Understanding and Contrasting the Legislative Framework of Private Arbitration in Section 147(6)

1. ARBITRATING WHERE THERE IS AN AGREEMENT TO PRIVATE ARBITRATION

2. PURPOSE • A look at the current legislative framework - contrasted with proposed amendments

3. SECTION 147 (6) - CURRENT FORM • “If at any stage after a dispute has been referred to the Commission, it becomes apparent that the dispute ought to have been resolved through private dispute resolution in terms of an agreement between the parties to the dispute, the Commission may - • (a) refer the dispute to the appropriate person or body for resolution through private resolution procedures; or • (b) appoint a commissioner to resolve the dispute in terms of this Act.” (my emphasis)

4. SECTION 147 (6) • The wording of the S147 (6) in its current form confers a discretion on the Commission to refer the matter to the appropriate body or arbitrate the dispute • In exercising the discretion a commissioner will look into a whole host of factors • Factors are not listed in the LRA but can be gleaned from the founding provisions of the LRA • Labour Court decisions are instructive

5. LC DECISIONS • SACTWO obo STINISE v DAKBOR CLOTHING (PTY) LTD & OTHERS (2007) ILJ 1318 (LC) • The court did not find an private arbitration clause in a contract of employment to be binding and to exclude the jurisdiction of the council • Reference to S199 of the LRA made

6. LC DECISIONS • “199 Contracts of the employment may not disregard or waive collective agreements or arbitration awards • (1) A contract of employment, whether concluded before or after the coming into operation of any applicable collective agreement or arbitration award, may not – • (a)… • (b) permit an employee to be treated in a manner, or to be granted any benefit, that is less favourable than that prescribed by that collective agreement or arbitration award; or • (c) waive the application of any provision of that collective agreement or arbitration award. • (2) Any provision in any contract that purports to permit or grant any payment, treatment, benefit, waiver or exclusion prohibited by sub-s (1) is invalid.”

7. LC DECISIONS • Court noted commissioner did not deal with whether the private arbitration clause in the employment contract offered the employee less favourable terms than those prescribed in a collective agreement • Court found S199 (1) (c) to be applicable i.e. the private arbitration agreement clause waived the collective agreement • Conclusion • A collective agreement takes primacy over a private arbitration agreement clause • Private arbitration agreement clauses invalidated by S199(1)(c)

8. LC DECISIONS • CARLBANK MINING CONTRACTS (PTY) LTD v NBCRFI & OTHERS (2010) BLLR 1142 (LC) • Facts somewhat similar to those of Dakbor Clothing • Court took a different view • Issue in dispute summed up thus: • “should this court enforce a term of an employment contract that requires disputes to be referred to private arbitration, in circumstances where the parties are subject to the jurisdiction of a bargaining council that has concluded a collective agreement providing for the resolution of disputes under the auspices of the council?”

9. LC DECISIONS • Court noted LRA encourages private dispute resolution as much as it encourages collective bargaining • Friction exists between two objectives • Confirmed in terms of S23 (3) of LRA collective agreement takes precedent over the terms of any individual contract • But find collective agreement did not oblige a party to refer a dispute to the council • Held S23 (3) not a bar to an agreement to refer disputes arising from contract of employment to private arbitration

10. LC DECISIONS • Reference to Dakbor Clothing made • Court found the latter decision did not establish a general principle that S199 excludes the application of any private arbitration agreement. • Reasoned terms of a collective agreement and the private arbitration agreement relevant factors when making a S199 enquiry • Noted S199 protects employees at 3 levels i.e. minimum wage; prohibiting contractual terms less favourable than those of collective agreement; and prohibits waiver of application of collective agreement

11. LC DECISIONS • Court found the collective agreement did not establish a right to refer a dispute to the council and there can therefore be no waiver of that right. • Alternatively the collective agreement did not compel an employee to refer the dispute to the council and only the council • Consequently a private arbitration agreement did not waive the application of the council’s collective agreement • Court concluded it will be empowered after evaluating the content of the private arbitration agreement to decide if it offered less favourable terms than the collective agreement

12. LC DECISIONS • Court noted councils do not have inherent right of supervision over private arbitration proceedings between parties within its registered scope • In the Carlbank decision the judge tried to distinguish it from Dakbor Clothing. Taking into account the somewhat similar facts of the cases the distinction appear superficial • Conclusion • Courts have taken varying approaches when dealing with disputes relating to S147 (6) • The Amendment Bill comes at the backdrop of this uncertainty

13. S147 PROPOSED AMENDMENT • “Section 147 of the Principal Act is hereby amended by insertion after subsection (6) of the following subsection – • (6A) For the purpose of making a decision in terms of subsection (6) the Commission must appoint a commissioner to resolve the dispute – • (a) if an employee earning less than four times the threshold prescribed by the Minister in terms of section 6(3) of the Basic Conditions of Employment Act is required to pay any part of the cost of the private dispute resolution procedure; or • (b) if the person or body appointed to resolve the dispute is not independent of the employer”. (my emphasis)

14. S147 (6A) • The amendment is written in obligatory/ mandatory terms (use of the word must) • No discretion to exercise if any of the two factors mentioned in subsection 6A are present in the private arbitration agreement clause • The commission/ commissioner will be bound to assume jurisdiction regardless of the private arbitration agreement • An independent person in the context of an employer will be someone not working for the employer; not subject to the authority of the employer; and or engaged in business with the employer, etc.

15. S147 (6A) • The amendment is prescriptive and can be misconstrued • The amendment ought to be read as a whole paying attention to its foreword • The Objects to the Labour Relations Amendment Bill is a useful interpretive tool

16. LRA EXPLANATORY MEMORANDUM • Objects of the amendment are listed as follows: • “This section is amended to require the Commission to resolve disputes even where the parties have agreed to private dispute resolution if, in the case of lower paid employees, the employee is required to pay any part of the cost of private dispute resolution, or, in the case of all employees, the person appointed to resolve the dispute is not independent of the employer.” • 2. The purpose of the amendment is clearly aimed at assisting those employees that may be deemed vulnerable employees

17. LRA EXPLANATORY MEMORANDUM • 3. Amendment also seeks to ensure that private dispute resolution procedure is conducted by an impartial person/ body • CONCLUSION • A commissioner’s discretion where factors mentioned in subsection 6A are not present is still retained • The discretion is to be exercised having regard to amongst others submissions from the parties, the content of a collective agreement (where one exists) and the private arbitration agreement clause, the need for expeditious resolution of labour disputes; and that LRA encourages volunteerism