Private Arbitration Agreements versus Bargaining Councils

Private Arbitration Agreements versus Bargaining Councils              RexLex™

 The inclusion of a term providing for private arbitration in employment contracts to resolve labour disputes arising from the contracts is not uncommon practice. In fact South African law encourages it.  In general, the high courts and the labour courts have tended to stay proceedings brought within their jurisdiction if either of the parties to the case raises the issue of a pre-existing private arbitration clause in an employment agreement.  Usually, as a consequence thereof, the case is then dealt with in terms of the private arbitration agreement clause of the employment contract. 

However, the above methodology, may truly have changed in the case of unfair dismissals following the court’s finding in the case of Carlbank Mining Contracts (Pty) Ltd vs National Bargaining Council for the Road Freight Industry & Others (2010) 11 BLLR 1142 in which it was ruled that an employee was bound by a private arbitration term if the employer undertakes to pay the arbitration costs and if the appointed arbitrator is competent and reputable.  It also ruled that such agreement did not breach the bargaining council’s main agreement.

Significantly, the Labour Appeal Court did not agree with the finding of the Labour Court

The legal effect of the Labour Appeal Court’s judgment in case of National Bargaining Council for the Road Freight Industry vs Carlbank Mining Contracts (Pty) Ltd & Another is that a private arbitration clause that did not make provision for conciliation prior to arbitration proceedings in terms of the clause and which contains an undertaking on the employer’s part to pay for the costs of the arbitration is unenforceable.

The private arbitration clause is unenforceable because it reduces the rights of an employee considerably, by being less beneficial to the employee and constitutes a waiver of the employee’s statutory rights, in casu being rights under a collective bargaining agreement.

The position would be no different if the proceedings were before the CCMA and in this regard there are also the provisions of section 147(6) of the Labour Relations Act. Section 147(6) gives a CCMA commissioner a discretion to hear a dispute in terms of that section even if there is a private arbitration clause in the employment contract. 

The significance of the Labour Appeal Court case supra, is that private arbitration clauses in employment contracts will not be enforceable per se at the instance of an employer unless they are no less favourable than the rights which the employee receives the benefit of in terms of the Labour Relations Act 66 of 1995, as amended.  This equates to the following, namely, that insofar as the merits of the case supra was concerned, there, at a minimum, must be inclusion in the private arbitration clause the provision for conciliation of the dispute before arbitration proceedings and also that the employer must bear all the extra costs for the private arbitration proceedings.

 RexLex™ Mediations & Arbitrations

18 May 2021

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