The pay differential war

On 19 April 2016 the Labour Court (Court) handed down judgment in one of the first appeals to be decided in terms of the newly enacted section 10(8) of the Employment Equity Act, 1998 (EEA). Section 10(8) allows an aggrieved party to appeal to the Labour Court against an award of The Commission for Conciliation, Mediation and Arbitration (CCMA) in an unfair discrimination dispute.

In terms of a collective agreement between Pioneer Foods (Pty) Ltd (Pioneer) and the Food & Allied Workers Union (FAWU), Pioneer pays newly appointed employees, for the first two years of employment, at 80% of the rate paid to established employees doing the same work.

Seven newly appointed employees, represented by the trade union Workers Against Regression (WAR), referred a dispute to the CCMA alleging that the negotiated pay differential was an arbitrary ground of unfair discrimination.

In the proceedings WAR failed to disclose the arbitrary ground on which they relied. The CCMA Commissioner however considered that the newly appointed employees had previously rendered services to Pioneer through various labour brokers and that this had triggered the difference in remuneration. He found that the difference in remuneration was not based on any rational ground and was in conflict with the requirement of equal pay for work of equal value. The Commissioner ordered the payment of damages and the correction of the remuneration rate of the new employees.

Pioneer took the decision on appeal to the Court.

The Court found that to prove that the conduct complained of amounts to discrimination on an arbitrary ground, a complainant must show that the conduct complained of is not rational, amounts to discrimination, and that the discrimination is unfair. If the complainant cannot prove that the conduct complained of is not rational, that is the end of the matter.

The Court considered Pioneer’s reasons for the difference in remuneration. The Court accepted that the terms of a collective agreement were not a defence to discrimination but cautioned against stretching this principle beyond its proper application. The agreement had come about because Pioneer was in the process of reducing the extent to which it utilised the services of “precarious” employees such as employees of labour brokers. FAWU had proposed the pay differential to recognise the existing service of its members already employed by Pioneer. The Court found that Pioneer had acted transparently in the appointments. It revealed to all the applicants that they would be appointed on a lower wage rate. These employees faced an election either to agree to this or not. Furthermore the ground of “labour broker permanency” had never been put to Pioneer in the CCMA proceedings. This, the Court found, was a valid ground for a review of the award.

The Court found that where a collective agreement stipulates different pay levels for employees employed with different periods of service that, this in itself is not arbitrary differentiation. Proving discrimination on an arbitrary ground will depend upon whether, objectively, the ground is based on attributes and characteristics which have the potential to impair the fundamental human dignity of persons, or to affect them in a comparably serious manner.

The Court found that the differentiation in respect of pay on the basis of length of service with an employer is not irrational. It does not impair employees’ fundamental human dignity or affect them adversely in a comparably serious manner. It is a classic example of a legitimate and very common ground for differentiation, which both the EEA and the Labour Relations Act recognise as rational and legitimate.

The Court found that differential treatment is ubiquitous in modern life and the workplace. It would be impossible to regulate a modern country without differentiation and classifications which treat people differently and which impact on people differently.

The Labour Court upheld Pioneer’s appeal. It found that the conduct complained of was not based on an arbitrary unlisted ground, it was not unfair and that the CCMA Commissioner ought to have dismissed the claim.

Norton Rose Fulbright South Africa represented Pioneer in this matter.