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[2009] ZALCD 38
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Trafford Trading (Pty) Ltd v National Bargaining Council for the Leather Industry of South Africa and Others (D598/07) [2009] ZALCD 38 (29 April 2009)
IN
THE LABOUR COURT OF SOUTH AFRICA
HELD
IN
DURBAN
D
598/07
Reportable
TRAFFORD
TRADING (PROPRIATARY)
LIMITED
APPLICANT
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 N O
THIRD
RESPONDENT
GINO BARBIERI
NO
FOURTH
REPONDENT
JUDGEMENT
CELE
J
INTRODUCTION
[1]
This application has been brought in terms of section 158 (1) (g) of
the Labour Relations Act 66 of 1995
(“the Act) to review and
set aside a determination dated 28 August 2007, issued by the third
and fourth respondents under
the auspices of the second respondent,
in terms of clause 14 (11) of the collective agreement of the
footwear junction of the first
respondent (“the collective
agreement”). In the event of the review application being
granted, the applicant
seeks to be granted an exemption from the
provisions of the collective agreement as extended to non parties and
in particular from
the payment of:
(a) the
regulated wages rates,
(b)
payment of contributions to:
(i)
the Provident Fund
(ii)
the Sick Benefit Fund
(iii)
the Technological Fund
(c) payment of
administrative levies.
The first respondent
opposed the application in its capacity as the body under whose
auspices the National Exemption Committee (“the
Exemption
Committee”) issued a decision refusing an exemption application
of the applicant.
[2]
While the review application was pending, the applicant
instituted two interlocutory applications. The
first was an
application for the postponement of the review application pending an
application for access to information under
the Promotion of Access
to Information Act No 2 of 2000 ( PAIA). The second was in the
alternative, where the applicant sought
an extension of the rules of
discovery to the review application. The information sought by the
applicant related to the exemption
applications granted by the
Exemption Committee to other employers falling under the same
collective agreement as the applicant.
The first respondent opposed
both applications but supplied the needed information in its
answering affidavit to the application
to extend rules of discovery.
The result is that both interlocutory applications were abandoned,
what remains for consideration
by this court though, is the costs
issue of the two applications.
BACKGROUND FACTS
[3] During or about
November 1998 parties to the first respondent concluded various
agreements, namely:
Ø the
Footwear Section Collective Agreement;
Ø the
Provident Fund Collective Agreement;
Ø the Sick
Benefit Fund Collective Agreement;
Ø the
Administration Expenses Collective Agreement and
Ø the Footwear
Section Technological Fund Collective Agreement.
[4] The
collective agreements have been renewed from time to time by notice
in the Government Gazette, and the
terms thereof are binding on all
employers who are members of the employers’ organisation and
all employees of the trade
unions and who are engaged in the Leather
Industry. The applicant fell within the registered scope of the first
respondent by virtue
of the collective agreements which were extended
to non-parties by the Minister of Labour in terms of Section 32 (2)
of the Act.
In terms of S 33 A of the Act, the first respondent is
empowered to monitor and to enforce compliance with its collective
agreements.
The applicant registered with the first respondent on 12
May 2003.
[5]
In January 2005 the first respondent sued the applicant,
inter
alia
, for the recovery of R366 828, 58 and R 117 490, 39 on the
basis of an alleged breach of the provisions of the collective
agreements.
That it did by launching private arbitration proceedings
against the applicant. Professor Alan Rycroft was appointed to
arbitrate
the dispute between the parties. A pre-arbitration
agreement was drawn and filed by the parties to lay down the
procedural
rules. Just before the hearing commenced, parties agreed
that the issue of quantum would be separated from the merits and that
it would be held over for later agreement, failing which,
determination would be done by the arbitrator. On 31 May 2005 the
arbitrator
found that the applicant was bound by the collective
agreements and liable to pay the amounts of the claim to be agreed
upon by
the parties or to be determined by him. After some
investigations into the financial records of the applicants,
attorneys of both
parties deliberated on the issue of quantum and the
matter was finally resolved by agreement on 8 September 2005. it was
agreed
that the quantum owed by the applicant was:
1. R
205 363, 02 for the under payment of wages for 1 May 2003 to 16
February 2004; and
2.
R 77, 490 51 emanating from the statement of claim and for the period
1 May 2003 to 18 February 2004.
The agreement was made an
award on 2 November 2005.
[6] The
first applicant made numerous attempts to recover the two amounts
owed by the applicant. Correspondence was
exchanged by the parties,
when it failed to recover the monies it lodged an application for the
liquidation of the applicant in
the High Court of South Africa,
Durban and Coast Local Division. On 2 March 2007 an order was taken
by consent between the parties
in the liquidation application in the
following terms:
“
IT IS ORDERED: -
(BY CONSENT)
1
That the application is
adjourned sine die, with all questions of costs reserved.
2
That the applicant’s
Exemption Committee is directed to consider and decide on
Respondent’s Exemption Application within
4 (four) weeks of the
date hereof and if such applications are unsuccessful, to communicate
such decision and the reasons therefore
to the Respondent within the
(four) 4 week period aforesaid.
3
If the Exemption
Applications are unsuccessful, and the Respondent elects to appeal
outcome to the Independent Appeal Body, then
the respondent is
directed to do so within four weeks of the decision of the
applicant’s Exemption Committee refusing such
applications.
4
If, following on the
outcome of such appeal, the respondent elects to bring any review
proceedings in the Labour Court, it is directed
to do so within four
(4) weeks of the outcome of the Appeal ( such four 4 weeks beginning
to run from the date upon which the outcome
of the Appeal is
communicated to the respondent).
5.
In the event that a
Review eventuates at the instance of the Respondent, then it is
recorded that this Consent Order is taken without
prejudice to the
Respondent’s rights to raise in such Review, inter alia:-
(a)
Applicant’s initial refusal to consider Respondent’s
Exemption Applications,
(b)
Applicant’s refusal to do so on the ground that such Exemption
Applications were not
competent on the basis that:-
(i)
in respect of the period
1 May 2003 to February 2004 onward had been
made;
(ii)
in respect of the other periods, it
was not competent to bring
Exemption Applications retrospectively.
6
That the record all in
paragraph 5 of this order is made without prejudice to the
Applicant’s right to challenge, in any such
Review, the
correctness of what is set out in paragraphs 5 (a) and (b) of this
order.” (Sic)
[7] It
is clear from paragraph 5 of the order that the applicant had applied
for exemption but that the first
respondent had initially refused to
consider it. Then on 21 June 2006 the applicant filed with the first
respondent an application
for exemption as described herein before.
The exemptions were sought for the periods:
(a)
1 March 2003 to 30 June 2003
(b)
1 July 2003 to 30 June 2004
(c)
1 July 2004 to 30 June 2005
(d)
1 July 2005 to 30 June 2006
[8]
The general basis upon which the exemption application was made was
that:
1.
If the applicant was not to be granted exemption. Its viability would
be affected with the potential
for far-reaching job losses.
2.
The applicant by way of exemption would not gain a competitive
advantage over any other manufacturer
operating within the industry
but would instead simply remain in business.
3.
The exemption would not infringe upon the basic conditions of
employment rights of the applicant’s
employees.
4.
The collective bargaining process would not be undermined.
5.
The applicant would at all times be compliant with other obligations,
including but not limited to the
payment of Unemployment Insurance
Fund contributions and PAYE taxes on behalf of its employees.
6.
The employees currently and previously working with applicant had
expressed their continued support for
the exemption application,
primarily on the basis that payment of reduced wages was preferable
to unemployment.
[9]
The Exemption Committee refused to grant the applicant exemption
citing various reasons, including the
following:
“
(1)
FAIRNESS TO EMPLOYER, EMPLOYEES AND OTHER EMPLOYERS
AND EMPLOYEES IN THE INDUSTRY
.
Applicant operates a
business based on a model which it describes as a cut, measure and
trim service to Spectrum. The essence of
the arrangement however
appears as one in which Applicant provides a low cost labour service
to Spectrum who in turn competes in
the retail market.
Applicant justifies its
low labour cost strategy by claiming that it is necessary to compete
with the low labour costs of the footwear
producers operating within
Far Eastern countries. It is not surprising in this regard that
Applicant only lists footwear importers
as its competitors. When
challenged on this claim Applicant’s Mr Moosa conceded that
there were local competitors who perform
a similar function to the
Applicant.
To give Applicant license
to continue on the basis of being viable only because of its low
labour cost regime would be unfair to
these other employers.
Besides being unfair to
competing employers it is also extremely unfair towards Applicant’s
employees. In this regard Applicant
claims that it pays 60 % of the
prescribed wage of the applicable Collective Agreement. On a
consideration of the wage schedules
filed by Applicant it becomes
apparent that Applicant has not given its employees any increase for
the period relevant to the exemption
applications. It is furthermore
apparent that Applicant currently pays substantially less that 60% of
the applicable prescribed
wage rates. Compounding its employees’
agony in this regard is the fact that Applicant does not contribute
to the social
benefit funds installed by the provident and sick fund
Collective Agreements. It is submitted that this situation is a
social injustice
and smacks of exploitation of labour desperate for
work.
Applicant attempts to
justify its low wage regime,
inter alia
on the basis that its
employees have agreed to working under these conditions. In support
of this contention Applicant filed affidavits
from four senior
employees as well as what appears to be an agreement with all of its
employees.
As regards the
affidavits, the averments contained therein should be seen in the
light of the employees’ weak bargaining position.
If the employees are as
desperate for employment as what Applicant claims to be the case then
it is likely that they would have
signed those affidavits only for
the sake of holding on to employment that they currently have.
With regard to the wage
agreement, the employees not being represented by a union would be
vulnerable to threats of loosing their
employment. This would make it
easy for Applicant to extract from them an undertaking that they
would allow it, at its discretion
to pay a minimum of 60 % of the
prescribed wage rates. Of importance in this regard is the fact that
notwithstanding its undertaking
in terms of the agreement, Applicant
continues to pay its employees less than a minimum of 60% of the
prescribed wages rates.
Clearly Applicant’s
business strategy is not only unfair towards employers but also
extremely unfair and unjust towards its
employees.
(2)
WHETHER AN EXEMPTION, IF GRANTED, WOULD UNDERMINE THIS
AGREEMENT OR THE COLLECTIVE BARGAINING PROCESS
.
By extending Collective
Agreements to non- party employers the Bargaining Council is able to
effectively discharge one of its functions
i.e. to ensure the
even-handed and fair application of basic terms and conditions of
employment to all employees within the Industry
under its
jurisdiction.
To grant the applications
in question would be to undermine an important function of Collective
Agreements which are to establish
a consistent labour cost and
benefit regime applicable to all employers and employees of the
industry. (Sic)
When considered from a
party employer point of view, allowing the applicant to continue on
its current path constitutes a serious
threat to these employer
enterprises who generally comply with the applicable terms of the
Council Collective Agreements. If applicant
were allowed to continue
paying lower wages and other conditions of employment there would be
little, if any point, in any other
employers seeking or maintaining
membership of a party to the Bargaining council. To condone
Applicant’s business model
would be to seriously discourage
Council party membership by employers which in turn would be
detrimental to orderly collective
bargaining in general and
collective bargaining at sectoral level in particular. This in turn
would defeat one of the primary objects
of the Act.
(3)
WHETHER IT WILL MAKE A DIFFERENCE TO THE VIABILITY OF A NEW
BUSINESS OR A BUSINESS PREVIOUSLY OUTSIDE THE COUNCIL’S
JURISDICTION
Mr Shaikh, the joint
Managing Director of the Applicant and Spectrum is no stranger to the
Industry. According to records, Mr Shaik
has been involved in the
shoe manufacturing Industry (Spectrum and Fargo Shoes) for a while
prior to the dates relevant to the
exemption applications in
question. Whereas it is accepted that to grant the exemption will
contribute to the viability of the
Applicant based on its current
business model, it is submitted that Applicant cannot be allowed to
trade on the back of its labour.
It is submitted that it is a social
injustice to allow the employees to sacrifice their right to fair
terms and conditions of employment
so that the current business model
of the Applicant may be promoted.
(4)
UNEXPECTED ECONOMIC HARDSHIP OCCURING DURING THE CURRENCY OF
THE AGREEMENT AND JOB CREATION AND/OR LOSS THEREOF
The economic conditions
within the National Footwear Industry can hardly be described as
unexpected. These conditions have
been around for a while and
at least for a time longer than the period relevant to the exemption
applications. Mr Shaik was aware
of the trading conditions and
applicable legal framework when he designed his business model. He
must have been aware that the
only way that his business model would
succeed is by flouting the laws relevant to the applicable legal
framework. It is submitted
that an entrepreneur cannot allowed to
commence a business, the viability of which depends solely on its
failure to comply with
applicable laws.
Applicant through its
representatives has hinted that imposing full compliance with
applicable Collective Agreement and Council
levies could potentially
force a situation of job losses. Applicant’s representatives
stopped short of stating categorically
that jobs will as a matter of
fact be lost. In this regard it is not too far fetched for the
committee to conclude that, Mr Shaikh
will rearrange his business
affairs to accommodate the adjusted operating costs of managing the
Applicant through appropriate increases
to the sale price of
Applicant’s shoes to Spectrum. It is submitted that to allow
Applicant to continue undisturbed would
be jeopardizing the job
security of employees employed by compliant employers. Furthermore it
is unlikely that if Applicant were
to close its doors that the job
opportunities created by the demand for shoes by Spectrum would be
lost. It is likely that Spectrum
would source its shoes from other
employers operating within the industry.
(5)
INFRINGMENT OF BASIC CONDITIONS OF EMPLOYMNET RIGHTS
It is submitted that
Applicant’s actions constitute a social injustice. Applicant
severely undermines employees’ right
to fair basic conditions
of employment by depriving its employees of retirement funding
benefits as well as sick fund benefits.
These benefits are considered
basic rights relative to the Leather Industry. By paying the low
wages its does, coupled with the
failure to contribute to sick fund
and retirement fund; Applicant severely undermines employees’
ability to prepare themselves
for retirement or access medical
attention when they or their dependents require it. (Sic)
(6)
THE FACT THAT A COMPETITIVE ADVANTAGE MAY BE CREATED BY THE
EXEMPTION
There is no doubt that
Applicant’s low labour cost business practices give it
substantial advantage over local competitors
who are compliant. If
one considers that Affidavit deposed to by Mr Shaik, it appears that
his business strategy is based on competing
with imports on the basis
of denying his employees the wage rates and benefits determined by
the applicable Collective Agreements
of the Industry. This strategy
clearly gives the Applicant a substantial advantage over compliant
employers when competing for
a share of the local footwear or market.
(7)
COMPARABLE BENEFITS OR PROVISIONS
It was conceded by
Applicant’s counsel that Applicant provides no benefits
comparable to the sick and provident funds provided
by applicable
Collective Agreements. Access to retirement funding benefits, as well
as medical health benefits are considered to
be a basic right of
employees. In this regard clause 17 of the Footwear Collective
Agreement provides that:
“
Employers and
employees and/or the unions may enter into collective agreements at
plant level, which may vary or amend the terms
and conditions of this
agreement. Any such agreement and variation may not:-
·
vary or amend an employee’s entitlement to his/her provident
and sick fund
benefits.”
(8)
APPLICANT’S COMPLIANCE WITH OTHER STATUTORY REQUIREMENTS
It appears that Applicant
complies with the Unemployment Insurance Act and the Act on the
taxation of employees. Conspicuous by
its absence is the claim or
proof of Applicant’s obligations in terms of the Skills
Development Act.
(9)
OTHER FACTORS
Applicant also seeks
exemption from contributing to the technological fund and paying
Bargaining Council levies.
To without further ado
grant exemptions from the technological fund would be to reduce the
fund’s capability of sponsoring
(as it does)
research and development intended to promote the Industry at large.
In this regard the technological fund plays an
important role in
contributing to the growth and viability of the Industry. It would be
unfair to allow Applicant to benefit from
development of the Industry
without contributing towards the costs thereof as its competitors do.
The Bargaining Council is
statutorily charged with inter alia the following functions:
·
To conclude Collective Agreements;
·
To enforce those Collective Agreements;
·
To prevent and resolve labour disputes;
·
To perform the dispute resolution functions referred to in section
51;
·
To establish and administer a fund to be used for resolving disputes
etc.
The council funds these
functions from the proceeds of the levies collected from the
Industry. To grant exemption from payment of
these levies will
effectively render the Bargaining Council incapable of performing its
statutory functions. Equally it would prevent
the Council from
discharging its functions in regard to exemptions and providing for
appeal mechanisms against decisions of the
Council regarding
exemption applications.
It is submitted that
exemptions are intended for employers to cater for exceptional and
mainly unexpected circumstances. The main
complaints of the Applicant
are the challenges posed by the importing of footwear at costs they
find difficult in matching. This
situation is not unexpected,
exceptional or unique to the Applicant. All employers in this
Industry operate subject to the same
challenges. Many have adapted
and now conduct viable business. This is evident by the growth of the
industry from 140 registered
employers in 2000 to 149 in 2006.”
[10]
The applicant lodged an appeal with the second respondent as
envisages in clause 14 (9) of the collective
agreement. The third and
fourth respondents dismissed the appeal through a determination they
issued on 28 August 2007, hence the
present application.
THE CHIEF FINDINGS
OF THE SECOND RESPONDENT
[11]
Having considered the applicable legal principles and the nature of
the application before it, namely whether
it was a review or a wide
appeal, the second respondent dealt with issues before it in the
following manner:
Ø “In
terms of whether there are any grounds for reviewing the decision of
the Exemptions Committee, the Independent
Appeal Body is satisfied
that there is nothing before it which establishes that the Exemptions
Committee misdirected itself in
coming to its decision. To this end,
the Independent Appeal Body accepts the arguments set out by the
Respondent in its Heads of
Argument at paragraph 18. The Independent
Appeal Body is satisfied that the Exemptions Committee applied its
mind properly to the
criteria as set out in the Collective Agreement
and determined that an exemption should not be granted.
Ø Were the
Independent Appeal Body to consider the appeal in terms of a “wide
appeal”, the Independent
Appeal Body’s determination
remains the same. There is no new evidence before the Independent
Appeal Body which takes the
matter further for the Appellant.
Ø In any
event, the Independent Appeal Body accepts the Respondent’s
argument that the only criterion established
by the Appellant is the
fact that three out of 52 employees consented to the exemption
application. This is simply one of a number
of criteria and the
Independent Appeal Body concurs with the determination made by the
Exemption Committee in this regard.
Ø Further,
there is simply nothing before the Independent Appeal Body which
indicates that were the Appellant to be
granted the exemption,
this is the breathing space it requires within a defined period to
enable it to “catch up”
and eventually pay the requisite
minimum wages and benefits to its employees.
Ø Having
regard to the above, the provisions of section 14 (6) of the
Collective Agreement and the evidence and
argument presented by the
Appellant and Respondent, the Independent Appeal Body is satisfied
that the Appellant has failed to establish
any grounds upon which the
appeal should succeed.
Ø The
Independent Appeal Body is furthermore satisfied that the
Respondent’s refusal to grant the exemption is
fair and
reasonable in the circumstances”.
GROUNDS OF REVIEW
[12] The applicant
submitted that:
(1)
The second respondent failed to take into account all those grounds
set out in clause 14(3) of the collective
agreement when making its
decision.
(2)
The second respondent made a wrong statement in saying that the
applicant only relied on the fact that
it purportedly had the consent
of three employees to bring the exemption application. Why the
statement is wrong is because-
Ø the consent was
that of all of the employees of the applicant,
Ø the three
employees to whom the second respondent refers to were employees who
had deposed to affidavits. For example,
at paragraph 9 of the
affidavit of Mr Kurmiah Naidoo, it is stated that the senior
employees “speak for and on behalf of
all the respondent’s
employees”
Ø the first
respondent conducted investigations as to whether the applicant’s
employees supported the exemption and
found that there was such
support.
(3)
The statement that the applicant relied on no further grounds
was simply wrong. The
applicant infact relied upon the following
grounds-
·
If it were compelled to (abide) by the collective agreement, there
was a distinct
possibility of “the potential loss of some
eighty jobs”.
·
The applicant was facing severe competition and a serious loss of
market share
as a result of cheaper imports of foot wear into the
country.
(4)
The second respondent showed a fatal misunderstanding of the
affidavits of the three employees when
it said that: “the
consent of the three employees seems to be the cornerstone of the
appellant’s case. Subtract this
and there is nothing left,
other than the fact that the appellant is having a hard time in the
industry”. All three employees
made an allegation that Mr Abdul
Kader Hoosen Shaikh, (the deponent to the founding affidavit) spoke
on behalf of the entire body
of employees.
(5)
The second respondent was also misguided in finding that the only
basis for review would be that the
Exemptions Committee ignored
material evidence, or took into account irrelevant evidence, or
reached a conclusion without substantiation.
(6)
The second respondent failed to apply its mind properly to the
submissions of the applicant or even
to read properly the affidavits
of the employees and thus failed to take into account relevant
considerations when reaching its
decision.
(7)
It was simply wrong of the second respondent to have indicated that
“the onus rests on the appellant
for exemption to prove that it
differs from other employers.” Nowhere in clause 14(3) does it
specify that the applicant
for exemption must prove any form of
difference from other employers, a requirement which would be nearly
impossible to meet for
various reasons. The second respondent
misdirected itself in applying a test that required the
applicant to discharge
an onus to prove a difference from other
employers, when it was required to prove that it was entitled to an
exemption, taking
into account the factors listed in clause 14(3) of
the Collective Agreement.
PROCEDURAL
IRREGULARITIES
(1)
On 25 May 2007 the matter was adjourned because of the failure of the
first respondent to index and
paginate a set of papers for the second
respondent yet the second respondent ordered that costs should follow
the cause, the effect
of which was that the applicant was ordered to
pay those costs, an absurd result.
(2)
On 11 June 2007 (a date to which the matter was adjourned)
applicant’s counsel was unavailable.
A formal application for
an adjournment was made on 8 June 2007. Second respondent refused to
grant it. The effect was to bar the
applicant from seeking proper
representation and more particularly from engaging the presentation
of its choice.
(3)
A refusal of an adjournment, even after a substantial application and
on grounds of unavailability of
counsel should be seen against the
immediate grant of an adjournment without a costs order, when the
first respondent’s counsel
was delayed due to technical
problems with the airline on which he was traveling to Durban. The
delay was recorded as being not
the fault of the first respondent.
The approach is simply wrong and illustrative of the favour shown to
the first respondent by
the second respondent. The delay was quiet
simply the fault of improper planning on the part of the first
respondent’s counsel
who could have arrived on the night
before. It should have, at the very least, occasioned an adverse
costs order.
(4)
These irregularities suggest that the second respondent’s
ruling falls to be set aside as having
been made in bad faith.
SECOND RESPONDENT’S
COUNTER SUBMISSIONS
[13] The
second respondent denied that its ruling or determination ought to be
reviewed for its failure to consider
the grounds outlined in clause
14(3) of the collective agreement.
[14] The
applicant was said to have mistaken the recordal by the second
respondent of the argument of the first respondent’s
counsel
being a statement by the second respondent. The statement referred to
was that of Advocate Grogan, made in his heads of
argument submitted
on behalf of the first respondent. Any and all references to the same
statement were denied as being of the
second respondent. It was
submitted that the affidavits of the three employees of the applicant
were of hearsay nature and that
they were not to be accepted at face
values as they had little evidential value. It was disputed that the
second respondent failed
to apply its mind properly to the
submissions of the applicant or even to read the affidavits of the
employees properly.
[15] In
relation to whether the second respondent misdirected itself in
applying a test that required the applicant
to discharge an onus to
prove a difference from other employers, the applicant was said to
have misconstrued the second respondent’s
recordal of Advocate
Grogan’s argument as being a statement on the part of the
second respondent.
[16]
That the entire reasoning of the second respondent’s ruling was
tainted by the considerations in respect
of the affidavits of the
employees, it was said that it was not evident that the second
respondent placed any reliance on them.
PROCEDURAL FAIRNESS
[17] It was
disputed that the costs for 25 May 2007 were awarded in favour of the
first respondent. In respect of 11
June 2007, the submission was that
counsel for the first respondent was indeed delayed in arriving for
the hearing. An application
to postpone the hearing made by the
applicant was then acceded to by the second respondent
notwithstanding a request by the first
respondent to have the matter
stood down for its counsel. In postponing the matter, the second
respondent reserved the question
of costs despite the applicant being
the one who was seeking the indulgence of a postponement. It was
disputed that the second
respondent’s ruling was visited by
irregularities suggestive that the ruling falls to be reviewed and
set aside as having
been made in bad faith.
FRESH
CONSIDERATIONS
[18] The
applicant made submissions in support of court ruling on the
application for exemption itself, in the event
that the decisions of
various exemption boards are reviewed and set aside. As the
consideration of the fresh submissions depends
on the success of the
review application, the review application must therefore be firstly
considered.
SUBMISSION BY
PARTIES
SUBMISSION ON
BEHALF OF THE APPLICANT
[
19]
Mr Moosa appeared for the applicant. He highlighted the grounds of
review by weighing them against the findings
of the first and the
second respondent and the evidence in general. His further
submissions are dealt with below.
[20]
Although this is a review of a decision of the second respondent it
is in effect also a review of the decision
of the first respondent
considering that the decision of the second respondent was given by
it on appeal from the decision of the
first respondent. Fairness is
the cornerstone of the manner in which the second respondent is
required to carry out its function
regard being had to the provisions
of section 32(3) (f) of the Act. When approaching the appeal the
starting point for the second
respondent ought to have been that the
first respondent had initially refused to entertain the applicant’s
exemption applications.
The first respondent had already displayed
unfairness in refusing to even consider the applicant’s
exemption applications.
These in circumstances
inter alia
where:
Ø the applicant
had made an application to be registered as a member of the first
respondent but this application was never
acknowledged by the first
respondent
Ø the applicant
was never informed as to who constituted the first respondent’s
exemption committee.
Ø the managing
director of the applicant had brought an exemption application in the
name of another entity Fargo Footwear
(Pty) Ltd and that application
had simply been refused with no reasons furnished in circumstances
where competing entities were
receiving exemptions.
Ø the first
respondent had no rules or procedure whatsoever in regard to
exemption applications.
[21] If
regard is had to the finding of the first respondent it is evident
that the first respondent simply paid lip
service to the criteria set
out in clause 13(3) by stating each criterion and concluding that
same was against the applicant’s
application without alluding
to any facts or evidence in support of each conclusion. If that was
the correct way of considering
exemption applications then no
exemption applications could ever be granted.
[22] In
terms of clause 14(10) of the Footwear Section Collective Agreement,
the second respondent must consider all
applications with reference
to the criteria in sub-clause 3 of the agreement. In other words the
second respondent is enjoined
to consider the matter afresh. When it
did so, it entirely misdirected itself. For example it concluded that
the only case made
out by the applicant was the support of its three
employees (being a reference to the affidavits of the three senior
employees
put up in the liquidation application). However, it simply
failed to consider the affidavit of Gcinaphi Zulu, a designated agent
of the first respondent who confirmed that he had interviewed 26
employees of the applicant and all of those employees were aware
of
and supported the exemption application.
[23] It
appears that other than the summary schedule which has been
discovered in the discovery application the
first respondent did not,
when it considered applicant’s applications for exemption, have
any other information or records
concerning the basis on which it
granted exemptions to other employees. The irresistible inference is
that the first respondent
was deliberately withholding disclosing the
information as it knew that the disclosure would be highly damaging
to it. In the absence
of the relevant information, first respondent
could not have determined whether applicant’s application for
exemption should
be granted in that such information is directly
relevant under the criteria fairness to the employer and other
employers, whether
a competitive advantage may be created by the
exemption and comparable benefits or provisions where applicable. It
is even more
disturbing that the second respondent did not enquire
into this.
[24] In
all the circumstances it is evident that the second respondent not
only failed to apply its mind but that
it showed an overt bias
against the applicant. The applicant has made out a case under each
criterion set out in section 14(3)
of the Footwear Section Collective
Agreement and its applications for exemption should accordingly be
granted. In the premises
the applicant asks that this court should
set aside the decision of the second respondent and that it should
grant to the applicant
its application for exemption to pay a wage
rate of 60% of the prescribed rate and total exemption from payment
of contributions
to the provident fund, the sick fund, the
technological fund and the payment of administrative levies in
respect of the periods
1 March 2003 to 30 June 2003, 1 July to 30
June 2004 and 1 July 2004 to 30 June 2005.
SUBMISSIONS ON
BEHALF OF THE FIRST AND SECOND RESPONDENTS
[25] Mr
Broster SC appeared for the first and second respondents. He
similarly highlighted the findings of the first
and second
respondents against the background of evidence filed. His further
submissions follow here under.
[26] When
seeking an exemption, it is incumbent upon the applicant to
demonstrate the special circumstances which exist
in order to warrant
a deviation from the provisions of the collective agreement. This is
the approach set out in
Ram International Transport Pty Ltd v
National Bargaining Council for the Road Freight Industry (2002) 23
ILJ 1943 BCA at 193
. Where it was said:
“…
. the
primary consideration for deciding an exemption application
is whether or not the applicant
has established a justifiable reason
why the main agreement should not be complied with, as it was
intended, namely in a uniform
manner in respect of every enterprise
in the industry and why the principle underlying the operation of the
main agreement in the
sector of the economy governed by sectoral
collective bargaining should be determined.”
[27] At
no stage either before the exemptions committee or the independent
appeal body did the applicant seeks
to identify the special
circumstances which is sought to rely upon. In practical terms, for
the period 1 May 2003 to February 2006,
it ought to have paid amounts
in excess of R1 million in order to comply with its obligations in
terms of the collective agreement.
Instead, it steadfastly refuses to
do so. The extent of the cynical approach adopted by the applicant
throughout these proceedings
is demonstrated by the fact that the
applicant opposed the original arbitration held before Professor
Rycroft in this way:-
“
To answer the
Council’s claim by saying that it is not liable because in this
particular claim the copies of the collective
agreement put up are
not the original ones or the very ones that resulted in the
Minister’s extension, is, in my view, an
evasive and inadequate
argument. It is, effectively, a concession that if the Council put up
the original agreements it would be
liable.”
[28]
Throughout the proceedings the applicant has accepted that it is
unable to pay the amounts due to the first respondent
and has
throughout contended that because it operates its business in a
“break-even” manner it is simply unable to
bear the
increased costs required to comply with its lawful obligation. In
this application the applicant’s case is pitched
exclusively on
the basis that if the exemptions are not granted, the employees,
which it has consistently underpaid, would be unemployed.
The
exemptions committee convincingly dealt with this contention in this
way:-
“
It is submitted
that the applicant’s actions constitute a social injustice.
Applicant severely undermines employees’
rights to fair basic
conditions of employment by depriving its employees of retirement
funding benefits as well as sick fund benefits.
These benefits are
considered basic rights relative to the Leather Industry. By paying
the low wages it does, coupled with the
failure to contribute to the
sick fund and retirement fund, Applicant severely undermines
employees’ ability to prepare themselves
for retirement or
access medical attention when they or their dependants require it”
[29]
The second ground upon which the applicant relies proceeds on the
basis that the exemption committee simply
paid lip service to the
criteria it was obliged to consider. This submission overlooks the
careful analysis by the exemption committee
under separate headings
of each of the requirements it was obliged to consider. The reasoning
is carefully set out and contains
a rejection of each of the
applicant’s submissions. To suggest, as the applicant does,
that the independent appeal body failed
to apply its mind at all
ignores this finding:
“
Having regard to
the above, the provisions of section 14 (6) of the Collective
Agreement and the evidence and argument presented
by the Appellant
and the Respondent, the Independent Appeal Body is satisfied that the
Appellant has failed to establish any ground
upon which the appeal
should succeed. The Independent Appeal Body is furthermore satisfied
that the Respondent’s refusal
to grant the exemption is fair
and reasonable in the circumstances
.”
[30] It
is apparent from the information put before the first respondent that
all the applicant’s employees
accepted the wage regime imposed
upon them by the applicant. In this regard the exemptions committee
said:
“
Besides being
unfair to competing employers it is also extremely unfair towards
Applicants employees. In this regard Applicant claims
that it pays
60% of the prescribed wage of the applicable Collective Agreement. On
a consideration of the wage schedules filed
by applicant it becomes
apparent that Applicant has not given its employees any increase for
the period relevant to the exemption
applications. It is furthermore
apparent that Applicant currently pays substantially less than 60% of
the applicable prescribed
wage rates. Compounding its employees’
agony in this regard is the fact that Applicant does not contribute
to the social
benefit funds installed by the provident fund and sick
fund Collective Agreements. It is submitted that this situation is a
social
injustice and smacks of exploitation of labour desperate for
work.
Applicant attempts to
justify its low wage regime, inter alia on the basis that its
employees have agreed to working under these
conditions. In support
of this contention Applicant filed affidavits from four senior
employees as well as what appears to be an
agreement with all of its
employees”
[30] It
is submitted that not only was the exemption committee fully aware of
the applicant’s claim that
all its employees supported the
exemption application, it trenchantly rejected the cynical approach
of the applicant on the sound
basis set out above. The applicant
accordingly submits that when the reasonableness test is applied to
both the first and the second
respondent’s decision it cannot
be concluded that their approach and reasoning is not reasonable in
the circumstances of
the matter. The respondents accordingly submit
that the application for review should be dismissed with costs.
EVALUATION
[32]
Two decisions are the subjects of the review in these proceedings.
The one is of the first respondent and
the other is that of the
second respondent. Initially this application was premised on the
provisions of the Promotion of Administrative
Justice Act 3 of 2000
(PAJA). Mr Moosa conceded that, in the light of the decision in
Sidumo and Another v Rustenburg Platinum Mines Ltd And Another
[2007] 12 BLLR 1097
CC,
Paja was not applicable. It falls to be
determined whether the decisions reached by the first and the second
respondents are decisions
that a reasonable decision maker could not
reach, in the circumstances. Further, the applicant submitted that
the second respondent
failed to apply its mind properly to the
submissions of the applicant and to take into account relevant
considerations when reaching
its decision. Effectively the applicant
is alleging that the second respondent committed a gross irregularity
in various ways in
this matter.
[33] The
concept of a gross irregularity was discussed in
Goldfields
Investments Limited & Another v City Council of Johannesburg &
Another
1938 TPD 551
, where court held
inter alia: “
the
crucial question is whether it prevented a fair trial of the issues.
If it did prevent a fair trial of the issues then it will
amount to a
gross irregularity”. In
County Fair Foods (Pty) Limited v
CCMA & Other (1999) 4 LLD 459 LAC at Para [30]
Zondo3AJA (as
he then was) stated:
“
In Ellis v Morgan
1909 TPD 576
Mason J is reported to have said an irregularity in
proceedings does not mean an incorrect judgment it refers not to the
result
but to the method of a trial, such as, for example, some
high-high handed or mistaken action which has prevented the aggrieved
party from having his case fully and fairly determined.”
[34] The
second consideration in this application will be whether or not the
decisions of the first and second respondents
are reasonable, as
already indicated. When commenting on the Sidumo decision the Labour
Appeal Court in Fidelity Cash Management
Services v CCMA & Others
[2008] 3 BLLR 197
LAC, posed the question in paragraph 102: “What
is the different between the approach enunciated in Carephone and
that enunciated
in Sidumo with regard to the grounds of review set
out in section 145 of the Act?” In answering this question
court
inter alia
said: “It seems to me that, even
if there may have been a debate under Carephone and prior to Sidumo
on whether a commissioner’s
decision for which he or she has
given bad reasons could be said to be justifiable if there were other
reasons based on the record
before him or her which he or she did not
articulate but which could sustain the decision which he or she made,
there can be no
doubt now under Sidumo that the reasonableness or
otherwise of a commissioner’s decision does not depend-at least
not solely
– upon the reasons that the commissioner gives for
the decision. In many cases the reasons which the commissioner gives
for
his decision, finding or award will play a role in the subsequent
assessment of whether or not such decision or finding is one that
a
reasonable decision maker could or could not reach. However, other
reasons upon which the commissioner did not rely to support
his or
her decision or finding but which can render the decision reasonable
or unreasonable can be taken into account. This would
clearly be the
case where the commissioner gives reasons A, B and C in his or her
award but legitimately before him or her, one
finds that there were
reasons D, E and F upon which he did not rely but could have relied
which are enough to sustain the decision”.
[35] I
remind myself that the present review application is premised on the
provisions of section 158 (1) (g) of the
Act, which reads:
“
The
Labour Court may-
(a)
-
-
-
(g) subject
to section 145, review the performance or purported performance of
any function provided for in this Act on any grounds
that are
permissible in law.”
[36] I
turn to the merits of the review application. From the authority in
Fidelity Cash Management Case it follows
that the reasons given by
the second respondent for its determination are not the be all and
end all. They are rather, part and
parcel of those facts upon which
the second respondent may not have relied to support its decision but
which can render the decision
reasonable or unreasonable.
[37] When
considering the exemption application the first respondent had to
consider the grounds in clause 14 (3) of
the collective agreement.
The first respondent did consider each of the grounds. It did not
just list these grounds but dealt with
each in relation to the
application. In my view the first applicant acquitted itself in the
manner it handled each of the 6 general
bases upon which the
exemption application was premised. Each and every critical finding
made by the first respondent was not only
relevant to the issue in
point but dealt exhaustively with considerations attendant thereto.
The first respondent accepted the
fact that the application was
supported by all employees of the applicant. It looked at the
submissions by the employees in support
of the application against
their weak bargaining position. In my view, it correctly realised
that the employees were vulnerable
to threats of loosing their
employment.
[38]
The first respondent noted as of importance the fact that
notwithstanding its undertaking in terms of the
agreement, the
applicant had continued to pay its employees, less than a minimum of
60% of the prescribed wages rates. During the
liquidation
application, the applicant had admitted that it was unable to pay its
debts. In my view there is overwhelming evidence
in this application
that the liabilities of the applicant, including a claim premised on
the arbitration award, had exceeded its
assets. The applicant was
infact not breaking even, as it said.
[39]
The first respondent correctly held that the applicants’
actions constituted a social injustice by
severely undermining
employee’s rights to fair basic conditions of employment by
depriving its employees of retirement funding
benefits as well as
sick fund benefits. These benefits are certainly basic rights
relative to the Leather Industry.
[40]
There is overwhelming evidence that the applicant’s low labour
cost business practices give the applicant
substantial advantage over
local competitors who are compliant. A denial of the employees the
wage rates and benefits determined
by the collective agreement does
indeed give the applicant a substantial advantage over compliant
employers when competing for
a share of the local footwear or market.
An exemption under such circumstances would dissuade other employers
from complying with
the collective agreement and the objective of
collective bargaining would be easily frustrated.
[41]
The applicant was, in my view, entitled to the information relating
to the exemption applications granted
to other employers falling
under the same collective agreement. However, as there were other
considerations in this regard, such
failure did not have fatal
consequences to the case of the second applicant.
[42]
There is another consideration of importance in this application. It
relates to the nature of the applicant’s
enterprise. To qualify
for a wage reduction of 60% of the prescribed rate, the enterprise
had to be a semi-formal sector establishment,
which it is not, in
terms of its classification form. The exemption should accordingly
not apply to the period relevant to the
applicant’s
indebtedness to the respondents, at least until September 2005.
[43] In
my view, it was not necessary that I had to traverse each of the 9
grounds covered by the first applicant,
even after I had considered
them. The critical finding of the second respondent in this matter
is, in my view that:
“
In terms of
whether there are any grounds for reviewing the decision of the
Exemptions Committee, the Independent Appeal Body is
satisfied that
there is nothing before it which establishes that the Exemptions
Committee misdirected itself in coming to its decision……….
The Independent Appeal Body is satisfied that the Exemptions
Committee applied its mind properly to the criteria as set out in
the
Collective Agreement and determined that an exception should be
granted”
[44] The
reference to there being no evidence brought before the Independent
Appeal Body, bears reference to the right
of the applicant to bring
new evidence for the consideration of the appeal. In my view the
further comments by the second respondent
were unnecessary in the
circumstances. To the extent that there may be well founded criticism
on such further comments; such do
not, in my findings amount to there
having been any reviewable irregularity amounting to there having not
been a full and fair
trial of the issues in this matter. As already
indicated, a solid foundation had already been laid in the manner by
which the first
respondent dealt with the application. I accordingly,
find it unnecessary that I should deal individually with every ground
of
review, having considered each against the conspectus of all
evidential material.
[45] In respect of
procedural fairness, the applicant ought not to be responsible for
costs for 25 May 2007 and 11 June 2007. The
postponement of the
matter on 11 June 2007 was clearly at the instance of the respondent
as the application by the applicant had
been turned down. The
decision in
Carephone Pty Ltd v Marcus No and others (1998) 191
ILJ 1425 (LAC)
, serves as a reminder that a litigant’s
rights to being represented by a representative of its choice is a
right, the exercise
of which may be circumscribed, depending on how
it is being exercised. This ground is accordingly devoid of any
merits. The
decision I have reached makes it unnecessary to consider
the fresh submissions of the applicant to be granted an exemption by
this
court. I have considered the issue of costs in relation to the
law and fairness of this matter.
[46] In
the premises, the appropriate order I make is the following:
1.
The review application in this matter is dismissed.
2.
The applicant is ordered to pay the costs of this application.
3.
Costs of 25 May 2007 and 11 June 2007 occasioned at the initial
application for exemption are to be borne
by the first respondent.
4.
Costs for the interlocutory application, for a postponement of the
review application, pending access
to information are to be borne by
the second respondent.
_______________
CELE
J
APPEARANCES
FOR
THE APPLICANT: ADVOCATE O.A MOOSA
INSTRUCTED
BY: C M SARDIWALLA & CO
FOR
THE RESPONDENT: ADVOCATE L.B BROSTER
INSTRUCTED
BY: COX YEATS
Date
of Judgment: 29 April 2009