Labour News from Deneys Reitz http://www.deneysreitz.co.za 82 Maude Street Sandton 2196 PO Box 784903 Sandton 2146 Tel [011] 685 8500 Fax [011] 883 4000

Labour Publications from Deneys Reitz

It is generally accepted by most companies that employees need to make limited use of its facilities for private communication.

Problems arise where these facilities are abused, or utilised for fraudulent purposes. It often happens that our social and work communications intersect, creating an area of possible conflict within the employer/employee relationship.

Private communication at the workplace has raised a number of practical and legal issues which have rapidly gained attention with the widespread availability of Internet and e-mail facilities at work. These principles can equally be applied to the use of faxes, telephone calls and even letters at work.

From a company perspective, the notion of employees utilising company facilities for private use is daunting as, firstly, the company bears the actual cost of the use of the facilities and the consequences of employees not attending to their work while engaged in private communications.

Secondly, there is the risk of the company becoming liable as a result of correspondence, such as an e-mail, being sent privately by an employee under the company banner, which potentially defames another company or person. South African law contains a principle of "vicarious liability" which means employers are legally responsible for the actions of their employees.

Thirdly, private use of Internet or e-mail facilities has given rise to varied disputes within the workplace. The CCMA and Labour Court have repeatedly upheld dismissals of employees who have viewed or distributed pornographic material in the workplace. These matters often arise from the complaints of offended employees who submit grievances to their superiors.

Similar sentiment has been expressed toward dismissals arising out of gender or racially sensitive material being sent through company facilities.

Most employers have effectively addressed these prospective risks and problems by formulating policies and rules within which employees may operate the facilities.

The policing of these policies entails companies monitoring employee communication, including checking internet sites visited, e-mails, faxes and even telephone calls.

This practice sets "legal" alarm bells ringing as our constitution recognises rights of privacy to citizens. As a consequence, the question is often asked, how private is private in the workplace?

There are three main arguments in this regard:

• as the company owns the equipment, the employees give up their rights to privacy when using this equipment for private use. The company may monitor without notification;
• employees have an absolute right to privacy which prevents companies monitoring communications; and
• companies may only monitor private communications if prior warning or notification has been given that monitoring may take place from time to time.

These arguments have, from time to time, been given support by various courts in varying dgrees, although the most widely accepted view is that the company ought to publish a policy, informing employees that all forms of communication may be monitored from time to time. If the company has given notification, it would therefore be entitled to tap phones, and read e-mails and faxes. It could rely on these in instituting action against employees. In any event, legal advice should be sought prior to embarking on this type of action, as there are a number of complex legal issues which may arise.

At the end of the day, the nub of the employer/employee relationship is one in which an employee is expected to work according to an employer's reasonable instructions for the purpose of perpetuating the success of a particular enterprise. It therefore is not too much of a surprise for companies to take steps to control the use of company facilities for private purposes. The challenge is to balance accountability with responsibility.

BRUCE MACGREGOR
DENEYS REITZ INC.
www.deneysreitz.co.za

Outsourcing is a business trend which has enjoyed increasing popularity in Europe and the US over the past few years and the recent growth of outsourcing companies in this country is a strong indication that this trend is being mirrored in the South African economy. Assessing the pros and cons of outsourcing is controversial, since companies and employees inevitably view this trend from different perspectives.

These are best illustrated by way of example.

A transport company started, from home by an entrepreneur, consists of a single truck and driver whith a cellphone being the only means of procuring business. If the business prospers, the entrepreneur may purchase additional trucks and employ drivers, and a clerical assistant for the administration.

In a year's time the company, if successful, would have grown into a large transport business, not only employing drivers, mechanics and administration staff, but also a range of employees to handle functions as diverse as human resources, security and cleaning.

The entrepreneur may wish to maintain the focus of the business on transport and may find that the time and resources expended on non-cor functions are unjustified. Consequently, the company may elect to outsource.

The reasoning being that an outsourced company could perform certain functions more efficiently and effectively than the transport company. In addtition, the transporters' organisation will benefit by being able to focus on improving its core function and offering better quality service.

The transport company concerned will monitor the outsourcing service closely and will, if need be, replace the outsourcing company if performance is substandard or if the service becomes too expensive. Two of the risks inherent in the outsourcing process:

Should the transport business decide to outsource its cleaning services, for example, it would be required to shut down its cleaning function and, in doing so, retrench cleaners employed. This means a retrenchment process entailing consultations with affected employees in terms of the Labour Relations Act. One of the issues that may arise is an alternative to retrenchment is the possibility of the outsourcing company employing the cleaners. The question that would arise in this instance would be whether the cleaners would accept this alternative.

The Labour Courts expect a high degree of compliance with the prescribed process from companies undertaking retrenchment exercises. Poorly executed retrenchment exercises frequently result in orders of compensation equivalent to 12 months' remuneration per employee, and reinstatement is often granted. From an employee perspective, the notion of being retrenched is serious, especially in light of South Africa's high unemployment. In the above example, long-standing cleaners may feel insecure at the prospect of employment with someone other than the transport company.

A debate exists in our Employment Law as to whether outsourcing constitutes a transfer of the company's business and hence whether, barring a retrenchment exercise, employment contracts are automatically transferred to the outsourcing company. The legal enquiry being whether outsourcing is the sale, in this instance, of the claning portion of the transporter's business as a going concern, or merely the outsourcing of a function. Our labour courts have expressed varying views.

An interesting Labour Court decision involved NEHAWU and University of Cape Town, in which an outsourcing exercise (gardening and cleaning services) was challenged. The court held that the outsourcing did not constitute a transfer of a part of the university's business and, accordingly, the employment contracts would not automatically be transfrred to the outsourcing company. The University was vindicated in its retrenchment. This case is on appeal, and the outcome is eagerly awaited.

Where does that leave us in acssessing the pros and cons of outsourcing? On one hand, a successfully run, profit-driven company which maintains its focus, grows, creating new and favourable employment conditions.

On the other hand, South Africa, unlike its US and European counterparts, has a chronic unemployment problem. There is signficant social pressure to maintain employment for employment's sake. Only time will tell with whom the ultimate benefits or risks will lie.

BRUCE MACGREGOR
DENEYS REITZ INC
www.deneysreitz.co.za

1. In the case of Carephone (Pty) Limited v Marcus NO and Others (1998) 19 ILJ 1425 (LAC) at 1437, the court held that the Labour Courts could review an arbitration award on the "wider basis". i.e. if an arbitration award is not justifiable. The Court held that an arbitration award will be reviewable if there is no "rational objective basis justifying the connection made by the administrative decision maker between the material properly available to him and the conclusion he or she eventually arrived at".

2. After the Carephone decision, there were a number of decisions of the Labour Courts in which the "wider" approach to review applications, suggested by Carephone, was questioned.

3. In particular, Wallis AJ in the Labour Court case of Shoprite Checkers and A Ramdaw NO and Others, held that the Carephone decision was no longer binding because in making an arbitration award, a CCMA commissioner did not perform an administrative action. The reasoning was that it was only in performing an administrative action that the "wider" ground of review would apply.

4. We acted for Shoprite Checkers in this case, which was then taken on appeal to the Labour Appeal Court. The judgment was handed down on Friday 29 June 2001.

5. In a Landmark judgment handed down on 29/06/01, the Labour Appeal Court makes reference to the case of Pharmaceutical Manufacturers of SA; in re Ex Parte President of the RSA 2000 (2) SA 674 (CC), where the Constitutional Court held that whenever public power is exercised, it has to be exercised rationally and, if it is exercised irrationally, the courts are entitled to intervene. The Labour Appeal Court then concluded as follows:

i) The CCMA exercises public power when it issues arbitration awards in terms of its compulsory arbitral functions;

ii) It follows that, when the CCMA deals with compulsory arbitrations under the Labour Relations Act, it exercises public power, and therefore CCMA arbitration awards can be reviewed and set aside if they are irrational;

iii) Although the terms "justifiable" and "rational" may not be synonymous, they bear a sufficiently similar meaning to justify the conclusion that CCMA arbitration awards can be reviewed on the basis of both rationality and justifiability;

iv) The Labour Appeal Court concluded as follows:

6. The importance of this Labour Appeal Court decision cannot be under emphasised. Although there is no provision for appealing against arbitration awards, it does mean that parties are entitled to continue to challenge arbitration awards on the "wider" basis, where such awards are not, "justifiable" or "rational".

DENEYS REITZ INC
www.deneysreitz.co.za

"Slip 'n Trip" cases in supermarkets and other retailers are prolific sources of litigation and a frequent source of public liability indemnity claims against underwriters.

Often a successful defence of a claim will turn on the adequacy of the cleaning system employed by the retailer. Underwriters, in seeking to reduce their risk, can do so by taking steps to ensure that the insured has in place an appropriate cleaning system.

The law does not demand an unrealistically high standard of care. "Assistants are not expected to walk behind each customer to sweep anything that he or she may drop …". See Turner v Arding & Hobbes Ltd, 1949 (2) All ER 911 (KB). Reasonable measures must be taken.

In the then Rhodesia, a 60-year old partially disabled gentleman was proceeding down an isle when he slipped on a piece of ice cream on the floor, fell and injured himself. Action was instituted for damages. Evidence was that the piece of ice cream had been dropped by a schoolgirl who entered the supermarket a few minutes prior to the plaintiff. It was assessed that the ice cream could not have been lying on the floor for longer than ten minutes.

The crucial question was whether the defendant was negligent in permitting ice cream to be on the floor at a place where, and at a time when, the accident happened.

The supermarket had in place a cleaning system:

• Every morning before opening, the floor tiles were scrubbed down with liquid detergent.
• An employee was assigned the sole duty of ensuring the floor remained clean throughout the day.
• That employee patrolled the isle of the self-service area and swept away and picked up spills from the goods displayed and items such as dust, plastic bags and pieces of paper.
• There were also standing directives to other staff members that any potentially hazardous matter on the floor should be removed immediately.

The court found that the mere fact that ice cream was shown to be on the floor for ten minutes without being detected and cleaned up did not justify the conclusion that the defendant's system was defective. The piece of ice cream was of too small a size and remained on the floor for too short a duration to suggest that.

The accident happened despite a properly, working cleaning system. The action was dismissed. See Jones v Maceys of Salisbury (Pvt) Ltd, 1982 (2) SA 139 (Z).

Contrast that with the plaintiff who has slipped on cooking oil spilled on the floor. The evidence was that the retailer did not make any provisions for any systematic coverage of the entire shop floor at reasonable intervals.

The only procedure in place was that the floor was cleaned properly before opening and two cleaners were on duty at the fruit and vegetable section all day. Accordingly, if there was an oil spillage, the oil could lie on the floor for up to six hours, creating a potential hazard to customers.

The cleaning system was held to be insufficient and haphazard. "It depended largely upon any one of an unspecified number of shelf packers, or one of the price taggers, chancing upon any particular spillage that constituted a hazard".

The plaintiff would succeed if it could be shown that the retailer knew, or should have known, that a spillage was not an uncommon occurrence, and that if it should happen and not be attended to promptly, it would create a serious risk that customers would fall and injure themselves. The retailer could not show that the accident would have been likely to happen irrespective of the existence of a proper and adequate cleaning system. See Probst v Pick 'n Pay Retailers (Pty) Ltd, 1998 (2) All SA 186 (W).

In a recent decision, on a visit to a chain store, the plaintiff allegedly sustained damages when she slipped on a bean in one of the retailer's stores. The court found that before the presence of produce such as green beans can give rise to an inference of negligence there must be some evidence of either a direct or circumstantial nature that the retailer, at the time of the accident:

• Ought to have taken steps to prevent the presence of the offending item on the floor from occurring;
• Alternatively knew, or ought to have known of the presence; and
• Failed to take reasonable steps to remove the offending item forthwith.

The mere presence of vegetable matter on the floor during shopping hours was not in itself prima facie evidence of negligence on the part of the defendant.

The evidence could not establish when the spillage had occurred. The court found that no more was required than evidence that a reasonably adequate cleaning system was in place to detect and eliminate spillage.

• The retailer had outsourced the cleaning of the store to a specialist contractor;
• The store was cleaned in two phases on a nightly and daily basis;
• During trading hours in the day, two spillage cleaners constantly roamed throughout the store to detect and clean spillages and to remove obstacles lying on the floor;
• One cleaner worked fulltime in the food market while the other, 70% of the time in the food market and 30% in the rest of the store, since the food area carried the greater risk that spillages would occur.
• There was also a backup system referred to as a paging or call-light system. That consisted of a series of coloured lights housed in the roof of both the top and bottom floors of the store which served to alert cleaners and staff of spillage problems in the store. If spillage occurred, a cleaner was paged via the system. The person who discovered the spillage would wait there until the cleaner arrived.

Both the Trial and Appeal Courts found that the cleaning system was proper and adequate so as to provide for the safety of customers. There was no evidence to suggest that the system had failed on the day on question. See Montesli v Woolworths (Pty) Ltd, 2000 (4) SA 735 (W).

No slip-ups in cleaning systems result in no slip-ups on the shop floor.

DONALD DINNIE AND PENNY LEE
DENEYS REITZ INC
www.deneysreitz.co.za

DENEYS REITZ INC
www.deneysreitz.co.za

Section 197 of the LRA deals with the transfer of contracts of employment when a business is transferred. This paper will focus on transfers under solvent circumstances in order not to unnecessarily complicate matters, and will refer to the old employer as the seller and the new one as the buyer.

The meaning of the existing section 197 is unclear in many important aspects. Deneys Reitz is involved in a matter where a judgement by the Labour Appeal Court on the issues is awaited. We had hoped that the judgement would have been out by now so that we could analyse it and inform you what the definitive law on the issue is. Unfortunately, the matter has not been decided.

The proposed amendments to the LRA include significant amendments to section 197. Some of the amendments will bring greater certainty on contentious aspects whilst other will not.

Due to the above reasons, we can only share our views with you, but they may be right or wrong. Accordingly you should not treat this paper as legal advice.

There are four key aspects to section 197, namely: ·

• Does it operate automatically or is an agreement between the seller and the buyer required before it kicks in?
• If it operates automatically, what types of transactions does it apply to?
• What are the consequences of the application of the section?
• Can one avoid the section by retrenching the affected workers prior to the transfer?

The answer to these questions depends on the interpretation of section 197, more particularly 197(1)(a) and 197(2)(a), and section 189. We shall deal with them in turn.

The common law position is that the rights and obligations in terms of a contract of employment, may not be transferred form one employer to another without the consent of the employee. This is very much what subsection 197(1) seems to say:

"Transfer of contract of employment

(1) A contract of employment may not be transferred from one employer (referred to as "the old employer") to another employer (referred to as "the new employer") without the employee's consent, unless-"

Paragraph (a) then seems to create an exception to the common law position and permits the transfer of a contract of employment without the consent of the employee under certain defined circumstances, namely:

"(a) [when] the whole or any part of a business, trade or undertaking is transferred by the old employer as a going concern; or"

Subsection 197(2)(a) deals with the consequences of the transfer of a contract of employment without the consent of the employee concerned. I shall deal with this aspect later.

Approached in the above fashion the section seems to be quite straightforward and uncontroversial. Employers are allowed to transfer contracts of employment without the consent of the employees concerned if they dispose of their business or part thereof, provided that they do not try to amend the employees' conditions of employment or length of service.

However, this approach does not suit trade unions. They contend that the section is a worker protection provision. Accordingly, it should be interpreted to mean that the contracts of employment of all employees transfer automatically where the seller transfers a business to a buyer. This was the approach adopted by Seady AJ in the Powerplus matter, obliquely approved by the Labour Appeal Court in the Foodgro matter but rejected by Mlambo J in the UCT matter.

Unfortunately Seady AJ did not attempt to interpret the section in Powerplus - she mainly followed certain European authorities.

The unions contend that the words "If a business is transferred in the circumstances referred to in subsection (1)(a)" in section 197(2)(a) actually only refer to paragraph (a) of subsection (1), and not to the whole of subsection (1)(a). So interpreted, the section does become a worker protection provision as it is clear that the rights and obligations between the seller and the employees transfer to the buyer unless it is otherwise agreed.

However, we can not think of any reason to break 197(1)(a) up into the two distinct parts.

One also wonders why the section pertinently provides that, in circumstances of insolvency, contracts of employment transfer automatically.

It would indeed be interesting to see how the Labour Appeal Court interprets the matter.

The amended section 197 settles this issue. It provides that the buyer is automatically substituted in the place of the seller in respect of all contracts of employment in existence immediately before the date of transfer.

What type of transactions does the section apply too?

An analysis of subparagraph (a) shows that the section applies to transactions where

• the whole or any part
• of a business trade or undertaking [or service]
• is transferred
• as a going
• concern

"the whole or any part"

The words "any part" can mean the smallest part. In 1994 the European Court of Justice held that the outsourcing of one cleaner was subject to the relevant European Directive as it then stood.

"of a business trade or undertaking"

In its widest sense, "business" is any activity, enterprise or pursuit of serious importance occupying a person's time, energy or resources. Trade has a more limited meaning and undertaking has been defined in various judgements under the old LRA as an activity in which employers and their employees are involved in. Accordingly " business" has the widest application, and can mean anything of note.

"is transferred"

Transfer has a legal meaning - namely "to make over the possession or control of; to sell or give." Again, this is very broad. An interesting question is whether a temporary making over would suffice. The Labour Court has decided that it does not, but we believe that a temporary transfer is possible in law. You could, for example rent a car for a month and it would be transferred to you for this period.

"concern"

Concern means a "commercial company or enterprise" or a "business or firm". This would suggest that concern has the same wide meaning as business trade or undertaking.

Accordingly, these terms give the section very wide application. Is this limited by the phrase "as a going"? We believe so.

"as a going"

Going clearly means that the concern must be in actual operation and also that it must be in operation without interruption. More importantly, we do not believe that a concern can be said to be going if what it does changes. These are indications of a real limitation.

If you sell off some assets and they get mothballed for a period of time or shipped to another part of the country, they can not be said to be going. Similarly, if you manufacture paint, decide not to distribute your product any longer, sell your trucks to a second hand dealer and give the contract to a transport company, we do not believe that that part of your concern can be said to have remained going.

The Australian High Court has recently handed down an interesting decision in a matter that dealt with a similar provision. It held that, where a pharmacy took over a banking agency from a bank, it would be incorrect to say that the pharmacy, by its involvement banking activities, was carrying on banking business - it was in fact carrying on the business of a bank agent. This decision illustrates the point that a change in the nature of the concern may cause it not to be a going concern.

The only real change brought about by the amended section in this regard is that service is included in the definition of business. This was done to nullify the impact of the UCT case and to ensure that no transaction slips through the net. Accordingly, a golden opportunity to clarify some of the question marks was lost, and the Labour Appeal Court will have to determine them. Only lawyers will be happy about this.

What are the consequences of the application of the section?

The amended section spells out that, unless otherwise agreed with a union (if union members are affected), or otherwise with the affected employees:

• All the rights and obligations between the seller and each employee continue between the buyer and each employee.
• Anything done by the seller will be considered to have been done by the buyer.
• The employment of the employees continues with the buyer as if with the seller.
• The buyer and the seller are jointly and severally liable in respect of any claim, concerning a term or condition of employment, that arose prior to the transfer.
• If the employees are retrenched within twelve months after the transfer, the seller is jointly and severally liable with the buyer for leave pay, severance pay and other payments that have accrued at the date of transfer.
• The provision of substantially less favourable terms and conditions of employment by a buyer, constitutes a dismissal.

This has important implications for buyers of a business:

• Do a proper due diligence.
• Insist on an indemnity by the seller.
• Make sure that all accrued rights like leave pay, have been catered for in the purchase price.
• If you retrench in the future you are liable to pay severance for all the years of service with the seller, and according to the Labour Appeal Court in Foodgro you cannot vary this obligation by agreement.
• If your terms and conditions of employment are less favourable than those of the seller, you will have to negotiate in order to equalise them and you may face a strike or an unfair dismissal claim.

The European law prohibits a dismissal if the reason for it is the transfer of a business. However, there is an important exception. A dismissal based on the organisational requirements of either the buyer or the seller is not prohibited.

Our LRA also does not expressly prohibit such dismissals. In fact, there is no link between section 189, dealing with retrenchments, and section 197. Thus the test for a fair retrenchment remains whether the dismissal is for a fair reason based on the operational requirements of the employer.

Operations requirements are defined as: "'operational requirements' means requirements based on the economic, technological, structural or similar needs of an employer;"

This should include the fact that the buyer does not require the employees or that he does not require them at their existing terms or conditions of employment. Having boldly stated this, we must alert you to the fact that there is a Labour Court decision to the effect that the seller cannot retrench as a result of its operational requirements. However, the judge in that matter was not referred to the definition of operational requirements.

Furthermore, the amendments provide that the dismissal of an employee for a reason related to a transfer in terms of Section 197 is automatically unfair. It seems as if the lawmakers have decided that the operational requirements of the buyer and the seller are irrelevant and that the buyer must be stuck with the employees of the seller. Again, it remains to be seen what the Labour Appeal Court will decide.

Conclusion

We have been unable to provide many answers in this paper. The Labour Appeal Court will have to determine the law. The only advice that we can give is that a conservative approach is called for when buying or selling a business.

HERMANN NIEUWOUDT
DENEYS REITZ INC.
SEPTEMBER 2001

DENEYS REITZ INC
www.deneysreitz.co.za

INTRODUCTION

South Africa made a smooth political transition from the apartheid regime to the present government, which has been hailed internationally as a success which borders on a miracle. The challenge which is presently facing the South African government is an economic one. After the transition, the trade barriers that existed during the apartheid era were broken down and the South African economy was exposed to globalisation which came with its challenges. The manufacturing sector which provided a lot of employment to South African citizens faced challenges in terms of cheaper products that were brought into the country. Most of the sectors had to look at cost-cutting measures and many of them looked at retrenchments as a means of cutting costs in order to remain competitive.

The changes in the trend in the international community, such as the dominance of technology and telecommunications and ownership and trading in intellectual property, meant that the traditional sources of employment were becoming insignificant. A demand for specialised skills which were needed to cope with the changes in the economy was created and the South African economy had such skills in short supply.

There are various measures that were introduced by the government in order to address the question of skills shortage, inter alia, the Employment Equity Act which seeks to address the shortage of skills amongst previously disadvantaged groups (blacks, women and disabled persons) as well as the enactment of the Skills Development and Skills Levies Acts. Whilst these measures are commendable, they do not seem to be adequate to address skills shortage particularly in the short term.

Another trend that has come with globalisation is that capital movement between countries is easier. This has caused entrepreneurs in other countries to look beyond the borders of their countries to invest their funds. There are quite a number of companies that are overseas-based that have operations in South Africa. Most of these companies need to export human capital in order to set up operations which are extensions of these companies, whether it is separate companies or branches.

The acquisition of skilled labourers from outside the country and the secondment of employees from overseas operations to local operations, has been encumbered by the immigration laws that apply in South Africa, and this in turn has had a negative effect on investment in the country.

The statute that deals with control of admission of person to their residence in and their departure from the Republic of South Africa is the Aliens Control Act 96 of 1991 ("the Act"). Section 23 of the Act provides as follows :

It is clear from the provisions of section 23 that a foreigner needs an immigration permit in order to be a permanent resident in the country, and a person who requires to sojourn inside the country for a temporary period, requires a temporary residence permit.

There are different categories of temporary residence permits which are set out in section 26(1) of the Act, these being :

i) a visitors permit

ii) a work permit, which may be issued to any alien who applies for permission :

1. to be temporarily employed in the Republic with or without any reward; or
2. to temporarily manage or conduct any business in the Republic whether for his or her own account or not;
3. a business permit;
4. a study permit;
5. a work seeker's permit;
6. a medical permit.

Foreigners who want to work in South Africa require a work permit. As a result, the requirements for the issue of a valid work permit will be discussed hereunder:-

1. An application for a work permit may only be made while the Applicant is outside the Republic of South Africa and such an Applicant is not allowed to enter the Republic until such time as the permit has been issued, which means that an application for an immigration permit must be made in the country of which the Applicant validly holds a passport or in which he / she normally lives.

2. An application for a temporary work permit as indicated above, has to be made outside the Republic of South Africa to a South African mission in the country where the Applicant is based. After the application has been made, it is then forwarded to the Republic of South Africa where it is considered and a decision is made whether or not to grant same. If an immigration permit is issued, it is issued subject to the terms and conditions that may be set forth in the permit. The director-general may from time to time extend the period of the work permit or alter the conditions subject to which a permit is issued.

3. The categories of applicants for temporary work permits that are usually encountered are foreigners who want to be employed in South Africa and who have been offered positions by companies based in the Republic; and employees who are seconded to the country by an overseas parent company. Seconding employees from an overseas company is relatively easier than to get an employee who is not employed by the company to come and work in the country. The reason for this is that if an employee is seconded from an overseas company to a local operation, there is no requirement that the position must have been advertised inside the country, before the employee is offered the position. A prospective employer who requires to employ an expatriate, must first advertise for the position and only when suitable candidates are not found inside South Africa, can such prospective employer look outside the country for a candidate. In that case, the employer must provide proof of press-clippings of advertisement placed over a period of at least one month in national newspapers.

Procedure for applying for an immigration permit:

1. An immigration permit must be made in the country or the territory of which the Applicant validly holds a passport or in which he or she normally lives, as in the case of a temporary residence permit, unless the individual concerned is in possession of a temporary work permit. There are various categories of immigrants, which include workers, family reunion schemes, sponsored persons, retired persons, financially independent persons, persons who intend establishing their own businesses on their own or in partnership, or in co-operation with other businesses. However, it should be mentioned that applicants for an immigration permit do not choose in which category they are going to place themselves, as this is a function which is performed by the officials of the Department of Home Affairs, taking into account a prospective immigrant's educational background and other relevant information.

Attracting skilled employees into the country would benefit South Africa in that the country will have skilled employees to fill those positions where numbers in the country are insufficient to cater for that particular job category, and it makes it easier for investors to invest in the country if they know that the operation that they are setting up is going to be in the hands of their employee. The Republic can benefit from creating easy access to our labour market in that it can retain highly skilled individuals who can then transfer such skills to local individuals, thereby addressing the question of skills shortage and may also encourage investment. The present immigration system militates against such an easy access for the following reasons:

1. The process is regulated by the Department of Home Affairs which does not seem to be organized to handle the applications in a uniform and consistent fashion;

2. The system is inflexible and rigid;

3. The method of application is cumbersome and it takes a long period of time to process applications for work permits, which may range from a period of 8 weeks up to 12 months, depending on the complexity of the application;

4. The present system is insensitive to the economic needs of the country.

The criticism of the present immigration system has led to the drafting of the Immigration Bill which has to go through various stages in Parliament before becoming law. Categories of permits that may be issued in respect of individuals that seek to enter the Republic of South Africa for the purposes of working, are the following:

1. Work permit, which is the permit which may be issued to a foreigner intending to conduct work, and his prospective employer has satisfied the following requirements:

a) certification from a chartered accountant that the terms and conditions under which the employer will be employed will not be inferior to those prevailing in the relevant market segment for citizens and residents;

b) pay an amount prescribed by the Department from time to time as a ratio of such foreigner's remuneration, which amount should be shown in the training fund;

c) the Department may waive payment of the amount referred to above after consultation with the Departments of Labour and Trade and Industry, if it is verified that the employer concerned has in place an adequate training programme for citizens and residents; or when requested by the Department of Trade and Industry in respect of foreign investments.

d) A work permit shall lapse within six months after issue and within a year thereafter, if its holder fails to submit to the Department certification that he is still employed.

2. Intra-company transfer permits which are permits issued to a foreigner who is employed abroad by a business operating in the Republic in a branch, subsidiary or affiliate and who is required by that company to conduct business in the Republic for a period not exceeding two years, provided that:

a) a chartered account certifies that the employer needs to employ such foreigner;

b) the holder of an intra-company transfer may only conduct work for the employer who seconded him to the South African company.

3. Corporate permit. A corporate permit may be issued by the Department to a corporate Applicant to employ foreigners who may conduct work for such corporate Applicant. The Department of Labour may, after consultation with the Departments of Labour and of Trade and Industry, determine the maximum number of foreigners to be employed in terms of a corporate permit, by a corporate Applicant, after having considered:

a) the training programme, provided by the corporate employer for the citizens and residents of the Republic and/or the financial contribution offered by the corporate Applicant, to be shown in the training fund;

b) certification by a chartered accountant that the foreigners will be employed on terms and conditions not inferior to those enjoyed by citizens and residents of the Republic.

4. Permanent residence. The Department of Home Affairs may issue a permanent residence permit to a foreigner of good and sound character who:

a) has been a holder of a work permit for five years and has received a permanent offer of employment provided that the prospective employer certifies that a position exists and is intended to be filled by such a foreigner;

b) has received an offer for permanent employment provided that the prospective employer certifies the position was advertised but no suitably qualified citizen or resident was available to fill it;

c) has demonstrated to the satisfaction of the Department, extraordinary skills or qualifications, and

d) intends to establish a business in the Republic.

It will be seen that the changes that are contemplated in legislation are geared to deal with the shortage of skills and the role that can be played by foreigners in training citizens and residents to acquire skills they do not have and to attract much needed foreign investment.

1. A levy is paid in respect of an employee that is issued with a work permit and such levy is reflected in the training fund of such employer. However, the levy may be waived by the Department provided that the employer concerned has in place an adequate training programme for the citizens and residents of the Republic of South Africa and when requested by the Department of Trade and Industry in respect of foreign investment. It is clear that the intention of the government in imposing a levy to be paid by an employer who intends to bring a foreigner into the country is to ensure that there is a premium paid by such employer for bringing a foreigner. However, the Bill is sensitive to the training and the investment needs of the country as the levy may be waived provided an adequate training programme is in place and the Department of Trade and Industry is satisfied that foreign investment is being brought into the country.

2. The requirements for obtaining an intra-company transfer have been made clear.

3. Although previously an employer could make an application to get a certain number of foreigners to come and work for it in the country, the only thing the department could do was to agree in principle that it would grant the foreigners concerned permission to work in the country, provided that the relevant applications are made. The proposed system for corporate permits is available to employers, subject to a limitation in terms of numbers that can be brought into the country.

4. The number of foreigners allowed into the country will be dictated by the business and investment needs of the country.

5. The rules relating to the application for residence and other work permits are simplified and liberalized.

6. The audi alteram partem rule is extended to the adverse decisions affecting individuals that may be made by the Department and review procedures are clearly set out, and immigration courts have been established to review decisions of the Department.

There can be no doubt that the new Immigration Bill is long overdue having regard to the changes that have taken place in the international labour market. The fact that the proposed Bill is sensitive to transfer of skills and investment is commendable. The Bill has not been without criticism, particularly with regard to the question of who shall have the power to administer the statute. Criticism has also been that the Bill is going to result in an influx of foreigners into the country. It is submitted that such fears are unfounded as the Act is clearly worded and will be backed by clearly worded regulations. The interests of the country with regard to transfer of skills as well as foreign investment are taken into account in the Act. Staying with a rigid and inflexible immigration system would not augur well for the country.

It remains to be seen whether the introduction of the new immigration laws will have the desired effect, but the intention of the government and the legislature is quite clear.

DENEYS REITZ INC
www.deneysreitz.co.za

There has been a considerable growth of temporary employment services, or labour brokers, as they are more colloquially known, in South Africa over the past five years. In discussing the reasons for such enormous growth with labour brokers and those companies utilising their services, it is evident that there are two main reasons for this growth.

Firstly, there is a perception that the costs of complying with the employment laws are high, as are the costs of the direct administration of employees, and organisations are better served by temporary employment services (TES') who have the infrastructure to manage such compliance.

Secondly, that labour brokers often build up a pool of specialist employees who can be brought into a client organisation and utilised at the highest level of efficiency on short notice.

The common factor between these two reasons being one of cost, as an accepted norm in the TES industry is that the costs of utilising the services of a TES are approximately 10% of what it would cost to directly employ a temporary employee. It would be interesting to compile a report on the difference between employing temporary employees directly, as opposed to through a TES, over a 24 month period. It has been my experience that, on the whole, TES' are generally more efficient as temporary employment remains their core business, whereas in most instances other organisations use temporary employees in pursuance of their core business.

The Labour Relations Act ("LRA") makes provision for TES' to lawfully exist and trade, with emphasis on the fact that an employee of a TES will remain an employee of the TES, irrelevant of the employee performing services for a client of a TES.

There is, however, joint and several liability on both the TES and the particular client of the TES in terms of Section 198 of the LRA with respect to contraventions of collective agreements, arbitration awards, the Wage Act or the Basic Conditions of Employment Act.

Section 82 of the Basic Conditions of Employment Act specifically spells out the ambits of such joint and several liability, which would range from salary shortfalls, overtime disputes, and/or incorrect working hours.

In terms of Section 57 of the Employment Equity Act, an interesting situation arises in that, for the purposes of employment equity, a TES employee who provides services for an indefinite duration or a period of three months, is deemed an employee of that particular client and, furthermore, where there has been an act of unfair discrimination, both the TES and the client remain jointly and severally liable.

There are a number of additional obligations on TES' because of the Income Revenue Legislation, which I am not going to deal with in this presentation.

Contractual Arrangements

The operation of a TES usually involves a tripartite relationship between the TES and client, and the TES and a particular employee. Careful examination of the TES industry reveals an administratively intensive industry in which the TES' are extremely particular with employment contract administration as there are clear pitfalls in circumstances where fixed term contracts, for example, are not monitored or permitted to roll for months on end.

The principle agreement entered into between the TES and the client usually provides for a series of indemnities from the TES to the client in respect of various issues, including those areas in which the client would be jointly and severally liable.

It is my experience that the most common area for dispute is one in which employees frequently seek relief against a TES client erroneously. This often has its roots in either a misunderstanding of the nature of the relationship or, alternatively, a desire for some type of employment permanency with the client rather than with the TES.

This entails disputes directly against the client being referred in terms of the dispute resolution mechanisms of bargaining councils and the CCMA, necessitating the need for the TES intervention to clarify the situation. There should be no need for such disputes if TES' have entered into substantial contracts with their employees, in which the nature of the relationship is spelt out. Clearly, this is an obligation incumbent open the TES.

An additional factor to be borne in mind is that the provisions governing TES' do not apply to independent contractors, and in a recent Labour Appeal Court decision, LAD Brokers (Pty) Limited v Robert Mandla, Unreported Case No. CA14/001, in which a United Kingdom-based company, Weatherford UK Ltd ("Weatherford"), with no ties in South Africa sought the services of two employees to work on an off-shore drill platform located off Cape Town. It accordingly employed the employees through a labour broker, who facilitated the employment and the payment of the salaries, thereafter rendering monthly invoices to Weatherford as part of its fee.

The employees entered into contracts with the broker entitled "Independent Contractor - Contracting Agreement". The employees worked on the drilling rig under the control of Weatherford until such time as Weatherford gave notice to the employees, terminating the agreement.

One of the employees instituted action against the labour broker.

At the Labour Court, the court a quo, and subsequently at the Labour Appeal Court, the broker attempted to argue that the employee was an independent contractor. The court looked at the circumstances and found that the broker was the employer and that the employee was not an independent contractor. The court made an interesting finding in that, in applying the classical tests to establish whom the employer was, it found that Weatherford was the employer, however, the statutory intervention of Section 198 of the LRA placed on obligation upon a broker who paid the remuneration to be held liable as the employer.

In the circumstances, the broker was found to have unfairly dismissed the employee as, clearly, no procedure had been followed. This case is underscored with notions of equity as the nature of the defence created two alternative employers, both denying liability. The court was obliged to seek an equitable result.

South African Jurisdiction

The protections provided for an employee working within the Republic of South Africa are carefully legislated, providing mechanisms for efficient dispute resolutions. This cannot be said for employees working outside the jurisdiction of the Republic of South Africa. In essence, this issue will arise with respect to all companies in similar circumstances, not only TES'.

The Labour Appeal Court has ruled decisively in the Chemical Workers Industrial Union v Sopelog CC2 decision, holding that the Labour Relations Act has no extra territorial application and that the location of the workplace was "the factor" in determining whether the court will have jurisdiction or not. Similar sentiments were raised in De Kok v Executive Outcomes BK & Another3 .

Although this remains the over-riding factor to be taken into consideration, the courts have considered that, in terms of private international law, the law of the country where the performance is to be rendered in terms of the contract, will apply. This ties to a court's consideration in deciding whether a court would be able to enforce its decision as, if it is not possible or practical for other considerations, there is no purpose in hearing the case as the outcome will be academic at best.

See Watson v Petra Diamonds Limited, CCMA NC25004

The relevance, from a TES perspective, is that employees employed by South African TES' but who are engaged in an extra-territorial workplace, will have virtually no remedies in South Africa, placing employees in a potentially weak position. This weakness, however, is usually balanced at the negotiation stage prior to entering into such employment contract, as employees would demand, quite justifiably, higher remunerative packages.

A further factor to bear in mind is the attitude of the country in which the employee is being employed to the relationship between the TES and the employee, as certain countries prohibit and regulate the existence and workings of temporary employment services.

A broad reading of various jurisdictions indicates that in the United Kingdom, Ireland, the Netherlands and Luxembourg and most southern and central African states, there is a widespread operation of temporary employment services, with fairly low level of regulatory compliance5.

Jurisdictions such as Belgium, Spain, Portugal, France and Norway permit the operation of temporary employment contracts, to maximum contract periods under specific conditions such as the replacement of an absent employee, a temporary increase in the company's activities, seasonal work, and work in hospitality industries.

Prior to 1997, temporary employment in Italy was banned, although subsequently, mostly due to pressure from the European Commission, TES' operate under stipulated conditions.

From a South African perspective, there are certainly serious implications in placing staff outside of South Africa, both for the employee and for the TES itself, with respect to potential breaches. I do not intend dealing with the practical implications and problems faced in enforcing contracts outside the South African jurisdiction, but do note that South African TES' do experience various legal and practical problems in placing staff outside of South Africa, none of which are made easier with the relative weakness of the South African Rand against foreign currencies.

The notion and use of TES' is certainly growing in South Africa, and the need to place staff outside of South African jurisdiction will and does continue to be a challenge in the lucrative source of business for TES', which such challenge has been met in joint ventures and even mergers in certain cases taking place with South African TES' and international organisations creating a global presence.

BRUCE MACGREGOR
DENEYS REITZ INC
SEPTEMBER 2001