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Is interest arbitration the magic solution to resolving a strike?

Aadil Patel

Our constitution guarantees workers' the right to strike – a right further entrenched in the Labour Relations Act (LRA), which also gives employers the right to lock workers out of the workplace pending resolution of such disputes. But lengthy, and often violent or destructive, strikes have called into question the value of strike action as the prime method of resolving disputes about wages or other matters of mutual interest between employers and employees (sometimes referred to as 'interest disputes'). Is there another, more beneficial, method of resolving strikes?

Where employers and trade unions reach deadlock during collective bargaining, the parties don't resort to strikes or lock-outs, but refer the dispute to arbitration. An arbitrator then determines the salary increase to be awarded or other changes to terms and conditions of employment to be effected.

There have been recent calls for interest disputes to be resolved through arbitration*, when appropriate. While the use of arbitration - as a dispute-resolution mechanism in collective bargaining - isn't new, it's certainly not widespread in South Africa.

Interest arbitration offers an alternative mechanism to breaking deadlocks between parties engaged in collective bargaining. This, together with the mayhem that has occasioned some of the recent strikes, has prompted a growing list of parties to call for interest arbitration.

Is interest arbitration the panacea to all our industrial action difficulties?

While any alternative that could assist South Africa to minimise the negative effects of industrial action should be applauded, interest arbitration isn't always the best way to resolve a dispute quickly. During arbitration, a third party determines the solution that should be applied to the dispute between the parties. This may result in an arbitrator-imposed solution that fails to meet the needs of both parties to the dispute.

Parties who are considering interest arbitration should consider if they can live with an award that favours the other side or where the arbitrator splits all assets in half – in a nonsensical manner - in an attempt to find an amicable solution. They should also consider the nature and scope of the power they allow the arbitrator in resolving the issue in dispute:

  • Is the arbitrator at liberty to determine the size and scope of the wage increase, for example, without being forced to accept either party's proposal on the increase?

    In this scenario, the arbitrator is given free rein to determine the actual increase to be awarded after taking into account the evidence presented by both parties.

    The arbitrator isn't obliged to agree to the employer's proposal (let's say for a 6% salary increase) or to that of the trade union (who may have motivated for a 15% salary increase). The arbitrator has a very wide discretion to determine the size of the increase.

  • In contrast, when using pendulum or baseball arbitration - so-called because of its successful resolution of a baseball strike in the USA - the arbitrator must accept the proposal of only one of the parties.

    The arbitrator doesn't have discretion to select an appropriate outcome that may be somewhere between that of the parties' proposed outcomes, but is forced to select the one she or he determines to be the most appropriate.

    As a result, the arbitration award reflects the position of one of the two parties, clearly signalling a winner and a loser in the process.

While this process may appear radical on the face of it, there is method in getting the parties to motivate their most reasonable proposal. It places pressure on the parties to understand their best and worst positions, and present the arbitrator with a proposal which they believe will be more reasonable than that of the other party.

Let's look at an example:

Using the figures in our example above, the employer who wanted to implement a 6% salary increase may be forced to present its full mandate of an 8% salary increase to the arbitrator in the hope that this position would be viewed as being more reasonable than that of the trade union.

By the same token, the trade union may have demanded a 15% salary increase for its members during negotiations, but would have to be willing to accept a 10% salary increase. They will, therefore, face the same pressure as the employer to put their best compromise forward to the arbitrator. The union may not be willing to stick with its 15% increase demand where there is a risk that the arbitrator may find that the employer's position is more reasonable.

Many employers and trade unions may not be ready for this type of deadlock-breaking mechanism. Parties who seek to use interest arbitration should ideally have mature bargaining processes and structures in place and be able to negotiate in good faith to extract the maximum benefit for both parties during the arbitration process.

Where either party uses collective bargaining and industrial action as a means of settling scores or inflicting pain, using a different method to resolve the eventual dispute may not address the underlying issues. However, parties who want to achieve the best collective bargaining outcomes should earnestly explore if interest arbitration would assist them in avoiding costly strikes and lock-outs. All reasonable alternatives should be explored to minimise industrial action that can undermine job creation and labour stability in our country.

If parties opt for arbitration, it requires them to be open, transparent and mature as to what they can afford and the impact of a demand on the bottom line. The question to ask is if South Africa is prepared for this type of openness.

* Using arbitration is compulsory for interest disputes involving essential services, for instance.

Aadil Patel is the director and national practice head: Employment at Cliffe Dekker Hofmeyr.