Sneller Verbatim/MB
IN THE LABOUR COURT OF SOUTH AFRICA
BRAAMFONTEIN CASE NO: J742/01
2001-03-13
In the matter between
N U M Applicant
and
I HAFFEGEE 1st Respondent
TUBATSE FENOCHROME MINES 2nd Respondent
________________________________________________________________
J U D G M E N T
________________________________________________________________
TRENGOVE AJ: The first respondent employer is in the process of contracting out
certain of the work at one of its mines. It is doing so to cut costs. The process will
involve the retrenchment of about 109 of its employees. Some 95 of them are
members of the applicant union.
The union contends that the contracting out and the concomitant
retrenchments are in breach of an agreement between the union and the
employer. The agreement regulates the use by the employer of labour other than
that of employees employed full time and for an indefinite term. It regulates
amongst other things, the contracting out of work. I will refer to it as the
outsourcing agreement.
The union contends that the outsourcing agreement applies to the
contracting out of all work, and accordingly also applies to the contracting out in
this case. The employer on the other hand, denies that that is so. It contend that
the agreement only applies to the contracting out of certain kinds of work, and
that in this case the contracting out is not within the scope of the agreement.
The parties agreed to submit their dispute to private arbitration, that is, to
an arbitrator appointed by agreement between them and not by the CCMA. The
second respondent was the arbitrator. He made his award on 27 February 2001.
He upheld the employer's contention that the outsourcing agreement did not
apply to the contracting out being undertaken by the employer. The award thus
cleared the way for the employer to proceed with the contracting out and
retrenchment without regard to the outsourcing agreement.
The union now applies to have the award set aside. It does so in terms of
section 33 of the Arbitration Act 42 of 1965. It also applies for an order
interdicting the employer from proceeding with the retrenchments pending the
final determination of the main application to have the award set aside .
By agreement between the parties, only the prayer for temporary relief
pending the final determination of the application to have the award set aside,
have come before me for determination on an urgent basis.
In order to succeed in its claim for temporary relief, the union at least has to
establish a prima facie right. The right which has to be established on that basis,
is a right to the final relief it claims, that is a right ultimately to stop the
contracting out and the retrenchments. But the right only needs to be established
prima facie. It means that the union must show that it is a right that arises as a
matter of law from the facts of which there is prima facie proof, that is, from the
facts disclosed by the union's evidence, together with the facts disclosed by the
employer's evidence that the union does not dispute.
All of this means that I must take the union's evidence together with the
evidence of the employer that the union does not dispute, and ask myself whether
on that evidence and if its truth is accepted, the union is entitled to two things.
The first is to have the award set aside because if it is not set aside, the award
remains final and binding on the parties whether right or wrong. The second is
whether, if the award is set aside, the union will be entitled under the outsourcing
agreement to stop the contracting out and the retrenchments in this case.
Mr Find for the employer submitted that the test is a more stringent one
than the one I have described. He submitted that that is so because, although the
claim for a temporary interdict is a claim for interim relief in form, it is indeed a
claim for relief with final effect. The more stringent test for final relief, would
require final proof of the same right on a balance of probabilities and not merely
prima facie. It seems to me however that the difference between the two tests
may not be material in this case, because the facts material to the issue between
the parties are not in material dispute.
It is common cause between the parties that, in terms of section 157(3) of
the Labour Relations Act 66 of 1995, the union's application to have the award set
aside, is governed by section 33(1) of the Arbitration Act 42 of 1965. The latter
section reads as follows:
"Where -
(a) any member of an arbitration tribunal has misconducted himself in relation to his
duties as arbitrator or umpire, or
(b) an arbitration tribunal has committed any gross irregularity in the conduct of the
arbitration proceedings or has exceeded its powers, or
(c) an award has been improperly obtained, the court may on the application of any
party to the reference after due notice to the other party or parties, make an order
setting the award aside."
The union contends that the arbitrator misconducted himself, committed
gross irregularities in the conduct of the arbitration proceedings, and exceeded his
powers. I accordingly have to determine whether those contentions have been
prima facie proved.
The facts on which the union relies for its contentions go no further than that
the arbitrator committed manifest errors of fact and law in his interpretation of the
outsourcing agreement. The union does not say that the arbitrator asked himself
the wrong question. It says merely that his answer to the question was manifestly
wrong, both in fact and in law.
An arbitrator's manifest error of fact or law, is not in itself a ground for
review. It may however be evidence from which misconduct may be inferred, and
the latter would be a ground for review in terms of section 33(1)(a) of the
Arbitration Act.
The circumstances in which such an inference is justified, are however rare.
They are described in the chapter on arbitration in Joubert, The Law of South
Africa vol 1, first re-issue, page 291, paragraph 445 as follows:
"The word (misconduct) must be construed in its ordinary sense of wrongful or
improper conduct on the part of the person whose behaviour is in question. A
bona fide mistake of law or fact cannot be construed as misconduct; but if the
mistake is so gross or obvious that it could not have been made without some
degree of misconduct, the award may be set aside, not on the ground of mistake,
but on the ground of misconduct, the mistake merely amounting to evidence of
the misconduct. If there is an explanation for the error other than misconduct or
corruption, a court would not be entitled to set aside the award in question. There
is no assumption that an arbitrator knows and applies the principles of our law.
Accordingly if an arbitrator misdirects himself on the law, that in itself is no reason
for setting aside the award. The parties are bound by his finding even if he errs on
the facts or the law."
The learned author continues as follows later in the same paragraph:
"The court will set aside an award if there is no evidence to support it. Whether
lack or absence of evidence is so glaring as to amount to a total want of judicial
capacity, the award will be set aside. A party attacking an award, must prove not
only that there is no evidence to support it and that no reasonable man could
possibly have made it, but also that the lack of evidence is such that misconduct
on the part of the arbitrator ought properly to be inferred therefrom."
These principles were confirmed by the Appellate Division in Amalgamated
Clothing and Textile Workers Union the Veldspun 1994 1 SA 162 (A). His Lordship
Mr Justice Goldstone, who gave the judgment of the court, said the following in
this regard at 169:
"It is only in those cases which fall within the provisions of section 33(1) of the
Arbitration Act, that a court is empowered to intervene. If an arbitrator exceeds
his powers by making a determination outside the terms of submission, that would
be a case falling under Section 33(1)(b). As to misconduct, it is clear that the
word does not extend to bona fide mistakes the arbitrator make whether as to fact
or law. It is only where a mistake is so gross or manifest that it would be evidence
of misconduct or partiality that a court might be moved to vacate an award:
Dickinson & Brown vs The Fishers Executors, 1915 (AD) 166 at 177-181. It was
held in Donner The Ehrlich 1928 (WLD) 159 at 161 that even a gross mistake,
unless it establishes mala fides or partiality, would be insufficient to warrant
interference."
Later on the same page the learned judge continued as follows:
"When parties agree to refer a matter or arbitration, unless the submission
provides otherwise, they implicitly, if not explicitly (and, subject to the limited
power of the Supreme Court under section 3(2) of the Arbitration Act), abandon
the right to litigate in courts of law and accept that they will be finally bound by
the decision of the arbitrator. There are many reasons for commending such a
course, and especially so in the labour field where it is frequently advantageous to
all the parties and the interests of good labour relations to have a binding decision
speedily and finally made. In my opinion the Courts should in no way discourage
parties from resorting to arbitration and should deprecate conduct by a party or
an arbitration who does not do all in his power to implement the decision of the
arbitrator promptly and in good faith."
I accordingly have to determine whether the arbitrator's interpretation of the
outsourcing agreement was right or wrong. If he was right, then that is the end of
the matter. But if he was wrong, I need to embark on a second inquiry to
determine whether his error was so gross as to give rise to an inference of
misconduct. I turn firstly to his interpretation of the outsourcing agreement.
I have already mentioned that the outsourcing agreement deals broadly with
a company's use of labour other than that of its own full time employees to do
some of its work. The alternative forms of labour contemplated by the agreement
are firstly contracting out, that is, the employment of independent contractors;
secondly, labour brokers, that is, the employment of labour brokers who make the
services of their employees available to the company; thirdly, casuals, that is,
people employed for short spells of not more than three days in any week; and
lastly temporary employees, that is, people employed by the company for a
limited specified period to perform specific functions. This matter of course is
particularly concerned with those provisions of the outsourcing agreement that
govern contracting out, and I will henceforth confine myself to them.
The only operational provisions of the outsourcing agreement governing
contracting out, are those in clauses 5 and 9. In terms of clause 5 the parties
agreed to establish a Joint Contracting and Temporary Labour Committee. The
committee comprises three members representing management and three
members representing labour. Clause 5.4. provides that:
"The terms of reference of the committee shall be -
1. To establish a list of work that has historically been contracted out;
2. To preview work expected to be contracted out and explore possible alternatives
in line with the guidelines stipulated above.
3. To resolve the matters under 1 and 2 above by mutually agreeing that the work in
question either shall or shall not be contracted out or if the matter is not resolved,
to submit the disagreement to expedited arbitration."
The implication of this clause is in other words that the contracting out to which
the agreement applies, may only be undertaken by agreement between the
parties in the joint committee or, if they are unable to reach agreement, by
arbitration. This mechanism is supplemented by clause 9 which provides in broad
terms that the employer is obliged when contracting out is contemplated, to notify
the union of that fact and to furnish it with such particularity of the planned
contracting out as is necessary to enable the union to formulate its response to
the employer's proposal.
The remainder of the agreement in so far as it applies to contracting out,
gives flesh to the bones of this mechanism created under clauses 5 and 9. They
are the following provisions. There is firstly clause 1 which is a preamble that
describes the purpose of the agreement in broad terms. Clause 2 contains a
number of definitions, including definitions of contracting out and contractors. The
definitions are central to the dispute between the parties and I will return to them
later. Clause 3 lays down certain guiding principles which guide the decisions
involving the use of contractors. The clause provides for some four guiding
principles of that kind. Clause 4 provides that in order to determine the
reasonableness of using alternative labour and/or contracted services, certain
factors have to be considered. It lists 11 factors which have to be considered in
their context. Clause 6.1. lastly provides for certain guidelines on the use of
contractors. It lays down four guidelines for that purpose.
It is accordingly clear that the provisions of clauses 3, 4 and 6.1. lay down
the principles or guidelines upon which decisions have to be taken in the joint
committee and if no consensus is achieved, the basis upon which their dispute is
to be arbitrated.
The employer's contention which was upheld by the arbitrator, is that the
outsourcing agreement only governs contracting out by a contractor as defined in
clauses 2.1. and 2.2. of the outsourcing agreement. Those two definitions read as
follows:
"Contracting out shall mean a contractor given a contract on basis of specialised
skills that it offers and that (the employer) does not have, for a specified period of
time which will not exceed 12 months."
"Contractors shall mean registered service providers who are contracted by the
company to do complete projects for the company which are too large for the
company to handle itself or acquires specialised equipment or expertise which is
not available inside the company, or can be performed more efficiently by a
contractor than by the company. This agreement will be between the company
and the contractor for a project."
The effect of the employer's contention upheld by the arbitrator, is in other
words that the outsourcing agreement only applies to contracting out which
conforms to those two definitions of "contracting out to a 'contractor'". It which
means that it would only apply to contracting out which complies with the
following four requirements. The first is that the contract must be one given to a
contractor on the basis of the specialised skills that it offers that the employer
does not have. The second is that the contract must be for a specified period of
not more than 12 months. The third is that the contract must be one for a
discreet and complete project. The fourth is that the project must be one which is
too large for the employer to handle itself, or which requires specialised
equipment or expertise which is not available to the employer, or which can be
performed more efficiently by the contractor than by the employer.
The contracting out within the meaning of these definitions would in other
words be of a kind that can generally be more readily justified on the basis that it
is firstly for work that the contractor can perform better or more efficiently than
the employer, and secondly that the contractor is employed for a limited period to
address a temporary need or to serve as a transitional arrangement and
accordingly does not become part of the employer's long term structural
arrangements.
It would in my view be highly anomalous that the employer should submit to
the decisions of the joint committee only when it intends to embark on contracting
out of this kind that can more readily be justified, but that it should remain free
and unfettered whenever it wishes to embark on contracting out of a kind which
cannot be justified on the basis contemplated by these two definitions.
Let me give a few examples of these anomalies that would arise from the
interpretation adopted by the arbitrator. Firstly, it would mean that when the
employer contracts out for a period of less than 12 months, he would be bound by
the fetters of the outsourcing agreement. On the other hand if he chooses to
embark on a more drastic form of outsourcing for a period in excess of 12 months,
he is entitled to do so unfettered by the limitations of the outsourcing agreement.
Secondly, if the employer embarks on contracting out for a project too large
for the employer itself to handle, then he would be bound by the agreement and
the fetters that it imposes on him. On the other hand if the employer indeed has
the capacity to handle the project itself, but nonetheless for some peculiar or
perverse reason decides to contract it out, the outsourcing agreement does not
apply and the employees are not protected.
Thirdly, if the employer does not have the specialised skills and accordingly
has to contract out to acquire them, the fetters of the outsourcing agreement
applies. If on the other hand the employer does have the skills and it is not
necessary to contract out to have the work done, the employer is free to do so
without the strictures of the outsourcing agreement.
Fourthly and lastly, if the contractor can perform the work more efficiently
than the employer and the contracting out is accordingly commercially justifiable
on that basis, the outsourcing agreement applies. On the other hand, where the
employer itself can do the work as efficiently or more efficiently than the
contractor and if there is accordingly no similar commercial justification for the
outsourcing, the employer is nonetheless free to proceed without the strictures of
the outsourcing agreement.
These anomalies just seem to me to be intolerable. It is inconceivable that
the parties contemplated that the restriction upon the employer and the
protection of the employees would operate only in those cases where the
contracting out could generally be readily justified on the basis contemplated by
these definitions but that, where it could not be so justified, the employer would
remain free to proceed with the contracting without any restriction. Such an
interpretation would defeat what seems to me to have been the clear intention of
the outsourcing agreement, namely to protect the employer's freedom on the one
hand, to resort to contracting out where there is a commercial justification for it,
but on the other hand, to protect the employees in their job security by limiting
the employer's freedom to resort to contracting out in those cases where it could
be commercially justified.
I accordingly conclude that the arbitrator's interpretation of the outsourcing
agreement was with respect incorrect. The proper interpretation of the
outsourcing agreement is that it applies to all contracting out. The contracting out
contemplated by the definitions of "contracting out" and "contractor", is merely
that kind of contracting out which the agreement contemplates as the contracting
out that would be permissible under the agreement. Its purpose is to confine the
employer to contracting out within the meaning of those definitions. The purpose
of the agreement is not to permit the employer to embark on any other form of
contracting out without limitation. The outsourcing agreement was intended to
apply and govern all contracting out by the employer.
But as I have said at the outset, my conclusion that the arbitrator erred in
his interpretation of the outsourcing agreement, is not the end of the matter. The
fact is that the parties agreed to have their dispute resolved by the arbitrator of
their choice. They are bound by his determination whether right or wrong, unless
it can be said that he was so grossly wrong that it justifies an inference of
misconduct. I accordingly have to embark on the next inquiry whether the error of
misconduct. I accordingly have to embark on the next inquiry whether the error of
the arbitrator was so manifest and gross as to give rise to an inference that he
was guilty of misconduct. One merely needs to pose that question immediately to
appreciate that he was not. There is no basis upon which to infer that the
arbitrator was guilty of misconduct or indeed that he acted in anything other than
in good faith.
The agreement is poorly drafted and is consequently confusing. The
interpretation adopted by the arbitrator is compatible with the language of the
agreement. Indeed, although I have held his interpretation to have been wrong
because it would be contrary to the very purpose of the agreement, his
interpretation fits more comfortably with the language of the agreement. I am of
the view that the interpretation adopted by the arbitrator, although it is one that I
have held to be incorrect, is one that an arbitrator applying his mind in good faith
to the issue before him, can quite readily adopt by the exercise of reasonable care
and skill. There is accordingly no basis to infer from the arbitrator's error that he
was guilty of any misconduct.
It follows from this conclusion that the union is not entitled to the relief it
seeks because it has not established a right to stop the contracting out or the
retrenchments whether on a prima facie or on a final basis.
That leaves only the question of costs. I appreciate that I make this
determination at an interim stage. It may well appear when the matter is finally
determined on all the evidence that the parties wish to place before the court,
that the court which makes the final determination in this matter, may come to a
different conclusion than the one that I have arrived at today. If that were so, it
would be unfair to mulct the union in costs if at the end of the day its contentions
are upheld once all the facts are known.
The appropriate order for costs will accordingly in my view be to order that
the costs in the application for interim relief be costs in the cause of the
application for final relief. I therefore make the following order:
1. The application for the relief claimed in part A of the applicant's notice of motion is
dismissed.
2. The costs of the application for the relief claimed in part A of the notice of motion,
are to be costs in the cause of the application for the relief claimed in part B of the
notice of motion.
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ON BEHALF OF THE APPLICANT : ADV MOSEBO
ON BEHALF OF THE FIRST
RESPONDENT : IN PERSON
ON BEHALF OF THE SECOND
RESPONDENT : ADV J OLIVIER