Restructuring: majoritarianism re-examined

24th August 2017

Restructuring: majoritarianism re-examined

In a unanimous decision in NUMSA v South African Airways SOC Limited, the Labour Appeal Court found that whilst it might at first seem objectionable for individuals (and their unions) to be deprived of the right to challenge their retrenchment, the legislature had endorsed the principle of majoritarianism that allowed all collective agreements (including restructuring settlement agreements) to be extended to minority, non-parties, even if that means depriving them of statutory rights that they might otherwise have.

An employer can conclude a restructuring settlement agreement with a trade union or trade unions representing the majority of its employees, and that is then binding upon the workforce as a whole. Such an agreement would then bar all affected employees from contesting the fairness of their dismissals.

Due to a R 2.6 billion loss in its 2013 / 2014 financial year, SAA embarked upon a large scale restructuring exercise in terms of section 189A of the Labour Relations Act 66 of 1995. Following CCMA facilitated consultations involving all seven trade unions, SAA concluded a settlement agreement with the three largest trade unions representing about 80% of the workforce. The agreement settled all aspects of the restructuring exercise including which employees were to be retrenched and the severance pay to be paid to them.  The agreement also provided that it would be extended to non-parties in accordance with section 23(1)(d) of the LRA.

NUMSA (a minority, non-party trade union) sought to challenge the agreement on various grounds, principally whether an agreement settling a restructuring exercise could be extended to non-parties and whether this extinguished any claim that it might have against the employer for unfair retrenchment.

The judgment will come as some solace to employers operating in a multi-union environment.  If the trade unions representing the majority of employees can be persuaded to settle a restructuring exercise then the employer may rest assured that the settlement will cover all other employees, and prevent smaller trade unions from exercising a veto over the process in respect of their members.

Employers will however need to be mindful that a restructuring exercise that unfairly targets only members of minority trade unions (in order to obtain the blessing of the majority) will probably be found to be discriminatory by a Court.

Submitted by Jason Whyte, Director, Norton Rose Fulbright