The Labour Appeal Court has dismissed an application from public sector unions challenging government's decision to renege on paying salary increases for the final year of a three-year wage deal.

The hearing was held earlier this month and Judges Dennis Davis, Violet Phatshoane and Philip Coppin delivered the judgment on Tuesday.

Government took the decision as part of a plan to slash the state's wage bill by R160 billion over the next three years. Implementing this year's wage agreement would require government to cough up some R37 billion to pay civil servants.

The collective agreement struck between the Public Servants Coordinated Bargaining Council and government back in 2018 had been implemented for the years 2018/19 and 2019/20. Earlier this year, a day before the February 2020 budget was tabled, government had requested that the agreement be reviewed as its costs were unaffordable.

Unions however lodged an application for the enforcement of a clause in the agreement which would see government fulfill the final year of the wage deal. Finance Minister Tito Mboweni then filed a counter-application to have the enforcement of the clause declared "unlawful, invalid and unenforceable", the judgment read.

The court considered regulations 78 and 79 of the Public Service Regulations, under the Public Servant Act, and together they impose certain requirements for the conclusion of a collective agreement by the state. For one, the cost of the collective agreement must be covered from the relevant department of the state.  Other requirements are that there should be a written commitment from National Treasury to provide additional funds, or the agreement should be funded from the budget of other departments or agencies, with their written consent and that of Treasury, the judgment read.

"From the papers it appears that the cost of the collective agreement could not be covered solely from the budget of the seventh respondent (the Department of Public Service and Administration).

"No written commitment was provided by National Treasury to provide additional funding, and, further, no written agreement by any other department or agency and National Treasury's approval has been procured to fund the deficit from other budget," the judgment read.

At the hearing, unions' legal teams contended that the Treasury and the finance minister were bound by the approval of cabinet, in a draft agreement entered into in January 2018. The judgment however points out that then minister of finance Malusi Gigaba had written a letter to former Public Service and Administration Minister Faith Muthambi, explicitly outlining that no additional funding could be made available for the wage agreement.

The court ultimately found the enforcement of the clause in the agreement to be unlawful, as it is in contravention of the Constitution and regulation 78 and 79 of the Public Servants Regulations. On these grounds the application of the unions was dismissed, as the court resolved there is no valid agreement on which they based their claim.

No cost orders were made.