Article written by Elani Vogel, Candidate Attorney, checked by Dave Loxton, Partner at Schindlers Attorneys
04 February 2022
Riaan Gerber (“appellant”) had referred three disputes to the court a quo (Labour Court) comprising of several claims, including a dispute in terms of section 187(1) of the Labour Relations Act 66 of 1995 (“LRA”) on the basis that his dismissal by STANLIB Asset Management (Pty) Ltd (“respondent”) was automatically unfair alternatively substantively and/or procedurally unfair.
The issue that came for adjudication, amongst others, before the court a quo, was whether that court had the requisite jurisdiction to entertain the appellant’s claims, when he is contractually obliged to refer the disputes to compulsory private arbitration.
The point in limine in the court a quo concerned the question of jurisdiction in that it was contended that the court a quo was non-suited to entertain the disputes which ought to have been referred to compulsory private arbitration as required by the terms and conditions of employment contained in the employment contract of the appellant. The said terms and conditions of employment were averred to have been incorporated by reference in the letter of employment which the respondent issued to and was accepted by the appellant by attaching his signature thereto. The court a quo upheld the respondent’s point in limine.
The core issue for adjudication in the Labour Appeal Court (“LAC”) was whether the court a quo erred in making a finding that there is a valid enforceable private arbitration agreement between the parties and, if so, whether the court a quo judicially exercised its discretion to stay the proceedings and to refer same to compulsory private arbitration.
In deciding whether there was a validly enforceable compulsory private arbitration agreement between the parties, the court a quo had found that the letter of appointment which incorporated the terms of the Disciplinary Code and Grievance Procedures (“the Code”) by reference, eventually integrated the compulsory private arbitration clause into the appellant’s terms and conditions of employment. As such, the court a quo concluded that the appellant was required to refer any dispute concerning the fairness of his dismissal to arbitration in terms of the compulsory private arbitration process established by his contract.
In casu, the appellant argued that the compulsory private arbitration clause was not encompassed in the Code, and, as a result, it could not have been integrated into the terms and conditions of the appellant’s employment contract. The appellant, however, failed to take into account that he was handed a summary of the respondent’s conditions of employment which referred to the respondent’s Employee Handbook, which in turn contains the compulsory private arbitration prescript. Accordingly, the LAC held that there was a connection between the provisions of the compulsory private arbitration clause that is found in the respondent’s Employee Handbook and the Code referred to in the letter of employment. Consequently, the court a quo was correct to have concluded in its judgment that the appellant’s letter of employment describes the Employee Handbook in specific and particular terms for it to be validly incorporated by reference into the employment contract.
The LAC further held that the appellant’s argument that the respondent’s Code should include only what regulates discipline in the workplace and cannot include private arbitration because private arbitration regulates the relationship post-employment, is fundamentally flawed. The disciplinary process and the arbitration process are all part of the same process. Although the arbitration process happens after dismissal, both processes are included in the Code, because the arbitration clause serves to inform the employees what process to follow after dismissal.
Having made a finding that the court a quo correctly decided the issue of jurisdiction, the LAC had to consider the court a quo’s decision to stay the proceedings and to refer the disputes to compulsory private arbitration. In terms of section 158(2) of the LRA, the Labour Court is enjoined, where it becomes apparent that the dispute ought to have been referred to arbitration, to stay the proceedings and refer the dispute to arbitration. If it is expedient to do so, it will continue with the proceedings in which case the court may make any order that a commissioner or arbitrator would have been entitled to make. This is a discretion in the strict sense.
Consequently, for the appellant to succeed in his appeal, he first had to show that there was a basis for the LAC to interfere with the discretion exercised by the court a quo to stay the proceedings, that is, that the discretion was not exercised judicially. Secondly, he had to then establish that there were exceptional circumstances present for the court not to enforce the arbitration clause.
By virtue of the use of the word ‘may’ in the provisions of section 158(2) of the LRA, the Labour Court does not have to automatically assume jurisdiction over the dispute. The subsection gives the court the discretion to act under subsection (a) or (b), that is, it may stay the proceedings and refer the dispute to arbitration or if it is expedient, continue with the proceedings. This is a two-stage enquiry. The court must first determine whether the proceedings should be stayed, and to refer the dispute to arbitration if it is so, or it must determine whether it is expedient to continue with the proceedings. More importantly, section 157(5) of the LRA specifically oust the jurisdiction of the Labour Court to deal with a dispute that must be resolved through arbitration.
The LAC held that the court a quo referred the disputes to arbitration as a way of emphasising the provisions of the LRA which encourages private dispute resolution. In this regard, it reinforced its reasoning by relying on the principle of pacta sunt servanda. It is trite that if parties agree in a contract of employment that any disputes arising between them will be privately arbitrated then, absent evidence to the contrary the principles of pacta sunt servanda must apply.
In the circumstances, the LAC found that when the court a quo took a decision to stay the proceedings and refer the disputes in respect thereof to arbitration, it exercised a discretion, and that that discretion was exercised judicially.
The appeal was dismissed, with no order as to costs.
An employee who has agreed to compulsory private arbitration is required to refer any dispute concerning the fairness of his dismissal to arbitration when it is so established by his contract. Section 158(2)(b) of the LRA is not an invitation to refer matters to the Labour Court which ought ordinarily to be subject to arbitration.