Further to the recent post Breaking news – Minister’s extension of MEIBC agreement set aside it has now been possible to obtain a copy of the actual Labour Court judgement but not in a format that could be ‘posted’ here.   It is now in Word format with links added to the cases referred to in the judgement of justice Van Niekerk delivered on 20 December 2012, after the hearing on 17 December 2012, and this may account for a few ‘gremlins’ in the judgement.

Application heard 17 December 2012

Judgment delivered 20 December 2012

Summary:

Application to declare invalid the extension to non-parties of a collective agreement concluded by a bargaining council on the basis that minister failed to establish representativity within scope of the agreement, as required by s 32(3)(b) and (c).   Respondents relying on certificate of representativity issued by registrar in terms of s 49.   Held that certificate relevant only to representativity of parties to the council within its registered scope;  not sufficient to satisfy requirement of representativity within scope of agreement upon extension.   Minister’s decision set aside.   Order suspended for four months to enable minister to consider extending agreement in terms of s 32(5).

Judgement.

Van Niekerk J

Introduction

[1]        This is an application in terms of s 158(1)(g) of the Labour Relations Act (LRA) and s 6 of the Promotion of Administrative Justice Act (PAJA), to review and set aside a decision made by the first respondent, the minister of labour, to extend a collective agreement concluded under the auspices of the second respondent (the bargaining council) to non-parties that fall within the council’s registered scope.   The applicants also seek to have the notice that gives effect to the minister’s decision (Government Notice are 748, published in Government Gazette 34613 on 23 September 2011), declared invalid and of no force and effect.

[2]        The applicants rely on a number of grounds to content that the extension of the agreement was unlawful, including a challenge to the validity of the request to the minister in terms of s 32(1) of the LRA to extend the collective agreement to non-parties.   At the hearing of the application it was agreed that without prejudice to the applicants rights to pursue the other grounds for review, argument would be confined to the question whether the minister’s decision to extend the agreement complied with the provisions of s 32(3)(b) of the LRA.   The applicants submit that if the requirements of s 32(3) were not met, it must follow as a matter of law that the decision to extend the collective agreement to non-parties was invalid.

[3]        Two primary issues emerge during the course of the proceedings.   The first is the determination of the thresholds established by s 32(3)(b) and (c) of the LRA; the second is an issue relating to remedy and in particular, a submission made on the minister’s behalf and dealt with at some length in a supplementary affidavit filed on her behalf, that if the court were to find that her decision should be set aside, the court should suspend the order for a period of three months, to afford the minister an opportunity to consider whether to extend the collective agreement to non-parties in terms of s 32(5) of the LRA.

Factual background

[4]        The first applicant, the National Employers’ Association of South Africa (NEASA), is a party to the bargaining council.   It represents some 1 250 employers who operate within the bargaining council’s registered scope.

[5]        In May 2011, negotiations on sectoral conditions of employment and other matters of mutual concern commenced under the auspices of the bargaining council.   Following the declaration of disputes and a strike called by one of the trade union parties to the council, an agreement was concluded on 18 July 2011 regulating a host of issues.   In effect, the agreement amends a number of clauses [in] what is referred to as the ‘main agreement’, and is intended to regulate employment-related matters in the sector until 30 June 2 014.   NEASA opted not to sign the agreement.   On the same day on which the agreement was concluded, the bargaining council resolved to request the minister to extend the agreement to non-parties within the council’s registered scope, as contemplated by s 32(1).   While the validity of this request is contested, this is not an issue for decision in the present proceedings.

[6]        Prior to the conclusion of the collective agreement, on 28 June 2011, the registrar of labour relations, acting in terms of s 49(4) of the LRA, issued a certificate recording that the bargaining council ‘is a representative council’ and would be regarded as such until 30 June 2012.   In terms of the certificate, as at 24 June 2011, 335 163 employees were found to be employed within the registered scope of the bargaining council, 172 799 of which were members of the trade unions that are parties to the council.   The certificate notes further that 197 061 employees were found to be employed within the registered scope of the council by members of employers’ organisations that are parties to the council.

[7]        On 22 July 2011, the bargaining council wrote to the director-general of labour requesting that the minister extend the agreement to non-parties.   The letter enclosed the certificate of representativity.

[8]        On the 23 September 2011, the minister issued the notice referred to above in terms of which the collective agreement concluded under the auspices of the bargaining council on 18 July 2011 was extended to non-parties for the period 26 September 2011 to 30 June 2014.   It is common cause that when she extended the agreement, the minister acted in terms of s 32(2) of the LRA and that in doing so, she relied only on the certificate of representativity issued by the registrar.

The relevant legal principles

[9]        The relevant parts of s 32 of the LRA read as follows:

…….

[10]      Section 32 therefore creates two mechanisms by which collective agreements concluded in bargaining councils may be extended by the minister to non-parties.   The first is mandatory (s 32(2));  the second is discretionary (s 32(5)).   Since the minister did not rely on s 32(5) when she decided to extend the collective agreement in the present instance, it is not necessary to consider the nature and extent of the threshold established by this provision.

[11]      The use of the word ‘must’ in s 32(2) makes it plain that unless any of the provisions of s 32(3) precludes the extension of an agreement that otherwise complies with the provisions of s 32(1), the minister has no discretion but to extend the collective agreement to non-parties within the time period and in the manner provided for in s 32(2).   Accordingly, for the purposes of s 32(3)(b) and (c), before deciding to agree a valid request from a bargaining council to extend a collective agreement to non-parties, the minister must determine the scope of the agreement that is sought to be extended, and for the purposes of compliance with the majority threshold requirements, thereafter be satisfied of two things.

The first is that the majority of those employees who will fall within the scope of the agreement are members of trade unions that are parties to the council.

The second is that the majority of employees who will fall within the scope of the agreement are employed by employers who are members of employers’ organisations that are parties to the council.

The issue:  were the requirements of s 32(3)(b) and (c) met?

[12]      The certificate of representativity issued by the registrar on 28 June 2011 and on which the minister relied when she decided to extend the agreement records that –

(a)        The total number of employees employed within the registered scope of the council amounted to 335 163;

(b)        172 799 – or 51.56% – of the employees in the industry were members of the trade unions party to the council; and

(c)        197 061 – or 58.80% – of the employees employed within the registered scope of the council were employed by members of the employers’ organisations party to the council.

It is clear from its terms that the certificate addresses only the question of the representativity of the trade union and employer parties to the council within the council’s registered scope.   The certificate is silent on the question of representativity for the purposes of s 32(1) (i.e. whether the members of the trade union parties voting in favour of the request to extend the agreement constituted the majority of the unions that are party to the council, and whether the employers’ organisations that voted in favour of extension employee the majority of the employees employed by members of employer parties to the council).

In particular the certificate is silent on the question of representativity in relation to the number of employees who on extension of the agreement will be found to be members of trade unions that are party to the council, and who will be found to be employed by members of employers’ organisations, party to the council.

On the face of it therefore, given the nature of the thresholds established by s 32(3)(a), (b) and (c) respectively, the certificate served no apparent purpose.

[13]      The applicants contend that the minister was wrong in relying on the figures contained in the certificate of representativity in determining whether or not there was compliance with the requirements of s 32(3)(b) and (c).   They contend that the number of 172 799 relied upon by the minister is in fact (sic) represents the total membership of trade unions that are party to the council and that falls within the registered scope of the council.

The relevant figure, the applicants contend, is the number of trade union members who are employed within the scope of the agreement, since the registered scope of the council is far larger than the scope of the main agreement, primarily because (sic) the a significant number of employees who fall within the council’s registered scope are expressly excluded from the terms of the main agreement.

On the other hand, the respondents contend that the scope of the agreement as extended is to be determined by the agreement itself, before accounting for any exclusion.   In other words, on the facts and on a proper reading of the main agreement, the scope of the agreement is the same thing as the scope of registration of the bargaining council.

On this construction, the respondents submit that the minister was correct in having regard to the certificate of representativity .

[14]      Clause 1(1) of the collective agreement states that its terms shall be observed ‘in the Iron, Steel, Engineering and Metallurgical Industry throughout the Republic of South Africa… by all employers who are members of the employers’ organisations and by all employees who are members of the trade unions that is (sic) who are party to the bargaining council in the industry as defined’.

[15]      Clause 1(3) provides that the terms of the agreement shall not apply to certain categories of operations.   The preamble to the clause reads ‘Notwithstanding the provisions of sub clause (1), the terms of this Agreement shall not apply to the following…’.   Sub clause (3) proceeds to list some 16 undertakings or activities, including those undertakings that are regulated by what are referred to as ‘house agreements’, i.e.   collective agreements concluded in respect of specified undertakings that fall within the council’s registered scope.   Clause 1(4) limits the application of the agreement in respect of apprentices and trainees.   Clauses 1(5) and (6) represent a limited ‘claw back’ to the extent that issues relating to leave pay apply ‘to all employees employed in operative processes’ receiving above a defined rate of pay;  and a minimum wage is indirectly prescribed for employees employed in a ‘manufacturing or production process’, a phrase that is defined by the agreement.

[16]      In my view, by defining those persons and operations who are excluded from the main agreement does not mean, as the respondents contend, that the parties concerned are included within the scope of the agreement, if only for the purpose of being excluded.   The structure of the main agreement is to posit a universe comprised by the registered scope of the agreement, and then to expressly exclude from application the listed undertakings and activities.

These categories are not exempted from the main agreement; they are expressly excluded from its application.   An interpretation to the effect contended for by the respondents would render meaningless the clear distinction drawn in the Act between representativity within the registered scope of a bargaining council and representativity within the scope of a collective agreement concluded by a bargaining council.

As I have indicated, this distinction finds expression not only in s 32 (to the extent that s 32(5) permits the extension of agreements when parties to a council are ‘sufficiently representative’ within the registered scope of the council;  a criterion that ignores the scope of any extended agreement), but also in s 49(2)(b), where in the context of representativity requirements there is a clear reference to the number of employees who are ‘covered’ by a collective agreement that has been extended by the minister in terms of s 32, as opposed to the number of members of the union parties to council, and employees employed by members of employers’ organisations that are party to the council.

The interpretation most consistent with these provisions, regulating as they do representativity requirements for councils, is that those employees and employers who are expressly excluded from the main agreement are not ‘covered’ by it.   This is the interpretation applied by the council itself – all of its correspondence with the department relating to representativity requirements draws the distinction between the council’s registered scope and the scope of the collective agreement.

Given the significant number of employers and employees who are not covered by the main agreement but who fall within its registered scope, it cannot be said therefore that the registered scope of the council and the scope of the main agreement are one and the same thing.

[17]      It follows that the certificate of representativity, reflecting as it does representativity  within the registered scope of the council, was not relevant for purposes of the requirements of representativity established by s 32(3).   The minister ought to have had regard to the number of employees who fall within the scope of the collective agreement on extension and then first, the number of them that are members of trade union parties to the council, and secondly the number of them that are employed by members of employers’ organisations that are party to the council.

[18]      For the above reasons, I am satisfied that the peremptory requirements of s 32(3)(b) and (c) were not met when the minister decided to extend the collective agreement to non-parties.   These required an assessment of representativity within the scope of the agreement upon extension, and not within the registered scope of the council.   The minister did not have before her information regarding the number of employer organisations to the council that would fall within the scope of the agreement upon extension, nor did she have before her information as to the number of employees who upon extension would be found to be the members of the trade union parties to the council.

[19]      The wording of s 32 is such that a collective agreement may not be extended in terms of subsection (2) unless the minister is ‘satisfied’ that the requirements of paragraphs (a) to (g) have been met.   Prof Hoexter notes the following at  p 301 – 302 of the second edition of Administrative Law in South Africa:

‘Since the decision in Hurley the courts have treated ‘reason to believe’ and similar clauses objectively, and this is evident in the recent case law.   But what about clauses that are more obviously subjective, such as ‘is satisfied’?   Even before 1994 there was some judicial acknowledgement that a subjective opinion is not unfettered.   Nevertheless, such clauses are deliberately used by the legislature to signal wide discretionary power and thus to minimise the scope of judicial review.   Does the advent of the constitutional era make them less effective in this regard?

The answer must be yes, in ever to be so.   First, the right to lawful administrative action in s 33(1) of the Constitution implies that the courts must be able to satisfy themselves as to the lawfulness of administrative action, including any factual assumptions on which that action is based….

The effect of Walele  is to make all jurisdictional facts objectively dish justiciable what ever their wording.’

[20]      In Walele v City of Cape Town and others 2008 (6) SA 129 (CC), the Constitutional Court, in considering whether the Cape Town City Council had properly approved building plans submitted in support of an application to erect a four-storey building and where the empowering legislation contained a number of disqualifying jurisdictional factors (one of which was that the local authority must reject the plans if it is satisfied that the building will probably derogate from the value of adjoining or neighbouring properties), said the following:

(60)… In the past, when reasonableness was not taken as a self-standing ground for review, the city’s ipse dixit could have been adequate.   But that is no longer the position in our law.   More is now required if the decision-maker’s opinion is challenged on the basis that the subjective precondition did not exist.   The decision-maker must now show that the subjective opinion it relied on for exercising power was based on reasonable grounds.   In this case, it cannot be said that the information, which the City admitted at been placed before the decision-maker, constituted reasonable grounds for the latter to be satisfied’.

[21]      In the present instance, s 32(3) required the minister to ensure that all of the conditions listed in paragraphs (a) to (g) had been met before she extended the collective agreement.   Counsel were agreed that these jurisdictional facts, that (sic) are objectively justiciable.   The minister does not dispute that the information before her and on which she acted related only to the representativity of the parties to the bargaining council having regard to the council’s registered scope.   To the extent that the minister contends that the representativeness requirements in relation to the scope of the collective agreement are the same thing, for the reasons stated above, this cannot be so.

The factual assumption on which the minister based her decision to extend the collective agreement (i.e. the adequacy of the certificate of representativity ) was therefore incorrect.   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 that fall within the registered scope of the agreement is invalid and accordingly stands to be reviewed and set aside.

Remedy

[22]      The minister submits that in the event that the court finds that her decision falls to be set aside, the court should exercise its discretion to suspend any such order for 90 days from the date of the order, to afford the minister an opportunity to consider whether or not to exercise the power under s 32(5) of the LRA to extend the agreement to non-parties on the grounds set out in that section.

[23]      Those grounds, recorded in the supplementary affidavit filed on the minister’s behalf on 14 December 2012, prima facie appear to merit serious consideration.   The minister states that suspension of an order to set aside her decision under s 32(2) – while she takes a fresh decision, under s 32(5) – would be in the public interest.   She proposes to follow a process over a period of 90 days.   During the first 30 day period, the affected parties will have an opportunity to make written representations to the minister.   A further 30 day period will allow the parties to respond to each other’s representations.   The minister will take her decision, after consideration of all representations, during the final 30 day period.

[24]      Section 158(1) of the LRA empowers the Labour Court to make ‘any appropriate order’.   What is appropriate must be determined according to the particular circumstances of each case, taking account of the provisions and values of the Constitution and the purposes and objects of the LRA.   These include the promotion of orderly collective bargaining at sectoral level and the effective resolution of labour disputes – which would encompass avoiding labour disputes.

[25]      Section 8(1) of PAJA (the statute on which the applicants rely for this review) provides that a court in proceedings for judicial review ‘may grant any order that is just and equitable’.   That accords with the emphasis placed in s 33 of the Constitution on the element of reasonableness and fairness in relation to administrative justice and the promotion of any effective administration, and the guarantee of the right to fair labour practices and the right to engage in collective bargaining.

[26]      If the Court concludes, as it has, that the minister’s decision amounts to conduct inconsistent with the principle of legality, the correct approach to be adopted as that set up by the Constitutional Court (per Froneman J) in Bengwenyama Minerals (Pty) Ltd v Genorah Resources (Pty) Ltd and others  2011 (4) SA 113 (CC), where the court said at paragraph [84]:

‘It would be conducive to clarity, when making the choice of a just and equitable remedy in terms of PAJA, to emphasise the fundamental constitutional importance of the principle of legality, which requires invalid administrative action to be declared unlawful.   This would make it clear that the discretionary choice of a further just and equitable remedy follows upon that fundamental finding.   The discretionary choice may not precede the finding of invalidity.   The discipline of this approach will enable courts to consider whether relief which does not give full effect to the finding of invalidity, is justified in the particular circumstances of the case before it.   Normally this would arise in the context of third parties having altered their position on the basis that the administrative action was valid and would suffer prejudice if the administrative action is set aside, but even then the ‘desirability of certainty’ needs to be justified against the fundamental importance of the principle of legality’.

[27]      The primary relief to be granted then is a finding that the administrative act under review is unlawful.   Considerations of what further remedies would be just and equitable in the circumstances do not impact on the primary finding of unlawful administrative action.   As Froneman J explained:

‘The apparent anomaly that an unlawful act can produce legally effective consequences109 is not one that admits easy and consistently logical solutions.   But then the law often is a pragmatic blend of logic and experience.   The apparent rigour of declaring conduct in conflict with the Constitution and PAJA unlawful is ameliorated in both the Constitution and PAJA by providing for a just and equitable remedy in its wake.   I do not think that it is wise to attempt to lay down inflexible rules in determining a just and equitable remedy following upon a declaration of unlawful administrative action.   The rule of law must never be relinquished, but the circumstances of each case must be examined in order to determine whether factual certainty requires some amelioration of legality and, if so, to what extent.   The approach taken will depend on the kind of challenge presented – direct or collateral;  the interests involved and the extent or materiality of the breach of the constitutional right to just administrative action in each particular case’.

[28]      The general criterion is what would be in the interests of justice and good governance.   In SA National Defence Union v Minister of Defence 1999 (4) SA 469 (CC) at paragraph [42], O’Regan J, for the majority, granted an order setting aside legislation which precluded the right of defence force members to join trade unions, as constitutionally invalid, but this was suspended for a period of three months to allow the authorities to adopt a new regulatory framework.   This was aimed at avoiding the disruption to discipline that could otherwise result and ‘to ensure that labour relations develop in an orderly and constructive manner’.

[29]      More than a year of the three-year period of the extended agreement has passed.   In my view, it is appropriate, just and equitable in the circumstances, to suspend the order of invalidity, having regard in particular to the following;

(a)        If an order of invalidity were to operate with immediate effect or retrospectively, uncertainty and confusion are likely to arise in the ranks of both employees and employers as to the remuneration and other benefits to be provided to employees.

(b)        This will in all likelihood lead to tension, anxiety and potentially serious disputes which could undermine orderly collective bargaining and labour peace.   Recent events, particularly on platinum and gold mines as well as in the agricultural sector, have shown the serious prejudicial consequences of a failure to ensure smooth and orderly collective bargaining through recognised structures, sometimes manifesting in violence and under lawful industrial action.

(c)        it is in the interests of sound collective bargaining and harmonious and peaceful labour relations, and in the interests of workers, their unions and employers and in the general public interest, that the process for a decision whether or not to extend under s 32(5) of the LRA should be allowed to run its course without the potential disruption and risk of adverse consequences which could materialise if an order of invalidity were to take immediate or retrospectively effect.   This is particularly so given the degree of representativity that the parties to the council enjoy within the registered scope of the council.   While it is for the minister to determine (if she is so inclined) whether the requirements of s 32(5) are met, this is not a matter where the parties to the council enjoy a degree of representativity that would bring the application of the section beyond consideration.

[30]      Counsel for the minister submitted that the implementation of any order of invalidity be suspended for a reasonable period, and proposed a period 90 days from the date of the court order.   The other respondents represented at the hearing adopted a less optimistic view of the minister’s capacity to make a decision within that period, and proposed (sic).     This application was heard at the commencement of the year-end holiday period.   It is unlikely that any of the affected parties will be in a position to give proper consideration to what is required of them prior to mid-January 2013.   The order I intend to make will therefore be suspended for a period of four months.   This ought to afford the minister a more than reasonable opportunity to invite and receive representations on any possible extension of the agreement in terms of s 35(5) and at the same time, affords a remedy that has the effect both of balancing the competing interests at stake and upholding the principle of legality, thus serving to promote a culture of adherence to the rule of law.

Costs

[31]      Finally, in relation to costs, this matter was initially enrolled for hearing on 25 October 2011.   On that date, the ministers sought a perspire and mint of the proceedings, on the basis that she wished to respond more fully to the ground for review on which these proceedings are ultimately turned.   This additional ground for review (and not foreshadowed by the founding affidavit) was introduced by way of a supplementary affidavit deposed to on seven March 2012.   In terms of the order granted by the court on 25 October 2012, the minister was required to file a supplementary a affidavit by no later than 19 November 2012.   The affidavit was filed on 14 December 2012, almost a month late, on the Friday brackets [incomplete] something missing exercise of the broad discretion in relation to costs orders conferred on the court by the provisions of s 162 of the Act, it seems to me to be consistent with the requirements of the law and fairness that the minister be held responsible for the applicants wasted costs occasioned by the postponement on 25 October 2012.

For the above reasons, I make the following order:

  1. The decision by the first respondent in terms of which the collective agreement concluded on 18 July 2011 under the auspices of the second respondent was extended to non-parties who fall within the registered scope of the second respondent, is set aside.
  2. Government notice R 748 published in the Government Gazette number 34613 on 23 September 2011 is declared invalid and of no force or effect.
  3. Paragraphs 1 and 2 of this order is suspended for a period of four months to enable the first respondent to consider whether or not to make a decision to extend the collective agreement in terms of s 32(5) of the Labour Relations Act, 66 of 1995.   In the absence of any such decision within the period stipulated, this order shall lapse.
  4. The first respondent is to pay the applicants’ wasted costs occasioned by the postponement  of proceedings on 25 October 2012.

Signed Andre van Niekerk

Judge of the Labour Court