Time to review your contract

20 June 2011

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Time to review your contract

From 1 July 2011, employees earning more than the new threshold of R172 000,00 per year will not automatically benefit from certain sections of the Basic Conditions of Employment Act, 1998. The previous threshold was R149 736,00 per year. Employees earning more than the monetary threshold cannot insist on only working a minimum of 45 hours in any week without receiving overtime pay (sections 9 and 10) and are also excluded from sections 11 and 12 which regulate compressed working weeks and the averaging of work hours. They cannot insist on a one hour meal interval (section 14), daily and weekly rest periods between ending and recommencing work (section 15) and to be paid for work done on Sundays (section 16). They also do not qualify for the protection afforded by the BCEA in relation to night work (section 17(2)) and are not automatically entitled to additional pay for working on public holidays (section 18(3)).

The potential pool of employees who are automatically entitled to overtime pay and for additional remuneration for work performed on weekends and public holidays will therefore increase from 1 July 2011.

Employers need to be aware of this change to ensure that their employees are paid what they are entitled to and to ensure that all the collective agreements, letters of appointment and policies which may be in place are updated to reflect the increase in the threshold.

In calculating an employee’s annual earnings for purposes of the monetary threshold, “earnings” means the regular annual remuneration before any deductions such as income tax and pension and medical payments. Earnings exclude contributions which the employer makes in respect of the employee (for instance contributions towards medical aid and pension funds). In particular, subsistence and transport allowances, achievement awards and payments for overtime worked are not regarded as remuneration for the purpose of calculating an employee’s earnings.

 

By: Karen Ainslie

Using labour broking does not avoid dismissal obligations

The Labour Court has confirmed the principle that clauses in a contract of employment that provide for the automatic termination of an employee’s employment if the labour broker’s client no longer requires the services of the employee, are invalid.

In the past businesses have avoided having to comply with the dismissal provisions in the Labour Relations Act by using labour brokers to provide employees. The labour brokers have in turn built in automatic termination provisions in their contracts of employment to avoid unfair dismissal claims by their employees.

The facts

In Mahlamu v CCMA and others (unreported) the respondent labour broker employed the applicant as a security officer with a provision in his contract that the employment contract would automatically terminate:

  • on expiry of the contract between the labour broker and the client; or
  • in the event that the client no longer required the services of the employee “for whatever reason”.

The client sent notice of the immediate termination of the labour broking contract and the labour broker in turn notified the employee in a letter that his services were no longer required and that he was “automatically terminated” because it had no alternative position for him.

Pursuant to an unfair dismissal claim the arbitrator found that since the client no longer required the applicant’s services, the employment contract had terminated automatically and there had therefore been no dismissal.

Issue to be determined

The issue was whether automatic termination clauses in employment contracts are contrary to the provisions of the Labour Relations Act (LRA) and therefore invalid?

In SA Post Office Limited v Mampeule (2009) 30 ILJ 664 (LC), the LAC endorsed the view that parties may not contract out of the dismissal requirements of the LRA, and that in such cases the employer must prove that the termination clause was fairly triggered. The court noted that section 185 of the LRA gives every employee the right not to be unfairly dismissed. Section 5 prohibits employers preventing employees from exercising rights conferred on employees, except by contractual provisions permitted by the LRA. The question was, accordingly, whether the automatic termination clause in the contract between the applicant and his employer, was permitted by Section 5 of the LRA.

Finding

The court found in the Mahlamu case that the automatic termination clause fell within the prohibition in section 5(2)(b) of the LRA because the clause prevented the employee from exercising his right not to be unfairly dismissed.

The commissioner had committed a reviewable error of law and the court set aside his award and replaced it with a ruling that the termination of employment constituted a dismissal. The applicant was granted leave to refer the dispute concerning the fairness of his dismissal either to the CCMA or the Labour Court, as the case may be. It follows that the adjudicator will find that the dismissal of Mahlamu was both substantively and procedurally unfair.

Conclusion

The Court found that the decision by the client had the effect of unacceptably converting a substantive right into a conditional one. The client could at any time, for any reason, simply state that the employee’s services were no longer required which would result in the termination of the employment contract leaving the employee with no right of recourse.

The importance of the case

The importance of this case is that it confirms the principle that clauses in a contract of employment that provide for the automatic termination of an employee’s employment, in circumstances where the labour broker’s client no longer requires the services of the employee, are invalid.

In Mahlamu, the Court drew a distinction between that case and the situation where the end of an agreed fixed term is defined by the happening of a particular event, for instance the completion of a project. In the latter scenario, the Court said that there would not be a dismissal for the purposes of 186(1) of the LRA.

This means that labour brokers may enter into fixed term contracts with employees that they will be employed for the duration of a specific project or task. Labour brokers may not contract with employees for the automatic termination of their employment contracts on expiry of the contract between the labour broker and the client. This illustrates the importance of drafting employment contracts which clearly explain the specific project or task that the employees will be employed for.

 

By: Murray Alexander

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Court’s intervention in disciplinary hearings: Justifiable or just delay tactics?

In law, jurisdiction is determined according to whether a particular court has the power or competence to hear and determine an issue between parties.

A recent decision of the Labour Appeal Court dealt with the issue of whether the Labour Court has jurisdiction to intervene in pending or incomplete disciplinary proceedings. The effect of this decision is that an employee facing disciplinary hearings may approach a court to prevent the hearing from taking place, but only in exceptional circumstances for instance to avoid a grave injustice.

In Booysen v The Minister of Safety and Security & others [2011] 1 BLLR 83 (LAC) the Labour Appeal Court was approached by Mr. Booysen, a Director in the South African Police Services. Booysen had been charged with fraud, corruption and perjury in July 2007 and was suspended without pay. The facts are complicated due to the numerous attempts by Booysen and his legal representative to apply for relief to both the Labour Court and the Cape High Court.

The main reason for Booysen’s court applications was to challenge the fairness of the disciplinary hearing pending against him. The hearing was initially scheduled for August 2007, but had since been postponed on numerous occasions. Evidence had been submitted by medical professionals that Booysen suffered from post-traumatic stress disorder with an associated major stress disorder. The hearing had been repeatedly postponed after Booysen suffered a panic attack during the resumption of the hearing in October 2007. As a means to proceed with the hearing, the chairperson of the disciplinary committee then requested a medical report from an independent doctor of her own choosing to determine whether Booysen was mentally and physically fit to participate in the hearing.

In February 2008, after hearing all the medical evidence, the chairperson ruled that despite Booysen’s medical condition, he was fit to participate in the hearing and that the hearing would continue. Having made this ruling, the chairperson ordered that the hearing would continue on 13 February 2008.

The day before the hearing was to resume, Booysen launched an urgent application in the Labour Court to have the hearing postponed, and to review and set aside the chairperson’s ruling that he was fit to participate in the hearing. The Labour Court dismissed Booysen’s urgent application on the grounds that it did not have jurisdiction to intervene in pending disciplinary proceedings.

Thereafter, Booysen sought the same relief and launched a second urgent application to the Cape High Court. The High Court also dismissed the application on the grounds that it did not have jurisdiction.

Booysen then took the decision of the Labour Court on appeal. The issue before the Labour Appeal Court was confined to the correctness of the Labour Court’s finding that it did not have jurisdiction to intervene in pending disciplinary hearings.

In reaching its judgment, the court reasoned that the effect of the lower court’s decision is that the court cannot come to the assistance of an employee before he or she has been dismissed. This would be the case even if the employee is in a situation where his or her pre-dismissal rights have been infringed or where there have been unfair labour practices. In such a case, a court would only be able grant relief after the fact. Whilst the court noted the argument that court intervention in pending disciplinary proceedings would be costly and time-consuming, it reasoned that possible future litigation to appeal the decision of the disciplinary committee could be prevented if the relief is granted at an early stage.

The court held that the Labour Court has jurisdiction to interdict any unfair conduct including a disciplinary action. The matter was remitted to the Labour Court for it to make a decision on the fairness of the pending disciplinary hearing against Booysen. The court added that such an intervention should only be exercised in exceptional cases. The court did not set out what it would consider exceptional circumstances. It did, however, mention that courts should consider whether a failure to intervene would result in a grave injustice or whether the employee could achieve justice by other means. We anticipate that future decisions of the Labour Court will provide guidance on how such matters should be dealt with. The courts are likely to adopt a strict test and avoid multiplicity of spurious challenges and delaying tactics.

Due to the peculiar circumstances of Booysen’s case, the court did not make a finding on the merits. The court commented that it was remarkable that the matter had been ongoing for more than three years without the dispute relating to Booysen’s actual misconduct ever being considered. Courts must not encourage delaying tactics used by employees, but a court is justified in granting employees relief against injustice before they face the humiliation of a possible dismissal. The question will always be whether exceptional circumstances exist to justify court intervention.

Sipelelo Lityi (Candidate Attorney) and Daniel Breier (Candidate Attorney)

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Striking employees told to tone down protest

The Kwazulu-Natal High Court granted an interdict preventing protesters from chanting loudly or using any kind of instrument to make noise because tolerance levels for conducting business were exceeded by unacceptably high noise levels.

The dispute involved the La Lucia Mall owners seeking to prevent Dischem employees from picketing loudly in their basement parking area and intimidating members of the public. The first issue was whether the High Court had jurisdiction to grant an interdict in relation to a labour dispute. South African Commercial Catering and Allied Union’s (SACCAWU) contended that this matter could only be dealt with by the CCMA and, if needs be, the Labour Court. The High Court ruled that it had jurisdiction as the cause of action and the relief sought was couched squarely within the common law of nuisance.

SACCAWU’s representative claimed that “noise is plainly part of the picket” and that “the only issue should be one of degree”. SACCAWU further contended that the application for the interdict conflicted with collective bargaining provisions in the Labour Relations Act which prohibits any civil proceedings being instituted against any person for any conduct in contemplation or in furtherance of a protected strike.

The employees have a constitutional right to picket and a right to freedom of expression but SACCAWU could not deny that the owner and the tenants conducting business in the mall had a right to property, to trade and to a healthy environment. It was for the court to balance these two constitutional rights.

The court held that: “like all other rights, the right to demonstrate, bargain collectively, strike and picket are not unlimited and absolute. Inevitably in the nature of pickets, non-parties to the labour dispute are inconvenienced sometimes even prejudiced.” It followed that the justifiable limitation on SACCAWU was to exercise their right to picket with a lower noise level. They were not precluded from demonstrating, singing and chanting softly.

The owners led expert evidence that the striking employees' noise levels had exceeded 100 decibels, with regulations only permitting 85 decibels, but led little or no evidence that the employees were intimidating the general public during their picketing. On the evidence before the court the interdict was granted solely on the noise levels that infringed rights to property and trade.

Employers can approach a competent court for relief when their right to property, to trade and to a healthy environment is unduly limited by striking employees exceeding their own rights in the circumstances.

By: Lance Witten, Johannes Burger and Sipelelo Lityi.

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The impact of the public interest factor in proposed mergers before the tribunal

There may be no retrenchments in South Africa as a result of the merger for two years after the implementation of the transaction (1 December 2010), except senior management.

On 14 October 2010 the Competition Tribunal announced the approval of the merger of Metropolitan Holdings Limited and Momentum Group Limited subject to certain conditions. There may be no retrenchments in South Africa as a result of the merger for two years after the implementation of the transaction (1 December 2010), except senior management.

The Competition Act requires the tribunal to “initially determine” the competition effects of a merger. If the merger is not likely to substantially prevent or lessen competition, then the tribunal must still consider its effect on the public interest. The Act sets out the public interest grounds. Employment is one of the public interest law grounds listed found to be relevant to this merger because the merging parties had indicated that the merger may lead to up to 1000 retrenchments.

The tribunal confirmed that merging parties are not required to affirmatively justify a merger on public interest grounds. However, once the merger, on the face of it, may not be justifiable on substantial public interest grounds, the burden shifts to the merging parties to rebut the inference. The merging parties must prove that a rational process has been followed to arrive at the determination of the number of jobs to be lost; and that the public interest in preventing employment loss is balanced by an equally weighty, countervailing public interest justifying the job loss which is recognized under the Act.

Even if the merging parties make a good efficiency argument for job losses, if the job losses are substantial this efficiency gain must, be justified on a ground that is public in nature to countervail the public interest in preserving jobs. The Act refers to the public interest which must be distinguished from a private interest. The merger must be assessed on public policy grounds even after it has been justified for its efficiency.

The tribunal found that that the merging parties failed to prove a rational connection between the efficiencies sought from the merger and the job losses claimed to be necessary on their worst case scenario. Thus the tribunal found that the merging parties had not met the second leg of the criteria, namely, that the job losses can be justified for a reason that countervails the job loss incurred by the merger.

The tribunal accepted that there may be certain circumstances where efficiency gains with substantial job losses may be justifiable on public interest grounds. However, in this case the merger leads to an adverse effect on the public interest on employment. response to a request to take a deferential approach to labour issues, the tribunal held that it has a discretion that it must exercise. The employment loss would be of a considerable magnitude and the short term prospects of re-employment for a substantial portion of the affected class are limited. Thus an unconditional merger would have a substantial adverse effect on the public interest.

The merger was, therefore, approved subject to the limited moratorium on retrenchments for two years, except in the case of senior management. This merger clearly illustrates how public interest and employment considerations can have an impact on proposed mergers and can serve to delay or stall or attach conditions to a merger even a merger with limited anti-competitive effects.

Written by candidate attorneys Vuyo Goni and Lynette Swart

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