Demarcation disputes play an important role in South African Labour Law, especially in the context of sectoral determinations and the classification of businesses within specific industries. These disputes arise when an employer believes their business should not be classified under a particular sector or industry defined by the Labour Relations Act (LRA) or Bargaining Council Agreements.
For instance, a business operating within the civil engineering field might dispute whether it falls under the Construction or Civil Engineering sector or should be classified entirely under a different sector. If a business is incorrectly classified, it may be subject to regulations, wage rates, and conditions that wouldn’t typically apply to it.
Section 62 of the LRA empowers the CCMA and the Labour Court to resolve disputes regarding the classification of employers within a specific sector.
When an employer disputes the classification of their business, the first step is to attempt resolution through negotiation or consultation with the relevant Bargaining Council agent or trade union. If these efforts are unsuccessful, the employer may refer the dispute to the CCMA or, in more complex cases, to the Labour Court for a final ruling.
In Coin Security (Pty) Limited v Commission for Conciliation Mediation and Arbitration and Others (JR2130/02) [2005] ZALC 70; (2005) 26 ILJ 849 (LC); [2005] 7 BLLR 672 (LC) (26 April 2005), the Labour Court stated that a demarcation dispute involves more than simply comparing the words of the defined scope of a Bargaining Council Main Agreement.
The Court considered several key factors when deciding a demarcation dispute:
- Nature of the business: The character of an industry is determined by the nature of the business in which employees and the employer are associated for a common purpose, not the specific occupation of the employees. Once the industry is defined, all employees engaged in the operations are considered part of it, regardless of their particular roles.
- Multiple Industries: An employer may simultaneously operate in multiple industries. For instance, a business may have operations in both the construction and civil engineering sectors. The key question is whether the activities are substantial enough to justify classification in more than one industry.
- Ancillary Operations: An ancillary business provides services that support a business’s main operations. Whether an operation is ancillary depends on the degree to which it supports the main business and whether it serves the same customer base.
The question of whether an employer operates in a particular industry is determined by the facts and circumstances of each case, including all relevant evidence. The exact duties of each employee are less important than the overall nature of the employer’s business.
The Labour Court further clarified that the industry classification depends on the broader nature of the employer’s business and its common purpose with employees, not just the specific tasks performed by individual workers.
Demarcation disputes are a significant aspect of South African Labour Law, particularly when an employer disputes their inclusion in a particular sector. Employers challenging their industry classification must carefully assess the nature of their business activities against the legal criteria. A successful challenge may lead to changes in their obligations under industry-specific agreements.
These disputes underscore the importance of clear and consistent industry classifications within South Africa’s dynamic industrial landscape. As industries continue to evolve, resolving demarcation disputes will remain essential to ensuring fairness in the application of Labour Laws.
Article By Claire Turner
Provincial Manager at Consolidated Employers Organisation (CEO SA)