Arbitration awards made in terms of the Labour Relations Act (LRA) are “debts” in terms of the Prescription Act. Awards affording employees compensation with or without back pay are therefore unenforceable after a period of three years.
In a combined judgment dealing with three appeals, the Labour Appeal Court in Myathaza v Johannesburg Metropolitan Bus Service; Mazibuko v Concor Plant; Cellucity (Pty) Ltd v CWU obo Peters ended the uncertainty whether arbitration awards are extinguished by prescription and if so when. The Court held that the LRA does not prescribe a time limit within which an arbitration award must be enforced. Accordingly the provisions of the Prescription Act must apply.
The Court clarified the position:
- CCMA arbitration awards are simple debts not judgment debts and are therefore subject to a prescription period of three years;
- The three-year period will commence on the handing down of the award;
- If the award is made an order of court, the order becomes a judgment debt and only prescribes after 30 years;
- Since the amendment of section 145 of the LRA (effective 1 January 2015), an application to have a CCMA arbitration award reviewed interrupts the running of prescription of that award;
- The amendment to section 145 is not retrospective. Where an employer applies for the review of an award handed down before 1 January 2015 prescription is not interrupted. An employee in these circumstances may become disentitled to relief if the review process is not finalised within three years of the award being handed down.
It is not uncommon for review applications in the Labour Court to take months (or even years) to be finalised. Employers must be aware that from 1 January 2015 a legal challenge under section 145 to set aside an arbitration award interrupts prescription and extends the shelf-life of these awards.
Assisted by Michaela Bolton.