05 May 2017

Arbitration Awards, CCMA Referrals and Prescription – What Does the Constitutional Court Say?

by Verlie Oosthuizen, Partner, Durban,
Practice Area(s): Employment |

The Constitutional Court recently handed down judgment in the case of Mogaila v Coca Cola Fortune (Pty) Ltd, finding that an arbitration award does not prescribe in terms of the Prescription Act No. 68 of 1969 (“Prescription Act”).  The Constitutional Court made this finding in line with its judgment in the Myathaza v Johannesburg Metropolitan Bus Services (SOC) Limited t/a Metrobus matter earlier this year where a divided court reached the same ) , with none of them holding the majority.  Essentially the conclusion was that the arbitration award in that case had not prescribed in terms of the Prescription Act and could be enforced.

In the Mogaila matter the Court found that if any of the judgments from the Myathaza were followed, then the award in the present case had not prescribed.  Either the Prescription Act did not apply to arbitration awards in terms of the Labour Relations Act, 1995 (“the LRA”) or, a referral to the Commission for Conciliation, Mediation and Arbitration (“the CCMA”) in an unfair dismissal claim interrupts prescription until the finalisation of review proceedings.  In the latter scenario this would be because the referral to the CCMA sought to enforce legal obligations by the employer, namely reinstatement, re-employment or compensation and thus could be defined as a “debt” in terms of the Prescription Act.

A brief background of the case and the facts are as follows:
On 26 November 2007, after a disciplinary enquiry had found her guilty of assault, an employee was dismissed. She referred an unfair dismissal dispute to the CCMA who found her dismissal substantively unfair. Coca Cola was ordered to reinstate her with effect from 2 June 2008, and she was awarded six months' back pay.

On 2 June 2008, the employee applied to have the arbitration award formally certified in terms of section 143(3) of the Labour Relations Act No. 66 of 1995 (“LRA”). Mogaila reported for duty only to be told that Coca Cola was taking the arbitration award on review. The review was subsequently dismissed by both the Labour Court and the Labour Appeal Court on 2 October 2013 some 5 years later.

After leave to appeal was refused by the court, the employee again attempted to report for duty on 4 November 2013. On this occasion she was told that the arbitration award constituted a "debt" for the purposes of the Prescription Act and since she had failed to enforce it within the three-year period (starting from 29 April 2008), the award had prescribed.

In an application for direct access to the Constitutional Court, the employee sought an order that:

1. The Prescription Act is not consistent with the LRA;
2. The order of reinstatement does not constitute a "debt" for the purposes of the Prescription Act.; and
3. Coca Cola had to reinstate her to her previous position.

By the time the employee’s application was heard, the Constitutional Court had already ruled in the Myathaza judgment.  In the Mogaila judgment, the Court can be seen to be attempting to reconcile the three judgments from the Myathaza case. Those judgments briefly held as follows:

• Judgment 1 held that the Prescription Act did not apply to the LRA (and therefore Mr Myathaza's arbitration award had not prescribed);
• Judgment 2 held that the Prescription Act was not inconsistent with the LRA, but rather complementary to it. It also held that commencing proceedings before the CCMA interrupted prescription in accordance with section 15(1) of the Prescription Act and that a claim for the enforcement of legal obligations should qualify as a 'debt' under the Prescription Act; and
• Judgment 3 supports the finding of Judgment 1 that the Prescription Act did not apply to the LRA and that an arbitration award did not constitute a “debt” in terms of the LRA.

The Constitutional Court held that, on either approach (Judgment 1 or 2), the employee was entitled to an order declaring that the arbitration award ordering her reinstatement had not prescribed.

As a result of there being no majority judgment in the Myathaza case, there is no binding ratio for the decision, however in its award in the Mogaila case, the Constitutional Court found that on any of the approaches used in Myathaza the employee ought to be successful.  They found that she was entitled to an order that the arbitration award had not prescribed and she was entitled to secure its certification and enforcement in terms of the LRA.

Employers are once again warned of the dangers of prolonging litigation in labour forums in the hope that unfair dismissal disputes will be forgotten or abandoned or indeed that they will prescribe.  Claims for backpay in scenarios such as the one described above can amount to millions and the courts are unlikely to be sympathetic.