As discussed in our previous articles this month, the extension of a collective agreement to non-parties in a specific industry is not without its challenges and possible downsides.  Extension in terms of section 32(3)(e) of the Labour Relations Act (LRA) determines, among other, that as part of the legal requirements to successfully extend a collective agreement to non-parties, said agreement needs to provide for a reasonable and fair exemption process which is to be heard as soon as possible and decided by an independent body, as well as an appeal process.  This article will unpack the challenges of exemptions as experienced by employers and their representatives.  The following article herein will discuss the possible remedies available when an employer received an unfavourable outcome of such an application for exemption.

As much as the extension of a collective agreement hinges on sufficient representation of parties thereto and/or majoritarianism, there will naturally be those minority businesses, especially SMMEs (Which CEO represents), that cannot necessarily comply/afford all the terms and conditions contained in such an agreement.  An example hereof may be a particular council’s main agreement that regulates minimum wages, working conditions and contributions.  Therefore, it is important that an exemptions clause may be relied upon by such a business that cannot observe said collective agreement as the first remedy for businesses.

An application for an exemption is, in essence, an application to stay/waive either partial- or complete compliance of certain a provision(s) of the collective agreement; in some instances, such an application may also include a delay of a certain period in compliance that may be allowed by the exemptions board or appeals board.

The exemption clause is part and parcel of the collective agreement where an applicant is seeking some form of exemption from the status quo of the particular agreement.  In most bargaining councils, said clause can be found in each of the council’s collective agreements, however, some councils have their own Exemptions Collective Agreements that apply to all collective agreements/policies that the council may conclude (i.e. Bargaining Council for the Civil Engineering Industry – BCCEI and National Bargaining Council for Private Security – NBCPSS).  Such clauses set out the procedure, timeframe and what supporting documentation need to be included in the application.  This is where the challenges start for businesses as a full schedule of documents that are material / relevant to the application need to be prepared as part of the application.  Such documentation may include, but not be limited to:

  1. Consultation Minutes with the workforce/trade union regarding the exemption application;
  2. proof of audited financial statements, management accounts, trial balances etc.;
  3. full company details of directors, shareholders, investors, the number of employees affected, company property such as vehicles/plant/tools – which need to be set out in affidavit(s) from director(s) in the exemption;
  4. the applicant must address possible unfair competition, possible labour unrest, increased employment, possible exploitation, sound conditions of employment, benefits, health and safety, possible infringement on basic rights of the workforce, financial stability, impact on productivity, future relationship with the workforce/trade union, and job sustainability/moratorium on retrenchments if the exemption is granted, which is all to be addressed by the Applicant business;
  5. information on the applicant’s history of compliance and previous exemption applications and/or number of exemptions granted in the past to the applicant;
  6. business strategy document/outline as to how the applicant will grow its business in an attempt to avoid exemption applications in future; and
  7. whether or not the Applicant business is under business rescue, prospects of liquidation and whether the employer has considered/implemented alternate measures such as training lay-offs and training lay-off scheme(s), short time and even retrenchments; and
  8. What type of exemption is required by the applicant business.

Most applications for exemption are done on paper, however, some councils may require or allow an applicant business to appear in front of it, explain the application and to be scrutinised under questioning on the application.  Unfortunately for Applicants, such an application will usually be unsuccessful if but one of the above requirements are lacking in the exemption application, despite the applicant business desperately needing the exemption.  It is clear from the above that as much as big enterprise businesses extend collective agreements upon all businesses, big or small, in a particular industry, the exemptions clause requirements are usually above the capacity and grasp of most SMME employers.  An example hereof is that most SMMEs do not even get audited, which inherently may make them unable to submit a full application in terms of the exemptions clauses/policy.

Generally speaking, a particular ‘council’ would make the decision on such an application.  This function is, however, delegated in terms of a council’s constitution to either an independent exemptions board/appeals board (in most instances) or to a specific regional council (which consists of parties to the council) where the business conducts business from in that jurisdiction.  The exemptions boards are usually consisting of commissioners, financially knowledgeable persons, and council staff.

The following principles need to be kept in mind in respect of exemptions:

  1. in terms of the LRA, exemptions are in principle intended for non-parties.  There are, however exceptions to the rule.
  2. a party can only apply for an exemption from certain terms and conditions of a collective agreement in the event that (1) the collective agreement is indeed extended to non-parties by the Minister of Employment and Labour in terms of section 32(2) of the LRA; whether the party is a signatory to the collective agreement of not; or (2) where the party is indeed a signatory to the collective agreement, in the event that the collective agreement is not extended to non-parties and the exemption policy allows for parties to apply thereto.

In conclusion, exemption applications are tedious processes with a lot of requirements that make it difficult or even impossible to comply with, which may allow for some relaxation of an industry requirement/standard.  It is, unfortunately many times businesses’ experiences that the exemption boards regard such applications as an indulgence if granted, rather than a right.  However, it actually becomes a right to obtain an exemption application in the event that an applicant business submits a complete application with all the supporting documentation.  The following article will discuss what employers may expect in the event of an unfavourable exemption application and the remedies available.

Article by: Johann Preiss
National Collective Bargaining Co-ordinator – Pretoria