The Labour Court reviewed and refused to set aside an award concerning a settlement agreement concluded more than 5 years ago and having the effect of awarding back pay of about R18 million to 47 reinstated employees.  The award dated 16 April 2012 applied retrospectively to the date of dismissal on 3 February 2006.  The invalid and unfair reason to dismiss related to a refusal of the employees to attend a presentation on a BEE share incentive scheme that was in the process of being created by the employer.

Genrec Engineering (Pty) Ltd v Metal and Engineering Industries Bargaining Council and Others (JR1284/12) [2016] ZALCJHB 213 (17 June 2016) per P Benjamin AJ.

Excerpts without footnotes

Meaning of “back pay” in the settlement agreement

[10] The company argued that the term “back pay” should not bear its normal meaning in the agreement as it applied to both employees who returned to work in terms of the agreement, as well as those who had died in the interim and those who have elected not to return to work in response to the undertaking of reinstatement contained in the agreement.  As these two categories of employees, whose position is specifically dealt with in paragraph 3 of the agreement, at no stage returned to work subsequent to the dismissal in 20 November 2005, it was argued that the monies awarded to them could not be “back pay” and, accordingly, the term “back pay” could not bear its normal meaning in the agreement.   The union, in response argued, that the meaning of the term back pay was sufficiently broad to encompass any award of payment for the period up until the employees were entitled to return to work in terms of the settlement agreement.

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[15] I am of the view that term “back pay” as used in the settlement agreement refers to payment for the period between the date of dismissal and the date on which the reinstatement statement took effect in terms of the agreement. The fact that the deceased employees were unable to tender their services for reinstatement and the fact that certain others elected not to do so, does not alter the fact that payment for the period between their dismissal in February 2006 and their entitlement to tender their services for reinstatement in September 2011 can be considered to be back pay.  In other words, payment for this period does not only constitute back pay at such time as an employee tenders his or her services.

[16] There is nothing in the text of the agreement that supports the conclusion that the arbitrator’s powers were limited to an award of compensation as contemplated by section 194(1) of the LRA.  It would not be a reasonable interpretation to imply into the agreement a 12-month limitation on the award that the arbitrator could make in the absence of either an explicit reference to the relevant statutory provision or the use of language mirroring the relevant statutory provision.

[17] In my view, the agreement correctly construed gives the arbitrator a power to determine back pay for the period between the date of dismissal on 6 February 2006 and the date when the reinstatement took effect, 18 September 2011.  Accordingly, this ground of review must fail.

[18] As indicated above, the union adopted the view in its argument before the arbitrator that the effect of the agreement was that arbitrator was obliged to award full back pay to the dismissed employees and had no discretion to award a lesser amount.  The employer argued in this review that the arbitrator had merely accepted that argument and accordingly the arbitration award should be set aside.  Counsel for NUMSA in the review conceded that the union representative representing NUMSA in the arbitration had argued that the arbitrator did not have a discretion to award a lower amount of compensation.  However, he submitted that the arbitrator had rejected this argument and had properly applied his mind to determining the quantum of back pay that he should award.   I accept that as a correct submission.  It is evident from the arbitration award that the arbitrator was of the view that he had a discretion and analysed the submissions and information before him in order to exercise that discretion.  That the arbitrator sought to exercise his discretion on the basis of the evidence that the parties placed before him is evident from the analysis of the further grounds of review that follows.

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Inconsistency and bias in the admission of evidence

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[46]    While it is appropriate that arbitrations are conducted with less formality than court cases,[3] this does not imply that arbitrations should be a free-for-all in which parties can introduce evidence in any way and at any time they see fit.  The company must have known, at the time it submitted the document, that the arbitrator could not have admitted it as evidence and would, at a minimum, have had to permit the employees concerned to respond to its contents.  Under the circumstances, the company should, at the very least, have submitted an affidavit by one of its officials who had secured the document to explain its contents or an affidavit by a relevant official of the Department of Labour who had provided the information and applied for a re-opening of the arbitration.  The fact that the arbitrator rejected the submission of the document in these circumstances is not a decision that a reasonable arbitrator could not have come to nor is it a failure to apply an approach that is consistent with the approach of the LRA to dispute resolution, as typified by section 135 (1)) of the LRA.

The company’s financial position

[47] A further attack by the company is that the arbitrator did not take into account the fact, stated by the Counsel for the employer in its heads of argument at the arbitration, that the company had made a loss of R1,8 billion during the previous financial year.  In rejecting the argument that this was a relevant factor in determining the quantum of back pay, the arbitrator stated:

‘The respondent has not placed any specific or written or oral evidence before me as to what brought about the huge financial loss.’

[48] The arbitrator’s conclusion in this regard is entirely justifiable.  The company failed to present any evidence placing the loss of R1, 8 billion in context.  It would have been entirely arbitrary for the arbitrator to reduce the quantum of back pay merely because this substantial loss had been mentioned.  The company did not argue that the award in this case would place untenable strain on its financial resources nor did it explain the reason for the loss in the previous financial year.  If anything, the fact that the company could sustain a loss of that type in the previous financial year and still be in operation is an indication that the award, which amounts to some R 18 million, would not have a significant impact on its overall financial position.  Accordingly, the fact that the arbitrator did not consider that he should reduce the back pay award in the light of the company’s financial position is not a reviewable irregularity.