Is an applicant required to furnish security when instituting an urgent application to stay the execution of an arbitration award?

In Emalahleni Local Municipality v Phooko and Others (J396/21) [2021] ZALCJHB (5 May 2021) the Labour Court (LC) recently answered this question. In this case, the employee was appointed as head of the traffic and security department of the municipality (employer). The employee refused to report to his new position which resulted in his suspension.

7 Jun 2021 3 min read Employment Law Alert Article

At a glance

  • The Labour Court recently addressed the question of whether an employer is required to furnish security when seeking an urgent application to stay the execution of an arbitration award.
  • The court held that bringing a review application does not automatically suspend the operation of an arbitration award, but the court has the discretion to stay the enforcement of the award.
  • The court ruled that the employer in this case did not need to furnish security because it had sufficient assets to meet its obligations if the award was upheld on review, emphasizing the importance of having assets as a safety net.

Following a disciplinary hearing, the employee was dismissed. The employee then referred a dispute to the South African Local Government Bargaining Council (bargaining council) alleging an unfair dismissal. The bargaining council found in favour of the employee and an award was issued ordering the employer to reinstate the employee and to pay him compensation. The employer instituted review proceedings. Two months later, the employee’s award was certified, and his trade union alerted the employer that steps would be taken in execution of the award.

Consequently, the employer brought an urgent application seeking an order to stay the enforcement of the arbitration award. The application was brought in contemplation of section 145 (3) of the Labour Relations Act 66 of 1995 (LRA), which states that the LC may stay the execution of an award pending its decision. Additionally, the application sought exemption from furnishing security in line with section 145(7) of the LRA, which states that;

“the institution of review proceedings does not suspend the operation of an arbitration award, unless the applicant furnishes security to the satisfaction of the Court in accordance with subsection (8)”.

The main issue before the LC was whether the employer is required to furnish security when instituting an urgent application to stay the execution of an arbitration award.

The LC held that bringing a review application does not automatically suspend the operation of an arbitration award and traditionally, one would need to furnish security to do so, unless good cause was shown to be exempted from furnishing security. Additionally, it was stated that the LC retains a discretion to stay the enforcement of an award pending its decision in line with section 145(3). This is a self-standing discretionary power and once exercised its effect is that the enforcement of an arbitration award is stayed pending the decision of the LC.

During its evaluation the LC analysed the general principles for the granting of a stay in execution. Notably, the LC illustrated that nowhere in the principles does it state that there is a requirement to furnish security or to be absolved from such before a stay in execution may be granted, and once a party satisfies the necessary requirements, a stay in execution must happen irrespective of whether a party has furnished security or not.

Ultimately, the LC relied on the recent decision of the Labour Appeal Court (LAC) in City of Johannesburg v Samwu obo Monareng and another (C1230/2018), where the LAC concluded that a party is exempt from furnishing security where the applicant has made a case and shown good cause to be absolved from furnishing such security. Furthermore, in its judgement the LAC held that the onus lies with an applicant who must show that it has assets of a sufficient value to meet its obligations should the arbitration award be upheld by the LC on review. Having sufficient assets was seen by the LAC as a crucial safety net for an employee should the review application be decided in his / her favour.

As such, the LC in the present matter, held that it was satisfied that the employer had sufficient assets to execute if the review application was decided in favour of the employee. Therefore, it was not necessary for the employer to furnish security and the LC used its discretionary power to absolve the employer accordingly.

Employers must be cognisant that when attempting to protect their assets from execution, the furnishing of security is not a prerequisite for staying the execution of awards as long as good cause can be shown to that effect. This will be aided further by the value of the assets in the employer’s possession.

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