Wage dispute divides employers

The bargaining council system has come in for criticism in the engineering industry once again. A pillar of the collective bargaining system in South Africa, it has been criticised as expensive by the International Monetary Fund and others.

In confrontations in the engineering and clothing industries, however, it is becoming clear that large companies prefer the system, even though it might result in relatively high wages, because of the labour stability it theoretically promotes. But representatives of smaller employers say high wages mean they employ fewer unskilled people, otherwise their businesses will become unviable.

In the Metal and Engineering Industries' Bargaining Council, the National Employers Association of South Africa is increasingly in conflict with the industry's employers' federation, the Steel and Engineering Industries Federation of South Africa.

A brief honeymoon between the  association and the federation this year recently ended in a dispute over bargaining council wage rates.

Following a violent two-week strike last year, a three-year wage deal was reached and the labour minister subsequently extended the deal to nonparties. It was challenged in an urgent application to the Johannesburg Labour Court by the  association on the grounds that the bargaining council was not properly constituted.

Defective
The court rejected the association's application on a principle of law that protects -administrative actions even if they are defective. The association then lodged an application to review the decision. However, shortly after the application, all parties reached an out-of-court deal in which the unconstitutionality of the bargaining council's make-up was admitted. It was reconstituted and the  association got 50% of the employer constituency (in bargaining council structures, employers have 50% representation and unions 50%).

The association is now challenging the bargaining council on two further grounds.

One arbitration concerns exemptions to the agreement that companies under financial stress can apply for. The association says the system discourages employers from applying.

But the federation's operations director, Lucio Trentini, said the exemptions procedure was lenient: in the year to end February, 1194 of 1678 applications, or 71%, were successful, only 199 were refused and some were still in progress.

The bigger arbitration relates to the three-year wage agreement in which, in the second year beginning July 1 2012, only wage increases for grades A and H were specified and no increases for grades between A and H were specified.

Wage models
he association's chief executive, Gerhard Papenfus, said it had cautioned the bargaining council about this "mistake" in May and advised it to apply to the minister for an extension to nonparties with a complete list of increases. The bargaining council did not do this, he said, because it did not want to be put in a position where it would have to prove its majority representivity.

Trentini, however, said there was no mistake. Although only two grades were specified, the bargaining council had been a leader in determining "wage models". It was implied that the increases between those two grades would be proportional and those intermediate rates had since been published.

The federation has issued a statement warning employers not to heed the association's suggestion that they are not bound to pay the intermediate increases. Trentini said such suggestions threatened industrial peace.

Said Papenfus: "We don't entirely oppose the collective bargaining system. We just believe that if the voice of small business can be heard, a better result for South Africa and for employment can be achieved.

"For instance, in the engineering industry an entry-level unskilled person earns R38 per hour or R6800 per month. This is unsustainable for most small businesses, so most of them avoid employing any more unskilled people than absolutely necessary."

Papenfus believes small employers are outspoken on the issue because their survival is at stake. One indicator, he said, was the rapid increase in the association's membership.

Trentini said the association still represented a small number of employers compared with the federation.

The National Union of Metalworkers of South Africa, the main union in the industry, has reacted vehemently to the association's challenges. Recently, a union representative remarked to Papenfus during a debate at the bargaining council: "Democracy has its limits; there is a time that the majority must thrash the minority."

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