Public Newsletter
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Worklaw subscribers receive a monthly newsletter containing commentary on the latest labour law cases and trends. This newsletter has a single theme - 'Deductions from employees' remuneration - what are the limits?' - - due to several new cases on this topic and the number of helpline requests we receive from Worklaw subscribers relating to this. The new cases are discussed in the article below.
This public newsletter is a free edited version of the subscriber newsletter.
LEGISLATION UPDATE
LRA Amendment Bill
The process drags on....Pam Saxby writing for Legalbrief Today (12 June 2013) reports that the National Assembly's Labour Committee has agreed on changes to the LRA Amendment Bill, the effect of which will be to reduce the 6 month limitation on the use of temporary employment services (labour brokers) to 3 months. It is also reported elsewhere that similar time period changes have been agreed relating to the use of fixed term contracts and part time employees.
Worklaw subscribers will recall that the previous Bill provided that after 6 months, labour broker employees would be deemed to be employees of the client, to be employed on conditions similar to the client's other employees unless justifiable reasons existed. Similarly, the previous Bill provided that fixed term contracts should not be longer than 6 months, unless the work is of limited duration or the employer can demonstrate a justifiable reason for doing so: failing this, their employment would be deemed to be permanent. Part time employees should after 6 months be employed on substantially similar conditions to comparable full time employees doing similar work, unless justifiable reasons existed.
Presuming the reports are accurate, these time periods would now change to 3 months. This is against a background of business having initially wanted a 24 month period and ANC committee members arguing for a 'zero month' position. Some labour experts have slammed these latest amendments, commenting that they are disastrous for job creation and that these changes totally undermine the role of Nedlac in negotiating legislative amendments by consensus.
The committee has apparently also, as expected, agreed to drop the new clauses in the Bill that sought to reintroduce strike ballots for protected strikes.
The parliamentary process still has some distance to run. The above amendments will be reflected in a redraft of the Bill, which will be considered clause-by-clause at the Committee's next meeting, before being referred to the National Assembly for a second reading debate.
ARTICLE: Deductions from employees' remuneration- what are the limits?
By Prof Alan Rycroft
The BCEA prevents employers from making unilateral deductions from an employee's wages. The rationale behind this protection is that an employee is entitled to wages earned for work done. Simple justice is behind that idea. Where the employee has caused damages or incurred debts, another principle comes into play: an employer should not be both prosecutor and judge in deciding how much should be deducted or set-off. Put simply: there is just too much scope for abuse.The aim of this article is to try to understand exactly what the BCEA restricts and to look at several situations which may fall in or out of the restrictions. We receive many helpline queries from Worklaw subscribers relating to these topics. In addition, there have been new cases relating to these issues, which we discuss below. We think the most effective way of dealing with the topic is to present this article in the form of a series of Questions and Answers.
Section 34 of the BCEA
The basic provision in section 34(1) is that an employer may not make any deduction from an employee's remuneration except in certain specified circumstances, namely with the employee's written consent or in terms of a law, collective agreement, court order or arbitration award.
Q. What are the BCEA's restrictions on deductions from remuneration?
A. The first restriction under section 34(1) is that an employer may not make any deduction from an employee's remuneration unless the employee agrees in writing to the deduction in respect of a debt specified in the agreement.
Q. Does this mean that an employee can give consent in advance (eg at the time of signing an employment contract)?
A. Well, the employee can sign such an agreement but this still may not automatically give the employer the legal right to deduct unilaterally at a later stage. The reason is that the first condition (ie agreement in writing) is made subject to further provisions: Under section 34(2), if a deduction is made to reimburse an employer for loss or damage caused by the employee, it may be done only if:
- the loss or damage occurred in the course of the employment of the employee and was due to the fault of the employee;
- the employer followed a fair procedure and gave the employee a reasonable opportunity to show why the deduction should not be made;
- the total amount of the debt does not exceed the actual amount of the loss or damage; and
- the total deductions from the employee's remuneration do not exceed one quarter of the employee's remuneration in money.
Q. What is a fair procedure in these circumstances?
A. S 34(2)(b) says the employee must be given 'a reasonable opportunity to show why the deductions should not be made'. The Act is silent about procedure, but it should involve the employer explaining why it wishes to make the deduction and attempting to get agreement to do so. The employee must be given an opportunity to show that the money is not due, or is not the right amount, or why it would be a real hardship if the money was deducted at that stage. Although it is not provided, we see no reason to exclude a trade union representative or co-employee being present to assist the employee.
Q. What are the other restrictions on deductions?
A. In terms of s 34(1)(b) and in the absence of the employee's written agreement, an employer may not make any deduction from an employee's remuneration unless the deduction is required or permitted in terms of a law, a collective agreement, court order or an arbitration award.
Q. What about over-payments?
A. S 34(5)(a) says an employer may not require or permit an employee to repay any remuneration "except for overpayments previously made by the employer resulting from an error in calculating the employee's remuneration".
Q. Does this mean that repayments of overpayments made in error are treated differently to other deductions (eg for damage to the employer's property)?
A. The BCEA is not clear on this but we read section 34(5)(a) not as an exception to the s 34(1) requirement to get agreement in writing before deducting, but rather as a protection against an unscrupulous employer who pays wages and then requires the employee to hand some or all of it back. We think it is important to note the distinction that section 34(5) deals with the repayment of overpayments (which could then take place in different ways and not necessarily by deductions from remuneration), whereas section 34(1) deals specifically with deductions from an employee's remuneration.
But case law has taken a different line, allowing deductions for overpayment without first getting the employee's written agreement to do so. In other words, section 34(5)(a) has on occasions been applied as an exception to the conditions imposed by section 34(1).
In Jonker v Wireless Payment Systems CC (2010) 31 ILJ 381 (LC) the employee had initially been paid a car allowance by the employer. However, when she was subsequently given a company vehicle, she was no longer entitled to the allowance. The employer erroneously continued to pay her the allowance for 11 months. When the employer notified the employee of termination of employment for operational reasons, she was informed that it would deduct the amount overpaid in two instalments - one at the end of May and the second at the end of June 2009, the last day of her notice period. The employer duly made the first deduction from her May remuneration. The employee approached the Labour Court seeking an urgent order for repayment of the amount allegedly unlawfully deducted from her May remuneration and an interdict restraining the employer from making the further deduction at the end of June. The employee contended that the employer was prohibited from making the deductions from her remuneration in terms of s 34(1) of the BCEA. The court said that as a general rule the BCEA prohibits deductions from employees' salaries without their prior consent. However, deductions without consent were permitted where the employee had been overpaid in error. In such an instance the employer merely had to advise the employee of the error in payment and the amount of the deduction to be made.
In Cenge & others v MEC, Department of Health, Eastern Cape & another (2012) 33 ILJ 1443 (LC) the court had this to say (paragraph 7):
"In terms of s 34 it is clear that the only basis on which the employer would be entitled to make the deductions would be under the provisions of s 34(1)(a) or (b) or 34(5)(a)."As stated above, we question whether these cases have correctly interpreted section 34(5)(a) as being an exception to the requirements of section 34(1).
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Bruce Robertson
June 2013
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