Employment law update – Substance over form

September 1st, 2020

Pelindaba Workers Union v SA Nuclear Energy Corporation and Others (LAC) (unreported case no JA73/2018, 25-6-2020) (Sutherland JA with Davis JA and Savage AJA concurring)

At the centre of this matter was the correct categorisation of a dispute, which came before the Commission for Conciliation, Mediation and Arbitration (CCMA). Additionally, the correct categorisation of the dispute had a direct impact on the CCMA’s jurisdiction to hear the matter.

By way of collective bargaining the employer and the majority union, the National Education, Health and Allied Workers’ Union (NEHAWU), negotiated a 7,5% remuneration increase for employees within band A of the employer’s structures. The employer took a decision to extend the same increase to employees in band B, however, only granted employees in band D an increase of 5,5%.

Unhappy with the disparity in respect of increases between the different bands, the appellant trade union, (a minority and unrecognised union) referred an unfair labour practice dispute on behalf of its members who were employed within band D.

The union, Pelindaba Workers Union (PWU) described the employer’s conduct as an unfair act or omission involving unfair conduct relating to the provisions of benefits to an employee.

At the onset the employer challenged the CCMA’s jurisdiction to hear the matter – according to the employer the dispute was not one relating to benefits and for this reason, the CCMA lacked jurisdiction to entertain the referral.

The arbitrator found that the dispute related to benefits thus invoking CCMA’s jurisdiction to hear PWU’s claim. This finding was later set aside by the Labour Court on review.

PWU approached the Labour Appeal Court (LAC) on appeal.

The LAC noted that the dispute before the arbitrator was to firstly ascertain the true nature of the dispute. Moreover, and axiomatic to this approach, the arbitrator would have addressed the issue of jurisdiction – if the true nature of the dispute was one relating to benefits – then the CCMA would have jurisdiction to hear the matter if, however, the true nature of the dispute did not relate to benefits, then it would follow that the CCMA did not have jurisdiction to continue with the matter.

The LAC reiterated the test to adopt when determining the true nature of a dispute, was to examine the substance of the dispute and not the form of the dispute or how the referring party has categorised the dispute (see Coin Security Group (Pty) Ltd v Adams and Others (2000) 21 ILJ 924 (LAC) and National Union of Metalworkers of SA and Others v Bader Bop (Pty) Ltd and Another (2003) 24 ILJ 305 (CC)).

Having made this point, the task before the LAC was to determine whether the dispute referred by the trade union, satisfied the meaning of benefits as contemplated in s 186(2)(a) of the Labour Relations Act 66 of 1995 (LRA).

As to what constitutes a ‘benefit’ for purposes of an unfair labour practice, the court referred to the decision of Apollo Tyres SA (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (2013) 34 ILJ 1120 (LAC), wherein the LAC in that matter stated:

‘In my judgment “benefit” in s 186(2)(a) of the Act means existing advantages or privileges to which an employee is entitled as a right or granted in terms of a policy or practice subject to the employer’s discretion.

On the other hand, where an employee wants to use the same remedy in relation to the provision of benefits such an employee has to show that he or she has a right or entitlement sourced in contract or statute to such benefit’.

Returning to the jurisdictional ruling, the arbitrator’s reasoning for accepting the matter related to benefits (and hence the CCMA had jurisdiction to hear the matter), was as follows –

  • no collective bargaining took place in respect of employees on band D;
  • thus the increase of 5,5% to employees in band D was a unilateral act of the employer;
  • this unilateral decision made by the employer was in terms of a ‘policy’ of the employer;
  • the ‘policy’ in question was the employer’s decision to apply a sliding scale to wage increases for that year; and
  • therefore, the increase in wages constitute a benefit as envisaged in s 186(2)(a) of the LRA, which in turn, meant the CCMA had jurisdiction to hear the dispute.

Expressing its views on the arbitrator’s findings, the LAC held:

‘The reasoning is fundamentally flawed. It constitutes, in part, a series of non sequiturs. The elevation of an ad hoc decision to grant different percentage increases into a “policy” is fatuous. The approach seems to have been influenced by the decision in Apollo, which articulates the idea that a benefit as contemplated by section 186(2)(a) is something which can be conferred pursuant to a practice or policy. It does not follow that a “policy” decision of the management to grant differential wages increases in a particular year is a “policy” in the sense of a practice or a policy as described in Apollo. Moreover, the notion that a benefit can form part of remuneration, itself uncontroversial, seems another influence; but plainly, that notion cannot be harnessed to support the conclusion reached on these facts. … Lastly, it may be that the critical element in the flawed reasoning is that the commissioner seemingly equated a decision made in consequence of a discretion reserved to management as the antithesis of collective bargaining and ergo, if giving money to employees is not the result of collective bargaining, it must follow that it is a benefit. Plainly that is incorrect; a grant of a “benefit” is not the flip-side of a collective agreement derived from collective bargaining’.

Before the LAC, PWU persisted with a similar approach as the one adopted by the arbitrator. It argued that the employer took a unilateral decision to extend a wage increase, which increase was a product of collective bargaining in respect of employees in band A, to other bands of employees but not to employees in band D. This according to the union demonstrated that the employer’s decision not to extend the same increase to employees in band D was arbitrary, capricious and inconsistent, which in turn triggered the protection afforded to employees in terms of a s 186(2)(a) of the LRA. The court rejected this argument. The conclusion or rationale reached by PWU did not necessarily follow the logic of its argument. The court concluded that the meaning of a benefit had been confined to a meaning prescribed in binding authority and against which, the union’s argument fell short.

The appeal was dismissed with no order as to costs.

Moksha Naidoo BA (Wits) LLB (UKZN) is a legal practitioner holding chambers at the Johannesburg Bar (Sandton), as well as the KwaZulu-Natal Bar (Durban).

This article was first published in De Rebus in 2020 (Sept) DR 49.