In Working on Fire (Pty) Ltd v NUMSA and Others (Reportable) (DA5/2021) (LAC) the Labour Appeal Court was required to determine a dispute that arose from wage negotiations in respect of employees engaged in the essential service of firefighting.
Working on Fire (“the Employer”) performs firefighting services in respect of veld and forest fires and fires in townships and rural areas. It is the implementing agent of the Working on Fire Programme (“the Programme”) which is funded by the Department of Environmental Affairs (“the Department”). As such, the Programme is an Expanded Public Works Programme (“EPWP”) and the terms and conditions of these employees are set out in Ministerial Determination 4, issued in terms of section 50 of the Basic Conditions of Employment Act 75 of 1997.
The National Union of Metalworkers of South Africa (“NUMSA”) represents only 13% of the Employer’s employees. It was, as such, not recognised as a bargaining agent. Notwithstanding this, NUMSA demanded wage increases for its members. The Employer was placed in a predicament as the wages of its employees were determined by the Ministerial Determination and the Department, and its funding model had little or no room to accommodate any consideration for wage increases.
Preliminary skirmishes between NUMSA and the Employer took place before NUMSA referred a dispute to the Commission for Conciliation, Mediation and Arbitration (“the CCMA”) in which it demanded a wage increase to R12,000.00 per month for its members. Two weeks before arbitration NUMSA modified its demands to include a 12% increase in daily pay, an “S&T” allowance, overtime pay, and medical aid etc.
The Arbitrator adopted the hypothetical approach to determining the dispute (more on this below). He found that NUMSA’s demands could not merely be handed to it on a silver platter in exchange for its members losing their right to strike. He found further that the CCMA was not permitted to tamper with wage rates contained in the Determination. Crucially, the Arbitrator also found that NUMSA had not presented any evidence to substantiate its demands.
NUMSA brought an application for review and the Employer brought a conditional counter-review in the Labour Court. The Labour Court reviewed and set aside the award as it found that by adopting the hypothetical approach, the Arbitrator committed a material error of law; the manner in which the Arbitrator adopted the hypothetical approach rendered the award unreasonable, and the Arbitrator abdicated his statutory duty to decide the matter before him as he was reluctant to tamper with EPWP rates.
The Employer brought an appeal and NUMSA brought a cross-appeal against the judgment of the Labour Court. The Labour Appeal Court found that the Arbitrator had three methods to determine the dispute before him. He could use the hypothetical approach – determining what the bargain would have been should a deal have been struck between the parties; the fairness approach – to determine which parties’ position is most fair, and the final offer approach – where he must choose between the proposals of each party based on the evidence before him.
The Arbitrator had a narrow (or true) discretion to adopt whichever approach he considered the most appropriate in the circumstances. The LAC found that the Courts should be slow to interfere with the decision of an arbitrator when they exercise a discretion. The LAC found that the Arbitrator’s decision to adopt the hypothetical approach was not unreasonable.
The LAC endorsed the Arbitrator’s reasoning that, should NUMSA’s members receive substantial wage increases, this may cause other employees to ‘jump ship’ which would result in industrial unrest. The Arbitrator’s approach was consistent with the established authority that employees engaged in essential services cannot expect to gain through arbitration what other employees cannot obtain through industrial action.
As the employees’ wages were set out in the Determination and the Employer’s budget was determined with reference to these wages, the only way the Employer could comply with NUMSA’s demands was to retrench 677 of its employees. Ironically, the nature of an EPWP is to reduce wages and increase employment.
The LAC furthermore found that NUMSA had completely failed to provide any credible evidence to justify its demands. NUMSA’s approach to this dispute was thus fundamentally flawed. It should have joined the other recognised unions by addressing its concerns with the Minister of Environmental Affairs and NEDLAC. NUMSA’s belated attempt to join the Department as a respondent in the proceedings was also rejected.
In sum, the LAC found that the award was reasonable and thus the appeal succeeded. The judgment appears to confirm that there is no one correct approach to the determination of interest arbitrations. The LAC should perhaps have examined the different approaches more closely and provided some guidance on the approaches and when they would be best suited. Nevertheless, the judgment serves as a touchstone for the effectiveness of a system of interest arbitrations – something the drafters of the amendments to the LRA should seriously consider as an alternative to the destructive and violent powerplay model currently playing out under the LRA.