Section 143(1) of the Labour Relations Act, 1995 ("LRA") stipulates that an arbitration award issued by a commissioner appointed by the Commission for Conciliation, Mediation and Arbitration ("CCMA") is final and binding and may be enforced as if it was an order of the Labour Court. Typically, such an arbitration award will be issued in terms of section 138(7) as the outcome of arbitration proceedings. There is, however, another manner in which arbitration awards can come into binding force. Section 142A envisages that the parties to a dispute referred to the CCMA may settle the dispute and that such a settlement agreement may, by agreement between the parties, be made an arbitration award. Such an award is also final and binding.
There are also two possible ways in which a final and binding arbitration award can be challenged. The first is that the award may be reviewed and set aside by the Labour Court. The second is that an award can be varied or rescinded.
Section 144 of the LRA provides that a commissioner may, on their own accord, or on the application of any affected party, vary or rescind an arbitration award:
- erroneously sought or erroneously made in the absence of an affected party;
- in which there is an ambiguity or an obvious error or omission;
- granted as a result of a common mistake between the parties; and
- made in the absence of any party, on good cause shown.
These provisions are also applicable to an arbitration award issued by an arbitrator acting under the auspices of a bargaining council.
The recent Labour Court decision in Department of Education v Shilowa deals with the interesting question regarding whether an arbitration award that flows from a settlement agreement, as opposed to one that flows from an arbitration process, is capable of being rescinded in terms of section 144 of the LRA.
Mr Shilowa was employed by the Department of Education. On 17 August 2020, the Department published an advertisement for a headmaster position. Mr Shilowa applied and was invited to attend an interview. On Mr Shilowa's version, he was recommended for appointment. However, the Department appointed the runner up, Mr Mahlaule, to the position. Aggrieved by the decision, Mr Shilowa referred an unfair labour practice dispute to the Education Labour Relations Council ("ELRC"). Conciliation failed to resolve the dispute and the matter was referred to arbitration.
Prior to the arbitration process commencing, the parties entered into settlement discussions, which culminated in an agreement resolving the unfair labour practice dispute. By agreement between the parties, the settlement agreement was then made an arbitration award by the commissioner in terms of section 142A.
The Department subsequently sought to rescind the arbitration award. The commissioner, in the rescission ruling, found that the ELRC did not have jurisdiction to preside over the matter and therefore could not rescind the award. Aggrieved by the ruling, the Department brought an application to review and set aside the rescission ruling.
The Labour Court's decision
The Labour Court distinguished between the circumstances under which an arbitration award comes into force in terms of section 138(7) and section 142A respectively. Insofar as the former is concerned, the Labour Court held that to arbitrate a dispute means that, after hearing the arguments and opinions of both parties, a decision is made, ie, being an arbitration award. Insofar as the latter is concerned, the arbitration award is the product of an agreement between the parties. The commissioner, by exercising his discretion to make the settlement agreement an arbitration award, gives the agreement "the colour" of an arbitration award. In terms of section 142A, the request made to the commissioner is not to arbitrate the dispute, but to make an agreement reached an arbitration award. The Labour Court therefore found that section 144 did not apply and that the arbitration award could not be rescinded.
The Labour Court summarised the basis of its decision as follows:
"Without a shadow of doubt, the Commissioner was correct that the ELRC had no jurisdiction. There was no jurisdiction because the arbitration award sought to be rescinded is in itself, effectively is a consensual product. Parties settled a dispute which they had the right to refer for arbitration and or adjudication; parties, in agreement, asked that the settlement agreement they reached should be given another colour, which is that of an arbitration award. Put it differently, as allowed by the LRA, all what the commissioner did was to, in the exercise of his discretion, paint the settlement agreement and adorned it with arbitration award colours. This arbitration award is not same as the one contemplated in section 138 (7) of the LRA."
As an additional consideration, the Labour Court noted that the arbitration award concerned involved an exercise of the commissioner's discretion. It stated that, as a general rule, a court of review is loath to intervene where an exercise of discretion is involved unless capriciousness, mala fides and application of wrong principles are shown to exist.
The key takeaway from the Shilowa decision is that the Labour Court distinguished the "colour" of an arbitration award arising from a settlement agreement in terms of section 142A from that of an arbitration award issued in terms of section 138(7), flowing from the conclusion of actual arbitration proceedings. As a result of this distinction, the Labour Court's finding is that a settlement agreement that has been made an arbitration award cannot be rescinded. The position from this decision appears to be that such an arbitration award would have to be reviewed in terms of section 145 of the LRA.
However, it should be pointed out that in an earlier decision of the Labour Court in Department of Health v Jones and Another, it was suggested that there are at least two ways in which a settlement agreement that has been made an arbitration award can be set aside, being (1) the rescission of the award in terms of section 144; and (2) the review and setting aside of the arbitration award in terms of section 145. The Jones decision was not referred to by the Labour Court in the Shilowa decision and it is submitted that the approach adopted in the Jones decision may still be reconsidered and applied in later decisions.
Reviewed by Peter le Roux, an Executive Consultant in ENSafrica's Employment practice.
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