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How can recent developments in labour law impact your business?
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In this article, Chris Kotze and Aadil Dasoo of Deloitte Consulting highlight recent events in the labour arena. By posing and answering pertinent questions, they also give their thoughts on how these events may impact business.
1. In light of proposed amendments to the LRA and BCEA, should companies rethink their outsourcing strategies?
We say: Yes! Outsourcing may under certain circumstances constitute the use of labour-brokered resources. To determine whether a particular outsourcing arrangement is deemed a labour-broking relationship, a distinction must be drawn between an outsourcing arrangement for services and one for the provision of resources. To make this distinction is usually problematic.
The true relationship between the client, resource and service (or resource) provider – and not the contractual terms – will be conclusive. A variety of factors will be considered to determine the true nature of the outsourcing (or labour-broking) relationship. In short, the question to ask is whether the deliverable being provided to the client is a defined output or thing (service) or, alternatively, the productive capacity of other persons. Where a person is providing a client with the productive capacity of other persons, for reward, the relationship will be deemed a labour-broking relationship.
Unlike the 2010 bills, the 2012 LRA and BCEA amendment bills no longer seek to ban labour broking in general. However, additional protection is proposed for employees who earn below the BCEA earnings threshold. With reference to these brokered resources, the client of a labour broker may:
•Bedeemedtheemployerofabrokeredresourceiftheresourceisemployedforlonger than three months and is not rendering temporary work for the client.
•Beobligedtograntremunerationandbenefitstoabrokeredresourcethatisdeemed its employee, similar to the remuneration and benefits of the client’s other employees who do the same work.
•Beliablefortheunfairterminationofemploymentandunfairlabourpracticesrelated to the brokered resource.
The anticipated amendments will make it difficult for clients to keep outsourced resources separate from their own staff. Clients may further be burdened with the costs of equalising remuneration and benefits as well as unfair terminations. This will compromise the natural value of dealing with an outsourced service.
The time has come for business to review its outsourcing strategies and determine the viability of such arrangements with due consideration of the anticipated changes to employment legislation.
The time has come for business to review its outsourcing strategies and determine the viability of such arrangements with due consideration of the anticipated changes to employment legislation.
Recent Case Law
1. Fixed-term employment deemed indefinite – Hlatshwayo & Others and Kwadukuza Municipality
Members of a rural community were employed by the municipality intermittently on a series of fixed-term contracts. They worked past the expiry date of their last fixed-term contracts. Upon being advised that their services were no longer required by the municipality, they referred an unfair dismissal dispute to the SA Local Government Bargaining Council. The municipality argued that the contracts were not terminated but had in fact simply expired.
The arbitrator found in favour of the employees. He relied on Labour Court authority that stated, “when an employee was taken into service without being told about the service period, the default position was that the contract was for an indefinite period.” The termination of their employment was deemed to be both substantively and procedurally unfair, and the employees were reinstated with retrospective effect.
2. Employment of refugees – Ndikumdavyi vs Valkenberg Hospital & others
The employee, a Burundian citizen was offered permanent employment as a professional nurse at Valkenberg Hospital. A month after his appointment, he was advised that his permanent employment was being withdrawn. The hospital relied on the Department of Health’s policy which restricted the employment of foreign health professionals on fixed-term contracts only, as well as the employee’s refugee status that was expiring at the end of the year. The Hospital argued that because the Department’s policy was binding on them, the appointment of the applicant was an administrative error void from the outset, and he could thus not have been dismissed in terms of the LRA. They also relied on section 10 of the Public Service Act (PSA), which prohibits the permanent employment of any person to a post in a department unless he or she is a South African citizen or permanent resident. The Labour Court was satisfied that the employee as refugee qualified for the status of “employee” and that a dismissal had occurred.
The Labour Court was precluded from finding that the employee’s dismissal was substantively unfair because of section 10 of the PSA, but it found the Hospital’s withdrawal of employment procedurally unfair. It had made no attempt to afford the employee any right to be heard before dismissing him. The Court awarded the employee 12 months’ compensation for the procedurally unfair dismissal.
3. Team misconduct – Foschini Group vs Maidi & Others
Five employees, which constituted the entire staff complement of a store operated by the employer in Mabopane, were all charged with “ failure to secure the assets of the company”. The charges were levelled against them after a stock take confirmed shrinkage in excess of 28%. The employees failed to attend the hearing and were eventually found guilty of negligence in that they “failed to take proper care of company property, which resulted in a loss of R207 000.00 as well as an irretrievable breakdown in the trust relationship”.
The labour Appeal Court had to consider two issues, namely: (i) did the evidence corroborate the massive stock losses as alleged by the employer
and (ii) could the employees be held collectively responsible for the stock loss.
“When an employee was taken into service without being told about the service period, the default position was that the contract was for an indefinite period.”
How can recent developments in labour law impact your business? 2
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The stock losses were supported by the evidence submitted by the employer. With reference to the “team misconduct”, the Labour Appeal Court adopted the following approach:
•“Justificationfordismissalofeachemployeeliesinhisorherindividualculpabilityforfailureofthegrouptomeet the performance standards set by the employer.
•Responsibilityforthecollectiveconductoftheofthegroupinfailingtomeettheperformancerequirementsof the employer is indivisible.
•Anemployerisentitledtosetstrictrulesinordertoprotectitsassetsandiftheserulesarebreacheditmayjustify summary dismissal of the entire group.”
The dismissal of the employees was upheld on appeal.
Contact detailsChris KotzeAssociate Director | Human Capital Deloitte ConsultingDeloitte Place, Building 33, The Woodlands, 20 Woodlands Drive, Woodmead, 2052, South AfricaTel/Direct: +27 11 806 5389Fax: +27 11 388 9905Mobile: +27 83 408 [email protected] | www.deloitte.com Aadil DasooSenior consultant | Human CapitalDeloitte ConsultingDeloitte Place, Building 33, The Woodlands, 20 Woodlands Drive, Woodmead, 2052, South AfricaTel/Direct: +27 11 209 6643Fax: +27 11 388 9548Mobile: +27 83 383 [email protected] | www.deloitte.com
An employer is entitled to set strict rules in order to protect its assets and if these rules are breached it may justify summary dismissal.
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