Trafford Trading (Pty) Ltd v National Bargaining Council for the Leather Industry of South Africa and Others (DA11/09) [2011] ZALAC 35 (1 January 2011)

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[2011] ZALAC 35
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Trafford Trading (Pty) Ltd v National Bargaining Council for the Leather Industry of South Africa and Others (DA11/09) [2011] ZALAC 35 (1 January 2011)

IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA
[HELD
AT DURBAN]
CASE
NO: DA11/09
In
the matter between:
TRAFFORD
TRADING (PTY) LTD
........................................................
APPELLANT
AND
NATIONAL
BARGAINING COUNCIL
FOR
THE LEATHER INDUSTRY OF
SOUTH
AFRICA
....................................................................
FIRST
RESPONDENT
EXEMPTION
APPEAL COMMITTEE
OF
THE NATIONAL BARGAINING
COUNCIL
FOR THE LEATHER
INDUSTRY
OF SOUTH AFRICA
..........................................
SECOND
RESPONDENT
MARK
FUTCHER NO
...........................................................
THIRD
RESPONDENT
GINA
BARBIERI NO
.........................................................
FOURTH
RESPONDENT
JUDGMENT
Tlaletsi
JA
Introduction
[1]
The appellant is an
incorporated company that falls within the jurisdiction of the
National Bargaining Council for the Leather
Industry of South Africa
(“the first respondent”). The latter has been established
in terms of the Labour Relations
Act No 66 of 1995 (“the Act”).
The appellant applied to the first respondent for exemption from
complying with certain
provisions of a collective agreement entered
into under the auspices of the first respondent and as extended to
non-parties by
regulation of the Minister of Labour. The application
for exemption was considered by the first respondent’s
Exemption Committee
1
and was declined.
[2]
The appellant appealed to
the second respondent being the Exemption Appeal Committee of the
first respondent. The appeal was also
unsuccessful. The appellant
thereafter brought an application in terms of section 158 of the Act
to review and set aside the decision
of the Exemption Appeal
Committee. The review application was dismissed by
Cele J
sitting in the Labour Court, Durban. The appellant now appeals
against the judgment and order of the Labour Court, having obtained

leave from that court. A brief factual background is apposite.
Factual background
[3]
At all relevant times the
footwear industry was regulated by at least five collective
agreements that were concluded within the
first respondent. The said
agreements are:
3.1 The Footwear Section Collective
Agreement;
2
3.2 The Provident Fund Collective
Agreement;
3.3 The Sick Benefit Fund Collective
Agreement;
3.4 The Administrative Fund
Collective Agreement; and
3.5 The Footwear Section
Technological Fund Collective Agreement.
[4]
Each of the said
collective agreements have been extended by the Minister in terms of
section 32 of the Act by way of publication
in the Government Gazette
respectively, from time to time and at different dates. The Footwear
Section Collective Agreement makes
provision for parties falling
within the first respondent’s (also referred to as the Council
in this judgement) registered
scope to apply to the latter for
exemption from any or all of the provisions of the agreement and
prescribes a procedure to be
followed for such applications. Such
applications must be in writing on an application form provided by
the Council
3
.
In terms of clause 14(3) of the Collective Agreement, the Exemption
Committee when considering the applications for exemption
must take
into account:
any written and/or verbal
substantiation provided by the applicant;
fairness to the employer, its
employees and other employers and employees in the industry;
whether it will make a material
difference to the viability of a new business, or a business
previously outside the jurisdiction
of the Council;
unexpected economic hardship
occurring during the currency of the agreement and job creation and/
or loss thereof;
the infringement of basic
conditions of employment rights;
the fact that a competitive
advantage might be created by the exemption;
comparable benefits or provisions
where applicable;
the applicant’s compliance
with other statutory requirements such as the Occupational Injuries
and Diseases Act or Unemployment
Insurance Act; or
any other factor which is
considered appropriate.
[5]
The Exemptions Committee
is required, on approving the application, to advise the applicant
within fourteen days of such decision
and issue a Licence of
Exemption setting out: the full name of the person or enterprises
concerned; the provisions of the agreement
from which the exemption
has been granted; the conditions subject to which exemption is
granted; the period of exemption; and the
date from which the
exemption should operate. In cases where the exemption application is
either wholly or partly not approved,
the Exemptions must advise the
applicant within fourteen days of the date of such decision,
providing the reason(s) for such decision.
[6]
The collective agreement
provides for the appointment of the Independent Appeal Body as
required by section 32(3)(e) of the Act
to hear and decide any appeal
brought by a party or non-party against the decision of the
Exemptions Committee refusing an application
for exemption or the
withdrawing of an exemption. The written application for appeal as
well as the original application for exemption
and its supporting
documents shall be forwarded to the Independent Appeal Body. The
latter body is enjoined to decide the appeal
in a manner it considers
appropriate to determine the applications fairly and quickly. The
Independent Appeal Body may limit itself
to a consideration of
written motivation or may hear evidence and arguments
4
.
It must however consider all applications with reference to the
criteria referred to in paragraph (4)
5
above. The Independent Appeals Body is further required to issue its
decision with full reasons within fourteen days and must issue
the
applicant with a licence of exemption if the appeal is successful
6
.
The Independent Appeal Body may make an order of costs against an
unsuccessful applicant.
7
[7]
It is not in dispute that
the first respondent demanded payments in the amounts of R366 828.58
and R117 490.39 from the appellant
being payments due in terms of the
collective agreements. Private arbitration proceedings, presided by
Professor Alan Rycroft
were
instituted
to arbitrate the dispute relating to the payments due. A
pre-arbitration agreement as to how the proceedings were to
be
conducted was concluded by the parties. It was agreed inter alia,
that quantum would be separated from the merits of the dispute
and
was to be determined at a later stage, failing which the arbitrator
would be called upon to determine the quantum.
[8]
On 31 May 2005 the
private arbitrator made a determination to the effect that the
appellant was bound by the collective agreements
and as such liable
to pay the amounts to be agreed to by the parties.
[9]
On 8 September 2005 the
parties ultimately agreed through their attorneys that the following
amounts were due by the appellant
to the first respondent:
R205 363.02 for the underpayment
of wages for 1 May 2003 to 16 February 2004, and
R77 490.51 emanating from the
statement of claim and being for the period 1 May 2003 to 18
February 2004.
[10]
The aforesaid agreement
on the amounts due was made an award of the private arbitrator on 2
November 2005. The appellant failed
or neglected to pay the amounts
due to the first respondent. Several attempts were made to recover
the amounts without success.
The parties exchanged a string of
correspondence which also did not bear any fruit.
[11]
Sometime in 2006 the
first respondent lodged an application in
the
Kwa-Zulu Natal High Court, to have the appellant liquidated. On 2
March 2007 an order by consent was issued by the High Court.
The
effect of the order was
inter alia
:
to direct the first respondent’s
exemption committee to consider and decide the appellant’s
application for exemption
within four weeks;
that in the event of the appellant
wishing to appeal against the decision of the Exemptions’
Committee to do so within
four weeks;
that in the event that the
appellant is aggrieved by the Independent Appeal Body’s
decision to bring an application for
review in the Labour Court
within four weeks of such determination.
The order read further that:
“
5
.
In the event that the review eventuates at the instance of the
[appellant], then it is recorded that this Consent Order is taken

without prejudice to the [appellant’s] rights to raise in such
review inter alia:-
[First Respondent’s]
initial refusal to consider [appellant’s] Exemption
Applications,
[First Respondent’s]
refusal to do so on the grounds that such Exemption Applications
were not competent on the basis that:-
in respect of the period 1 May
2003 to February 2004 award had been made;
in respect of the other
periods, it was not competent to bring Exemption Applications
retrospectively.
That the recordal in paragraph 5
of this order is made without prejudice to the [First Respondent’s]
right to challenge in
any such Review, the correctness of what is set
out in paragraph 5(a) and (b) of this order”
. (sic)
[12]
On 21 June 2006 the
appellant submitted an application for exemption to the first
respondent for the payment of monies due to the
first respondent for
the periods:
1 March 2003 to 30 June 2003.
1 July 2003 to 30 June 2004
1 July 2004 to 30 June 2004
1 July 2005 to 30 June 2006
[13]
The appellant’s
application for exemption served before the Exemptions Committee of
the first respondent and was unsuccessful.
The following were the
reasons for the decision of the Committee. The reasons relate to the
issues that had to be considered when
determining an application for
exemption:
13.1
The
Committee found that the appellant was operating its business based
on a model which it described as a “
cut,
measure and trim service”
to
an entity known as Spectrum. By this system the appellant was
providing a low costs labour service to Spectrum who in turn was

competing in the retail market. Justification by the appellant of the
model of its business was that it competed with the low labour
costs
of the footwear producers operating within the Far Eastern countries.
The Committee found that to allow the appellant to
continue on the
basis of being viable only because of its low labour costs regime
would be unfair to other employers in the industry.
It was also found
to be unfair to the appellant’s employees because on the
appellant’s own admission it was paying
its employees 60% of
the prescribed wage as per the Collective Agreement. The employees
had not been given any increase in the
periods applied for exemption
and that what they were currently paid was substantially less than
60% of the applicable prescribed
wage rates. Furthermore, it was
found that the appellant was not making any contributions to the
social benefit funds constituted
in terms of the provident and sick
fund collective agreements. The fact that the employees had agreed to
be paid these low wages was rejected on the basis,
inter
alia,
that the employees were desperate for employment and
vulnerable and were being exploited by the appellant.
That granting the exemptions would
undermine the collective agreements’ function of establishing
a consistent labour cost
and benefit regime applicable to all
employers and employees; would discourage council membership by
employers and be detrimental
to orderly collective bargaining in
general and at sectoral level, and defeat the primary objects of
the Act.
That whereas granting the
exemption would contribute to the viability of the appellant’s
business based on its model,
it would mean that the appellant would
be allowed to “
trade on the back of its labour”
and that it would cause social injustice to allow the employees to
sacrifice their right to fair terms and conditions of employment
in
order to provide for the appellant’s business model.
The Committee further found that
Mr Shaik, the joint managing director of the appellant and Spectrum
had been involved in the
shoe manufacturing industry through
Spectrum and Fargo Shoes for a while prior to the dates relevant to
the exemption applications
and was therefore aware of the economic
conditions surrounding the industry. It was found that he had
therefore designed the
appellant’s business model in such a
way that it would only be viable and successful if it did not
comply with the applicable
laws. Allowing the appellant to continue
as modelled with exemptions, would jeopardise the job security of
employees employed
by compliant employers.
That the appellant severely
undermined employees’ rights to fair basic conditions of
employment and was depriving them
and their dependants of
retirement and sick fund benefits.
That allowing the appellant low
labour costs would give it a substantial advantage over local
compliant competitors.
The appellant conceded that it did
not provide benefits comparable to those that the exemption was
sought.
Although the appellant appeared to
comply with the Unemployment Insurance Act and the taxation
legislation for employees, it
did not appear to be complying with
the skills Development Act.
Other factors were that exemption
from complying with the Technological and Bargaining Council Fund,
the appellant would be
to reduce the fund’s capacity of
sponsoring research and development intended to promote the
industry at large. It was
found that it would therefore be unfair
for the appellant to benefit from the development of the industry
without making any
contributions towards the costs thereof. The
bargaining council would also be without levies to enable it to
perform its statutory
functions.
[14] The Exemption Committee further
noted that the exemptions were intended for employers to cater for
exceptional and mainly unexpected
circumstances. That since the
appellant’s main complaint was in relation to the challenges
posed by the importation of footwear
at costs they found difficult to
match, this was not at all unexpected, exceptional or unique to the
appellant. This was a challenge
to all employers in the industry and
many had adapted and were conducting viable businesses as evident
from the growth of the industry
from 140 registered employers in 2000
to 149 in 2006.
[15] Aggrieved by the refusal of its
exemption application the appellant lodged an appeal with the second
respondent. Its appeal
was similarly unsuccessful. The Independent
Appeal Body was chaired by the third and fourth respondents. It held
thus:
There was nothing before it which
established that the Exemptions Committee had misdirected itself in
coming to its decision
and that it had applied its mind properly to
the criteria set out in the collective agreement.
Were the Independent Appeal Body
to consider the appeal in terms of a “
wide appeal”
it was satisfied that there was no new evidence before it which
took the matter further for the appellant.
That the only criterion
established by the appellant was the fact that three out of 52
employees had consented to be paid
the low wages mentioned in the
exemption application.
That there was nothing before the
Independent Appeal Body to indicate that were the appellant to be
granted the exemption,
it would be the breathing space it required
within a defined period to enable it to “
catch up”
and eventually pay the requisite minimum wages and benefits to its
employees.
That no grounds of appeal had been
established and that the decision to refuse the exemption was fair
and reasonable in the
circumstances.
Proceedings in the labour
court
[16]
The appellant then
launched its application in the labour court to have the decision of
the second respondent reviewed and set
aside. The grounds of review
relied upon by the appellant were: that irrelevant considerations
were taken into account, or relevant
considerations were not taken
into account; the decision was given in bad faith; was arbitrarily or
capriciously taken; was not
rationally connected to:
16.1 the purpose for which it was
taken;
16.2 the purpose of the empowering
provisions.
16.3 the information before the
Administrator; or
16.4 the reasons given for it by the
Administrator.
[17]
In its evaluation, the
labour court noted that there were two decisions which were the
subject of review
viz,
the decision of the Exemptions
Committee and that of the Independent Appeal Body. The labour court
thereafter made
inter alia,
the following findings:
17.1 The Exemptions Committee
considered each and every ground listed in clause 14(3) of the
collective agreement. It did not just
list the grounds but dealt with
each in relation to the application and as such “
acquitted
itself in the manner it handled each of the 6 general bases upon
which the exemption application was premised
.”
The Exemptions Committee accepted
the fact that the appellant’s application was supported by
all employees of the applicant
and correctly held that the
employees were vulnerable to threats of losing their employment.
The appellant’s low labour
cost business practices gave it substantial advantage over local
competitors who comply with
the collective agreements and the law.
The appellant was entitled to the
information relating to the exemption applications granted to other
employers on previous
occasions as requested. However, failure by
the first respondent to provide the appellant with such information
“
did not have fatal consequences”
as there were
other relevant considerations.
For the appellant to qualify for a
wage reduction of 60% of the prescribed rate, it had to be a
“
semi-formal sector establishment”
. The
appellant was not such an establishment according to its
“
classification form”
and as such the exemption
could not have applied to the relevant period of indebtedness to
the first respondent until September
2005.
The Independent Appeal Body
correctly found that there was no new evidence submitted for the
consideration of the appeal and
any criticism against its remarks
do not at all amount to there being reviewable irregularities or
the matter not being fully
and fairly tried.
[18]
The labour court then
dismissed the review application with costs and ordered the first
respondent to pay the costs of 25 May 2007
and 11 June 2007
occasioned during the initial application for exemption as well as
the costs for the application for a postponement
of the review
application pending the access to information application.
The Appeal
[19] The appeal before us is only
against that part of the order of the labour court dismissing its
application for review with
costs. The grounds of appeal
relied
on may be summarised as follows: That the court
a quo:
19.1 erred in finding that the
appellant was alleging that only the second respondent committed a
gross irregularity in various
ways in the matter;
ought to have concluded that the
first respondent committed gross irregularities sufficient to
vitiate first respondent’s
consideration of appellant’s
exemption application;
ought to have found that the first
respondent committed gross irregularities by demonstrating an overt
bias against the appellant
and by failing to apply its mind to the
criterion set out in clause 14 of the collective agreement as it
was enjoined to do;
erred in not concluding that the
first respondent as a reasonable decision maker, could not have
come to the decision which
it did which was to dismiss the
appellant’s exemption application.
[20] As regard
s
second respondent the appellant contends that it committed gross
irregularities sufficient to vitiate the proceedings because of
its
overt bias towards the appellant; failure to furnish reasons for its
conclusion that it was satisfied that the Exemptions Committee
had
applied its mind properly to the criteria set out in the collective
agreement; failure to consider the matter afresh having
regard to the
criteria in clause 14 of the collective agreement and finally that
second respondent as a reasonable decision maker,
could not have come
to the decision which it did.
Analysis
[21] The decision that was the
subject of the review application is that of the second respondent.
One can say that the second respondent
was established
inter alia
,
as a result of sec 32(3) of the Act. I say this because sec 32(3) (e)
provides that a collective agreement may not be extended
in terms of
subsections (2) unless the minister is satisfied that,
inter alia
,
provision is made in the collective agreement for an independent body
to hear and decide, as soon as possible, any appeal brought
against
the bargaining council’s refusal of a non-party’s
application for exemption from the provisions of the collective

agreement; and the withdrawal of such an exemption by the bargaining
council. The appellant in this matter is a non-party to the

collective agreement and is bound by the provisions of the collective
agreement as a result of the minister’s extension of
the
collective agreements referred to above to non-members.
[22] Although it is the decision of
the second respondent that was the subject of review, the decision of
the Exemption Committee
of the first respondent is also affected. As
indicated above, clause 14(10) of the collective agreement obliges
the second respondent
to consider all applications referred to it
with reference to the criteria set out in clause 14[4] applicable to
the Exemption
Committee. This means that in addition to any further
evidence that the appellant may have placed before the second
respondent
the latter body was also enjoined to also consider the
material that was placed before the Exemption Committee. The powers
of the
second respondent in considering the applications referred to
it are therefore less circumscribed.
[23] The application to review the
decision of the second respondent was brought in terms of sec.
158(1)(g) read together with sec
32(3)(e)(i) of the Act. Sec
158(1)(g) provides that the labour court may review the performance
or purported performance of any
function provided for in the Act on
any grounds that are permissible in law. In this case the second
respondent when considering
the application referred to it was
performing a function under sec. 32(3)(e)(i) of the Act. The first
respondent is a body accredited
by the Commission for Conciliation,
Mediation and Arbitration (CCMA) in terms of the Act. That being the
position the test for
reviewing an award or decision of a tribunal
such as the second respondent is as provided in
Sidumo and another
v Rustenburg Platinum Mines Ltd and Other
8
namely whether the decision taken by the tribunal is a decision that
a reasonable decision maker could not reach. See also an analysis
of
the test by this Court in
Fidelity Cash Management Services v CCMA
& Others
9
.
[24] The exemptions committee as
well as the second respondent correctly, in my view, approached the
matter on the basis that the
appellant was obliged to comply with the
provision
s
of the collective agreement.
For an exemption to be granted the appellant must establish a
justifiable reason why the collective
agreement should not be
complied with. It is therefore incumbent upon the applicant for
exemption to place facts and evidence,
before the two tribunals,
representing special circumstances that justify the exemption of the
applicant from complying with the
collective agreement.
10
This approach makes sense since the purpose of the Act as stated in
sec.1 is also the advancement of economic development, social

justice, labour peace and the democratization of the workplace by
fulfilling the primary objects of the Act. Subsection 1 (c) states
as
one of the primary objects of the Act, provision of a framework
within which employees and their trade unions, employers and

employers’ organisations can collectively bargain to determine
wages, terms and conditions of employment and other matters
of mutual
interest and formulate industrial policy.
[25] In considering the applications
for exemption it is important to bear in mind the rationale for the
extention of the terms
of a collective agreement to non-parties like
the appellant. The rationale is inter alia,
to
prevent unfair competition which employers who are not a party to
collective agreements may pose. This Court per
Zondo JP
held
as follows in
Kem-lin Fashions CC v Brunton and Another
11
.
“
If the collective
agreement is not extended to non-parties, the non-parties would be
able to pay employees at rates which are lower
than those which their
competitors who are party to collective agreements have to pay to
their employees. The result of this would
be a serious threat to the
business of those who are parties to collective agreements. This
would seriously discourage orderly
collective bargaining in general
and collective bargaining at sectoral level in particular which are
part of the primary object
of the Act. If this were allowed, there
would be little, if any, point in any employer seeking to be party to
a bargaining council.
That would be a threat to one of the pillars of
the labour relations system in this country.”
[26] One of the acts that constitute
gross irregularity by the exemptions committee as contended by the
appellant is that the initial
refusal by the Exemption Committee to
consider the appellant’s application for exemptions is a
display of an overt bias towards
the appellant and its exemptions
applications. For the appellant to succeed on this ground it must
show on a balance of probabilities
that the Exemption Committee
approached the issues in its application with a mind which was in
fact prejudiced or not open to conviction.
12
The fact that the Exemption Committee wrongly believed that it could
not entertain the application is in my view not sufficient
to
establish a reasonable apprehension of bias. Its initial refusal has
not been shown to have prevented a fair consideration of
the issues
subsequently.
[27] It was further contended on
behalf of the appellant that the Exemption Committee failed to apply
its mind and merely listed
the criteria for exemption applications as
catalogued in clause 14 of the collective agreement and concluded
after a “
general and nebulous discourse”
under
each criterion that they all fell to be decided against the
appellant. I find no merit in this contention whatsoever. The

exemption committee as expected of it, considered each and every
criterion against the information supplied by the appellant, and

provided its reasons for its conclusion on each aspect. It is not
surprising that the labour court quoted the entire section of
the
analysis by the exemption committee at paragraph 9 of its judgment.
It made a detailed and lengthy analysis of the application.
I find it
therefore unnecessary to burden this judgment with a detailed
analysis as the labour court did. It is therefore incorrect,
in my
view, to suggest that the Exemption Committee failed to apply its
mind and as such committed a gross irregularity. The finding
of the
labour court in this regard is therefore correct.
[28] What is evident is that the
appellant is not seeking an exemption as a temporary measure to
recuperate or resuscitate its business
and to comply with the
collective agreements once its business has fully recuperated or in
good health. This was not the request
that they made to the
exemptions committee as well as to the second respondent. The
following factors relating to the appellant
are fundamental:
When the appellant commenced
business on 1 May 2003, the leather industry was already facing
difficulties dating back at least
1999;
Apart from foreign competitors
there were local competitors performing a similar function to that
of the appellant;
Since its inception, the
appellant’s business model could be viable only when it is
granted exemption from complying with
the law. Without exemption
its business would never be viable;
The appellant designed its
business model less than two weeks before it registered with the
first respondent in order to apply
for an exemption.
The conclusion that granting the
appellant an exemption would undermine the collective agreement as
well as the bargaining process
is not, in my view, unreasonable. By
granting the exemption, the appellant would be given an unfair
advantage against other competitors
in the industry who are willing
to comply with the law under difficult circumstances.
[29] Furthermore, nothing was
unexpected in the economic hardship encountered by the appellant. Its
managing director, the deponent
to the founding affidavit was found
by the respondents to have been long in the industry and understood
its operations and conditions
quite well. It is correct that the
appellant’s employees have no objection to the granting of the
exemption. It must be understood
that from inception these employees
have not been paid the regulated wages. The conclusion by the
respondents that they are vulnerable
and would agree to anything
given to them is in my view not unreasonable. There is in my view
nothing that justifies depriving
these employees of their basic
conditions of employment especially in the circumstances where the
business model of their employer
was designed such that it can only
succeed if the applicable basic conditions of employees are not
complied with.
[30] Both the Exemption Committee
and the second respondent have rendered detailed reports that are
well reasoned. They have dealt
with each and every matter that was
placed before them. The two bodies as well as the labour court
applied their minds to the issues
before them. In the result the
appeal falls to be dismissed with costs.
[31] In the result the following
order is granted:
The appeal is dismissed with costs.
______________
Tlaletsi JA
I agree
________________
Mlambo JP
I agree
_________________
Mailula AJA
_________________
For
the appellant: Adv O A Moosa SC
Assisted
by: M T Hutson
Instructed
by: C M Sardiwalla & Company
For
the respondent: Adv L B Broster SC
Instructed
by: Cox Yeats attorneys
1
The
Exemptions Committee is also referred to as the District Committee
or the National Exemption Committee.
2
The
parties that concluded the collective agreement are the South
African Footwear and Leather Industries Association and Association

of Small and Medium Manufactures of Footwear and Allied Products as
the employers’ organisations, on the one part, and
National
Union of Leather and Allied Workers and the South African Clothing
and Textile Workers’ Union as the trade unions
on the other
part.
3
Clause
14.1
4
Clause
9 of the collective agreement.
5
Clause
10 of the collective agreement
6
Clause
11 of the collective agreement
7
Clause
12 of the collective agreement
8
(2007)
28 ILJ 2405(CC);
9
(2008)
3 BLCR 197(LAC);
10
(See:
Ram International (Pty) Ltd and Nation (2002) 23ILJ 1943 (BCA).
11
(2001)
22 ILJ 109(LAC) AT 115h-j:
12
(BTR
Industries SA (Pty) Ltd v Metal & Metal & Allied Workers
Union 1992(3) SA 673 (AD) at 690A-B).