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Settlement agreement founded on a common mistake is invalid

26 August 2019
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The Labour Appeal Court (LAC) has emphasized two important points of law relating to the validity of settlement agreements and the organizational rights of minority unions. One is that a settlement agreement is invalid if the parties were under a common misapprehension when they entered into it. The other is that a majority union cannot limit a minority union’s right to engage in collective bargaining by entering into private threshold agreements.

On 20 August 2019, the LAC issued its judgment in a long-running rights dispute between Murray & Roberts (M&R) and the Association of Mineworkers and Construction Union (AMCU).

M&R failed to meet with AMCU to discuss granting AMCU organisational rights as requested, whereafter the union referred a dispute to the CCMA. On 21 May 2014, in the conciliation proceedings at the CCMA, M&R raised a point to the effect that for AMCU to become entitled to the organisational rights it sought, it was legally required to become a member of the Metal and Engineering Industries Bargaining Council (MEIBC).

On the same day, AMCU and M&R entered into a settlement agreement in terms of which AMCU would withdraw its dispute and submit its audited membership figures to the MEIBC to become a member in order to obtain organisational rights.

A year later, AMCU again sought organisational rights from M&R in respect of a different site. M&R did not respond to AMCU’s request and AMCU again referred the issue to the CCMA. At conciliation, M&R raised a jurisdictional point that the matter was res judicata and the CCMA upheld the preliminary point. AMCU then took the jurisdiction ruling and settlement agreement on review.

The Labour Court reviewed and set aside the settlement agreement and the jurisdiction ruling. M&R then took the Labour Court judgment on appeal to the LAC, whose full judgment can be read here.

Effect of a ‘common mistake’

The LAC agreed with the Labour Court that the settlement agreement was invalid because both M&R and AMCU had made a ‘common mistake’ when entering into it. This was because both had assumed the wrong legal position regarding the nature and effect of the threshold agreements supposedly applicable to AMCU’s request for organisational rights. The settlement agreement was therefore based on that wrong assumption of the law; had AMCU known what the true legal position was, it would not have entered into the settlement agreement the LAC said.

Minority unions preserve their organizational rights

The judgment also clarified the legal position on collective agreements in relation to minority unions’ rights, finding that employers and majority trade unions cannot limit minority trade unions’ rights by entering into collective agreements.

The judgment further highlighted the other ways in which a minority union can seek to exercise its rights in terms of the Constitution and sections 12, 13 and 15 of the Labour Relations Act where a collective agreement is in place between the employer and the majority union regulating the required threshold of representivity.

In their judgments, both the Labour Court and the LAC referred to previous case law which held that threshold agreements between employers and majority unions did not prevent smaller unions from obtaining organizational rights.

This is a clarification of which employers and trade unions alike should be cognisant.