Penalising bankrupt business in a pandemic

An unusual award issued by the Court of Appeal on June 12 may be of interest to employer and trade union alike.

It had to do with the interpretation of two fundamental principles under the IRA: the first the distinction between a matter that is a trade dispute Section 2(1), which is defined as a dispute connected with employment or matters connected to terms and conditions of employment, and one that is a "difference” of interpretation or application of a term in an order or award of the Industrial Court or in a registered collective agreement or an amendment of such an agreement.

The first must go through the usual processes to the Industrial Court to be heard and ruled upon; the second can go directly to the court to be adjudicated.

This may seem like a small matter, but as the processes are different, the time it takes to reach a decision may vary considerably, and if an issue arises in industrial relations, the standing wisdom is not just that it must be resolved, but that it must be resolved quickly.

Recently, perhaps due to the backlog of cases that arose during the pandemic shutdown, the Industrial Court has been using its authority under Section 54 (1) to accept before it matters that have not been sent to it by the Ministry of Labour with the usual CRD or certificate of unresolved dispute, but rather those sent directly by one of the parties to the dispute.

This is a matter worth taking note of, as the other party may be unaware that this has been done due to the faltering postal service, and therefore that it has a matter before the court which by law it must attend.

But Section 54 of the IRA makes it eminently clear that where parties cannot agree on whether the matter is a trade dispute or a “difference,” that matter should be sent to the Industrial Court and the court will make a final decision on the matter, with or without a hearing.

The second matter involves the status of terms in a collective agreement that has expired and asks which, if any of its terms, will still form part of a worker’s contract when the collective agreement has come to an end. While Section 48(2) of the act leaves no doubt that the terms in a collective agreement for avoiding and settling disputes continue in force even after the agreement itself has come to an end, some confusion has arisen as to whether the other terms and conditions, benefits, etc remain in force.

Well, they do and they don’t. They become the terms and conditions of the individual contracts of employment of the individual workers in the bargaining unit, Section 47(2), but not of the bargaining unit as a whole.

For example: clauses setting out the method and periodicity in relation to meetings for non-crisis issues will no longer be enforceable once the contract has come to an end. Although this does not stop the parties from having these meetings if they want to, the mandatory nature will have expired until another collective agreement containing the same provisions is signed and registered.

On the other hand, clauses granting vacation or sick leave, once granted in the registered collective agreement, then automatically become terms of the individual’s contract, and remain so even once the collective agreement has expired. They then revert to being the individual’s property rights and the Constitution guarantees each citizen the right to own property, in this case the number of vacation days earned per month of work after the first year has passed. The Constitution also guarantees that a person’s right to own property cannot be taken away from her other than by the force of law.

In practical terms this means that if, after six months into the working year, a person’s employment has been terminated, whether by summary dismissal, for poor performance, for theft or ill health or force majeure such as fire, flood or pandemic, they will have earned half of the vacation leave allocated in the contract of employment and they must be paid that sum as it is their property right.

Where the matter became one in contention in the Court of Appeal was a matter of law, and that was whether issues implemented in relation to the bargaining unit that were put in place after the agreement expired became terms and conditions of each individual worker’s contract.

In the 1986 award in the ABEL case quoted in this award, the severance of the employees arose after the expiration of the collective agreement and was therefore not an issue to be taken before the Industrial Court, but it noted that Section 16(2) of the IRA that the question of whether it arose out of the expired collective agreement and was therefore theirs as a matter of right in their contract of employment or something that had lapsed but they wanted to gain and was therefore a matter of interest could still be decided by the Industrial Court.

Their severance entitlement under the Retrenchment and Severance Pay Act does not cease under those conditions, of course.

While the legal issues may be contentious and more than a little convoluted, they are dangerously relevant today in light of the many, many closures of business due to the government shutdown orders.

The question will be asked whether it is just and equitable for a government to force the closure, and in many cases resultant bankruptcy of a business, and then to penalise it for having had to close down and lay off its employees.


"Penalising bankrupt business in a pandemic"

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