The Free Market Foundation’s quixotic venture

The announcement by the Free Market Foundation (FMF) that it will challenge the constitutionality of certain collective bargaining rules, suggest that the organisation has a lot of money to waste. In a constitutional democracy, the temptation to rush to the courts in the hope of advancing your partisan policy agenda will always be high. Why try to win policy arguments when you can take a short-cut via the courts? But unless you understand the broad socio-political commitments embodied by the Constitution as interpreted by the Constitutional Court (an understanding the FMF and its lawyers seem to lack) you run the risk of wasting your money on expensive litigation which you have no hope of winning.

Earlier this week the FMF announced that it would challenge the constitutionality of certain aspects of section 32 of the Labour Relations Act, arguing that this was a “draconian” provision as it allowed collective agreements to be binding on third parties within a sector. Collective agreements are concluded in bargaining councils where representatives of unions and employers reach agreement on wages and working conditions for workers in that sector.

Section 32 of the Act allows the Minister to order that a collective bargaining agreement concluded in the bargaining council be binding on all employers and workers in that sector – even if the employers or workers were not directly or indirectly a party to the agreement. If the Minister extends a collective bargaining agreement, an employer cannot employ workers in that sector at a lower wage or with fewer benefits than that agreed upon at the bargaining council – even when that employer was not part of the bargaining process. This rule provides an incentive for employers to engage in collective bargaining processes and protects workers who, through sheer chance, might not work for an employer covered by the collective bargaining agreement.

The FMF argues that the extension of such agreements “create unemployment and uncompetitive conditions in product markets”. By setting wage levels (and broader labour costs) above what some companies would pay and some employees would accept, it can make it unprofitable for certain types of firms to operate. According to the FMF, it is mostly smaller and more labour intensive firms, where wages are generally lower, where these extensions bite.

Personally, I am a bit skeptical of the ideologically driven claims by people whose business it is to exploit others and make as large a profit as possible (and are often handsomely rewarded for their efforts), that they are on the verge of bankruptcy because the law does not allow them to exploit their labour force as much as “market forces” might allow them to. However, I will leave aside for the moment the question about whether these claims are true and examine the legal aspects of this court action.

It is unclear what section of the Bill of Rights the FMF is relying on in its constitutional challenge of section 32 of the Labour Relations Act. (I have been unable to get access to their court papers.) Could it hope to invoke section 22 of the Bill of Rights, which guarantees for every citizen the right to choose their trade, occupation or profession freely, subject to regulation by law?

If it is pinning its hopes on this section the FMF is barking up the wrong tree. I cannot imagine that the Constitutional Court will ever find that labour regulations which may or may not make it more difficult for an employer to employ more staff would limit the rights of a citizen freely to choose an occupation. Even if it was true that section 32 inhibited the ardent and unbridled accumulation of wealth by the capitalist class, this section does not stop anyone from choosing any occupation they see fit.

As far as I know, there is no right to make a profit enshrined in the Constitution. Neither does the Constitution guarantees for everyone the right to work or to be employed. However, section 23 of the Bill of Rights does guarantee for everyone the right to a fair labour practice, which includes the right to engage in collective bargaining.

What the FMF is aiming to do is to attack a provision of the Labour Relations Act aimed at providing a framework within which more effective collective bargaining can take place. Section 32 of the Labour Relations Act can therefore be viewed as helping to give effect to the constitutionally guaranteed right to a fair labour practice. How it will ever convince the Constitutional Court that this provision infringes on the constitutional rights of any person to work for a wage far below the wage collectively agreed upon for that sector is beyond my comprehension.

Even if there was a right that was being infringed here – something that seems hard to imagine – the Constitutional Court will almost certainly find that the infringement constituted a justifiable limitation of the right in terms of section 36 of the Constitution. This is because any limitation would be aimed at giving effect to another constitutional right to effective collective bargaining. A study of section 32 of the Labour Relations Act makes this crystal clear as it provides several safeguards to prevent the abuse of this section.

First, the Minister can only extend the binding force of a collective agreement if the members of the majority trade union vote in favour of the extension and if the employers’ organisations, whose members employ the majority of the employees that are party to the bargaining council, vote in favour of the extension.

Second, a collective agreement may not be made biding on others who were not party to the negotiations and agreement unless the majority of all the employees who will be bound by the extended collective are members of the trade unions that are parties to the bargaining council and if the employers’ organisations who are parties to the bargaining council agreement will employ the majority of all the employees who are bound by the extended collective agreement.

Third, the Section also prevents the Minister from extending the agreement to other workers and employers in a sector if the parties to the bargaining council are not sufficiently representative within the registered scope of the bargaining council; and if the Minister is satisfied that failure to extend the agreement may undermine collective bargaining at sectorial level or in the public service as a whole.

There might be a few eccentric judges out there (free market fundamentalist judges like Nigel Willis come to mind) who might be willing to entertain such frivolous arguments. But given the long line of Constitutional Court judgments affirming the transformative nature of the South African Constitution and given the firm commitment in section 23 of the Constitution to collective bargaining, it is difficult to see how the Constitutional Court will declare invalid legal rules aimed at making collective bargaining agreements more effective.

As far as I can tell, the FMF is really not making a constitutional argument at all. It is aggrieved by the policy choices made by the legislature, policy choices aimed at protecting collective bargaining agreements as well as those workers who happen not to be immediately bound by such agreements. Now, you may well disagree with such policy choices and you may argue – as I am sure the FMF would do – that workers do not deserve this protection from exploitation as it detracts from the ability of business owners to employ non-unionised workers at whatever rate they are willing to be exploited at. But how this argument can be fitted into a constitutional straightjacket is not immediately clear.

If you believe that collective bargaining agreements in a sector help to protect employees who might not be unionised or might work for an unscrupulous employer, then the provisions of section 32 make perfect sense as it bolsters the right to collective bargaining set out in section 23, extending the benefits of collective bargaining beyond the parties who happen to be covered by the original agreement.

It seems to me that the FMF knows that it will never be able to convince the government to change the law and is now turning to the courts for assistance. If it was better advised it would not have wasted its money on such a quixotic venture.

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