Employment law update – ‘Employees’ and review test for jurisdictional rulings

February 1st, 2012

By Talita Laubscher

The case of J & J Freeze Trust v Statutory Council for the Squid and Related Fisheries of SA and Others [2011] 11 BLLR 1068 (LC) raised two interesting questions, namely who constitute ‘employees’ and what review test applies to jurisdictional rulings.

Prior to the termination of his services, the third respondent provided the applicant with his services as skipper on the vessel Langusta II. The relationship between the applicant and the third respondent lasted for a year. When the individual’s services were terminated, he referred an unfair dismissal claim to the first respondent council. The applicant argued that the individual was not an ‘employee’ but an independent contractor. The arbitrator rejected this objection and held that the third respondent was in fact an ‘employee’. The applicant accordingly applied for the review of the jurisdictional ruling.

In support of its contention that the third respondent was an independent contractor, the applicant argued as follows. The third respondent was paid on a commission basis, which was calculated on the squid caught, as well as R10 per kilogram of choka caught. The third respondent, as the skipper, was in charge when the vessel was at sea. Therefore, once at sea, the third respondent made his own decisions and the shore skipper, Mr Shaw, and Mr Nel, a trustee of the applicant, had no control over him. This decision-making power applied to both working hours and the crew that assisted the third respondent. The third respondent did, however, require Nel’s approval when he was to come back in to the harbour. The third respondent recruited the crew that worked on the vessel and was responsible for managing them. The applicant did, however, pay the crew on behalf of the third respondent.

As regards the written employment contract on which the third respondent relied in support of his contention that he was an ‘employee’, the applicant argued that this was ‘just a couple of rules’ and hence ‘just guidelines’.

The applicant conceded during cross-examination that the third respondent had worked only for it and that the third respondent was economically dependent on the applicant. It also emerged that the applicant had deducted tax and provided the third respondent with a ‘salary advice’.

The third respondent contended that he was phoned by Shaw and informed that ‘his employment contract’ was terminated and that, as an employee, he had received family responsibility and sick leave (which he took during his employment with the applicant). He accordingly argued that he was an employee and not an independent contractor.

On review, the applicant argued that the commissioner committed a reviewable irregularity in that, inter alia, the arbitrator failed to have proper regard to the evidence that Shaw, who concluded the employment contract with the third respondent, did not have the authority to do so, neither did he have the authority to issue the letter to the third respondent certifying that the third respondent was a ‘permanent employee’ of the applicant.

The Labour Court, per Molahlehi J, first considered the test that applied to the review of jurisdictional rulings. In this regard, the court held that the council could not ‘grant’ itself jurisdiction that it did not have. The question of whether the council had jurisdiction was therefore to be determined by the Labour Court, and the Labour Court did so on the existence of objective facts. Where the jurisdictional objection concerned the question of whether an employee/employer relationship exists, the Labour Court must determine de novo whether such a relationship exists. The test in reviews concerning the jurisdiction of a council (or the Commission for Conciliation, Mediation and Arbitration (CCMA)) was therefore not that of the reasonable decision-maker as is the case in reviews of arbitration awards, but whether the objective facts as they existed formed the basis on which the council (or CCMA) could assume jurisdiction. In doing so, the court must apply its own mind to the facts presented to the commissioner.

Considering these objective facts, the court held that the relationship between the applicant and the third respondent was in fact an employment relationship. This was because:

  • although not determinative on its own, the written contract between the parties described it as an ‘employment contract’ and identified the third respondent as ‘an employee’;
  • the employment contract listed the third respondent’s duties, which included cleaning the vessel before entering the harbour, controlling food, stock and tackle provided by the applicant, and managing fellow employees employed by the applicant;
  • the contract provided for a probationary period of three months, after which the third respondent would be employed permanently, provided he had performed satisfactorily;
  • the third respondent was economically dependent on the applicant;
  • the third respondent received a ‘salary advice’ from the applicant, which also categorised him as ‘an employee’; and
  • importantly, the third respondent rendered his personal services to the applicant.

The court stated that the fact that no Unemployment Insurance Fund deduction was made from the individual’s pay and that tax was deducted in terms of an income tax directive from the South African Revenue Service was not decisive in the determination of the true nature of the relationship.

The application for review was accordingly dismissed with costs.

Protected disclosures

Practitioners should note that s 159 of the new Companies Act 71 of 2008 expands on the protection granted to whistleblowers. Protection is now also granted to registered trade unions that make protected disclosures. In addition to the protection granted to employees in terms of the Protected Disclosures Act 26 of 2000, employees and trade unions who make protected disclosures are, in terms of s 159(4) of the Companies Act, immune from civil, criminal or administrative liability for that disclosure and have qualified privilege in respect of the disclosure. They are furthermore entitled to ‘compensation … for any damages suffered’ because of any threats made to them as a result of a possible or actual protected disclosure.

Practitioners should further take note of the Practical Guidelines for Employees, GN 34572 of 31 August 2011, which were published in terms of s 10(4)(a) of the Protected Disclosures Act.

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

This article was first published in De Rebus in 2012 (Jan/Feb) DR 51.