March 19, 2019
“It is the duty of an employee when rendering his or her services always to act exclusively in the interest of the employer … an employee is not entitled to use his or her employment relationship with the employer without the employer’s permission to make a profit or earn commission for his or her own account” (Extracts from judgment below)
Employees have very strong rights in our law, but employers also have effective remedies when employees “go rogue”.
A recent case, in which an employee was ordered to repay his employer R33m in “secret profits” including R9m in damages, provides a good example.
Diverted sales opportunities and secret profits
- A manufacturer employed a “Key Accounts Manager” as its agent in dealing with customers. He was trusted with an “almost unlimited discretion” and minimal management oversight to act in his employer’s interests.
- His employer sued him in the High Court on allegations that he breached both his employment contract and his duty to his employer, firstly by selling product to customers at below-minimum prices, and secondly by selling through his own companies to secretly profit thereby.
- The employee’s denials of wrongdoing cut no ice with the Court, which held that he “was clearly under a general obligation to do his best for his employer and to conduct the plaintiff’s business in good faith and for its benefit” but “was in breach of his fundamental obligation of loyalty and good faith which he owed to … his employer”.
- The secret profits claim. Ordering the employee to “disgorge” his secret profits of R33,291,599.24 (less any “amounts paid in making such profits” which the employee is able to prove), the Court held that the employer had proved the three elements needed to succeed in such a claim –
- The employee owed it a “fiduciary obligation” (a duty to act honestly and in utmost good faith),
- In breach of that obligation he placed himself in a position where his duty and his personal interest were in conflict, and
- He made a secret profit out of corporate opportunities belonging to the employer.
- The damages claim was for losses on product sold to customers at prices well below the employer’s base price “in order to further [the employee’s] secret profit-making activities.” Finding that but for the employee’s wrongdoing the customers would have bought product at no less than the base price, the Court awarded the employer R9,407,651.05 in damages (to be allocated, when paid, to the R33m claim).
Rubbing salt in…
To really rub salt into the employee’s wounds, he was ordered to pay costs, and the bill will be a big one, including –
- Costs on the punitive “attorney and client” scale, an appropriate order said the Court “given the secret and unlawful nature of the scheme which the defendant ran for four years at the expense of his employer”,
- The cost of audio visual equipment used in the trial, and
- The (no doubt substantial) travel and subsistence costs of both the employer’s legal team and its six witnesses, all of whom travelled from Gauteng to Cape Town for the trial.
January 17, 2019
Employers and employees need to know about four new Acts which will usher in important changes to our labour laws.
The summary below is a short one of only those changes likely to affect a significant number of people and businesses, so take advice on your specific circumstances.
In a nutshell –
Parental leave extended
Until now, mothers have been entitled to unpaid leave when welcoming a new child into the world, in the form of 4 consecutive months’ “maternity leave”. Plus they can claim maternity benefits from the UIF if they are contributors. New fathers however have been limited to at most 3 days’ family responsibility leave.
That will now be extended to –
- “Parental leave”: “Parents” (i.e. including fathers and same-sex partners) – 10 consecutive days’ parental leave.
- “Adoption leave”: Adoptive parents of a child under 2 years old – either 10 consecutive weeks’ adoption leave or 10 consecutive days’ parental leave (where there are two adoptive parents, they decide between them who gets 10 weeks and who gets 10 days).
- “Commissioning parent leave”: Commissioning parents in a surrogacy agreement – same provisions as for adoptive parents.
Parents taking unpaid leave as above also become eligible for UIF benefits.
Employers with maternity leave policies, and those who offer paid as opposed to unpaid maternity leave, should take advice on reviewing these policies.
Minimum wages introduced
The new national minimum wage is set as follows –
- Farm workers – R18 per hour
- Domestic workers – R15 per hour
- Workers in an ‘expanded public works programme’ – R11 per hour
- Other employees – R20 per hour.
Separate allowances apply to those in learnership agreements.
Employers who cannot pay the minimum wage will be able to apply for exemption for up to a year, but regulations allow for only a 10% exemption.
Failure to pay the minimum wage will expose employers to fines of the greater of 2x the value of the underpayment, or 2x the employee’s monthly wage (going up to 3x for second or further non-compliances).
Strikes, lockouts and picketing
An “advisory arbitration panel” can be (and presumably will be) appointed to help resolve protracted or violent strikes or lockouts, and those causing or exacerbating an acute national or local crisis.
New picketing regulations are also in the wind.
December 13, 2018
Believing someone to be guilty of a crime you call the police and have the suspect arrested, only to have the charges dropped. Can you be sued for defamation?
A recent High Court case provides some answers.
A fraudulent iPad order, an arrest and a R1.6m claim
- A government employee was, at the instigation of officials in his department, arrested and taken in for questioning by police on suspicion of fraudulently ordering R138,000 worth of 14 iPads on departmental letterheads.
- The police released him after taking a statement and his employers did not pursue disciplinary charges against him. They also withdrew an accusation of unlawful conduct in the workplace, with however an indication that the matter might be revisited if further information came to light.
- The employee accused his employers of defamation and sued them for R1.6m in damages for his tarnished dignity and reputation at work, trauma, post-traumatic stress, medical expenses and loss of earnings
Holding that the publication or allegation of a suspicion of a criminal offence is defamatory and the onus is upon the accuser “to prove justification”, the Court concluded, on the facts of this particular case, that there was indeed a “reasonable suspicion” that the employee had been involved in the fraudulent order. The employer had therefore been justified in its conduct.
The employee’s claim for damages accordingly failed and he is lumbered with a (no doubt substantial) legal bill.
The acid test – 3 things an accuser must prove
An accuser relying on reasonableness of the publication as a defence must prove, held the Court, that he or she –
- Had reason to believe in the truth of the statement,
- Took reasonable steps to verify its correctness, and
- Acted reasonably when reporting the matter to the police, or that publication of the statement was reasonable in all the circumstances of the case.
What that all boils down to is this – whether in the workplace or out of it, you aren’t automatically guilty of defamation just because no prosecution ensues.
What is vital is that you have enough evidence to prove all three legs of the reasonableness test if it comes to justifying your actions in court.
November 21, 2018
Once again November is upon us, and no doubt employees around the country are starting to dream of all the good things they can do with that “Christmas” bonus coming their way. If you are one of them perhaps you plan to pay off debt or to re-charge the family’s batteries with a special holiday. Or perhaps you just want to reward yourself and your loved ones with a bit of free-spending on a luxury or two to celebrate a special time of year.
That’s all well and good, but the hard reality is that every year a percentage of employers decide that they can’t afford a sudden doubling of their staff costs and will call everyone together to say something like “Sorry guys, times are really tough so no bonuses this year. You’re lucky to still have jobs”.
Disappointment and anger will no doubt lead to thoughts of CCMA referral and legal action, but none of that is necessary if both employers and employees (a) understand the law, (b) prepare and plan properly, and (c) communicate effectively long before hopes are raised then shattered.
Firstly, what does our law say?
It is a persistent myth that our law automatically forces employers to pay annual bonuses. Not so – nothing in our labour legislation or employment law says anything of the sort.
What our law does say to employers is this –
- If your employment contracts say you must pay bonuses, your employees have an enforceable legal right to receive them. This is just standard contractual law – both you and your employees are held to your agreements.
- You must consider not only what your employment contracts themselves provide, but also any company policies, collective agreements and the like.
- Check also whether any conditions – like profitability of the business or employee performance or contribution to profitability – are specified. And are you given unlimited discretion in deciding whether or not to award bonuses?
- Even where nothing has actually been agreed as above, you may still be bound to pay annual bonuses if you have paid them regularly in the past. This is because departing from any established practice or custom without prior employee consultation can be seen as an unfair labour practice. The law aside, employee morale will naturally plummet if expectations of a bonus have been built up over the years but are then dashed at short notice.
- Be careful of differentiating between employees performing the same or similar work – that’s a recipe for dispute and accusations of unfair labour practice.
Prepare and plan
Employers: Have your lawyer check all your employment contracts and company policies to make sure that you have full discretion and will never be forced to pay bonuses your business can’t afford. Take advice on how you can regularly pay bonuses in good years without creating “rights of expectation” enforceable by your employees in bad years. Use cash flow projections to give you (and your employees) early warning of any inability to pay bonuses this year.
Employees: Don’t spend your bonus until you know for certain how much (if anything) is actually coming your way. And remember that SARS could be taking a bigger than normal slice out of this particular pie – ask your employer for an estimate of how much from the PAYE deduction tables. And in planning how to spend your bonus you can do a lot worse than follow the tips in an article like The Post’s “Use your 13th cheque wisely” here.
Whichever side of the employment contract you are on, open and effective communication will always be the key to avoiding false hope and bitter disappointment when it comes to bonus time.
So as an employee don’t be shy to ask the boss about his/her bonus plans and if as an employer you have any doubt at all about your business’ capacity and/or willingness to pay bonuses this year, tell your employees what to expect before expectations build up. After, of course, taking legal advice if you have any doubt as to your legal position in this regard – our labour laws are complex and getting them wrong can be costly!
October 24, 2018
The media has been awash with reports (sometimes conflicting, often vague) of what the recent Constitutional Court ruling actually means in practice.
Whether you agree with the ruling or not, and whether or not you personally have ever had (or intend to have) anything to do with cannabis/marijuana/weed/dagga, we all need to be aware of the implications. Here’s some food for thought –
- Err on the side of caution: Parliament has two years to change the relevant Acts to cure their constitutional defects. Until it does so, there will be many grey areas and your best course of action is always going to be to err on the side of caution. You really don’t want to be funding a test case in court, particularly if your job or your clean criminal record is at stake.
- The limits of the ruling: The Court’s decision has not comprehensively “legalised dagga”. What it has done is to provide that, until the Acts are amended, it could not be a criminal offence for an adult person –
- To use or be in possession of cannabis in private for his or her personal consumption in private; and
- To cultivate cannabis in a private place for his or her personal consumption in private.
Any form of supply or purchase, even in private, and any possession or use by a minor (under 18), anywhere, would still put you at risk of a criminal record and heavy penalties.
- The danger of arrest: As the Court put it, if a police officer finds a person in possession of cannabis and thinks it is not for personal consumption, then “He or she will ask the person such questions as may be necessary to satisfy himself or herself whether the cannabis he or she is in possession of is for personal consumption. If, having heard what the person has to say, the police officer thinks that the explanation is not satisfactory, he or she may arrest the person. Ultimately, it will be the court that will decide whether the person possessed the cannabis for personal consumption.” Similar considerations will, said the Court, apply to questions around cultivation.There is also no clarity on what will be considered to be a “private place” other than the Court’s comment that there are places other than “a person’s home or a private dwelling” where the right to privacy would apply.The bottom line – you still risk arrest on suspicion of having or growing more dagga than a police officer considers reasonable for your personal consumption, or in a place that you consider “private” but that a police officer doesn’t.
- Driving under the influence: Our law provides that: “No person shall on a public road … drive a vehicle or occupy the driver’s seat of a motor vehicle of which the engine is running … while under the influence of intoxicating liquor or a drug having narcotic effect” (our underlining). Effective testing by police if you are pulled over is another matter entirely, but does anyone really want to risk a stay in a police cell while a test is arranged?
- In the workplace: Since the court’s ruling applies only to “private places” it seems unlikely that employees could ever get away with use or possession in a standard office situation. But what about an employee pitching for work whilst still under the influence? Practical issues of proof aside, it is probably an extremely bad idea. Employees have a general duty to perform their functions properly and doing anything to compromise that probably puts you at risk of at the very least a disciplinary warning. Of course anyone in a job where 100% sobriety is a non-negotiable necessity (think heavy machinery operators, surgeons, pilots and the like) risks a lot more than just a warning.
Employers: a final note
Having a properly-drawn “sobriety policy” in place will reduce the risk of confusion and dispute in the workplace. If you have a policy in place already, ask your lawyer to check that it adequately covers you in light of these new developments.
September 21, 2018
You want to charge one of your employees with serious misconduct so you institute disciplinary proceedings. To avoid a possible dismissal the employee resigns “with immediate effect”.
Can you go ahead with disciplining the employee? Until recently the answer was no, the Labour Court having decided in such a matter that immediate resignation brings an end to the employment relationship and puts the employee beyond your reach.
Employers will be relieved to know that a new Labour Court decision has reversed that.
Looking for a loophole
- The Executive Director and Head Curator of an art museum was invited by his employer to “make written representations in respect of allegations of serious misconduct”.
- He supposedly then resigned immediately and without notice, and asked the Labour Court to hold that his employer no longer had any jurisdiction to discipline him, and to interdict his employer from doing so.
- The Court refused, holding instead that –
- An employee’s contract of employment comes to an end only once his/her resignation takes effect at the end of the applicable notice period (four weeks in this case).
- It is up to the employer whether or not to accept an immediate resignation, force the employee to serve the period of notice, cancel the contract and claim damages, reach another agreement, or waive all its rights.
- On the facts, the employer in this case had not accepted the “tender of notice” as an immediate resignation, and so it still had the right to proceed with disciplining the employee before the end of the notice period.
The employee’s attempt to find a loophole having thus failed, he must now face his disciplinary hearing and presumably, if found guilty, the possibility of dismissal for misconduct.
The bottom line for employers
If you want to proceed with disciplinary action be careful to unequivocally reject any attempt at immediate resignation. Then move quickly before the end of the notice period terminates the employment contract. As always take proper legal advice on your particular matter – the complexities and pitfalls inherent in our labour laws make it very unwise not to do so.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
July 19, 2018
A recent Labour Court decision shows how dangerous it is as an employer, when attempting to dismiss an employee, not to draw a clear distinction between misconduct and incapacity.
Disciplined for depression
- An employee, whose track record had originally been an excellent one, was charged at a disciplinary enquiry with four charges of misconduct –
- Unauthorised absence from work for 17 working days,
- Failure to inform his manager of his absences in accordance with company policy,
- “Gross insolence” in the form of turning his back on his manager when talking about his absenteeism,
- Refusal to obey a “lawful and reasonable” instruction.
- He was summarily dismissed after being found guilty of all the charges.
- He then asked the Labour Court to declare his dismissal unlawful on the basis that although his conduct was as charged, it was caused by his state of depression. He had been diagnosed by two doctors for depression and prescribed anti-depressants. Moreover a clinical psychologist recommended he be granted sick leave as he was suffering the symptoms of a burnout and “reactive depression”, and was close to an emotional breakdown.
- He blamed his depression on his personal and financial problems, and on workplace stress related to his management’s reaction (and inaction) when he asked for help. For example, he was denied a salary increase and performance bonus and said he felt betrayed when his manager appeared on behalf of his wife in his divorce.
- The Court, finding that depression is a form of mental illness and that the employee’s conduct was inextricably linked to his mental condition, held that the employer had a duty to institute an incapacity enquiry rather than a disciplinary one. Furthermore, knowing that the employee was a person with a disability, the employer “was under a duty to reasonably accommodate him”.
- In all the circumstances the Court found that –
- The dismissal was automatically unfair in terms of the Labour Relations Act, and
- The employee had suffered unfair discrimination in terms of the Employment Equity Act.
The hard lesson for employers
The end result is that the employer must –
- Reinstate the employee with full retrospective effect,
- Pay him an additional six months’ salary as compensation,
- Pay his legal costs.
Mental health issues are perhaps not always as easily understood as physical ones, but they can both amount to incapacity and in both a little bit of empathy will go a long way. Moreover specific legal rules apply as to how you should proceed, and even if you suspect malingering it’s vital to act fairly and in accordance with procedure.
Take specific advice before you do anything as the penalties for getting this wrong will be severe – our courts are not gentle with employers who contravene our labour laws, particularly in cases of automatic unfairness and unfair discrimination.
November 15, 2017
“… you are going to be a very sorry man you (sic) probably going to sit in jail tonight” (a “dirty dozen threat” quoted in the judgment below)
When we hear of employers and employees at loggerheads with each other in our court system, we normally think of labour disputes – strikes, disciplinary hearings, unfair dismissals and the like.
But at times such disputes end up in our normal civil courts, dealing with issues which potentially apply to all civil claims. An interesting SCA (Supreme Court of Appeal) case provides a good example.
An accused diamond thief sued for R6m
- A business which processes mine dumps to find and then sell rough diamonds employed a ‘Final Recovery Manager’ in a senior position of trust.
- Monitoring of workplace CCTV surveillance raised suspicion that the manager had been stealing diamonds.
- Confronted, he made a videotaped confession, signed a R5m acknowledgment of debt, paid over R530,000 cash as part proceeds of stolen diamonds, and assisted in the recovery of other stolen diamonds. He later gave his employer a copy of his full confession to the police and also consented to a second interview, similarly recorded.
- He was prosecuted but acquitted after the criminal court found that his statement to the police had not been freely and voluntarily made. The CCTV surveillance footage was not put in as evidence at the criminal trial – relevant because the civil court later found it to provide evidence of theft.
- The employer then sued the manager for R6.015m. He objected to the admission in evidence of his various confessions, admissions and statements on the grounds of unlawful duress.
- The High Court however allowed the admissions in as evidence, a decision upheld on appeal by the SCA.
“Spilling the beans” after the “dirty dozen” threat
In his first interview the employee initially denied the allegations of theft, but “spilled the beans” after he was exhorted to tell the truth and was presented with a “dirty dozen” option, including threats of arrest, prosecution, and adverse publicity if he lied.
The SCA held that –
- “The admissibility of evidence in a criminal trial stands on a different footing from a civil dispute”, partially because “a criminal matter is a contest in which the might of the State is pitted against an individual. In a contest of this kind, a bad result for an accused person may lead to a loss of freedom. Such a consequence is incomparably different from any outcome in a civil dispute.”
- “An employer is not only entitled to confront an employee about an allegation of wrongdoing, but is also obliged to do so, even before a formal disciplinary hearing is convened.” That’s because of the basic rule in our law that both sides of a story must be heard and taken into account.
- There were no threats of physical violence nor of anything unlawful.
- What was said to the employee immediately before he began to confess to his theft was not extortion or blackmail, nor was it contra bonos mores (against public policy) – “it did not result in [the employer] exacting or extorting something to which it was not otherwise entitled. The contrary is true.”
- “Even in our law of criminal procedure an exhortation to tell the truth will not exclude a confession … Not even a threat of the probability of arrest constitutes undue influence … After all, the test is whether there is ‘any fair risk of a false confession.’”
The employee had therefore failed to prove that his admissions were obtained by any “legally recognised duress”, nor had his constitutional right to a fair trial been breached.
Clearly, it will depend on the facts of each case whether a threat of prosecution and/or adverse publicity constitutes unlawful duress. Take legal advice before making accusations or relying on any admissions flowing from such threats.
December 8, 2016
This year’s new minimum wages for all domestic workers are set out in the table at the end of this article.
Who is covered?
- All domestic workers in South Africa working in a private household
- People employed by employment services
- Independent contractors who are doing domestic work
- A person doing gardening in a private home
- People who look after children, sick or old people and people with disabilities in a private home
- A person driving for the household
But excluding –
- Domestic workers employed on farms
- Domestic workers employed in activities covered by another sectoral determination or bargaining council agreement (such as contract cleaning workers).
Are you in Area A or Area B?
Area A includes most major metropolitan areas; Area B is all other areas.
See the full lists on the Department of Labour website.