Bargaining council collective agreements and retirement funds
Bargaining council collective agreements and retirement funds
Bargaining councils have extensive powers under the Labour Relations Act 66 of 1995 (the LRA). Once such power being that a bargaining council is entitled to establish and administer pension, provident, medical aid, sick pay, funds, or any similar schemes or funds for the benefit of one or more of the parties to the bargaining council or their members. Does this, however, allow a Collective Agreement (CA) concluded in a bargaining council to impose obligations on existing funds in its sector?
At a glance
- Bargaining councils have extensive powers under the Labour Relations Act, including the establishment and administration of pension, provident, and other similar schemes for the benefit of the parties involved.
- However, a recent Pretoria High Court case clarified that a collective agreement concluded in a bargaining council cannot impose obligations on existing funds in the sector without infringing upon the independence of the fund's trustees.
- The court emphasized the separation and distinct nature of retirement funds from employers, employees, and bargaining councils, affirming the importance of the trustees' discretion and the regulatory framework of the Pension Funds Act.
This was a question, that arose in the recent February 2023 Pretoria High Court (the court) matter of Municipal Workers Retirement Fund v South African Local Government Bargaining Council and Others and Other Related Matters  ZAGPPHC 98 (Municipal Workers Retirement Fund.)
On 15 September 2021, the South African Local Government Bargaining Council (SALGBC), South African Local Government Association (SALGA), Independent Municipal and Allied Trade Union (IMATU), as well as the South African Municipal Workers Union (SAMWU) concluded a Retirement Fund Collective Agreement. Its purpose was to inter alia establish a uniform approach to the provision of retirement fund benefits to employees in the local government sector (i.e., municipal workers). The CA affected 250 000 employees and thousands of other retirees, so its impact was serious. The Municipal Workers Retirement Fund took issue with the CA on the basis that the agreement was not within the domain of the SALGBC, SLAGA, IMATU and SAMWU, as it sought to impose conditions for the continued operation of the retirement funds essentially by coercive force. The coercive force was the creation of an accreditation process for funds under the terms of the CA and member transfer provisions which were non-existent. The CA provided that a fund needed to be accredited under the agreement to receive member contributions.
Leaving aside the questions of whether the CA itself was impeachable on the basis that it may not have been a collective agreement as contemplated by the LRA, or the question of whether the issues covered by the CA could amount to a ‘mutual interest’ issue under the LRA.
It has long been South African law, as confirmed by the Supreme Court of Appeal in Tek Corporation Provident Fund & Others v Lorentz (1999) (4) SA 884 (SCA), that pension funds are and remain at all times separate and distinct entities from both the employer and their employees. In addition, the rules of a retirement fund provide the guiding principles upon which its trustees are required to operate.
The court in Municipal Workers Retirement Fund considered whether the ‘accreditation terms’ set out in the CA was binding upon the funds and if their implementation would impinge upon the discretion of trustees of the various funds. Another consideration was whether the effect of the CA could result (whether intended or not), on one or more or all the funds in the sector being regarded as financially unviable – this being a consideration under the Pension Funds Act, 1956.
The court found that the CA was prejudicial to the independence of the board of trustees (of a fund) and that the proposed rule changes were also inconsistent with the PFA. This is because the CA provided inter alia its accreditation committee the power to change rules and compel the board of trustees to adopt those new rules. The court also found that this force of power undermined the power and authority of the entire regulatory and directory regime of the PFA by imposing a parallel supervisory regime under the purview the bargaining council.
The court again upheld the importance of the Financial Service Conduct Authority (FSCA) in the regulatory environment by confirming that any specific rule change was not a unilateral decision of the board of trustees in any event but was to be approved by the FSCA. The court stated that;
“the entire construction of the accreditation regime is inimical to the separation of identity and interests between employers and the pension funds and fundamentally amounts to a rule-based intrusion on the statutorily protected independence of the trustees of pension funds”.
This judgment once again confirms that retirement funds are and remain at all times separate and distinct entities from both the employer, their employees (trade unions), as well as, bargaining councils.
It is the trustees of a fund who hold responsibility for the affairs of a fund and there can be no intrusion into their powers by third parties no matter how noble their intent.
So, a collective agreement which seeks to deal with retirement funds must be concluded with reference to not only employment laws but also with reference to PFA and likewise bargaining councils may never intrude into the workings of a fund where this would interfere/corrode the protections entrenched by the PFA.
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