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Worklaw subscribers receive a monthly newsletter containing commentary on the latest labour law cases and trends. Given recent publicity relating to high levels of employee debt and excessive administrative charges by money lenders and collection agencies, this subscriber newsletter contains an article which looks at Employee Indebtedness: What is the employer's responsibility?

We also look at three new cases: The first revisits the issue of when an independent contractor is an employee, an increasingly important issue given the new sections198A-D contained in the 2014 LRA Amendments. The second considers what an employer must prove in a 'team misconduct' situation, where proof of individual guilt by the employees involved may not be necessary. The third case looks at requirements for a fair ultimatum in a strike situation.

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


Independent contractors or employees?

There are important consequences if a person who renders services is categorised by the law as an employee: the worker can use the CCMA for dismissal and unfair labour disputes, can access social benefits (unemployment benefits and worker's compensation), and can strike without being in breach of the employment contract. In the recent case of Phaka and Others v Bracks and Others (JA 3/2014) [2014] ZALAC 73 (18 December 2014), the persons providing services challenged their long-standing 'independent contractor' status, seeking to be regarded as employees under the LRA.

Here are the facts of this LAC case: The company operates as a courier company on a fixed route basis, with regular and recurring collection times, primarily for financial houses. After a consultation process with the company's employees, the company introduced a scheme in the 1980's in the interests of productivity, empowerment and efficiency. Agreement was reached in terms of which existing employees were offered the opportunity to participate in an owner-driver programme. There was no objection to the scheme by either the unions or the regulatory authorities prior to the present dispute. The model was viewed favourably and its implementation encouraged by the bargaining council and the relevant government department.

The appellants alleged an unfair labour practice had arisen out of this empowerment initiative using owner-drivers to render client services on behalf of the company. The appellants were aggrieved about their status of being independent contractors. They contended that a contract of employment existed notwithstanding the apparent existence of a relationship of independent contractor established in the explicit terms of the contract between each individual appellant and the company. Their reasons for taking that view were that the contract subjected them to significant control by the company and their activities were integrated into the company in such a way as to constitute an employment relationship.

At the bargaining council the arbitrator held that as there was no employment relationship there was no jurisdiction to hear their unfair labour practice claim. This award was upheld in both the Labour Court and Labour Appeal Court. This principle was confirmed by the LAC: The legal relationship between parties must be gathered primarily from the contract they concluded. This won't be decisive because the court will scrutinize to see if it is a sham arrangement where an actual employment relationship is disguised as an independent contractor contract or a co-operative agreement. Where the contract places operational and necessary constraints and control over the independent contractor, this does not necessarily alter the relationship to one of employment. There is a balance between the factors set out in s 200A of the LRA, the contract and the context.

This case also clarified the test to be applied when the court is asked to review an arbitrator's jurisdictional ruling as opposed to an award involving the fairness of a dismissal or labour practice. The LAC confirmed that the Sidumo review test of establishing that the award was one that could not have been made by a reasonable decision-maker, applies only to the review of determinations relating to the fairness of a dismissal or labour practice. It has no application to the determination of jurisdiction. The court on review in such an instance is required to determine whether that finding by the arbitrator was correct in law or not.

Team misconduct: what must an employer prove?

Employers frequently face a situation in which it is clear theft by one or more persons within a department or group of employees is taking place, but it is very difficult to establish which employees are involved.

Consider the facts of the case in True Blue Foods (Pty) Ltd t/a Kentucky Fried Chicken (KFC) v Commission for Conciliation Mediation And Arbitration and Others (D441/11) [2014] ZALCD 70 (28 November 2014). Continuous shrinkage (R80,000-R120,000 per month) persisted at a branch of KFC despite numerous and diverse steps taken and warnings given by the employer. For example 518 cans of juice, 113 pieces of chicken and 32 kg of chips went missing during one shift. KFC contended that given these large volumes, it was literally impossible that all the team members would not have been aware of what was going on. Prior to the employees being suspended, they were spoken to by the Area Manager who gave each of them an opportunity to come forward and provide any information of how the stock losses were taking place. None of them accepted the offer.

A disciplinary enquiry was then held of all employees who worked in one shift when stock went missing and they were all found guilty and dismissed. Since the dismissal of these employees, the stock position resolved itself and there were no longer any stock losses.

The employees referred the matter to the CCMA. The arbitrator determined that the employer had failed to prove that the individual employees were involved in causing the items to leave the store without them being paid for or that they knew or should have known who was responsible for it. He consequently found the dismissal of the employees substantively unfair and ordered six months compensation in respect of each employee.

Not surprisingly the company took this decision on review. The Labour Court held that the arbitrator had misunderstood the legal principles relating to 'team misconduct' resulting in a reviewable outcome.

The court confirmed this principle: In the case of 'team misconduct' (just as in the case of derivative misconduct and common cause purpose) there is no need to prove individual guilt. It is sufficient that the employee is a member of the team, the members of which have individually failed to ensure that the team meets its obligations to ensure that there is no stock loss.

We are concerned that the court in this case may have confused the notions of 'team misconduct' (in terms of which the employer dismisses a group of workers because responsibility for the collective conduct of the group is indivisible - each has culpably failed to ensure that the group complies with a company rule or standard set by the employer) and 'derivative misconduct' (in terms of which employees fail to offer reasonable assistance to an employer to detect individuals actually responsible for the misconduct - they violate the relationship of trust and confidence). This is a complex subject. For more on this topic, go to 'Group Offences' in the index under Unfair Dismissal Law in Worklaw's menu of services on

Communicating the strike ultimatum

The Code of Good Practice: Dismissal stipulates that in a strike situation, an employer, after discussing the matter with a trade union official, must issue an ultimatum which gives the employees sufficient time to reflect on the ultimatum and respond to it - either by complying or rejecting it.

What is the impact if the ultimatum doesn't come to the attention of all the strikers?

In a strike dating back to 2009 (another example of an unacceptably long period to resolve a dispute through our dispute resolution system), employees embarked on an unprotected strike on 17 to 20 November. On 20 November, the Labour Court declared the strike an unprotected strike and interdicted the strikers from participating in it. During the afternoon of 20 November 2009, the appellant issued an ultimatum requesting the strikers to return to their work stations by 15h00. Some strikers failed or refused to do so and they were subsequently issued with notices to attend a disciplinary hearing to face the following charges of failing to comply with a court order, and failure to adhere to an ultimatum.

The employees refused to take part in the hearing which proceeded in their absence and they were subsequently found guilty and dismissed. Conciliation at the Bargaining Council (SARPBAC) failed. The SARPBAC issued a certificate that the dispute was unresolved and that it may be referred to the Labour Court.

At the Labour Court it was conceded by the employees that the ultimatum was communicated to them along with the fact that an interdict had been granted against the unprotected strike. They also agreed that the court order and ultimatum were read out to the striking employees at both depots, by members of the SAPS who also translated the documents, and that copies of the ultimatum were also handed out to the employees. They also did not challenge the fairness of the ultimatum.

The Labour Court found that even on the employer's version - that the ultimatum was read at approximately 13h00 - the dismissals were still unfair. The court was of the view that two hours to return to work was insufficient because the strikers were not given proper opportunity to consider whether they should return to work and what the consequences of a failure to return to work would be. According to the court, the fact that the strikers were no longer union members required of the employer to give them time to consult with their families.

The employer appealed against the LC judgment. The Labour Appeal Court in Mvelatrans (Pty) t/a Bojanala Bus Services v Jackson and Others (JA72/13) [2014] ZALAC 68 (23 October 2014) took the view that the evidence showed that some employees had time to report to work after the ultimatum was read and that some dismissed employees' evidence as to why they did not report to work was not plausible. Their dismissals were accordingly substantively fair. But those employees whose evidence was found to be plausible for not reporting to work, were reinstated. The appeal was accordingly partly upheld.

The lesson of this case is this: Where employees are not represented by a union and where there is no strike committee or discernible communication channels between and amongst the employees, there must be some indication that the employees were aware of an ultimatum. The employer must prove that the employees were aware of the ultimatum or that they would reasonably or in all likelihood have been aware thereof and that they did not comply with it. Knowledge of the ultimatum is important for a finding that there was no compliance with it.


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Bruce Robertson
January 2015
Copyright: Worklaw