Category: In the Media

BCHC: AUTOMATIC TERMINATION CLAUSES IN FIXED TERM CONTRACTS

 


Written by John Noble and edited by Prof Darcy Du Toit


Employers often include automatic termination clauses in fixed-term employment contracts. The legality of these clauses however depends on the circumstances surrounding the employment relationship.

Whilst the use of automatic termination clauses in fixed term employment contracts may be commercially justifiable, courts are scrutinising these clauses more carefully because of the potential for abuse.  Employers should therefore be careful not to include clauses that could be found to be un-enforceable or in contravention of labour legislation.

As a starting point, not all terminations of fixed term employment contracts would amount to dismissals. Fixed term contracts, by their very nature, terminate by operation of law when they expire on the date that the parties agreed to. However, where a fixed term contract contains an automatic termination clause, it would result in the contract terminating before the agreed date i.e. when the contract is subject to the existence of another contract between the employer and a third party. Such a termination clause may not always be enforceable and could potential require a retrenchment process to be followed as opposed to simply relying on the termination by operation of law.

By way of example, a security company could for instance enter into a contract with a client to provide security services. The security company then employs security guards on fixed term contracts for the duration of its contract with the third-party client. In its employment contracts with the guards, the security company includes a clause stipulating that the contract will terminate should the contract between the security company and the client terminate. This is a common example of a resolutive condition, which has the effect of automatically terminating an employment relationship. The question which naturally follows is whether such a term is lawful, especially given the stringent protection afforded to employees by the Labour Relations Act, 66 of 1995 and given the fact that an automatic termination clause could deprive an employee of that protection.

As a general point of departure, an automatic termination clause that is triggered by the happening of a certain event may be lawful where the cause of the termination was not due to an act of the employer and whether or not the clause should be enforced by an employer will therefore depend on the factual circumstances.

BCHC: AN INTERESTING CONFLICT WHEN SENIOR MANAGERS ARE UNION MEMBERS


Written by John Noble and edited by Prof Darcy Du Toit


The interplay between senior management and more junior employees is a vital factor in any modern organisation. Equally vital, and often equally contentious, is the interplay between trade unions and employers. At the heart of these relationships is the age-old conflict between labour and capital, underpinned by the often acrimonious divergence of interests between the two.

The question arises as to what an employer should do if its senior managers join trade unions that represent workers, over whom senior managers have disciplinary authority. The potential for a conflict of interests in this situation is clear.

It is well known that South African law provides everyone with the right to freedom of association and every worker with the right to form and join a trade union. It is also a fact of any workplace that senior employees are normally tasked with disciplining more junior employees. Where does this leave senior managers who wish to join trade unions representing more junior employees?

To date our courts have decided the issue firmly in favour of the right of any employee to join any union. Although the clear conflict of interest that would naturally arise were not lost on the courts, the hard-won protections of the Constitution and the Labour Relations Act, 66 1995, in this respect, are unassailable.

This position is not as concrete in international law – something that our courts have not taken into account in deciding this issue. Although it takes a relatively similar stance to our labour legislation in most respects, the ILO has decided that to prevent a senior employee from joining a union which represents more junior employees would not amount to a violation of the right to form and join a trade union as long as senior employees are free to form their own so called “white collar” unions.

Under the current disposition, employers would be hard-pressed to prevent their senior employees from joining a union of their choice. However, nothing prevents an employer from taking disciplinary action for misconduct or incapacity against a senior employee, who by virtue of their union membership, places himself or herself in a conflict of interest position and who is rendered unable to perform his or her duties.

A possible further avenue for employers could be that of an operational requirements dismissal on the basis that a senior manager should have the ability to impartially discipline more junior employees. This possibility has however not yet been considered by our courts.

BCHC: Can jurisdictional arguments be raised after a certificate of outcome has been issued?

Written by Jeannette Vlok and edited by Bradley Conradie

Parties often only realise that there are jurisdictional issues that they could raise before the date of the arbitration. The question then arises as to whether a party can or should raise those jurisdictional issues after the matter has already been conciliated.

There is a misconception that the fact that a matter has been conciliated condones any jurisdictional defects such as lateness or non-joinder. The fact that a certificate of outcome has been issued does not however confer jurisdiction on the CCMA or a bargaining council to arbitrate a dispute.

This was confirmed in Bombardier Transportation (Pty) Ltd v Mtiya [2010] 8 BLLR 840 (LC) where the Labour Court held that “a certificate of outcome is no more than a document issued by a commissioner stating that on a particular date, a dispute referred to the CCMA for conciliation remained unresolved. It does not confer jurisdiction on the CCMA to do anything that the CCMA is not empowered to do, nor does it preclude the CCMA from exercising any of its statutory powers. In short, a certificate of outcome has nothing to do with jurisdiction. If a party wishes to challenge the CCMA’s jurisdiction to deal with an unfair dismissal dispute, it may do so, whether or not a certificate of outcome has been issued. Jurisdiction is not granted or afforded by a CCMA commissioner issuing a certificate of outcome. Jurisdiction either exists as a fact or it does not.”

The position in Bombardier was also confirmed by Cinqplast Plastop (Pty) Ltd v Dunn NO & Others [2016] JR 1751/14 and in SAMWU obo Manentza v Ngwathe Local Municipality & Others [2015] 9 BLLR 894 (LAC).

The CCMA and bargaining councils are therefore obliged to first determine whether or not it has jurisdiction before proceeding to arbitrate the dispute in question.

This risk of not raising these issues and ensuring that the CCMA or bargaining councils actually have jurisdiction is that these jurisdictional issues can later be used as grounds for review by the unsuccessful party.

Parties can and should therefore raise any jurisdictional issues as soon as they come to light to avoid a situation where the matter is remitted back to the CCMA or a bargaining council to be heard again, which could be years after the initial referral.

BCHC: Can employees be expected to disclose misconduct to their employer?

Written by Danny Hodgson and edited by Prof Darcy Du Toit


“Derivative misconduct” happens where an employee knew or must have known about misconduct by another employee but decided, without justification, not to disclose it to the employer. According to the Labour Appeal Court, it amounts to a breach of the duty of good faith for which employees could be dismissed.

The Constitutional Court has now added an important qualification. In NUMSA obo Khanyile Nganezi and Others v Dunlop Mixing and Technical Services (Pty) Ltd and Others (CCT202/18) [2019] ZACC 25 (28 June 2019) it held unanimously that this duty to disclose cannot be imposed unilaterally and that there must be a reciprocal good faith obligation on the employer.

The case arose from the dismissal of Dunlop’s entire workforce after a violent protected strike. A group of employees who were not positively identified as being present when the violence took place were dismissed on the basis of derivative misconduct in that they failed to disclose who the perpetrators were or to exonerate themselves.

The Labour Court and Labour Appeal Court upheld the dismissals on the basis that the employees probably had knowledge of the misconduct. The Constitutional Court, however, disagreed. It held that placing a unilateral obligation on employees to disclose information about the participation of other employees in misconduct would be akin to placing a fiduciary duty on the employees. In the context of a strike, this would undermine collective bargaining power as it would require action from the employees in the interests of the employer without any reciprocal obligation from the employer.

In order to impose a duty to disclose, the Court found, there must be a reciprocal duty on the part of the employer to protect the employees’ individual rights. In the context of a strike, this would require that the employees’ safety be guaranteed before expecting them to come forward and disclose information to exonerate themselves. This was not done in the Dunlop case and the union’s appeal succeeded for this reason.

It therefore appears that employers will not be able to rely on the principle of derivative misconduct unless they are able to show a reciprocal obligation that they owe to the employees which justifies placing such a duty on the employees.

Employees who have knowledge of misconduct and refuse to disclose it, however, could still be treated as “accessories after the fact” on the basis of complicity in the primary misconduct as opposed to derived misconduct. In this case, evidence will have to be led that those employees associated themselves with the violence before it commenced or even after it ended, and prior or subsequent knowledge of the violence as well as the necessary intention will have to be proven.

BCHC: Can a volunteer be seen as an employee?

By Venolan Naidoo, edited by Bradley Conradie


Section 3(1)(b) of the Basic Conditions of Employment Act, 75 of 1997 (BCEA) specifically excludes “unpaid volunteers working for an organisation serving a charitable purpose” from the application of the BCEA.

Section 3 of the National Minimum Wage Act, 9 of 2018 (NMWA) also excludes an individual “who performs work for another person and who does not receive or is not entitled to receive any remuneration for his or her services” from the application of the NMWA.

Although the above specific labour legislation excludes a volunteer from being seen as an employee, it often happens that supposed volunteers (receiving periodic allowances) claim to be employees in order to obtain employee rights.

Our law has developed various tests over the years in determining whether there is an employment relationship. These tests have however largely been based on the distinction between independent contractors and employees.

The Code of Good Practice of Who is an Employee also contains a list of factors to determine whether an individual should be considered to be an employee. Both section 200A of the Labour Relations Act, 68 of 1995 and section 83A of the BCEA create a statutory rebuttable presumption that a person is an employee if certain factors are present. These factors include the following:

  • the manner in which the person works is subject to the control or direction of another person.
  • in the case of a person who works for an organisation, the person forms part of that organisation.
  • the person is economically dependent on the other person for whom he or she works or renders services.

The statutory presumption that a person is an employee only applies to individuals earning below the statutory earnings threshold which is currently R 205 433.30 per annum.

The Labour Court (LC) and Labour Appeal Court (LAC) have dealt with cases where individuals in volunteer arrangements claimed that they were employees. The LC and LAC held that both parties must have a clear intention to create a legally enforceable employment contract whether it be oral or in writing. In other words, a clear intention must be established before any conclusion can be made on the existence of an employment relationship. In analysing whether such an intention exists, our courts have looked at the following:

  • the documents signed demonstrating the nature of either a volunteer or employment relationship.
  • whether an organisation normally enters into employment contracts with a specific type of individual (within its organisation) claiming to be an employee.
  • whether there is any contractual arrangement regardless of the form.

Conclusion

A volunteer earning below the statutory threshold could therefore claim that he/she is an employee based on certain factors being present.  The volunteer, claiming to be an employee, must however demonstrate that both parties had a clear intention to enter into a contractual arrangement and that this arrangement has the characteristics of an employment relationship.

It is therefore important that if employers want to make use of volunteers, the nature and terms of the relationship should be clearly set out in an agreement to avoid any uncertainty and disputes at a later stage.

BCHC: The date of dismissal in a reasonable expectation of renewal dispute?

Introduction

It is easy to assume that the date of dismissal in a reasonable expectation of renewal dispute would be when an employee’s fixed term contract expires. This date becomes important to determine when an employee has to refer an unfair dismissal dispute to the CCMA or bargaining council.


Section 190(2)(a) of the Labour Relations Act

Section 190(2)(a) of the Labour Relations Act, 66 of 1995 (the LRA) however provides an exception in reasonable expectation of renewal disputes with regard to when the date of dismissal is. In such cases the date of dismissal is the date on which the employer offered the less favourable terms or the date when the employer notified the employee of the intention not to renew the contract.

Some may argue that section 190(2)(d) of the LRA applies in such cases which states that the date of dismissal is when the notice of termination expires or, if it is an earlier date, the date on which the employee is paid all outstanding salary.

Section 190(2)(a) however specifically caters for reasonable expectation of renewal disputes and section 190(2)(d) was inserted in a later amendment in 2014 to deal with circumstances where section 190(2)(a) does not apply i.e. where an employer, for whatever reason, decides to terminate a permanent contract of employment by giving notice or decides to terminate a fixed term contract of employment early.  If this was not the case section 190(2)(a) would have been repealed in 2014. It could in any event never have been the intention of the legislature to allow an employee to pick a date of dismissal as this would lead to uncertainty.  There is also no requirement for an employee to be given notice before the agreed expiry of a fixed term contract.

The above interpretation has been confirmed by the Labour Court in Ndlambe Municipality v CCMA & others [2008] JOL 22780 (LC).


Conclusion

Employers should therefore check whether employees’ reasonable expectation of renewal disputes in the CCMA or bargaining councils have in fact been filed within the prescribed 30-day period as calculated from the date on which the employee was informed that the contract would not be renewed or would be renewed on less favourable terms.

BCHC: A thank you to Judge Steenkamp

It is with great sadness and shock that we mourn the death of our dear friend and colleague Judge Anton Steenkamp. Anton, a man of strength, resilience and integrity was also a kind hearted and compassionate soul. There can be no doubt that we have lost someone that has made a major contribution to the development of labour law in our country as a labour lawyer and later as a judge.

Over the 25 years that I knew him he played an instrumental role in mentoring me. From the day he recruited me in 1996 as a candidate attorney at Cheadle Thompson and Haysom through to employing me into his team in 2003 at Sonnenberg Hoffman and Galombik (later ENS) where I became a partner through his motivation and guidance.

He encouraged my involvement in SASLAW of which he was the 4th national president with me following in his footsteps to become the 6th national president.  His guidance and mentorship came with ease and continued even during my time as an acting judge.

He had a passion for writing and we worked, with others, as co-authors on Labour Relations Law and Strikes and the Law.

I had the honour of arguing many cases before him. He was an outstanding judge with the highest morals and utmost efficiency, always delivering thorough and timeous judgments.

Anton you have shaped and changed my life in many ways, particularly at a time when it was very difficult for black people to enter the legal profession and to succeed in it.  Thank you for your effortless guidance and for being such a great friend.

Your contribution to life and law will not be easily forgotten.

Rest in peace my dear friend.

BCHC: Can an employee hold a reasonable expectation of renewal and permanency at the same time?

An employee can refer an unfair dismissal dispute to the CCMA or bargaining council in terms of section 186(1)(b) of the Labour Relations Act, 66 of 1995 (LRA) if the employee was employed on a fixed term contract and reasonably expected that the employer would –

  • Renew the contract on the same or similar terms but the employer offered to renew it on less favourable terms, or did not renew it; or
  • Retain the employee on an indefinite basis on the same or similar terms as the fixed term contract, but the employer offered to retain the employee on less favourable terms, or did not offer to retain the employee.

Employers occasionally face cases where employees claim that they held both a reasonable expectation of renewal and a reasonable expectation of permanency.

Commissioners then have to figure out what the employee’s actual expectation was. If this clarity is not sought or cannot be obtained, they often conclude that the employee held both an expectation of renewal and an expectation of permanency which results in the award being susceptible to review by the Labour Court.

Such a review application was heard in the Cape Town Labour Court on 31 May 2017 by Judge Anton Steenkamp in City of Cape Town v IMATU obo Searle & Others under case number C494/2016.

In that case the City argued that an employee who was employed on a fixed term contract, could not have held both expectations at the same time. This was based on the fact that the previous version of section 186(1)(b) of the LRA only referred to a reasonable expectation of renewal which meant that there was no basis for an expectation of permanency. This section was, however, amended in 2015 to include a reasonable expectation of permanency as a new and alternative remedy to a reasonable expectation of renewal. The mutual exclusivity of these remedies are evident from the use of the word “or” as opposed to “and” in the amended section.

The Court in the Searle case agreed with the City’s interpretation of the section and inter alia concluded that the award should be reviewed and set aside for the following reasons:

  1. The commissioner committed an error of law by ignoring the use of the word “or” in the amended section of the LRA.
  2. The employee could not have held both expectations at the same time as the two are mutually exclusive.
  3. Any reasonable expectation of renewal cannot include a reasonable expectation of permanency.

Employers should therefore insist that employees clarify the exact basis of their disputes before proceeding with their cases. If commissioners are reluctant to accept the above interpretation of section 186(1)(b), the above judgment can be referred to.

BCHC: Must employers hold a hearing before placing an employee on precautionary suspension?

Case review: Long v South African Breweries (Pty) Ltd and Others [2018] ZACC 7

On 19 February 2019 the Constitutional Court handed down judgement in the case of Long v South African Breweries (Pty) Ltd and Others in which the Court unanimously rejected the applicant’s submission that employees are entitled to a pre-suspension hearing.

Facts

From 2008, Long was employed by SAB as a district manager. His responsibilities included ensuring that the company complied with all legal requirements in respect of its operation in the Border District, including requirements relating to licensing and maintaining a fleet of vehicles. In late 2012, Long was informed about irregularities regarding the vehicle fleet including fraudulent activities. An investigation revealed discrepancies in fleet records, also that vehicles and trailers were unlicensed and not roadworthy. In May 2013, a trailer was involved in a fatal accident. Shortly thereafter Long was advised that he was being investigated for dereliction of duties and gross negligence. He was placed on precautionary suspension to ensure that the investigation could proceed unhindered.

In August 2013, three months after being placed on suspension, Long was given notice to attend a disciplinary enquiry for allegations of gross dereliction of duties, gross negligence, dishonesty, derivative misconduct and bringing the company’s name into disrepute.  The hearing commenced in late August.  In October 2013, Long was found guilty of three of the allegations and was dismissed.

Litigation history

Long took the matter to the CCMA in two separate disputes.  The first concerned his suspension pending disciplinary proceedings. The arbitrator held that his suspension amounted to an unfair labour practice because he had not been given a prior hearing and that the suspension was unreasonably long.  As a result, Long was awarded two months’ compensation. In the second dispute relating to Long’s dismissal, the arbitrator found that the illegalities regarding the maintenance and registration of vehicles did not fall within his responsibility and ordered SAB to reinstate him.

On review, the Labour Court set aside both awards.  Leave to appeal to the Labour Appeal Court was refused, but the Constitutional Court granted Long leave to appeal on the question of whether a pre-suspension hearing is required in the case of a precautionary suspension.

Precautionary suspension

Regarding suspension, the Labour Court held that, where a suspension is precautionary and with full salary, there is no requirement that the employee be allowed to make representations.  In the Constitutional Court, Long submitted that this finding went against existing case law and that the arbitrator’s finding that the length of the suspension was punitive meant that it was unfair.

The Court however held that when assessing whether a precautionary suspension is permissible, the presiding officer must determine whether there is a fair reason for the suspension and whether it prejudices the employee. But suspension for the purpose of an investigation is a fair reason, and where suspension is on full pay “cognisable prejudice will be ameliorated.” Even if the employee was not given an opportunity to make pre-suspension representations, under the circumstances, the suspension did not materially prejudice Long. As for the delay or length of the suspension, the court did not find it to be substantial.

Thus, the LRA’s requirements relating to fair disciplinary action do not apply when suspensions are instituted for precautionary as opposed to punitive reasons.  As the Court summarised, “[w]here the suspension is precautionary and not punitive, there is no requirement to afford the employee an opportunity to make representations.”

This judgement is good news for employers as it will speed up the overall disciplinary process and does away with the need to deal with unnecessary suspension disputes.

BCHC: What you need to know about the recent amendments to the CCMA rules

 

In this newsletter we look at the recent amendments to the CCMA Rules which came into effect on 1 January 2019. The need to amend the rules flows from practical issues that have been experienced by the CCMA and from the recent changes to legislation. Whilst most of the changes to the Rules may not appear to be substantial, it is still important for parties to ensure that they adhere to these new rules. 

The main amendments can be summarised as follows:

  • In terms of rule 11, the CCMA must give the parties at least 7 days’ notice of a conciliation (as opposed to 14 days) in relation to strikes, lockouts and major retrenchments. The 14-day notice rule continues to apply in respect of other disputes. A shorter notice period will be allowed if the parties agree to a shorter period or if reasonable circumstances require it.
  • Rule 14A now incorporates section 135(2A) of the Labour Relation Act, 66 1995 (the LRA) and provides for an extension of the conciliation period.
  • Rule 20 has been amended to make pre-arbitration conferences compulsory 14 days before the arbitration if both parties are represented by a trade union, employer’s organisation, legal practitioner or candidate attorney; both parties agree to hold a pre-trial conference; or the parties are directed to do so by the CCMA. If the pre-arbitration conference is not held, the commissioner may decide to continue with the arbitration but may consider awarding costs for the non-compliance.
  • In terms of rule 24 a conciliation or arbitration can now be held in the region where the dispute arose or the region where the employer’s principal place of business is located.
  • Candidate attorneys have specifically been included in rule 25 as being able to represent parties in arbitrations. This amended rule also provides that a commissioner may, on application in terms of Rule 31, rule that a person not contemplated in Rule 25(1) may represent a party at the arbitration after considering various factors. Legal representatives are also not allowed to represent parties in the facilitation of large-scale retrenchments.
  • The amended version of rule 29 requires parties to request disclosure of documents/evidence not less than 14 days prior to the date of hearing and the request must be answered within 5 days. The parties can however agree on a later disclosure and a commissioner may still rule that relevant documents/evidence be disclosed.
  • In terms of rule 31A parties can apply for picketing rules or ask for the determination of disputes relating thereto and such applications must now be set down within 2 days of receipt of the application, unless the parties agree otherwise.
  • Section 73A of the LRA came into effect on 1 January 2019 and provides that employees earning below the threshold of R 205 433.30 per annum may now refer disputes to the CCMA relating to employers’ failure to pay any amounts owing to that employee in terms of the Basic Conditions of Employment Act, 75 of 1997 or the National Minimum Wage Act, 2018, contracts of employment, a sectoral determination or a collective agreement. Employees who fall above the threshold can approach the Labour Court, High Court, Magistrates Court or Small Claims Court depending on the size of the claim. Previously employees had to wait for the Department of Labour to approach the Labour Court or sue their employers in the normal course.
  • Given the above amendment to the LRA, a new rule 31B has been added to the CCMA Rules in relation to what should be included in an application for an arbitration award in respect of a compliance order or written undertaking. The process regarding affidavits to be filed and the hearing that could follow are also included in this rule.
  • Rule 37 has been amended to provide for how a subpoena has to be served at least 7 days before the arbitration hearing.
  • Rule 40 deals with the certification and enforcement of arbitration awards and has been amended to explain that the amount of the award, costs, an arbitration fee, interest on the amount awarded and the sheriff’s costs can be enforced through execution by the Sheriff.
  • Rule 40A provides that if a commissioner awards arbitration fees in respect of a procedurally unfair dismissal, the fee must be paid by the employer to the CCMA within 14 days.

The amendments to the Rules will hopefully contribute to the more efficient and speedy resolution of disputes going forward.