South Africa: CCMA Jurisdiction Over Retirement Funds

The Commission for Conciliation Mediation and Arbitration ("the CCMA") is the body principally charged with dispute resolution in the employment arena. It derives its jurisdiction from the Labour Relations Act 1995 ("the LRA"). The disputes over which it has jurisdiction are those of mutual interest between employees and trade unions on the one hand and employers and employer organisations on the other. Where bargaining councils exist, the function is discharged by those councils.

While it has been contended that as a retirement fund has an identity in law which is independent of the employer, it should not be subject to labour legislation, the Industrial Court in the past has said that where an employer is well represented on the board of trustees of a fund, it will be required to exercise its influence at that level so that employees are not unfairly penalised by rules which may operate unfairly towards them.

In Archibald v Bankcorp Limited 1992 (13) ILJ 1538 (IC), in the context of retrenchment, the court said the following:

The principle should apply equally to other forms of arbitrary and unfair discrimination in the rules of funds. However, its application is not straightforward and, depending upon the circumstances or the court, greater emphasis may be placed on the independence of the retirement fund.

In the Labour Appeal Court decision of Yscor BBK v Meyer (1995) 16 ILJ 864 (LAC) the court recognised the independence of a pension fund from the employer. The respondent had alleged that he had been unfairly discriminated against by his forced retirement which had precluded him from benefiting from later amendments to the pension fund rules. This had had the effect that he received a lesser benefit that his colleagues who were permitted to retire later. The Industrial Court found that the appellant had initiated the changes to the rules and it had used its influence on the board of trustees to effect those changes which had resulted in discrimination against the respondent. The Industrial Court found the respondent entitled to the additional benefit provided by the amendment to the rules.

On appeal however, the Labour Appeal Court considered whether the employer, by its conduct has been responsible for the amendment of the pension fund rules. It found that the pension fund was an autonomous entity and that there was no justification for the submission that the trustees of the fund had not acted independently of the employer. The employer had merely approved the amendment of rules proposed by the trustees. Any unequal treatment which arose out of the amendment to the rules had been caused by the pension fund which was a separate legal entity.

Whether or not the employer should have taken steps to ensure that the fund did not discriminate against different groups of retiring employees was not considered by the court as the question had not been addressed in the course of proceedings before the lower court.

In the LRA there are 2 important contexts in which employment benefits receive attention.

While statutory workplace forums have not become a feature of the South African industrial relations scene, where there institutions are established, there is provision for consensual or joint decision making at the workplace forum before the implementation of proposals covering a number of employment issues. These include "changes by the employer or by employer-appointed representatives on trusts or boards of employer-controlled schemes, to the rules regulating social benefits schemes" (Section 86(1)(d)).In the case of disputes there is provision for conciliation and arbitration on the issue by the CCMA (or bargaining council).

Of broader application is the residual unfair labour practice definition in schedule 7 to the LRA which extends to cover "any unfair act or omission that arises between an employer and an employee, involving … the unfair conduct of the employer relating to … the provision of benefits to an employee".

In the case of disputes about unfair labour practices, the CCMA once again has jurisdiction to conciliate and to arbitrate upon such disputes.

The act or omission in question must arise between employer and an employee. Where the rules of a retirement fund, which is a legal entity independent of the employer, or the decision of the trustees is unfair, the question arises whether such conduct can be said to fall within the definition of the unfair labour practice.

The rules of the retirement fund may, in particular circumstances, form part of the employment contract. it is arguable that this is the case where it is obligatory, in terms of the employment contract for employees to join the fund.

Where the rules of the fund explicitly make the employer liable for the balance of costs of the fund, this again would favour an interpretation which draws the fund into the ambit of the employment relationship.

The CCMA will perhaps in these circumstances, bridge the gap and find that a dispute, which on the face of it, concerns a retirement fund and a member, in fact originates from the relationship between the employer and employee because membership of the fund or payment of contributions to the fund are compulsory under the employment contract. The rules of the fund may, by implication, form part of the employment contract.

Employment benefits commonly are matters dealt with between employers and employees (or their unions) by way of negotiation in one or another bargaining forum. To the extent that the subject in question is a matter of mutual interest between the employer and employee (which generally will be the case), a dispute arising from such negotiations may then be referred for conciliation to the CCMA. It would not however have the power to arbitrate on the dispute unless provided for in the LRA. Disputes of interest as opposed to disputes of right do not fall subject to statutory arbitration except occasionally as in the case of an essential service.

However, while the dispute in question may not be subject to arbitration, Section 64(4) provides that any employee or trade union that refers a dispute about a unilateral change to terms and conditions of employment to a bargaining council or to the CCMA, may require the employer to reverse that change or, not to implement it, for the duration of the 30 day conciliation period.

In terms of the Pension Fund's Amendment Act of 1996, all pensions funds shall be required to have a board consisting of at least 4 members, at least 50% of whom the members of the fund shall have the right to elect. This becomes effective in December 1998 in the case of existing funds.

In the run up to December 1998 it may be anticipated that some trustees or employers may attempt to initiate significant changes to the rules. To the extent that they affect substantive fund benefits, members of the fund may seek to take advantage of the interdict contained in section 64 where the proposed changes are not preceded by negotiation between employers and employees or their trade unions.

Where the rules of a fund grant a discretion to the employer to, for example, approve a request for early retirement of a member or to provide an enhancement in pension benefits, it is clear that such conduct may fall within the ambit of the unfair labour practice jurisdiction.

The primary office for dealing with disputes arising in retirement funds is that of the pension fund's adjudicator, a position established by the Pension Funds Amendment Act 1996. The adjudicator is likely to assume office in November of this year. His powers are wide ranging and he may conduct an investigation into any complaint following procedures he deems appropriate. A determination of the adjudicator will be deemed to be a civil judgment of court. he does not, however, have equity jurisdiction and will be concerned principally with interpretation and application of the rules of funds, maladministration, the exceeding of powers by trustees and so on. The conciliatory functions provided by the CCMA as well as the unfair labour jurisdiction may serve to complement the work of the pension funds adjudicator.

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The material contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. We accept no responsibility for any loss or damage, which may arise from reliance on information contained in this article.

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