Validity of agency shop agreement and the applicability of s77

Labour Court clarifies between legality and constitutionality.

The labour court, in UASA and Association of Mineworkers and Construction Union v BHP Billiton Energy Coal South Africa and National Union of Mineworkers (2013) 24 SALLR 82 (LC), had the opportunity of considering the following important issues:

(a) Does the CCMA have jurisdiction to determine the lawfulness or validity of an agency shop agreement?
(b) In the above scenario, if it is found that the CCMA lacks such jurisdiction, on what basis is it to be determined that the labour court has jurisdiction to determine the lawfulness or validity of an agency shop agreement?
(c) Is it competent for a litigant to challenge an agency shop agreement as infringing the Bill of Rights without challenging the empowering section in the LRA, namely, s25, as being unconstitutional?

Overview

On 7 August 2012 this court made the following order:

• the first point in limine is dismissed;
• the second point in limine is upheld; and
• the issue of costs must be determined at the conclusion of the trial.

Pertinent facts of the case

The first applicant in this matter is UASA, a trade union duly registered in accordance with the Labour Relations Act 66 of 1995 (“the LRA”).

The second applicant is the Association of Mineworkers and Construction Union Africa (“AMCU”), a trade union duly registered in accordance with the LRA (UASA and AMCU are referred to collectively as “the applicants”).

The first respondent is BPH Biliton Energy Coal South Africa Limited (“BECSA”).

The second respondent is the National Union of Mineworkers (“NUM”), a trade union duly registered in accordance with the provisions of the Act.

From the papers, it appears that it is common cause that BECSA owns and manages a number of coal mines (Douglas Mine, which is, however, being closed down, Kutala Mine, Klipspruit Mine and Middleburg Mine) and employs a significant number of employees at each operation in one of four grades (B, C, D or E) comprising:

• as to B grade, general workers;
• as to C grade, most members of the skilled and supervisory staff;
• as to D, grade some officials and managerial staff; and
• as to E grade, senior personnel such as engineering and general managers.

This application only concerns B and C level employees.

Apart from the four mines, BECSA also has within its organisational structures a central services department, a mine closure operation, a research unit (“Yanka) and the BECSA Academy. These four units all fall under central services and operate, according to BECSA as part of a single integrated BECSA business.

According to the applicants, each of these locations (eight in total) is geographically and administratively a discrete and separate unit and is treated as a separate unit by the respondents under the threshold agreement and industrial relations policy documents applicable at BECSA.

It is stated, in the statement of claim, that each of these locations, accordingly, constitutes a separate workplace within the contemplation of the LRA in general and s25 in particular. This is denied by BECSA. According to BECSA, these divisions, units and depots are not “independent” of one another. All of these operations are situated in close proximity to each other in the Witbank/Middelburg area and are all controlled as a single and integrated unit. According to BECSA, these operations do not operate independently from one another by reason of their size, function or organisation.

However, this dispute is not the subject of these proceedings.

Agency shop agreement

During July 2009, BECSA and NUM entered into an agency shop agreement (hereinafter referred to as “the agreement”). The agreement provides for the deduction of agency fees from employees “within the B and C levels job grades in a workplace of BECSA”. The agreement further conceives of BECSA as a single entity and the degree of representation for the grant of agency shop rights (a clear majority) is determined with reference to BECSA’s enterprise taken as a whole.

Deduction of agency fee

BECSA expressed an intention to deduct, with effect from November 2009, agency fees in the amount of 1% from the basic salaries of all BECSA employees in the B and C grades who are not members of NUM.

Claim of the applicants

Pursuant to this intention, the applicants filed a statement of claim setting out the following two causes of action as set out infra.

Breach of s25 of the LRA

The first claim relates to a breach of s25 of the LRA. The applicants argue that, under s25 of the LRA, agency shop agreements can be lawful only if the union enjoys the majority support within the workplace in which the agreement is expressed to be binding. According to the applicants, within BECSA such support must be determined by poling employees in each of the eight workplaces and, for this purpose, they must be treated as separate and discrete.

The applicants, therefore, claim that the agency shop agreement is in breach of s25 of the LRA because NUM’s support was calculated with reference to BECSA as a whole (and therefore as a single workplace) instead of eight separate workplaces.

In its respective responses to the statement of claim, both BECSA and NUM deny that BECSA consists of eight workplaces for proposes of poling support within the workplace. Instead, it is submitted that the workplace of BECSA consists of all its operations operating as a single unit.

Contravention of rights to freedom of association and fair labour practices

The second claim (assuming that the agency shop agreement is otherwise lawful and enforceable) relates to the constitutionality of the agency shop agreement. In essence, it is claimed that the agency shop agreement constitutes an impermissible contravention of the rights to freedom of association and fair labour practices embodied in clauses 18 and 23(1) of the Bill of Rights respectively.

The applicants seek an order declaring the agency shop agreement unlawful and invalid and an interdict restraining the respondents from implementing the agency shop agreement.

The applicants further claim that any monies deducted from the applicants’ members be reimbursed with interest. BECSA and NUM oppose the claims and seek an order dismissing the claims.

Points in limine

In its response to the applicants’ statement of claim, NUM (the second respondent) raised two points in limine.

These two points in limine are the subject of these proceedings:

• firstly, in relation to the applicants’ first claim, it is submitted, on behalf of NUM, that the labour court does not have jurisdiction to determine whether an agency shop agreement complies with s25 of the LRA because that is not a matter that has been assigned to the labour court for determination in terms of “any other law”, as envisaged in s157(1) of the LRA; and
• secondly, in relation to the applicants’ second claim, NUM submits that this constitutional challenge is bad in law.

In essence, it is argued that the applicants have not challenged the constitutionality of s25 of the LRA and, therefore, the claim does not disclose a cause of action.

BECSA opposes the first point in limine raised by NUM but supports the second point in limine.

The labour court was in agreement with the applicant that should the jurisdictional point be upheld no evidence will be required to determine the applicants’ claim.

For the findings of the court, please visit www.hrfuture.net and view this month’s “Just in case” in the December 2015 issue (accessible to HR Futuyre members only).

Findings of the court

First point in limine

CCMA does not have jurisdiction to deal with validity or lawfulness.

What is clear is the fact that the CCMA does not have jurisdiction to decide the lawfulness or validity of agency shop agreements.

The CCMA only has jurisdiction in relation to the interpretation and application of a valid collective agreement (including an agency shop agreement) in terms of s24(6) of the LRA (see, in this regard, NUMSA and Others v Highveld Steel and Vanadium Corporation Ltd [2002] 1 BLLR 13 (LAC) at paragraph [21] and Annandale Building Materials (Pty) Ltd t/a Altocrete Brickworks and Another v NUM [2002] 11 BLLR 1058 (LC) at paragraph [40]).

The labour court has already had occasion to decide whether or not the labour court has jurisdiction to pronounce on the validity of agency shop agreements.

s157(1) of the LRA

Francis, J in Annandale Building Materials (Pty) Ltd t/a Altocrete Brickworks and Another v NUM [2002] 11 BLLR 1058 (LC) at paragraph [40], concluded that this court does have jurisdiction on the following basis:

“[40] This brings me to the question whether this court does have jurisdiction to rectify the agency shop agreement. In terms of section 24(6) of the Act, a dispute over the interpretation of an agency shop agreement must be referred to the CCMA which must attempt to conciliate the dispute and if it fails to do so, the dispute must be resolved by the CCMA in arbitration. Where it is the validity of an agency shop agreement that is challenged, the CCMA would lack jurisdiction to entertain the dispute. The labour court would have to exercise jurisdiction over that dispute in terms of section 157(1) of the Act. That section confers on the labour court ‘exclusive jurisdiction of all matters that elsewhere in terms of this Act or in terms of any other law are to be determined by the labour court’. The labour court has general supervisory powers and appellate jurisdiction in terms of section 24(7) of the Act in regard to some portions of an award dealing with an agency shop agreement. It follows that it may pronounce on the validity of the agreement.”

The respondent submitted, with reference to this decision, that the court was correct in considering whether the determination of the lawfulness or validity of an agency shop agreement is, in the language of s157(1), a matter that “elsewhere in terms of the [LRA] or in terms of any other law [is] to be determined by the labour court” but submitted that the court was wrong in assuming jurisdiction on the basis that it did, namely, that this court has “general supervisory powers”.

In this regard, it was submitted that, the mere fact that this court has supervisory powers or appellate jurisdiction over CCMA awards regarding the manner in which funds are being administered and utilised in terms of s24(7) of the LRA (read with s25(3)(c) and (d)), this does mean that it is clothed with jurisdiction to determine a dispute about the lawfulness or validity of the agency shop agreement itself. The labour court is in agreement with this submission.

If regard is had to the decision in Fredericks and Others v MEC for Education and Training, Eastern Cape and Others [2002] 2 BLLR 119 (CC) at paragraph [38], it is clear that the LRA does not confer a general jurisdiction on this court to deal with all disputes arising from employment.

Paragraph [38] reads as follows:

“[38] Section 157(1) therefore has the effect of depriving the high court of jurisdiction in matters that the labour court is required to decide except where the Labour Relations Act provides otherwise. Deciding which matters fall within the exclusive jurisdiction of the labour court requires an examination of the Labour Relations Act to see which matters fall “to be determined” by the labour court. It is quite clear that the overall scheme of the Labour Relations Act does not confer a general jurisdiction on the labour court to deal with all disputes arising from employment. As Nugent JA held in Fedlife Assurance Ltd:

‘…section 157(1) does not purport to confer exclusive jurisdiction upon the labour court generally in relation to matters concerning the relationship between employer and employees'” (see also Fedlife Assurance Ltd v Wolfaardt [2001] 12 BLLR 1301 (SCA) at paragraph 25).

The question, therefore, arises, namely, where can the jurisdiction of this court, to determine the applicants’ first claim regarding the validity and/or lawfulness of the agency shop agreement, be located?

Is this a matter that can be determined in terms of the LRA or is this a matter than may be determined by the labour court in terms of “any other law”?

The labour court is in agreement with the submission that it does not appear that there is a section in the LRA which expressly clothes the labour court with jurisdiction to determine the said dispute.

It was argued that a jurisdictional foundation may be found in the BCEA which, in the language of the s157(1) of the LRA, qualifies as “any other law”.

s34(1)(b) and s77(1) of the BCEA

It was argued, with reference to s34(1)(b) of the BCEA, which deals with deductions from remuneration of an employee, that the labour court has exclusive jurisdiction in terms of s77(1) of the BCEA in respect of all matters in terms of the BCEA.

Section 34(1)(b) of the BCEA stipulates that an employer may not make any deduction from an employee’s remuneration unless “the deduction is required or permitted in terms of a…collective agreement”.

An agency shop agreement is a collective agreement and, consequently, the labour court has jurisdiction.

The jurisdictional foundation of the labour court can, therefore, be found in s77(1) of the BCEA which provides that the labour court “has exclusive jurisdiction in respect of all matters in terms of the [BCEA]”.

Furthermore, in terms of s77(2) the labour court has jurisdiction to “review…any act or omission of any person in terms of [the BCEA] on any grounds that are permissible in law”.

It would appear that the labour court has jurisdiction in terms of s77(1) and/or s77(2) of the BCEA on the basis set out above.

If regard is had to the applicants’ amended statement of claim, it is clear that what the applicants are claiming is for an order declaring the agency shop agreement (permitting the deduction from the applicants’ members’ salaries of an agency fee) unlawful and invalid and for an order that all monies deducted unlawfully from the applicants’ members with interest to be reimbursed.

This being the case for the applicants, the labour court has jurisdiction in terms of s157(1) of the LRA “in terms of any other law [in this case the BCEA]”.

In the event, the first point in limine is dismissed.

Second point in limine

In respect of the second point in limine, NUM argued, with reference to case law, that it has been held that, where the legislature gives expression to the Bill of Rights, a party cannot rely on the Bill of Rights without challenging the legislation in question first.

Section 23(6) of the Bill of Rights (contained in the Constitution) provides that national legislation may recognise union security arrangements contained in collective agreements and that, to the extent that such legislation may limit a right in the Bill of Rights, the limitation must comply with s36(1) of the Constitution (see generally, Cheadle et al, South African Constitutional Law: The Bill of Rights (issue 11, 2011) at 18-17, paragraph 18.5.2).

As already pointed out, the applicants argue that the agency shop agreement is unconstitutional.

Various judgments indicate that an agreement under s25 of the LRA is not immune from constitutional scrutiny (see MEC for Education, Kwa-Zulu-Natal and Others v Pillay 2008 (1) SA 474 (CC) at paragraph 40 and City of Johannesburg and Others v Mazibuko and Others 2009 (3) SA 592 (SCA) and Investigating Directorate: Serious Economic Offences and Others v Hyundai Motor Distributors (Pty) Ltd and Others: In re Hyundai Motor Distributors (Pty) Ltd and Others v Smit NO and Others 2001 (1) SA 545 (CC)).

The labour court is in agreement with the submission that an agency shop agreement could not be challenged without challenging s25 of the LRA.

In this regard, the court was referred to the unreported decision in Greathead v Metcash Trading Ltd and Others (unreported judgment of the WLD Case No 97/24313) where the court pertinently held that, in order to succeed in declaring an agency shop agreement unconstitutional, s25 of the LRA must first be declared unconstitutional.

Moreover, where legislation is enacted to give effect to a constitutional right, it is not competent for a litigant to bypass legislation (such as the LRA) and rely directly on the Constitution in claiming that a collective agreement (such as for example an agency shop agreement) is unconstitutional.

In Mazibuko v City of Johannesburg and Others 2010 (4) SA 1 (CC) at paragraph [73] the court confirmed this point and pointed out that, were litigants permitted to ignore legislation and rely directly on a constitutional provision, it may lead to the creation of a dual system of constitutional jurisprudence: the one under the Constitution and the other under legislation.

Dr Brian van Zyl is a Director of labour law firm Van Zyl Rudd and Associates, www.vanzylrudd.co.za.