Pioneer Foods (Pty) Ltd v Workers Against Regression (WAR) and Others (C687/15) [2016] ZALCCT 14 (19 April 2016)

Principle:

  1. It is not unfair discrimination where an employer adopts and applies a rule in terms of which newly appointed employees start at a rate lower than existing long-serving employees.
  2. It is not fair for an arbitration to run without the complainant being required to identify - and then being held to - the unlisted arbitrary ground of discrimination relied upon.

Facts:

In accordance with a collective agreement with the FAWU, the employer paid newly appointed employees for the first two years of their employment at 80% of the rate paid to its longer serving employees. The Commissioner found that, by applying this to the seven members represented by WAR, the employer had unfairly discriminated against them in breach of section 6 of the EEA. He ordered the payment of damages and the correction of the remuneration rate of the employees concerned "to 100% ratio of the entry level applicable..."

The employer appealed to the Labour Court against the arbitration award (the first appeal under the new s10(8) of the EEA, introduced by the 2014 amendments). The LC found that the differentiation complained of was not irrational and was not based on an arbitrary or unlisted ground, and was not unfair. The court held that the Commissioner ought to have dismissed the claim. The Commissioner's award was reversed and substituted by an order dismissing the claim.

The principle established in this case is that it is not unfair discrimination where an employer adopts and applies a rule in terms of which newly appointed employees start at a rate lower than existing long-serving employees.

Extract from the judgment:

(Steenkamp J:)

[19]   To establish pay discrimination it is necessary for a complainant to show that:

19.1.   the work performed by the complainant is equal or of equal value to that of a more highly remunerated comparator; and

19.2.   such difference in pay is based on a prohibited ground of discrimination.

[20]   In order to prove that the conduct complained of "amounts to discrimination" in terms of section 11(2)(b), the complainant must identify the listed or unlisted arbitrary ground of discrimination relied upon; establish that that ground is an "other arbitrary ground"; and prove that that ground is the reason for the disparate treatment complained of. As this Court observed in Ntai& Others v SA Breweries Ltd :

"Litigants who bring discrimination cases to the Labour Court and simply allege that there was 'discrimination" on some or other 'arbitrary' ground, without identifying such ground, would be well advised to take note that the mere "arbitrary' actions of an employer do not, as such, amount to 'discrimination' within the accepted legal definition of the concept."

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[22]   In an unfair discrimination claim where the act or omission is shown to constitute differentiation between people or categories of people, the Court embarks on the following two-stage analysis, as laid down in the seminal decision of the Constitutional Court, Harksen v Lane N.O.:

  1. "Firstly, does the differentiation amount to 'discrimination"? If it is on a specified ground, then the discrimination will have been established. If it is not on a specified ground, then whether or not there is discrimination will depend upon whether, objectively, the ground is based on attributes and characteristics which have the potential to impair the fundamental human dignity of persons as human beings or to affect them adversely in a comparably serious manner.
  2. If the differentiation amounts to 'discrimination', does it amount to 'unfair discrimination'? If it is found to have been on a specified ground, then unfairness will be presumed. If on an unspecified ground, unfairness will have to be established by the complainant. The test of unfairness focuses on the impact of the discrimination on the complainant and others in his or her situation."

[23]   See also: Ntai& Others v SA Breweries Ltd:

"It is only when such differentiation is based on or linked to an unacceptable ground that it becomes discrimination within its pejorative meaning."

[24]   And in IMATU &ano v City of Cape Town the Court added:

"The impact of the discrimination complained of on the complainant is generally the determining factor regarding the unfairness of alleged discrimination. Factors which must be taken into account include: the position of the complainants in society and whether they have suffered in the past from patterns of disadvantage; the nature of the provision or power and the purpose sought to be achieved by it; the extent to which the discrimination has affected the rights or interests of complainants and whether it has led to an impairment of their fundamental human dignity or constitutes an impairment of a comparably serious nature."

[25]   It is against this analysis that the alleged discrimination asserted by the complainants must be assessed.

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[32]   Differentiation on the basis of "being newer employees" is not an unlisted arbitrary ground of discrimination; and a practice of paying newer employees at a lower rate for a two year period is in any event neither irrational nor unfair. The Code of Good Practice on Equal Pay / Remuneration for Work of Equal Value specifically states that it is not unfair discrimination if the difference is fair and rational and is based on any one or a combination of the following factors:

"the individuals' respective seniority or length of service".

[33]   And this justification must in any event be seen against the background that the Commissioner allowed the case to proceed without first requiring WAR to identify what the unlisted ground of discrimination on which its case was premised was alleged to be. In terms of section 138(1) of the Labour Relations Act, read with section 10(7) of the EEA, a commissioner is obliged to determine the dispute "fairly". This necessarily implies, as the Constitutional Court has held, that he or she "must act fairly to all the parties", including the employer. It is not fair to the employer for an arbitration to run without the complainant union being required to identify - and then being held to - the unlisted arbitrary ground of discrimination relied upon. That fact in itself would have made the award reviewable; there can be little doubt that it is also a valid ground for appeal.

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[36]   The case that Pioneer was called upon to meet in WAR's heads of argument was that the arbitrary ground was "the fact of their being newer employees, their having started work for [Pioneer] later than their colleagues". Inexplicably, the arbitrator makes no reference to this in his award. Instead he finds that it was the employees' "status as former temporary employment service employees" that triggered the difference in remuneration.

[37]   It is irregular and contrary to the principles of fairness to find against an employer on a basis different from that which was argued against it and which it was called upon to argue. The union should have been held to the case which it argued (even though I hold below that that case was in any event without merit).

[38]   Moreover, the arbitrator's finding that it was the employees' status as former temporary employment service employees that triggered the difference in remuneration is not founded on the facts as proved. There was no evidence to contradict Pioneer's evidence that the 80% rate was paid to all those taken into its employment on 1 November 2014 (the date on which the seven complainants were employed) and was not paid only to former labour broker employees.

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[44]   It therefore emerges that the Commissioner's approach rests on nothing more than a finding that it amounts to unfair discrimination for the Appellant to pay a newly appointed employee previously employed by a labour broker at a rate lower than the rate paid to existing long-service employees, no matter how short the period of previous employment with the labour broker.

[45]   That cannot be correct. Nothing in the EEA precludes an employer from adopting and applying a rule in terms of which newly appointed employees start at a rate lower than existing long-serving employees. This applies whether or not the newly appointed employee had previous substantial experience, whether with the employer concerned or some other employer. It also applies whether or not the employee had, in the past, rendered services to the employer concerned via a labour broker.

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[49]   The arbitrator's award, if correct, has the startling implication that it is impermissible in terms of the EEA for a South African employer to give effect to a collective agreement which prescribes differential rates for employees with different periods of service with it. The award is simply wrong in this regard, and giving effect to such agreements does not constitute "discrimination" on an unlisted "arbitrary ground", much less "unfair" discrimination.

[50]   Differential treatment is ubiquitous in modern life and in the workplace. The EEA does not regulate such differential treatment at all unless and until it is established that it is both "not rational" and constitutes "discrimination". (To constitute "discrimination" the differentiation must take place on a listed ground or on any "other arbitrary ground", as contemplated to in section 6(1)) .

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[56]   Where a collective agreement stipulates different pay levels for employees with different periods of service with the employer concerned, this is not arbitrary differentiation (as contemplated in para 25 of Prinsloo); nor is "length of service" (or being a "new employee") an unlisted ground meeting the test just referred to.

[57]   Differentiation in respect of terms and conditions of employment on the basis of length of service with the employer concerned is, on the contrary, a classic example of a ground for differentiation which is rational and legitimate and, indeed, exceedingly common. That the lawgiver shares the view that this is rational and legitimate is apparent inter alia from:

57.1.   Regulation 7(1)(a) of the Employment Equity Regulations 2014 , which includes "length of service" as one of the "factors justifying differentiation in terms and conditions of employment";

57.2.   Section 198D(2)(a) of the LRA, which includes "length of service" as a "justifiable reason" for differential treatment;

57.3.   Clause 7.3.1 of the Code of Good Practice on Equal Pay / Remuneration for Work of Equal Value.

[58]   In WAR's heads of argument to the Commissioner, the crux of the argument advanced was that it is not rational to pay new employees less than those who have been employed longer. That was a wholly untenable legal proposition. There is quite manifestly a rational connection between using length of service as a factor determining pay, and the objective of recognising long service and loyalty of existing employees. The Commissioner ought to have dismissed the case on that basis alone.

[59]   Moreover, length of service with the employer concerned as a factor affecting pay levels is not an "other arbitrary ground", as contemplated in section 6(1) or in the test laid down by the Constitutional Court. Treating people differently in the workplace in accordance with their length of service with the employer does not impair their fundamental human dignity or affect them adversely in a comparably serious manner. The unlisted ground proffered by the union in its heads of argument did not qualify. That too should have been the end of its case.

[60]   And even if the inclusion of an "arbitrary" ground is meant to widen the scope of discrimination in the context of equal pay for work of equal value, the distinction in this case - length of service - is not arbitrary. This wider reading of the new subsection is discussed in these terms by Du Toit:

"[T]he reintroduction of the prohibition of discrimination on 'arbitrary' grounds cannot be understood as merely reiterating the existence of unlisted grounds, which would render it redundant. To avoid redundancy, 'arbitrary' must add something to the meaning of 'unfair discrimination'. Giving it the meaning ascribed to it by Landman J in Kadiaka - that is, 'capricious' or for no good reason - would broaden the scope of the prohibition of discrimination from grounds that undermine human dignity to include grounds that are merely irrational without confining it to the latter."

[61]   But even on this broader interpretation, the differentiation between new entrants and longer serving employees is rational, sanctioned by collective agreement, and envisaged by the Code of Good Practice.

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[64]   The authorities appear to show that, where unfair discrimination is proved, the mere fact that it is authorised by a collective agreement does not disclose a defence. But this principle should not be stretched beyond its proper application. I am persuaded that, in determining whether there has been unfair discrimination in the first place, it is by no means irrelevant that the conduct complained of is the product of a collective agreement negotiated with a representative trade union. This is particularly the case where, as in this case, the reasons for reaching agreement on the relevant point have been disclosed and are in no sense illegitimate and where, but for the term now objected to, it is doubtful that the jobs concerned would ever have been created.

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[76]   In conclusion, I find that:

76.1.   The differentiation complained of was not irrational; was not based on an arbitrary unlisted ground; and was not unfair; 76.2.   The Commissioner ought therefore to have dismissed the claim; 76.3.   The Commissioner's award should be reversed and substituted by an order dismissing the claim; 76.4. &Nbsp; The appeal should be upheld.