Brief Summary

Labour Law — Collective Bargaining — Unfair Labour Practice — The appellant, Mutual and Federal Insurance Company, refused to negotiate wages and conditions of employment with the respondent union, representing its non-managerial employees, leading to a dispute over collective bargaining rights. The Industrial Court initially dismissed the union's claim of unfair labour practice. However, the Labour Appeal Court found in favor of the union, determining that the company's refusal constituted an unfair labour practice. The Supreme Court of Appeal upheld the Labour Appeal Court's decision, affirming that the company's conduct in refusing to negotiate was indeed an unfair labour practice under the Labour Relations Act.

Comprehensive Summary

Summary of Judgment

1. Introduction

These proceedings concerned an appeal in a labour matter arising under the Labour Relations Act 28 of 1956 and, specifically, whether an employer’s refusal to bargain collectively with a trade union on the union’s proposed basis constituted an unfair labour practice.

The appellant was Mutual and Federal Insurance Company Limited (an insurance company with its head office in Johannesburg and branches elsewhere). The respondent was the Banking, Insurance, Finance and Assurance Workers Union, an unregistered trade union.

The procedural history was that the union, after a deadlock and an unsuccessful conciliation process, referred the dispute to the Industrial Court for determination under section 46(9) of the Act. The Industrial Court dismissed the union’s claim and found that the company had not committed an unfair labour practice. The union then appealed to the Labour Appeal Court in terms of section 17(21A)(a) of the Act, where it succeeded and obtained a substituted determination that the company’s refusal to negotiate constituted an unfair labour practice. The company then appealed further to the Supreme Court of Appeal (Appellate Division) under section 17C(1)(a), with leave having been granted.

The dispute’s general subject matter was collective bargaining, including (i) the demarcation of bargaining units within the company’s Johannesburg office and (ii) the degree of representivity required before an employer is obliged, on pain of unfair labour practice, to bargain with a union.

2. Material Facts

It was common cause, or not in issue, that the union was formed in 1983 to organise workers in the banking and finance industry. In March 1986 it approached the company seeking engagement and the conclusion of a recognition agreement, after which negotiations continued for a prolonged period.

The company initially adopted a majoritarian approach, indicating that it would recognise a union for collective bargaining purposes only if it had more than 50% membership in a defined bargaining unit, with units to be determined by criteria linked to job complexity, conditions, and pay. In July 1987, the company proposed three bargaining units for its non-managerial staff, namely non-clerical employees, clerical employees, and first-line supervisory employees, and it pointed out that the union did not have majority representation in any of them.

Subsequently, the company abandoned the majoritarian approach in favour of a pluralist approach. In November 1990, through its attorneys, the company offered to bargain with the union regarding the union’s members in the non-clerical category, subject to verification of sufficient representivity. However, it refused to bargain concerning the union’s members in the clerical and first-line supervisory categories on the basis that the union was not sufficiently representative in those groups.

The union rejected the offer because it did not accept the company’s clerical/non-clerical distinction. It demanded to bargain on behalf of all its members, maintaining that bargaining unit demarcation served only to test representivity. On the union’s approach, if it was sufficiently representative within any bargaining unit, it was entitled to bargain on behalf of its members even if some members fell outside that unit. The union proposed instead two units—managerial and non-managerial—with representivity to be tested in the non-managerial unit. It was common cause that, at the relevant time, the union had no members among managerial staff.

In March 1991, the union declared a deadlock and applied for a conciliation board. In the meantime, the company implemented new wages and conditions of employment for the period starting 1 January 1991 without negotiating them with the union. The union then launched proceedings in the Industrial Court in July 1991, seeking, among other relief, a declarator that the refusal to negotiate for the period from 1 January 1991 constituted an unfair labour practice.

The court relied on membership and representivity figures. As at January 1991, all union members were within the non-managerial section. The union’s constitution excluded white employees from membership, and its strongest representation was among non-clerical employees. The union’s membership was 34 out of 85 non-clerical employees (40%), 34 out of 367 clerical employees (9%), and 5 out of 80 first-line supervisory employees (6%), being 73 out of 532 non-managerial employees (13.72%) overall. By the time of the Industrial Court hearing in October 1992, overall non-managerial membership had risen to 15%, with 44% of non-clerical employees, 10% of clerical employees, and 3% of first-line supervisory employees being union members.

The Industrial Court accepted largely uncontested evidence from the company’s witnesses that there were significant differences between clerical and non-clerical work, qualifications, remuneration and benefits; that the company operated a structured job evaluation and performance appraisal system; and that the demarcation proposed by the company was rational and aligned to operational and administrative realities. The union’s witness emphasised that the union was formed to promote the interests of black workers in a sector where they were a minority, and asserted that those interests were substantially distinct from those of white workers, with examples offered as to issues of particular concern to black workers.

3. Legal Issues

The central legal questions the court was required to determine were whether the company’s refusal to engage in collective bargaining with the union on the union’s terms constituted an unfair labour practice, and how the requirements of representivity and the demarcation of bargaining units should be approached when assessing alleged unfairness.

A key point of dispute was whether the company was entitled, without acting unfairly, to insist on a bargaining structure consisting of three bargaining units within the non-managerial workforce and to require the union to be sufficiently representative in each unit before bargaining would occur in respect of that unit. Connected to this was whether a union could demand bargaining rights for all its members across categories on the strength of representivity in a single, larger unit.

The dispute primarily concerned the application of legal standards to established facts within the statutory unfair labour practice jurisdiction. It also involved an evaluative assessment of fairness within the labour relations framework, including the balancing of the interests of the union and its members, the employer, and non-union employees, as well as the role of collective bargaining in promoting industrial peace.

4. Court’s Reasoning

The court accepted that the right of employees to bargain collectively is a well-established and fundamental feature of the labour relations system. It referred to authority emphasising the centrality of collective bargaining and the legislature’s preference for collective bargaining as a means to maintain good labour relations and resolve disputes. However, the court held that the right to bargain collectively is not absolute, and it rejected as overly dogmatic the proposition that it would necessarily be unfair for an employer to refuse to bargain whenever employees choose collective bargaining. The court noted that a fairness inquiry requires consideration not only of the union’s interests but also those of the employer, non-union employees, and the requirements of efficient management.

A substantial portion of the reasoning addressed representivity. The court found that the union itself had historically accepted that it needed to show sufficient representivity in a proposed bargaining unit in order to bargain collectively, as demonstrated in correspondence and in its approach before the Industrial Court. The court then examined two Industrial Court decisions—Natal Baking and Allied Workers Union v B B Cereals (Pty) Ltd and Another (1989) 10 ILJ 870 (IC) and Radio Television Electronic and Allied Worker Union v Tedelex (Pty) Ltd and Another (1990) 11 ILJ 1272 (IC)—which had suggested a markedly different approach by grounding bargaining rights in an asserted individual right of each employee to negotiate with the employer, with the union’s role deriving from delegated individual rights.

The court rejected that conceptual basis. It reasoned that no individual right to negotiate conditions of employment exists at common law, and it cited authority holding that agreements to negotiate are unenforceable and that the law does not recognise a general obligation to negotiate. The court further considered reliance in those Industrial Court decisions on the right to associate protected under the unfair labour practice definition (as it then read), but held that inferring an individual right to bargain from associational rights was incorrect because bargaining rights arise when employees associate and are collective in nature, not individual. On this footing, the court concluded that B B Cereals and Tedelex were not good authority for departing from the generally accepted approach that a union must show sufficient representivity before it can bargain collectively, regardless of whether another union exists or is anticipated.

Turning to bargaining units, the court emphasised that the Act did not prescribe how bargaining units should be determined. The legislature had left it to the parties, or failing agreement, to the Industrial Court’s unfair labour practice jurisdiction to develop substantive and procedural rules for collective bargaining outside industrial councils and conciliation boards. The court noted that the Industrial Court had been reluctant to use this jurisdiction to determine bargaining units due to concern about undue interference in collective bargaining, and it cited warnings that compelling bargaining that does not advance industrial peace might undermine the Act’s purpose.

Applying these principles, the court held that the company led evidence—largely uncontested and accepted by the Industrial Court—that its proposed three-unit bargaining structure was rational, fair, and justified by commercial and administrative reasons aimed at promoting industrial peace. The court considered that smaller bargaining units could, in principle, facilitate recognition and effective collective bargaining agreements, particularly where a union lacked representivity overall or across certain categories. The court treated the company’s insistence on sufficient representivity in each of its proposed units as consistent with the generally accepted approach.

On the facts, the court regarded the union’s representivity in the two categories where bargaining was refused as minimal (clerical employees at 9% and first-line supervisory employees at 6% at the relevant time). In these circumstances, the court concluded that the company’s stance could not be characterised as unfair.

The court also addressed the Labour Appeal Court’s reasoning that the company had effectively imposed a precondition that the union must bargain for non-union employees. It held that the evidence did not justify that finding, stating that the company had not said it would refuse to bargain unless the union represented non-members, and that a desire to avoid disparate terms between members and non-members did not, without more, establish a demand that the union represent all employees in a category.

5. Outcome and Relief

The Supreme Court of Appeal upheld the appeal. It set aside the order of the Labour Appeal Court and substituted an order dismissing the union’s appeal to that court, with the result that the Industrial Court’s dismissal of the unfair labour practice claim stood.

No costs orders had been made in the Industrial Court or the Labour Appeal Court. In the appeal before the Supreme Court of Appeal, the court held that, having regard to the statutory requirements of law and fairness and relevant considerations in the case law, no order as to costs should be made.

Cases Cited

National Union of Mineworkers v East Rand Gold and Uranium Co Ltd [1991] ZASCA 168; 1992 (1) SA 700 (A). National Union of Mineworker v Henry A Gould (Pty) Ltd and Another (1988) 9 ILJ 1149 (IC). National Union of Mineworkers & Others v Buffelsfontein Gold Mining Co (1991) 12 ILJ 346 (IC). Natal Baking and Allied Workers Union v B B Cereals (Pty) Ltd and Another (1989) 10 ILJ 870 (IC). Radio Television Electronic and Allied Worker Union v Tedelex (Pty) Ltd and Another (1990) 11 ILJ 1272 (IC). Scheepers v Vermeulen 1948 (4) SA 884 (O). Putco Ltd v TV and Radio Guarantee Company (Pty) Ltd 1985 (4) SA 809 (A). Stocks and Stocks Natal (Pty) Ltd v Black Allied Workers Union and Others (1990) 11 ILJ 369 (IC). Amalgamated Engineering Union of South Africa and Others v Mondi Paper Co Ltd (1989) 10 ILJ 521 (IC). S A Union of Journalists v Times Media Ltd and Others (1993) 14 ILJ 387 (IC). S A Commercial Catering and Allied Workers Union v Shoecrop Shoe Stores (Pty) Ltd and Another (1994) 15 ILJ 1072 (IC).

Legislation Cited

Labour Relations Act 28 of 1956, including section 46(9), section 1 (definition of “unfair labour practice”, particularly paragraph (j) as it read prior to amendment), section 17(11)(a), section 17(21A)(a), section 17C(1)(a), and section 17C(2). Labour Relations Amendment Act 9 of 1991 (noted in relation to amendment of the unfair labour practice definition).

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that although collective bargaining is fundamental to the statutory labour relations system, it is not an absolute entitlement irrespective of context. A trade union is generally required to demonstrate sufficient representivity within an appropriate bargaining unit before an employer’s refusal to bargain can be characterised as unfair. The court held further that the Industrial Court decisions which derived bargaining rights from an asserted individual right of employees to negotiate were not sound authority for dispensing with representivity.

On the facts, the company’s demarcation of three bargaining units within the non-managerial workforce was accepted as rational and fair, supported by largely uncontested evidence, and the union’s representivity in the clerical and first-line supervisory units was minimal. The company’s refusal to bargain with the union in respect of those categories accordingly did not constitute an unfair labour practice. The Labour Appeal Court’s determination to the contrary was set aside, and no costs order was made.

LEGAL PRINCIPLES

Collective bargaining is recognised as a central mechanism in the statutory system of labour relations, but the entitlement to bargain collectively is not absolute and must be assessed within a fairness enquiry that considers the interests of the union and its members, the employer, non-union employees, and the requirements of effective and efficient management.

A union’s entitlement to compel collective bargaining through unfair labour practice proceedings generally depends on the union showing sufficient representivity in the relevant bargaining unit. The collective nature of bargaining means it is not properly founded on an asserted individual right of each employee to negotiate, particularly where the common law recognises neither an enforceable agreement to negotiate nor a general duty to negotiate.

The Act does not prescribe a fixed method for determining bargaining units outside statutory bargaining structures; the formulation of bargaining arrangements is primarily left to the parties, and judicial intervention under unfair labour practice jurisdiction is approached cautiously so as not to undermine the collective bargaining process or industrial peace.

In relation to costs in labour appeals under the Act, the decision is guided by the statutory standard of law and fairness, and an absence of costs orders may be warranted where those considerations so indicate.

Mutual and Federal Insurance Company Ltd. v Banking Insurance Finance and Assurance Workers Union (451/94) [1996] ZASCA 37; [1996] 4 BLLR 403 (AD) (28 March 1996)