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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 which looks at 'The Double Whammy - compensation under both the LRA and EEA'. We also look at three new cases: The first takes a relook at inconsistency as part of fairness. The second looks at whether an adverse inference can be drawn if a witness refuses to answer questions. The third case looks at disclosure of the arbitrator's conflict of interest.
This public newsletter is a free edited version of the subscriber newsletter.
Inconsistency as part of fairness
We understand instinctively that it is unfair to irrationally or arbitrarily distinguish between people, whether this is in the provision of benefits or in the administration of workplace discipline. Employees are entitled to know what they can expect and what is expected of them, and to know that they will be treated in the same way as others.
Consistency as an element of fairness is specifically referred to in the Code of Good Practice: Dismissal. In terms of item 3 an employer's rules must create certainty and consistency in the application of discipline and the 'employer should apply the penalty of dismissal consistently with the way in which it has been applied to the same and other employees in the past, and consistently as between two or more employees who participate in the misconduct under consideration'. And in Item 7 it is provided that any person who is determining whether a dismissal for misconduct is unfair should consider whether the rule or standard has been consistently applied by the employer.
There is however a tension between consistent treatment and the obligation to consider an individual's mitigating factors. Taking into account mitigating factors may result in inconsistency, having regard to how such offences have been dealt with in the past.
There are also situations where the degree of seriousness of the misconduct results in what seems to be inconsistent treatment. This arose in the recent LAC case of Absa Bank Limited v Naidu and Others (DA 14/12)  ZALAC 60 (24 October 2014). The employee, an executive investment broker at Absa, was charged with two counts of misconduct. In terms of her job description she advised and recommended to clients the best investment portfolio. She would then assist clients in investing their funds in various portfolios. With the consent of a client, she could move or "switch" funds from one investment portfolio to another. A "switch form" was used to implement the transfer of funds. The particulars of the client, the type of the investment and an original signature of the client had to be reflected on the switch form which was then faxed to the central point known as the Absa's Investment Management Services (AIMS), where the final transaction switch was to take place.
Believing she was acting in the best interests of the client who was out of the country, the employee switched a client's funds of R100 000 between investment portfolios without the client's authorisation and confirming signature. This was in violation of the bank's rules and the code of conduct under the FAIS Act. Notwithstanding 20 year's service, she was dismissed. Over and above the dismissal sanction, the bank reported the employee to the Financial Services Board which, in turn, found her misconduct to be sufficiently serious to have her debarred from practising as a Financial Advisor.
The employee was not satisfied with her dismissal which she considered unduly harsh, on the basis that there were other employees who had previously committed similar transgressions but were not dismissed. The matter was referred to the CCMA. On the misconduct charge and conviction, the commissioner found that the sanction of dismissal was "too harsh" in the circumstances of the case. The commissioner held that the dismissal of the employee was procedurally fair but substantively unfair; and he ordered that she be reinstated with effect from the date of her dismissal.
The bank was not satisfied with this outcome and took the matter on review to the Labour Court. The LC, acknowledging that dishonesty has a corroding effect on the trust which the employer is entitled to expect from its employees, nevertheless held that an employer who exhibits a propensity of condoning acts of misconduct performed under dishonest circumstances runs the risk of being ordered by courts to reinstate employees found guilty of acts of misconduct in line with the parity principle. In its judgment, the LC accordingly dismissed the review application with costs.
The bank appealed to the LAC which took a different approach to the CCMA and LC, and upheld the appeal, finding the dismissal was fair. In so doing it said that consistency on the part of an employer is an important but not decisive factor to take into account in the determining the fairness of a dismissal. The fact that another employee committed a similar transgression in the past and was not dismissed cannot, and should not, be taken to grant a licence to every other employee to commit serious misdemeanours, especially of a dishonest nature, towards their employer on the belief that they would not be dismissed.
The learning that can be drawn from the LC and LAC judgments is that if an employer is inconsistent in applying discipline in similar circumstances, it runs the risk of having an otherwise fair sanction overturned. But whilst consistency is important, it is not necessarily decisive particularly in cases of serious misconduct. Varying degrees of dishonesty may justify different treatment. Each case should be treated on the basis of its own facts and circumstances.
Refusing to answer questions: when can an adverse inference be drawn?
We all accept the principle that as an employee is innocent until proved guilty, that the onus is on the employer to establish guilt, and not the employee to establish innocence. This is reinforced by section 192 of the LRA, which sets out the onus in dismissal disputes.
When a witness refuses to answer a question in a court or arbitration, a natural assumption may be that 'they have something to hide'. But this need not be the case. As an example, a witness may for 'noble' reasons decide to protect another person. The issue is what consequences should flow from a refusal to testify or answer questions. Can an employer or arbitrator reach a conclusion that the refusal to answer questions is a negative factor, because the employee was given the opportunity to answer the charges?
Taking this one step further: what are the consequences if an arbitrator does not warn the employee that a negative or adverse inference will be drawn from the refusal to answer questions? These were the issues that arose in National Union of Mine Workers obo Smith v Namakwa Sands, A Division of ExxaroTsa Sands (Pty) Limited and Others (CA12/2013)  ZALAC 57 (23 October 2014). In this case a Plant Operator at the Namakwa Sands plant smelter was summoned to a disciplinary hearing on charges including falsifying records at weighbridges; conspiring in the theft of pig iron; and conspiring in granting site access to a contractor under a false name. The employee failed to testify at his disciplinary hearing. He elected to give no account of his actions, contending that it was up to the employer to prove his guilt. He was found guilty of misconduct and was subsequently dismissed.
Alleging that his dismissal was substantively unfair, a dispute was referred to the CCMA. The employee refused to answer any question relating to an ex-employee, Coetzee. He was only prepared to admit that he knew him as an ex-employee. The employer led evidence that the employee was working on the night of the offence and had access to the weighbridge system on which the information was changed at 21h16. The employer established from telephone records that numerous telephone calls were made to Coetzee from the weighbridge tea room and office telephones, with the most suspicious one being at 21h08 lasting 11 minutes. This is the time when the changes were made to the system.
The CCMA commissioner found that the employee's outright refusal to answer questions relating to Coetzee was a matter of concern, in particular after another witness connected him with Coetzee. This made it difficult for the employer to test the credibility of the employee's contention that they were only work colleagues. The commissioner said: "An inference could be drawn that he did not want to implicate Coetzee or himself under oath in considering the possibility of criminal proceedings. An isolated denial was not good enough under the circumstances."
The commissioner concluded that it was probable that the employee was the one who changed the data on the system to conceal the theft or was at least aware of the person changing it, and that he was connected to Coetzee in terms of this transaction or aware that Coetzee was running the scheme. The commissioner concluded that dismissal was the appropriate sanction as there was irreparable breakdown in the trust relationship. The theft was premeditated, carefully planned and involved a substantial amount of money.
The application for review to the Labour Court was dismissed with costs. On appeal to the LAC, it was held that there was evidence that while the commissioner did allow the employee to refuse to answer questions, it was made clear that this refusal could result in an adverse finding. The LAC dismissed the appeal.
This case establishes that it will not be a reviewable irregularity where an arbitrator indicates that questions in cross-examination do not have to be answered but makes the employee aware or warns that an adverse inference may be drawn against the refusal to answer questions. But the case did not go further to explore whether it automatically results in unfairness if the employee is not warned that adverse inferences may be drawn from the refusal to answer questions. Similarly, should the chairperson of a disciplinary hearing warn an employee of the potential consequences of an adverse inference being drawn if he/she refuses to answer key questions posed during the hearing?
Regarding the arbitration process, the answer perhaps lies in clause 21 of the CCMA Guidelines for Misconduct Arbitrations which provides as follows:
".... If it is evident at a subsequent stage that a party or its representative does not understand the nature of proceedings and that this is prejudicing the presentation of its case, the arbitrator should draw this to the attention of the party. Circumstances in which it may be appropriate for the arbitrator to do this include if a party -A practical application of the above guidelines would suggest that an arbitrator does have a duty to warn a party (particularly one not legally represented) of the consequences of an adverse inference being drawn through a failure to answer relevant questions. We recommend that a similar approach be adopted by chairpersons of disciplinary hearings. This is not difficult to achieve. Without using legal jargon, a chairperson should in appropriate circumstances simply point out to an employee refusing to answer questions that whilst he/she has the right to do so, that refusal may be taken into account in weighing up the probabilities of any conflicting versions of events presented at the hearing.
21.1. fails to lead evidence of its version under oath or affirmation."
Disclosure of the arbitrator's conflict of interest
The CCMA Code of conduct for Commissioners requires them to disclose any interest or relationship that is likely to affect their impartiality or which might create a perception of partiality. The duty to disclose rests on the commissioners.
What must Commissioners disclose to the CCMA before an arbitration? The Code lists the following:
- Any direct financial or personal interest in the matter.
- Any existing or past financial, business, professional, family or social relationship which is likely to affect impartiality or may lead to a reasonable perception of partiality or bias.
These ethical principles were tested in the recent LAC case of Sasol Infrachem v Daniel and Others (JA58/12)  ZALAC 54 (21 October 2014). The employee was employed as a Crime Control Officer and, following a disciplinary enquiry, was found guilty of neglecting to perform his duties, particularly for failing to respond promptly to an armed robbery that had taken place. He challenged his dismissal and the matter was referred to the CCMA for resolution.
An arbitrator was appointed to arbitrate the unfair dismissal dispute. The arbitrator found in her award that the dismissal was substantively fair and "procedurally fair, save for the fact" that the Chairperson of the Disciplinary Enquiry "at times" prevented the employee from "properly cross-examining certain witnesses and putting his version forward". The arbitrator, effectively, confirmed the dismissal, but awarded the employee compensation equivalent to one month's salary for the procedural unfairness, but further recorded that "the Chairperson did not act in a biased manner" and made no costs order.
Unhappy with this outcome at the arbitration, the employee brought an application in the Labour Court to review and set aside the arbitration proceedings and the arbitrator's award. The employee contended that it had come to his knowledge that a certain company PAS Automation Services (Pty) Ltd ("PAS") was a preferred contractor of the employer; that it was owned by the arbitrator's husband and that the arbitrator conducted her consulting services business from the same premises as PAS. The employee said that these facts were not disclosed by the arbitrator and were not known to him at the time of the arbitration. He contended that she should have disclosed the facts linking her to the employer and should have recused herself and not presided as arbitrator in his matter, because of the closeness of the relationship between herself and the employer which gave rise to a reasonable apprehension of bias.
The Labour Court concluded that the arbitrator ought to have made disclosure of the facts at the outset of the arbitration, finding that a reasonable apprehension of bias on the part of the arbitrator had been shown. The court declared the arbitration proceedings "null and void" and ordered that the arbitration be conducted afresh before another arbitrator.
The employer sought leave to appeal to the LAC against the Labour Court's order. The LAC dismissed the appeal, but held that the mere failure of an arbitrator to disclose facts about a possible conflict of interest at the outset of the arbitration does not mean that s/he is biased, or that s/he has to recuse herself/himself. The latter is to be determined by means of a second, objective enquiry, namely, whether a reasonable, objective and informed litigant would, on the correct facts, reasonably apprehend bias.
In this case the LAC found that the arbitrator was obliged to make disclosure of the relationship between her husband's company and the employer. This case reminds arbitrators that they need to be meticulous in pre-arbitration disclosure to prevent a perception of bias.
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