On 15 December 2016, the South African Constitutional Court handed down a landmark judgment in Myathaza v Johannesburg Metropolitan Bus Services (SOC) Limited t/a Metrobus and Others, in which it held that arbitration awards issued in terms of the Labour Relations Act, 1995 (the “LRA”) do not prescribe. This may have significant consequences for employers who have previously succeeded in the Labour Court or the Labour Appeal Court (the “LAC”) in resisting the enforcement of arbitration awards on the basis that those awards had prescribed. Below is a brief discussion on the background facts of the case and the impact that the Constitutional Court’s decision will have on the enforcement of arbitration awards in the future, especially those awards that employers have avoided complying with by relying on prescription.

Brief background

This matter concerned the applicability (or the extent of applicability) of the Prescription Act, 1969 (the “Prescription Act”) to arbitration awards made in terms of the LRA prior to the Labour Relations Amendment Act, 2014. This amendment inserted section 145(9) into the LRA, which provides that an application to set aside an arbitration award “interrupts the running of prescription”.

In November 2015, the LAC handed down a judgment in three matters involving appeals against decisions of the Labour Court, namely Myathaza v Johannesburg Metropolitan Bus Service (SOC) Limited t/a Metrobus; Mazibuko v Concor Plant; and Cellucity (Pty) Limited v Communication Workers Union obo Peters. In all three appeals, at issue was the applicability of the Prescription Act to arbitration awards made under the LRA. All of the appeals involved arbitration awards issued prior to 1 January 2015 and had to be decided on the wording of the LRA as it stood before the amendment of section 145 and, in particular, before the enactment insertion of section 145(9), which only applies to arbitration awards issued after 1 January 2015.

The three appeals had the following issues for determination:

  • whether the Prescription Act applies to arbitration awards made in terms of the LRA;
  • the period of prescription applicable to such arbitration awards; and
  • whether an application brought to review and set aside an arbitration award interrupts the running of prescription or whether such an application otherwise constitutes an impediment to the running of prescription.

The LAC held that in order to determine the applicability issue, it was necessary to consider whether an arbitration award is a “debt” as contemplated in section 16 of the Prescription Act and whether the LRA specified a period within which the arbitration award (ie, if it is a debt) is to be satisfied. The LAC held that any arbitration award that creates an obligation to pay or render to another, or to do something, or to refrain from doing something, meets the definitional criteria of a “debt” as contemplated in the Prescription Act. Although an arbitration award under the LRA is generally not a “judgment debt” under the Prescription Act, it comfortably satisfies the definitional criteria of a mere “debt” under that Act. Accordingly, the LAC held that a three-year prescriptive period applies to such arbitration awards. As a result of this judgment and the previous judgments of the Labour Court, employers who had adverse arbitration awards against them were able to avoid complying with those awards if three years had lapsed.

Constitutional Court judgment

The Constitutional Court, on appeal, delivered three separate judgments in the Myathaza matter. Each supported the same ultimate finding that prescription did not run in respect of the arbitration awards in terms of the LRA, but for different reasons. The court ordered that the arbitration award in question be made an order of court.

In the first judgment, by Justice Jafta, the court found that the LRA tribunals are specialist tribunals that operate separately from ordinary civil courts and even reviews of arbitration awards take place in a specialised court created in terms of the LRA. This could not have been contemplated by the Prescription Act, which was enacted in 1969. This judgment further held that the provisions of the LRA are inconsistent with those of the Prescription Act and the objectives of the two Acts differ.

In the second judgment, Justice Froneman found that reinstatement is in fact a “debt” as envisaged in the Prescription Act. However, the Prescription Act must be reinterpreted to give proper constitutional effect to access to justice. The best way to do this is to apply the principle that prescription does not run until court proceedings are finalised. The court held that the amendment that took effect on 1 January 2015 affirms this position.

In the third judgment, Justice Zondo, for additional reasons, supported the first judgment and held that the LRA dispute resolution system is a specialised self-standing system, with its own prescribed periods that are not subject to the Prescription Act.

Conclusion

The effect of this judgment is that employers who have adverse awards against them cannot avoid complying with the awards by relying on prescription. More significantly, there is a substantial number of employers who have previously succeeded, either in the Labour Courts or the LAC, by relying on the prescription of LRA arbitration awards. These employers may find former employees and trade unions applying to have LRA arbitration awards made orders of court or for the rescission of judgments in which the awards were held to have prescribed. In such proceedings, former employees and trade unions may argue that the judgments were erroneously given. It is important for such employers to seek appropriate advice as soon as possible, and before employees and trade unions take any steps following this judgment.