Work In Solutions

Who would ever have thought that some aspects of our criminal law have crept into the golden pathways of our labour law? A commission is a positive legal act that is wilful and intentional. On the other side, an omission is a negative legal act, which can also create legal liability by the perpetrator. A lifeguard standing idle next to a public swimming pool watching a child drown can be found guilty of not doing anything positive to save the life of the drowning child. It seems as though these ideas have now cemented themselves in relation to your job as well. “Que tacet consentire”, the maxim of the law is “silence gives consent”. This maxim is what cost Sir Thomas More his head in his fight against King Henry VIII.

Silence is not always golden; sometimes it can cost you your job. In the recently reported case of Neuhoff v Capitec Bank [2006] 11 BALR 1147 (CCMA), which was heard in the CCMA, the manager of the branch in Somerset West paid a high price for her attempts to protect a staff member. She discovered that one of the consultants reporting to her took R450.00 out of the float without permission. When she confronted this consultant, the consultant undertook to repay the money on the same day. The money was not replaced same day, neither in the following 3 days. Despite this, the manager did not report the incident to the regional manager. Three days later the regional manager did a surprise inspection and discovered the shortage in the float. As a result the manager was dismissed.

The Commissioner defined derivative misconduct as instances where employees were aware of the identity of perpetrators, but declined to disclose such information to the employer. This particular form of misconduct “has at its very core and essence that the employee’s silence justifies an inference that he participated or supported the particular misconduct that he had failed to disclose to the employer.” The requirements for this form of misconduct have been described as twofold. First, that the employee knew or reasonably could have acquired knowledge of the wrongdoing; second, that the employee failed without justification to disclose that knowledge to the employer, or take reasonable steps to help the employer acquire that knowledge. The manager in this case argued that she did not decline to disclose any information, once the regional manager discovered the shortage, she co-operated. The Commissioner however believed that she tried to protect the consultant when she did not report the theft for a period of 3 days but only after the shortage in the float had been discovered. This conduct on the employee’s part displays an intention to withhold the information from the regional manager to whom she should report. The fact that this happened in the financial industry was regarded as an aggravating factor. As the trust relationship between the parties had been severely tarnished, the Commissioner held that the dismissal was fair.

It is clear from this case that the duty of trust on an employee goes further than the requirement to be honest in his/her own actions. It extends to protecting the interests of the employer against other dishonest employees as soon as there is a suspicion that another employee is acting in a dishonest manner. This means that it is not enough for an employee to keep his/her own nose clean, but may be dismissed for their failure to alert their employer to the actions of fellow employees.

This interesting new development in our labour law sends out the important message to all employees that it certainly does not help to remain silent in all circumstances.

For any further information or assistance in this regard, contact Advocate Murray Zimbler on 021-465 3599 / 082 2966 636 or Advocate Dee Cranswick on 021-465 3500 / 083 2525 680 who has specialist knowledge in this field of law.

Much has been said and written about the National Credit Act 2005 (NCA), which came into full force on 1 June 2007. However, considerable mystery remains about the implications of the NCA on the employment relationship. The following article seeks to resolve some of those mysteries.

The fundamental aim of the NCA is to protect the consumer (which of course, can include an employee) by ensuring that they are not given credit to levels that they cannot repay. The NCA seeks to bring about this consumer protection by placing greater responsibilities on credit providers.

Employee Loans

The full extent of employer obligations is difficult to pinpoint at this early stage of the NCA and may not be known until the Courts are asked to interpret the meaning of some parts of the legislation. This is particularly the case concerning employee loans. The NCA states that it will apply to every credit agreement between parties “at arm’s length”. The Merriam-Webster Dictionary defines this phrase as requiring parties to a transaction “to be independent and on an equal footing”. If such a meaning is adopted by the Courts, they may well find that the parties to an employer-employee relationship are not at arm’s length, because they are not on equal footing, which in turn would mean the NCA does not apply to credit agreements that are employee loans.

Two other points add to the confusion. Firstly, the statutory body entrusted with enforcing the NCA, called the National Credit Regulator (NCR), appears to consider that employee loans do fall within the ambit of the NCA. According to the NCR, employee loans cannot be excluded by the ‘arms length’ requirement, because to do so would “prejudice the employee’s other creditors.” Secondly, if employee loans are covered by the NCA, they will not apply if the employer does not charge interest on the loan. One aspect of the NCA which is not ambiguous is that for an employee loan to be deemed a credit agreement, the employer must levy “a fee, charge or interest.”

Subject to the ‘interest exemption’ discussed above, risk-adverse employers should accept that employee loans are credit agreements and the NCA does apply. To ensure that employee loans meet the requirements of the NCA, employers must then, at the very least:

1. before entering into the agreement, conduct an assessment of:
   1.1 the financial means, prospects and obligations of the borrower
   1.2 the borrower’s propensity to repay by analysing their previous debt repayment history; and
   1.3 the borrower’s general understanding of the risks, costs, rights and obligations under the agreement.
2. when entering into the agreement, provide the employee with:
   2.1 information that is comprehensive, clear, concise and in plain language;
   2.2 particulars of the total cost of the credit;
   2.3 the names and business address of the parties; and
   2.4 a credit agreement in any of South Africa’s official languages.

Credit Providers

Some employers will need to comply with the NCA because they issue loans with interest, but for other employers, compliance will be required because they are deemed to be “credit providers.”

The NCA will require an employer to register as a credit provider if they have at least 100 credit agreements (such as an employee loan) or if the total debt owed under all credit agreements exceeds R500,000.

For those employers who must register as a credit provider, and fail to do so, the penalties can be considerable. At first instance, the NCR will issue employers with a compliance notice. If employers continue not to comply, they may face fines (yet to be determined), imprisonment of up to 12 months, or both. Furthermore, any employee loan given after 1 June 2007 may be declared unlawful if the employer was required to register as a credit provider but did not.
Application forms to be registered as a credit provider can be found at http://www.ncr.org.za/pdfs/Form%202.pdf

Debt Counselling

As part of its consumer protection objectives, the NCA provides for debt-counsellors that will assist an over-indebted consumer, such as an employee. A debt counsellor is given broad powers, including the ability to put proposals before a Court suggesting that it should make orders relating to the restructuring of the credit agreement, or that credit agreement was ‘reckless credit’ and should be suspended or set aside.

Employers of choice, regardless of their required level of compliance with the NCA, should consider making use of debt counsellors to assist the financial literacy and understanding of their employees.

Employee Credit Checks

One implication of the NCA for a wide-range of employers relates to accessing pre-employment credit reports. The Regulations enacted under the NCA restrict the accessing of credit reports to candidates for employment “in a position that requires trust and integrity and the handling of cash or finances”. In addition, where credit reports are sought for such a position, the Regulations require the consent of the applicant prior to the report being requested.

What Must Employers Do?

Many South African employers will need to comply with the NCA, at least to some degree, and should become familiar with the terms and effect of the legislation. This applies particularly to employers issuing many staff loans or staff loans with interest (who will need to train those conducting credit assessments) and organisations wanting to do credit checks on job applicants. On a wider scale, all employers should take heed of the aims and purposes of the NCA and consider mechanisms for promoting financial literacy in their organisation.

For more information contact Dee Cranswick (dee@workinsolutions.co.za) on (021) 465 3500 or visit www.workinsolutions.co.za.

Subsequent to publishing this article the case under discussion was overturned by the Constitutional Court. See below for the update.

From time to time companies contact WISE following unpleasant experiences in the CCMA, often after losing an unfair dismissal claim. Invariably such employers comment that they feel the decision to terminate an employment relationship no longer rests with the employer (and by inference, now rests with the CCMA). Such organisations can take comfort from a recent decision of the Supreme Court of Appeal (SCA) that was highly critical of the CCMA’s interference in an employer’s decision to dismiss an employee.

In Rustenburg Platinum Mines Ltd v CCMA & ors [2006] SCA 115, the SCA dealt with an appeal from an employer seeking to overturn a CCMA’s decision to reinstate an employee.
The employee was a security officer and after a spate of stock losses (the company mined platinum), the employer placed surveillance on the employee to determine if he was doing the tasks required of him. The surveillance showed that he was not; a number of times he neglected to carry out personal searches as instructed, or failed to carry out a search at all.

The CCMA relied heavily on the employee’s 15 years of service and determined that it should overturn the employer’s decision to dismiss. He was reinstated. The employer appealed to the Labour Court, who declined to intervene. The matter was eventually heard by the SCA, who overturned the CCMA’s decision. In doing so, the SCA stated:

“…commissioners must exercise great caution in evaluating dismissals. The mere fact that a CCMA commissioner may have imposed a different sanction does not justify concluding that the sanction was unfair. Commissioners must bear in mind that fairness is a relative concept, and that employers should be permitted leeway in determining a fair sanction.”

For employers, this decision’s importance lies in the acknowledgement from the SCA that the discretion to dismiss lies primarily with the employer – and not the CCMA. It is a discretion that must, of course, be exercised with reservation and in a manner that is consistent with the law. For employees, the SCA’s ruling is a reminder that prevention is better than a cure - disciplinary hearings remain the best opportunity to ensure their continued employment, rather than waiting to lodge an unfair dismissal in the hope that the CCMA will make a reinstatement order.

For more information on dismissal procedures, or to talk to WISE about alternatives to terminating an employment relationship, please contact Dee Cranswick (dee@workinsolutions.co.za) on (021) 465 3500 or visit http://www.workinsolutions.co.za/.

Update on Ruling

I refer to the article concerning the SCA’s decision in Rustenburg Platinum Mines v CCMA.

All the judges in this court concurred that a Commissioner is not required to defer to the decision of the employer when he/she considers the fairness of a dismissal.

Subsequent to the submission of this article, this case was reconsidered by the Constitutional Court: Z Sidumo & others vs. Rustenburg Platinum Mines Ltd (Rustenburg Section) & others, case number CCT 85/06. On 5 October 2007 the Constitutional court overturned the decision in the SCA and held that the dismissal of the Applicant had been unfair.

There were various reasons for this, but the aspect of the judgement which changes our earlier report is that a Commissioner is not required to defer to the decision of the employer when he/she considers the fairness of a dismissal. A Commissioner should balance the interests of the Employee and Employer and objectively decide whether the Employer’s decision to dismiss was fair.

The differing Constitutional Court judgements can be summarized as follows:

Navsa AJ, held that the Constitutional issues by this case involved the interpretation of the LRA and PAJA as well as the functions of the LC and LAC. There was nothing in the constitutional or statutory scheme that suggested that a commissioner must approach a dismissal form the perspective of the employer. The fairness of a dismissal must be assessed while holding the competing interests of the employee and employer evenly in the balance. Security of employment is a core value of the Constitution. While the decision to dismiss belongs to the employer, the Commissioner has to determine impartially if this decision was fair. If the court’s failure to defer to the employer caused a greater number of cases to be referred to the CCMA, then there was a duty on the State to provide the means to hear these referrals. Commissioners have to take all the circumstances leading to the dismissal into account when it determines the fairness of the dismissal, including the importance of the rule that had been broken, and the reason why the employer decided to dismiss the employee, the harm caused by the employee’s conduct, whether additional training and instruction may have resulted in the employee not repeating the misconduct and the effect of the dismissal on the employee as well as long service record of the employee. He/she must also take into account the basis of the employee’s challenge of the dismissal. This does not mean that a Commissioner may consider afresh what he/she would have done in the circumstances, but must merely determine if the employer’s action and decision was fair.

The court held further that arbitration by a commissioner was administrative action. However, PAJA does not apply to arbitration awards in terms of the LRA. Section 145 of the LRA regulates review applications of arbitration awards of the CCMA. The standard of review was described as one of reasonableness. “Is the decision reached by the Commissioner one that a reasonable decision maker could not reach?” Applying these standards, the court held that the Commissioner was correct to consider that the employer could not prove that it suffered any losses as a result of the conduct of the employee, but mistaken when he held that the employee’s conduct was a “mistake or unintentional”. The Commissioner was correct to find that there was no dishonesty on the part of the employee, but incorrect to hold that this inevitably means that the employment relationship was not breached. The employee’s years of unblemished service was a significant factor in determining if the dismissal was fair and there was no indication that the principle of progressive discipline would not adjust the employee’s efficiency. This was a case where decision makers acting reasonably might have reached different conclusions. The award of the Commissioner was restored.

In her judgement, O’Regan J held that even when independent tribunals perform judicial tasks, this does not mean that their actions are not administrative in nature. Administrative action is required by section 33 of the Constitution to be lawful, reasonable and procedurally fair. The CCMA is an organ of the state exercising public power and its task is to resolve disputes that arise in the workplace. There is a need for administrative agencies to be scrutinised and in the case of the CCMA this is done by the Labour Court.

Sachs J held that it is not possible or proper to label the functions of the CCMA as either administrative or judicial in nature as the result will be the same i.e. that of fairness and reasonableness. The CCMA’s function is a hybrid of administrative and judicial acts and in accordance with the Constitution.

Finally, Ngcobo J, held that a Commissioner in an arbitration has to objectively decide if the employer’s decision to dismiss was fair. While the Commissioner has to respect the employer’s greater knowledge of its own business, it cannot defer to the employer’s decision to dismiss. Regarding the functions of the CCMA, Ngcobo J, held that the sole business of the CCMA is to adjudicate labour disputes between workers and employers in terms of the LRA. This process employs the same techniques as a court of law and essentially their functions are identical to that of a court of law. While the CCMA performs many administrative functions, a Commissioner who arbitrates a dispute performs a judicial function which has to be separated from the administrative functions of the CCMA as an administrative body and the review process is regulated by section 145 of the LRA. In this case, the 14 years of loyal service of the employee outweighed his one failure to perform searches in the prescribed manner and his dismissal was unfair. Ngcobo J concurred that the award of the Commissioner should be restored.

For further information please contact Adv Dee Cranswick at dee@workinsolutions.co.za or Adv Lynette Myburgh at lynette@workinsolutions.co.za

Limiting Employer Liability for the Actions of Employees

The recent Old Mutual decision and 2005’s Naspers decision should serve as lessons to employees that they must take proactive steps to avoid being held liable for the unlawful actions of their employers. We take a look at those decisions and list some of the practical ways that employers can prevent liability.

In the Old Mutual decision (SATAWU v Old Mutual Life Assurance Company, 11 April 2006) the Labour Court was asked to determine whether Old Mutual was vicariously liable for the actions of an employee who had called a black employee a “kaffir”. Ostensibly the case concerned whether the employer had taken appropriate steps to prevent racist comments occurring at the workplace.

The Labour Court was extremely critical of Old Mutual’s handling of the incident, noting that “the attitude adopted by management sent a message that employees who insulted their fellow employees in this way may expect a rap over the knuckles, and then only when dissatisfaction was expressed or a trade union becomes involved”. It found that both the employee (who had made the comment) and the company were guilty of racial discrimination.

It seems that the Court’s message was heeded by Old Mutual; actions taken after the decision provide an example of what steps all employers must take to avoid vicarious liability. Since the decision the company has:

• used the incident to emphasis to all employees that racism is unacceptable and will not be tolerated;
• tightened disciplinary procedures to ensure anyone guilty of racism is dismissed; and
• sought an assessment of its policies and procedures dealing with transformation, diversity and racism.

The Naspers decision (Media 24 Limited & anor v Grobler SCA 1 June 2005) dealt not with racism but an equally controversial issue at the workplace – sexual harassment. A female employee of Naspers (now known as Media 24) alleged that she had been sexually harassed by her superior over a period of five months. She also claimed that the company were vicariously liable for the acts of her superior, as it had failed to:

• deal with the employee’s allegations seriously;
• take any action against the superior; and
• protect the well-being of its employees.

The High Court (and later, the Supreme Court of Appeal) accepted the employee’s claim of sexual harassment against the superior and Naspers and she was awarded in excess of R700,000.00 damages. The lessons for employers emanating from this decision include:

• a workplace policy (such as a sexual harassment policy) is not enough to protect an employer from liability for the acts of its employees – appropriate training and awareness campaigns are also required;
• Courts are willing to extend vicariously liability not only to acts that happen within the workplace, but also to events that occur outside the working environment; and
• when harassment issues are first raised, employers must take immediate steps to deal with the matter (particularly in relation to the alleged harasser) – it is not enough for employers to wait to see whether the complainant elects to use formal grievance procedures.

For more information contact Dee Cranswick (dee@workinsolutions.co.za) on (021) 465 3500 or visit www.workinsolutions.co.za.