Employment law update

July 23rd, 2015
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Talita Laubscher BIur LLB (UFS) LLM (Emory University USA) is an attorney at Bowman Gilfillan in Johannesburg.

Talita Laubscher BIur LLB (UFS) LLM (Emory University USA) is an attorney at Bowman Gilfillan in Johannesburg.

Monique Jefferson BA (Wits) LLB (Rhodes) is an attorney at Bowman Gilfillan in Johannesburg.

Monique Jefferson BA (Wits) LLB (Rhodes) is an attorney at Bowman Gilfillan in Johannesburg.

 

 

 

 

 

 

 

 

 

 

Employees vs independent contractors

In Phaka and Others v Bracks and Others [2015] 5 BLLR 514 (LAC), the Labour Appeal Court (LAC) considered whether the nature of the relationship between the alleged employer, UTI, and certain ‘owner-drivers’ was that of employment or an independent contractor arrangement. In this case, UTI had implemented an empowerment scheme about 30 years ago in terms of which certain individuals resigned from their employment with UTI and rendered courier services to UTI in terms of an independent contractor arrangement. UTI had initially provided financial assistance to the individuals to enable them to purchase a vehicle with which to render the services. Over time, some of the individuals acquired more vehicles and engaged other drivers to assist with rendering the services. The owner-drivers then challenged the empowerment scheme and referred an unfair dismissal claim to the National Bargaining Council for the Road Freight Industry. The arbitrator found that the bargaining council did not have jurisdiction to determine the dispute as the owner-drivers were not employees. This ruling was upheld by the Labour Court on review.

The matter was then taken on appeal to the LAC. In determining whether or not the owner-drivers were employees, the LAC (per Murphy AJA, Waglay JP and Setiloane AJA) considered the following factors, which were indicative of an independent contractor relationship –

  • the contract between UTI and the owner-drivers expressly provided that it was not an employment relationship;
  • the individuals acquired their own vehicles to render the services (albeit with financial assistance from UTI);
  • the individuals were not paid a salary but were paid on presentation of invoices, which were subject to VAT; and
  • the individuals were entitled to engage their own employees to assist in rendering the services.

On the other hand, the individuals were required to wear uniforms provided by UTI and to work specified hours as determined by UTI. Furthermore, the individuals were under the supervision and instructions of UTI and in many instances reported to the same managers that they had reported to when they were employees of UTI. However, what was found to be more important than the element of supervision and control in determining whether or not there was an employment relationship was the terms and conditions that the parties contractually agreed to.

In this regard, Murphy AJA concluded that regard had to be had to the terms of the contract, which expressly provided that it was an independent contractor relationship and thus the intention of the parties was for there not to be an employment relationship. He found that the level of control in relation to the routes, hours of performance, vehicle maintenance and branding were essential requirements to the nature of the services being performed and that these limitations on the owner-drivers’ control should not change the relationship to that of employment. It is important to note that UTI also deducted PAYE from the ‘owner-drivers’ which is usually a factor indicative of an employment relationship. However, this was not considered as a factor indicative of an employment relationship as it was found to be an obligation imposed by income tax legislation.

Insubordination and insolence

In the case of Palluci Home Depot (Pty) Ltd v Herskowitz and Others [2015] 5 BLLR 484 (LAC), an employee was dismissed for gross insubordination and poor work performance following an altercation that she had with the managing director after over R 6,000 was deducted from her salary in respect of unauthorised calls. The employee referred an unfair dismissal to the Commission of Conciliation, Mediation and Arbitration, which upheld the dismissal. On review, the Labour Court (LC) set aside the award after finding that the employee had been guilty of insolence and not gross insubordination and that the sanction of dismissal was accordingly too harsh. The LC referred to Commercial Catering & Allied Workers Union of SA and Another v Wooltru Ltd t/a Woolworths (Randburg) (1989) 10 ILJ 311 (IC) in which insolence had been found to be offensive, disrespectful, cheeky and rude conduct while insubordination amounts to resistance or defiance of authority, disobedience and refusal to obey an order. In this regard, the LC found that while it is probable that the employee was confrontational and disrespectful, this did not amount to insubordination as the employee was not given an order to desist from her behaviour. Furthermore, her conduct was provoked by the employer unlawfully deducting amounts from her salary without giving her an opportunity to be heard and make representations. The LC found that more weight should have been placed on the employer’s conduct and it consequently granted compensation equal to ten months’ remuneration.

The Labour Appeal Court (LAC) (per Kathree-Setiloane AJA, Musi JA and Murphy AJA) held that the LC had incorrectly found that in order to be guilty of insubordination there must be a refusal to obey an instruction. It was held that there is a fine line between insolence and insubordination and that insolence can become insubordination if there is a challenge to the employer’s authority. The employer alleged that the employee had accused the Managing Director (MD) of being ‘unprofessional’ and ‘not an MD’. However, the employee denied this and the only person to give evidence to this effect was the MD himself. The LAC found that the commissioner had erred in not rejecting the MD’s testimony in this regard.

After considering the surrounding circumstances of the employee’s conduct, the LAC concluded that the employee had not been acting defiantly as she had been trying to discuss the deduction from her salary and there had not been a persistent deliberate challenge to her employer’s authority. It was held that whether an employer is guilty of insubordination depends on the following factors –

  • the wilfulness of the defiance;
  • the reasonableness of the orders defied; and
  • the actions of the employer prior to the alleged act of insubordination.

The LAC held that acts of insolence and insubordination do not justify dismissal unless they are serious and wilful. In addition, provocation by an employer prior to the act of insubordination or insolence may be a mitigating factor when determining the seriousness of the offence and in such circumstances dismissal may be too harsh a sanction. It was concluded that the commissioner erred in finding the employee guilty of gross insubordination. The LAC concluded that the conduct was not serious or wilful and thus the sanction of dismissal was too harsh in the circumstances regardless of whether the conduct amounted to insolence or insubordination and a warning would have sufficed.

The court did not interfere with the compensation which the LC awarded to the first respondent, namely ten months’ compensation.

Moksha Naidoo BA (Wits) LLB (UKZN) is an advocate at the Johannesburg Bar.

Moksha Naidoo BA (Wits) LLB (UKZN) is an advocate at the Johannesburg Bar.

Affordability of disciplinary procedure
Question:

The employer is a sole proprietor with only one employee. This employee commits a serious offence. The employee, however, emphatically denies the complaint. The employer wishes to dismiss the employee and wants to continue with the required disciplinary procedures or by means of a formal disciplinary hearing.

The employer, however, does not have the financial means to appoint an attorney or labour consultant to attend to the disciplinary process or inquiry/hearing, neither can the employer find any person (whether family or friend) to act (or who is willing to act) as an independent chairperson or person to facilitate the process.

What does the employer stand to do in a matter of this nature, and especially taking into consideration the under mentioned:
• The rules of natural justice requires ‘the other party must be given an opportunity to be heard’, which is also applicable to disciplinary procedures.
• The rules of natural justice are, however, two folded, and also includes that no person may be ‘the judge in his or her own case’.
• The chair must be independent and impartial (not bias).

How does one then conduct and go-about in avoiding to be and/or act as judge, jury and executioner during such a disciplinary process or hearing (thus conducting the role of both ‘prosecutor and judge’ during the disciplinary process or hearing)?

Answer:

In my experience many attorneys, as well as officials from both employer organisations and trade unions, hold the view that procedural fairness can only be achieved when the internal disciplinary hearing mimics court proceedings. This view is incorrect.

To elaborate; sch 4(1) of the Code of Good Practice: Dismissals, which speaks to pre-dismissal procedural requirements, is instructive to the question and reads:

‘Normally, the employer should conduct an investigation to determine whether there are grounds for dismissal. This does not need to be a formal enquiry. The employer should notify the employee of the allegations using a form and a language that the employee can reasonably understand. The employee should be allowed the opportunity to state a case in response to the allegations. The employee should be entitled to a reasonable time to prepare the response and to the assistance of a trade union representative or fellow employee. After the enquiry, the employer should communicate the decision taken, and preferably furnish the employee with written notification of that decision.’

While the Code is considered a guideline, s 188(2) of the Labour Relations Act 66 of 1995 (LRA) places an obligation on any person who is adjudicating the procedural fairness of a dismissal to ‘take into account any relevant code of good practice issued’ under the LRA.

In addition to sch 4 the explanatory memorandum, which accompanied the draft Labour Relations Act stated the following with regard to pre-dismissal procedures:

‘The draft Bill requires a fair, but brief, pre-dismissal procedure … . [It] opts for this more flexible, less onerous, approach to procedural fairness for various reasons: small employers, of whom there are a very large number, are often not able to follow elaborate pre-dismissal procedures; and not all procedural defects result in substantial prejudice to the employee.’

Both sch 4(1) and the memorandum were discussed in Avril Elizabeth Home for the Mentally Handicapped v The Commission for Conciliation, Mediation and Arbitration & Others (2006) 27 ILJ 1644 (LC).

Van Niekerk AJ, as he then was, having regard to sch 4(1) held:
‘It follows that the conception of procedural fairness incorporated into the LRA is one that requires an investigation into any alleged misconduct by the employer, an opportunity by any employee against whom any allegation of misconduct is made, to respond after a reasonable period with the assistance of a representative, a decision by the employer, and notice of that decision.

This approach represents a significant and fundamental departure from what might be termed the “criminal justice” model that was developed by the Industrial Court and applied under the unfair labour practice jurisdiction that evolved under the 1956 Labour Relations Act. …

The rules relating to procedural fairness introduced in 1995 do not replicate the criminal justice model of procedural fairness. …

The balance struck by the LRA thus recognizes not only that managers are not experienced judicial officers, but also that workplace efficiencies should not be unduly impeded by onerous procedural requirements. … The continued application of the criminal justice model of workplace procedure therefore results in a duplication of process, with no tangible benefit to either employer or employee.’

Referring to the aforementioned memorandum the court held:
‘On this approach, there is clearly no place for formal disciplinary procedures that incorporate all of the accoutrements of a criminal trial, including the leading of witnesses, technical and complex “charge-sheets”, requests for particulars, the application of the rules of evidence, legal arguments, and the like.’

Following this approach the Supreme Court of Appeal in Old Mutual Life Assurance Co SA Ltd v Gumbi 2007 (5) SA 552 (SCA) held:
‘The right to a pre–dismissal hearing imposes upon employers nothing more than the obligation to afford employees the opportunity of being heard before employment is terminated by means of a dismissal.’
Against this background and returning to the question, my advice would be that the employer inform the employee of the allegations that needs to discussed, inform the employee of the date on which these discussions will take place (rule of thumb is that 48 hours’ notice be given to the employee to prepare for the discussions unless this would be unreasonable), on the day the employer discusses with the employee the evidence he or she has, which supports the conclusion that the employee is guilty of the allegations put to the employee. Once the employer does so, the employee would be given an opportunity to defend his or her action. Should the employee want to bring in witnesses who can attest to the employee’s version then the employer should allow this.

Thereafter, the employer must make a decision as to whether the employee is guilty of the misconduct and if so, to determine an appropriate sanction and inform the employee of same.

The only rule of natural justice applicable to pre-dismissal processes, is the audi alteram partem – the opportunity to be heard; that is in essence what an arbitrator focusses on in deciding whether a dismissal is procedurally fair.

I do wish to state that the above process would only be acceptable in the absence of an agreement, be it in terms of an employment contract or collective agreement, which prescribes a different procedure to be followed. In the public sector there is a collective agreement, which prescribes the procedure that needs to be followed when instituting disciplinary action against senior managers. This process sets out certain time frames for when a disciplinary hearing should take place in relation to when the employee was charged, it allows for both employee and employer to be represented by an attorney or advocate and stipulates that the chairperson be an independent person. Failure to follow this process could well lead in any subsequent dismissal being declared procedurally unfair.

Do you have a labour law-related question that you would like answered? Send your question to derebus@derebus.org.za

This article was first published in De Rebus in 2015 (Aug) DR 56.