply for organisational rights. NUMSA is allowed to challenge the decision of Lufil denying it organisational rights as it clearly has a personal interest in the legality of that refusal and is a party to a dispute as contemplated in section 21 of the LRA. However, in the final analysis standing is not the issue. The fact that NUMSA has standing enabling it to apply for organisational rights and refer a dispute in that regard to the CCMA does not mean it has an entitlement to those rights in terms of the legal requirements of the LRA. The decisive issue throughout, as the commissioner appreciated in both his ruling and the award, was the contention that NUMSA could not qualify to be granted the organisational rights because Lufil employees are ineligible to be members. That remains the fundamental question to be determined in this appeal, which must be decided first and foremost with reference to the governing provisions of the LRA.

[24]   The right of trade unions to obtain organisational rights is a legitimate intrusion upon an employer's proprietal and entrepreneurial autonomy. It, accordingly, is circumscribed by functional legislative requirements ensuring that it is exercised by sufficiently representative unions, properly compliant, acting in the interests of employees in accordance with the policy imperatives of orderly collective bargaining at sectoral level.

[25]   Section 95 of the LRA is concerned with the requirements for the registration of trade unions or employer's organisations. Section 95(1)(b) provides that a trade union may apply for registration (and thus obtain the benefits of registration) if, inter alia, it has adopted a constitution that meets the requirements of sections 95(5) and 95(6) of the LRA. Section 95(6) provides that the constitution of any trade union may not include any provision that discriminates against any person on the grounds of race and sex. The provision reflects the legitimate interest of the Registrar in ensuring compliance with fundamental values in trade union criteria for membership. Section 95(5) of the LRA is concerned with more prosaic matters such as membership, rules for meetings, decision-making, the election of office bearers and officials, and so on. Section 95(5)(b) is of particular relevance. It provides that the constitution of any trade union or employer's organisation that intends to register must prescribe qualifications for and admission to membership.

[26]   The Registrar must apply his mind to whether the requirements for registration have been met. He is obliged to register the trade union once satisfied that there has been compliance. If after affording the applicant trade union the opportunity to remedy any defect in its application or constitution he concludes there has not been compliance, he must refuse registration.

[27]   One of the most meaningful benefits of registration is the right of a registered trade union to obtain organisational rights under Part A of Chapter III of the LRA. Only a registered trade union may apply for the exercise of those rights and for the relief to obtain and enforce them.

[28]   Section 101 of the LRA regulates amendments by trade unions of their constitutions. A registered trade union may resolve to change or replace its constitution. However, to do so effectively it must send the Registrar a copy of the resolution and a certificate signed by its secretary stating that the resolution complies with its constitution. The Registrar will only register the amendment if it meets the requirements for registration under sections 95 and 96 of the LRA. The amendment will only take effect from the date that the resolution is endorsed by the Registrar, certifying that the amendment has been registered.

[29]   NUMSA's constitution may be amended only by a vote of two-thirds of the members of its National Congress - though annexures to the constitution, such as Annexure B, may be amended by the Central Committee. It is common cause that there has been no amendment of the scope of the union, as stipulated in Chapter 2 or Annexure B of the Constitution of NUMSA, in order to include the packaging industry within it.

[30]   Section 4(1)(b) of the LRA provides that every employee has the right to join a trade union, subject to its constitution. The obvious implication of this provision is that the right to join a trade union will be circumscribed by the membership eligibility criteria in the trade union's constitution as adopted by the trade union's relevant decision-making body and registered by the Registrar.

[31]   The submission of Mr. Pillay SC that section 4(1)(b) of the LRA was unconstitutional, because it infringes the fundamental rights in section 18 and 23(2)(a) of the Constitution, is unsustainable. Besides the fact that no constitutional challenge to section 4(1)(b) of the LRA was pleaded or canvassed adequately in evidence, the limitation is reasonable and justifiable. Section 23(5) of the Constitution provides that national legislation may be enacted to regulate collective bargaining. Such legislation, the LRA, has been enacted. To the extent that the legislation may limit a right in Chapter 2 of the Constitution, the Bill of Rights, including the rights of freedom of association in section 18 and section 23(2)(a) of the Constitution, the limitation must comply with section 36(1) of the Constitution and be reasonable and justifiable in an open and democratic society having regard inter alia to the nature of the right, and the nature, purpose and extent of the limitation. The requirement that eligibility to join a trade union be determined by the provisions of its constitution, as adopted by its own decision-making body and registered by the Registrar, gives effect to the legitimate government policy of orderly collective bargaining at sectoral level. The means of implementation, involving supervision of the scope of union activity by the Registrar, are minimally restrictive and are carefully tailored to the purpose of achieving the policy. Section 4(1)(b) of the LRA is accordingly consistent with the Constitution.

[32]   Trade unions at common law have only those powers and capacities that are conferred on them by their constitutions. The LRA requires unions to determine in their constitutions which employees are eligible to join them and by necessary implication precludes them from admitting as members' employees who are not eligible to be admitted in terms of the trade union's registered constitution. If it is shown that the persons concerned are precluded by the union's constitution from becoming its members, any purported admission of such employees as members is ultra vires the union's constitution and invalid.

[33]   In Van Wyk and Taylor v Dando and Van Wyk Print (Pty) Ltd Landman J held correctly that a union acts ultra vires its own constitution when it allows membership of individuals who are not allowed to be members of that union in terms of the union's own constitution. A trade union cannot create a class of membership outside the provisions of its constitution, and if they purport to do so they act in excess of their powers and the act has no validity. A purported decision by a union to admit a member who is not eligible under its constitution to become a member is not a mere internal decision which is immune from attack by an affected employer. Such a decision is ultra vires and invalid and, as such, susceptible to challenge by the employer from whom organisational rights - based on the membership concerned - is sought.

[34]   The ultra vires rule is of both practical and policy value. There is a direct relationship between the conception of the trade union as a distinct legal entity and the rule that it may not legally carry out any activity which is not authorised by the LRA and the powers and capacities provided in its constitution. The LRA grants trade unions specific powers and capacities to act within a particular scope and does so in furtherance of a contemplated constitutional and policy framework. The principle of legality requires observance of that framework and its purposes may not be arbitrarily dissipated. NUMSA is accordingly not permitted in terms of the common law or the LRA to allow workers to join the union where such workers are not eligible for admission in terms of the union's own constitution. As such, it is not entitled to any of the organisational rights contained in respect of Lufil's workplace.

[35]   Mr Freund SC drew an instructive analogy with the administrative law doctrine of a permissible "collateral attack" arguing that a similar principle applies in the present matter. The doctrine was explained by the Supreme Court of Appeal in Oudekraal Estate (Pty) Ltd v City of Cape Town and others as follows:
'But just as some consequence might be dependent for validity upon the mere factual existence of the contested administrative act so there might be consequences that will depend for their legal force upon the substantive validity of the act in question. When construed against the background of principles underlying the rule of law a statute will generally not be interpreted to mean that a subject is compelled to perform or refrain from performing an act in the absence of a lawful basis for that compulsion. It is in those cases - where the subject is sought to be coerced by a public authority into compliance with an unlawful administrative act -that the subject may be entitled to ignore the unlawful act with impunity and justify his conduct by raising what has come to be known as a 'defensive' or a 'collateral' challenge to the validity of the administrative act....It will generally avail a person to mount a collateral challenge to validity of an administrative act where he is threatened by a public authority with coercive action precisely because the legal force of the coercive action will most often depend on the legal validity of the administrative act in question.....While the legislature might often, in the interests of certainty, provide for consequences to follow merely from the fact of an administrative act, the rule of law dictates that the coercive power of the State cannot generally be used against the subject unless the initiating act is legally valid.'
[36]   In applying to the CCMA to be granted organisational rights, NUMSA sought to invoke the coercive power of the state. The CCMA cannot impose upon Lufil its coercive power, in granting NUMSA the organisational rights it seeks, if the basis for seeking these rights (the employees' purported membership) is not legally valid (because the union acted ultra vires its own constitution in allowing these employees to be its members).

[37]   The correct legal position, therefore, is that NUMSA had to show that it was sufficiently representative. The employees on which it relied in alleging it was sufficiently representative could not be and thus were not, in law members of NUMSA, as they did not fall within the scope of the union in terms of NUMSA's constitution. As such, NUMSA was not sufficiently representative of the employees at the workplace and therefore was not entitled to any organisational rights. The commissioner erred in not coming to that conclusion and committed a material error of law, which resulted in an unreasonable decision. The Labour Court erred equally in not setting aside the award on that basis.

[38]   Although the parties agreed not to seek costs in the Labour Court, both sought the costs of the appeal.

[39]   The following orders are made:
39.1.   The appeal is upheld with costs, including the costs of senior counsel.
39.2.   The order of the Labour Court is set aside and substituted with the following:
'The arbitration award of the second respondent, under case number KNDB 14987-14 and dated 14 March 2016, in relation to the dispute between the third respondent and the applicant is reviewed and set aside.'