The interpretation of what constitutes a benefit in terms of s 186(2) of the LRA: Is it by entitlement of contract, law or by sole discretion of the employer?

August 1st, 2020
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Apollo Tyres SA (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (2013) 34 ILJ 1120 (LAC)

The underlying undefined concept by s 186(2) of the Labour Relations Act 66 of 1995 (the LRA), has raised many questions, which has had to be broadly unfolded to accommodate both the employer and the employee in a binding contract of employment.

The question whether an employee who alleges that their employer has committed an unfair labour practice – in relation to the provision of benefits – has a remedy if such an employee can prove that they have a right or entitlement to the benefit as envisaged in terms of s 186(2) of the LRA?

The term ‘benefits’ is not defined in the LRA or any other legislation, and South African courts were tasked with defining and clarifying this concept – something that turned out to be an onerous task.

The narrow interpretation of the term ‘benefits’ can perhaps be ascribed to the courts’ quest to uphold the distinction between disputes of rights and disputes of interests and, therefore, in their attempt to separate benefits from remuneration the court has created an artificial divide. (‘A dispute of right refers to an infringement, application or interpretation of existing rights embodied in a contract of employment, collective agreement or legislation, while a dispute of interest refers to the creation of a new right’ (see E Fourie ‘What constitutes a benefit by virtue of section 186(2) of the Labour Relations Act 66 of 1995? Apollo Tyres South Africa (Pty) Ltd v CCMA [2013] 5 BLLR 434 (LAC)’ (2015) 18.1 PER 3300).)

The court, therefore, upheld the restrictive interpretation of benefits to uphold the divide between disputes of interest and disputes of rights and to ensure that issues that should be the subject of negotiation could not become issues that can be decided by an arbitrator (s 191(5) of the LRA provides that disputes in respect of unfair labour practices must be referred to arbitration and s 65(1)(c) prohibits strikes or lock-outs when an issue can be referred to arbitration).

The case of Apollo Tyres SA (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (2013) 34 ILJ 1120 (LAC), is noteworthy for its interpretation of the term ‘benefits’. Hoosen, a 49-year-old female, was employed by the appellant from 1 April 1984. The appellant, a tyre manufacturing company, was struggling under economic pressures and introduced an early retirement scheme for certain employees.

Through the introduction of this scheme the appellant company tried to reduce the number of employees in accordance with the decrease in demand for its products. Employees were informed of this decision through various meetings and notices placed on the notice boards at the premises of the appellant. According to the notice the scheme applied only to staff between the ages of 46 and 59 who were paid on a monthly basis.

The successful applicant would receive two months’ additional pay and an ex gratia payment calculated on a sliding scale based on the age of the applicant. Hoosen, (the third respondent) enquired about the scheme, however, she was refused entry into the scheme and was informed that to qualify for the early retirement scheme, applicants had to be between 55 and 59. When Hoosen asked for reasons she was sent from pillar to post.

She enquired if she could appeal against the decision and mentioned that the phrase ‘subject to management’s discretion’ could be abused, but was told by her immediate senior that his mind was made up and that she was to be replaced. Hoosen resigned and while serving her notice she referred an unfair labour practice dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA). The argument raised at the CCMA was that the early retirement package was not a benefit in terms of s 186(2) and in any event that it was not unfair not to grant Hoosen the early retirement package.

The commissioner found that it was unfair to deny Hoosen entry into the scheme. The court found that the commissioner’s ruling that the scheme was a benefit within the ambit of s 186(2)(a) of the LRA was a decision that fell within the band of reasonableness.

According to the Labour Appeal Court (LAC), the question before the court should not have been whether the commissioner reached a conclusion that a reasonable commissioner could not reach, but whether the second respondent was correct in his ruling that the CCMA had jurisdiction to adjudicate the dispute.

The court a quo supported the statement in Protekon (Pty) Ltd v CCMA and Others [2005] JOL 14544 (LC), that the mere existence of a discretion exercised by an employer does not deprive the CCMA of jurisdiction and also highlighted two instances where the CCMA would have jurisdiction to consider the fairness of the employer’s conduct, namely where –

  • the employer fails to comply with a contractual obligation that it has towards the employee; and
  • the employer exercises a discretion that it enjoys in terms of a contract of the scheme conferring the benefits.

The court further overturned the decision in Schoeman and Another v Samsung Electronics SA (Pty) Ltd [1997] 10 BLLR 1364 (LC) where it was held that the term ‘benefit’ could not be interpreted to include remuneration. It stated that a benefit is something extra to remuneration. Leave to appeal was granted by the LAC.

The LAC found that the early retirement scheme was a benefit, and that by not granting it to Hoosen, the employer committed an unfair labour practice. Hoosen did not have a contractual entitlement to the early retirement benefits and the granting of this benefit was subject to the employer’s discretion.

I agree with the court’s decision that it was clear that there was no acceptable, fair or rational reason why Hoosen was not allowed to participate in the scheme. The employer did not exercise its discretion fairly. The appeal was dismissed with costs.

Sipho Tumelo Mdhluli LLB (University of Limpopo) is a legal practitioner at Lekhu Pilson Attorneys in Middelburg.

This article was first published in De Rebus in 2020 (Aug) DR 30.