Yesterday the High Court reviewed and set aside the Labour Minister’s decision to extend the 2010 National Main Collective Agreement of the National Bargaining Council for the Clothing Manufacturing Industry to non-parties in the clothing industry.

The judgment of justice Koen In Valuline CC v Minister of Labour, unreported case 5642/11, is important because it follows the recent Labour Court judgment of justice Andre van Niekerk in Neasa v Minister of Labour and establishes that:

  • the High Court has concurrent jurisdiction with the Labour Court  to determine matters arising out of s 32 of the Labour Relations Act of 1995;
  • the word ‘shall’ is peremptory; and
  • declarations of invalidity should not simply be made prospective.

See NEASA v Minister of Labour – JR3062/11 (LC) for the Neasa judgment which has still not been reported.

Earlier relevant posts

Principle of legality and appropriate remedies

Imagining lawful and fair mass dismissals

See also the category Collective bargaining for further posts

Edward West’s article on the judgment Victory for small firms in minimum wages case was first published in Business Day today.

Extracts from the Valuline judgment yesterday

[68]      As in the Neasa judgment the unavoidable conclusion is that the factual assumption on which the first respondent based her decision to extend the collective agreement, namely the adequacy of the certificate of representivity in terms of s 49, was incorrect.    As it was put in that judgment ‘put another way, there were no reasonable grounds for the Minister to be satisfied that the conditions set out in paragraphs (b) and (c) of s 32(3) had been met.    The Minister’s decision to extend the Collective Agreement to non-parties put forward in the registered scope of the agreement is invalid and accordingly stands to be reviewed and set aside.

. . .

[81]      The applicants correctly point out that if the order setting aside the extension by the first respondent was not to have retrospective affect, the applicants and other non-parties would still be bound by the provisions of the collective agreement although the extension thereof to them was invalid in law.    Even if the order of invalidity was not to have retrospective effect save to the extent that the second respondent should not be entitled to commence compliance proceedings against non-parties in respect of non-compliance with the agreement, it would still permit the second respondent to continue with compliance proceedings which it might have already instituted against non-parties.

[82]      In the light of the aforesaid, I am not persuaded that the limited retrospectivity which the second respondent proposes, or a suspension of the order as contended for by the first respondent is ‘just and equitable’ on the facts before me.   As much as I appreciate that the review and setting aside of the first respondent’s decision will have some impact, I do not have actual evidence of what this impact would be.   Even if a suspension of the order of invalidity might be justified in principle, the question arises whether such suspension should be for two or three or four or perhaps more months.   The fixing of such a time limit would be entirely arbitrary.

[83]      One would obviously be reluctant to expose vulnerable employees to possible claims for the reimbursement of higher remuneration packages that might have become payable to them in terms of the extended collective agreement.   Whether that will in fact happen, remains to a large extent speculative with no evidence of the potential of such fears having been placed before me.

[84]      It might be irresponsible for employers who have paid employees higher wages in terms of the extended agreement to now seek to recover the extent of such overpayment.    That could obviously bring disruption to the industry, but particularly to individual work places, which employers presumably would want to avoid.    I however have no evidence on the application before me that any non-parties to the extended collective agreement contemplate such action.

[85]      An invalid administrative act remains invalid.    It is of no force and effect.    It would also not be just and equitable if administrative functionaries were, in all instances where a challenge to the validity of their administrative action is raised, to have the assurance, even in the absence of an evidential basis supporting any potential prejudice, that if they are unsuccessful in opposing the challenge to the validity of their actions and it is found that the administrative act is indeed invalid, that this would make no difference, because that which was achieved pursuant to invalid action will stand with an opportunity being granted to correct it by other means.

[86]      The present matter is not an instance where invalid administrative action understandably occurred.

[87]      Having regard to what has been placed before me, it is not just and equitable that the applicants and other non-parties be burdened with obligations extended to them invalidly whilst an arbitrary period of four months or two months, or whatever, is allowed to enable the first respondent to consider whether the same result could be achieved validly by other means.    The first respondent should not have to operate within or under those constraints.    She should consider whether the collective agreement should be extended at all, objectively and dispassionately.

[88]      If any limitation of the nature contended for by the first or second respondents is to be placed on an order of invalidity then it should have been firmly founded on a factual and evidential basis.

Extracts from the article by Edward West

IN A decision that could have far-reaching consequences for labour law, the high court in Pietermaritzburg on Wednesday ruled that small clothing factories owned by families of Chinese and Taiwanese descent in Newcastle are exempt from a 2010 bargaining council agreement on wages.

The ruling will strengthen the arm of critics of collective bargaining.   They argue small business development is being hampered by the law’s insistence on uniformity of wages across industries, regardless of the relative size of employers, their location, or their ability to match the wages of their larger counterparts.

Earlier this month, the Free Market Foundation lodged an application in the North Gauteng High Court to challenge the constitutionality of extending national wage bargaining agreements to employers that are not members of their respective industry bargaining councils.

Although that application differs in that it argues that it is unconstitutional for big businesses and labour to be able to “gang up” and enforce wage agreements on non-signatories of collective bargaining agreements, Wednesday’s ruling will be seen as a further question mark against the Labour Relations Act.

A group of five Taiwanese-owned companies and the United Clothing and Textile Association had asked the court to set aside minimum wages set by the council and extended across the industry.   Judge Koen ruled that factories that were not members of the council could hold separate talks with their workers on pay levels.

Newcastle Chinese Chamber of Business president Alex Lui welcomed the judgment, primarily as it meant that writs of execution to close noncompliant clothing companies issued after January 2011, were now invalid.