The fact that agreements reached in bargaining councils — usually between large employers and trade unions — can be extended to nonparties by the labour minister has become subject to increased litigation.   The foundation, small employers and many expert economists believe it pushes wages up and puts smaller employers out of business.

Today Business Day was the first to publish the article by Carol Paton Foundation challenges labour law.


SOUTH Africa’s contentious Labour Relations Act is facing a legal challenge in the Gauteng North High Court, with the Free Market Foundation on Tuesday launching a constitutional challenge against provisions that allow collective agreements made in bargaining councils to be extended to employers and employees who are not members of the councils.

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The foundation says that apart from the concern that the extension of deals has “a severe impact on current and future jobs” and discourages entrepreneurship, it is also unconstitutional for agreements reached among private parties to be extended to others who were not in any way involved in making them.

Such agreements, the foundation says, also act to eliminate competition and are in the interests of the parties who make them.

Pioneering black entrepreneur Herman Mashaba, who is chairman of the foundation, said the extension of agreements by bargaining councils was denying people the right to choose whether to work or not, and for what remuneration.

“This is about giving people the freedom to decide for themselves what kind of jobs they want to do, what amount of pay they are prepared to work for, and what conditions they are prepared to work under.   It is the sole right of unemployed people to decide what jobs they consider to be better than no job at all … to decide what job is a ‘decent’ job,” he said.

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This is the first direct constitutional challenge to the act.

The act says that the minister is compelled to extend an agreement to nonparties if the employer parties constitute a majority of employers and the trade unions in the council represent a majority of employees in the industry.   The minister has the discretion to extend an agreement if she has reason to believe that collective bargaining will be damaged should she fail to do so.

The foundation is challenging the constitutionality of the former.   Because the minister has no discretion in this instance, it says the state has delegated its powers of statutory regulation to a private body, which it cannot do without violating the constitution.

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Expert evidence from University of Stellenbosch professor Neil Rankin will also argue that “there is a clear causal relationship between bargaining councils and lower levels of employment in sectors and regions where these councils operate”.

“The largest negative impact of bargaining councils is on employment in smaller firms and entrepreneurs: employment and entrepreneurship (are) lower where bargaining councils operate,” Prof Rankin said.

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