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Worklaw subscribers receive a monthly newsletter containing commentary on the latest labour law cases and trends. This newsletter contains an article entitled "Doubts surface about Derivative Misconduct" following a recent LAC judgment on the matter. We also discuss three new cases: The first case is the log-awaited Constitutional Court ruling on whether a labour broker and client are joint employers or whether the client becomes the sole employer when the deeming provision kicks in. The second case considers what needs to be proved in a case of misconduct that could also constitute a criminal offence. The third case looks at practical problems that can arise from enforcing disputed reinstatement orders.

This public newsletter is a free edited version of the subscriber newsletter.


Labour broking: when the client is the sole employer

Worklaw subscribers will know the history to this dispute: amendments to the LRA in 2014 limited the use of temporary employment services (TES) or labour brokers as they are commonly known, through a new s198A. In 2015 Assign Services, a TES, placed 22 workers with Krost Shelving and Racking (Pty) Limited, a number of whom were members of NUMSA. The placed workers provided services to Krost for a period exceeding three months and on a full time basis. Assign Services' view was that s198A(3)(b) created a dual employer relationship involving it and the client, while NUMSA contended that the employees' sole employer was Assign Services as a result of this section.

The CCMA supported NUMSA's sole employer interpretation, but the Labour Court held that s198A(3)(b) created a dual employment relationship, in which both the TES and the client have rights and obligations in respect of the workers. In an appeal by NUMSA to the LAC, it was found that the sole employer interpretation best protected the rights of placed workers and promoted the purpose of the LRA.The LAC set aside the LC order and held that a placed worker who has worked for a period in excess of three months is no longer performing a temporary service, and the client becomes the sole employer of that worker. The matter was then referred to the Constitutional Court.

In a long awaited judgment in Assign Services (Pty) Limited v National Union of Metalworkers of South Africa and Others [2018] ZACC 22 (26 Aug 2018), the Constitutional Court in a majority judgment held that the purpose of section 198A must be contextualised within the right to fair labour practices in section 23 of the Constitution and the purpose of the LRA as a whole. The majority found that for the first three months the TES is the employer and then subsequent to that the client becomes the sole employer. The majority found that the language used in s198A(3)(b) supports the sole employer interpretation.

Whilst the majority judgment decides the matter, in a dissenting judgment Cachalia AJ found that the dual employer interpretation was correct, as the LRA does not expressly state that the TES would cease to be the employer after three months. Cachalia AJ concluded that the dual employer interpretation provided greater protection for lower paid workers in line with the purpose of section 198A(3)(b), and for these reasons would have upheld the appeal.

Irrespective of the merits of the different views, we now have legal certainty: S198A(3)(b) of the LRA supports the sole employer interpretation, altering the employment contract between a TES and worker created by s198(2). But whilst the Constitutional Court recognised Krost as the sole employer of those employees placed by the TES, it still recognised the possible existence of a triangular relationship between the parties if "the commercial contract between the TES and the client remains in force and requires the TES to remunerate the workers."

This seems to mean that whilst the labour broking client becomes the employer, there is nothing to prevent that employer from continuing to contract out aspects of its employment obligations to the labour broker. On this basis it would appear that labour brokers can still make their services available to employers for this purpose.

Whether it is commercially viable for employers to go this route, given the 'equal pay for equal work' provisions that will apply to those employees plus the fact that they will still have to pay the labour brokers' fees, is a matter for consideration.

Proving misconduct is not the same as proving a crime

The recent case of Nel v Construction Education and Training Authority and Others (PA3/17) [2018] ZALAC 16 (10 July 2018) highlights the dangers of laying disciplinary charges in the form of a criminal offence. The facts of this case are as follows: the employer (CETA) deposited R6 093.38 into Pick 'n Pay's bank account and the employee was instructed by her supervisor to collect stock at Pick 'n Pay in accordance with a pre-approved standard list of office supplies.

Instead of collecting the items, the employee loaded the funds from the employer's credit onto two gift cards. With these two cards the employee purchased goods, then returned some of them, putting the refund into a third gift card. Although she disclosed the two gift cards to her supervisor, she did not disclose the third. During the shopping the employee used her smart shopper card, a Pick 'n Pay loyalty programme used for the accumulation of points which can be converted into cash for further purchases. She also used her credit card to effect payment for some of the items purchased which CETA said was unnecessary as it had paid for its own goods.

The employee had explained to her supervisor that she had been advised by a cashier at Pick 'n Pay to load the funds onto two gift cards. He was surprised as there was no need for this - all she had to do was collect the supplies. Video footage of the employee transacting at the store showed the employee arriving at the store on two occasions wearing different clothing and with a changed hairstyle, possibly to conceal her identity.

The employee faced charges of dishonesty, fraud, material breach of fiduciary duty, gross dereliction of duty, gross negligence, failure to exercise due care in the discharge of her duties, and contravention of CETA's internal policies and procedures. She was found guilty on all the charges at an internal disciplinary hearing and dismissed.

At the CCMA, the commissioner concluded that her dismissal was both procedurally and substantively unfair and reinstated her retrospectively with back pay. The commissioner found that the employee's version was reasonable: that she had been advised by Pick 'n Pay to transfer the money onto gift cards because she needed to pick up the goods at different times, her car being too small to collect all the goods at once. She had not disclosed the third gift card because she had not completed the transactions.

On review, the Labour Court found that the employee had an opportunity to report the third gift card to her supervisor but deliberately elected not to do so. She misled him into believing that she spent all the money deposited by CETA into Pick 'n Pay's account. The LC drew an inference, on the basis of her non-disclosure of the third gift card, that she committed fraud. This was fortified by her buying pattern. The employee made herself guilty of serious misconduct which involved dishonesty. This destroyed the relationship of trust and justified her dismissal. It reviewed and set aside the commissioner's award and substituted it with an order that the dismissal was substantively and procedurally fair.

On appeal to the LAC, one of the issues was whether the employer had proved all the elements of fraud. The court held that in misconduct hearings one is not required to satisfy the criminal law requirements of any wrongdoing. All that is required is to establish if the employee committed misconduct, whether the misconduct involved dishonesty or something else, and the seriousness thereof.

What the LAC is saying is that labels are totally irrelevant, particularly to a criminal charge that is for the criminal courts to deal with. Here the employee misled CETA into believing that all the monies had been spent on the groceries. The evidence is overwhelming that she deliberately concealed the existence of the third gift card which had a balance of R381.84, and thereby made herself guilty of dishonest conduct. The appeal was dismissed.

Our first comment is that this case is a useful reminder that in drafting charges the emphasis should be misconduct rather than a criminal law category. The criminal law definitions of theft and fraud require proof of intention - something that is often difficult to do.

Our second comment is that employers can create difficulties for themselves in splitting charges - here the employee was charged with "dishonesty, fraud, material breach of fiduciary duty, gross dereliction of duty, gross negligence, failure to exercise due care in the discharge of her duties, and contravention of CETA's internal policies and procedures". Think of the extra witnesses that might be needed to properly establish all of those charges. How much simpler this case could have been if the charges were something like "you are charged with dishonest conduct in that you obtained and failed to disclose the existence of a gift card onto which the company's money was loaded".

Does reinstatement include remuneration after the date of reinstatement?

The recent judgment in Bopape v Mintek SOC Ltd (J660/16) [2018] ZALCJHB 244 (10 July 2018) highlights practical problems that can arise from enforcing disputed reinstatement orders. Presuming an employer unsuccessfully challenges a reinstatement order through review proceedings, and now much later has to reinstate the employee in terms of the original award - but refuses to fully compensate the employee for the period from the date of reinstatement ordered by the arbitrator to the date when the reinstatement finally takes place. What can the employee do about this? Is the period between the date of the award and the actual date of implementation covered by a reinstatement order?

First, let's look at the facts of this case: at the CCMA arbitration the employer's dismissal of its General Manager: Corporate Services was held to be substantively unfair and reinstatement was ordered. The employer's attempt to review the award was unsuccessful, and the employer ultimately reinstated her some 4 years after the dismissal. The employee was paid an amount of R5 787 901.00 as back pay, but this did not cover the full period from the date of reinstatement ordered by the arbitrator to the actual date of reinstatement - there was a shortfall of R1 339 908. The employer paid the back pay under protest, and launched an unsuccessful application in the High Court for the employee to disclose her source of income between the period of her dismissal and her reinstatement. The employee resigned as a result of this and referred an alleged constructive dismissal dispute to the CCMA, which is still being processed.

In an attempt to remedy the back pay shortfall, the employee brought an application in the Labour Court to make the arbitration award that ordered her reinstatement an order of the court. The employee submitted there was only partial compliance with the arbitration award, and the remaining amount of R1 339 908 was due to her. The LC however dismissed her application, finding that she had used the wrong process to deal with her claim. Remuneration earned after the date of reinstatement ordered by the arbitrator is clearly not covered by that reinstatement award, and the employer had complied with the reinstatement order. The LC found she should have pursued her contractual claim in the civil courts or brought a Labour Court application under s77 of the BCEA.

This case is a reminder of what reinstatement means: putting the employee back into the position s/he would have been in had they not been dismissed. The back-pay ordered by the commissioner can therefore only refer to the period between the date of dismissal and the date of the order. Whilst it may seem clumsy and overly bureaucratic that the successful employee has to lodge a new dispute arising out of a failure to properly comply with the objective of an award already obtained, the forthcoming amendments to the BCEA to provide for implementation of the new national minimum wage do make specific provision for claiming unpaid remuneration either through arbitration (for employees earning below the threshold) or through the Labour Court or civil courts (for employees earning above the threshold).

Doubts surface about Derivative Misconduct

By Prof Alan Rycroft

Over the last few years we have reported on several cases about a form of misconduct called 'derivative misconduct' that arises from an employee's refusal or unwillingness to give the employer information which would assist the employer in identifying who was responsible for misconduct.

Uneasiness about derivative misconduct has now surfaced in a recent decision of the Labour Appeal Court in NUMSA obo Nganezi & others v Dunlop Mixing and Technical Services (Pty) Ltd & others DA16/2016 [2018] ZALAC 19 (17 July 2018). While the majority view supported the traditional view of derivative misconduct, we believe that employers need to consider the minority views and advice expressed by the LAC in this judgment.

Read more (note - only available to Worklaw subscribers)

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Bruce Robertson
August 2018
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