Exemptions from collective agreements are not for the asking or taking
Authors: Andile Mphale – Candidate Attorney
Supervised by: Lavery Modise –Consultant
Collective agreements are the centrepiece of the labour dispensation in South Africa.
These are agreements entered into by employers’ organisations and trade unions to regulate, among other things, dispute resolution mechanisms, conditions of service, and matters of mutual interest. Collective agreements and adherence to such are thus imperative to preserving confidence in the institution of collective bargaining.
However, there comes a time when an employer, for various unforeseen circumstances, experiences hardships and is unable to comply with the provisions of the collective agreement. Alive to such an eventuality, collective agreements have mechanisms in place that allow for the employer to be exempted from certain provisions of the collective agreement.
With the advent of Covid-19, numerous unprecedented exemption applications were lodged with the South African Local Government Bargaining Council to exempt municipalities from the Salary and Wage Collective Agreement, citing economic hardships. All but one of those exemption applications were not granted.
Exemption applications are generally narrowly construed in their application by senior panellists who preside over them. In Trafford Trading (Pty) Ltd v National Bargaining Council for the Leather Industry of South Africa  ZALAC, the court held that, as point of departure, when considering exemption applications, an applicant is obliged to comply with the provisions of the collective agreement. For an exemption to be granted, an applicant must establish justifiable reasons why the collective agreement should not be complied with. To do this, there are a range of considerations or factors (for exemption as listed in the collective agreement) that must be considered in determining whether an exemption should be granted in a particular case.
When a municipality alleges that it is undergoing a financial crisis and seeks to be exempted from a collective agreement, a predominant criterion when considering such an exemption application will be its financial position and affordability. In this regard, an applicant has an onerous duty/task to prove unaffordability and, in doing so, must provide sufficient information that sets out the financial state of the municipality, such as:
the revenue and cash flow of the municipality;
the reasons for the dire financial state of the municipality;
evidence of cost-cutting measures and business recovery plans;
steps taken to increase collection debts;
information relating to revenue collection rate; and
sufficient information to show the impact of Covid-19, if such impact still exists at the time of application.
In Putco (Pty) Ltd v SA Road Passenger Bargaining Council & others (2019) 40 ILJ 2389 (LC), the court held that the crisp and critical issue to be determined was one of affordability.
The court further went on to say:
“The nature of a process in which a party seeks exemption from the terms of a binding collective agreement on the grounds of affordability, raised as starkly as they are in the present instance, is less about reconciling competing interests than the determination of a factual dispute.”
The court granted the exemption after having considered the financial situation and liquidity of the municipality.
Juxtaposed against the precarious financial position of a municipality and of similar importance is the issue of fairness to the employer and employee and the effect of granting such an application on collective bargaining. In this regard, senior panellists who have adjudicated on these applications tend not to take prisoners.
Each exemption application brought before the Bargaining Council is considered on its own facts, but all except one of the exemption applications have rightly or wrongly not been granted to municipalities, on the basis that they failed to show unaffordability or were unable to show the steps taken to increase debt collection, which may allow a municipality to comply with the relevant provisions of a collective agreement. However, there have also been instances where, even if it has been objectively evident that the municipality was in a dire financial state, such applications were denied for reasons other than unaffordability.
Considering the above, it has become starkly clear that exemption applications are not for the asking or taking. Rather, they have, in some instances, unnecessarily become a very difficult hurdle to cross. Even when the facts demonstrate that a municipality is in a parlous financial position, it will not be enough to justify exemption from a collective agreement. It also appears that senior panellists are wary of granting exemption applications because they have the potential to undermine centralised collective bargaining in the sector, albeit that the very same collective agreements provide for municipalities to apply for exemptions on the basis of unaffordability.
Lawtons Africa is a South African law firm. With roots that grew out of seeds sown in down-town Johannesburg in 1892, our history features various changes and different names. Our team of lawyers, including directors, consultants, associates and candidate attorneys is highly qualified, market-recognised and skilled. For further information, visit www.lawtonsafrica.com