Jurisdiction of the CCMA to adjudicate benefit disputes expanded

The confusion that has existed for years between employers and employees over the scope of what the term “benefits” in section 186(2)(a) of the Labour Relations Act entails has finally been resolved by the Labour Appeal Court in Apollo Tyres SA (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration (2013) 34 ILJ 1120 (LAC).

This case also dispelled the fallacy that in order to have an unfair labour practice claim against an employer there has to be an employment relationship in existence at the time that the employee declared and referred an unfair labour practice dispute to the CCMA.

Until very recently, the position in South African labour law was that the Labour Relations Act only allowed an employee to refer an unfair labour practice dispute relating to employment benefits to the CCMA if such benefits were provided for in the employee’s contract of employment, the employer’s conditions of employment, collective agreement or any applicable legislation. If the benefits in dispute could not be traced back to any one of these categories, such a dispute would be classified as a dispute of mutual interest which could only be pursued by way of industrial action, and the CCMA would not have the necessary jurisdiction to arbitrate such a dispute except to conciliate it. A dispute of mutual interest is a dispute where an employee wishes to assert a right which he does not have in terms of any legislation, policy or employment contract, for example, an increment or bonus when there is no provision for such in the contract of employment. The reason for this distinction is based on the view that a wider definition of the term “benefits” could undermine the employees’ right to strike which is constitutionally entrenched.

The issue for determination in the Apollo case at the CCMA was whether an employee’s entitlement to claim benefits under an early retirement scheme fell within the ambit of the unfair labour practice provisions. Due to a decline in trade Apollo Tyres was forced to start with an early retirement scheme for monthly paid staff between the ages of 46 and 59 years. After being told that she did not qualify for the scheme, Ms Hoosen resigned and referred a dispute to the CCMA, claiming that the company’s refusal to pay her the amount specified in the voluntary retrenchment scheme amounted to an unfair labour practice relating to the provision of benefits. Apollo Tyres argued that the CCMA lacked jurisdiction to arbitrate the matter as the voluntary retrenchment scheme was not a “benefit” as contemplated by the Labour Relations Act. The commissioner however ruled that the company had committed an unfair labour practice by not admitting Ms. Hoosen to the scheme, and ordered Apollo Tyres to pay her the specified severance package.

The Labour Appeal Court considered the matter and held that the retirement benefit in Apollo Tyres had been offered to all monthly paid employees between the ages of 46 and 59. The employee was 49 and was paid a monthly wage. Apollo Tyres also had a discretion as to whether or not to grant the benefit. The issue was whether that discretion had been exercised unfairly, for example, whether the employer had acted arbitrarily, capriciously or for no justifiable reason. The Labour Appeal Court concluded that Appollo Tyres had shifted the goal posts and had provided no credible reason for not granting the employee an early retirement package. The court accordingly held that Apollo Tyres had perpetrated an unfair labour practice by excluding the employee from the early retirement scheme and dismissed the appeal with costs.

In arriving at its decision the Labour Appeal Court enunciated the following important legal principles:

  • A proper approach is to interpret the term “benefit” to include a benefit to which an employee is entitled (from contract or from legislation, including rights judicially created) as well as an advantage or privilege which the employee has been offered or granted in terms of a practice subject to the employer’s discretion. Those judgments in which a contrary approach was adopted are accordingly wrong.
  • Employees who wish to use unfair labour practice jurisdiction to claim a right to be promoted, receive training or be granted employment benefits, do not have to prove a right to be promoted or trained if the fairness of the employer’s conduct is challenged.
  • The concern that a wide definition of “benefit” will undermine the right to strike is no longer justified.
  • Disputes over the provision of benefits fall into two categories. Where the dispute is not based on an allegation that the grant or removal of a benefit is unfair, strike action is the remedy. Where the dispute concerns the fairness or otherwise of the employer’s conduct, it can be adjudicated through arbitration.

The Labour Appeal Court went further and held that there are at least two instances of conduct by an employer relating to the provision of benefits that may be subjected to scrutiny by the CCMA under its unfair labour practice jurisdiction:

  • The first instance is where an employer fails to comply with a contractual obligation that it has towards an employee. In this instance, an employee would still only be able to refer a dispute to the CCMA for adjudication if such a dispute is based on a right or benefit contained in the contract of employment, or alternatively in law.
  • The second situation is where the employer exercises a discretion that it enjoys under the contractual terms of a scheme conferring a benefit. In this instance, even where the employer enjoys a discretion in terms of a policy or practice relating to the provision of benefits, such conduct can be scrutinized by the CCMA.

As a result, the term “benefit” in the Labour Relations Act has now been expanded to include not only existing advantages or privileges to which an employee is entitled to as a right, but also those advantages and privileges granted in terms of a policy or practice over which the employer has a discretion. Employers should thus exercise extra care when exercising their discretion and implementing policies relating to benefits.

This judgment may also be seen to have potentially opened the floodgates for referrals by unsatisfied employees to the CCMA regarding privileges and advantages awarded by an employer at its discretion. Importantly thougth, the unfair labour practice jurisdiction cannot be used by employees to assert an entitlement to new contractual terms such as new benefits, new forms of remuneration or new policies not previously provided for by the employer.

It is clear that employers faced with having to exercise a discretion as to whether to grant certain benefits or not must exercise such discretion in a fair, transparent and justifiable manner to avoid falling foul of the unfair labour practice provisions of the Labour Relations Act.

September 30, 2013

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