What happens when an employer realises years later that it may have been paying its employees too much?
That question lies at the heart of a recent Labour Appeal Court judgment. What began as a dispute over a 6% shift allowance became a significant ruling on collective agreements, bargaining council jurisdiction, administrative law and the importance of identifying the true dispute between the parties.
At first glance, the dispute appears to be about pure mathematics, but the judgment demonstrates that in labour law, the way a dispute is characterised can be just as important as the underlying disagreement itself.
A costly calculation
In 2011, the South African Local Government Association (Salga) together with the South African Municipal Workers Union (Samwu) and the Independent Municipal and Allied Workers Union (Imatu) concluded a collective agreement.
Clause 10.1 of that agreement dealt with a shift allowance and provided that:
“The allowance is equal to 6% of the employees’ annual basic salary and is payable monthly.”
For approximately 10 years, the employer applied the clause in a manner that financially benefited employees.
Bradley Workman-Davies 16 Oct 2026 In 2018, an anonymous letter questioned whether the employer was calculating the allowance correctly and suggested that its interpretation differed from that applied by other municipalities.
The employer reconsidered its position, but consultations with the trade unions failed to resolve the disagreement. The matter was then taken to the local labour forum and ultimately referred to the South African Local Government Bargaining Council for arbitration.
The central question that was asked was a simple one which was, what did “6% of the employees’ annual basic salary and payable monthly” actually mean? The employer argued that 6% represented the total annual allowance, which should then be divided by 12 and paid monthly.
The trade unions, by contrast, maintained that the existing method was correct and that employees were entitled to receive 6% of their annual basic salary each month.
The difference was far from academic: the employer’s interpretation would substantially reduce the employees’ shift allowance.
The arbitrator ultimately accepted the employer’s interpretation. Unsurprisingly, the trade unions were dissatisfied with the outcome, and the ensuing litigation became considerably more complex.
The dispute reframed
After the arbitration award was issued, Samwu challenged it and brought an urgent application to prevent the employer from implementing it. The application was unsuccessful.
The subsequent review application was not pursued and eventually lapsed. The employees later sought to be joined to the proceedings and applied for reinstatement of the review application. Both applications were granted.
When the matter eventually came before the Labour Court, the respondents adopted a different approach. Rather than arguing only that the arbitrator had misinterpreted clause 10.1 of the collective agreement, they contended that the arbitrator had lacked jurisdiction to determine the dispute in the first place.
Their case was that the dispute did not truly concern the interpretation and application of a collective agreement. Rather, they contended that, after 10 years, the employer had unilaterally changed its historical interpretation and application of the agreement.
This argument was accepted by the Labour Court. The court held that the employer's original interpretation and application of the agreement constituted an administrative action.
On that basis, it concluded that the dispute did not fall within section 24 of the Labour Relations Act, which deals with disputes concerning the interpretation or application of collective agreements. Consequently the arbitration award was therefore reviewed and set aside.
The matter then went to the Labour Appeal Court.
What was the real dispute?
The Labour Appeal Court was critical of the respondents' change in approach. The court pointed out that when the dispute initially arose, the parties had agreed that the issue should be referred for a proper interpretation of the collective agreement.
At the bargaining council, the respondents had vigorously maintained that the agreement had been correctly interpreted and implemented. What is important to note is that at arbitration they did not raise a jurisdictional point. The jurisdictional argument only emerged after the arbitrator had ruled against them.
The court held that the respondents could not effectively adopt one position when the dispute was being arbitrated and then after receiving an unfavourable outcome adopt a fundamentally different position in the Labour Court in an attempt to invalidate the award.
The court describes this as a situation in which the respondents sought to “approbate and reprobate” in other words, they could not accept and reject the same legal position depending on which suited them at a particular stage of the litigation.
The court emphasised that the material before the arbitrator demonstrated what the real dispute was about. This included the referral, the parties' opening statements, the evidence and their closing arguments.
All of these pointed to one issue: the interpretation and application of clause 10.1. The Labour Court, according to the Labour Appeal Court, had therefore lost sight of the actual dispute between the parties.
Bradley Workman-Davies 21 Aug 2026 A collective agreement is, at its core, a contract. Section 213 of the Labour Relations Act defines a collective agreement as a written agreement concerning terms and conditions of employment or another matter of mutual interest, concluded between registered trade unions and employers or employers' organisations.
The respondents attempted to characterise the employer's implementation of the agreement as an exercise of administrative power. The Labour Appeal Court rejected this.
The source of the employer's power to implement clause 10.1 was the collective agreement itself, not legislation. The court found that the employer was not exercising public power when it implemented the contractual provision.
This distinction is particularly important in South African public-sector employment disputes.
The fact that an employer is an organ of state does not automatically mean that every decision it makes is “administrative action” reviewable under the Promotion of Administrative Justice Act (Paja). The source and nature of the power being exercised matter.
Lessons from this judgment
The judgment provides a useful reminder that administrative law should not be relied on merely because one party is unhappy with a decision made by an organ of state.
Paja defines administrative action in terms of the exercise of public power or the performance of a public function in specified circumstances. For attorneys, this reinforces the importance of identifying the true source of the power being exercised before selecting a cause of action or review mechanism.
For employees and employers, the lesson is simpler, being employed by a municipality or another public institution does not automatically transform every workplace dispute into an administrative-law dispute. The court was also concerned about whether the dispute had actually been decided.
The Labour Appeal Court went further than simply correcting the jurisdictional analysis. It found that the Labour Court had failed to properly engage with the material that was before it.
A judgment can be undermined where there is a fundamental and pervasive failure to properly consider the relevant facts and legal issues. The result was that the appellant was not afforded a fair hearing.
The court observed that the real dispute, which was the proper interpretation of the collective agreement, remained unresolved because the arbitration award had been set aside.
That creates an important point: courts must determine the dispute that actually exists between the parties, based on the evidence and issues properly before them.
Practical lessons for the workplace
For employers, the judgment is a warning that discovering, years after implementation, that a collective agreement may have been incorrectly interpreted does not make the issue disappear.
An employer that believes it has applied a collective agreement incorrectly may have legitimate grounds to seek clarity on its proper interpretation.
However, changing how a contractual provision is applied can have serious financial consequences for employees and is likely to generate a dispute.
The safest course is to consult properly with the relevant unions and, where necessary, use the dispute-resolution mechanisms provided by the Labour Relations Act and the applicable bargaining council.
For trade unions and employees, the judgment contains an equally important lesson: parties should identify their legal case early and maintain consistency. If a dispute is presented at arbitration as one concerning the interpretation and application of a collective agreement, a party seeking to overturn an unfavourable award cannot later recast it in review proceedings as an entirely different dispute.
The judgment therefore highlights the importance of pleadings, referral documents, evidence and submissions. These are not mere procedural formalities; they shape how a court understands the dispute.
Ultimately, this case was never simply about whether 6% should be divided by 12. It was about identifying the true nature of the dispute.
The Labour Appeal Court held that the parties’ dispute concerned the interpretation and application of a collective agreement. It therefore fell squarely within section 24 of the Labour Relations Act and was properly before the arbitrator.
The court accordingly upheld the appeal, set aside the Labour Court's order and dismissed the review application, with no order as to costs.
For practitioners, the message is clear: identify the true dispute, distinguish contractual rights from administrative action and advance a consistent case from arbitration through review.
Litigation is not a second chance to redefine an unfavourable dispute. Once parties choose their case, they must stand by it.
