Brief Summary

Labour Law — Jurisdiction — Settlement agreement — Appellant contending that Labour Court lacked jurisdiction to adjudicate dispute due to a settlement agreement reached with NUMSA regarding retrenchments — First respondents arguing that NUMSA did not have mandate to represent them as their membership had lapsed — Labour Court finding it had jurisdiction based on the nature of the terminations and the validity of the settlement agreement. The appellant, GB Engineering Pty Ltd, appealed against a Labour Court ruling that it had jurisdiction to hear a dispute involving the first respondents, who were retrenched following a settlement agreement with NUMSA. The agreement was intended to resolve a large-scale retrenchment process, but the first respondents contested NUMSA's authority to represent them, claiming their membership had ended prior to the agreement. The legal issue was whether the Labour Court had jurisdiction to adjudicate the dispute given the existence of the settlement agreement and the first respondents' claims regarding NUMSA's representation. The Labour Appeal Court upheld the Labour Court's finding of jurisdiction, determining that the nature of the terminations and the validity of the settlement agreement warranted judicial review, despite the appellant's assertions to the contrary.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were an appeal to the Labour Appeal Court against a portion of a judgment and order of the Labour Court dated 8 February 2021. The appeal concerned only the Labour Court’s ruling that it had jurisdiction to adjudicate one of two related disputes (the dispute under case number JS373/18, referred to in the judgment as the Mbongo dispute).

The appellant was GB Engineering (Pty) Ltd (the employer). The first respondent was Mbongo, Lucky Johannes and 16 others (employee respondents). The second and third respondents were the CCMA commissioner (Commissioner Lungile Mtiya) and the Metal and Engineering Industries Bargaining Council, respectively.

Procedurally, the Labour Court had dealt with two matters, JS373/18 and JS1093/18, together under a consolidated case number (JS372/2018). The merits of the two disputes were not determined because the employer raised a preliminary point: whether the Labour Court had jurisdiction to hear the disputes in circumstances where the employer and NUMSA (the National Union of Metalworkers of South Africa) had concluded a settlement agreement during a section 189A facilitation process, purporting to settle the retrenchment process and related issues in full and final settlement.

The subject-matter of the dispute concerned the legal effect of the settlement agreement concluded in the context of a large-scale retrenchment process under section 189A of the Labour Relations Act 66 of 1995, and whether, despite that agreement, the Labour Court could adjudicate the employees’ claims (in particular, the Mbongo dispute).

2. Material Facts

It was common cause that the employee respondents, represented and advised by NUMSA, entered into the relevant settlement agreement with the employer. The settlement agreement was the product of a section 189A consultation process facilitated under the auspices of a senior CCMA commissioner.

The settlement agreement recorded that 49 employees took voluntary separation packages (including a “sweetener” of R3,000 per person), and that a further 20 employees (whose names were listed in Annexure “A”) were to be retrenched “by agreement”, also receiving the same R3,000 sweetener. The agreement recorded a termination date of Friday, 13 April 2018 for those 20 employees. Importantly, it provided that it was reached in full and final settlement of the section 189A process and “all issues related thereto”, and that neither party would declare any dispute arising from the section 189A process and the agreed termination of services.

It was common cause that the employee respondents were paid the amounts stipulated in the settlement agreement and that they did not tender repayment of those amounts. It was also common cause that the settlement agreement had not been set aside.

The employer’s narrative placed the settlement agreement within a broader chronology. It contended that the matter’s genesis lay in an unprotected strike between 26 and 30 October 2017, after which employees (including the employee respondents) were dismissed following a final ultimatum. The dismissed employees pursued a dispute, which was conciliated. The employer then offered, in writing, an opportunity to return to work on the same terms and conditions; the employee respondents accepted and returned. Subsequently, on 1 March 2018, the employer issued a notice to NUMSA initiating a contemplated large-scale retrenchment. The section 189A process was facilitated by a CCMA commissioner, and voluntary separation packages were introduced as an option. The employer contended that the employee respondents did not apply for VSPs but were included among the 20 employees retrenched “by agreement” through the settlement concluded with NUMSA on 12 April 2018.

A key disputed factual contention, as framed in argument, concerned NUMSA’s authority and mandate. While it was recorded as common cause (for purposes crucial to the appeal) that the employee respondents were NUMSA members and that NUMSA had authority and mandate to enter into the agreement on their behalf, this was contested by the employee respondents on appeal. They asserted that NUMSA allegedly had no mandate because their union membership had been terminated, or alternatively because NUMSA lacked specific instructions from them.

The Labour Court had drawn a distinction between two groups of employees: those in the Zwane dispute (JS1093/18), who had individually applied for voluntary retrenchment/VSPs, and those in the Mbongo dispute (JS373/18), who had not applied for VSPs. In dealing with Mbongo, the Labour Court characterised the terminations as “forced retrenchments” and reasoned that the employees could therefore be aggrieved and raise fairness issues. This distinction formed part of the context for the Labour Court’s jurisdictional ruling, which the employer challenged on appeal.

3. Legal Issues

The central legal question was whether the Labour Court had jurisdiction to adjudicate the employee respondents’ dispute(s) given the existence of a settlement agreement concluded between the employer and NUMSA during a section 189A facilitation process, which purported to settle the retrenchment process and related issues in full and final settlement, and included an undertaking not to declare further disputes arising from that process and termination.

Closely connected to that question was whether the settlement agreement constituted a binding collective agreement and whether, absent a pleaded and established basis to set it aside (such as duress, misrepresentation, coercion, or undue influence), the employees could litigate issues said to be settled.

The dispute before the Labour Appeal Court was primarily one of law, focusing on the legal consequences of the settlement agreement and, as the appellant submitted and the court accepted in argument, materially turning on the interpretation and enforceability of that agreement. To the extent that the employee respondents contested NUMSA’s mandate, that introduced a factual contention, but the appeal court treated the determinative inquiry as whether there was any proper basis placed before the court to avoid the settlement agreement’s binding effect, in light of the common cause setting in which it was concluded and the absence of pleaded vitiating factors.

4. Court’s Reasoning

The Labour Appeal Court approached the matter from the premise that a settlement agreement ordinarily resolves and puts to rest the underlying dispute between the parties. The court held that this consequence follows unless circumstances exist that would justify the agreement being set aside, such as those referred to in the authorities relied upon in argument, including instances of misrepresentation or duress.

In applying these principles to the facts, the court emphasised that the process preceding signature of the agreement was common cause and was recorded in the agreement itself: a section 189A large-scale restructuring process commenced, and a CCMA commissioner facilitated the process. Against that background, the court concluded that the employee respondents could not, on the pleadings and common cause facts as presented, rely on vitiating factors such as duress, misrepresentation, coercion, or undue influence to avoid the agreement. The court specifically noted that the employee respondents had not pleaded such circumstances to justify a court assuming jurisdiction to adjudicate the alleged unfairness of dismissal on the basis that the settlement could not be enforced.

The court placed weight on the Constitutional Court’s articulation of the public and judicial interest in enforcing agreements concluded in full and final settlement, reasoning that parties should not be lightly released from undertakings “seriously and willingly embraced”. In this respect, the court treated the settlement agreement’s finality clause and its undertaking not to declare further disputes as significant in assessing the jurisdictional point.

On the employee respondents’ attempt to avoid the agreement by contesting NUMSA’s mandate, the court recorded that counsel for the employee respondents was unable, when engaged by the court, to demonstrate that the employee respondents were no longer NUMSA members at the time the agreement was concluded. The court also noted the proposition advanced that a union may represent employees who were its members at the time of the dispute even if membership subscriptions were automatically terminated after employment terminated, and recorded that counsel could not provide an answer to that proposition in argument.

The court further reasoned that the employee respondents could not escape the consequences of a collective agreement concluded between an employer and a trade union representing employees under the LRA. It relied on Constitutional Court authority emphasising the importance of compliance with collective agreements to collective bargaining, industrial peace, the right to fair labour practices, and the rule of law.

In dealing with the Labour Court’s distinction between the Zwane and Mbongo disputes (based on whether employees applied for VSPs), the Labour Appeal Court rejected the notion that individual applications in the Zwane matter could elevate those agreements above the collective agreement concluded on behalf of the employees in Mbongo. The court therefore treated the Labour Court’s differentiation as insufficient to sustain jurisdiction in Mbongo in the face of the binding settlement agreement.

In summary, the court held that, absent pleaded and established grounds to set aside the settlement agreement, and given that the agreement remained in force and had been performed (with payment accepted and not tendered back), the Labour Court ought to have found that it lacked jurisdiction to adjudicate the disputes.

5. Outcome and Relief

The Labour Appeal Court held that the Labour Court erred in concluding that it had jurisdiction in the Mbongo dispute. The appeal was upheld, and the Labour Court’s order was set aside and replaced with an order that the Labour Court lacked jurisdiction to adjudicate both disputes, namely JS1093/18 and JS373/18.

The Labour Appeal Court made no order as to costs in the appeal. The substituted order likewise made no order as to costs.

Cases Cited

Goddard v Metcash Trading Africa (Pty) Ltd [2009] ZALC 62; (2010) 31 ILJ 104 (LC).

Ulster v Standard Bank of South Africa Limited [2013] ZALCCT 3; (2013) 34 ILJ 2343 (LC).

Ngwathe Local Municipality v SA Local Government Bargaining Council and others (2011) 32 ILJ 2724 (LC).

Gbenga-Oluwatoye v Reckitt Benckiser South Africa (Pty) Limited and Another [2016] ZACC 33; (2016) 37 ILJ 2723 (CC).

CUSA v Tao Ying Metal Industries and Others [2008] ZACC 15; 2009 (2) SA 204 (CC).

Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; [2012] 2 All SA 262 (SCA).

Legislation Cited

Labour Relations Act 66 of 1995 (as amended), with specific reference to section 189A.

Constitution of the Republic of South Africa, 1996, with specific reference to section 23(5).

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The Labour Appeal Court held that a settlement agreement concluded between an employer and a trade union during a section 189A facilitation process, expressed to be in full and final settlement of the retrenchment process and all issues related thereto, is enforceable and resolves the underlying dispute unless properly set aside on recognised vitiating grounds.

The court held that the employee respondents had not pleaded or established any basis such as duress, misrepresentation, coercion, or undue influence to avoid the settlement agreement, and that the agreement remained valid and had not been set aside. As a result, the Labour Court lacked jurisdiction to adjudicate the disputes notwithstanding the Labour Court’s distinction between the Mbongo and Zwane groups.

LEGAL PRINCIPLES

A settlement agreement reached between parties in full and final settlement generally extinguishes the underlying dispute, and courts have a strong interest in enforcing such agreements, particularly where they were seriously and willingly concluded.

A collective agreement concluded between an employer and a trade union representing employees in terms of the Labour Relations Act is binding, and compliance with collective agreements is integral to the constitutional right to collective bargaining and the maintenance of industrial peace.

Where a party seeks to avoid the consequences of a settlement agreement, the agreement may be susceptible to being set aside only if legally recognised vitiating factors such as duress or misrepresentation are properly invoked and established; absent such pleaded and proven grounds, the agreement stands and constrains subsequent litigation over issues it purports to settle.

GB Engineering Pty Ltd v Mbongo and Others (JA75 / 2022) [2023] ZALAC 29; [2024] 1 BLLR 14 (LAC); (2024) 45 ILJ 267 (LAC) (18 October 2023)