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Arbitration Awards: Stuck in a Time Warp

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Arbitration Awards: Stuck in a Time Warp

23rd February 2017

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The question of whether or not arbitration awards issued by the CCMA and the bargaining councils prescribe three years after they are issued in terms of the Prescription Act, 1969 has given rise to conflicting case law. Recently, however, in the case of Myathaza v Johannesburg Metropolitan Bus Services (SOC) Limited t/a Metrobus and Others, the Constitutional Court had the opportunity to settle the issue once and for all. But did it?

In brief, the facts were that Mr Myathaza was dismissed by his employer, Metrobus. Mr Myathaza then referred an unfair dismissal dispute to the bargaining council for arbitration.  Mr Myathaza won the arbitration and was awarded reinstatement with back pay. Metrobus launched an application to review and set aside the arbitration award. However, Metrobus, like many employers, did nothing to prosecute the review to its conclusion.

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More than three years later, Mr Myathaza applied to the Labour Court for the arbitration award to be made an order of court. According to previous judgments of the Labour Court and Labour Appeal Court, having the award made an order of court would have the effect of interrupting the prescription of the award. Metrobus opposed Mr Myathaza's application to have the award made an order of court on the grounds that Metrobus had launched its review application. Metrobus further contended that the arbitration award had already prescribed, three years after the award was issued, in terms of the Prescription Act.

The Labour Court, and subsequently the Labour Appeal Court, agreed with Metrobus and held that the arbitration award had prescribed. Not to be deterred, Mr Myathaza then applied for leave to appeal to the Constitutional Court.

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In three separate judgments, the Constitutional Court upheld Mr Myathaza's appeal and found that the arbitration award had not prescribed in terms of the Prescription Act. Unfortunately, the judgments differed significantly in their approach to the issue.

The first of these judgments was written by Jafta J. Jafta J found that the Prescription Act was not consistent with the LRA because the purpose of the Prescription Act is to regulate time limits for the enforcement of debts whereas the purpose of the LRA is to give effect to the constitutional right to fair labour practices. Jafta J noted that section 210 of the LRA provides that the LRA takes precedence over legislation with which it is in conflict. Thus, because arbitration awards are issued in terms of the LRA which conflicts with the Prescription Act, the Judge held that the provisions of the LRA trump those of the Prescription Act and, accordingly, arbitration awards are not debts for purposes of the Prescription Act.

The second judgment was that of Froneman J. Froneman J disagreed with Jafta J's finding that an arbitration award is not a debt for purposes of the Prescription Act. Froneman J found that, because prescription is interrupted by the service of any process where the creditor claims payment of the debt, the institution of the review application by Metrobus necessarily interrupted the prescription of the award and, until the review was finally determined, prescription did not run.
Zondo J, in a separate judgment, disagreed with Froneman J that the Prescription Act applies to arbitration awards. 

In this regard, Zondo J stated that, unlike other debts under the Prescription Act, where an arbitration award has been issued, liability has been decided and that decision is binding upon the debtor. At that stage, all that remains is for the debtor to comply with the arbitration award.  Zondo J further reasoned that the LRA dispute resolution system is a self-standing dispute system with its own prescribed periods within which various steps are required to be taken. On this basis, Zondo J found that an arbitration award is not a debt as contemplated in the Prescription Act. 

Even though all three judgments reached the same conclusion, the outcome remains problematic.  Ordinarily the majority judgment of the court will define how the law is to be applied in the future. However, in this case, the Constitutional Court did not deliver a majority judgment. Instead, the court produced three separate and fundamentally different judgments. Although all three judgments contain an extensive and useful analysis of the law, because each judgment criticises important aspects of the others, there is no definitive majority judgment. Thus, regrettably, the Constitutional Court has failed to establish clear principles on the issue. 

Finally, it is also important to remember that Mr Myathaza's arbitration award was issued prior to the most recent amendments to the LRA which came into effect in January 2015 and, in particular, the inclusion of section 145(9). This section states that an application to set aside an arbitration award under section 145 interrupts the running of prescription. While it may be argued that the legislature would only have included section 145(9) in the LRA amendments if it considered that arbitration awards were subject to prescription, Jafta J commented that he considered section 145(9) to be a response by the legislature to confusion in the courts rather than an indication that the Prescription Act was intended to apply to arbitration awards.

No matter what criticism may be levelled at the Constitutional Court's apparent division on key principles, it is obvious that the court has taken a strong stance against any limitation of an employee's right to enforce an arbitration award more than three years after it is issued. It will therefore take a brave judge in the lower courts to find otherwise. 
In the circumstances, we caution employers against assuming that arbitration awards prescribe within three years, or at all.

Written by Senior Associate, Neil Searle. This article first appeared in the Labour, Employment and Human Rights: Fasken Martineau Bulletin.

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