Employment law update – Private arbitration v collective agreement dispute resolution path

June 1st, 2012

The National Bargaining Council for the Road Freight Industry and Another v Carlbank Mining Contracts (Pty) Ltd and Another (LAC) (unreported case no JA52/10, 20-3-2012) (Murphy AJA)

By Moksha Naidoo

Is an agreement between an employer and employee to refer an unfair dismissal dispute to private arbitration valid if both parties are subject to a collective agreement that specifically provides for the dispute to be referred to a statutory arbitrator appointed by the bargaining council? This was the question the Labour Appeal Court (LAC) faced in this case.

Factual background

As a labour broker, the first respondent, Carlbank, employed the second appellant, Mosoeu, and placed him at a client. As its client was in the road freight industry, both Carlbank and Mosoeu were bound by the first appellant council’s collective agreement, which provided for a specific dispute resolution path. In line with this path, Mosoeu referred an unfair dismissal dispute to the council.


Before the second respondent, Fourie (whom the council appointed to conciliate the dispute), Carlbank’s representative raised the point that the council lacked jurisdiction and handed up Mosoeu’s employment contract, in which the following was recorded:

‘In the event of a dispute arising as a result of this agreement, the dispute will be submitted to arbitration in terms of the Arbitration Act of [42 of] 1965, by way of written notice thereof. … The arbitrator will be selected from the [private arbitrator] Tokiso list of panellists.’

Carlbank’s representative argued that, in terms of this, the parties agreed that the dispute should be referred to a private arbitrator and hence the council did not have jurisdiction to hear the matter.

Among Fourie’s reasons for accepting jurisdiction, she referred to s 199 of the Labour Relations Act 66 of 1995 (LRA) and found the collective agreement took precedence over the private arbitration clause. She further found that, if bound by the clause, Mosoeu would be prejudiced by not enjoying the benefits of a conciliation process before the dispute was arbitrated and, secondly, he could possibly be expected to contribute to the arbitrator’s costs.

To understand the prejudices Fourie referred to, one must examine both the dispute resolution path as set by the council (in terms of its collective agreement) and s 199 of the LRA.

The council’s collective agreement provided for every unfair dismissal dispute to first be conciliated and, if not resolved, arbitrated. Both the conciliator and arbitrator would be appointed from the council’s panel at no cost to either party.

Section 199 of the LRA states:

‘(1) A contract of employment, whether concluded before or after the coming into operation of any applicable collective agreement or arbitration award, may not –

(a) permit an employee to be paid remuneration that is less than that prescribed by that collective agreement or arbitration award;

(b) permit an employee to be treated in a manner, or to be granted any benefit, that is less favourable than that prescribed by that collective agreement or arbitration award; or

(c) waive the application of any provision of that collective agreement or arbitration award.

(2) A provision in any contract that purports to permit or grant any payment, treatment, benefit, waiver or exclusion prohibited by subsection (1) is invalid.’

Review at the Labour Court

In Carlbank Mining Contracts (Pty) Ltd v NBCRFI and Others [2010] 11 BLLR 1142 (LC) Van Niekerk J categorised the debate as one that focused on the LRA’s encouragement of private dispute resolution versus the LRA’s promotion of sectorial collective agreements.

Having found that in terms of the private arbitration clause Masoeu’s dispute would be referred to a reputable dispute resolution agency at no cost to the employee, the court held that the clause did not place Mosoeu in a less favourable position as compared to the dispute resolution path set by the council. On the issue of a waiver, the court noted that the collective agreement did not compel a party to refer a dispute to the council. Put differently, the collective agreement did not create a right for a party to refer his dispute to the council. Thus the agreement to arbitrate privately could not waive an application of the collective agreement if the collective agreement did not compel parties to refer their dispute to the council.

The court ruled that the private arbitration clause was valid and, in doing so, found that the council did not have jurisdiction to hear the dispute. Fourie’s findings were therefore set aside.

Appeal to the LAC

On appeal to the LAC, the council maintained its argument that the private arbitration clause was invalid in terms of s 199(1)(b) read with s 199(2) as Mosoeu would be prejudiced if bound by the arbitration clause as compared to having referred his dispute to the council. The two reasons advanced by the council on this point were:

  • The private arbitration clause was silent on who bears the costs of the arbitration, which could lead to Mosoeu having to contribute to such costs. This would be in contrast to having the dispute arbitrated at the council at no cost to either party.
  • Secondly, unlike the dispute resolution path as set out in the collective agreement, Carlbank and Mosoeu would not have their dispute conciliated before an arbitrator makes a final and binding decision. Thus Mosoeu would not enjoy the benefits associated with the conciliation process.

The council further argued that the clause was invalid in terms of s 199(1)(c) as it waived the application of the collective agreement.

The LAC’s findings

On the issue of costs, although the LAC acknowledged Carlbank’s offer to pay all costs associated with the private arbitration, as contained in its founding affidavit, the court held that in the absence of a written obligation in the arbitration clause to do so, nothing prevented it from requiring Mosoeu to contribute to such costs.

With regard to the preclusion of the conciliation process, Murphy AJA said the following:

‘The arbitration clause in the present matter does not grant an employee the benefit of such a procedure. The virtue of conciliation is in the possibility it presents for the dispute to be resolved in a less adversarial fashion by means of a consensus-seeking process. This has obvious advantages for the continuation of the employment relationship should reinstatement prove to be an appropriate remedy. The conciliation procedure in the collective agreement has the additional advantage of being an opportunity to obtain a quick, non-binding award by less litigious means from a skilled independent mediator, which will allow the parties to reflect upon their options on a more informal basis. The arbitration clause in the contract of employment denies the employee these benefits and thus permits less favourable treatment.’

In comparing the collective agreement, the court noted further unfavourable instances the employee would face if bound by the private arbitration clause. Among these were:

  • Unlike the collective agreement, the private arbitration clause did allow the employee to compel the arbitration process.
  • An arbitrator, acting in terms of the private arbitration agreement, could award costs against a party despite the claim being neither vexatious nor frivolous, whereas an arbitrator appointed by the council could only award costs if the claim was vexatious or frivolous.

Based on these findings, the LAC held that the private arbitration clause was invalid in terms of s 199(2) as it permitted less favourable treatment than that prescribed by the collective agreement.

Turning to s 199(1)(c) and having regard to clause 5 of the collective agreement, which stated: ‘All disputes shall, if required by the Act, be referred to council for conciliation and arbitration’, the LAC took a contrasting view to that of the Labour Court. It held that, as a provision in the collective agreement, clause 5 meant that a party had an entitlement to refer a dispute to the council. The private arbitration purported to waive this entitlement and, in doing so, rendered the clause invalid in terms of s 199(1)(c).

The appeal was upheld and the decision of the Labour Court was substituted with an order dismissing Carlbank’s review application.

Moksha Naidoo BA (Wits) LLB (UKZN) is an advocate at the Johannesburg Bar.

This article was first published in De Rebus in 2012 (June) DR 55.