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[2017] ZALCD 8
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National Bargaining Council for the Clothing Manufacturing Industry (KZN) v Glamour Fashions Worker Primary Co-operative Limited and Others (D20/16) [2017] ZALCD 8; (2017) 38 ILJ 1849 (LC) (15 February 2017)
IN THE LABOUR
COURT OF SOUTH AFRICA,
DURBAN
Reportable
Case no: D20/16
In the matter between:
NATIONAL BARGAINING COUNCIL FOR THE
CLOTHNG
MANUFACTURING INDUSTRY (KZN
)
Applicant
and
GLAMOUR FASHIONS WORKER PRIMARY
CO-OPERATIVE
LIMITED
First Respondent
SUGARBAY WORKER
CO-OPERATIVE LTD
Second Respondent
SRN
MANUFACTURING WORKER CO-OPERATIVE LTD
Third Respondent
FANTASY PRIMARY
WORKER CO-OPERATIVE LTD
Fourth Respondent
MASAKHE CLOTHING
WORKER CO-OPERATIVE LTD
Fifth Respondent
KZN
MANUFACTURING WORKER CO-OPERATIVE LTD
Sixth Respondent
RICHARD LYSTER
N.O
.
Seventh Respondent
Heard
:
19 October 2016
Delivered:
15 February 2017
Summary:
Labour
Relations Act, 1995
and
Co-Operatives Act 14 of 2005
- court cannot
issue blanket declaratory order stipulating that workers’
co-operatives are subject to the
Labour Relations Act – Labour
Relations Act applies only to ‘employees’, as defined -
no conflict between
Labour Relations Act and
Co-Operatives Act.
>
JUDGMENT
WHITCHER
J
[1]
Applicant
is a bargaining council registered in terms of
section 29
of the
Labour Relations Act 66 of 1995
. First to Sixth Respondents purport
to be worker co-operatives, registered under section 7 of the
Co-Operatives Act 14 of 2005
(“COA”).
[2]
Applicant, as per the notice of motion, seeks a declaratory order
that the provisions of section 6 of Schedule 1, Part 2 of
the COA do
not
prevail over the provisions of the LRA pursuant to the
provisions of section 210 of the LRA, and accordingly that members of
worker
co-operatives who
otherwise
fall within the definition
of an “employee” in terms of section 213 of the LRA are
employees for the purposes of the
LRA, and the co-operatives and such
members are accordingly bound by the provisions of the LRA.
The
statutory framework
[3]
Section 210 of the LRA provides as follows:
210
Application of Act when in conflict with other laws
If
any conflict, relating to the matters dealt with in
this Act
,
arises between this Act and the provisions of any other law save the
Constitution or any Act expressly amending this Act, the
provisions
of
this Act
will prevail.
[4]
Section 6 in Schedule 1, Special provisions relating to certain kinds
of Co-Operatives, part 2 Worker Co-Operatives of the COA
reads:
6
Application of Labour Legislation
(1)
A
member of a worker co-operative is not an employee as defined in
terms of the Labour Relations Act, 1995 (Act 66 of 1995), or
the
Basic Conditions of Employment Act, 1997 (Act 75 of 1997).
(2)
Despite
subsection (1), a worker co-operative is deemed to be the employer of
its members who work for the co-operative for the
purposes of the
following Acts: [Skills Development Act, Skills Development Levies
Act, OHSA, COEDA, UIF Act and Unemployment Insurance
Contributions
Act].
[5]
Section 4 and 5 of Schedule 1, part 2 to the COA provides:
4
Termination of membership
(1)
Despite any other provisions of this Act, the constitution of a
worker co-operative
may give the board of directors the power to
terminate the membership of a member if there is good reason to do
so.
(2)
Before terminating the membership of a member, the board of directors
must give such
member- (a) notice that termination is contemplated;
(b) reasons for the proposed termination which, in the case of a
member that
has served a period of probation, must relate to the
conduct or capacity of the member to carry out his or her duties, or
to the
operational requirements of the co-operative; and (c) a right
to be heard.
(3)
A member whose membership is terminated by the board of directors has
a right to appeal
to a general meeting within the time limits set out
in the constitution.
(4)
A termination of the membership of a member by the board of directors
is confirmed
on appeal if the members, at a duly called general
meeting, do not reverse the decision of the board of directors.
(5)
If the general meeting is called to consider the appeal of a member
whose membership
is terminated and a quorum of members is not
present, the decision of the board is confirmed.
5
Laid-off member
(1)
A temporary lay-off of a member does not result in termination of
that member’s
membership.
(2)
If a member is laid off and two years have elapsed since the date of
the lay-off without
the member having resumed employment with the
co-operative, the board of directors may, in accordance with the
constitution of
a co-operative, terminate the membership of the
member.
(3)
The provisions of item 4 (2) to (5) apply to the termination of a
member’s membership
in terms of this item.
Applicant’s
submissions
[6]
The necessity for the declarator arises from a proliferation in the
registration of worker co-operatives in the clothing manufacturing
industry falling within its registered scope and hence jurisdiction.
[7]
The proliferation arises solely in order to circumvent the
application of the LRA and Applicant’s main collective
agreements
to employees previously engaged as such by close
corporations or companies who have now converted into worker
co-operatives but
who operate no differently than they did before.
[8]
The worker co-operatives seek to avoid the provisions of the LRA by
way of reliance on section 6 part 2, Schedule 1 of the COA,
and, in
so doing, argue that the former employees of the juristic entities,
now framed as “members” of the primary
worker
co-operative, are not employees for the purpose of the LRA and
accordingly, the co-operatives are exempt from according
such members
(who are no more than employees) the rights and protections accorded
employees under the LRA.
[9]
While items 4 and 5 of the COA purport to accord members of worker
co-operatives rights akin to some of those set out in the
LRA, they
afford no substantive, alternatively no adequate substantive re-dress
for the breach of those provisions and are in conflict
with
employees’ rights to fair labour practices entrenched in
section 23 of the Constitution.
[10]
Section 6, part 2, Schedule 1 to the COA is in direct conflict with
the provisions of the LRA. It is accordingly inconsistent
with the
provisions of the LRA, in particular the definition of “employee”
as contained in section 213 of the LRA and
flowing therefrom is
inconsistent with the rights and remedies afforded employees by the
LRA.
[11]
The COA does not, however, serve to
expressly
amend section
210 of the LRA or the definition of “employee” in terms
of section 213 of the LRA, or for that matter,
any other provision of
the LRA which confers rights and remedies on employees as defined in
terms of the LRA.
[12]
Accordingly, the COA is
not
an Act
expressly
amending
the LRA, and, accordingly its provisions purporting to exclude
members who fall within the definition of employee in terms
of the
LRA from the ambit of the LRA do not supersede the provisions of the
LRA. Given the requirements in section 210 for express
amendment, an
implied amendment by virtue of the COA’s reference in section 6
to the LRA, is insufficient.
[13]
It is trite that the legislature is deemed to know the law and
further that where a supremacy provision in an earlier Act (such
as
the LRA) requires an
express
amendment of it in order for a
subsequent Act to prevail over its provisions, such Act would have to
specifically and expressly
amend or repeal the supremacy provision
contained in the preceding Act,
in casu,
section 210 of the
LRA, which the COA does not do.
[14]
It is evident from the preamble to the LRA as well as lists of Acts
set out in the LRA which have expressly amended the LRA
(the COA is
not one of them), seen together with the absence of any express
provision in the COA repealing or amending section
210 or 213 of the
LRA, that the LRA prevails over any inconsistent provisions of the
COA and accordingly the definition of an “employee”
contained in section 213 of the LRA prevails over the exclusion
granted in section 6, Schedule 1 part 2 of the COA.
[15]
Members who fall within the definition of employee pursuant to the
provisions of section 213 of the LRA accordingly enjoy the
rights and
remedies afforded them by the LRA; not the watered down rights and
remedies accorded to members in terms of sections
4 and 5 of part 2,
schedule 1 of the COA.
Respondents’
submissions
[16]
The COA was enacted after the LRA, and consequently the presumption
that the Legislature was aware of the LRA when it enacted
the COA is
applicable. That presumption is raised to an almost certainty when
one considers that Schedule 1, Part 2, Section 6(1)
specifically
refers to the LRA. Had the Legislature intended the LRA to apply to
members of a worker co-operative, more particularly
the LRA’s
definition of “employee”, why did it specifically enact
Schedule 1, Part 2, Section 6(1) of the COA,
to the effect that “a
member of a worker co-operative is not an employee as defined in
terms of the Labour Relations Act,
1995 (Act 66 of 1995)…”?
[17]
Patently the Legislature intended to exclude members of a
co-operative from the definition of “employee” under
the
LRA, and consequently exclude such members from the provisions of the
LRA itself.
[18]
Applicant incorrectly interprets section 210 of the LRA and fails to
appreciate the true nature of co-operatives. Section 210
heralds the
LRA as the pre-eminent legislation
in labour matters
that are
dealt with by that Act. Only the Constitution itself or a statute
that expressly amends the LRA can take precedence in
application to
such labour matters.
[19]
Schedule 1, Part 2 of the COA does not deal with matters that are
dealt with by the LRA, and consequently the provisions of
section 210
can find no possible application to First to Sixth Respondents’
members.
Relief
sought
[20]
Put simply, Applicant seeks a declaration that provisions of the COA
to the effect that members of worker co-operatives are
not employees
in terms of the LRA do
not
prevail over the provisions of the
LRA itself since section 210 of the LRA provides for the latter Act’s
precedence. While
concerned with sham worker co-operatives, Applicant
wishes this court to make a
legal
finding that sections of the
COA are,
a priori
, inconsistent with the definition of
“employee” contained in the LRA. This finding is to be
made without reference
to the facts of how any particular worker
co-operative functions. Given the framing of the relief sought and
the arguments presented
by Applicant, I am called upon to adjudicate
a conflict of laws that will have a blanket effect on all worker
co-operatives.
Analysis
[21]
While much time was spent arguing whether the COA effectively amended
the LRA or not, the outcome of this case, to my mind,
flows from a
proper consideration of the definition of employee in section 213 of
the LRA. For reasons given below, I can only
consider exercising this
court’s discretion to issue a declarator in respect of the
members of worker co-operatives who indeed
fall within the definition
of an “employee” set out in section 213 of the LRA. But
it is not self-evident that all
members of workers’
co-operatives are covered by the LRA’s definition of
‘employee’. Any declaratory order
could, logically, only
cover those co-operative members who work
for
another
person and who receive any remuneration
[1]
.
What this means is that any declaration of the LRA’s precedence
over the COA could only apply to those members of sham co-operatives
who are in fact employees as defined in the LRA in the first place.
There is no point granting such a declaratory order because
the
issues are essentially fact-dependent and their determination in the
abstract would have little, if any, precedential value
and thus no
practical effect.
The
meaning of ‘employee’
[22]
Despite the fact that a worker co-operative’s primary purpose
is to provide employment (or work) to its members, I am
not prepared
to find that this activity necessarily brings its members within the
ambit of the LRA; an Act regulating solely the
relationship between
employers and employees. The COA appears to me to regulate work of
another variety. The mere fact that co-operative
members are employed
or receive remuneration is not sufficient for the LRA to cast its net
over them. The nature of the relationship
between the parties
performing co-operative work on the one hand and directing and paying
for it on the other hand must be considered.
One of the main objects
of labour law is to ensure equity in the relationship between
individual employees and their employers;
with it being accepted that
the latter possess considerable social and economic power over the
former
[2]
.
However, if the relationship between the parties to production have
transcended the traditional employment hierarchies, where
those
providing their labour also jointly own the enterprise, share in any
surplus and have a democratic say in the running of
the operation,
then, in my view, labour law should not and does not apply.
[23]
This flows from the definition of both ‘employee’ and
‘remuneration’ in section 213 of the LRA which
envisages
affording the protections of the Act to persons working
for
as
opposed to
with
other persons. A legitimate and properly constituted co-operative is
characterized by the values of collective self-help, self-reliance,
self-responsibility, democracy, equality and social
responsibility
[3]
.
At its heart is the impulse of members to voluntarily associate with
each other and to apply democracy as the basis of organisational
decision-making
[4]
.
This is reflected in provisions of the COA dealing with shareholding
and the allocation of surpluses, requiring regular meetings,
and
instituting the general membership of the cooperative as the highest
decision-making body of the organisation
[5]
.
Members of a workers’ co-operative may be employed in a very
wide sense but, in legitimate co-operatives, these members
are not
working
for
another
person in the same way a wage-earner is. They do not place their
capacity to work at the disposal of others. They are working
with
others for themselves in an enterprise they jointly own and
collectively control.
[24]
Case law and commentary on the meaning of ‘employee’ is
dominated by the distinction between contracts of service
(characteristic of employees) and contracts of work (characteristic
of independent contractors)
[6]
.
This distinction does not assist very much in this case because both
employees and independent contractors perform work for -
or render
services to - other persons; the extent of control, dependence,
exclusivity and ownership of tools merely differing.
Members of a
legitimate and properly functioning co-operatives cannot be assessed
against section 200A of the LRA since they do
not work for or render
services to a party distinct from the collective of which they are a
part, even though their day-to-day
work may be subject to the control
of appointed managers.
[25]
One has to come to terms with the fact that legitimate workers’
co-operatives engage in an entirely novel variety of
work,
characterized chiefly by their being joint owners and being capable,
at intervals, of exercising democratic control over
the enterprise.
Should the situation arise where the termination of the membership of
one particular member is sought by
the others, such a member has
democratic channels at his disposal to resist this outcome. He also
has the right to be heard in
terms of Items 4 and 5 of Schedule 1,
part 2 to the COA. Given that the nature of a member’s
relationship with others in
a legitimate co-operative is based on
voluntary association underpinned by democratic decision-making, the
substantive and procedural
protections in the LRA against unfair
dismissal are out of place.
[26]
It may at first glance appear that Section 6 in Schedule 1, part 2 of
the COA gives the game away that members of workers’
co-operatives are indeed thought of as employees but then excluded
from labour law protections. This section provides that members
are
still subject to various labour statutes
other than
the LRA
and BCEA, such as the Skills Development Act, Occupational Health and
Safety Act, and the Unemployed Insurance Fund Act.
This is not the
case. These are deeming provisions that, so to speak, opt
into
certain labour law obligations while asserting the fundamental point
of this case; that members of workers’ co-operatives
are not
employees.
[27]
Applicant has urged that I consider the rights on termination of
membership afforded to members of a co-operative in items
4 and 5 of
Schedule 1 to the COA to be inadequate to the task of ensuring
‘employees’ rights to fair labour practices
entrenched in
section 23 of the Constitution. In the first instance, this begs the
question of whether the members are employees
or not. If the
co-operative is a sham and ‘members’ manifestly are
employees, these employees access their rights to
fair labour
practices via the LRA by pleading a case of unfair dismissal in the
Commission for Conciliation, Mediation and Arbitration
(CCMA) or
Bargaining Council. Should the facts bear their contentions out,
these labour forums will both have jurisdiction and
will provide them
with appropriate relief. However, I have already found that the
members of a legitimate and properly constituted
workers co-operative
do not fall within the definition of employee in the LRA as they do
not work
for
another
person. As such, their remedies
lie, much as an independent contractor or partner in a company does,
outside labour law. Indeed,
their position will most closely resemble
that of a trade union official outvoted at a general meeting. He or
she may enforce compliance
with the organisation’s constitution
and the rules of natural justice. He or she may decry
male fides
or irrationality but not complain that the Code of Good Conduct on
Dismissal was not observed in the termination of his association
with
the union.
[28]
It may be argued that since the right to fair labour practices is
indeed extended to ‘everyone’
[7]
perhaps the meaning of employee in the LRA, (the statute meant to
give expression to that fundamental right), should be more
expansively
interpreted. Perhaps in creating a distinction between
working
for
and
with
another person, I am unduly excluding people from the ambit of the
LRA and thus the constitutional right to which the LRA is meant
to
give expression. Perhaps working in - or for - a co-operative should
be taken to be working for another person; in this case
a juristic
one.
[29]
I am alive to these arguments and, in interpreting the meaning of
‘employee’ in section 213 of the LRA, I am enjoined
to do
so in a way that gives effect to the spirit, purport and object of
the Bill of Rights.
[8]
This means I must prefer a reasonable interpretation of a statute
that preserves the scope of a constitutional right over one that
unduly limits it. Section 3 of the LRA also requires that those
interpreting this statute do so in a manner that gives effect to
its
primary objects and in compliance with the Constitution.
[30]
However, it strikes me that section 22 of the Constitution exerts
some interpretive pull on the scope of the definition of
‘employee’
too. In
Affordable
Medicines Trust,
[9]
the Constitutional Court noted:
‘
Freedom
to choose a vocation is intrinsic to the nature of a society based on
human dignity as contemplated by the Constitution.
One’s work
is part of one’s identity and is constitutive of one’s
dignity. Every individual has a right to take
up any activity which
he or she believes himself or herself prepared to undertake as a
profession and to make that activity the
very basis of his or her
life. And there is a relationship between work and the human
personality as a whole. “It is a relationship
that shapes and
completes the individual over a lifetime of devoted activity; it is
the foundation of a person’s existence”.
[10]
[31]
As I have stated earlier, the relief sought by Applicant would cover
even those working in legitimate and properly functioning
co-operatives. These are “autonomous associations of persons
united voluntarily to meet their common economic and social
needs and
aspirations through a jointly owned and democratically controlled
enterprise organised and operated on co-operative principles”
[11]
.
I do not understand Applicant to deny the existence of legitimate
workers’ co-operatives. And yet, were I to declare that
sections of the COA are,
a
priori
,
in conflict with the provisions of the LRA, (which would take
precedence by virtue of section 210), the effect would be that these
enterprises and those who consider themselves joint-owners of a
democratically controlled enterprise run co-operatively with others
would be treated in law as no more than businesses with wage or
salary earners. It would not be a stretch to say that such a
declaration
may limit the freedom of vocation of these citizens in
the way set out in the passage from
Affordable
Medicines Trust
above, by impacting the dignity and sense of identity that comes with
the work one does.
[32]
I mention section 22 of the Constitution to illustrate that,
sensitivity to the spirit, purport and object of the Bill of Rights
does not inexorably lead to an interpretation of ‘employee’
in the LRA that extends the reach of labour law over as
many
varieties of work as reasonably possible. A countervailing freedom is
also at play in declaring that joint owners of a workers’
co-operative are not,
in substance
, employees.
[33]
On the balance, I am satisfied that members of a legitimate workers’
co-operative do not fall under the definition of
‘employee’
in the LRA and that the reasons I have given above flow from a
constitutionally healthy interpretation of
the relevant provisions of
the statutes concerned.
Conflict
between the LRA and COA
[34]
Much was made in this case about a potential conflict of laws between
the LRA and the COA. Section 210 of the LRA envisages
a situation in
which the application of the LRA might conflict with other laws. In
this regard the LRA states:
‘
If
any conflict, relating to the matters dealt with in this Act, arises
between this Act and the provisions of any other law save
the
Constitution or any act expressly amending this Act, the provisions
of this Act will prevail’.
[35]
Respondents argued that the LRA was expressly amended by the COA.
Although, it is unnecessary to rule on this issue given the
approach
I have taken, I have my doubts whether the COA amended the LRA. The
word “expressly” in section 210 of the
LRA sets out the
form in which any amendment to that statute must take place. For the
sake of legal certainty, even if a later
Act purported to amend the
LRA, such as the COA does, this is of no effect since such an
amendment was not done in a manner required
by the earlier Act; i.e.
expressly.
Sham
co-operatives
[36]
Nothing in this judgment should be taken to condone sham
co-operatives who adopt the form of a workers’ co-operative
to
circumvent labour law. These simulations are a blight on the labour
market and a serious abuse of worker rights. The COA itself
creates
criminal offences relating to the malfunctioning of co-operatives to
which it attaches sanctions, including imprisonment.
In particular,
section 92 (2) provides:
Any
person who knowingly-
(a)
makes or assists in making a report, return, notice or any other
document to be sent to the registrar or any other person, as
required
by this Act, that contains an untrue statement of a material fact; or
(b)
omits to state a material fact on any of the documents referred to in
paragraph (a), that will be sent to the registrar or any
other
person, as required by this Act, is guilty of an offence and is
liable on conviction to a fine or to imprisonment for a period
not
exceeding 24 months or to both a fine and such imprisonment.
[37]
Unscrupulous employers setting up sham co-operatives to circumvent
labour law will,
on a proper examination of the facts on a case by
case basis,
hopefully come short in the CCMA or Bargaining
Council.
Findings
[38]
For the reasons given, I am unable to issue a blanket declaratory
order stipulating that all workers’ co-operatives are
subject
to the Labour Relations Act of 1995. The LRA applies only to
‘employees’, as defined.
[39]
There is also no direct,
a
priori
,
conflict between the
Labour Relations Act of 1995
and the
Co-Operatives Act 14 of 2005
. These laws serve different purposes.
There is nothing inherently sinister in the
Co-Operatives Act 14 of
2005
. It seeks to create and regulate a new variety of economic
enterprise in which members work
with
others for mutual gain. The provisions of the
Labour Relations Act
are
not suited to regulate this variety of enterprise, nor does the
Labour Relations Act apply
to them. The fact that the
Co-Operatives
Act 14 of 2005
provides for exemptions from labour law for members of
genuine worker co-operatives is not the problem. It is the misuse of
the
co-operative form by unscrupulous employers that is the problem.
Unfortunately these abuses will have to be addressed as and when
the
facts as labour disputes
[12]
on a case by case basis.
[40]
Since the application raised novel and important legal issues whose
determination is of benefit to many other parties, I intend
to depart
from the general rule that costs follow the result.
Order
[41]
The application is dismissed, with no order as to costs.
________________________________
Whitcher J
Judge of the Labour
Court of South Africa
APPEARANCES:
For
Applicant:
Adv C Nel, instructed by MacGregor Erasmus Attorneys
For
First to Sixth Respondents: Adv M E
Stewart, instructed by Omar & Associates
[1]
See subsection (a)
of the definition of employee in
section 213
of the LRA. Subsection
(b) does not apply in this case.
[2]
Certification of the Constitution
of the Republic of South Africa
,
1996 (4) SA 744
(CC) at para 66
[3]
Preamble to COA
[4]
Section 2(b) of the COA
[5]
Section 27(2) of the COA
[6]
see
Niselow
v Liberty Life Association of Africa Ltd
[1998] ZASCA 42
;
1998
(4) SA 163
(SCA);
Phaka and
Others v Bracks and Others
[2015]
5 BLLR 514
(LAC)
[7]
Section 23 of the Constitution states
that “
Everyone
has the right to fair labour practices”(my emphasis)
[8]
Section 39(2) of the Constitution
[9]
Affordable Medicines Trust and
Others v Minister of Health and Another 2006 (3)
SA
247 (CC)
[10]
Kommers
The
Constitutional Jurisprudence of the Federal Republic of Germany
2
ed (Duke University Press, Durham and London 1997) translating the
German Court decision in the
Pharmacy
case
[7 BVerfGE 377] at 274.
[11]
Definition of
‘co-operative’ in
section
1 of the COA.
[12]
See
National
Bargaining Council for the Clothing Manufacturing Industry (KZN
Regional Chamber) and Hot Chilli Worker Primary Co-operative
Ltd
(2013) 34 ILJ 3377 (BCA).