Collective bargaining

In National Education Health and Allied Workers Union v Minister of Public Service and Administration and Others and related matters 2022 (6) BCLR 673 (CC), Cabinet approval does not have the effect of authorising the Minister to legally conclude a collective agreement if it is in contravention of the provisions of Public Service Regulations 78 and 79.

By Merilyn Rowena Kader LLB (Unisa), Legal Editor at LexisNexis South Africa.

Labour law - Collective bargaining: In National Education Health and Allied Workers Union v Minister of Public Service and Administration and Others and related matters 2022 (6) BCLR 673 (CC) the applicants were trade unions with members employed in the Public Service.

In 2018, the state concluded a collective agreement with trade unions who were parties to the Public Service Co-ordinating Bargaining Council. The agreement contained three clauses which regulated wage increases for Public Service employees for the years of 2018/2019, 2019/2020 and for 2020/2021, respectively clauses 3.1, 3.2 and 3.3. The increases agreed on for 2018/2019 and 2019/2020 were implemented. In respect of the third year, however, the state asked the trade unions to agree to a revision of the agreement on the basis that the cost of implementation would be unaffordable for the state. The trade unions declined to agree. The previously agreed wage increases for that year (clause 3.3) were not implemented. A dispute was referred to the Bargaining Council. It remained unresolved at conciliation. Applicants referred the dispute to arbitration. Before the arbitration could be finalised, applicants launched an application in the Labour Court seeking an order to compel the state to comply with clause 3.3 of the collective agreement for the 2020/2021 financial year. The state launched a counterapplication seeking declaratory relief regarding the legality of the collective agreement and its enforcement. By agreement the Labour Appeal Court (LAC) was requested to hear the matter as a court of first instance in terms of s 175 of the Labour Relations Act 66 of 1995. The LAC granted that request.

The state contended that the collective agreement was invalid and unenforceable because it was concluded in contravention of the Public Service Regulations (promulgated in GN R877 GG40167/29-7-2016) read with ss 213, 215 and 216 of the Constitution. Regulation 78 empowers the executive authority to engage in negotiations and conclude collective agreements on behalf of the state. It requires, however, that in entering into such collective agreements the executive authority must ‘meet the fiscal requirements contained in regulation 79’. Regulation 79 provides that the state can enter into a collective agreement only if –

‘(a) he or she has a realistic calculation of the costs involved in both the current and the subsequent fiscal year;

(b) the agreement does not conflict with the Treasury Regulations; and

(c) he or she can cover the cost –

(i) from his or her departmental budget;

(ii) on the basis of a written commitment from the Treasury to provide additional funds; or

(iii) from the budgets of other departments or agencies with their written agreement and Treasury approval’.

It emerged that none of these requirements had been met.

Applicants had contended in the LAC that the National Treasury and the Minister of Finance were nevertheless bound because the Cabinet had approved the draft agreement, which later became the collective agreement in question. It was argued that because the Minister of Finance was the political head of the National Treasury and, as a member of the Cabinet, had participated in the relevant Cabinet decision, it had to be inferred that there had been Treasury approval for the proposal. The Cabinet, they argued, must necessarily have considered ways in which it would raise the necessary additional funding required for the implementation of the collective agreement.

The LAC found on the facts that the ‘cost of the collective agreement could not be covered solely’ from the Minister of Public Service and Administration’s budget; that the Treasury had not provided a written commitment to guarantee additional funding; and no further agreements were made by other departments or agencies in accordance with reg 79. It also found evidence (in the form of a letter written by the Minister of Finance) that showed ‘the absence of any commitment by National Treasury of the kind required expressly by regulation 79’. The LAC found that the fact that the Cabinet appeared to have sanctioned the collective agreement did not constitute compliance with the express wording of regs 78 and 79. The collective agreement had been concluded in contravention of those regulations. Clause 3.3 of the agreement (dealing with wage increases for the year 2020-2021) was unlawful for violating ss 213 and 215 of the Constitution and the impugned regulations. The LAC dismissed the application.

Ten trade unions lodged separate applications to the Constitutional Court (CC) for leave to appeal against the judgment of the LAC. They were consolidated for hearing. The Department of the Public Service and Administration and the Minister of Finance opposed the applications.

The CC unanimously granted leave to appeal but dismissed the appeal.

The CC identified the issue as whether the non-compliance with regs 78 and 79 rendered clause 3.3 of the collective agreement invalid and unenforceable. Regulations 78(2) and 79(c) created jurisdictional facts, which had to exist prior to the Minister’s exercise of power to negotiate and conclude collective agreements on behalf of the state. If those requirements were not met, the Minister, if he acted, would do so without legal authority. It was clear that in casu the jurisdictional facts were not present. The fact that there had been Cabinet approval could not have had the effect of authorising the Minister to legally conclude a collective agreement in contravention of the provisions of regs 78 and 79. Non-compliance with the requirements of regs 78 and 79 rendered the resultant collective agreement between the state and the trade unions invalid and unlawful, and thus unenforceable.

Merilyn Rowena Kader
Legal Editor at LexisNexis