ConCourt rules on 2018 public service wage deal: no clear way forward to unscramble the proverbial “egg”
On 28 February 2022, the Constitutional Court handed down judgment in National Education Health and Allied Workers Union v Minister of Public Service and Administration and Others – a matter that dealt with the State’s refusal to honour a wage agreement it concluded with a number of trade unions for employees in the public service.
On 21 May 2018, the State (as employer) and a number of trade unions concluded Resolution 1 of 2018 in the Public Service Co-ordinating Bargaining Council – a collective agreement regulating wage increases for employees in the public service.
Of importance are the following three clauses of the Resolution:
- clause 3.1 regulated wage increases for 2018/2019;
- clause 3.2 regulated wage increases for 2019/2020; and
- clause 3.3 regulated wage increases for 2020/2021.
After the conclusion of the Resolution, South Africa’s already then deteriorating economy worsened. Notwithstanding this, the 2018/2019 and 2019/2020 increases provided for in clauses 3.1 and 3.2 of the Resolution were implemented. The 2020/2021 wage increase provided for in clause 3.3 of the Resolution was not implemented by the State because it was simply unable to afford it, including in light of the diversion of necessary funds to aid the State in combatting the COVID-19 pandemic.
Aggrieved by the State’s refusal to honour clause 3.3 of the Resolution, the trade unions launched applications in the Labour Court to compel the state to comply with clause 3.3 of the Resolution. The State, in a bizarre turn of events, launched a counter-application in which it sought to have clause 3.3 declared invalid because the Resolution had been concluded in contravention of regulations 78 and 79 of the Public Service Regulations, read together with certain provisions of the Constitution of the Republic of South Africa, 1996.
Regulations 78 and 79 require, amongst other things, that before entering into a collective agreement that has financial implications for the State, the cost of the issues dealt with in the collective agreement must be covered by the budget of the relevant department of State or on the basis of a written commitment from the Treasury to provide additional funds or, alternatively, from the budget of other departments or agencies with their written consent together with approval from National Treasury. The State argued that the requirements contained in regulations 78 and 79 were not met before the State concluded the Resolution.
The State and the trade unions requested the Labour Appeal Court (“LAC”) to hear the matter as a court of first instance in terms of section 175 of the Labour Relations Act, 1995 which request was granted. The LAC found that clause 3.3 of the Resolution was not enforceable because it violated the Constitution as well as regulation 78 and 79 of the Regulations. The trade unions approached the Constitutional Court and sought leave to appeal the judgment of the LAC.
There were a number of issues for determination before the Constitutional Court including:
- the jurisdiction of the Constitutional Court;
- the validity and enforceability of the Resolution, particularly clause 3.3;
- whether the State is entitled to renege on the Resolution, which it voluntarily entered into in its capacity as the employer;
- whether the matter was moot because the period of operation of the wage increase expired on 31 March 2021;
- whether the doctrine of estoppel applied in the present matter;
- whether the State’s delay in challenging the legality of the resolution was reasonable;
- whether specific performance is an appropriate remedy in this matter; and
- the determination of a just and equitable remedy.
The focal point of the Constitutional Court’s judgment is the findings it made in respect of the validity and enforceability of the Resolution. The Constitutional Court found that:
- compliance with Regulations 78 and 79 of the Regulations are conditions precedent to the executive authority’s exercise of the power to negotiate and conclude collective agreements on behalf of the State. The court found that these conditions are "jurisdictional facts" because the exercise of power depends on their existence. These jurisdictional facts simply did not exist when the executive authority concluded the Resolution on behalf of the State;
- if the executive authority acts outside of these regulations, she or he lacks the necessary authority and acts ultra vires;
- the State’s failure to comply with the conditions set out in regulations 78 and 79 renders the Resolution invalid and unlawful;
- the Resolution was void ab initio and has no legal force and ordering specific performance would be unjust and defeat the purpose of regulations 78 and 79; and
- if an invalid agreement is void, it gives rise to no legal obligations and the State cannot be ordered to comply nor can be expected to perform because there is nothing in the eyes of the law to be complied with nor enforced.
Notwithstanding its finding that the Resolution is void ab initio because it was invalid and unlawful, the Constitutional Court made a finding that clauses 3.1 and 3.2 by default still stand, as they were not challenged.
While the judgment of the Constitutional Court confirms the findings of the LAC in respect of the validity and enforceability of clause 3.3 of the Resolution, it leaves much to be desired in respect of the legal standing of the remaining terms of the Resolution and in particular, clauses 3.1 and 3.2. There can be no doubt that the findings of the Constitutional Court have far-reaching consequences (including those that are yet to arise) for the State, the trade unions and all employees in the public service.
In our respectful view, the Constitutional Court missed an opportunity to provide guidance to the parties on how to now unscramble the proverbial “egg” that the State has managed to scramble in respect of wages for the three-year period covered by the Resolution. For example, there is still much uncertainty about whether the trade unions may re-open negotiations in respect of wages for the three-year period.
Reviewed by Dion Masher, an Executive in ENSafrica’s Employment department.
Hassan van Wyk
Employment | Associate