Oct 4,2013 / News / Legal Brief

INTRODUCTION

The Labour Relations Act 66 of 1995 (“LRA”) will soon be amended by the promulgation of the Labour Relations Amendment Bill (“the Bill”).[1] One of the significant changes the Bill will introduce relates to the review of arbitration awards in the Labour Court.[2] Parties wishing to review arbitration awards may be required to provide the Labour Court with sufficient monetary security if they wish to suspend the operation of the arbitration award under review pending the outcome of the review application. In addition, review applications will have to be enrolled by the applicant within six months of the application being launched.

These amendments seem to be aimed at curtailing spurious review applications as well as reducing the time taken for such applications to be concluded. Currently the LRA does not contain any provisions requiring parties to furnish security before an arbitration award is taken on review. It merely states that review applications must be brought within six weeks of the date on which the award was served on the applicant.

CURRENT PROVISIONS OF THE LRA

Currently, the LRA provides that an arbitration award under review remains enforceable unless the Labour Court stays its enforcement pending the outcome of the review. In practice, applicants frequently apply to stay the enforcement of arbitration awards pending the completion of the review proceedings. The Bill provides that if an applicant furnishes security to the satisfaction of the Labour Court, the arbitration award’s enforceability is stayed. The Bill therefore provides a mechanism for avoiding the need for the aforementioned applications to stay the arbitration award.  However, the introduction of these provisions may give rise to a proliferation of applications to reduce the amount required for security.

In this regard, the Bill not only provides the Labour Court with discretion to decide on the quantum of the security required but also whether any security is required at all. The Bill provides that “unless the Labour Court directs otherwise”[3], security will have to be provided. This means that the Labour Court may, of its own accord, direct whether security is to be tendered and the amount thereof. This in turn suggests that it may be possible to bring an application to condone a lesser amount of security; or none at all.

CATEGORIES OF ARBITRATION AWARD REVIEWS

The Bill’s security provisions relate to two categories of arbitration award reviews. The first category includes orders for reinstatement or re-employment. The second category of award relates to arbitration awards ordering compensation. A review of any other type of arbitration award would not require security.

In the case of reviews of an arbitration award ordering reinstatement or re-employment, security must be equivalent to 24 months of the employee’s remuneration. The review of an arbitration award ordering compensation requires security equivalent to the amount of compensation awarded. The reason for requiring such significant security seems to be because the retrospective effect of a reinstatement award is not subject to any maximum period as is the case with a compensation award – which is capped at either 24 months’ compensation for automatically unfair dismissals, or 12 months’ compensation for other forms of substantively unfair dismissals.

It is not clear why so much security is required in the case of an arbitration award ordering re-employment which is generally not of retrospective effect. Whilst it might be argued that the reason for the lengthy period used to calculate security is the time it takes for review applications to be finalised, this would seem to be catered for by the Bill’s requirement that the review application must be enrolled within six months of the application being delivered as well as the requirement that judgment must be handed down within a reasonable time.

The amount of security required is determined with reference to each employee involved.  In the circumstances, the amount of security required will increase in the event that several employees have been dismissed and reinstated or re-employed, or awarded compensation.

Although the Bill refers to “the applicant” and the LRA refers to “any party to a dispute”, in effect the security provisions will only apply to employers. No provision is made for employees to furnish security for the legal costs an employer incurs when opposing a review application brought by an employee. Likewise, no security is required of an employee who wishes to review an award in favour of the employer.

It would appear that the Bill’s security provisions are designed to dissuade applicants from bringing frivolous review applications. Unfortunately these provisions may also result in legitimate review applications not being brought, simply because to do so would be too expensive.

INFRINGEMENT OF CERTAIN CONSTITUTIONAL RIGHTS?

Whether the Bill’s provisions infringe on the employer’s constitutionally-enshrined right of access to court[4] remains to be seen. The discretion afforded to the Labour Court to exempt a party from paying security or to reduce the amount of security required may save this aspect of the Bill from constitutional challenge. Our courts have reiterated the sentiment that ultimately, it is the Court that can best protect the interests of both parties fairly by determining the amount of security. This issue was dealt with in the High Court.  The previous rule governing the furnishing of security for the High Court was held to be unconstitutional because the Court was not given discretion to exempt an appellant from having to provide security or interfere with the amount fixed by the Registrar.[5] Though the Bill does afford the Labour Court such discretion, it also stipulates statutory default amounts. It is likely that many employers will find these amounts to be excessive and will have to request reductions, thereby incurring further legal costs.

From an administrative point of view, the Bill also omits any mention of the process for paying security. The Bill also does not state what process a party should follow in order to reclaim monies paid as security. It is not clear whether such amounts paid as security will garner interest.  No doubt these issues will be addressed in due course.

CONCLUSION

The Bill’s provisions regarding the furnishing of security may be onerous, particularly for employers. The combined effect of the large amounts of security required and the fact that review proceedings do not suspend the operation of arbitration awards will probably result in additional legal costs or fewer arbitration awards being taken on review by employers.


[1]The Labour Relations Amendment Bill B16B–2012 was passed by the National Assembly on 20 August 2013 and was transmitted to the NCOP for concurrence.

[2] s 22 of the Bill adds six clauses to s 145 of the LRA.

[3] s 22(8) of the Bill.

[4] s 34 Constitution of the Republic of South Africa, 1996.

[5] Shepherd v O’Niell 2000 (2) SA 1066 (N). This judgment was referred to with approval by the Constitutional Court in Dormehl v Minister Of Justice And Others 2000 (2) SA 987 (CC).

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