Glencarol (PTY) Ltd v National Bargaining Council for the Clothing Manufacturing Industry (Northern Chamber) and Another (JR 926/2021) [2022] ZALCJHB 353; (2023) 44 ILJ 563 (LC) (7 December 2022)

THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

Not Reportable

Case No: JR 926/2021

In the matter between:

GLENCAROL (PTY) LTD

Applicant

And

NATIONAL BARGAINING COUNCIL FOR THE

First Respondent

CLOTHING MANUFACTURING INDUSTRY

(NORTHERN CHAMBER)

JOYCE NKOPANE N.O.

Second Respondent

Heard: 15 November 2022

Delivered: 07 December 2022

(This judgement was handed down electronically by circulation to the parties’ legal representatives, by email, publication on the Labour Court’s website and released to SAFLI. The date on which the judgment is delivered is deemed to be 07 December 2022.)

JUDGMENT

VAN NIEKERK, J

[1] The applicant seeks to review and set aside an arbitration award issued by the second respondent (the arbitrator) on 12 April 2021. In her award, the arbitrator upheld a compliance order issued to the applicant in respect of contraventions of clauses 4.10 and 14 of the main collective agreement concluded by the first respondent (the bargaining council) and made the compliance order an award. Clause 4.10 of the agreement regulates annual bonuses payable to employees; clause 14 provides for annual leave pay.

[2] Clause 4 (10) of the collective agreement reads as follows:

(a) ‘Each employee shall be paid an annual bonus on the day of his employer’s annual closure in December each year, equivalent to 1.5% of his annual basic prescribed wage (excluding overtime earnings and production bonuses) calculated from 1 January to 31 December. A pro rata share thereof shall be paid to an employee who leaves employment before 31 December.

(b) The bonus is inclusive of and not additional to any annual bonus paid by an employer.

(c) An employee shall not suffer a reduction in the amount of the annual bonus as a result of periods of authorised absence from work.’

[3] Clause 14 provides all the granting of annual leave in respect of an annual leave cycle, meaning the period of 12 months of employment with the same employer following either the employee’s commencement of work, or the completion of that employee’s leave cycle. Annual leave is accumulated on the basis of a defined number of consecutive work days worked.

[4] The material facts are not disputed. The applicant is a member of the bargaining council. During the national lockdown in 2020, the applicant was prevented from conducting business, and the employees from attending work. In what the applicant contends was a period of supervening impossibility of performance, when calculating its employees’ annual bonus, it excluded from reckoning any wages that the employees would have earned during the national lockdown. Similarly, when calculating the employees’ entitlement to annual leave, it did so by excluding the days that the employees did not work during the national lockdown.

[5] During March 2021, the bargaining council issued a compliance order against the applicant in respect of the payment of annual leave pay and annual bonuses. The applicant disputed that it had failed to comply with the terms of the collective agreement. The dispute was ultimately referred to arbitration in terms of section 33A (4) of the LRA.

[6] In her award, the arbitrator recorded that it was common cause that the applicant did not pay its employees as provided in the collective agreement, and that the issue in dispute was thus whether there was any justification for the council to issue the compliance order. She recorded the applicant’s submissions in relation to supervening impossibility of performance and came to the following conclusion:

28. It is a fact that Covid 19 pandemic had a serious effect on the businesses globally. It is also a fact that due to lockdown that was imposed in terms of the Disaster Management Regulations made it impossible for parties that were not designated as essential services to engage in terms of the employment relationship.

29. The question that arises is whether can it be said that these circumstances resulted in a situation where the respondent should be absolved from its liabilities. As pointed out in the above dicta, the mere fact that it has become difficult or expensive to discharge one’s obligations does not mean that performance has become impossible.

30. The applicant submitted that there were many companies who applied for exemption and this was not granted. On the submissions before me I cannot find that there is anything to indicate that all the players in the industry are unable or cannot comply with the collective agreement. Thus there is nothing to satisfy the objective test that the courts held should be satisfied.

31. If objectively performance was impossible the parties to the Council could have considered suspending the above provisions of the collective agreement. The parties did not suspend these provisions and in fact a circular was issued reiterating that employers should comply with the provisions of the agreement.

32. The respondent’s interpretation of the agreement to the effect that bonus pay and leave pay should be based on actual earnings and time worked cannot be sustained as that is not what the respective clauses in the agreement provide. It is also important to indicate that the respondent’s interpretation of the collective agreement cannot be binding on the Council, and the respondent cannot choose the agreement should be applied contrary to what is provided.

33. It was submitted that in this case the absence of the employees was not authorised by the employer but rather by law. In the agreement there is nothing to indicate who should authorise absence. The agreement only makes reference to ‘authorised absence’. When an employee falls ill and is absent from work, at the time when the employee presents himself to go to the doctor the employer would not have granted permission. The law (Basic Conditions of Employment Act. 1997) entitles an employee to sick leave and that is the source of the authorisation. The employer may post facto approve. I thus cannot find any distinction between this type of authorisation and the one that happened as a result of lockdown regulations.

[7] On this basis, the arbitrator found that the applicant had contravened the provisions of clauses 4.10 and 14 of the collective agreement and accordingly made the compliance order an award.

[8] It is not in dispute that on 15 March 2020, the president declared a national state of disaster, and that 23 March, the president declared a 21-day lockdown. The effect of the lockdown was to confine persons to their place of residence, except for the purposes of performing an essential service, obtaining essential goods or services, collecting a social grant, or seeking emergency, lifesaving or chronic medical attention. The applicable regulations for the required businesses to

cease operations during the lockdown, save for any business or entity involved in the manufacturing, supply or provision of essential goods or services, or where the services could be provided remotely from the employees’ normal place of residence. The regulations thus prohibited the applicant from operating its business, and prohibited its employees from traveling from their places of residence to the business.

[9] During the arbitration proceedings, the applicant’s representative submitted that given the nature and extent of the prohibitions in place during the lockdown, the contracts of employment between the applicant and its employees were suspended temporarily by operation of law. It was submitted that there was a clear supervening impossibility of performance on the side of the employer on account of the lockdown regulations, with the consequence that the applicant’s obligations in respect of annual leave and annual bonus in terms of the main agreement were suspended. Given that all reciprocal obligations had been suspended, an employee could not accrue leave or accrue the annual bonus during the lockdown. In summary, the applicant’s case was that the employee’s entitlement to a bonus payment was clearly linked to the employee’s

presence at the workplace, as was the accrual of annual leave. For the reasons reflected in the extract from the arbitration award

quoted above, the arbitrator rejected these submissions.

[10] In these proceedings, the parties agreed that the threshold to be applied is one of correctness, and that the reasonableness threshold established by Sidumo & another v Rustenburg Platinum Mines & others (2007) 34 ILJ 2795 (CC) is not applicable.

[11] In his contribution to Liber Amicorum Manfred Weiss (eds. Olivier, Smit and Kalula, Juta 2021) entitled ‘Termination of employment due to supervening impossibility of performance’

Prof (now Judge) Avinash Govindjee reflects on the challenges presented by the Covid pandemic to employment relationships. He notes

that ‘The declaration of a national state of disaster and promulgation of regulations to address the coronavirus pandemic

initially resulted in performance in terms of the vast majority of employment contracts being ‘impossible ’to some extent’, and that ‘the situation was probably best understood as a form of temporary (subjective) impossibility of performance based on the temporary incapacity of certain employees to attend work safely to fulfill their contractual obligations while the Covid – 19 situation persisted’ (at p 291). He submits that it is at least arguable that for the period of incapability, employers were not obliged to pay wages or, put another way, since the affected employees could not tender their services lawfully, the employer’s obligation to pay wages was effectively suspended. Judge Govindjee makes reference to Macsteel Service Centres (Pty) Ltd v National Union of Metalworkers of SA and Others [2020] ZALCJHB 129 at paragraph 82, where this court said the following:

‘The reality in law is that the employees who rendered no service, albeit to no-fault of their own or due to circumstances outside of their employer’s control, like the global Covid -19 pandemic and national state of disaster, are not entitled to remuneration and the Applicant could have implemented the principle of ‘no work no pay’.’

The principle may be different where the employer may have been permitted to trade in some form during the national lockdown, but elected not to do so on account of anticipation that trading would not be profitable (see Matshazi v Mezepoli Melrose Arch (Pty) Ltd and Another [2020] ZAGPJHC 136). That was not the case in the present instance.

[12] The record reflects the applicant’s chief executive officer, Mr. Shunmugam, recording the impact of the declaration of the national state of disaster on the applicant’s business. He made clear that employees did not work during the lockdown and that the applicant did no business.

[13] While the bargaining council submits in these proceedings that the issue before the court is not about a temporary supervening impossibility of performance rather than a proper construction and interpretation of the relevant clauses of the collective agreement, it would seem to me that if the contracts of employment of the applicant’s employees were suspended during the period of lockdown, that has a material bearing on the matter. As the court noted in Matshazi, as a general rule, impossibility of performance brought about by vis major or casus fortuitus will excuse performance of a contract. If there is no obligation on the part of the applicant to pay wages during the period of the

national lockdown (a position that the bargaining council appeared to accept in the course of the arbitration hearing), then there can be no obligation on the applicant to incorporate any period of absence occasioned by the suspension of the contract into the calculation of the annual bonus payable in terms of clause 4.10 of the collective agreement, nor can an employee continue to accrue annual leave in respect of the same period, given that the employee’s entitlement is computed on the number of days worked.

[14] The arbitrator correctly observes that as a general rule, impossibility of performance will excuse performance of a contract. She records the requirement that performance must have become objectivity impossible, i.e. that the impossibility must be absolute and not relative, and further, the ‘mere fact that performance has become difficult or expensive does not mean that it is objectively impossible’. Secondly, the arbitrator observes that the impossibility of performance must not have been avoidable or reasonably foreseeable by the party attempting to invoke the principle. As I have noted, the arbitrator concluded that there was nothing in the submissions before her to support a finding that ‘all the players in the industry are unable or cannot comply with the collective agreement’. She also appears to attach some weight to the fact that the parties to the council did not suspend the provisions of the collective agreement.

[15] Neither of these considerations has any relevance. What the arbitrator’s conclusion overlooks is that it is the impossibility of performance as between the applicant and its employees that was at issue before her, not whether the industry as a whole was unable to comply with the terms of the collective agreement. Had the arbitrator confined her inquiry into the discrete circumstances of the applicant and its employees, she would have concluded that performance of the employment contracts concluded between them had become objectively impossible. In these circumstances, given the prohibition of performance of the employment contract by law, the matter ought properly to have been treated as one of objective supervening impossibility of a temporary nature. The employees’ contracts of employment were thus suspended for the period of the hard lockdown. That relieved the applicant, for that period, of any obligation to remunerate any employee, or to implement any terms and conditions of employment that were dependent on physical presence in the workplace. It follows that clause 4 of the collective agreement, as well as clause 14, both of which establish levels of remuneration and other conditions of employment, and incorporated as they are into the relevant contracts of employment, were suspended. The applicant cannot therefore be said to have breached the collective agreement by refusing to bring into account period of absence occasioned by the lockdown into the calculation of bonus payments, or accrued annual leave. The arbitrator’s award is thus incorrect, and stands to be reviewed and set aside.

[16] Given the conclusion to which I have come, it is not necessary for me to consider the parties’ submissions on the proper interpretation of clauses 4.10 and 14 of the collective agreement.

[17] Neither party sought costs, and no order for costs will be made.

Order

1. The arbitration award issued by the second respondent under case number J034-31 on 12 April 2021 is reviewed and set aside.

2. The compliance order issued by the first respondent in respect of the alleged contravention by the applicant of clauses 4.10 and 14 of the main agreement is set aside.

André van Niekerk

Judge of the Labour Court of South Africa

Appearances:

For the Applicant:

L Frahm-Arp, Fasken

For the respondents:

L Malan SC

Instructed by:

Joubert Attorneys