Comments on SCA ruling on Divisional Conditions of Service

City Manager, Sibusiso Sithole, released the following statement to clarify eThekwini Municipality’s position in light of the Supreme Court of Appeal (SCA) ruling on the Collective Agreement on Divisional Conditions of Service of 17 September 2013, as well as highlight the process to be followed in dealing with the implications of the ruling.

Background and Latest Developments

In accordance with the requirements of the Local Government Transitional Act (No 201 of 1993), some 46 local authorities in the Durban Metropolitan area were restructured into a Metropolitan Council and 6 Local Councils involving approximately 16000 employees. This was followed by the final phase of local government restructuring and in terms of the Municipal Structures Act (No 117 of 1998), the Metropolitan Council and Local Councils were amalgamated into the eThekwini Municipality.

Throughout this restructuring process employees from the former 46 local authorities retained their salary structures and conditions of service until rationalization had been finalized. This resulted in employees in the eThekwini Municipality being paid on 5 different pay structures and some 31 different conditions of service.

Following the adoption of core national conditions of service by the South African Local Government Bargaining Council (SALGBC) in 2004, proposals were prepared for a common set of divisional conditions of service for all employees of the Municipality, which would cover conditions that were not included in the national conditions of service.

Following lengthy negotiations amongst the parties, a Facilitator was appointed and at the conclusion of final negotiations in the Drakensburg the Facilitator’s proposal was taken by the parties for consideration and mandating. On the 29 March 2007 the eThekwini Municipality and the two representative Trade Unions (SAMWU and IMATU) signed a Collective Agreement on Divisional Conditions of Service (DCOS), effective from 01 April 2007. These conditions of service included the adjustment of the salaries of approximately 5800 employees from the lower pay structures to the highest pay structure.

Following the signing of this agreement, the Trade Unions expressed some dissatisfaction with certain of the clauses in the agreement. Following further negotiations, amendments were made to certain of these conditions of service, i.e. the overtime regulations were improved and the IOD leave provisions were also improved.

Notwithstanding these amendments the unions advised that they wanted to withdraw from the collective agreement and lodged separate applications to the Labour Court, which were subsequently joined. On 27 September 2007 the Labour Court found that the parties had violated the Levels of Bargaining Collective Agreement by including items in the agreement that were reserved for national negotiation, e.g. medical aid and pension fund provisions. The municipality argued that these benefits were not negotiated at all, but had been included in the final set of conditions for purposes of completeness. Notwithstanding these arguments, the Labour Court handed down judgment declaring the agreement “null and void and of (no) legal effect”. Based on legal advice, the employer applied for and was granted, leave to appeal. On 03 March 2011 the Labour Appeal Court upheld the decision of the Labour Court.

The Municipality, following legal advice from Senior Counsel, lodged an application to the Supreme Court of Appeal (SCA) to appeal the judgment. On 08 June 2011 this right to appeal was granted.

At a meeting of the Bargaining Council Executive Committee on 28 July 2011 it was agreed by the parties to apply to the SCA for the appeal to be suspended pending further negotiations to establish new divisional conditions, as the current collective agreement was due to expire on 31 March 2012.

The SCA subsequently granted a suspension of this matter to 07 June 2012 to allow the parties time to resolve this matter. As no progress had been made by 07 June 2012, the parties agreed to submit a further application to the SCA which granted a further and final extension to 07 December 2012 for the filing of the record. Following a number of meetings of the Bargaining Committee on this matter, no agreement was reached by 07 December 2012 and the matter consequently proceeded to the SCA.

On 17 September 2013 the parties appeared before the SCA in Bloemfontein. Despite both parties arguing that the dispute around the collective agreement was not academic and needed to be heard, the SCA concluded that, as the agreement had expired on 31/3/12, it was indeed academic and dismissed the appeal without hearing the merits of the case. The SCA’s view was that as the collective agreement had expired and no claims had yet been lodged by union members, any decision made by the Court in relation to the merits would have no practical effect.

The effect of the decision of the SCA is that the original decision of the Labour Court now stands, ie, that the DCOS are null and void and of no legal effect.

It is important to note that the eThekwini Municipality resolved on 25 April 2012, that the DCOS as contained in the collective agreement, be retained by the Municipality from 01 April 2012 until such time as a new collective agreement is concluded in this regard.

Key Implications of SCA Decision

The key implications of the SCA decision is that employees or the unions on behalf of their members, can now lodge claims in respect of any conditions of service that were more favourable prior to 01 April 2007. Conversely, the Municipality can also claim back monies from employees who have benefitted from any conditions of service that were less favourable prior to 01 April 2007.

It is critical to record that the administrative process of quantifying the extent of the claims for thousands of employees backdated for over 6 years, will be extremely complex and time consuming.

Another key implication is that as the DCOS Collective Agreement is now of no legal effect, it is critical that the Municipality and the unions commit to negotiating new conditions of service for the future.

It is also critical that the Municipality continues to have conditions of service in place in order to administer and manage its relationship with its employees, until such time as new conditions of service can be negotiated with the trade unions.

The City would like to dispel the myth that this ruling will bankrupt the Municipality as some of the media houses have concluded. Based on the City’s own initial assessment, there is bound to be more implications on individual employees than the City itself. However, we await the final quantification of the implications before we can pronounce further on this matter.

The Way Forward

A Technical Task Team consisting of representatives of management, IMATU and SAMWU will be established to:

• Identify and quantify all claims to be lodged by employees or their trade unions in respect of conditions of service that were more favourable to employees prior to the introduction of the Collective Agreement on Divisional Conditions Of Service with effect from 01 April 2007, (e.g. the “omnibus” allowance, long service awards and group life assurance benefits), in terms of the respective previous conditions of service.
• Calculate and quantify all monies due by employees in respect of conditions of service that were more favourable to employees after the introduction of the Collective Agreement on Divisional Conditions Of Service with effect from 01 April 2007, (e.g. pay parity, increased pay scales for new appointees and job grading increases), in terms of the respective previous conditions of service.
• Audit all proposed payments and deductions for conditions of service in terms of 4.1 and 4.2 above, prior to any payment being effected.
• Agree on the Conditions of Service which shall apply in the interim, until such time as new Divisional Conditions of Service are negotiated with the trade unions, or until such time as these conditions are discontinued in terms of any other lawful process.
• Urgently re-commence with negotiations between the Municipality and the trade unions on new Divisional Conditions of Service.

Conclusion

We appreciate that with the benefit of hindsight, the City could have treated this matter differently when the initial dispute was raised in 2007. This is now water under the bridge, our task is to manage the process constructively and find a solution to the matter.

We will communicate with all stakeholders including all our employees on the processes that we are embarking upon to address the implications of the court’s judgement.

We appeal to all parties to treat this matter with great care and circumspection to avoid causing an unnecessary instability within the organization, nor to raise people’s expectations prematurely. We also appeal to the parties to avoid speculating about financial implications on the Municipality and individual employees until all accounts have been raised and validated by Internal Audit.