17 August 2020 by , and Employment Alert

The never-ending story of ultra vires

In the recent judgment of Passenger Rail Agency of South Africa v Commission for Conciliation, Mediation and Arbitration and others [2020] 1 BLLR 49 (LC), the Labour Court was called upon to consider the review application issued by PRASA seeking to review and set aside an arbitration award in terms of which the arbitrator found, inter alia, that fixed-term employees of PRASA were deemed to be employed on an indefinite basis with effect from 1 April 2015.

The said fixed-term employees were all employed on fixed-term contracts with PRASA when section 198B of the Labour Relations Act 66 of 1995 (LRA) came into effect on 1 January 2015. Subsequent to the operation of s198B, the said employees remained in the employ of PRASA and were not required to sign new fixed-term contracts of employment.

The unions acting on behalf of the employees referred numerous disputes to the CCMA, which were later consolidated for the purposes of conciliation. Prior to conciliation, the parties concluded a settlement agreement which made provision for the appointment of fixed-term contract workers, and that the agreement was the full and final settlement of all disputes between parties, and any dispute relating to the interpretation or application of the agreement ought to be resolved in line with the provisions of the PRASA Bargaining Forum Constitution. The unions then brought an application the LC for the settlement agreement to be made an order of court in terms of section 158(1)(c) of the LRA, the court granted such order.

The employees then referred two disputes to the CCMA of their own accord, which were subsequently consolidated. The employees sought to be declared permanent employees in terms of section 198B of the LRA and for the CCMA to award backdated compensation.

The arbitrator found that the employees were integrated into the organisation, however PRASA never declared them permanently employed and thus the employees were treated differently to others who were permanently employed. In this regard, the CCMA found that the employees were not members of PRASA’s provident fund and never received any bonuses as was customary for other permanent employees.

The arbitrator found that the differential treatment amounted to an unfair labour practice and could even amount to discrimination. The arbitrator also found that the employees were deemed to be employed for an indefinite period with effect from 1 April 2015 in line with section 198B(5) of the LRA which stipulates that a fixed-term contract is deemed to be a contract for indefinite employment after three months in the absence of a justifiable reason which impedes the automatic conversion.

By way of his award, the arbitrator referred to the remedial actions contained in section 198B(8)(a) of the LRA and ordered PRASA to pay the concerned employees all unpaid bonuses and past provident fund contributions backdated to 1 April 2015. PRASA was also directed to ensure that the employees were made members of its provident fund.

PRASA took the award on review to the Labour Court raising six grounds of review. Three of the grounds for review related to the issue of jurisdiction, in terms of which PRASA contended that the CCMA lacked jurisdiction as the parties reached a settlement agreement. PRASA argued that pursuant to the conclusion of the settlement agreement any dispute between the parties relating to the terms of the agreement ought to have resolved in line with the dispute resolution clause contained therein, by way of a referral to the relevant bargaining council. Furthermore, PRASA contended that the dispute ought to have been referred to the CCMA within six months after 1 April 2015, the date in which PRASA failed to declare or treat the employees as permanent employees and that the employees had not condonation for the delayed referral.

RRASA further contended that arbitrator committed an error in law by conflating section 198B with section 189 where he held that any failure by PRASA to equally treat employees deemed to be employed permanently would constitute unfair labour practice and possibly discrimination. Lastly, PRASA contended that the arbitrator acted ultra vires in making the award for compensation by ordering it to effect compensation backdated to 1 April 2015 and addition to that also pay the provident fund contributions directly to employees, as section 198B does not mention any remedial powers which as a commissioner has.

The court found that the arbitrator lacked jurisdiction to hear this matter as there was settlement agreement in place between parties and employees were also bound to the terms of the agreement, therefore, this matter ought to have been resolved in line with the dispute resolution clause of the agreement by referring the dispute to the relevant bargaining forum, and in any event, the employees referred their dispute late and no condonation was sought.

The court further held that the arbitrator could not on the strength of section 198B, grant substantive relief to the employees in terms of remuneration and benefits – in doing so he acted ultra vires and committed an error in law as section 198B is concerned with fixed-term contracts of employees earning below the earning threshold and does not apply to employees already employed permanently as PRASA already conceded in the settlement agreement that the affected employees were employed permanently.

Furthermore, the court held that the arbitrator dealt with the matter on the basis that he was dealing with an unfair labour practice and in doing he committed a gross irregularity as the matter was referred to the CCMA and conciliated as a dispute relating to section 198B. The court held that if employees felt that they were treated differently they ought to have referred an unfair labour practice dispute, however, this was not the case. The arbitrator therefore lacked jurisdiction to deal with on the basis of an unfair labour practice.

The court upheld the review application, reviewing and setting aside the arbitration award.

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