Cases Cited in this edition

Settlement Agreements and the Jurisdiction of the CCMA

The CCMA only has the jurisdiction and powers afforded it under the Labour Relations Act, 1995 ("the LRA"). When conducting an arbitration, the CCMA Commissioner must be satisfied that the statutory preconditions for the exercise of powers exist.

In the case of an alleged unfair dismissal, the grievant's dismissal is a precondition for the exercise of the arbitrator's powers.

Much controversy surrounds the situation where a grievant signs a resignation letter or a settlement agreement and then places the resignation or settlement agreement in dispute. The question then arises whether the CCMA has jurisdiction to arbitrate on such a dispute.

To establish the jurisdiction of the CCMA the employee will have to prove that a dismissal occurred. In the instances under consideration only two sub-sections of s I 86 of the LRA need to be considered, namely:

"(a) An employer has terminated a contract of employment with or without notice;

(e) An employee terminated a contract of employment with or without notice because the employer made continued employment intolerable for the employee".

In the matter of Rosa Schmahmann v Concept Communications Natal (Pty) Ltd (unreported Labour Court judgment, case no. D18/97, dated 13/08/97) at pg. 5, Landman J held that a termination of the contract of employment by the employer constitutes a unilateral act. In the matter of D Stewart Wrightson (Pty) Ltd v Thorpe 1977 (2) SA 943 A, Jansen JA held that the resignation by an employee (on the basis of so-called constructive dismissal) is a unilateral act.

It has repeatedly been held by the Labour Court that a consensual termination does not fall within the dismissal definition of the LRA. In this regard see:

¨ Ackron & others v Northern Province Development Corporation [19981 8BLLR 916 (LC): "The employment relationship between the parties in this matter was terminated by agreement. The applicants were not dismissed and therefore there was no termination of services for operational requirements".

¨ In Kynoch Feeds (Pty) Ltd v CCMA & others [ 1 9981 191LJ 836 (LC): "The Act defines the word "dismissal". It means the termination of a contract of employment by the employer as set out in Section 186(a). I therefore agree with counsel for the applicant, that an agreement between an employer and an employee to terminate a contract of employment is not a "dismissal" as defined by Section 186(a) or in any other sense", and

¨ The Rosa Schmahmann case: "A dismissal [as defined] is not the effect of an agreement reached at the stage of the termination of services....".

The CCMA is not a forum which can enquire into whether or not a contract has been reached or breached. The following arbitration awards illustrate this point clearly.

In Mark Langley v Billiton SA Ltd (unreported CCMA arbitration award, case no. GA40909, dated 14/01/99), it was held that:

"It was argued for the applicant that prior to his signature of this letter he was 'so distraught" that he did not read the letter and that he signed the letter under duress. The CCA4A is an administrative tribunal created by statute with limited powers specified in the Act ("LRA"). The commissioner has no jurisdiction to enquire into matters not specified in the Act. It follows therefore that the CCMA is not empowered to consider matters of a contractual or delictual nature unless expressly provided for in the Act. No provision in the Act grants jurisdiction to the CCMA to enquire into the validity of contracts or set aside a contract on ally grounds. This remains a power reserved for the High Court'

In Moolman v Border Technikon (unreported CCMA arbitration award, case no. EC568, dated 30/10/97), the commissioner concluded:

"If the applicant challenges the validity of the settlement agreement, the challenge must be made at a different forum and the a applicant is confined to his remedies on that agreement, which remedies must be sought in the ordinary courts"

In Samantha Leigh James v Thirstys Dockside Cafe (unreported CCMA arbitration award, case no. KN 1 7344, dated 28/10/98), the commissioner found that:

"The CCMA is not the forum to decide on whether an agreement has been repudiated. The commission is a creature o statute and derives its functions from the Act only. It cannot arbitrate its dispute based on a party's common law rights or one relating to the law of contract. Not even the parties, by consenting, can confer jurisdiction on the CCMA to arbitrate disputes of this nature

"Where the parties have entered into an agreement and where the one party seeks to resile from it, I find that I have no jurisdiction to set aside the agreement".

Accordingly, it must now be accepted that the controversy whether the CCMA can enquire into the validity of a settlement agreement has finally been put to bed.

The Applicant for Employment

The dispute concerned the application of item 2 (1) (b) of schedules of the Labour Relations Act 66 of 1995 ("the LRA") which provides that:

(a) an unfair labour practice means any unfair act or omission that arises between an employer and employee involving -

(b) the unfair conduct of the employer relating to the promotion, demotion or training of an employee or relating to the provision of benefits to an employee.

¨ FACTS: The employer by advertisement invited applicants for three vacancies. The advertisement stated that there were three posts to be filled. Nine applicants were short-listed for these posts. The applicants were all interviewed and tested on the same day and two registered Trade Unions were entitled to observe the interviews, tests and deliberations of the interviewing panel. When Ms Damon was interviewed, a Union representative of SAMWU was present.

The employer appointed candidates to two of the posts. A third post was not filled as the employer claimed none of the other candidates met the minimum requirements for the job.

Ms Damon's representative argued that the affirmative action undertakings by the employer required that Ms Damon should have been employed as she clearly had the potential to do the job.

The employer contended that affirmative action should only be implemented where it provides a satisfactory and affordable service and can be done in a cost effective manner. The employer's further argument was that during the restructuring of local government there had been approximately 220 appointments and this could potentially lead to in excess of 1000 disputes should all the failed applicants take issue with their failure to be appointed.

¨ HELD: The onus is on the employee to make out a case of an unfair labour practice. Accordingly the reasons why Ms Damon was not appointed had to be examined to identify any defective reasoning on the part of the employer as to why she had not been appointed. Unless the employee is able to show that the employer had not applied its mind to the selection of the successful candidate, the CCMA will not interfere with the prerogative of the employer to appoint whom it considered to be the best candidate. When alleging that an appointment is unfair, the employee effectively requires the CCMA to review the decision of the employer.

The Union had failed to indicate in which respects the employer failed to apply its mind in not appointing Ms Damon.

Accordingly it was found that there was no defect in the reasoning of the employer in not appointing Ms Damon to the position and hence the employer did not commit an unfair labour practice.

The Arbitrator found that the Union's pursuit of this case was unsustainable as it provided no evidence of unfairness and made a costs order against the Union.

¨ COMMENT-. This case illustrates the benefit of a transparent selection process.

Strike by union members outside the bargaining unit

¨ FACTS: Plascon recognised the union as a collective bargaining agent of its members employed in a specific bargaining unit. During the 1998 round of wage negotiations the parties failed to reach agreement and deadlock was declared. The union and all its members, including members falling outside of the bargaining unit commenced protected strike action on 3 August 1998. Plascon gave notice to the striking non-bargaining union members of its intention to discipline them for striking. In response, the union applied for an urgent interdict to restrain Plascon from disciplining its striking members who fell outside the bargaining unit.

¨ HELD: The Court held that in terms of s64(l) of the LRA "every employee has the right to strike and every employer has the right to lock-out" subject to certain conditions. The Court referred to s23(2)(c) of the Constitution which enshrines the right of every worker to strike. Those who fail to comply with the pre-conditions are vulnerable to dismissal and a civil action for damages. There is no limitation in the LRA that only those employees of an employer who are directly affected by the strike (i.e. only the union members in a specific bargaining unit), may embark on protected strike action. The Court found that the purpose of s64(l) is a procedural requirement to compel employees to explore the possible resolution of their dispute through negotiations before exercising their right to strike. Once that purpose has been fulfilled, there are no further statutory objections limiting the right to strike only to employees directly affected by the demand.

Consequently once employees have complied with the provisions of s64(i) all employees of the employer may embark on protected strike action whether or not they fall within a specific bargaining unit.

¨ COMMENT- This case settles the law on whether employees outside the bargaining unit may join their co-employees in protected strike action.

Independent contractor v employee

SABC v McKenzie (1999) 1 BLLR I (LAC)

The Labour Appeal Court ("LAC") recently had occasion for the first time to address the interpretation of terms governing a working relationship for the purpose of ascertaining the legal status of the relationship - specifically, whether it constitutes one of employment.

¨ FACTS: The SABC appealed against the Industrial Court's determination in favour of McKenzie that he was an employee and had been unfairly dismissed by the SABC. McKenzie contended that he was dismissed when the SABC failed to renew his contract. The SABC pleaded that McKenzie, producer and presenter of two radio programmes for the Corporation, had been an independent contractor throughout and not an employee.

¨ HELD: When considering the various tests which had evolved over time, the LAC crystallised a number of important features of the contract of employment in contrast to that of an independent contractor:

+ Whereas the object of an employment contract is the employee's capacity to work personally for his employer, an independent contract has as its focus the product or specific result contractually agreed.

+ An independent contractor, in contrast to the typical employee, is not required (unless the parties agree otherwise) to do the work himself he may himself employ others to perform the work in order to procure the result or product agreed on.

+ An employer is essentially at liberty to decide whether or not to utilise the personal services required to be tendered by his employee; however, an independent contractor is obliged to deliver the result within the time determined by the work contract (or if it is silent in this regard, within a reasonable time).

+ A typical employee is subject to the control and super-vision of his employer usually in respect of both the end to be achieved and the manner or parameters within which his services are to be performed. The independent contractor, by way of contrast, tends . more toward being a free agent and, given such independence, there is at least notionally no overt power imbalance in the relationship between independent contractor and principal.

+ Whereas an employment relationship automatically terminates upon death of the employee, dissolution of the independent contractor relationship is not a natural consequence of the death of either the independent contractor or his principal.

+ While the independent contract will cease on completion of the job paid for, the duration of the employment relationship is directly related to the period (whether fixed or indefinite) that the employee tenders (or is required to tender) his services, which his employer accepts.

The LAC adopted the approach that the true legal status of the relationship between the parties must be ascertained on a conspectus of the realities ("substance") of the relationship and should not consider itself bound by how the parties perceive or label the relationship ("form").

The freelancer contract, in terms of which McKenzie was engaged, provided that:

1. he agreed to the production and presentation of two radio programmes for a definite period;

2. he was not paid a salary but a monthly fee for each programme;

3. an entirely separate contract had to be concluded in respect of each extra programme he produced and presented;

4. he received a separate fee for any such additional programmes;

5. he was not under the strict supervision of the SABC;

6. each contract terminated when the period lapsed within which it was agreed that he would produce and present the particular programme;

7. irrespective of whether the preparation work had been done, he was not paid if he did not present the programme;

8. he did not enjoy the pension fund, medical aid and life insurance policy benefits of SABC employees; nor was he subject to the SABC's disciplinary code and regulations;

9. he enjoyed no leave entitlement save for an occasion in 1993 which the parties conceded would be "time off " as an exception;

I 0. he had no right to sick leave;

I 1. provided he did not do so for a competitor, he could enter into other work contracts without the permission of or consulting the SABC.

The LAC was not convinced that the SABCs right to impose its editorial standards on McKenzie could be equated with an employer's rights of control over its employee.

While acknowledging that it would have been difficult for a third party to distinguish McKenzie from the SABCs employees, the LAC expressed the view that it was undoubtedly convenient to both parties that McKenzie used an office and telephone at the studio, even kept similar office hours and attended meetings - there was, however, no obligation on either party to do so. The LAC was also persuaded that the representation by McKenzie to the Receiver of Revenue (and the world at large) that he was an independent contractor and accordingly enjoyed certain income tax deductions as a freelancer, militated against a finding of an employment relationship.

The LAC upheld the SABCs appeal and substituted the Industrial Court's determination with an order to the effect that McKenzie was not an employee of the SABC.

¨ COMMENT. The approach adopted by the LAC is a practical one it is essentially a synthesis of the different tests developed over the years to distinguish an employment contract from one of work. The approach recognises the artificiality of the control test which is not consonant with the different manifestations of the contemporary employment relationship (particularly where many employees are more/differently skilled than their employers and not sub'ect to strict supervision). The LAC's approach also overcomes the inherent inadequacies of the Organisation test and addresses the primary criticism of the composite or dominant impression test.

The LACs approach, it is submitted, appears to constitute a refinement of the dominant impression test, which itself is a hybrid of its predecessors. The LACs approach is most instructive in first establishing the existence of the terms of the contract and only thereafter balancing the features or practical realities displayed in the relationship, in order to determine the extent to which the alleged employee is truly independent in contracting his services and delivering results to others.

 The applicant for employment

¨ FACTS: The applicant was employed with New Age Beverage ("New Age") a black empowerment company bortling Pepsi Cola products. Pepsi Cola's competitor was Coke (Amalgamated Beverage Incorporated or "ABI"). New Age ceased production in 1997 and was eventually taken over by ABI.

The applicant, when his job was lost, applied for employment at ABI. His application was unsuccessful for the following reasons:

"Because o fthe manner in which New Age Beverage and its employees acted towards Coca-Cola and ABI, the trust required for the employment relationship will not be present between ABI and any ex-New Age employee".

The applicant later received a second letter stating the reason why his application had been unsuccessful was that he did not meet the requirements in terms of the job criteria.

The applicant then launched an application in the Labour Court on the grounds that the ABI committed an unfair labour practise as envisaged by item 2(l)(a) read with item 2(2) of Schedule 7 of the Labour Relations Act 66 of 1995.

In evidence it was stated that ABI took a decision on board level not to employ any ex-New Age employees. This decision was motivated by the need to maintain the morale of those ABI employees who had remained loyal to ABI and who had not succumbed to lucrative offers by New Age to entice them away. Secondly, ex-New Age employees would not have the "passion for the Coca-Cola brand" which was integral to the success of ABI in winning

the battle and in making it what it was. Thirdly, ABI staff and the liquidators had inspected the books of New Age and were shocked at the extent of fraud and theft which permeated the Organisation from the highest to the lowest ranks. ABI did not feel that it could distinguish between honest and dishonest employees. For these reasons, ABI felt that it could not trust ex-New Age employees. There was also a reluctance to make use of the services of an employee of "poor performing competitor".

¨ HELD: Landman J found that the LRA seeks to ensure that employers provide equal opportunities for employment to all job seekers. The Act prohibits unfair discrimination on the basis of listed grounds or on arbitrary grounds.

Unfair discrimination on arbitrary ground takes place where the discrimination is for no reason or is purposeless. The discrimination must be balanced against societal values, particularly (as emphasised repeatedly by the Constitutional Court) the dignity of the complainant and a society based on equality and the absence of discrimination.

The Judge found that on the facts, he could safely say that ABI made out a case that the refusal to hire ex-New Age employees made commercial sense.

This was so because the ban was not vindictive. It was done to preserve the morale of ABI's work force, to discourage turncoats, to reward loyalty, to ensure commitment to the brand, to assure customers that ABI employees believe in Coke and all that it stands for and to avoid the taint of corruption. The ban was only implemented at ABI for a limited period.

¨ COMMENT. This case shows that a company is not prevented from taking objective commercial decisions in the work place.

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