By Graham Damant Tuesday, March 17, 2015

It is clear that there had been abuses of atypical employment relationships such as use of fixed term contracts of employment and in some cases the use of labour brokers. It is clearly an abuse to use fixed term contracts to escape the obligations of a fair termination. However this was already largely regulated by the existing definition of dismissal. Similarly there were abuses by employers in terminating labour broking agreements to avoid the procedural requirements of a fair dismissal and in some cases substantive requirements. This however had already been curtailed by the Labour Courts. However was it necessary to introduce pay parity into the use of fixed term contracts and labour brokers? The use of both was a legitimate strategy for employers to curtail the cost of permanent employment. There is no general requirement of pay parity that requires that all employees doing like work be treated the same and paid the same. It is submitted that this is so, even with the latest amendments to the Employment Equity Act (“the EEA”). The costs of introducing pay parity for some employers has been substantial.

This then raises the issue of whether pay parity has been introduced to all employees by the equal work for equal pay provisions introduced by the amendment of the EEA.  The Act was amended to provide that it is unfair discrimination to pay employees doing the same work, or work that is substantially the same or work that is of equal value differently, if that difference is based on a listed ground such as gender or race.  Up until the amendments it was clear that it was not permissible to discriminate in pay based on a prohibited ground such as race or gender. However the pay disparity had to be because of the person’s gender or race and not because of some other ground even if that ground was an arbitrary one. Now with the amendments and the introduction of “arbitrary” as a listed ground together with grounds such as race and gender, it is arguable that every difference in pay has to be based on a rational basis. If it is not it is unfair regardless of whether it is based on a previously tested discrimatory ground or not. We are of the view that this was not the intention of the legislature and that differentiation would still need to be on a ground analogous to or similar to one of the previously listed grounds such as race or gender.

Another methodology used by employers to curtail labour costs has been to outsource non-core functions to outside service providers. The service providers could usually provide the services on a cheaper basis because they could provide employees who are paid less. Once outsourced further cost savings could be achieved by changing one outsource provider for another who again would employ a new workforce on a cheaper basis. This has been substantially curtailed by the Labour Appeal Court decision in Unitrans which held that the termination of a contract with a subcontractor that provided labour only and the appointment of a new subcontractor to provide that labour was a transfer in terms of Section 197 of the LRA. This meant the employees of the outgoing subcontractor had to be transferred to the new subcontractor on identical terms and conditions of employment.

In addition to being restricted in the ability to adopt flexible employment practices employers have been hit with potentially severe financial penalties for non-compliance with Labour Legislation. This includes non-compliance with the EEA as well as with provisions of the BCEA. The EEA was amended to increase fines to a percentage of an employer’s turnover.  At the same time the criteria for determining compliance were also amended in such a way that assessing whether an employer is in compliance now is less certain. In this regard the EEA used a specify criteria for compliance to include factors such as the pool of suitably qualified people and the economic and financial position of the employer. These specific factors were deleted. Now the Act leaves it to the Minister to prescribe factors and for the employer to raise “reasonable grounds to justify its failure to comply”. While the general view is that all the old criteria for determining compliance remain this is no longer certain. There is no doubt that the labour department could well take a different view of how compliance is determined.

Possibly the greatest cost to employers remains the cost of dismissing employees. This has been aggravated by the CCMA’s Commissioners’ approach to determining an appropriate sanction for misconduct cases post the Constitutional Court decision of Sidumo in 2007. Sidumo rejected an argument that Commissioners’ in assessing sanction were obliged to determine whether the employer’s decision fell within a range of reasonable outcomes. If it did they could not intervene. Instead the Constitutional Court found that it was for the Commissioner to assess whether the sanction was fair or not. In doing so the Court stated “A Commissioner is not given the power to consider afresh what he or she would do, but simply to decide whether what the employer did was fair. In arriving at a decision, a Commissioner is not required to defer to the decision of the employer. What is required is that he or she must consider all relevant circumstances”. It is apparent that many Commissioners’ have interpreted this decision as giving them the absolute power to determine sanction. As a consequence lawyers have seen a substantial increase in cases where Commissioners have reinstated employees for the gravest misconduct such as theft or dishonesty and other material breaches of contract. In these instances the Commissioners feel that factors such as length of service are sufficient mitigation to trump the severity of the misconduct. In many instances it appears that Commissioners have misconstrued their powers and have taken the view that they have the power to determine sanction afresh as opposed to assessing whether what the employer did was fair or not. This of course is a fine line. The Commissioner must assess whether the employers imposition of the sanction of dismissal was fair. In doing so the Commissioner must assess the aggravating and mitigating factors considered by the employer. Where the Commissioner disagrees with the sanction or the weight attached to the aggravating or mitigating factors it is necessary that the Commissioner provides a rational basis for rejecting the employer’s decision. It is not for the Commissioner to determine the sanction afresh or to impose their own notion of fairness.

At the same time as Commissioners’ have started to substantially expand their powers the Labour Appeal Court and Supreme Court of Appeal have substantially curtailed the ability of employers to review Commissioners’ decisions. Once again this arises out of the Courts interpretation of the Sidumo decision. Initially the Courts interpreted Sidumo as permitting reviews on what was termed “process based” misconduct by Commissioners. This included circumstances where Commissioners made errors of fact or law, failed to consider relevant evidence or considered irrelevant evidence.  However the SCA in Herholdt and the Labour Appeal Court in the Goldfields decision ruled that this was not the correct approach to Sidumo and that reviews are restricted to circumstances where it can be said that the outcome is one that a reasonable Commissioner could not have reached. There are numerous decisions of Commissioners where there is clear process based fault in reasoning. Relevant evidence is excluded, irrelevant evidence is taken into account but it is difficult to say that the result is one that no reasonable Commissioner would have come to.

For employers there is now substantial uncertainty of whether the sanction of dismissal for the most serious breaches of contract will be upheld, together with uncertainty over whether a court faced with the most material irregularities in reasoning by Commissioner will interfere to rectify the situation. In addition to the uncertainty the cost of litigating these issues to finality are substantial. Many employers when faced with this would rather settle. This results in an untenable situation of an employer for instance paying an employee who was dismissed for theft of a minor item a substantial payment to avoid having to reinstate the thief back into employ.

The ongoing battle by smaller employers to avoid the punitive effects of Bargaining Council collective agreements being extended to them have not delivered any substantial outcomes. The victories achieved in the textile industry and more recently in the metal industry are not determinative as they are based on technicalities. These technicalities can easily be remedied. This substantive dispute regarding the ability of bargaining council’s to extend agreements remains unresolved.

Attempts by employers to curtail strike violence, which plagues South Africa’s Labour Relations, by introducing into Legislation strike ballots and empowering courts to bring violent strikes to an end were thwarted during the parliamentary process. Instead the ability to picket was extended to the premises of employers whose employees were not on strike.

In all 2014 was not a good year for employers insofar as Labour Legislation and Labour Law is concerned. Unfortunately 2015 is unlikely to be much better as employers grapple with the amendment to the LRA and the EEA. No doubt there will a series of test cases to determine numerous unresolved issues that the amendments have introduced. There will be test cases to determine the power of Commissioners on the question of sanction and further attempts to fully understand the Labour Court’s powers of review.