“ Legal attacks by non-parties to extensions of collective agreements ” Alec Freund SC

1. “Legal attacks by non-parties to extensions of collective agreements” Alec Freund SC

2. INTRODUCTION • Extension of Bargaining Council (BC) agreements to non-parties is a common feature of South African labour relations • Emergence in the last year or two of quite a few legal challenges to extension decisions • Proffered explanation: Inability to afford terms and conditions imposed by agreement between larger employers and trade unions; job losses and plant closures

3. INTRODUCTION • Numerous legal questions arising, many of which are not yet settled. These include: • Whether the extension decision(s) constitutes “administrative action” in terms of PAJA • Application of some of the key requirements, especially in respect of representativeness • Any obligation to hear non-parties? • Any obligation to act reasonably? • Problems concerning remedies • Constitutional challenges

4. The Legislative Framework • Extension provisions of the 1995 LRA built on provisions going back to the 1924, 1937 and 1956 Industrial Conciliation Acts • Key provisions of the 1956 Act: • Section 48(1): Minister “may, if he deems it expedient to do so”, declare an agreement binding on non-parties • Section 42(2)(b): no extension to non-parties “unless the Minister is satisfied that the parties to the agreement are sufficiently representative of the employers and employees” covered by the agreement

5. Key Provisions of the 1995 LRA • Section 32 applies to a collective agreement “concluded in” a BC • Section 32(1): There must be “a meeting of the bargaining council” where sufficient TU and EO parties vote in favour of an extension • TU’s “whose members constitute the majority of the members of the trade unions that are party to the bargaining council” must vote in favour of extension; and • EO’s “whose members employ the majority of the employees employed by the members of the Employers’ Organisations that are party to the bargaining council” must vote in favour of the extension • (These TU’s and EO’s need not necessarily be parties to, or affected by, the agreement.) • (cntd)

6. Key Provisions of the 1995 LRA • Section 32(2) – the Minister “must” extend the collective agreement within sixty days by publishing a notice in the Government Gazette • Section 32(3) – A collective agreement may not be extended in terms of section 32(2) “unless the Minister is satisfied that…” • Section 32(3)(b): “The majority of all the employees who, upon extension of the collective agreement, will fall within the scope of the agreement, are members of the trade unions that are parties to the bargaining council” • Section 32(3)(c): “The members of the employers’ organisations that are parties to the bargaining council will, upon the extension of the collective agreement, be found to employ the majority of all the employees who fall within the scope of the collective agreement” • (cntd)

7. Key Provisions of the 1995 LRA • Section 32(3)(e): Provision is made for exemption applications and appeals to an independent body • Section 32(3)(f): The collective agreement contains exemption criteria that “are fair and promote the primary objects” of the LRA • Section 32(3)(g): The terms of the collective agreement do not discriminate against non-parties • Section 32(5): Where section 32(3)(b) or (c) representativeness requirements are not met, the Minister still has a discretion to extend, if certain jurisdictional facts exist.

8. Administrative Action? • Is the decision by the Minister to extend “administrative action”? • Is the decision by the Bargaining Council to request the Minister to extend “administrative action” or part of “administrative action”? • The first of these questions was argued but not considered in the judgment in Valuline (“irrelevant to a review based on the principle of legality”) • “Administrative action” on the part of the Minister assumed (conceded?) in NEASA • “Exercising a public power of performing a public function in terms of an empowering provision” • “Which adversely affects the rights of any person…” • (cntd) • Valuline CC v Minister of Labour [2013] 6 BLLR 614 (KZP) • NEASA v Minister of Labour (2013) 34 ILJ 1556 (LC)

9. Administrative Action? • Is a decision to issue subordinate legislation a “decision”? • CC divided in New Clicks. Chaskalson CJ: Pricing committee’s recommendation and Minister’s decision to issue regulation part of a single administrative action. (But no clear majority.) • On Chaskalson CJ’s approach the BC’s section 32(1) decision forms part of “administrative action”, as does the Minister’s extension decision, particularly where the section 32(3) requirements are met • City of Tswane (SCA): Making regulations constitutes administrative action • Minister of Health v New Clicks 2006(2) 311 (CC) • City of Tswane Metropolitan Municipality v Cable City (Pty) Ltd 2010(3) SA 589 (SCA) accepts that the making of regulations constitutes administrative action

10. Reviewing the Minister’s “satisfaction” • What test is to be applied where the Minister states that she was “satisfied”? • Walele v City of Cape Town CC holds: “The decision-maker must now show that the subjective opinion it relied on for exercising power was based on reasonable grounds” • Followed in NEASA and Valuline • 2008(6) SA 129 (CC)

11. EO representativeness in terms of section 32(3)(c) • Same principles apply to TU representativeness in terms of section 32(3)(b) • Section 32(3)(c): “The members of the employers’ organisations that are parties to the Bargaining Council will, upon the extension of the collective agreement, be found to employ the majority of all the employees who fall within the scope of the collective agreement” • Section 49(4): “A determination of the representativeness of a Bargaining Council in terms of this section is sufficient proof of the representativeness of the council for the year following the determination” • (cntd)

12. EO representativeness in terms of section 32(3)(c) • Minister’s reliance on section 49(4) certificates results in successful reviews in both NEASA and Valuline (no “reasonable grounds” for satisfaction) • NEASA: Clear on the facts that the certificate addressed a different representativeness question, unhelpful in determining section 32(3)(c) representativeness • Valuline: Scope of the collective agreement arguably the same as BC’s registered scope • Current section 49(4) certificate certified that employer parties employed more than 50% of employees in registered scope of BC • BC’s later referral application form disclosed less than 50% representativeness • (cntd)

13. EO representativeness in terms of section 32(3)(c) • Koen J: “…even assuming some substantive measure of similarity or identity, the figures as per the certificate differed crucially as to whether the representation was more or less than 50%...” • Minister “…could not simply ignore those figures and accept those in the section 49(4) certificate” • Practice of relying on certificates abandoned?

14. How many employees fall within the scope of the collective agreement? • Collective agreements require all affected employers to register and to disclose their scheduled employees • Figures produced by BC’s (and verified by the Registrar) are based on the BC’s records derived from employers’ returns • In Valulinethe Bargaining Council was aware of less than 60,000 scheduled employees, but the applicants alleged that the true number exceeded 90,000 • If reliance cannot be placed on employer returns to the BC, is section 32(3) (or even section 32(5)) workable at all?

15. Must non-parties be afforded a right to a hearing? • Raised in NEASA and in Valuline but not considered in the judgments • Point seems arguable if the decision(s) constitute “administrative action” • The 60 day period and the failure to provided expressly for some “notice and comment” procedure might indicate that audi was intended to be excluded; alternatively fair procedure requirement may be discharged by right to apply to join BC or right to apply for exemption from the agreement • Recent amendment introduces notice and comment requirement where section 32(5) is invoked (impliedly excluding audi where section 32(3) requirements are met?)

16. Failure to specify fair exemption criteria • Raised but not decided in several cases • Likely to be raised again • If the Minister was not reasonably satisfied that the criteria exist and are fair, will this result in the entire extension decision being retrospectively set aside?

17. Minister to consider impact on jobs? • Clearly discernible removal of discretion where the section 32(3) jurisdictional facts exist • Valuline holds that the Minister enjoys no discretion. • Unreasonableness of extending without considering impact on jobs raised in Valuline; argument doubted but not decided

18. Extensions in terms of section 32(5) • Discretion to extend despite non-compliance with section 32(3)(b) and (c) if: • The parties to the BC are sufficiently representative within the registered scope of the BC: and • The Minister is satisfied that failure to extend may undermine collective bargaining at sectoral level • Perhaps permissible to rely on section 49(4) certificate? • Duty to consider impact on jobs as part of a duty to act reasonably more arguable • Perhaps susceptible to different constitutional attacks?

19. Remedies Interdict pending a review? • Refused in first NEASA judgment (partially on the basis that, if successful, the review would afford a satisfactory remedy) • This argument doubtful, having regard to the order given in the successful review • But Court recognised the right of non-party employers to raise a collateral attack on the validity of the extension if the BC pursued enforcement arbitration proceedings • NEASA v Minister of Labour (2012) 33 ILJ 929 (LC)

20. Remedies Court’s discretion regarding remedy when review succeeds • Normal consequence of successful review: decision invalid and set aside with full retrospective effect • Potential implications: • Wages and conditions of employment in the industry unregulated until next valid extension decision • Potential claims by employers against employees • Potential claims by employers and employees against BC’s for repayment of subscriptions, pension fund and medical aid contributions, etc. • NEASA – Order of invalidity suspended for four months to enable Minister to consider invoking section 32(5) • Valuline – refused to suspend or even to limit the retrospective affect of the order of invalidity

21. Constitutional Attacks • If Minister precluded from considering impact on jobs, provision requires unreasonable administrative action (the Valulineargument) • Impermissible to abdicate legislative power to a Bargaining Council (whose parties make decisions in accordance with their own self interest). Also: failure to confer any discretion on the Minister. ( FMF arguments, also raised in the MIBCO application) • Section 32 enables a minority to coerce the majority: limits inter alia freedom of association (an FMF argument) • Potentially complex “justifiability” arguments – see the Valuline respondents’ affidavits • All constitutional attacks thus far have refrained from attacking the principle of extension to non-parties • The core economic and social arguments of opponents to extensions seem to be more political than based on constitutionality

22. A few conclusions • Unsafe to rely on section 49 certificates • Risky to continue to rely solely on figures derived from employer returns to BC’s • Seems likely the Minister will rely more and more on section 32(5). This: • Arguably defeats the intended removal of discretion • Possibly opens the Minister up to reasonableness review • Emerging trend of legal attacks on extension decisions likely to intensify