Prescription Of Arbitration Awards

By Mr Vusi Mnguni
Manager: Dispute Management PHSDSBC
Does the Prescription Act 68 of 1969 apply to arbitration awards?

In terms of section 145(9) of the Prescription Act 68 of 1969 (PA), provides that an application to review an arbitration award, issued after 1 January 2015, interrupts the running of prescription in terms of the PA. This implied that the PA applied to claims under the Labour Relations Act No. 66 of 1995 (LRA).

In light of the two Constitutional Court judgments, delivered after 1 January 2015, which deal with the prescription of arbitration awards. held that the Prescription Act does not apply to claims under the LRA. In Myathaza v Johannesburg Metropolitan Bus Services (SOC) Ltd t/a Metrobus and others [2017] 3 BLLR 213 (CC) and Mogaila v Coca Cola Fortune (Pty) Ltd [2017] JOL 37484 (CC),

Mogaile determined that a reinstatement award was still enforceable after nine years and Myathaza, Jafta J decided that the PA did not apply to arbitration awards, based on the following differences between the PA and LRA:

• “The PA envisaged civil courts as the only forums at which claims or debts may be enforced whilst the LRA established the CCMA and bargaining councils as forums that must resolve labour disputes far more expeditiously than the time taken in courts. The prescriptive time periods in the PA are much longer that the periods prescribed by the LRA at the pre-arbitration stage.
• The PA bars creditors who fail to enforce their debts by instituting legal actions within specified periods, which are far longer than the periods prescribed by the LRA at pre-arbitration stage.
• An arbitration award constitutes an outcome in terms of which a claim or dispute is finally settled between the parties. On the other hand, apart from a judgment debt that prescribes after 30 years, the PA was designed to extinguish the right to enforce a claim that is still to be determined by a court”.

The judgements above emphasis that all the differences illustrate that the LRA is inconsistent with the PA. The judgment held that the inconsistency did not flow from the fact that the LRA and the PA had different prescribed time periods only, but also arose from the fact that section 158 of the LRA, empowers the Labour Court to make an award an order of court for purposes of enforcement. The application of the PA to arbitration awards effectively achieves the opposite outcome and compared to the LRA.

The PA suggests that, once an award prescribes it becomes unenforceable and the Labour Court may not exercise its power to make the award an order of court. In this instance the PA disregard the LRA process that was specifically designed to enforce the right to fair labour practices.

The above judgements agreed that the PA does not apply to the LRA dispute resolution system in general, concerning dismissal disputes for the following reasons:

• “The referral form is a first step towards the conciliation process and the conciliation process does not constitute legal or court proceedings.
• Proceedings recognised by the PA as capable of interrupting the running of prescription are proceedings that end with a court judgment. The conciliation process does not end with a judgment”.

Introduction

Despite the decision of the Labour Court in South African Post Office v CCMA & Others [2012] 11 BLLR 1183 (LC) where the Court specifically held (at paragraph 18) that “the CCMA (read Council) does not have a general unfairness jurisdiction” and further that “an employee referring an unfair labour practice dispute in terms of section 186 must demonstrate that it falls within that section”, despite the Council’s referral form specifically stating in paragraph 3 thereof that salary issues are excluded from the Council’s unfair labour practice relating to benefits jurisdiction, and despite countless jurisdictional rulings by the Council and its commissioners that deductions made from an employee’s salary do not fall within the purview of unfair labour practice as defined in section 186(2) of the Labour Relations Act 66 of 1995 (the LRA), the Public Health and Social Development Sectoral Bargaining Council (PHSDSBC) continue to be inundated with referrals alleging unfair labour practice the essence of which is that an employer made deductions from an employee’s remuneration or salary. In view of the continued growing number of referrals to the Council relating to deductions made from an employee’s remuneration or salary, I deemed it necessary to set out and explain the law and precedent laid down by our courts on the matter.

Relevant Legal Principles

Section 34 of the Basic Conditions of Employment Act 75 of 1997 (BCEA) regulates deductions that an employer can make from an employee’s remuneration. The section reads as follows:

Deductions and other acts concerning remuneration

(1) An employer may not make any deduction from an employee’s remuneration unless-

(a) subject to subsection (2), the employee in writing agrees to the deduction in respect of a debt specified in the agreement; or

(b) the deduction is required or permitted in terms of a law, collective agreement, court order or arbitration award.

(2) A deduction in terms of subsection (1)(a) may be made to reimburse an employer for loss or damage only if-

(a) the loss or damage occurred in the course of employment and was due to the fault of the employee;

(b) the employer has followed a fair procedure and has given the employee a reasonable opportunity to show why the deductions should not be made;

(c) the total amount of the debt does not exceed the actual amount of the loss or damage; and

(d) the total deductions from the employee’s remuneration in terms of this subsection do not exceed one-quarter of the employee’s remuneration in money.

(3) A deduction in terms of subsection (1)(a) in respect of any goods purchased by the employee must specify the nature and quantity of the goods.

(4) An employer who deducts an amount from an employee’s remuneration in terms of subsection (1) for payment to another person must pay the amount to the person in accordance with the time period and other requirements specified in the agreement, law, court order or arbitration award.

(5) An employer may not require or permit an employee to-

(a) repay any remuneration except for overpayments previously made by the employer resulting from an error in calculating the employee’s remuneration; or

(b) acknowledge receipt of an amount greater than the remuneration actually received.

The first point to note from a reading of section 34 of the BCEA is that the section does not prohibit an employer from making a deduction from an employee’s remuneration. The section states that an employer “may not…unless”. “May not … unless” means an employer may make deductions under certain conditions. Those conditions are specified in subsection 1, namely (a) subject to subsection (2), the employee in writing agrees to the deduction in respect of a debt specified in the agreement; or (b) the deduction is required or permitted in terms of a law, collective agreement, court order or arbitration award. In terms of the Interpretation Act 33 of 1957, ‘law’ means any law, proclamation, ordinance, Act of Parliament or other enactment having the force of law.

In so far as public servants are concerned, section 38 of the Public Service Act 103 of 1994 reads as follows:

Wrongly granted remuneration

(1) (a) If an incorrect salary, salary level, salary scale or reward is awarded to an employee, the relevant executive authority shall correct it with effect from the date on which it commenced.

(b) Paragraph (a) shall apply notwithstanding the fact that the employee concerned was unaware that an error had been made in the case where the correction amounts to a reduction of his or her salary.

(2) If an employee contemplated in subsection (1) has in respect of his or her salary, including any portion of any allowance or other remuneration or any other benefit calculated on his or her basic salary or salary scale or awarded to him or her by reason of his or her basic salary-

(a) been underpaid, an amount equal to the amount of the underpayment shall be paid to him or her, and that other benefit which he or she did not receive, shall be awarded to him or her as from a current date; or

(b) been overpaid or received any such other benefit not due to him or her-

(i) an amount equal to the amount of the overpayment shall be recovered from him or her by way of the deduction from his or her salary of such instalments as the relevant accounting officer may determine if he or she is in the service of the State, or, if he or she is not so in service, by way of deduction from any moneys owing to him or her by the State, or by way of legal proceedings, or partly in the former manner and partly in the latter manner;

(ii) that other benefit shall be discontinued or withdrawn as from a current date, but the employee concerned shall have the right to be compensated by the State for any patrimonial loss which he or she has suffered or will suffer as a result of that discontinuation or withdrawal.

(3) The accounting officer of the relevant department may remit the amount of an overpayment to be recovered in terms of subsection (2) (b) in whole or in part.

The labour court recently had the honour to interpret the meaning and import of section 38 of the Public Service Act in PSA v Department of Home Affairs and Another (J189/2012) [2015] ZALCJHB 406 (12 November 2015). The court, per Tlhotlhalemaje AJ, held (at paragraph 31) that “unlike in instances where a claim is brought under section 34 of the BCEA, where an amount erroneously paid is recouped in terms of the provisions of section 38 of the PSA, and where such amounts do not constitute remuneration, an employer is not in my view obliged to get the consent of an employee before effecting the deductions. Even more significant, to the extent that the amounts erroneously paid to employees are not what they are ordinarily entitled to ex lege or ex contractu, no such obligation arises, and all that is required is of the accounting officer to exercise his or her discretion in effecting those deductions, and to act reasonably within the meaning of section 38 (2) (b) of the PSA. Thus intrinsic in those provisions is a discretion enjoyed by the accounting officer to determine what instalments should be made based on what employees can afford to repay, and such a discretion should be exercised reasonably.”

In so far as the jurisdiction of the CCMA or the Council to deal with disputes relating to deductions from remuneration is concerned, the matter was addressed by the Labour court in the unreported case of Solidarity Obo Members v SFF Incorporated Association Not For Gain and Others (JR197/14) [2015] ZALCJHB 40 (13 February 2015).

The Facts

The briefs facts of the matter were as follows:

• On 5 July 2013 SFF Incorporated Association Not for Gain (the employer) issued letters to the 24 applicant employees on whose behalf the registered trade union Solidarity was acting informing them that the employer had erroneously made overpayments in respect of performance bonuses for the financial year 2010/2011. The employees were further informed of the exact amount allegedly overpaid, and were notified that the employer intended to recover those amounts by making reductions from their salaries. The employer effected the deductions and Solidarity referred an alleged unfair labour practice dispute to the CCMA after the matter remained unresolved internally.

• At the arbitration proceedings following the non-resolution of the dispute at conciliation, the Commissioner had identified the issue to be determined as whether the employer’s intention to deduct from the employees’ salaries an overpayment made in terms of an incentive bonus amounted to an unfair labour practice. The employer had raised a preliminary point to the effect that the CCMA lacked jurisdiction since the dispute did not relate to an unfair labour practice.

• In considering the preliminary point, the Commissioner had regard to the definition of an unfair labour practice in section 186(2)(a) of the LRA, and concluded that from the evidence of the parties, the dispute fell outside of that definition. The Commissioner also held that the recovering of amounts that were overpaid to an employee must be dealt with in terms of section 34 of the BCEA, and thus the CCMA lacked jurisdiction.

• Unhappy with the Commissioner’s ruling, Solidarity took the matter on review to the Labour Court.

Labour Court’s Findings

In a judgement coincidentally delivered by Tlhotlhalemaje AJ, the Labour Court made the following important and noteworthy findings:

1. The review test applicable in respect of jurisdictional rulings is simply whether or not the ruling was correct, and that the rationality or reasonableness test as postulated by the Constitutional Court in Sidumo and Another v Rustenburg Platinum Mines Ltd and Others (2008) (2) SA 24 (CC) does not apply.

2. Jurisdiction means ‘the power or competence of a court to hear and determine an issue between parties’ and the CCMA (read the Council) (1) is a creature of statute and is not a court of law, (2) as a general rule, it cannot decide its own jurisdiction, (3) can only make a ruling for convenience, (4) whether it has jurisdiction or not in a particular matter is a matter to be decided by the Labour Court, (5) may not grant itself jurisdiction which it does not have, (6) may not deprive itself of jurisdiction by making a wrong finding that it lacks jurisdiction which it actually has and (7) there is, nothing wrong with the CCMA enquiring whether it has jurisdiction in a particular matter provided it is understood that it does so for purposes of convenience and not because its decision on such an issue is binding in law on the parties.

3. The CCMA (read Council) can only determine disputes that fall within its jurisdiction as enjoined by the provisions of the LRA and other applicable pieces of legislation.

4. In determining whether it has jurisdiction, the CCMA (read Council) is not confined to how the parties wish to label their disputes, but rather whether the claim is one which it is competent to hear and determine.

5. Where the CCMA or Bargaining Council determines disputes which do not fall within their jurisdiction, any outcome in that regard will become a nullity.

6. Any deductions to be made to employees’ remuneration must be subject to the procedural constraints in section 34 of the BCEA.

7. The fact that an employer seeks to make deductions from employee’s remuneration to reverse wrongly overpaid amounts will not render such deductions an unfair labour practice, more especially since an overpayment cannot for all intents and purposes be an entitlement.

8. There is clearly a distinction between payments to which an employee is entitled and payments where there is no such entitlement. The latter category usually involves payments made to employees in error, and employers would ordinarily be entitled to adjust payments made so as to reflect what the employee is legitimately entitled to.

9. Where there is a dispute as to whether the deductions should be made or not, and which deductions can only be made in accordance with the provisions of section 34 of the BCEA, any such disputes must be adjudicated by the Labour Court, in terms of Section 77(1) of the BCEA which provides that “subject to the Constitution and the jurisdiction of the Labour Appeal Court, and except where this Act provides otherwise, the Labour Court has exclusive jurisdiction in respect of all matters in terms of this Act, except in respect of an offence specified in sections 43, 44, 46, 48, 90 and 92”.

10. The decision of the Commissioner to decline jurisdiction was correct both on the facts and the law. Solidarity’s review application was dismissed accordingly.

Lessons and Conclusion

The debate whether or not a deduction made from an employee’s remuneration constitutes an unfair labour practice has somewhat been settled by the Labour Court. So is the debate whether or not the Council has jurisdiction to deal with such disputes.  In a nutshell:

• Disputes about deductions from an employee’s remuneration must not be referred to the Council as they do not fall within the purview and definition of unfair labour practice in section 186(2) of the LRA. The disputes must be dealt with in terms of the provisions of section 34 of the BCEA.

• The Council does not have jurisdiction to deal with disputes concerning deductions from an employee’s remuneration.

• Such disputes must be referred to the Labour Court for adjudication in accordance with the provisions of section 77(1) of the BCEA.