Retirement Age

I have been asked the following question this morning:

"Can I be assisted on this matter, company policy states that the retirement age is 60 years with no extensions. Some years back employees were transferred to us (section 197 LRA) of which they still use their own pension fund which 65 years is the retirement age. The majority of employees are over 60 years of age and no longer productive. Any suggestions on how to retire them?"

Section 197(2)(a) of the LRA reads as follows: "If a business, trade or undertaking is transferred in the circumstances referred to in subsection (1)(a), unless otherwise agreed, all the rights and obligations between the old employer and each employee at the time of the transfer continue in force as if they were rights and obligations between the new employer and each employee and, anything done before the transfer by or in relation to the old employer will be considered to have been done by or in relation to the new employer."

The employer in question is facing the following problem.

Under the old regime (employer) the employees were used to the retirement age being 65. Should the new employer now decide to reduce the retirement age to 60 years of age, such variation of the employment contract will be regarded as a unilateral amendment of the employment contract.

The LRA allows employers to forcibly retire employees who have reached the "normal" retirement age, but fails to explain what constitutes normal retirement age.

Therefore, employers and employees need to look to case law for more detailed guidance and what would be fair in specific circumstances.

The employer's own rules and terms and conditions of employment can, within limits, play a significant role.

For example, in Rubin Sportswear v Sactwu and others, the employer took over a business and then introduced a rule changing the age at which employees were to take retirement.

The Labour Appeal Court found that the word "normal" means "the way things are normally done" and that the employer could not unilaterally change what was normal.

It is therefore imperative that employers have their rules reviewed in line with the latest interpretations of the courts.

In most circumstances, should any of these employees (60 years or older) then resign because they are not satisfied with such an amendment, the CCMA may find that the particular employees have been dismissed in terms of the provisions of Section 186. It will necessarily follow that such dismissal will be regarded as unfair, and the employer will end up re-instating these employees.

However, it is very difficult to say whether the new employer may find itself in the same detrimental position as described above. Firstly, it will depend on the terms and conditions of the existing employment contract. Then it will depend on the terms and conditions of the employment contract between the old employer and the relevant employees. An lastly, consideration will have to be given to the terms and conditions of the sales agreement between the old employer and the new employer.

Legal advice and assistance should be obtained to answer on the merits of each individual case..

It is advisable that the new employer commences a consultation process regarding early retirement and the official change of the retirement age. It allows the employer and the relevant employees to engage in a consultation process, which should in the end, be to the advantage of the employer. And yes, allow representatives of the relevant pension funds to address the relevant employees on the benefits of early retirement, if any. I will not even venture an opinion on this particular aspect, as I am not qualified and do not have the necessary knowledge on this topic.

Once the employees have accepted that they will benefit from early retirement, and they agree to accept early retirement, then the new employer may proceed to retire them.

Categorisation of a dispute

It happens that an employer receives a referral of a dispute, and that the referral does not disclose a cause of action (reason). Or that the cause of action (reasons) on the request for arbitration differs from those on the referral of the dispute.

The following case should be taken note of.

The applicant in Strautmann v Silver Meadows Trading 99 (Pty) Ltd t/a Mugg and Bean Suncoast and Others [2009] 10 BLLR 1007 (LC) was employed by Kishara CC t/a Mugg & Bean Suncoast as a general manager. After a disagreement with the members of the close corporation that employed him (of which he was also a member) the business of the close corporation was sold as a going concern to the first respondent. The first respondent contended that it was a condition of the sale that Strautmann would withdraw from the business and that he would not be involved in the business going forward.

Strautmann, on the other hand, contended that he was dismissed and that he was not aware of the reason for his dismissal. He contended, however, that his dismissal was not related to the transfer of the business. He referred a dispute to the CCMA. The conciliating commissioner, a Mr Vedan, issued a certificate recording that the dispute had remained unresolved. He ticked the box indicating that the nature of the dispute concerned an ‘unfair dismissal’ and added, in handwriting, ‘section 197 transfer of company as going concern’ and ‘automatically unfair dismissal in terms of s 187(1)(g) of LRA’. Vedan further indicated that the dispute should be referred to the Labour Court.

Strautmann was of the view that his dismissal did not relate to the transfer and was not automatically unfair – he contended that he was dismissed for an unknown reason. He accordingly referred the dispute to arbitration. At arbitration, the respondents raised a number of points in limine, including that the dispute ought to have been referred to the Labour Court as per the certificate. The arbitrating commissioner thereupon issued a ruling in which she held that Commissioner Vedan had previously ruled that the CCMA did not have jurisdiction to determine the matter, that the CCMA was functus officio and that the matter could not be arbitrated at the CCMA.

Strautmann took this ruling on review to the Labour Court. The court, per Van Niekerk J, held that the certificate of outcome had no legal significance other than to confirm that the dispute remained unresolved. The indication that was given as to which forum or courses of action might be open to the applicant was therefore nothing more than gratuitous advice. An applicant was accordingly not bound by the classification of a dispute on the certificate of outcome.

Furthermore, when the commissioner ticks a particular box on the certificate, he does not make up a ‘jurisdictional ruling’. To the extent that the arbitrating commissioner held that Vedan made a jurisdictional ruling when he completed the certificate of service, she committed a reviewable irregularity. The ruling was reviewed and set aside and the matter was referred back to the CCMA.

Interdicting disciplinary inquiries

In the past few months we have quite regularly heard on the news of people, holding high-raking positions, who have been suspended by their employers for the one or other reason. We have also noted the trend amongst these high-ranking officials to run to court to obtain some sort of relief against the employer.

The question we have to ask ourselves is if the Labour Court has any jurisdiction to prevent a disciplinary enquiry.

In Jiba v Minister of Justice and Constitutional Development and Others [2009] 10 BLLR 989 (LC), Ms Jiba brought an urgent application for a declarator that the decision to commence and proceed with disciplinary proceedings against her was unlawful, that the decision to suspend her was unlawful, and an order to be reinstated with immediate effect.

Jiba, a senior deputy director of public prosecutions in the National Prosecuting Authority’s (NPA’s) Directorate of Special Operations, was requested to assist the South African Police Service (SAPS) in an investigation concerning senior members of the NPA in September 2007. Following this engagement, she was requested by the NPA to divulge the contents of her communications with the SAPS. She refused to do so. Jiba was handed a letter of suspension on 12 December 2007. In February 2008, she was notified to attend a disciplinary inquiry to answer allegations of misconduct related to dishonesty, unprofessional conduct and bringing the NPA into disrepute. The hearing was postponed to 18 April 2008. At the commencement of the hearing, Jiba raised the point in limine that the NPA was precluded from proceeding with the inquiry because it had failed to proceed with the inquiry within 60 days as required by the applicable procedures. Having considered the evidence, the chairperson of the inquiry held that Jiba’s suspension came into effect on 10 January 2008 and that the inquiry was timeously convened. The inquiry was postponed to August 2008. At the commencement of the inquiry, Jiba applied for the indefinite postponement of the inquiry pending a review of the chairperson’s finding in relation to the point in limine. On 8 January 2009, Jiba received notice that the inquiry would proceed in February 2009. Although the tapes of the first hearing were made available to Jiba in August 2008, she received the transcript only on 27 January 2009. She accordingly filed this application on 29 January 2009 and contended that she was entitled to bring it as a matter of urgency.

The Labour Court, per Van Niekerk J, considered whether the court had jurisdiction to entertain the application. The fourth to 17th respondents argued that the court had no jurisdiction to intervene in internal disciplinary inquiries. As regards the suspension, they contended that Jiba had not referred a dispute concerning her suspension to arbitration and the time limits to do so had lapsed.

Van Niekerk J considered the decision of the Labour Court in Booysen v SAPS and Another [2008] 10 BLLR 928 (LC) where it was held that the Labour Court has no jurisdiction to intervene in disciplinary inquiries. In that case it was held that s 191 of the Labour Relations Act 66 of 1995 (LRA) requires disputes about the fairness of a dismissal to be referred to the Commission for Conciliation Mediation and Arbitration (CCMA) or a bargaining council with jurisdiction, and that those bodies – and not the Labour Court – have the jurisdiction to arbitrate disputes about dismissals for misconduct.

Van Niekerk J held that he was not convinced that the proposition in Booysen could be so broadly and unequivocally stated. It is so that the letter and purpose of the LRA precludes the Labour Court from making orders that would finally determine misconduct-disputes. However, s 158(1)(a) gives the court the power to grant urgent interim relief in respect of disputes that must ultimately be determined by arbitration. Whether the court should intervene is a separate question – but provided that the relief sought does not amount to usurping the CCMA’s statutory functions, the Labour Court, in principle, has jurisdiction to make interim orders concerning disciplinary proceedings. Nevertheless, he stated that it is undesirable for the Labour Court to entertain applications to review and set aside rulings made in uncompleted proceedings. This is because such intervention would undermine the informal nature of the system of dispute resolution established by the LRA, would frustrate the expeditious resolution of disputes and would entirely undermine the statutory dispute resolution system. By asking the Labour Court to rule that the disciplinary action initiated against Jiba was ‘unauthorised and unprocedural’, she was effectively asking the court to bypass the relevant bargaining council.

Regarding the suspension, the court held that it had jurisdiction to consider the matter but held that on the facts Jiba had not made out a case. As regards the application to review the chairperson’s ruling that the disciplinary inquiry was held within 60 days of Jiba’s suspension, the court observed that it has been held (in Lekabe v Minister of Justice and Constitutional Development [2009] JOL 23134 (LC)) with reference to the same policy that an employer’s right to discipline an employee did not fall away if the employer had failed to convene the inquiry within the 60-day period.

In the circumstances the application was dismissed with costs.

Smoking in the workplace

I do believe that most businesses (employers) have a smoking policy in place. Smoking in the workplace is governed by the Tobacco Products Control Act, Act 83 of 1993. The framework for such smoking policy is set out in government notice GNR975 of GG 21610 of 19 September 2000. 

In terms of item 6, an employer must ensure that no person smokes anywhere other than in the designated smoking area in that work place. Item 7 requires that an employer must ensure that employees who do not want to be exposed to tobacco smoke are protected from tobacco smoke in that workplace and employees may object to tobacco smoke in the workplace without retaliation of any kind. An employer, may totally prohibit smoking at its work place, therefore, as far as our law stands, there is no right to smoke at the workplace.

Thus, the employer has to ensure that the smoking policy complies with said framework. Thus, employees have to protected from tobacco smoke in the workplace.

We have to ask ourselves the following question: If the employer fails to implement a smoking policy, which complies with the above framework, or if the employer fails to react to the complaints of employees regarding smoking in the workplace, and said employee resigns from employment, can it be said that such failure constitute constructive dismissal?

The only case law that I could find on this particular topic is the matter of Naude and Stealth Marine (2004) 13 MEIBC 6.13.3. 

The applicant had respiratory problems and previous serious health conditions, which included asthma attacks as a result of smoking and she had an allergy to cigarette smoke.
 

The employer’s premises had no designated smoking areas. The reception area was situated downstairs and the administrative offices were situated upstairs. The factory was outside. Staff smoked in the corridors, in the reception area and in their offices upstairs. Smoke often trickled down from the upstairs offices, into the reception area.

Within two weeks of commencing employment the applicant developed a reaction to the cigarette smoke and got sick. The applicant had a tight chest and difficulty breathing and developed nausea, headaches and light-headedness. She complained about the smoking to her boss and informed the employer about her allergy and the fact that she would develop serious health problems if staff did not stop smoking inside the building. Her supervisor said she would address the problem, but the smoking in open areas persisted. To make matters worse, her superior promised to ask the staff to stop smoking inside the premises, but he himself continued to smoke inside. The staff also continued to smoke inside the building. The applicant complained to her direct supervisor every day and on 29 April the applicant left early, as she could not tolerate the smoke any more. When she returned on the 30th, four people were again smoking inside the building. The applicant advised her boss that she had to leave, as she was unable to continue to work under the circumstances.

The commissioner found that, in terms of the Tobacco Products Control Act 83 of 1993 smoking is not allowed in offices or in public areas in workplaces. Smoking is only allowed in designated areas and it is the duty of an employer to ensure that the Act is complied with. On the applicant’s version the respondent failed to implement antismoking legislation in the workplace. The employer’s actions were therefore unlawful in allowing employees to smoke inside the administration building. It is important to note that the applicant in this case was not the average, healthy, non-smoking employee who was indignant at the fact that her employer was not complying with antismoking legislation. The applicant was previously a heavy smoker and had developed serious respiratory problems and an allergy to cigarette smoke as a result of her habit. The applicant developed debilitating physical symptoms when exposed to cigarette smoke. On the evidence before the commissioner, the respondent created an intolerable working environment for the applicant. The applicant was unable to be productive.

In the view of the commissioner, the applicant has proved that she was dismissed and that the respondent created an intolerable situation at the workplace that forced her to resign.

The warning is clear: Employers have to take smoking policies seriously, especially the complaints of non-smoking employees.

ESKOM - Failure to provide sufficient electricity

During 2008 we have all experienced Escom's implementation of load shedding. It affected the whole of the country - businesses and individuals alike. Fortunately, Eskom has not carried out its load shedding schedule since May 2008.

The World Cup Soccer 2010 is around the corner, and as at today, we have 137 days to go for the big kick off. Millions of international visitors is expected to arrive in South Africa within the next few weeks before the World Cup, and many more during the World Cup.

Rumour has it that Eskom has not managed to increase the availability of sufficient electricity supplies, and it has been suggested that Eskom is considering the implementation of load shedding prior to the commencement of the World Cup and even during the World Cup.

Past experience has shown that small and big businesses were all affected by load shedding. Some businesses have closed down completely, which lead to employees losing their jobs. Other businesses were forced to retrench some of its employees due to operational requirements.

Other problems experienced, just to name the most common, were staff reporting late for work and employers refusing to pay salaries to their employees for the time lost due to electricity cuts or load shedding.

Unfortunately, employers cannot refuse to pay salaries to its employees for time lost due to electricity cuts or load shedding. The employees are not to blame for this. The employees, although unproductive during electricity cuts or load shedding, have reported for duty, have made available their services to the employers, and thus they have to be remunerated for those hours lost. The employer is not permitted to deduct these lost hours from the salaries of the employees.

The question is whether alternative solutions are available to the employers to, at least, try and increase productivity. Some employers have considered asking employees to take their lunch breaks earlier during electricity cuts or load shedding, some even has gone so far as to ask employees to go on extended lunch breaks, and others have even considered asking employees to work extended hours in order to make up for lost productivity.

The following should be considered:

The Basic Conditions of Employment Act provides that employees must work 45 hours per week. That means, if the employee normally works from Monday to Friday, 9 (nine) hours per day. This calculation excludes lunch hours, which means that employees are not getting paid for their lunch breaks.

The Act further provides that the employee is entitled to a lunch break after 5 (five) hours of work. It further stipulates that employees must be remunerated for lunch breaks during longer than 75 (seventy five) minutes.

If employees are requested to work longer hours, it must be remembered that overtime remuneration of 1.5 the normal rate must be paid to employees.When work on a Sunday is required, the overtime rate of 2 times the normal rate will have to be paid to the employee, provided that the employee does not normally work on a Sunday.

Certain employers, such as the mining industry which is already a 24/7 industry, will never be able to make up for lost production, and thus the above considerations will not help them.

Depending on the nature of the business of the employer, the above considerations might be helpful in an attempt to make up for lost production.

However, the implementation of these alternatives is not a guarantee that the employer will not suffer from increased costs of production. 

Resignation

Most of us have entered into employment agreements with our employers or employees. Most employment agreements contain provisions regarding the termination thereof, especially concerning the notice period of resignation.

The question is now what can an employer when an employee resigns without giving the notice required in terms of the employment agreement? Can an employer, in such circumstances, claim the employee's salary in respect of the notice period not worked?

The Labour Court was requested to answer these questions in the matter of South African Music Rights Organisation Ltd v Mphatsoe (2009) 7 BLLR 696 (LC).

The facts of this case can be summarised as follows: Mphatsoe's employment agreement provided that his employment was terminable on one calender month's notice. When he returned from leave on 8 January 2008, he handed in his letter of resignation, which stated that he gave notice and that he would leave on 31 January 2008. SAMRO informed him that his notice did not comply with the provisions of his contract, because the notice was supposed to run from the first day of the month. It was further argued by SAMRO that his notice would only become effective on 1 February 2009 and that the notice period would therefore expire on 29 February 2008. Mphatsoe conceded that his notice period would not expire on 31 January 2008, but he argued that the notice period would expire on 8 February 2008. He then left SAMRO on 8 February 2008.

SAMRO proceeded to approach the Labour Court for an order in terms of Section 77(3) of the Basic Conditions of Employment Act, Act 75 of 1977, declaring that Mphatsoe's notice on 8 January 2008 was ineffective to terminate his employment agreement, that the employment agreement only terminated on 29 February 2008 and that Mphatsoe breached the agreement when he left work on 8 February 2008. SAMRO further sought damages in the amount of R 185-12, namely the amount Mphatsoe would have received in remuneration had he remained in employment until 29 February.

Regarding the requirement of a "calender month's notice" the Court agreed with the decision of the Labour Appeal Court in the matter of Edgars Consolidated Stores Ltd v Federal Council of Retail and Allied Workers Union (2004) 25 ILJ 1051 (LAC) which held that a "calender month" does not necessarily start on the first day of the month. What is required is to ascertain the intention of the parties to the agreement by way of interpretation. The Labour Court thus proceeded to analise the employment agreement as a whole, and reached the conclusion that by using the term "calender month" in the notice clause, the parties had clearly intended a different meaning, namely, that notice would take effect from the first day of the month and run to the last day of the month. Thus, it was held that Mphatsoe did indeed breach his employment agreement when he failed to work until 29 February 2009.

As regards the damages, the court held that an employer could not rely on the Basic Conditions of Employment Act, 1983, anymore. Thus an employer seeking damages due to an employee's failure to work the contractual notice period should prove such damages. The court observed that it is conceivable that the failure to work the contractual notice period could, in certain circumstances, not cause any damages at all, whereas in other circumstances the damages concerned could be well in excess of the remuneration the employee would have earned. SAMRO did not manage to prove its damages, and thus the claim for damages was dismissed.

Note: It is conceivable that an employer may accept the resignation of the employee, even if such notice does not comply with the provisions of the employment agreement. It is, further, conceivable that an employer may even inform the employee that he accepts the notice with immediate effect, that the employee must immediately leave his work place, and that he will still receive his full salary for the notice period.

Business take-overs - A good or bad thing???

South African businesses are struggling in today's economic climate. Many businesses are faced with the question - do we liquidate the business or do we sell the business as a going concern?

The worst of the negative effects of business closures is the wholesale loss of the jobs of the employees of the business.

Sometimes the struggling company is taken over instead of being forced to go into liquidation. The advantage of such a takeover is that it can avoid the loss of jobs caused by a liquidation.

However, the Labour Relations Act (LRA) strongly discourages takeovers (albeit unintentionally) by prohibiting dismissals for reasons related to a takeover as a going concern. The effect hereof is that would-be rescue deals usually fails due to the fact that partial retrenchments, resulting from the rationalisation necessitated by takeovers, are prohibited.

Where employees are illegally retrenched for reasons related to takeovers, it is often difficult to establish whether it is the old entity that is at fault or whether the new entity should be taken to task in court.

This is because the date of the takeover is often unclear. If the employee was retrenched before the takeover he/she should logically take the old entity to court, but what happens if the old entity does not have the assets necessary to pay the compensation ordered by the court?

Section 197(2)(c) effectively allows the employee to sue the new employer even if it was the old employer who retrenched the employee unfairly.

If the retrenchment takes place after the transfer, only the new employer can be sued.

However, establishing the date of the transfer for purposes of labour law can be tricky. Is the takeover date: the date on which the new entity began running the business? Or is it the date on which the buyer and seller signed the contract? Or the date that the buyer and seller designated in the contract as the date on which the sale took effect or would take effect?

This key question arose in the case of Business Design Software (Pty) Ltd & Another v Van der Velde (CLL Vol. 18, March 2009).

The employee (Van de Velde) was a general manager of Business Design Software (BDS) when it was bought by a company called AST Group.

Two years later, AST Group decided to sell its BDS division to the MD of BDS, Mr P Smulders.

A few days after this decision was made, Smulders brought his brother into the business at senior level. Smulders then decided that Van der Velde was no longer needed in the business.

A month later, Van der Velde was retrenched after turning down an offer of a post of administration manager.

Three days after the retrenchment, AST signed the agreement of sale of BDS with a company called WGN, the entity through which Smulders bought BDS.

Although the sale agreement was signed on April 3, 2003, the agreement stated that the sale took retrospective effect on January 1, 2003.

Van der Velde took the retrenchment to the Labour Court on the grounds that he had been automatically, unfairly dismissed for a reason related to the takeover of a going concern.

He cited section 187(1)(g) of the LRA that prohibits such a dismissal.

The Labour Court decided that:

• For purposes of labour law, the sale neither took place as at the April date on which the parties signed the sale agreement nor at the January date stipulated in the contract.
• Instead, the court decided that the takeover had taken effect on February 27, 2003, when Smulders began operating the business.
• The dismissal had taken place in March, after Smulders had taken over the business, and BDS, under its new ownership, was the employer at the time of the retrenchment.
• The retrenchment was an automatically unfair dismissal because the dismissal decision stemmed from the takeover of BDS.

BDS took this decision on appeal to the Labour Appeal Court, and the Labour Appeal Court upheld (confirmed) the findings of the Labour Court.

This case reinforces the crucial principles that employers:

• Need to be cautious about buying or otherwise taking over a business or part of a business as a going concern.
• Need to be even more cautious about dismissing any employee for any reason related to such a takeover even if the reason for the dismissal is only indirectly related to the takeover.
• Should neither enter into takeovers nor dismiss any employees before obtaining advice from a reputable labour law expert.