ARBITRATING WHERE
THERE IS AN
AGREEMENT TO
PRIVATE ARBITRATION
PURPOSE
A look at the current legislative
framework - contrasted with proposed
amendments
SECTION 147 (6) - CURRENT FORM
1.
“If at any stage after a dispute has been referred to the
Commission, it becomes apparent that the dispute ought to
have been resolved through private dispute resolution in
terms of an agreement between the parties to the dispute,
the Commission may (a) refer the dispute to the appropriate person or body
for resolution through private resolution procedures; or
(b) appoint a commissioner to resolve the dispute in
terms of this Act.” (my emphasis)
SECTION 147 (6)
• The wording of the S147 (6) in its current form confers a
discretion on the Commission to refer the matter to the
appropriate body or arbitrate the dispute
• In exercising the discretion a commissioner will look into a
whole host of factors
• Factors are not listed in the LRA but can be gleaned from
the founding provisions of the LRA
• Labour Court decisions are instructive
LC DECISIONS
SACTWO obo STINISE v DAKBOR CLOTHING (PTY) LTD &
OTHERS (2007) ILJ 1318 (LC)
• The court did not find an private arbitration clause in a
contract of employment to be binding and to exclude the
jurisdiction of the council
• Reference to S199 of the LRA made
LC DECISIONS
“199 Contracts of the employment may not disregard or waive collective
agreements or arbitration awards
(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)…
(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) Any provision in any contract that purports to permit or grant any
payment, treatment, benefit, waiver or exclusion prohibited by sub-s (1) is
invalid.”
LC DECISIONS
• Court noted commissioner did not deal with whether the private
arbitration clause in the employment contract offered the
employee less favourable terms than those prescribed in a
collective agreement
• Court found S199 (1) (c) to be applicable i.e. the private
arbitration agreement clause waived the collective agreement
Conclusion
• A collective agreement takes primacy over a private arbitration
agreement clause
• Private arbitration agreement clauses invalidated by S199(1)(c)
LC DECISIONS
CARLBANK MINING CONTRACTS (PTY) LTD v NBCRFI &
OTHERS (2010) BLLR 1142 (LC)
• Facts somewhat similar to those of Dakbor Clothing
• Court took a different view
• Issue in dispute summed up thus:
“should this court enforce a term of an employment contract
that requires disputes to be referred to private arbitration, in
circumstances where the parties are subject to the
jurisdiction of a bargaining council that has concluded a
collective agreement providing for the resolution of disputes
under the auspices of the council?”
LC DECISIONS
• Court noted LRA encourages private dispute resolution as
much as it encourages collective bargaining
• Friction exists between two objectives
• Confirmed in terms of S23 (3) of LRA collective agreement
takes precedent over the terms of any individual contract
• But find collective agreement did not oblige a party to refer a
dispute to the council
• Held S23 (3) not a bar to an agreement to refer disputes
arising from contract of employment to private arbitration
LC DECISIONS
• Reference to Dakbor Clothing made
• Court found the latter decision did not establish a general
principle that S199 excludes the application of any private
arbitration agreement.
• Reasoned terms of a collective agreement and the private
arbitration agreement relevant factors when making a S199
enquiry
• Noted S199 protects employees at 3 levels i.e. minimum
wage; prohibiting contractual terms less favourable than
those of collective agreement; and prohibits waiver of
application of collective agreement
LC DECISIONS
• Court found the collective agreement did not establish a
right to refer a dispute to the council and there can therefore
be no waiver of that right.
• Alternatively the collective agreement did not compel an
employee to refer the dispute to the council and only the
council
• Consequently a private arbitration agreement did not waive
the application of the council’s collective agreement
• Court concluded it will be empowered after evaluating the
content of the private arbitration agreement to decide if it
offered less favourable terms than the collective agreement
LC DECISIONS
• Court noted councils do not have inherent right of
supervision over private arbitration proceedings between
parties within its registered scope
• In the Carlbank decision the judge tried to distinguish it from
Dakbor Clothing. Taking into account the somewhat similar
facts of the cases the distinction appear superficial
Conclusion
• Courts have taken varying approaches when dealing with
disputes relating to S147 (6)
• The Amendment Bill comes at the backdrop of this
uncertainty
S147 PROPOSED AMENDMENT
“Section 147 of the Principal Act is hereby amended by insertion
after subsection (6) of the following subsection –
(6A) For the purpose of making a decision in terms of
subsection (6) the Commission must appoint a
commissioner to resolve the dispute –
(a) if an employee earning less than four times the
threshold prescribed by the Minister in terms of section
6(3) of the Basic Conditions of Employment Act is
required to pay any part of the cost of the private dispute
resolution procedure; or
(b) if the person or body appointed to resolve the dispute
is not independent of the employer”. (my emphasis)
S147 (6A)
• The amendment is written in obligatory/ mandatory terms
(use of the word must)
• No discretion to exercise if any of the two factors mentioned
in subsection 6A are present in the private arbitration
agreement clause
• The commission/ commissioner will be bound to assume
jurisdiction regardless of the private arbitration agreement
• An independent person in the context of an employer will be
someone not working for the employer; not subject to the
authority of the employer; and or engaged in business with
the employer, etc.
S147 (6A)
• The amendment is prescriptive and can be misconstrued
• The amendment ought to be read as a whole paying
attention to its foreword
• The Objects to the Labour Relations Amendment Bill is a
useful interpretive tool
LRA EXPLANATORY MEMORANDUM
1.
Objects of the amendment are listed as follows:
“This section is amended to require the Commission to
resolve disputes even where the parties have agreed to
private dispute resolution if, in the case of lower paid
employees, the employee is required to pay any part of
the cost of private dispute resolution, or, in the case of
all employees, the person appointed to resolve the
dispute is not independent of the employer.”
2.
The purpose of the amendment is clearly aimed at
assisting those employees that may be deemed
vulnerable employees
LRA EXPLANATORY MEMORANDUM
3.
Amendment also seeks to ensure that private
dispute resolution procedure is conducted by an
impartial person/ body
CONCLUSION
• A commissioner’s discretion where factors mentioned in
subsection 6A are not present is still retained
• The discretion is to be exercised having regard to amongst
others submissions from the parties, the content of a
collective agreement (where one exists) and the private
arbitration agreement clause, the need for expeditious
resolution of labour disputes; and that LRA encourages
volunteerism