City of Johannesburg v SAMWU obo Lucas Monareng

On 1 August 2016, an arbitration award was made by the first respondent under the auspices of the South African Local Government Bargaining Council (SALGBC). On 8 June 2017, the appellant (City of Johannesburg, a municipality established under the Local Government: Municipal Structures Act) applied to the Labour Court in terms of section 145(3) of the LRA for a stay of enforcement of the arbitration award pending the finalisation of a review application. The Labour Court (Baloyi AJ) granted the stay but made it subject to the appellant delivering a resolution to furnish security as required in terms of section 145(8) of the LRA. The appellant appealed this order with leave of the Labour Court, contending that providing security would contravene section 48 of the Local Government: Municipal Finance Management Act (MFMA). The appellant is a large metropolitan municipality with substantial assets, a strong credit rating (Moody's Prime-1.za and Aa3.za), and demonstrated financial stability. At the time, there were 36 arbitration awards against the appellant with pending review applications, with security requirements potentially exceeding R2 million. The respondent did not file an answering affidavit to dispute these facts.

• Whether a public sector employer governed by the MFMA is required to provide security in terms of section 145(8) of the LRA when seeking a stay of enforcement of an arbitration award pending review
• Whether section 48 of the MFMA prohibits a municipality from furnishing security for a debt obligation arising from an arbitration award
• Whether public entities regulated by the PFMA or MFMA are automatically exempt from providing security under section 145(8) of the LRA
• Whether the Labour Court properly exercised its discretion under section 145(8) of the LRA in ordering the appellant to provide security
• The relationship between section 210 of the LRA and the MFMA in cases of conflict
• The correct interpretation of 'unless the Labour Court directs otherwise' in section 145(8) of the LRA

The appeal was upheld with no order as to costs. Paragraphs 2 and 3 of the Labour Court order were set aside and substituted with an order that: 'The enforcement of the award issued under case number JMD 011607 and HO362-17 is stayed pending the decision of the Labour Court in the review application.' This effectively stayed enforcement of the arbitration award without requiring the appellant to provide security.

The binding legal principles established are: (1) Section 48 of the MFMA does not prohibit municipalities from providing security under section 145(8) of the LRA, as it enables municipalities to provide security for 'any of its debt obligations', which includes arbitration awards. (2) Section 210 of the LRA provides that the LRA prevails over conflicting provisions in other legislation (except the Constitution), so even if the MFMA contained a prohibition, the LRA would prevail in employment matters. (3) The general rule is that all employers, whether in the public or private sector, are obliged to provide security in accordance with section 145(8) of the LRA unless the Labour Court orders otherwise. Public entities regulated by the PFMA or MFMA are not automatically absolved from providing security. (4) The words 'unless the Labour Court directs otherwise' in section 145(8) confer a discretion on the Labour Court to either: (a) exempt the employer from paying security, or (b) reduce the quantum of security below the statutory threshold. (5) An employer seeking exemption or reduction must show good cause, which involves a proper explanation with particular emphasis on material prejudice the applicant may suffer. The employer must establish that it has sufficient assets to meet its obligations should the arbitration award be upheld. (6) In exercising its discretion, the Labour Court must have regard to the particular circumstances of each case and considerations of equity and fairness to both employer and employee. The principal concern is that dismissed employees should not be left unprotected if the review is unsuccessful. (7) On appeal, the court must consider whether the Labour Court properly took into account all relevant factors and circumstances, and whether the decision was justified.

The Court observed that the amendment to section 145 to include subsections (7) and (8) was largely directed at discouraging government entities and municipalities from instituting review applications with little or no prospects of success. The requirement to provide security would compel senior management in the public sector not to commit funds unless satisfied that the review application has prospects of succeeding, thus avoiding wasteful expenditure on litigation. The Court noted that policy considerations militate against public monies being unnecessarily encumbered as security when they should be used for their primary purpose of providing social services. The Court provided an illustrative example of what might constitute material prejudice: a small manufacturing business with 20 employees dismissing 10 employees for group misconduct, where the required security would wipe out the entire operating cash flow for several months. The Court distinguished this from situations where an employer merely finds it 'hard' to set security – the explanation must be that it would be 'unduly onerous and harmful' to be required to set the prescribed security. The Court also noted that no order as to costs was appropriate given that there were two conflicting judgments requiring resolution and the appeal concerned a novel question of law.

This judgment is significant in South African labour law as it definitively resolved a conflict between two Labour Court decisions regarding whether public sector employers must provide security under section 145(8) of the LRA. It establishes that: (1) the MFMA does not prohibit municipalities from providing security for arbitration awards; (2) section 210 of the LRA ensures that the LRA prevails over other legislation in employment matters; (3) all employers, whether public or private sector, are subject to the same general requirement to provide security when seeking a stay of arbitration awards pending review; (4) public entities are not automatically exempt from providing security merely because they are regulated by the PFMA or MFMA; (5) the Labour Court has a discretion to dispense with or reduce security requirements, but this discretion must be exercised judicially based on proper consideration of all relevant facts and circumstances, including the employer's financial position and ability to satisfy any award; and (6) the amendment to section 145 was intended to discourage frivolous review applications by all employers, including government entities, and to avoid wasteful litigation expenditure. The judgment clarifies the proper approach to applications for exemption from security requirements and emphasizes that employers must make out a proper case showing material prejudice or other compelling circumstances before being exempted from the statutory security requirements.