Employment law update – Prescription of arbitration awards

June 1st, 2021
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In South African Tourism v Monare [2021] 4 BLLR 386 (LAC) a former employee instituted a claim for payment in respect of loss of salary. The employee had been engaged on a fixed-term contract for three years but was dismissed prior to the expiry of the contract. The employee referred an unfair dismissal dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA). The dismissal was found to be substantively unfair, and reinstatement was ordered with backpay. When the employee wished to tender his services, he was advised by the employer not to report for duty as the arbitration award was to be taken on review.

On review, the Labour Court (LC) set the arbitration award aside on the basis that the CCMA lacked jurisdiction to determine the dispute. The matter was then taken on appeal to the Labour Appeal Court (LAC) where the LAC overturned the LC’s decision, and the reinstatement order was accordingly revived. By this time, the fixed-term contract had already expired, and the employee accordingly could not be reinstated to his position. The employee subsequently launched an application in the LC for the recovery of his lost salary.

The employer argued that the claim had prescribed but the LC found that the claim had in fact not prescribed. In the circumstances the employer was ordered to pay the employee damages as a result of the loss of salary from October 2010 to January 2015. This amount was calculated with reference to the exchange rate as at the expiry of the contract in January 2015. The employer took the decision on appeal and the employee cross-appealed alleging that the exchange rate to be applied should be that at the time of payment. He also alleged that the employer should have been ordered to pay costs and that the LC erred in not dealing with interest on the outstanding amount.

The LAC was required to consider whether the LC erred in finding that the claim for arrear salaries had not prescribed and in not making an order in respect of interest payable. Furthermore, the LAC had to consider whether the exchange rate that was applied was correct and whether an order of costs should have been made. In determining whether the claim had prescribed, the LAC had to determine whether the cause of action arose when the employee was dismissed on 30 September 2010 and whether the reinstatement order was suspended for the period between the LC judgment and the LAC judgment and if so, whether this also suspended the contractual claim.

According to the employer, the claim had prescribed as the cause of action to claim arrear salaries arose more than three years prior to the date when the employee was dismissed as the employee could have instituted a contractual claim immediately thereafter and could have sued the employer for damages or specific performance. This argument was on the basis that the employer alleged that it had repudiated the contract and at that point the employee did not have to wait for anything further before bringing such a claim. The LAC found that this argument would only be applicable if the employee had accepted the repudiation of his contract. This was not the case as the employee had immediately disputed the termination when he referred a dismissal to the CCMA and accordingly took steps to revive and enforce the contract as opposed to cancel it. The current claim arose because the employer did not comply with the reinstatement order. If the employer had complied with the reinstatement order, then the employee would have received payment of a salary as and when such payment fell due in terms of the contract. It was due to the employer’s conduct that the employee was not reinstated as per the order and this claim could only have arisen after the reinstatement order was revived by the LAC.

The LAC found that this was a contractual claim and agreed that there was no full cause of action before the LAC judgment on 11 November 2015. It was held that prescription starts to run when a debt becomes due and payable. Prescription, therefore, only began to run from the date that the new cause of action arose when the employer did not comply with the reinstatement order, which was a separate claim to that at the time of dismissal.

Regarding the cross appeal, the LAC found that the LC had erroneously not dealt with interest on the salaries claimed. It was held that the interest would run from the date of expiry of the fixed-term contract. Regarding costs, the LAC found that it was appropriate to award costs when regard was had to the fact that this was a civil claim, the parties had agreed that costs would follow the result and the employee had to bring a further application to enforce payment. It was held that the rule of practice that costs should generally not follow the result in LC disputes was relevant to employment and labour disputes but did not apply to civil claims to claim arrear wages. The appeal was dismissed, and the cross-appeal was upheld. Therefore, the claim had not prescribed, and the employer was required to pay the costs of the proceedings.

 

In NUM obo Majebe v Civil and General Contractors [2021] 4 BLLR 374 (LAC) the employee wanted to enforce a reinstatement order eight years after the award was issued. In this case, the employee was dismissed for misconduct in 2006. The dismissal was found to be unfair by the Commission for Conciliation, Mediation and Arbitration (CCMA) and in 2007 reinstatement was ordered with retrospective effect. The employer subsequently instituted review proceedings.

In 2014 the employee applied to have the award made an order of court. The employer then argued that the arbitration award had prescribed. The Labour Court (LC) agreed that the arbitration award had prescribed on the basis that the filing of a review application did not interrupt prescription. Two years later the employee appealed against the LC’s judgment. The employee applied for condonation on the basis that there had since been a judgment handed down in Myathaza v Johannesburg Metropolitan Bus Services (SOC) Ltd t/a Metrobus and Others [2017] 3 BLLR 213 (CC), which improved his prospects of success. This is because the LC decision in upholding the plea of prescription was based on the decision of the LC in Myathaza v Johannesburg Metropolitan Bus Service Soc Ltd t/a Metrobus In re: Mazibuko v Concor Plant; Cellucity (Pty) Ltd v Communication Workers Union obo Peters [2016] 1 BLLR 24 (LAC), in which it was held that an arbitration award is a ‘debt’ as per the Prescription Act 68 of 1969 and, as such, prescribes after three years. This decision was then overturned by the Constitutional Court (CC) in terms of which, four judges found that the Prescription Act is incompatible with the Labour Relations Act 66 of 1995 (LRA), and four judges found that it did not contradict the LRA, but that referring a dispute to the CCMA interrupted prescription. Condonation was accordingly granted based on excellent prospects of success, as well as the fact that there was no real prejudice to the other party, hearing the matter was in the interests of justice and the appeal would bring about certainty regarding the prescription of awards in terms of the LRA.

Subsequently in Food and Allied Workers’ Union obo Gaoshubelwe v Pieman’s Pantry (Pty) Ltd [2018] 6 BLLR 531 (CC) the CC held that the Prescription Act is not inconsistent with the LRA and that claims under the LRA do prescribe. In light of this, the Prescription Act does apply to orders for reinstatement or compensation and such claims prescribe after three years. It was held, however, that the referral of an unfair dismissal dispute to the CCMA interrupts prescription until any review proceedings are finalised. The appeal was accordingly upheld, and the matter was remitted to the LC for determination if the parties wished to pursue that application.

Monique Jefferson BA (Wits) LLB (Rhodes) is a legal practitioner at DLA Piper in Johannesburg.

This article was first published in De Rebus in 2021 (June) DR 35.

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