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[2021] ZALAC 6
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Barrier v Paramount Advanced Technologies (Pty) Ltd (JA35/2020) [2021] ZALAC 6; (2021) 42 ILJ 1177 (LAC); [2021] 7 BLLR 643 (LAC) (18 February 2021)
IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case no: JA35/2020
In the matter between:
PATRICK ALAIN HENRI
BARRIER
Appellant
and
PARAMOUNT
ADVANCED TECHNOLOGIES (PTY) LTD
Respondent
Heard (via TEAMS): 18
February 2021
Delivered:
Deemed to be the date
on which the judgment is e-mailed to the parties.
Summary:
Retrenchment---Severance
pay---
Basic
Conditions of Employment
Act
75 of 1997
---
Section
41
read with
s 84
---Determination
of length of service for purpo
se
of severance pay---Formal written contract of employment to terminate
upon employee reaching retirement age---Employee reaching
retirement
age but continued working without interruption---Employee later
retrenched---No break occurred in employment and
s 84(1)
finds no
application---
Service
continuous and encompassing the entire period of employment up to the
date of retrenchment---Employee entitled to severance
pay calculated
over entire period despite entitlement to retirement benefits.
Coram: Davis JA,
Coppin JA
et
Molefe AJA
JUDGMENT
COPPIN JA
[1]
This is an appeal against an order of the Labour Court (Prinsloo J),
with the leave
of that court, setting aside, in terms of s145 of the
Labour Relations Act
[1]
(“LRA”),
an arbitration award of a commissioner (“the arbitrator”)
of the Commission for Conciliation Mediation
and Arbitration (”
the CCMA”), that was made in favour of the appellant.
[2]
The dispute that was the subject of the award concerns the severance
amount that had
to be paid to the appellant when he was retrenched by
the respondent after working for it long before and beyond the date
of retirement
at the age of 65.
[3]
In particular, since the
relevant provision, namely, s 41(2) of the Basic Conditions of
Employment Act
[2]
(“BCEA”),
required the respondent to pay the appellant upon retrenchment an
amount ‘equal to at least one week’s
remuneration for
each completed year of continuous service’ with it, the
(ultimate) question is whether, and to what extent,
the payment(s) he
was entitled to upon his retirement at 65 impacted on the amount he
was entitled to as severance pay.
[4]
In determining the amount of severance pay
¸
the
respondent only took into account the period after the appellant had
reached the age of 65. The arbitrator essentially held
that the
period before that also had to be taken into account as the
appellant’s employment with the respondent continued
uninterrupted after he turned 65 and continued until it was
terminated upon his retrenchment.
[5]
The Labour Court, essentially, held that the arbitrator’s
conclusion was not
correct, having found, in essence, that the
(contractual) period that ended when the appellant turned 65 cannot
be taken into account
in determining the amount of severance pay that
was due to him. The correctness of that decision is to be evaluated
and adjudicated
in this appeal.
[6]
The succeeding paragraphs deal with the essential common cause facts,
the award of the arbitrator,
the Labour Court’ decision, an
evaluation of that decision, the issue of costs and, ultimately, the
relief.
For convenience and practicality, where necessary, the designation of
the parties as ‘applicant’ or ‘respondent’
in
quotations from documents or process preceding this appeal has been
adapted to reflect their designations as on appeal.
Common
Cause Facts
[7]
The respondent employed the appellant as an engineer with effect from
8 May 1985.
In terms of a written contract of employment subsequently
concluded between them on 19 May 1994, it was agreed, inter alia,
that
the appellant’s employment with the respondent would
terminate at the end of the month when he reached the age of 65
unless
the parties agreed otherwise in writing. The contract also
contained a so-called “no-variation-except-in-writing”
clause.
[8]
The appellant reached the age of 65 on 13 June 2013 but continued to
work for the
respondent, as he used to, uninterruptedly, beyond this
date until he was voluntarily retrenched by the respondent with
effect
from 31 May 2017.
[9]
On 21 February 2017, the respondent offered the appellant a
fixed-term contract that
was to commence from 1 February 2017 and
terminated on 28 February 2019 and provided, inter alia, that the
appellant would not
be entitled to “any discharge or severance
benefits” upon its termination. The appellant was not satisfied
with its
terms and did not accept the offer but continued to be
employed by the respondent.
[10]
In March 2017, the respondent indicated an intention to embark on a
restructuring of its business
operations due to its unfavourable
financial position. On 4 April 2017, the respondent invited all its
employees, including the
appellant, to apply for a voluntary
retrenchment package (VSP) on certain terms. One week’s
compensation was offered for
every completed year of service. The
terms of the VSP were the same as upon forced retrenchment, save that
the respondent offered
to even pay a week’s salary for
incomplete years of service and freed employees from the obligation
to work during their
notice period.
[11]
The appellant applied for the VSP, and his application was accepted
by the respondent on 10 April
2017. The agreement entered into
in that regard did not specify the actual amount of the severance pay
that the respondent
would pay the appellant, but he was informed of
that (specific) amount subsequently.
[12]
The appellant queried the amount as it was calculated only taking
into account the appellant’s
employment with the respondent
from 1 July 2013, and not the period up to the date of his
‘retirement’, i.e. 30 June
2013 (he reached the age of 65
on 20 June 2013), despite his payslip always having reflected 1 May
1985 as the starting date of
his employment with the respondent.
[13]
In response, the appellant was informed by the human resources (HR)
manager of the respondent,
Ms Mmolotsi, in essence, that the
appellant had officially retired on 30 June 2013 in terms of his
employment contract and therefore,
the first period ending on that
date was not taken into account in calculating his severance pay. The
HR manager also informed
him that his payslip had only indicated his
starting date as May 1985 for UIF and tax purposes, but not for the
purposes of calculating
his severance pay.
[14]
The appellant proceeded to accept the severance package subject to
the reservation that the severance
pay was not correct, in that it
had to be for 32 weeks (and not for 4 weeks). The appellant was paid
for 4 weeks at the rate of
R 34 849,14 per week (totalling R
139 396,55) in respect of severance pay.
[15]
On 15 June 2017, the respondent referred a dispute to the CCMA
regarding the calculation of his
severance pay. He contended that it
should have been for 32 weeks and not for 4 weeks. He sought payment
from the respondent of
severance pay for 29 weeks, made up of the
difference, and of the additional period he had remained in the
employ of the respondent.
Even though his termination date in the
retrenchment agreement had been stipulated as 31 May 2017, he only,
eventually, and finally
left his employment with the respondent on 30
June 2017.
The
arbitration in the CCMA
[16]
At the arbitration, there was an issue about whether the eventual
termination of the appellant’s
employment with the respondent
was a retrenchment and, accordingly, a dismissal as contemplated in
section 41(2) of the BCEA. The
respondent contended, essentially,
that the appellant had retired and that after his retirement, “the
termination was as
a consequence of the VSP granted” to the
appellant and that he was therefore not entitled to the severance pay
which he claimed.
[17]
The arbitrator found that even though the written employment contract
that the parties had entered
into in 1985 had provided for the
appellant’s retirement at age 65, the appellant did not in
fact, retire upon reaching that
age but continued to be employed by
the respondent until his eventual retrenchment by the respondent.
According to the arbitrator,
on the respondent’s own version,
it neglected to compel the appellant to retire when he reached the
age of 65, “even
though it had the right to do so.”
[18]
The arbitrator reasoned that even if it were to be accepted that the
written contract came to
an end on 30 June 2013 (i.e. after the
appellant turned 65), because it was not extended by the parties in
writing, as contemplated
in that contract, “it is apparent that
the (appellant’s] employment nevertheless continued
uninterrupted the next day
on similar or materially identical
conditions of service.”
[19]
With reference to section 84(1) of the BCEA, which provides the
formula for determining the length
of an employee’s employment
with the same employer, and provides, essentially, as shall be fully
discussed below, that a
break in the employment of less than one year
is inconsequential, the arbitrator held that “there was
absolutely no break
in the [appellant’s] employment with the
respondent when he continued his employment after 30 June 2013.”
[20]
The arbitrator referred to aspects of the decision in
Rogers v
Exactocraft (Pty) Ltd
(2015) 36
ILJ
277 (LC) (
Rogers)
,
but distinguished the facts there from the present on the basis that
the accepted evidence indicated that the appellant “had
in fact
not retired; nor did the respondent compel him to do so in June
2013”, and further, that neither the appellant nor
the
respondent, had processed the appellant’s retirement and the
appellant had not been paid any of his retirement benefits.
[21]
The arbitrator found that the respondent had initiated a retrenchment
process in March 2017,
and during the consultation phase, which it
had also initiated, had offered its employees (including the
appellant) the VSP, which
formed part of the respondent’s
efforts to comply with section 189(2)
(b)
and
(c)
of the
LRA. The section provides that the employer must, during the
consultation process, attempt to reach a consensus on the method
for
selecting the employees to be dismissed as well as on the severance
that is to be paid to them. In a memorandum dated April
2017, the
respondent had stressed that those who were granted the VSP would be
treated as if they had been forcibly entrenched.
[22]
In light of that, the arbitrator concluded, essentially, that the
matter before him was about
the amount of the appellant’s
severance pay, as the parties had already agreed that the appellant
would be paid severance
pay and that his employment had been
terminated for operational requirements, which was by definition, a
dismissal.
[23]
Regarding the calculation of severance pay, the arbitrator concluded
as follows: “
[66] I
made the finding, above, that the duration of the [appellant’s]
employment with the respondent, for the purposes of
section 41(2) is
8 May 1985 until 30 June 2017. The respondent therefore, had a duty
to pay the [appellant] severance pay equal
to at least one week’s
remuneration for each completed year of continuous service for this
period. The respondent had, in
addition, granted the [appellant] an
additional one week’s severance pay in terms of the VSP. Hence
the [appellant’s]
entitlement amounted to 33 weeks of his
weekly remuneration.”
[24]
Having taken into account the amount that the respondent had already
paid the appellant in respect
of severance pay, the arbitrator
concluded: “
the
respondent is still liable to the [appellant], in respect of
severance pay, in the amount of R1 010 625, which is calculated
as follows: R 34 849.14 (1 week’s income) x 29 weeks (33 weeks’
entitlement - 4 weeks already paid).”
[25]
The final award made by the arbitrator reads as follows:
‘
[68] The
[appellant], Mr. Patrick Alain Henri Barrier, is entitled to
severance pay, as contemplated in section 41(2) of the [BCEA]
in the
amount of R1 010 625.
[69] The respondent,
Paramount Advanced Technologies (Pty) Ltd, must pay the [appellant]
his severance pay entitlement of R1 010
625 by 20 October 2017.
[70] The amount of R1 010
625 shall attract interest as contemplated in section 143(2) of the
[LRA].’
In
the Labour Court
[26]
The Labour Court noted that the arbitrator’s finding that the
appellant was dismissed for
operational reasons was not challenged by
the respondent in the review, but nevertheless, briefly, considered
the cogency of arguments
raised by the respondent’s counsel in
that regard. It concluded, correctly, that it had to be accepted that
the arbitrator
was correct in finding that the respondent had
retrenched the appellant and that he was therefore entitled to
severance pay, but
that the actual issue and “bone of
contention” was about how the severance pay was to be
calculated with reference
to the number of years the appellant was in
the employment of the respondent.
[27]
Instead of then proceeding directly to the determination of the
severance package, the Labour
Court, firstly, considered whether a
severance was payable in light of the retirement of the appellant. It
concluded that the arbitrator
had erred in finding that the appellant
did not retire because he was not paid his retirement benefits and
did not cease his employment
when he turned 65. The Labour Court held
that when the appellant turned 65, his contract of employment
terminated by effluxion
of time. This did not constitute a dismissal;
since there was no dismissal at that stage, the provisions of section
41(2) of the
BCEA were not triggered, and the appellant was not
entitled to the payment of severance pay upon his retirement; hence
the appellant’s
employment (i.e. post his retirement)
constituted a new employment relationship.
[28]
The Labour Court then focussed on the computation of the severance
pay. It concluded that the
arbitrator’s differentiation of the
facts in
Rogers
was “artificial” and that there
was no reason to deviate from the position established in
Rogers
,
namely, that “the period before retirement should not be taken
into account when calculating an employee’s severance
pay in
accordance with section 41(2) and section 84 of the BCEA.”
[29]
The Labour Court then went on to conclude as follows:
‘
[75]
Severance pay is not payable in respect of retirement as there is no
dismissal and for purposes of calculating the number of
years’
continuous service, the arbitrator was wrong to include a period in
respect of which there existed no dismissal and
for which there was
no entitlement to severance pay.
[76] The right to
severance pay for the years prior to retirement never existed on
retirement and cannot be created simply because
the [appellant] was
employed by the [respondent] after his retirement. There is no need
to pay severance pay on retirement and
the [appellant] was never
eligible for severance pay on retirement. The [appellant] was only
eligible for severance pay in respect
of his employment post
retirement.
[77] The arbitrator was
wrong to find that the [appellant] did not retire in June 2013 and in
my view, as a result of the fact that
the arbitrator got this wrong,
he was incapable of calculating the severance pay correctly. The
arbitrator’s interpretation
of s 41(2) was wrong and so was his
calculation of the severance pay.
[78] The [respondent]
correctly calculated the period of service for purposes of payment of
severance pay and paid the [appellant]
accordingly. He is not
entitled to more.’
[30]
Having concluded that there should be no costs order due to the
novelty of the issues raised
by the review application, the Labour
Court proceeded to make the following order:
“
1. The arbitration
award issued on 28 September 2017 under case number GAT W9153 –
17 is reviewed and set aside;
2. The award is
substituted for an order as follows: ‘The respondent is not
entitled to any further severance pay’.
3. There is no order as
to costs.”
[31]
The Labour Court granted the appellant leave to appeal to this Court
against that order. The
appellant contends, in essence, that the
arbitrator was correct and that the Labour Court was wrong, while the
respondent argues
the exact opposite.
Discussion
[32]
It is generally accepted that a fair severance allowance, upon the
termination of employment
for operational requirements, is one based
(at least) on the employee’s length of employment with the
employer and his (or
her) remuneration.
[3]
[33]
Section 41(2) of the BCEA deals with severance pay. The section in
particular (as has been mentioned
above, albeit in paraphrasing)
provides as follows: “
An
employer must pay an employee who is dismissed for reasons based on
the employer’s operational requirements, or whose contract
of
employment terminates or is terminated in terms of section 38 of the
Insolvency Act, 1936 (Act No. 24 of 1936) severance pay
equal to at
least one week’s remuneration for each completed year of
continuous service with that employer, calculated in
accordance with
section 35.”
[34]
The section is relatively unambiguous. An employer who dismisses an
employee, inter alia, for
operational reasons is obliged to pay that
employee severance pay, the amount of which, at least, must be equal
to one week’s
remuneration for every completed year of
continuous service with that employer.
[35]
Section 35, which is referred to in section 41(2), deals with the
calculation of remuneration,
and it, inter alia, specifies how an
employee’s remuneration is to be calculated, what forms part of
such remuneration for
the purposes of the calculation, etc…
Since the dispute in this matter focuses on different, albeit
tangentially aligned
points, no more needs to be said about the
section at this juncture. Section 35 does not really assist in
determining the other
main aspect arising from section 41(2); in
particular, the length of the employee’s service or employment
with a particular
employer.
[36]
The phrase “continuous service” is not expressly defined
in the BCEA, and a meaning
would have to be given to it. Closely
aligned to the meaning of that phrase is the question of the duration
or length of service.
Section 84 of the BCEA deals with that
aspect.
[37]
Section 84(1) specifically provides that the section is applicable
where the length of an employee’s
employment with a specific
employer is to be determined “for any provision of the Act.”
Since the length of an employee’s
employment with a particular
employer would have to be determined for compliance with section
41(2) of the BCEA, section 84 would
be applicable, in particular,
where there has been a “break” or “interruption”
in the course of the employee’s
employment with the particular
employer. This was also the conclusion (effectively) of the
arbitrator and of the court in
Rogers
, the correctness of
which the court a quo also accepted.
[38]
Section 84(1), in particular, provides: “
For
the purposes of determining the length of an employee’s
employment with an employer for any provision of this Act, previous
employment with the same employer must be taken into account if the
break between the periods of employment is less than one
year.”
[39]
The section, like section 41(2) of the BCEA, is relatively clear and
unambiguous. Section 41(2)
has to be read in light of and
consistently with section 84(1) of the BCEA. The latter section
qualifies and assists in the interpretation
of the former.
[4]
[40]
Section 84(1) does qualify the ordinary, dictionary meaning of
“continuous”, and
effectively provides that even though
there is a break or interruption in the course of the employment, for
the purposes of determining
the length of service, the break or
interruption is inconsequential if it is less than one year. In that
sense, it gives a special
meaning to the phrase “continuous
service” found in section 41(2).
[41]
Thus, for the purpose of determining the length of service, a break
of less than a year is not
regarded as consequential in determining
whether the service was continuous. Section 84(1) creates a fiction
in that regard because
the ordinary dictionary meaning of
“continuous” is “uninterrupted” or “without
a break”. However,
having stated that, breaks are not
altogether irrelevant, as we shall see when dealing with section
84(2).
[42]
What is significant about section 84(1), in the light of the issues
in the present matter, is that
it requires, for the purpose of
determining the length of the employee’s service with a
particular employer, that all the
periods of employment of the
employee with that employer be taken into account, provided that the
break between those periods of
service is less than one year. What is
also noteworthy is that the length or duration of the break
determines whether the period
immediately preceding the break is to
be taken into account in determining the length of
service.
[5]
[43]
Even though the court in
Rogers
stated that it was purposively
interpreting sections 41(2) and 84, it did not illustrate how the two
sections could be applied
in harmony with each other, and in fact,
possibly, did not comply with section 84(1) when it excluded the
period before retirement
in that case in determining the length of
the employee’s service with the employer there, because the
alleged ‘break’
between the period that culminated in the
employee’s retirement and his further service with the same
employer was almost
imperceptible, and definitely far less than the
one year contemplated in section 84(1). The court a quo, in following
and applying
that decision to the facts of this case, made the same
error.
[44]
Both, in
Rogers
and in this matter, the Labour Court was
really grappling with an issue that arises, not in the context of
giving meaning to sections
41(2) or 84(1) of the BCEA, but that
arises from the application of section 84(2). The problem, in
particular, was not one relating
to the length of the continuous
service, but whether, firstly, there was a “break”
between the period of employment
that terminated upon the employee
reaching the age of 65 and the next phase of his employment with the
same employer; and, secondly,
whether, in light of the payment the
employee was entitled to, or had received at the end of the first
period, he or she was entitled
to severance pay for that (earlier)
period. Both of these are questions that are to be answered with
reference to the facts of
the particular case.
[45]
In both
Rogers
and in this matter, the Labour Court concluded
that the employee was not entitled to severance pay for the first
period because
he had received (or was entitled to) retirement
benefits in the form of “old-age benefits”, i.e. a
pension or provident
fund payout. But the conclusion was arrived at
on the basis of the incorrect premise, either because the inquiry
necessitated by
section 84(1) was, seemingly unwittingly, conflated
with the issue of entitlement, or because no particular attention was
given
to section 84(2) of the BCEA. There is no specific reference to
that section either in
Rogers
or in the judgment of the court
a quo.
[46]
While the court in
Rogers
,
and by extension the court a quo, implied that its conclusion was the
outcome of a purposive interpretation of sections 41(2)
and 84, it is
not evident from those judgments that the actual wording of those
sections was engaged. It is not stated how the
sections related to
each other, and how a section, such as section 41(5) of the BCEA,
found application in the particular legal
and factual matrix. The
latter section provides that “
payment
of severance pay in compliance with the section does not affect an
employee’s right to any other amount payable according
to law.”
[47]
It bears mentioning that the wording of a provision is vital in the
process of its interpretation because
“interpretation is a
process of attributing meaning to the words used”
[6]
in their proper context. The words of the provision are the starting
point of any interpretation,
[7]
be it purposive or otherwise. Therefore, the interpretation of a
provision must illustrate an engagement, inter alia, with its
actual
wording.
[48]
The position concerning the importance of the words in an
interpretation that is consistent with
the Constitution of the
Republic of South Africa (1996) was put aptly by the Constitutional
Court in
Moloto
[8]
as follows:
‘…
the
provisions of the Act must be interpreted purposively so as to give
effect to the Constitution, the objects of the Act itself
and the
purpose of the provisions in issue. But, this approach does not
necessarily equate to an expansive construction of the
provisions of
the Act. This is so because the purpose of the Act may well require a
restrictive interpretation of the particular
provisions so that the
exercise of a protected right is not unduly limited. Therefore, due
regard must be had to the express language
used in the provisions
under consideration
.’
[49]
Section 84(2) of the BCEA provides as follows: “
Any
payment made or any leave granted in terms of this Act to any
employee contemplated by subsection (1) during a previous period
of
employment must be taken into account in determining the employee’s
entitlement to leave or to a payment in terms of this
Act.”
[50]
This section, like section 84(1), applies to all provisions of the
BCEA that either expressly or by
implication, require the
determination of the length of an employee’s employment with an
employer, including section 41(2).
It is therefore relevant to the
computation of the amount of severance pay due to an employee who has
been employed by the same
employer for more than one spell.
[51]
Even though the “break” between the periods may be less
than one year, and therefore
(in terms of section 84(1))
inconsequential in determining the length of the employee’s
service with the particular employer,
in terms of section 84(2) “any
payment” made to the employee by that employer during a
previous period of employment
“must” be taken into
account in determining the employee’s entitlement to the
payment under consideration. The
latter part of the section refers
back to the provision(s) of the BCEA, which required the
determination of the length of an employee’s
employment as
contemplated in section 84(1).
[52]
The determination of the entitlement of an employee, who has had more
than one period of employment
with an employer, to severance pay, as
contemplated in section 41(2) of the BCEA, requires the application
of section 84(1) to
determine the length of service, but also, most
importantly for present purposes, requires the application of section
84(2), which
obliges the determiner of such entitlement to take into
account “any payment” made to that employee in the
previous
period(s) of his employment with the employer.
[53]
Hence, even if the break(s) between the periods of employment is less
than one year, and therefore
insignificant as contemplated in section
84(1) (the disparate periods of employee’s employment, added
together, being deemed
effectively to be continuous), the employee
with such a history of employment is not automatically entitled to
(at least) one week’s
remuneration for each completed year
(i.e. if the period(s) of his actual employment with the employer are
added together) –
but the determiner of the amount due to that
employee in respect of severance pay is obliged to take into account
“any payment”
made to that employee in any previous
period(s) in determining the amount of the employee’s
entitlement.
[54]
Regrettably, while obliging the determiner to take into account such
previous payment(s), subsection
84(2) does not provide any criteria
that the determiner may utilise for determining whether a particular
payment, made to an employee
in any particular previous period of
employment, disentitles the employee (totally or partially) to the
payment under consideration,
such as severance pay, in this instance.
[55]
This absence of criteria, norms or guidelines, to assist the
determiner not only introduces a
risk of possible arbitrariness or
irrationality, but saddles the determiner with a very difficult task.
In both the present matter
and in
Rogers
, even though there
was no particular reference to section 84(2), the court was, in
effect, grappling with this very problem. In
Rogers
, the court
was intensely engaged with determining, effectively, whether the
employee was entitled to be paid severance pay calculated
taking into
account a “previous” period of employment in light of the
fact that he had been paid his “old age
benefits” at the
end of that period.
[56]
The Labour Court in
Rogers
resolved the conundrum by finding,
effectively, that the period that culminated in the employee’s
retirement ought not to
be taken into account in determining, in
essence, the length of the employee’s continuous service with
the employer, and
in concluding that the reason for the break (i.e.
retirement), not being a dismissal, did not entitle the employee to
the payment
of severance pay.
[57]
Since the facts in this matter have many features in common with
those in
Rogers
,
the court a quo, seemingly, adopted the same approach as in
Rogers
.
As pointed out above, this approach was wrong because it effectively
and seemingly unwittingly overlooked the actual wording of
section
84(1), which does not accord any relevance to the reason for the
“break” or “interruption” in the
employment
[9]
.
[58]
Further, it is clear from the BCEA that the fact that an employee was
paid a wage or salary by
the employer in the course of his employment
with the same employer does not disentitle the employee from
receiving the statutory
severance pay as contemplated in section
41(2) if he is retrenched by that employer. And the same may be said
regarding the payment
of other bonuses and allowances.
[59]
In the ordinary course, an employee’s entitlement to what he
had accumulated while in the
employment of a particular employer, in
respect of his pension, or provident fund, does also not disentitle
him to (at least) statutory
severance pay, calculated by taking into
account the period he was employed there if he is retrenched by that
employer, say, before
or even shortly before his retirement
[10]
.
[60]
More directly, an employee, employed for a long, truly continuous
period, with the same employer,
does not lose his entitlement to
severance pay when he is, after all those years, retrenched by the
employer because the employer
had been paying him generously and
faithfully his salary and bonuses over the period of his employment.
Such an employee also does
not lose his entitlement to the retirement
benefits he had accumulated until then.
[61]
If that is so in the normal course, why must an employee who had been
employed over different periods,
albeit deemed to be in continuous
employment, i.e. if section 41(2) is a read with section 84(1), be
treated differently? Why must
she be disentitled to the statutory
severance pay contemplated in section 41(2) (read with section 84(1))
because of a pension,
or provident fund, pay out made to her in a
previous period of employment, and to which she is entitled by law?
[62]
In
Rogers,
the Labour Court considered the rationale or
purpose of severance pay, which, presumably would have been in order
to determine
whether that rationale or purpose was also covered by
the payment of “old-age benefits”, but, seemingly,
ultimately
did not execute that exercise to its logical conclusion
and make such a comparison, but resorted, instead, to concluding that
severance
pay was not payable upon retirement.
[63]
In
Banking
Staff Association,
[11]
a
CCMA Commissioner engaged in answering the question of whether a
retrenched employee was entitled to severance pay for a particular
period of service completed before a break (i.e. he had
resigned after seven years of service, had been re-employed shortly
thereafter, only to be retrenched by the same employer after two
years of his re-employment), made reference, inter alia, to a
“NEDLAC
Report on the Basic Conditions of Employment Standards Bill”
and mentions that the Bill had “specifically
stated that ‘any
previous payment of severance pay in terms of section 41 must be
taken into account in determining the employees'
entitlement to
severance pay’”. Unfortunately, I have not been able to
allocate the document or the Bill that was referred
to in order to
ascertain the veracity and accuracy of the statement.
[64]
Nevertheless, anecdotally, if section 84(2) had read as the Bill
reportedly, envisaged that it
should, the task of the determiner
would have been relatively simple in comparison to what it is now. In
any event, we know now
that it is not how section 84(2) reads. This
may be due to the fact that it was broadened so as to apply to other
kinds of entitlements
of an employee in terms of the provisions of
the BCEA, including the entitlement to severance pay, which all
require the determination
of an employee’s length of service
with an employer for purposes of such entitlement, as is envisaged in
section 84(1).
[65]
This reference, however, adds invaluable grist to the mill. If, say,
an employee had, in the previous
spell of employment with the same
employer, been retrenched and paid a severance, and had been rehired
again, the payment of the
severance pay in that previous period would
reasonably conceivably disentitle the employee to be paid severance
pay yet again for
the same period because it would clearly amount to
a duplication of payment.
[66]
That would also constitute a rational and reasonable basis for
finding that an employee is not
entitled to the severance pay
calculated over the entire period, as contemplated in section 84(1),
read with section 41(2), to
the extent that there would be a
duplication of payments.
[67]
In contradistinction to the situation where the employee was paid a
severance package in the previous
period, the payment of retirement
benefits (and not severance pay) in a previous period would not, at
least obviously, amount to
a duplication if the employee were to be
paid severance pay calculated as contemplated in section 84(1), read
with section 41(2),
covering that same period.
[68]
As pointed out earlier, section 41(5) of the BCEA provides that
payment of severance in compliance
with section 41 does not affect
the employee’s right to any other amount payable to him
according to law. The application
of section 84(2) checks the
validity of the corollary of that provision, namely, whether the
employee’s right to any other
amount payable according to the
law, albeit in a previous period of employment with the same
employer, affects his right to payment
of severance pay in compliance
with section 41(2) read with section 84(1) of the BCEA?
[69]
In the context of the South African labour laws
[12]
,
severance pay is “additional and distinct from contractual
notice pay and other entitlements”
[13]
.
It is a form of compensation, which is a gratuity for services
rendered and is intended “to soften the blow” of
unemployment,
but it is also intended to deter employers from readily
resorting to the retrenchment of employees
[14]
.
It is axiomatic that the payment must come from the employer’s
own funds, and is not to be subsidised or funded by the employees
themselves.
[70]
On the other hand, so-called benefits, such as pensions, provident
funds, retirement funds, medical
aid and the like, are usually and
generally funded by the employee himself from his remuneration.
Usually, the employer makes the
deduction from the employee’s
remuneration and pays the amount to the particular benefit fund as
the employer is obliged
to do in terms of section 34A (2) of the
BCEA. The money so deducted and paid-in is the employee’s
money, which he or she
is entitled to be repaid in terms of and in
accordance with the law and the rules of the relevant fund, and has
nothing to do with
the employee’s entitlement to severance pay.
[71]
The fact that there are instances where an employer also pays a
contribution into such a fund
does not make a difference. The
employer does so in compliance with a contractual obligation, and the
contribution constitutes
part of the employee’s remuneration.
It has nothing to do with retrenchment.
Application
[72]
Regarding the present matter, the principal question is whether there
was a “break”
as contemplated in section 84(1) of the
BCEA when the appellant reached the age of 65, but continued
(seamlessly) to work for the
respondent. Put differently, does the
termination of the written contract of employment which was concluded
in 1985 by the effluxion
of time when the appellant turned 65, and in
the absence of a written extension thereof, constitute a “break”
as contemplated
in section 84(1)?
[73]
It is evident from section 84(1) that the “break”
contemplated therein is a time-lapse
between periods of employment;
hence the reference in the section to breaks of less than one year.
[74]
It is common cause that despite turning 65, the appellant continued
with the employment routine that
he had been following since May 1985
and attended at the respondent’s workplace and provided his
services as an employee
to the respondent at the respondent’s
request and with its consent. There was not even a time-lapse (or
“break”)
of one working day between his employment up to
age 65 and thereafter. The fact that the written contract of 1985
may, strictly
in law, have terminated made no difference to that
routine.
[75]
The appellant’s employment with the respondent was
“continuous”, in the true
sense of that term (and without
the aid of the deeming provision, or fiction, created by section
84(1) regarding continuity) from
May 1985 until he was retrenched by
the respondent in 2017. His employment relationship with the
respondent subsisted beyond the
formal termination of the 1985
contract.
[15]
[76]
Turning to the application of section 84(2) – the question that
arises is whether the period
from May 1985 to the date of the formal
termination of the 1985 contract (i.e. by effluxion of time) could be
construed as “a
previous period of employment” of the
appellant with the respondent, particularly since a previous period
can only be such
because it is demarcated by a time-lapse (or
“break“), as contemplated in section 84(1), between that
period and the
one that culminated in his retrenchment. The answer
must clearly be negative because the appellant continued to be
employed by
the respondent uninterruptedly until his retrenchment.
This also implies that section 84(2) is not applicable as there is no
“previous
period of employment” as contemplated in that
section.
[77]
In any event, even if it is to be assumed that the phase of his
employment, that culminated in
the appellant turning 65, is “a
previous period of employment”, the evidence in the present
case that further distinguishes
it from the facts in
Rogers
,
is that even after the appellant had turned 65, he was not paid his
retirement benefits, despite being entitled to the same, and
this,
presumably, only occurred much later when he was ultimately dismissed
for operational requirements.
[78]
I should add that even if it is assumed that he had been paid such
benefits, that payment would
not, for the reasons stated above,
disentitle him to be paid a severance that was calculated taking into
account the entire period
of his employment, i.e. from May 1985 until
the date of his retrenchment or dismissal.
[79]
In sum, the appellant was entitled to be paid for 33 weeks, as found
by the arbitrator. The court
a quo was wrong in coming to a different
conclusion. It follows that the appeal should succeed.
[80]
Taking all the circumstances, including the law and fairness, as well
as the novelty and importance
of this matter, into account, a costs
order in favour of a particular party is not appropriate.
[81]
In the result, the following is ordered:
1.
The appeal is upheld.
2.
The order of the Labour Court is set aside and is substituted with
the following
order: “
The application to review and set
aside the arbitration award of the second respondent dated 28
September 2017 under case number
GATW 9153/17 is dismissed.”
___________________________
P Coppin
Judge of the Labour
Appeal Court
Davis JA and Molefe AJA
concur in the judgment of Coppin JA.
APPEARANCES:
FOR THE
APPELLANT:
Advocate Jacques
Eastes
Instructed by
Erasmus-Scheepers Attorneys.
FOR THE
RESPONDENT:
Advocate Ashley Cook
Instructed by Crawford &
Associates Attorneys.
[1]
Act 66 of 1995.
[2]
Act 75 of 1997.
[3]
See, inter alia, ILO Convention on Termination of Employment, 1982
(No. 158), in particular article 12(1)(a).
[4]
See inter alia,
Insurance
& Banking Staff Association
on
behalf of Aucamp
v Old Mutual Life Assurance Co
(2000)
21
ILJ
2515
(CCMA);
[2000] 9 BALR 1030 (CCMA) (“
Banking
Staff Association
”)
at 1030.
[5]
See also
Solomons
v Usabeo (Pty) Ltd
(2002) 23 ILJ 786 (CCMA) at 791 (‘
Solomons
”).
[6]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA) para 18.
[7]
Bothma-
Batho Transport (Edms) Bpk v S Bothma & Seun Transport (Edms)
Bpk
2012 (2) ALL SA 517
(SCA) para 12.
[8]
SA
Transport and Allied Workers’ Union (SATAWU) & others v
Moloto NO &another
[2012] ZACC 19
;
[2012] BLLR 1193
; (2012) 33 ILJ 2549 (CC) para 20.
[9]
See
Solomons
(above)
at 791 and
Rogers
(above)
at paras 21-22.
[10]
See for eg. the facts in
Heunis
v Lejsweleputswa District Municipality & another
(2016) 37 ILJ 895 (FB); and in
Meyer
v Iscor Pension Fund
(2003) 24 ILJ 338 (SCA).
[11]
See
Banking
Staff
Association
(above) at 1031.
[12]
For an excursus of foreign laws and other approaches on the topic
see, inter alia,
Irvin
and Johnson Ltd v CCMA & Others
[2006] 7 BLLR 613
(LAC) and D W de Villiers “
The
Entitlement to Severance Pay Revisited
”
(2010) 22 SA Merc LJ 114-116.
[13]
J Grogan
Workplace
Law
(9ed) p 240.
[14]
Ibid.
[15]
See:
National
Automobile v Borg-Warner SA (Pty) Ltd
(1994) 15 ILJ 509 (A).