Public Newsletter
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Worklaw subscribers receive a monthly newsletter containing commentary on the latest labour law cases and trends. This newsletter contains an article which deals with "Jobs, Eskom and the climate". We also discuss three new cases: the first case asks if it is possible to read a new term into a written agreement. The second case deals with an employer trying to back out of a promised pay increase. The third case discusses whether a failure to promote can be an unfair labour practice.
This public newsletter is a free edited version of the subscriber newsletter.
RECENT CASES
Trying to alter a written agreement
When a fixed term contract provides a termination date, is terminating before that date a dismissal? The issue in a recent case was whether the earlier termination of the fixed term contracts of the employees constituted a dismissal as defined in section 186(1) of the LRA.
Khum was a special-purpose company established to provide persons to perform the services contained in a professional services contract ("PSA") concluded by Khum with Eskom. Eskom was Khum's only client. The duration period of the PSA was five years, with a starting date of 14 April 2009 and completion on 13 April 2014. Each task order in respect of the services to be rendered to Eskom had a specific starting and completion date.
Khum recruited 333 persons to perform the services required by the PSA. The employees entered into fixed term contracts of employment with Khum, referred to as "the Contractor Agreement", which by agreement would terminate on 30 April 2014.
Prior to the contemplated completion date of the PSA, Eskom notified Khum that certain specified task orders were cancelled with immediate effect. Khum then issued written notice of termination in terms of the Contractor Agreement to employees.
Their union, Solidarity, referred an unfair dismissal dispute to CCMA on behalf of the employees. At arbitration, Khum submitted that the employees were not dismissed as contemplated in section 186(1) of the LRA. Its argument was that the Contractor Agreements automatically terminated due to Eskom's cancellation of the task orders and in terms of the termination clause regulating the relationship between Khum and the employees.
The Labour Court agreed with the CCMA that Khum had in fact dismissed the employees when it issued the termination letters terminating their contracts with notice. The Labour Court held further that the Contractor Agreement in any event did not provide for automatic termination in the event of the termination of the PSA.
On appeal to the Labour Appeal Court in Khum MK Investments and Bie Joint Venture (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others(JA52/2018) [2020] ZALAC 3 (6 January 2020) it was held that no provision was made for the automatic termination of the Contractor Agreement in the event that Eskom terminated the PSA. The LAC rejected the argument that there was a tacit term or a common unexpressed term permitting automatic termination which could be inferred from the surrounding circumstances.
The LAC held that when Khum issued the letters of termination to the employees it terminated their employment with notice and its conduct fell within the definition of a dismissal in section 186(1)(a) of the LRA. The decision of the commissioner to assume jurisdiction on that basis was correct and the Labour Court did not err in upholding it. The appeal accordingly failed.
The principle emerging from this case is this: where the parties have expressly agreed upon a term and given expression to it in a written contract in unambiguous terms, reliance on the surrounding circumstances to alter the clear meaning or to broaden the ambit of the express term may not be justified. A tacit term can only be implied into a contract if it is necessary in the business sense to make it effective.
Getting out of a promised pay increase
The employer decided to award ad hoc salary increases to a category of employees. The decision was a unilateral one and was not a result of prior negotiations or an agreement between employer and employees. Their ad hoc salary increases were designed to ensure that employee salaries were market-related.
The employees fell within a specified bargaining unit for which it had been agreed in a written document that individual salary adjustments, for example market related adjustments, can take place during the year on a one-to-one basis based on a mechanism determined by the Divisional Manager and agreed to by the respective Managing Director. It was specifically recorded in the document that all ad hoc salary adjustments must be approved by the relevant Divisional Managing Director. However in this case the initial letter to employees informing them of their adjusted salaries was signed by the General Manager, not the Divisional Managing Director.
On 22 May 2012, the employees received their electronic payslips. The amounts reflected on the payslips were less than the amounts which the employer had informed the employees to be the adjusted salary.
After queries by the employees, a second letter was generated by the employer on 25 May 2012. It was headed "Revised Salary Review - Salary Adjustment" and indicated revised post salary adjustments, which were clearly lower than those provided for in the first letter of 10 May. Although the employees refused to acknowledge this unilateral revision, the employer paid the employees according to the revised salary amounts as reflected in the second letter.
A grievance session was held on 30 July 2012 but this did not result in a resolution of the dispute, as a result of which employees approached the Labour Court with a contractual claim for specific performance based on s 77(3) of the BCEA.
The Labour Court upheld the employees' claim, finding that the general manager, who had signed the letters which contained the initial ad hoc salary adjustments, had the authority to approve them in terms of the agreed procedure.The court rejected the employer's argument that the initial letters contained reasonable and justifiable errors which rendered the initial offer of no force and effect.
On appeal to the Labour Appeal Court in Eskom Holdings SOC Ltd v National Union of Mineworkers and Others (JA78/18) [2020] ZALAC 2 (6 January 2020) it was held that a valid contract between the parties providing for the initial salary increases could not have lawfully come into existence in the absence of authorisation thereof by the Divisional Managing Director, which had been specifically agreed as a pre requisite in the bargaining unit agreement. The LAC accordingly granted the employer's appeal and overturned the LC decision.
The lesson of this case is that where there is no evidence to suggest that employees were misled into believing that any ad hoc salary increase could have been granted without the Divisional Managing Director's consent, which they knew was required, there was no basis for the affected employees to argue that the manager who signed the initial salary adjustment letters had the ostensible authority to do so and that the failure to implement the initial salary adjustments was a breach of contract.
When is a failure to promote an unfair labour practice?
M commenced employment with the Department on a permanent basis in January 2000. In 2006, he occupied the post of Deputy Director: Economics, Marketing and Statistics. In 2007 he was appointed to act in the Senior Manager: Economics, Marketing and Statistics Services ("SMEMSS") position.
The SMEMSS post was advertised in early 2009 but before the interviews could be held, the MEC for the Department placed a moratorium on various appointments including the post in question. As a consequence, M's acting appointment was extended a number of times over the ensuing years. M occupied the SMEMSS post for most of the four-year period from 1 March 2007 until 31 March 2011.
In 2011, an internal advertisement of posts included the SMEMSS post. The pertinent requirements for the position were stated to be 'B.Sc Agriculture or equivalent qualification in Agricultural Economics or Economics'. M satisfied the requirements of this advertisement.
This vacancy announcement was initially withdrawn but was advertised again in July 2011 with exactly the same selection criteria except for one significant change. The degree requirement was now stated to be: 'B.Sc in Agricultural Economics/Development/Economics/Statistics/Marketing'. M was not shortlisted as he did not have the required BSc degree. Before an appointment could be made to the post in question, the MEC suspended all recruitment and selection processes until further notice.
M was aggrieved at his exclusion from the interview process on the grounds of his alleged ineligibility. In response the Superintendent-General widened the scope of the eligibility criteria for the post to shortlist all officials who had been acting in higher positions that were advertised, even if they did not meet all the requirements in the advertisement. M was interviewed but the interview panel recommended another candidate who lacked the required years of experience. For reasons that are not clear, the recommendation of the interview panel was not given effect to and the post remained unfilled.
More than one year after the interviews, in December 2013, M referred an unfair labour practice dispute to the General Public Service Sectoral Bargaining Council. The arbitrator held that the failure to promote M to the post of Director: EMSS constituted an unfair labour practice. The arbitrator found that M was the only candidate eligible for appointment and one who had demonstrated competence and exemplary performance in the post; and the post, although critical and funded, remained vacant despite having been advertised several times. The arbitrator accordingly placed M in the position and directed the Department to pay him the difference between his current salary and that of the Director: EMSS backdated to 2014.
The Labour Court held that the arbitrator had proper regard to all relevant considerations that merited the promotion and was alive to the need for deference to an employer's discretion regarding promotions, but equally that an employer's decision not to promote had to be taken fairly and reasonably. The LC was accordingly not persuaded that the decision of the arbitrator was unreasonable (the review test).
On appeal to the Labour Appeal Court in Department of Rural Development and Agrarian Reform v General Public Service Sectoral Bargaining Council and Others(PA3/18) [2020] LAC 4 (6 January 2020) it was confirmed that courts and arbitrators should be reluctant to interfere with an employer's decision to refuse promotion. But they may interfere if:
- there is evidence that the employer acted on the basis of some unreasonable, irrelevant or invidious consideration; or
- the decision was arbitrary, capricious or unfair; or
- the employer failed to apply its mind to the promotion or acted in bad faith; or
- where there is no rational relationship between the decision not to promote, the purpose of the promotion and the information upon which the decision is based.
We recognise that this was a public sector employer and so a higher degree of rationality is required (The Promotion of Administrative Justice Act 3 of 2000 (PAJA) aims to promote lawful, reasonable and procedurally fair decision-making processes by public officials). But we do not see why, using the LRA's fairness criterion, an employer's failure to promote in the private sector also may not be an unfair labour practice in certain circumstances, so employers be warned!
ARTICLE : Jobs, Eskom and climate change By Prof Alan Rycroft
In recent news we see a creative engagement initiated by Cosatu linking three of the biggest threats currently facing South Africa: jobs, Eskom and the climate crisis. When NEDLAC sets aside two days to discuss Cosatu's proposals, it means government, business and organised labour are talking - even if at this stage it's just a process to agree on processes to deal with the Eskom mess.
Alan Rycroft in this article analyses the Cosatu proposals.
Read more (note - only available to Worklaw subscribers)
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Bruce Robertson
February 2020
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