By Talita Laubscher Monday, July 19, 2004

Recently, a U.S. multinational, Morgan Stanley, agreed to pay USD 54 million to settle the U.S. Equal Employment Opportunity Commission’s claim that the Wall Street giant systematically underpaid and failed to promote women. Up to 20 current and former Morgan Stanley employees were expected to testify in the trial about how they were denied raises and promotions and exposed to sexist behaviour, including all-male outings to strip clubs, hostile comments and a cake shaped like a breast.

Of the USD 54 million, USD 12 million is to go to Allison Schieffelin, the Wall Street trader whose complaint sparked the case. The firm also set aside USD40 million to pay claims from any of the estimated 340 mid- and upper-level women covered by the settlement who can demonstrate that they were discriminated against. The firm agreed to pay USD 2 million to improve diversity training and to create other internal programs designed to prevent and address discrimination.  Morgan Stanley, however, denies that it practiced discrimination.

The case has once again put the spotlight on the vexed issue of discrimination in the workplace.

In South Africa, unfair discrimination in the workplace is prohibited in terms of the Employment Equity Act of 1998.  No employer may unfairly discriminate against an employee in any employment policy or practice on grounds including their gender, sex, pregnancy, marital status, and family responsibility.

An employee who alleges that she has been unfairly discriminated against may refer a dispute to the Labour Court. If the Labour Court decides that the employee has been unfairly discriminated against, the Court may make any order that is “just and equitable” in the circumstances.  This may include an award of compensation and damages to the employee.

Unlike the USA, South Africa has not seen gender discrimination cases of the magnitude experienced in the Morgan Stanley case, the Publix case (USD 81,5 million) and the Mitsubishi Motors case (USD 34 million).  In fact, South Africa has seen very few.

The Constitutional Court recently dismissed an application for leave to appeal directly to it in a case involving alleged unfair discrimination. Dr Dudley, a black woman, alleged that she was the victim of unfair discrimination when she was not appointed to a more senior position. A white man was preferred for the job. Dr Dudley claimed that the appointment was tainted by unfair discrimination and violated the provisions of the Employment Equity Act. In particular, she contended that her employer was obliged to give her preference on the grounds of her race and gender.

The Labour Court departed from an earlier decision of the same court (in Harmse v City of Cape Town) and agreed with the employer’s contention that the Employment Equity Act does not give individuals a right to preferential treatment on the grounds of race or gender. Dr Dudley approached the Constitutional Court to challenge this decision.

The Constitutional Court refused her leave to appeal at this stage. It ruled that disputes arising under the Employment Equity Act should first be resolved by the Labour Court and Labour Appeal Court.  The Constitutional Court nevertheless considered the questions raised by the appeal to be important, and made it clear that it was not expressing any views at this stage on the merits of the matter.

In a matter before the Labour Court, Ms Ntsabo was awarded ZAR 50 thousand in compensation against her former employer for pain and suffering as a result of sexual harassment at the hands of her superior. The Court found that Ntsabo was sexually harassed and that her employer, by virtue of the Employment Equity Act, was liable.  In assessing compensation, the Court took account of the fact that Ntsabo had developed anti-social habits and become generally miserable, and that Real Security had avoided dealing with Ntsabo’s complaints.

In a recent decision of the High Court involving Naspers, Ms Grobler was awarded ZAR 150 thousand in compensation against her employer plus damages for medical expenses and loss of income, after she was subjected to various instances of sexual harassment by her superior over a period of some months, culminating in an incident where he pointed a gun at her and told her that all he wanted was one night with her. Grobler resigned.

The High Court accepted that Grobler had been sexually harassed and that she had suffered severe psychological harm.  The question was whether the company could be held liable for the conduct of Grobler’s superior.

The Court held that it could, because sexual harassment falls within the risks which employers assume when conducting business, and because sexual harassment is reasonably foreseeable in employment, particularly where there is an intimate working relationship or a relationship of power.

It seems that, generally speaking, our courts are reluctant to award large sums in compensation to victims of discrimination.  In fact, this was noted in the Grobler-case when the Court fixed compensation at ZAR150 thousand.  Also, South African law does not allow for the types of punitive damages that occur in the USA and this may explain why compensation awards in South Africa have been fairly low.  Nevertheless, although the chances of an employee being awarded millions are remote, the reputational damage as a result of such a claim may be significant.

Employers would therefore be well-advised to ensure that their policies and procedures, and in particular their promotion and pay practices, are not subject to challenge, and that their work environments are free from all forms of unfair discrimination.  Discrimination often occurs in subtle forms – all male outings with clients or drinks after work to which women aren’t invited or do not feel comfortable attending.  Incidentally, these are the most difficult forms of discrimination to prove, but it may only be a matter of time before our courts are seized with such a matter.  While not bound by overseas judgments, our courts do obtain guidance from them.