Are private dispute resolution agreements really binding?

Parties often contract out of the CCMA or Labour Court as the forum that considers their dispute and opt for private arbitration. But, are these agreements really enforceable? 

This question again recently came before the LAC in SAFPU and Others v Free State Stars Football Club (Pty) Ltd. The LAC was called upon to decide whether or not the employees were obliged to abide by the private dispute resolution process set out in their contracts of employment. 

The LAC confirmed the established principle that the discretion of the courts to refuse arbitration may only be exercised when a "very strong case" is made out and that "there should be compelling reasons" to do so.

The employees were professional football players who had entered into fixed-term contracts of employment. Their services were terminated for operational requirements. The employees lodged a claim in the Labour Court to which their employer raised a point in limine and sought an order that the claim be referred to private arbitration before the Dispute Resolution Centre (DRC). The court upheld the in limine point and ordered that the employees refer the dispute to the DRC. The court found that the employees failed to show that they would personally face difficulties at arbitration proceedings and secondly, that any special circumstances for refusing arbitration existed. The employees appealed the decision to the LAC.

The LAC found that the Labour Court misdirected itself and that there were in fact exceptional circumstances that existed, which justified that the employees ought not be bound by the private dispute resolution clause. In summary, some of the factors considered were the following: 

  • The employees had a good claim for payment of the balance of their agreed remuneration on the papers already filed in court.
  • A minimum of evidence would be required in the consideration of the dispute on a review of the papers already filed in court.
  • The DRC was more onerous for the employees as they would have to pay fees unlike in the Labour Court.
  • Importantly, the employees would have the benefit of a speedy dispute resolution mechanism of the LRA in the Labour Court.
So, a private disputes clause in an employment contract does not automatically preclude an employee from approaching the CCMA or Labour Court. The employee would, however, need to show that special circumstances justify a departure from the agreed process. 

This issue often arises in practice and the question of exceptional circumstances is fact dependent. Employers faced with such issue should take legal advice prior to filing responding papers in court as the issue is a legal one, which relates to persuading the Labour Court to exercise a discretion in enforcing the agreed terms of contract. The approach in the CCMA in the absence of pleadings, is obviously slightly different in approach.

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