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[2020] ZALAC 18
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Zono v National Commissioner of Correctional Services N.O and Others (PA10/18) [2020] ZALAC 18; [2020] 9 BLLR 923 (LAC) ; (2020) 41 ILJ 2447 (LAC) (18 May 2020)
IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA, PORT ELIZABETH
Reportable
Case
no: PA10/18
In
the matter between:
VUYANI
KENNETH
ZONO
Appellant
and
NATIONAL
COMMISSIONER OF
CORRECTIONAL
SERVICES N.O.
First
Respondent
REGIONAL
HEAD: CORPORATE SERVICES
DEPARTMENT
OF CORRECTIONAL SERVICES N.O
Second Respondent
THE
BOARD OF TRUSTEES OF THE GOVERNMENT
EMPLOYEES
PENSION FUND
Third
Respondent
SENIOR
MANAGER: CONTRIBUTION MANAGEMENT
OF
THE GOVERNMENT EMPLOYEES PENSION FUND
Fourth Respondent
Heard:
20 February 2020
Delivered:
18 May 2020
Summary:
Jurisdiction of the Labour Court –determination of pension fund
benefits a dispute between fund and its member----
No contractual
dispute between employer and employee as contemplated in s 77(3) of
the Basic Conditions of Employment Act- Labour
Court not having
jurisdiction – Appeal dismissed.
Coram:
Waglay JP, Murphy and Savage AJJA
JUDGMENT
MURPHY
AJA
[1]
The appellant appeals against the judgment of the Labour Court (van
Niekerk J) which
dismissed his application for orders
inter alia
declaring that he was entitled to pensionable service from 12
March 1986 until 30 October 2017 save for the period from 8 June 2006
to 30 October 2007.
[2]
The appellant commenced employment with the Department of
Correctional Services (“the
DCS”) on 12 March 1986. He
was dismissed for a first time on 8 June 2006. After protracted
litigation, on 29 June 2011, this
court retrospectively reinstated
the appellant to the date on which the bargaining council issued an
arbitration award upholding
the dismissal – namely, 30 October
2007. The appellant thus maintains that he was in continuous
employment with the DCS from
12 March 1986 until his second dismissal
in October 2017, except for the period from 8 June 2006 to 30 October
2007. The appellant’s
dismissal for a second time brought to
light the problem regarding his pension benefit that is the subject
of this appeal.
[3]
Throughout his employment, the appellant was a member of the
Government Employees
Pension Fund (“the GEPF”). On 14
March 2008, subsequent to his first dismissal being upheld by the
bargaining council,
but while his review application before the
Labour Court was pending, the appellant applied to withdraw from the
GEPF. The application
was approved, and on 15 April 2008, the
appellant received a withdrawal benefit of approximately R600 000.
[4]
The GEPF is a defined benefit fund and the withdrawal benefit paid to
the appellant
was calculated in accordance with the detailed
provisions of Rule 14 of the GEPF Rules. The appellant was not
compelled by the
Rules to choose this benefit option. He could have
remained a dormant member of the GEPF in terms of Rule 16 of the GEPF
Rules
pending the resolution of his employment dispute. The advantage
of not withdrawing from the GEPF and remaining as a dormant member
is
that if a dormant member recommences contributing to the GEPF his or
her pensionable service is calculated on the basis of his
or her
entire contribution history. That is not the case with employees who
withdraw from the GEPF and then subsequently rejoin
it. In such
cases, the employee may apply to the GEPF for recognition of his or
her prior pensionable service and if successful
will be obliged to
pay into the fund an amount determined by the GEPF in terms of Rules
9-12.
[5]
It is common cause that the appellant recommenced work pursuant to
this court’s
judgment on 1 August 2011. He had to institute
action for his back pay in the Labour Court, which the DCS was
directed to pay on
26 February 2014. He was dismissed for the second
time on 30 October 2017. When the appellant, now deprived of his
salary for a
second time, inquired about his pension benefits, the
DCS and the GEPF took the stance that his years of pensionable
service commenced
only when he was reinstated on 1 November 2007, and
that his years of service prior to that were to be discounted unless
he purchased
his prior pensionable service. On 26 October 2017, the
appellant requested a quotation for purchasing his pensionable
service for
the period from 1986 to 2007. The GEPF issued a quotation
according to which the appellant would have to pay R1 525 408.
[6]
The insistence of the GEPF that he purchases his prior pensionable
service, the appellant
submits, deprives him of the full rights which
flowed from his reinstatement by this court in 2011. The decision to
calculate his
pensionable benefits from 2007 in effect deprives the
appellant of more than 20 years’ pensionable service, and a
commensurate
drastic reduction of the retirement benefits to which he
would otherwise have been entitled.
[7]
The appellant was not willing to pay the amount in the quotation
issued by the GEPF
and accordingly approached the Labour Court for a
declaratory order and certain consequential relief. Prayer 2 of the
notice of
motion requested the following order:
‘
Declaring
further that Vuyani Kenneth Zono is entitled to pensionable service
from the 12
th
of March 1986 until the 30
th
of
October 2017, save for the period from 8
th
June 2006 until
30
th
October 2007.’
[8]
The Rules of the GEPF define “pensionable service” as
follows:
‘
pensionable
service, subject to the provisions of rules 9 to 12-
in respect of a member
who was a member of the Government Service Pension Fund or the
Temporary Employees Pension Fund immediately
prior to the fixed date,
the period of time which was recognised as pensionable service of the
member under the Government Service
Pension Act or the Temporary
Employees Pension Act in respect of which no benefit was paid out of
the Fund; continuous service
of a member on or after the fixed date
in respect of which such a member contributes or contributed to the
Fund or was liable to
contribute to the Fund, and in respect of which
no benefit has been paid out of the Fund under the rules; and any
other period
which is recognised or allowed in terms of the rules as
pensionable service of a member:
Provided that a period of
pensionable service shall be calculated by the year and any portion
of a year shall be determined according
to the proportion which the
number of days in that portion of a year bears to 365 days or to 366
days in any leap year, whichever
is applicable;’
[9]
In terms of the Rules of the GEPF, “pensionable service”
is thus: continuous
service of a member on or after the fixed date,
in respect of which such a member contributes or contributed to the
GEPF or was
liable to contribute to the GEPF; and in respect of which
no benefit has been paid out of the fund under the rules; and any
other
period which is recognised or allowed in terms of the rules as
pensionable service of a member.
[10]
Simply put, “pensionable service” is a period determined
in terms of the Rules of
the GEPF during which the member paid
contributions and did not receive a benefit. The concept of
“pensionable service”
form
s
an
integral part of the benefit design of a defined benefit pension
fund, used actuarially to determine a pension interest. It
does not
equate with the period of service in terms of a contract of
employment.
[11]
The problem facing the appellant is that instead of remaining a
member of the GEPF until his
employment dispute was finalised he
terminated his membership in 2008 and took a benefit, in the form of
a withdrawal benefit,
in respect of his period of service between
1986 and 2007. According to the GEPF, it follows, in terms of the
definition of pensionable
service, that unless he purchased his prior
pensionable service, his period of employment between 1986 and 2007
does not constitute
pensionable service because he has received a
benefit for that period.
[12]
The Labour Court held that it did not have jurisdiction to determine
the dispute. The appellant
relied on section 77(3) of the Basic
Conditions of Employment Act
[1]
(“the BCEA”) which confers jurisdiction on the Labour
Court to hear and determine “any matter concerning a contract
of employment”. The Labour Court held that the
determination of the appellant’s “pensionable service”
in terms of the Rules of the GEPF is not “a matter concerning a
contract of employment.” It is rather a matter concerning
the
interpretation and application of the Rules of the GEPF, which in
this instance form a contract between the appellant and the
GEPF. It
held:
‘
In my view, this
is not a dispute that arises from the applicant’s contract of
employment with the DCS, directly or even indirectly.
A dispute about
the number of years’ pensionable service that the applicant
might have accumulated whether by actual service
or otherwise, is not
a dispute that concerns his employer or his contract of employment.
It is properly a dispute between the applicant
and the GEPF, to be
determined by the rules of the GEPF and for which discrete dispute
resolution mechanisms have been established.’
[2]
[13]
The Labour Court did not err in this conclusion. While an employer
has a contractual obligation
to its employees to pay its and their
contributions to the pension fund, the determination of a pension
fund member’s entitlement
to benefits in terms of the rules of
a pension fund is a matter between the fund and the member. There is
no evidence that the
DCS did not pay the contributions due to the
GEPF in respect of the appellant. It appears to be common cause that
it did so.
[14]
Although the appellant seeks only a declarator that his period of
employment between 1986 and
2007 be regarded as pensionable service,
such a declarator would increase the period of his pensionable
service and in effect would
automatically enhance his actuarial
interest in the fund so as to increase the value of his benefits.
There is no legal basis for
granting that relief. But, most
importantly, as this is not a matter concerning his contract of
employment but a matter concerning
the appellant’s membership
of the GEPF and his entitlement to benefits under its rules, the
Labour Court, as it correctly
found, has no jurisdiction in terms of
section 77(3) of the BCEA to decide the matter.
[15]
This court is not without sympathy for the appellant and for
employees like him who in periods
of suspension from employment
pending the determination of the fairness of their dismissal opt to
withdraw from their pension funds.
Employees often need to rely on a
withdrawal benefit in order to survive a period of unemployment.
Where the pension fund is a
defined contribution fund, there usually
will be no hardship in that the withdrawal benefit is normally the
full amount of contributions
paid into the fund on behalf of the
employee plus growth. However, in a defined benefit fund, the suite
of benefits is actuarially
designed on the basis of certain
assumptions. Withdrawal benefits in defined benefit funds are
notoriously less generous and are
structured to permit a measure of
cross-subsidisation of longer serving members. The GEPF is a defined
benefit fund and the appellant
regrettably through the choice he made
has fallen victim to this arrangement. As intimated above, had he
remained a dormant member
he would not have been disadvantaged in the
way he has been. There is however no legal basis whereby additional
contractual obligations
may be implied into the employment contract
in order to compensate for his prejudicial withdrawal from the GEPF
in 2008.
[16]
The appeal must accordingly fail. This is not a case where equity
demands a costs order against
the appellant.
[17]
The appeal is dismissed.
_________________
JR Murphy
Acting
Judge of Appeal
I agree
_________________
B Waglay
Judge
President
I agree
_________________
K Savage
Acting
Judge of Appeal
APPEARANCES:
FOR THE APPELLANT: Adv
J Grogan
Instructed by Wheeldon,
Rushmere and Cole Attorneys
FOR THE FIRST AND SECOND
RESPONDENTS:
Adv N Gqamana SC and Adv M Mpahlwa
Instructed by The State
Attorney
FOR THE THIRD RESPONDENT:
Adv S Khumalo and Adv V Obonah
Instructed
by Strombeck Pieterse Attorneys
[1]
Act
75 of 1997.
[2]
[2]
The
learned judge remarked
obiter
that the dispute was one falling within the jurisdiction of the
Pension Funds Adjudicator in terms of the Pension Funds Act.
That is
not correct. The Pension Funds Adjudicator does not have
jurisdiction over the GEPF.