Kelly Industrial Ltd v CCMA & Others (JR 1237/13 [2015] ZALCJHB 12 (21 January 2015)

Principle:

  1. An agency arrangement in terms of which the labour broker undertakes to place employees and assign them work, but pending these attempts the employees will not receive remuneration and benefits and should not expect that the employer will provide work, offends the principle of security of employment and goes against the very notion and definition of an employment relationship where an employer provides work to an employee who renders services and is entitled to remuneration.
  2. When reviewing a jurisdictional fact, the Sidumo test of whether the finding of the arbitrator was one which no reasonable arbitrator could on the evidence arrive at, is not applicable.
Facts:

Kelly Industrial is a labour broker that places its employees with clients on a temporary basis at various sites. The ten employees in question were assigned by Kelly Industrial as general workers with KEC International at one of its operations in June 2012, on limited duration contracts. In March 2013 they received written notice from Kelly Industrial that their assignment at this particular project was to end. They were paid two week's remuneration in lieu of notice and accrued leave, and provided with UIF claim forms.

The employees referred an unfair dismissal dispute to the CCMA. They submitted they were employed for the duration of the project and not only for an assignment period, and that the project had not come to an end when their assignment with the client ended. The employer's case was hampered by the fact that the sole witness it called had no direct knowledge of the facts in question, and his evidence was largely hearsay. But in essence, the employer claimed at arbitration that whilst these employees' assignments had come to an end, this had no effect on their employment relationship with the company. This continued on the basis that whilst they were not placed on an assignment, they would receive no remuneration / benefits and with no expectation of immediately being placed elsewhere.

The arbitrator found that the employees had discharged the onus of proving they had been dismissed, and concluded that their dismissals were both substantively and procedurally unfair for lack of a valid reason and a fair procedure.

The employer took the matter on review and argued that the arbitrator committed gross misconduct in concluding that the employees had been dismissed, in that he ignored the fact that the employer was a TES and that termination of the placement of the employees on a temporary basis did not constitute a dismissal. What was in place was essentially an unpaid 'lay off' arrangement.

The LC disagreed and dismissed the review application. The court interpreted the contract between the parties as meaning the employees understandably believed they were employed for the duration of the project, and the contract further provided their employment could be terminated on completion of the project. It was also common cause that the project had not been completed at the time the employees' assignment at KEC International came to an end. Despite this, the LC found that the employer had dismissed the employees by giving them notice.

The LC was particularly scathing about the unpaid 'lay off' arrangement the company submitted was in place. The LC referred to the judgment of NUMSA v Abancedisi Labour Services (857/12) [2013] ZASCA 143 (30 September 2013) in which the SCA found that a similar lay off arrangement by a labour broker constituted an unfair dismissal. The SCA rejected the idea that a labour broker could retain employees, without work and without pay, on indefinite suspension. If work cannot be found, retrenchment must follow, or the inaction must be taken to be an unfair dismissal.

The employer also raised the alternative argument that there was no dismissal, as the employees' employment contracts terminated 'automatically' on the completion of the assignment. This argument had never been raised at the arbitration, but was in any event rejected by the court.

In the review proceedings, it appears the employer got the applicable test for review wrong. It argued the case on the basis of the standard review test as laid down in Sidumo v Rustenburg Platinum Mines Ltd and Others (Case CCT 85/06 Decided on 05 October 2007), namely whether 'the decision reached by the commissioner is one that a reasonable decision-maker could not reach?' But as the LC pointed out, this was not the test for review in this instance. Whether or not the employees had been dismissed (the essence of the case) was a jurisdictional fact, which must be determined - even on review - objectively. The LC followed a long line of cases that have said that when dealing with a jurisdictional issue, the court on review simply has to decide whether the commissioner was right or wrong - effectively the same test as for an appeal, and a far less onerous standard than the Sidumo review test applicable in unfair dismissal and unfair labour practice decisions. And in deciding whether the arbitrator's decision was right or wrong, the court only considers evidence and argument placed before the arbitrator - parties cannot raise new issues at the review stage.

Extract from the judgment:

(VENTER, AJ)

[23]   As the second respondent's finding is that the respondents were dismissed, which finding is a jurisdictional fact, the Sidumo test of whether the finding of the second respondent was one which no reasonable commissioner could arrive at on the evidence before him is not applicable.

[24]   The applicant in setting out its grounds of review in the founding and supplementary affidavits appears to have misconstrued the correct test of review and has argued that the award is not an award a reasonable commissioner would have arrived at on the facts before him. This test is not applicable.

[25]   The question I am required to determine is whether the second respondent was right or wrong in concluding as he did. Put differently whether the second respondent correctly found, based on the evidence before him that the respondents were dismissed. In determining this issue I am restricted to only consider the evidence on record that was before the second respondent when he arrived at his finding that the respondents were dismissed.

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[66]   It is thus my view that the respondents were employed in terms of the Contracts on a limited duration basis which employment would automatically terminate on completion of the project as envisaged in clause 3.3.1 and not so called "assignments". The Contract or "assignment agreement" as the applicant calls it was without doubt an employment contract and could only be terminated in terms of clause 3.3 thereof.

[67]   The applicant failed to place any evidence before the second respondent that the project was completed and that the Contracts terminated automatically in terms of clause 3.3.1 as a result. Mr Donaldson in fact conceded that at the time of the arbitration proceedings the project had not been completed. Accordingly, I am of the view that the Contracts did not automatically terminate on 31 March 2013 in terms of clause 3.3.1 and that by giving the respondents notice of termination of the Contracts on 25 March 2013, the applicant terminated the Contracts with notice and this was a dismissal as defined in section 186(1)(a) of the LRA.

The applicant's agency agreement argument

[68]   This brings me to the applicant's argument and business model that upon termination of the assignment by the applicant the "agency agreement" comes into operation in terms of which the applicant undertakes to find alternative assignments and that pending these attempts by the applicant the respondents will not receive remuneration and benefits and should not expect that the applicant will enter into any other assignment with them.

[69]   As this was the applicant's sole argument before the second respondent at the arbitration proceedings I feel that it is necessary for me to deal with it even though I have held that the respondents were dismissed.

[70]   This was the crux of the applicant's case at the arbitration proceedings.

[71]   This so called "agency agreement" contained at clauses 1.4 and 1.5 of the Contracts in effect places the respondents at the mercy of the applicant and not only offends the principle of security of employment but also goes against the very notion and definition of an employment relationship where an employer provides work to an employee who renders their services to the employer and is entitled to remuneration. The applicant's answer to this is that if the respondents did not want to linger at home with no pay while the applicant attempts to find alternative placements for them they could have resigned or cancelled the Contracts.

[72]   It is this very mischief the amendments to the LRA seeks to address, the abusive practices associated with labour brokers. If the applicant's business model is to be condoned and accepted, it would go against the very values of providing employees with security of permanent employment and would perpetuate the abuse of employees by labour brokers.

[73]   The applicant's case was that the respondents were not dismissed and remained employed pending the applicant finding alternative placements. However, the applicant led absolutely no evidence of the steps and attempts it made to find the respondents alternative work. The applicant appears to have expected the respondents to sit at home indefinitely at the back and call of the applicant, waiting for the applicant to find alternative placements for them, not receiving any remuneration and further not to expect that the applicant would in fact enter into another assignment agreement with them.

[74]   In National Union of Metalworkers of South Africa and others v Abancedisi Labour Services the employer, a TES, attempted to convince the Supreme Court of Appeal ("the SCA") that the employees who were excluded from the client's premises and told to go home without pay were not dismissed but were suspended indefinitely.

[75]   In this case, the employees refused to sign a code of conduct and were excluded from the client's premises. The employees were not allowed back to work at the client and were not paid as they did not work. The limited duration contracts envisaged the continuation of the employment relationship after the conclusion of the assignment at the client and the employer thus argued that they were not dismissed.

[76]   The SCA did not accept this argument by the employer......................