A recent study revealed that the coronavirus pandemic regulations have had a significant economic impact on small enterprises and the informal sector in South Africa, with over 3 million jobs affected. The study, titled “The Impact of COVID-19 on Micro and Informal Businesses in South Africa,” noted that the COVID-19 pandemic and lockdowns were unprecedented and termed as more devastating than the financial catastrophe of a decade ago in the country.
Many businesses may have had to make job-saving and business saving decisions in response to these challenges. An example may be the decision to freeze wages for the next financial year, or where bonuses are a term of the employment relationship, employers may have elected to stop these payments temporarily. Employees or registered trade unions acting on their behalf, who feel aggrieved by these decisions, may attempt to enter into negotiations with employers to attempt to resolve the dispute. When these disputes cannot be resolved, an employer can be faced with a mutual interest dispute where the remedy available to the employees is to engage in protected strike action.
Employers who are certified as essential services may feel a sense of relief as their employees do not have the right to strike legally. However, S74(4) of the LRA makes provision for these types of disputes to be arbitrated at the CCMA and are referred to as “interest arbitrations”. The arbitrator appointed to an S74(4) interest arbitration is then tasked with making a finding which will resolve the dispute fairly and reasonably.
There are two principal approaches taken by an arbitrator when conducting an interest arbitration, otherwise referred to as mutual interest arbitrations.
The first principle is the Replication Arbitration Principle. The replication principle is well established in interest arbitrations. In terms of this principle, it is the task of the arbitrator appointed, taking into account information or data provided by the bargaining parties, to replicate or simulate in his or her award, as closely as possible, the agreement that the parties would have concluded had the bargaining continued to conclusions provided their negotiations were reasonable and in good faith. The arbitrator must then make an award in the terms that would have been agreed upon had the bargaining process been successful in a free collective bargaining environment.
The second principle that can be followed is the Final Offer Arbitration Principle. This principle has developed more recently in the interest arbitrations sphere. In this approach, the arbitrator is required to consider which of the party’s final offer is the more reasonable. If both parties fail to convince the arbitrator to accept their positions, the arbitrator may consider possible intermediate positions.
The approach to be taken by the arbitrator depends on a case-by-case basis and the nature of the mutual interest dispute. The approach to be taken by the arbitrator will also depend on how far into the bargaining process the parties have progressed before negotiations have broken down and each party’s reasoning for their stance.
Once an approach has been identified by the arbitrator appointed, there is a non-exhaustive list of factors the arbitrator may consider in making his or her decision. These include but are not limited to the principles of fairness, affordability, the ability of the employer to pay, cost of living, previous practices in the company and applicable industry, expectations, and job security.
It is important to note that the final award issued by the arbitrator in interest arbitrations is binding on the parties. Therefore, employers and employees or respective trade unions are encouraged to attempt to resolve disputes of mutual interest internally or risk a third party making the final decision to which they are bound.
Article by: Gordon Flanagan
Dispute Resolution Official – Cape Town