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[2019] ZALCJHB 137
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Putco (Pty) Ltd v SA Road Passenger Bargaining Council and Others (JR1969-18) [2019] ZALCJHB 137; (2019) 40 ILJ 2389 (LC) (11 April 2019)
the
labour court of South Africa, johannesburg
judgment
CASE NO: JR 1969-18
Reportable
In the matter between:
PUTCO (PTY)
LTD
Applicant
and
SA ROAD PASSENGER
BARGAINING
COUNCIL
First Respondent
BHANA, STEPHEN
N.O
Second Respondent
JAMODIEN, TARIQ
N.O
Third
Respondent
FENN, DOUGLAS
N.O
Fourth
Respondent
HAMBIDGE, ELEANOR
N.O
Fifth Respondent
NATIONAL UNION OF
METALWORKERS
OF
SA
Sixth Respondent
SOUTH AFRICAN
TRANSPORT AND ALLIED
WORKERS
UNION
Seventh Respondent
TIRISANO TRANSPORT AND
SERVICES
WORKERS UNION
Eighth
Respondent
TRANSPORT AND ALLIED
WORKERS
UNION
OF SA
Ninth
Respondent
Application heard: 29
March 2019
Judgment
delivered: 11 April 2019
Summary:
Labour Court has jurisdiction in terms of s 158 (1) (g) to review
decisions by exemption and exemption appeal authorities
established
by bargaining councils. The threshold for review is the
Sidumo
test of reasonableness. Decision-makers are required to make
decisions on the basis of the evidence before them, with
affordability
as the primary criterion where that is the basis of the
application for exemption. It is not for exemption authorities to
engage
in Solomonic decision-making more suited to wage arbitrations.
Affordability is a factual issue, and must be resolved as such.
Exemption authorities must give reasons for their decisions. A
failure to do so constitutes a material irregularity. Question
remains
whether outcome of process is reasonable. Remedy –
where employer justifiably has no faith in exemption authorities and
where
all relevant information is available to the court, appropriate
for the court, given the statutory imperative of expeditious dispute
resolution, to substitute its decision for that of the
decision-maker.
JUDGMENT
VAN NIEKERK
J
Introduction
[1]
This is an application to review and set aside a number of decisions
relating to applications
for exemption from provisions of the main
agreement concluded under the auspices of the South African Road
Transport Passenger
Bargaining Council (the bargaining council).
[1]
Specifically, the applicant seeks respectively to review and set
aside an exemption ruling issued by the exemption authority
(comprising the third and fourth respondents) on 15 August 2018 and
an appeal ruling issued by the second respondent on 2 September
2018.
[2]
[2]
The application is opposed only by the sixth respondent (NUMSA).
Factual background
[3]
The factual background is not in dispute. The applicant is a provider
of commuter
bus services in the provinces of Gauteng, Limpopo and
parts of Mpumalanga. It is a party to the bargaining council, and a
party
to the substantive agreement (the 2018 main agreement) from
which it sought partial exemption.
[4]
On 13 June 2018, the applicant applied for exemption from clauses
3.2, 3.3, 4.1 and
25 of the main agreement. The applicant made
submissions that recorded its financial position in detail. The
applicant had been
experiencing financial losses due to the
underfunding of bus contracts for a number of years. In particular,
during the current
financial year, the applicant had suffered a loss
of R146.7 million and was under severe cash flow pressure, to the
extent that
it had exhausted all the facilities available to it. A
month-long industry strike had further exacerbated the situation. A
review
of the financial results to 31 December 2017 had indicated
that drastic action needed to be taken in order for the applicant to
continue as a going concern. One of the consequences of underfunding
had been the suspension of the bus replacement program, resulting
in
an aging fleet, unreliable, expensive to maintain and inefficient.
The consequent poor quality of service contributed to passenger
dissatisfaction and translated into declining passenger numbers and
declining passenger revenue.
[5]
The root causes of the applicant’s financial and operational
problems were described
in detail. The fundamental problem lay with
the bus contracts and their chronic underfunding. Contracts that were
intended to be
short-term remained in effect more than 20 years later
on account of the provincial department of transport wavering between
two
policy options – putting bus contracts on open tender or
negotiating contracts with existing operators. The bus contracts
operate fixed schedules with fixed trips and fixed kilometers, and
operators are not able to add additional trips where demand
is high
without approval from the provincial department of transport.
Likewise, operators cannot reduce trips where demand is low,
without
approval. The applicant recorded that since 2009, very few changes to
bus schedules had been approved. Further, during
the last nine years,
major cost items such as fuel, labour and inflation of outstripped
increases and by subsidies by far. Since
2009, by subsidies had not
been increased in accordance with the contract escalation formula,
and the department had failed to
do increased subsidies in accordance
with the escalation formula contained in the interim contracts. To
put the problem in context,
the applicant stated that the subsidies
it had received between 2009 to the 2017/18 financial year were
approximately R1.3 billion
less than what should have been paid in
terms of the escalation formula in the bus contracts. Further, the
escalation provided
for in the public transport operational grant had
been reduced from 4.97% to 3.24% as part of the measures adopted by
treasury
to reduce state expenditure.
[6]
The consequences of the difficulties experienced with bus contracts
and the underfunding
of these contracts over a protracted period were
listed as a loss of profitability, cash flow problems, negative
reaction from
financial institutions shareholders and investors,
pressure on procurement, pressure on preventative maintenance,
inability of
the company to invest in capital expenditure, a loss in
passenger numbers and the loss of subsidy revenue on account shifts
not
operate.
[7]
The applicant set out in some detail its efforts to address these
problems through
political and legal means. It also disclosed its
survival strategy and recorded that without intervention, the
applicant ran the
risk of being the subject of the business rescue
process, which in turn would place the employment of some 3300 staff
members at
risk. The applicant had involved in a number of
cost-cutting measures in order to bring its expenditure in line with
revenue and
was required to reduce costs by approximately R20 million
per month in order to sustain its profitability and viability. The
cost
rationalisation measures were disclosed in detail. What was
posited was the delayed implementation of the wage increase of 9% to
April 2019 that would provide the company with a measure of cash flow
relief during this period, in the hope that the shortcomings
in the
outdated contracts would be addressed by the department transport in
this time.
[8]
The executive summary that forms part of the motivation for the
application for exemption
reads as follows:
This application for
exemption is based on Putco’s serious financial position and
the risk of the company not being able to
continue as a going concern
unless drastic and immediate cost savings can be achieved. This is
necessary to bring the company’s
total expenditure outline for
the total revenue available, to ensure the survival of the company
and to enable Putco to continue
operating, until the problems
associated with the bus contracts and funding of these contracts have
been addressed and resolved.
A survival strategy has
been put in place which requires the reduction of total expenditure
by R20 million per month or R240 million
per year in all Putco
operations. While this survival strategy requires cost savings across
all expenditure items (including fuel,
maintenance and other costs) a
key component thereof is to achieve significant savings in employment
cost, which forms nearly 40%
of total expenditure.
The reduction in
employment cost is based on two initiatives firstly, a major CCMA
facilitated S189A retrenchment process has just
been completed,
resulting in the abolishment of more than 380 positions across all
Putco operations, and the actual retrenchment
of220 employees.
Secondly, the granting of exemption from the 2018 SARPBAC wage
increase (for the period 14 May 2018 to 31 March
2019) and the
payment of annual bonuses in 2018, will enable Putco to achieve the
required cost savings needed to ensure the survival
of the company,
until the funding and structural problems in bus contracts have been
resolved.
[9]
In these circumstances, the applicant sought partial exemption from
clause 3.2 of
the main agreement to the extent that no across the
board increase be implemented for eligible employees as from 1 April
2018 to
31 March 2019. In other words, the applicant sought to delay
the implementation of the 9% across-the-board increase payable in
terms of the main agreement by some 10 ½ months. In so far as
the exemption from clause 4.1 and clause 5.1.4 were concerned,
the
applicant sought for the same exemption from the minimum hourly wage.
In so far as the bonus contemplated by clause 25 of the
main
agreement was concerned, the applicant sought exemption for the
period 14 May 2018 to 31 December 2018, meaning effectively
that no
annual bonus would be paid to the applicant’s employees in
2018.
[10]
On 12 July 2018, the applicant was granted partial exemption by the
exemption panel, comprising the third and fourth
respondents. The
terms of the exemption required the applicant to pay a 7% wage
increase for the period 1 April 2018 to 31 March
2019, backdated to
the implementation date of 14 May 2018. An additional 2% increase
would apply from 1 January 2019. Further,
employees were to receive
back pay of 7% on the base rate of pay for the period 1 April 2018 to
17 April 2018. Further, a wage
increase of 8% on the base rate of pay
would become due from 1 April 2019 until 31 March 2020. Regarding
minimum hourly rates,
the exemption authority ruled that where the 7%
increase did not take certain employees to the minimum hourly rate,
those employees
were be given a further increase until they reach the
minimum hourly rate. Finally, in regard to the bonus payment, the
exemption
authority expressed the view that any ruling in this regard
was premature and that the applicant seek exemption closer to the
time
and finish the exemption authority with audited financial
statements for June 2018 to review and consider whether any such
exemption
was warranted.
[11]
On 27 July 2018, the applicant lodged an appeal against the exemption
authority’s ruling.
In terms of the ruling of the appeal
authority issued on 8 August 2018, the appeal was upheld in a one
page ruling to the effect
that the appeal authority was ‘
persuaded
to find that a compelling argument is made out for the exemption
authority to reconsider its findings
’. In terms of
the ruling, the matter was remitted to the very same panel that had
issued the first exemption ruling,
for that panel to reconsider its
decision issue a fresh ruling.
[12]
On 16 August 2018, the exemption panel issued the second exemption
ruling, one of the two rulings
that are the subject of these
proceedings. That ruling records the following:
DETAILS OF FINDNGS
1.
The exemption Authority had handed down a
ruling in the exemption application of the Applicant, Putco (Pty)
Ltd., for exemption
from certain provisions of the Main Collective
Agreement of the Respondent. The Respondent trade unions as cited
above opposed
the application. The Applicant had appealed against the
ruling with the result that the Appeal Panel had ruled that the
Exemption
Authority should reconsider its findings.
FINDINGS
2.
We have acknowledged previously that the
Applicant is indeed under financial stress. We have further reviewed
the additional information
and explanations provided to the Appeal
Panel. We remain cognizant of the need to be equitable in
acknowledging that employees’
economic and living conditions
need to be taken into account as well. Hence we are not prepared to
give the Applicant a full exemption
on the terms sought and are
persuaded that the Applicant is able to sustain a 6% wage increase
for 2018. The details of the ruling
will be considered hereunder.
3.
Regarding the bonus payment for 2018, the
Exemption (sic) has initially ruled that the Applicant would have to
apply for it closer
to the time of payment which would be in December
2018. The Appeal Panel has ordered the Exemption Panel to reconsider
this approach
and is of the view that we should make a ruling on it
in order to comply with the Exemption Procedure which stipulates that
a decision
should be made on the application within 30 days of the
conclusion of the Main Collective Agreement. …
6. The
Applicant has comprehensively motivated the reasons for seeking the
exemption from the aspects of the Main Collective
Agreement as
contained above. Financial constraints and cash flow difficulties are
driving these considerations. Having considered
the information and
the financial situation of the Applicant we order that the Applicant
pay 100% of the December 2018 bonus on
1 June 2019. Ten (10%)
interest will accrue monthly on a compounded basis from end December
2018 to end May 2019.
[13]
The exemption authority ruled accordingly. The applicant appealed
against that ruling. This time,
in a ruling issued on 5 September
2018, the exemption ruling was upheld. The salient portion of the
ruling reads as follows:
ANALYSIS
OF SUBMISISONS AND ARGUMENTS
I need to decide whether
or not to grant exemption on any of the clauses applied for, was an
appropriate decision (sic). In deciding
the matter, I must take
cognisance of each party’s submissions and the Main Collective
Agreement.
In dealing with the
specific items that the applicant has raised and having carefully
perused the comprehensive grounds for appeal,
I have come to the
following conclusions:
The Exemptions Authority
has reconsidered the exemption application in line with the
instruction from the previous Exemptions Appeal
Authority. They have
lowered the salary increases from the previous Exemptions Appeal
Authority. They have lowered the salary increases
and made a
reasonable decision on the bonus payment issues. The second ruling
was a direct result of the partially success appeal
made previously
and can thus not be considered a nullity. It replaces the first
ruling. In any event, the second ruling is more
favourable to the
applicant and addresses its concern about the bonus payment.
Having applied my mind
and considered Annexure “C” to the Main Agreement
(Exemption Procedure) I therefore see no reason
to interfere with the
ruling of the exemption panel.
Grounds for review
[14]
The applicant seeks to review and set aside the decision of the
exemption authority on the basis
that the decision is not reasoned.
In particular, and in respect of the increases in remuneration, the
applicant contends that
the exemption panel finds no more than that
although the applicant is under financial stress, after having regard
to employees’
economic and living conditions, it is not
prepared to grant the full exemption sought, and was persuaded
instead that the applicant
was able to sustain a 6% wage increase for
2018. The applicant submits that the decision did not consider the
applicant’s
financial situation at all, that it thus did not
take relevant facts into account, it considered irrelevant facts and
that the
decision ultimately bore no relationship between the facts
and the purpose of the exemptions sought. In respect of the decision
of the exemption appeal authority, the applicant contends that the
decision is not reasoned in that it denies the appeal solely
on the
basis that the second exemption ruling was more favourable to the
applicant.
[15]
In short, the applicant contends that neither the exemption nor the
appeal authorities took into
account all of the facts, and that both
rulings were issued without a proper consideration of each ground for
exemption submitted
by the applicant, and any proper evaluation of
why the application should succeed or fail.
Relevant
legal principles
[16]
There has been some doubt expressed as to whether this court has
jurisdiction to entertain a
review of an appeal authority in an
exemption application. In
National Union of Metal Workers of SA v
Metal and Engineering Industries Bargaining Council & others
(2019) 40
ILJ
399 (LC) the court held that the functions of an
appeal authority are not susceptible to review under s 158(1) (g).
This decision
appears not to account for the judgment of the Labour
Appeal Court in
Trafford Trading (Pty) Ltd v National Bargaining
Council for the Leather Industry of South Africa and others
(DA
11/09)
[2011] ZALAC 35
(1 January 2011). In that judgment, the LAC
said the following:
[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
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
[footnotes omitted].
[17]
In their seminal work, ‘Reviews in the Labour Courts’,
Myburgh and Bosch refer to
Trafford Trading
and a number of
additional authorities to support the conclusion that the decisions
of bodies tasked with determining exemption
applications are subject
to review in terms of s 158(1)(g) of the LRA (at p 425). After
argument and in the course of preparing
this judgment, I had occasion
to read the judgment of Nieuwoudt AJ in
Golden Arrow Bus Services
(Pty) Ltd v South African Road Passenger Bargaining Council of South
Africa and others
(C 1112/18, 2 April 2019). In its judgment, the
court confirmed that decisions by exemption and exemption appeal
authorities are
reviewable in terms of s 158(1) (g) of the LRA and
that this court thus has jurisdiction to entertain such applications.
This finding
is consistent with the authorities and obviously
correct. On the facts, the court found it unnecessary to have regard
to the nature
of the review – it was satisfied that even on the
strictest test (that established by
Goldfields Investment Ltd v
City Council of Johannesburg
1938 TPD 551)
, the decision by the
appeal authority stood to be reviewed and set aside on the basis that
the authority had adopted an erroneous
view to the effect that he was
precluded from hearing the appeal. While the court referred to
Trafford Trading
, it made no reference to the finding that the
basis for review in these circumstances is one of reasonableness.
[18]
In short: this court has jurisdiction in terms of s 158 (1) (g) to
review decisions by exemption
authorities relating to decisions to
grant or refuse exemption from binding collective agreements
concluded under the auspices
of bargaining councils. The threshold to
be applied is one of reasonableness, in the sense contemplated by
Sidumo & another v Rustenburg Platinum Mines Ltd & others
[2007] 12 BLLR 1097
(CC).
[19]
The application of the reasonableness threshold empowers a reviewing
court to intervene, amongst
other grounds, when the decision-maker
commits a gross irregularity. This extends to latent gross
irregularities or, put another
way, instances where the
decision-maker fails to apply him or herself to the available
evidence, makes defect of factual findings
and the like. In these
instances, a party seeking to set aside an award or ruling must
establish both the irregularity or defect
relied on and that
the
Sidumo
threshold is met.
In Gold Fields Mining SA (Pty)
Ltd (Kloof Gold Mine) v CCMA & others
[2007] ZALC 66
;
[2014] 1 BLLR 20
(LAC),
the Labour Appeal Court noted that it is not sufficient for an award
to be set aside simply to establish a gross irregularity
in the
conduct of the arbitration proceedings; it is incumbent on an
applicant to establish that the result was unreasonable or
‘
put
another way, whether the decision that the arbitrator arrived at is
one that falls outside the band of decisions to which a
reasonable
decision-maker could come on the available material
’. In
other words, the review court must consider whether despite the
arbitrator’s reasoning, the result is nevertheless
capable of
justification on the available material. Thus, material errors of
fact on the part of the arbitrator, as well as the
weight and
relevance to be attached to particular facts or a failure to have
regard to particular facts are not in themselves sufficient
grounds
for review; their effect must be to render the outcome unreasonable.
[20]
Precisely how this determination is to be made has been the subject
of guidance provided by the
Labour Appeal Court. In head of the
Department of Education v Mofokeng & others
[2015] 1 BLLR
50
(LAC), Murphy AJA said the following:
The determination of
whether a decision is unreasonable in its result is an exercise
inherently dependent on variable considerations
and circumstantial
factors. A finding of unreasonableness usually implies that some
other ground is present, either latently or
comprising manifest
unlawfulness. Accordingly, the process of judicial review on grounds
of unreasonableness often entails examination
of interrelated
questions of rationality, lawfulness and proportionality, pertaining
to the purpose, basis, reasoning or effect
of the decision,
corresponding to the scrutiny envisaged in the distinctive review
grounds developed at common law, now codified
and mostly specified in
section 6 of the Promotion of Administrative Justice Act (“PAJA”);
such as failing to apply
the mind, taking into account irrelevant
considerations, ignoring relevant considerations, acting for an
ulterior purpose, in bad
faith arbitrarily or capriciously etc. . The
Court must nonetheless still consider with apart from the flawed
reasons of or any
irregularity by the arbitrator, the result could be
reasonably reached in light of the issues and the evidence (at
paragraph 31)
Further:
Irregularities or errors
in relation to the facts or issues, therefore, may or may not produce
an unreasonable outcome or provide
a compelling indication that the
arbitrator misconceived the enquiry. In the final analysis, it will
depend on the materiality
of the error or irregularity and its
relation to the result. Whether the irregularity or error is material
must be assessed and
determined with reference to the distorting
effect it may or may not have had on the arbitrator’s
conception of the enquiry,
the determination of the issues to be
determined and the ultimate outcome. If but for an error or
irregularity a different outcome
would have resulted, it will
ex
hypothesi
be material to the determination of the dispute. The
material error of this order would point to at least a prima facie
unreasonable
result.
[21]
In relation particularly to an irregularity in the form of a failure
to provide reasons for a decision,
it should be recalled that s 33(2)
of the Constitution provides that ‘
Everyone
whose rights have been adversely affected by administrative action
has the right to be given written reasons’
.
Myburgh and Bosch (supra, at p 237) quote the following exposition
form
De Smith’s Judicial Review
:
It is clear that the
reasons given must be intelligible and must adequately meet the
substance of the arguments advanced. It will
not suffice to merely
recite the general formula will restate a statutorily prescribed
conclusion. It is also preferable if the
reasons demonstrate that a
systematic analysis has been undertaken by the decision-maker…The
reasons must generally state
the decision-makers material findings of
fact (and, if the facts were disputed at the hearing, there
evidential support), and to
me to the substance of the principal
arguments that the decision-maker was required to consider. If a
decision is made on the basis
of the evidence of witnesses or
experts, reasons for preferring one witness we expect to have another
should generally be explained.
In short, the reasons must show that
the decision makers successfully came to grips with the main
contentions advanced by the parties,
and must tell the parties
improve to why they lost, or as the case may be, won.
[22]
When this exposition is applied in the context of a reasonableness
review, and after a review
of the case law, Myburgh and Bosch
summarise the position as follows (at 238-9):
Although the judgment is
not consistent, the predominant position can be summarised as
follows. Firstly, the failure or omission
by Commissioner to provide
reasons for his or her does not per se give rise to a reef. Secondly,
where, though unreasoned, the
decision in question is anticipated by
findings made in the award of the reasons the four self-explanatory,
no reasonable effect
arises. Thirdly, conversely, when the decision
is unreasoned and its rationale cannot be determined from other
findings and is
not self-explanatory, then the decision will be
liable to review. Fourthly, without his authority to the effect that
the failure
to provide reasons is immaterial if the decision is
capable of justification on material the commissioner, the PW, in our
opinion,
is that a view arises in the circumstances mentioned in the
third point above. Firstly, where a decision is set aside because of
the absence of reasons, the issue will typically be remitted to the
commissioner for reconsideration [footnotes omitted].
[23]
The failure to give reasons has been considered more than once in the
context
of a rationality review. It is
well-established that if there is a failure to take into account
relevant material, and that failure
has an impact on the rationality
of the entire process, then the final decision may be rendered
irrational (see
Democratic Alliance v
President of the Republic of SA & others
2013 (1) SA 248
(CC), at para 39), where Yacoob ADCJ said the
following:
If in the circumstances
of a case, there is a failure to take into account relevant to
material that failure would constitute part
of the
means
to
achieve the purpose for which the power was conferred. And if the
failure had an impact on the rationality of the entire process,
then
the final decision may be rendered irrational and invented by the
irrationality of the process as a whole.
[24]
In
Judicial Service Commission &
another v Cape Bar Council & another
2013 (1) SA 170
(SCA), Brand JA said at para 44:
As
to rationality, I think it is rather cynical to say to an affected
individual: you have a constitutional right to a rational
decision
but you are not entitled to know the reasons for that decision. How
will the individual ever be able to rebut the defense
by the decision
maker: “Trust me, I have good reasons, but I am not prepared to
provide them”? Exemption from giving
reasons will be for almost
invariably result in immunity from an irrationality challenge.
[25]
There is no reason why the same principle ought not to be extended to
a review where the threshold
is one of reasonableness rather than
rationality. A failure to provide reasons will ordinarily give rise
to an inference that the
decision-maker failed to apply his or her
mind to the issues in dispute. If that failure caused the reviewing
party to lose, then
the decision, on the face of it, is unreasonable.
However, consistent with the
Sidumo
principle, the applicant must establish that the decision was
actually unreasonable.
[3]
Analysis
[26]
The primary ground for review, it will be recalled, is that neither
the exemption authority nor
the appeal authority gave reasoned
decisions and that to the extent that the authority concerned had
regard to the evidence, it
did not take relevant evidence into
account, considered irrelevant facts and that the decisions bore no
relationship to the facts
and the purpose for which the exemption was
sought. This had the consequence that the outcome of the proceedings
(in the case of
the exemption authority’s decision, the partial
exemption granted and in the case of the appeal authority, the
refusal of
the appeal) is unreasonable.
[27]
Measured against the standard articulated by
De
Smith
, the rulings of both the
exemption authority and the appeal authority fail to give effect to
the right to reasons for any administrative
action. There are no
material factual findings recorded, and no reasons are afforded for
what amounts to a rejection of the applicant’s
submissions.
Even less is there any reasoned basis for the conclusions reached,
and in particular that of affordability in relation
to the 6%
increase that was ordered. Stripped to its core, the ruling of the
exemption authority says no more than that it remains
cognisant of
the ‘
need to be equitable
’
and for that reason, is was not prepared to grant a full exemption on
the terms sought Similarly, in relation to the exemption
from the
bonus payment for 2018, the exemption authority simply records that
it has considered the information and the financial
situation of the
applicant and orders payment of the full bonus on 1 June 2019. Again,
no substantive reasons are finished for
this ruling.
[28]
The ruling of the appeal authority is not dissimilar in form and
content. It simply records that
the decision-maker, the second
respondent, has considered the appeal and on the basis that the
exemption authority had ‘
lowered the salary increases and
made a reasonable decision on the bonus payment issues’
,
and concluded that the appeal should fail. The second respondent
appears to have thought that since the second ruling made by
the
exemption authority was more favourable to the applicant and
addressed the issue relating to the bonus payment, those were
sufficient grounds in themselves to dismiss the appeal.
[29]
The terms of the main agreement required the exemption authority to
take into consideration all
relevant factors, which may include but
are not limited to criteria that address the applicants’ court
of compliance, any
special circumstances that exist, the interests of
the industry in relation to unfair competition and centralised
collective bargaining,
the interests of employees as regards
exploitation, job preservation, sound conditions of employment, and
the like; and the interests
of the employer as regards its financial
stability and the viability of its business. These factors are listed
to fulfil the requirements
of s 32(3) (f) of the LRA. Both the
exemption authority in the appeal authority approach the applications
before them in an entirely
misguided fashion. The correct approach is
that set out by the Labour Appeal Court in
Trafford Trading
.
At paragraph 24 the judgment, the court said the following:
[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. 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.
[30]
The applicant, having placed before both the exemption and appeal
authority special circumstances in
the form of facts and evidence
that clearly justify an exemption from compliance with the main
agreement, were entitled to expect
the respective exemption
authorities to interrogate the evidence and to make a considered and
reasoned decision, based on that
evidence, as to whether or not the
exemption sought ought to be granted. While the factors listed in the
main agreement are generally
relevant, the crisp issue in the present
instance was one of affordability. It was not open to the exemption
and appeal authorities
to treat the matter as one would a wage
arbitration, where the decision-maker’s function is largely
redistributive in the
sense of a balancing of competing interests and
the determination of a fair outcome that seeks as far as possible to
reconcile
those interests. The nature of a process in which a party
seeks exemption from the terms of a binding collective agreement on
the
grounds of affordability, raised as starkly as they are in the
present instance, is less about reconciling competing interests than
the determination of a factual dispute. In this instance, the
decision-maker is required, primarily at least, to ascertain
whether
on the evidence, a proper factual case has been made out for an
exemption in the terms sought. In the present instance,
there was no
evidence submitted by the union parties opposing the granting of the
exemption that seriously called into question
the dire financial
straits and issues of affordability recorded in the applicant’s
submissions. In those circumstances, it
was not open to the exemption
authorities to reject the applicant’s version in the summary
terms that they did, and impose
their view of an equitable settlement
on Solomonic terms.
[31]
Turning to the grounds for opposition to the present proceedings,
NUMSA opposes the application
only on substantive grounds. First, it
submits that the applicant’s viability is not at risk because
Stats SA has shown continuous
growth in commuters using bus services
as opposed to trains. This evidence is contradicted by the undisputed
evidence in the exemption
application and subsequent appeal detailing
the applicant’s dire financial position and forecasts. However,
the fact that
more commuters may be utilising the applicant’s
bus service does not translate into financial viability, particularly
where
government subsidies have been reduced to levels which make the
applicant’s business unsustainable if it is to comply with
the
2018 main agreement.
[32]
NUMSA further contends that the applicant has not put forward any
other cost cutting measure
other than the exemption application, and
that the inflation complained of affects employees ‘in more
dire ways’ than
the applicant. Again, this assertion is
contradicted by applicant’s undisputed evidence detailing its
costs rationalisation
measures and cost rationalisation plan on costs
items other than employment-related costs. While the granting of the
exemption
will no doubt prejudice NUMSA’s members, the
undisputed alternative painted by the applicant’s submissions
is one where
they have no jobs at all.
[33]
Those of the applicant’s averments that relate to the process
followed by the exemption
and appeal authorities are met with bald
denials by NUMSA and assertions that the exemption and appeal
authorities applied their
minds to the relevant submissions and
discharged their duties competently. On the face of the rulings under
review, as I have found,
in neither case were any substantive reasons
given for the conclusions reached.
[34]
In summary, the failure by the third and fourth respondents in their
capacities as the exemption
authority, and the second respondent, in
his capacity as the appeal authority, to interrogate properly the
evidence before them,
and to provide substantive reasons for their
decisions, constitute material misdirections.
[35]
In accordance with the authorities to which I have referred, the
court must decide whether notwithstanding
the misdirections that have
been identified, the result of the proceedings under review are
nonetheless sustainable. I would observe
only that in most cases
where a decision under review discloses a lack of reasoning (or a
failure to finish reasons), it can seldom
be said that the outcome of
the proceedings is in any event reasonable. The record of
unchallenged evidence clearly does not sustain
the outcome at which
the decision-makers arrived.
[36]
Ordinarily, in a matter where a decision is set aside on account of a
failure to provide reasons,
the matter is remitted to the
decision-making authority for rehearing. The applicant submits that
the present case is exceptional
in that the same issue has been
considered four times by the same authorities and that given the
outcome in each instance, they
have no faith in those authorities to
afford them a fair hearing. This court is inclined to substitute the
decision-makers finding
for one that is appropriate after considering
whether the result is a foregone conclusion, any prejudice that would
be caused to
the applicant by further delay, whether the
decision-maker has exhibited bias and whether the court is in as good
a position to
make the decision itself. In this court, the statutory
imperative of expeditious dispute resolution is a primary factor in
the
exercise of the discretion to limit or substitute. In
Palluci
Home Depot (Pty) Ltd v Heskowitz and others
[2015] 5 BLLR 484
(LAC), the Labour Appeal Court held that where all the facts required
to make a determination of the disputed issues are before
the
reviewing court so that the court is in as good a position as the
administrative tribunal to make the determination, the court
should
decide the matter itself. That approach, the court noted, was
consistent with the powers of this court under s 158 of the
LRA
‘
which are primarily directed at remedying a wrong, and
providing the effective and speedy resolution of disputes.
’
Expedited finality is thus an important consideration in the
determination of whether to remit the matter for reconsideration,
or
to substitute.
[37]
The court has before it all of the relevant material and given the
applicant’s justifiable
lack of faith in the exemption and
appeal authorities, and given further that the interests of
expeditious dispute resolution are
best served by an order of
substitution, I intend to substitute the decisions under review for
that reflected in the order recorded
below. I should add that the
present dispute has delayed the applicant’s ability to engage
in future financial planning,
and that its employees have had to
endure a long period of uncertainty regarding their remuneration
packages. It is in the interests
of all concerned and in the
interests of justice that there be no further delay in bringing this
matter to finality.
[38]
The applicant has filed a supplementary affidavit in which it has
provided evidence of its updated
financial position. The deponent
records that the most critical aspect of the exemption application is
the ability of the applicant
to pay its creditors in the short term.
The financial facilities currently available to the applicant have
been exhausted and financial
institutions have informed the applicant
that facilities will not be increased in circumstances where it
continues to be in a loss-making
situation. The applicant avers that
it would be more beneficial to the financial recovery process if a
full exemption, as applied
for in the initial exemption application,
were to be granted. However, in a good faith attempt to secure
certainty by way of an
agreement on the critical issue of the 2018
bonus payment, the applicant made an offer to its employees and their
union representatives
for a staggered payment of the bonus. The
applicant is of the view that a payment on these terms would enable
it to survive its
cash flow crisis and thus contribute to the job
security of its employees as the applicant, over time, returns to a
viable and
sustainable financial position. The applicant’s
efforts to address the situation were met with unprotected strike
action
during December 2018 and a refusal by the unions to accept the
proposal.
[39]
The applicant has further annexed audited financial statements for
the financial year ending
30 June 2018. It is also annexed a document
prepared by its financial director which deals with the applicant’s
current financial
situation and financial projections made on the
basis of a number of scenarios. The audited financial statements
expose the stark
reality which existed at the time and which persist
in regard to the applicant’s ability to survive the loss-making
situation
in which it presently finds itself, and the projected cash
flow situation experienced in the 2018 financial year, and which
persists.
The deponent records that the payment of the full bonus on
the terms awarded by the second exemption appeal panel (with the
punitive
interest payment that accompanies it) will place the
applicant in an impossible financial situation in which the
facilities available
to it would be exceeded, and financial
institutions will refuse (as they already have) to extend for those
facilities. In the current
financial year (1 July to 31 December
2018) the reported loss for this period is R38 million. That loss
takes into account the
cost realisation measures (including
retrenchment) and is based on an assumption that the exemption
application is successful.
[40]
In my view, the undisputed averments contained in the supplementary
affidavit regarding the applicant’s
liquidity and the tender
that it incorporates, provide the basis for both a substitution of
the decisions under review and the
terms of the order that I intend
to grant.
Costs
[41]
The applicant does not seek costs, and I do not intend to make any
order as to costs.
I make the following
order:
1.
The decisions relating to an
application and appeal brought by the applicant for exemption from
clauses 3.2, 3.3, 4.1 (read with
Annexure A) for the period 1 April
2018 to 31 March 2019, and exemption from clause 25 of the main
agreement concluded by the parties
to the South African Road
Passenger Bargaining Council of South Africa (SARPBAC) of:
1.1
the second exemption ruling issued by the
Exemption Authority comprising the third and fourth respondents dated
15 August 2018;
and
1.2
the second appeal ruling issued by the
exemption appeal authority comprising the second respondent dated 2
September 2018;
are reviewed and set
aside.
2.
The decisions referred to in paragraph 1
above are substituted by an exemption on the following terms:
2.1
that an across the board increase of 7% on the base rate
of pay (as
defined in the SARPBAC main agreement) applies from 1 April 2018 to
31 March 2019;
2.2
employees must receive back pay of 7% on the base rate
of pay
(excluding benefits and allowances) for the period 1 April 2018 to 31
March 2019;
2.3
the amount must be paid at the end of May 2019;
2.4
the annual bonus must be paid in three installments as
follows:
a)
the first instalment must be paid in December 2019,
b)
the second instalment must be paid in December 2020,
c)
the third instalment will be paid in December 2021.
2.5 Employees who are
eligible for the 2018 annual bonus and who leave the service of the
applicant before all three instalments
have been paid, shall not
forfeit any unpaid portion of the 2018 annual bonus.
3.
There is no order as to costs.
André van Niekerk
Judge
APPEARANCES
For
the applicant: Adv. T Ngcukaitobi, with him Adv. G Snyman, instructed
by Bowman Gilfillan Inc.
For
the sixth respondent: Union official
[1]
The
exemptions sought relate to clauses 3.23 and 3.3, read with Annexure
A, which require across the board increases on the hourly
rate paid
to all employees on the basis of an across the board increase of 9%
on the base rate pay which became due on 14 May
2018, until 31 March
2019; and back pay of 9% on the base rate of pay (excluding benefits
and allowances) for the period 1 April
to 17 April 2018. Exemption
was also sought in respect of clause 4.1, which sets a minimum
hourly wage for employees at not less
than R33.96 per hour, to be
implemented from 31 March 2019 and clause 25, which provides for the
payment of a bonus equivalent
to one month’s wages, pro rata.
[2]
The
relief initially sought extended to what were described as the first
exemption and exemption appeal rulings, issued on 12
July 2018 and 8
August 2018 respectively. The relief sought at the hearing was
confined to the (second) rulings referred to,
the first rulings of
the exemption authority and exemption appeal authority having been
overtaken.
[3]
Myburgh
and Bosch,
supra
,
at p239-40.