Bowman Gilfillan director and labour law specialist John Brand says he believes that bargaining councils are in a crisis as it is questionable whether many still cover a majority of their industries.   A legal blow against the extension of agreements would cause the entire system to unravel as large employers would no longer benefit from being part of what amounts to “a legalised cartel”.

Carol Paton’s article Wage bargaining council system ‘could unravel’ was first published in Business Day on 12 February 2013

Random extracts from the article

THE bargaining council system is coming under increasing pressure as employers take to the courts to challenge one of its fundamental aspects: the basis on which agreements can be extended to non-parties.

With a judgment against the Metal and Engineering Industries Bargaining Council (MEIBC) granted late last year, a case against the National Bargaining Council for the Clothing Industry under consideration and talk in legal circles of a constitutional challenge to the Labour Relations Act (LRA) in the wings, bargaining councils and the minister of labour are facing an upsurge in litigation.

The extension of collective bargaining agreements to companies that are not members of an industry bargaining council is believed by many employers and economists to be a central cause of inflexibility in the labour market.   In particular, bargaining councils are accused of forcing up entry-level wages by acting as a “legalised cartel” to keep new entrants to industry out.

At the end of last year, Labour Court judge Andre van Niekerk ruled that Labour Minister Mildred Oliphant had not applied the test for representivity in its entirety before extending the MEIBC agreement to the rest of the industry.

Not only must the parties in the bargaining chamber constitute a majority of the workers and the employers in the industry, but the agreement can only be extended if a majority of workers and employers are members of the trade unions and employers associations that signed the agreement.   Ms Oliphant was given 90 days to remedy the error and to consider extending the agreement under a different provision.

A similar argument was, two weeks ago, put before the KwaZulu-Natal High Court when small-scale Chinese clothing manufacturers challenged the minister’s extension of a collective agreement of the National Bargaining Council for the Clothing Industry on grounds that the council was not representative.

As well as an upsurge in litigation, consideration is being given to a constitutional challenge to provision in the Labour Relations Act which compels the minister of labour to extend collective agreements made in bargaining councils.

The applicants in the case against the National Bargaining Council for the Clothing Industry have also requested the court to consider whether this provision of the LRA is constitutional as it “permits the minister to extend a collective agreement without acting reasonably and without having regard for the consequences of such an extension for employment”.