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Can the courts set aside collective agreements?

Author: Sheila Moagi – Associate Designate

*Supervised by: Nombulelo Myeni – Associate


“Collective bargaining is the process by which employers and organised groups of employees seek to reconcile their conflicting goals through mutual accommodation. The dynamic of collective bargaining is demand and concession; its objective is agreement”. - John Grogan, Workplace Law

On 28 February 2022, the Constitutional Court handed down a unanimous judgment dismissing an application to enforce a collective agreement between the State and various trade unions (National Education Health and Allied Workers Union v Minister of Public Service and Administration and Others (CCT21/21) [2022] ZACC 6).


In May 2018 the State and the applicants (the Bargaining Council and trade unions), representing public service employees, concluded a collective agreement regulating, among others, the salary structures of public service employees for the 2018/2019, 2019/2020 and 2020/2021 financial periods.


Unbeknown to the Unions, the State’s representative had tabled a strikingly different offer to the one he was mandated to make. The effect of this offer was that it exceeded the allocated budget by ZAR30.2 billion. The State complied with its obligations relating to the salary structures of the first two financial periods as agreed in the collective agreement. But it failed to comply for the 2020/21 financial period because the salary adjustments were unaffordable. The State had also realised that the clause of the collective agreement providing for salary increments was unlawful as it had failed to comply with the requirements of regulation 78 and 79 of the Public Service Regulations (the regulations).


When the State’s fiscal affordability became compromised, it approached the Unions and proposed a revised wage increase for the 2020/2021 period. This proposal was met with displeasure and was rejected by the Unions, which insisted on the implementation of the collective agreement as it was.


The applicants approached the Labour Appeal Court (LAC) seeking the enforcement of the collective agreement. The Minister of Finance also launched a counter application seeking a declaratory relief that the relevant clause of the collective agreement was unlawful, invalid, and unenforceable. The LAC dismissed the applicants’ enforcement application, declaring the enforcement of the clause regulating the salary structures invalid and unlawful. In the Constitutional Court, the Unions now sought leave to appeal against the LAC judgment and order.


On 28 February 2022, the Constitutional Court upheld the decision of the LAC and held that the clause of the collective agreement contravening the relevant regulations was unlawful and, as a result, it also contravened section 213 and 215 of the Constitution.


The Constitutional Court emphasised that the State’s failure, in its capacity as the employer, to comply with the requirements of the regulations rendered the resultant collective agreement between the parties under the LRA invalid and unlawful. To hold otherwise, would amount to validating the mischief the relevant constitutional provisions and regulations seek to prevent.


The court reminded us that it is a fundamental principle of our law that an actor must be legally empowered to perform any act in question and that public power may only be exercised by a lawfully constituted authority. Moreover, that the act must be performed in accordance with substantive and procedural requirements prescribed by the empowering provisions.


Does this mean the end of collective bargaining as we know it?

Absolutely not. The primary objective of industrial relations legislation remains to promote collective bargaining to reach agreements by which the relationship between the employer and the employee is regulated. Collective bargaining remains unabated.


The courts are empowered to set aside collective agreements entered into freely and voluntarily on grounds similar to those on which ordinary contracts may be impugned, such as capacity to act and legality among others, in the same way that they are empowered to enforce those that are valid and lawful.


It therefore becomes crucial to the collective bargaining process that both unions and employers ensure that those with whom they are in negotiations have the requisite authority to do so and are compliant with the relevant legislation.


 

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