South Africa Briefing: When Strikes Cause Economic Loss

Strike action can have a serious impact on a company’s operations. It pays for both companies and employees to know their rights under South Africa’s legal system.

By Riaan Becker, Associate Attorney at Centurion Law Group’s Johannesburg headquarters

Investors and potential employers are often rattled by South African labour laws and the frequency of employee strikes, whether the strikes are protected or unprotected. The perception is that employees, and the unions who represent them, are well protected under the law and seldom face recourse for their actions in taking unprotected industrial action. In reality, employers also enjoy protection under the Labour Relations Act of 1995 (“LRA”) and the courts often enforce the LRA by providing relief for employers whose workers participate in unprotected activities. An examples of this is Algoa Bus Company (Pty) Ltd v Transport Action Retail and General Workers Union (Thor Targwu) and Another [2015] 9 BLLR 952 (LC) (“Algoa matter”).

Protected Strikes

It is important to understand the difference between a protected and an unprotected strike. Under South African law a protected strike is one that complies with the provisions of the LRA. The effect of a protected strike is that the participating employees cannot be dismissed by reason of their taking part in the strike, nor do they commit a breach of contract by participating in a protected strike action. Should employees participate in an unprotected strike, it follows that the employees’ participation would be grounds for dismissal.

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The requirements under the LRA for a protected strike, in summary, are:

  • Firstly, there must be an issue in dispute which is referred to the Commission for Conciliation, Mediation and Arbitration (CCMA);
  • Secondly, the dispute cannot be resolved and the CCMA has issued a certificate stating that the dispute remains unresolved;
  • And thirdly, the striking employees or union must give an employer at least 48 hours’ notice of the intended strike.

Provided that the employees comply with the aforementioned requirements, a strike will be protected in terms of the LRA.

The Algoa Matter

In the Algoa matter the employer, a transport company providing buses and drivers to clients, approached the court in terms of Section 68(1)(b) of the LRA concerning a claim for compensation for economic loss sustained as a result of an unprotected strike. The striking employees, acting with their trade union, took unprotected industrial action in a response to disciplinary action taken against some of the company’s workers.

As a result of the unprotected strike the employer suffered economic loss in the form of lost fares and subsidies for the duration of the action and there was no way the loss could be recovered by working additional hours once the employees returned to work. As compensation for the employer’s damages, the Labour Court ordered the trade union and the employees to compensate the employer the amount of R 1,406,285,33 in respect of the economic loss suffered during the unprotected strike.

Reassuring Employers

Strikes have a tendency to drag on as employers are not always in a position to meet the demands of their employees and/or trade unions. These demands could range from higher salaries to better working conditions. Most industries have been faced with tough economic times in recent months, and for some industries the hardship has spanned over years, resulting in employers finding themselves with limited resources to meet the demands of employees.

Therefore, as an employer, it has become an absolute necessity to gain an understanding of strikes, and especially what constitutes an unprotected strike, in order to mitigate the effect of industrial action as far as it is economically possible to do so. Furthermore, it is also important to understand that an employee’s right to strike is entrenched in the South African Constitution. However, as with any other right, the right to strike is met with obligations. An employer also enjoys rights under the same constitution and by extension, the legislative framework of the labour laws in South Africa.

The Algoa judgment should serve as a reminder to investors and potential employers in South Africa that trade unions and employees are well protected under South African laws, but they are not immune to consequences for failure to follow pre-industrial action procedures. Investors and employers should understand that employees may strike from time to time, but they should be reassured that legal recourse is available when strikes are unprotected.

The biggest concern for investors and employers concerning industrial action is the breakdown of the rule of law; especially where orders (interdicts) are issued and then disregarded. However, such disregard will not go unpunished and investors and employers once again enjoy the invaluable principal of the rule of law. The judgment in Algoa is therefore a display to investors and employers that the Court will uphold the rule of law and take the interests of the employees, trade unions and the business of employers into consideration when making orders.