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Durban - The eThekwini Municipality could be left bankrupt following a court ruling that it honour back-payments owed to more than 20 000 employees stemming from the unification of the council.
The South African Municipal Workers’ Union (Samwu) said the municipality was legally obliged to pay its employees millions of rand in staff benefits, dating back six years.
Last week, the Supreme Court of Appeal dismissed an appeal brought by the city against a judgment handed down by the Labour Appeal Court.
The case, brought by Samwu and the Independent Municipal and Allied Trade Union (Imatu), involved a divisional agreement about conditions of service that were the subject of dispute between the unions and the city in 2007.
Samwu regional secretary Nhlanhla Nyandeni said officials who had advised the city to implement unlawfully the new conditions of service, should be held accountable for the financial loss.
Nyandeni said Samwu would meet its lawyers on Friday to discuss how best to address the matter. He said that after the meeting, the union would meet city manager S’bu Sithole and the deputy city manager for corporate human resources, Dumisile Nene.
“We are talking about more than 20 000 employees. The judgment is looking at a basket of allowances, including risk allowances and overtime payments. We will also look into how the city will retrospectively pay employees who have retired and the beneficiaries of those who have died.”
Lilian Develing, of the Combined Ratepayers’ Association of Durban, said that cash-strapped ratepayers could not afford to pay more to keep up with the city’s financial burdens.
In the 2012/13 financial year alone, the city set aside R6.3 billion from its operating budget for salaries, allowances and salary increases. Develing said the city would have to apply for a loan to cover the backpay owed to staff.
“It’s a bottomless pit. They are really going to be digging to get the money and they will charge all sorts of things because, in the end, it always comes back to ratepayers. It’s mind-blowing. Already a huge bulk of the city’s budget goes towards salaries.”
Municipal spokesman Thabo Mofokeng said the implications of the court’s decision were being examined.
“Due to the complexity of the case, it is not possible to quantify the potential costs of the decision at this stage.”
Mofokeng said that other than employees who might wish to lodge claims on the strength of the case, there were a large number whose conditions of service, in particular their salaries, had been improved by the introduction of the divisional conditions of service in April 2007. This needed to be taken into account in considering the implications for the council and the costs.
“The way forward will be for the parties to enter into negotiations in the bargaining council around a new set of divisional conditions of service.”
Mofokeng said the decision to pursue the appeal was made on the basis of legal advice from senior counsel and with the agreement of top management.
Samwu claimed that human resources head Dave Cloete had resigned because of the Supreme Court of Appeal’s decision and did not want to be held accountable for the ill advice he had given the council.
Nyandeni said the city should not let Cloete leave the municipality until the matter had been settled because it would be difficult to go after him once he had left.
Mofokeng said Cloete had not resigned but had advised the city, as early as July 29, of his intention to retire.
“His retirement is in no way linked to the… court’s decision.”
The agreement was instituted in 2007 when employees, who fell under five pay structures relating to the former operational entities and all of whom had different conditions of service and wage packages, were unified under the newly created eThekwini Municipality.
This meant they were all placed on the highest of the five pay structures applicable at the time.
However, the unions said that after they signed the agreement, they asked the municipality not to go ahead with the implementation.
The unions raised concerns about the agreement as it dealt with issues that fell outside its permitted scope in terms of the National Bargaining Levels Collective Agreement and involved the removal of benefits.
But the municipality persisted with the agreement. The unions took the matter to court and won in the Labour Court and the Labour Appeal Court.
Mayor James Nxumalo could not be reached for comment.