The Labour Appeal Court recently handed down judgment in Southern Sun Hotel Interests (Pty) Ltd v South African Commercial Catering & Allied Workers Union (JA136/2021) (15 November 2022) in which it dealt with the limitations on an employer’s right to implement a lock-out.

Southern Sun (“the Employer”) had a collective bargaining relationship with the South African Commercial Catering and Allied Workers Union (“SACCAWU”) for 28 years. On 3 November 1993, the parties concluded a Recognition Agreement in terms of which annual wage negotiations would be held.

On 13 March 2020, shortly before the COVID-19 national lockdown, wage negotiations for 2020/2021 took place and a collective agreement (“the Wage Agreement”) was concluded in terms of which SACCAWU’s members would receive an annual wage increase of 5.5% from 1 April 2020. Covid hit and the Employer found itself unable to afford to pay the increase. After informing SACCAWU of this, the Employer curiously cancelled the Recognition Agreement.

Shortly thereafter, the Employer wrote to its employees, seeking an agreement, inter alia, that they would forego the 5.5% increase which had been agreed to in the Wage Agreement. Some agreed, many declined. The Employer, of the view that it had no other options, implemented a lockout demanding that the employees accede to its demands.

SACCAWU brought an urgent application to interdict the lockout and have it declared to be unlawful and unprotected. The Labour Court granted this application on the basis that the Employer’s lockout demand was one which was regulated by a collective agreement in terms of section 65(3)(a)(i) of the LRA. The Employer, dissatisfied, appealed.

The Labour Appeal Court (“the LAC”) dealt with the matter on three bases. Firstly, it emphasised the obligation of a court to determine the ‘true nature of the dispute’. The Employer creatively alleged that its demand was ‘that the employees accept a reduction in their remuneration which was backdated to 1 April 2020’. In this sense, the Employer alleged that the demand concerned ‘the waiving or giving up of a portion of their remuneration’. The LAC made short shrift of this argument. It found that to suggest that the demand was something other than a dispute which was regulated by a collective agreement was pure sophistry.

Secondly, the Employer alleged that as the term of the Wage Agreement had ceased, that agreement no longer regulated SACCAWU’s members’ wages. The LAC dismissed this argument. It held that although the term of the Wage Agreement had lapsed, it nevertheless regulated the wages of the respective employees for that period. In essence, the Employer could not embark on industrial action to reopen the issues regulated by the Wage Agreement. The appeal on this issue thus failed.

Finally, the LAC determined that, notwithstanding its findings above, the lockout was unprotected as the matter could be referred to arbitration or the Labour Court in terms of section 65(1)(c) of the LRA. The LAC found that as the Employer had breached the provisions of the Wage Agreement, SACCAWU was entitled to refer a dispute to the Commission for Conciliation, Mediation and Arbitration. The LAC also found that SACCAWU could have referred a dispute to the Labour Court in terms of section 77(3) of the Basic Conditions of Employment Act 75 of 1997 for payments of amounts owing to its members. The lockout was declared unprotected on this basis as well and the Employer’s appeal thus failed.

The judgment serves as a timely reminder that a party to a collective agreement will not ordinarily be entitled to reopen an issue or have a second bite at the cherry when the shoe pinches. Accordingly, caution must be taken that collective agreements are drafted with precision and should account for a myriad of contingencies. There may have been other options open to the Employer in these instances, but it is not clear whether they were explored or not. Employers should thus take specialist advice prior to engaging in restructuring exercises or changes to employment terms and conditions, whether Unions are involved or otherwise.