“I have seen media reports that the State will not be obligated to pay employees their annual salary increments this year due to the scarce financial resources of the State. Is this correct?”

Your question raises an important legal issue which has recently been decided by the Labour Appeal Court concerning a dispute over a collective agreement entered into between the government and the public service union members where the Public Servants Association (“PSA”) and the rest of the applicants sought to enforce a clause in the collective agreement regulating salary increases which the government contended would cost the fiscus R37.8 billion rand.
 
In this case, the State had entered into a collective agreement with the public service union members which entitled employees in the public service to receive salary adjustments for three financial years being 2018/2019; 2019/2020 and 2020/2021. The collective agreement was implemented for both the 2018/2019 and 2019/2020 financial years. The State however contended that it was not in a position to abide by the collective agreement with respect to the 2020/2021 financial year due to its limited financial resources.
 
In response, public service unions referred a dispute to the bargaining council and when conciliation failed, they approached the Labour Appeal Court in order to compel the government to abide by the collective agreement whilst the State simultaneously sought to have that part of the collective agreement declared unlawful and invalid for its failure to comply with Regulations 78 and 79 of the Public Service Regulations.  

The above regulations dictate that before the State enters into a collective agreement, the cost of the collective agreement must be covered from the budget of the relevant department of state or on the basis of a written undertaking from Treasury to provide additional funds or from the budget of another department which must be accompanied by their consent as well as approval from the National Treasury. According to the Labour Appeal Court, which was sitting as a court of first instance, none of these requirements were complied with prior to the conclusion of the collective agreement and therefore the Court found the specific clause of the collective agreement to be invalid for its failure to comply with sections 213 and 215 of the Constitution as well as Regulations 78 and 79 of the Public Service Regulations.  

With the declaration of invalidity, the Court further had to determine the consequences of such invalidity and it was argued on behalf of the respondent unions that the just and equitable remedy would be for the State to still meet its obligations in a gradual manner. The Court however held that due to the current economic crisis, it would not be just and equitable to order the government to exhaust scarce financial resources on employees whose jobs are secure and have already received their salaries to the detriment of the vulnerable people in South Africa who must mainly benefit from the recovery of the economy. 

Although this judgment by the Labour Appeal Court has now been referred to the Constitutional Court for acfinal verdict, it sketches the unfortunate reality that not only employees in the private sector but also Public Service employees have not been spared from the harsh effects caused by the Covid-19 pandemic.