Zero rated contracts in South Africa

November 1st, 2021
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This article evaluates how South African law addresses the circumstances where employers do not prescribe hours, which their employees are expected to work and exercise their discretion as to when to call such employees to work. This is done in light of s 23 of the Constitution, which provides, among others, that ‘everyone has the right to fair labour practices’. We evaluate whether subjecting employees to zero-rated contracts, amounts to fair labour practices under South African labour law.

A zero-rated contract has been defined as ‘an agreement between two parties that one may be asked to perform work for the other but there is no set minimum number of hours. The contract will provide what pay the individual will get if he or she does work and will deal with the circumstances in which work may be offered (and, possibly, turned down)’ (Chartered Institute of Personnel and Development ‘Zero-hours contracts: Understanding the law’ Guide June 2021 (www.cipd.co.uk, accessed 11-10-2021)). In other words, this is a type of contract where employment is offered, without guaranteeing the employee actual working hours. Given the fact that employees do not have certainty as to when they will be expected to render their services, they will only be remunerated when they have worked for certain hours and paid in accordance with the amount of hours they have worked (New Frame ‘Zero hours contracts are a poverty sentence’ (www.newframe.com, accessed 11-10-2021)). The working hours of employees who are subjected to zero-rated hours are controlled by the employer, who will summon them to work once the employer determines that there is work to be done by those employees at the workplace (New Frame (op cit)). With zero-rated contracts, employees are at the mercy of their employers and could go for months without being called to work, thereby preventing them from earning a salary, despite being employed.

Zero-rated contracts are non-standard by their nature, which makes it difficult to adequately safeguard and enforce employees’ rights. There is no specific provision in the Labour Relations Act 66 of 1995 (LRA) that specifically deals with zero-rated contracts in South Africa (SA). Given the uncertainty regarding their hours of work, it makes it difficult for employees to rely on the Basic Conditions of Employment Act 75 of 1997 (BCEA). While s 9 of the Basic Conditions of Employment Act provides the maximum working hours, which an employee is permitted to work, it does not provide the minimum working hours. This is the legislative gap that has allowed some employers in SA to subject some of their employees to employment contracts, which do not prescribe the actual time employees would be expected to render their services. Zero-rated contracts appear to be a clear violation of s 29(1) of the BCEA, which requires employers to supply their employees with ordinary working hours and days of work, what they will be paid and the frequency with which they will be paid. This provision ensures that employees have a level of certainty regarding the terms and conditions of their employment. Zero-rated contracts do not provide certainty and enable employers to punish employees by not scheduling them to work, thereby preventing them from earning a living. These contracts also provide employers with a measure of flexibility when they wish to dismiss any employee. Employers will not be obliged to follow the statutory fair dismissals procedures. They would simply not schedule the employee concerned to provide services indefinitely.

The conundrum faced by employees subjected to zero-rated contracts in SA was clearly illustrated in the Commission for Conciliation, Mediation and Arbitration award of Lupindo and Others v Ferrero SA (Pty) Ltd and Adcorp Blu (CCMA) (GAVL 3153-18, 22-10-2020). In this award, affected employees were subjected to a flexible working hours arrangement. Their contracts did not stipulate their working hours and salaries which they would be paid. The affected employees argued that they were entitled to be treated no less favourably as compared to the employer’s permanent employees who performed the same or similar services that they rendered to the employer, as and when they are called to do so (see para 44). Affected employees were paid a cash amount commensurate to the number of hours they worked during the week (see para 57). This meant that if they were not called to come to work, the affected employees did not receive any payment. Unlike the employer’s permanent employees, with a clear working schedule during the month, affected employees had no idea when they would be called to work and they did not have a basic salary, which impacted their ability to find credit (paras 59-60).

The employer argued that s 198C of the LRA permitted the employment of part-time employees and that the employees were employed based on the operational needs of the employer (para 69). The commissioner was not convinced by this argument, because even part-time employees knew exactly when they were expected to render their services, which was not the case with the affected employees in this award. In other words, the affected employees were not part-time employees.

The affected employees’ main argument was that they were entitled to the same treatment that the employer provided to its permanent employees. The commissioner noted that the main challenge was that affected employees in this award had no knowledge of how many hours, if any at all, they were entitled to work in any given month (para 123). The commissioner found that there was no justifiable reason for the differentiation between the affected employees and employer’s permanently employed employees, and that such differentiation was discriminatory (paras 124 – 127).

Zero-rated employees are subjected to a ‘no work, no pay’ principle even though the decision to work lies with the employer. With these contracts, employers decide when affected employees should render their services and when not scheduled to work, employers are not obliged to remunerate these employees. This implies that employees are often in a tentative position regarding when their next remuneration will be.

Employees who are party to zero-rated contracts can easily go months without working. As such, they need to earn an additional income elsewhere while waiting to be contacted, for them to pay for their daily expenses, feed and clothe their families as well as send their children to school.

The impact of zero-rated contracts on the country’s poverty rates is yet to be quantified. It is not entirely clear whether these contracts can be referred to as flexible contracts that allow employers to create flexible kind of work. What is clear, however, is that some of the people subjected to these contracts have families and urgent financial needs that they may not be able to adequately attend to for as long as their employment and ability to earn a living is uncertain. We submit that there is a need for urgent legislative intervention to prescribe the minimum hours across all sectors with a view to ensure that no employee in SA will be subjected to the uncertainty that results from zero-rated contracts.

In conclusion, we are of the view that zero-rated contracts do not comply with the Basic Conditions of Employment, and are thus invalid. They create unnecessary uncertainty regarding the working conditions. We are of the further view that they amount to unfair labour practice, as it contravenes the BCEA.

Dieketseng Damane LLB (UJ) is a legal practitioner at the Wits University Law Clinic and Clement Marumoagae LLB LLM (Wits) LLM (NWU) Dip Insolvency Law and Practice (UP) PhD (UCT) is a practising legal practitioner at Marumoagae Attorneys and an Associate Professor at the University of Witwatersrand. Mr Marumoagae is also a council member of the Legal Practice Council.

This article was first published in De Rebus in 2021 (Nov) DR 11.

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