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[2021] ZALAC 14
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Ekhuruleni Metropolitan Municipality v Mandosela and Others (JA29/2020) [2021] ZALAC 14; [2021] 10 BLLR 994 (LAC); (2021) 42 ILJ 2168 (LAC) (2 July 2021)
IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
case
no:
JA 29/2020
In
the matter between:
EKHURULENI
METROPOLITAN MUNICIPALITY
Appellant
and
LAWRENCE MANDOSELA AND
194 OTHERS
First Respondent
SOUTH AFRICAN LOCAL
GOVERNMENT
BARGAINING
COUNCIL
Second Respondent
TIMOTHY
BOYCE
N. O
Third Respondent
Heard:
25 May 2021
Delivered:
(In
view
of the measures implemented as a result of the Covid-19 outbreak,
this judgment was handed down electronically by circulation
to the
parties' representatives by email. The date for hand-down is deemed
to be 02 July 2021
Coram:
Waglay JP, Savage AJA and Molefe AJA
JUDGMENT
MOLEFE
AJA
[1]
The appellant appeals against the judgment
of Patel AJ, in particular paragraphs 31 and 32 thereof, handed down
on 13 February 2020.
The court
a quo
substituted the arbitrator’s award of three months’
compensation and ordered the appellant to pay compensation equal
to
12 months’ remuneration to each of the first respondents. The
crux of the appeal is based on the standard of reviewing
a
compensatory award. The appellant accepted that the second
respondent’s decision was reasonable in so far as he found that
the first respondents were permanently employed by the appellant
during the first period of employment, but that the court
a
quo
misdirected itself in substituting
the second respondent’s award of three months’
compensation with 12 months’
compensation.
[2]
The first respondents noted a cross-appeal
against the judgment and order of the court
a
quo
in so far as it pertains to the
finding that it failed to find that the first respondents were deemed
employees of the appellant
between December 2015 to August 2016.
[3]
Both the appeal and cross-appeal centre
around the involvement of the first respondents in the appellant’s
job creation programme
called Lungile Mtshali Community Development
Plan Project (the project).
The factual background
[4]
The first respondents were employed by the
appellant over two employment periods. The first period of employment
was governed by
two fixed-term contracts. On 14 February 2014, the
first respondents signed the first fixed-term contract for a period
of 12 (twelve)
months, commencing on 3 March 2014 and terminated on
30 March 2015. Upon termination of the first contract, it was
extended to
30 June 2015. The second fixed-term contract was signed
between the appellant and the first respondents from 30 March 2015 to
30
June 2015. Both contracts were terminated by the effluxion of
time.
[5]
The second period of employment commenced
on 15 December 2015 and was governed by a fixed contract which
expired on 31 August 2016.
There was a lapse of approximately five
and a half months between the conclusion of the first employment
period and the fixed-term
contract entered into in the second
employment period (‘the third contract’). The third
contract differed from the
two previous fixed-term contracts in that
it was concluded between the first respondents, a private company
called Hlaniki Investment
Holding (Pty)Ltd (‘Hlaniki’)
and a government entity named the Gauteng Enterprise Propeller
(‘GEP’). The
appellant was not a party to the third
contract.
[6]
Hlaniki
was engaged by the appellant to
inter
alia
manage the services to the GEP.
[1]
The GEP was engaged by the appellant to co-ordinate a job creation
programme in which the first respondents were supposed to
participate.
The project was initiated by the appellant as a short
term measure to alleviate poverty and unemployment through a job
creation
scheme. The purpose of the project was to target unskilled
labourers, and the programme entailed 60% theoretical training and
40%
practical training. The first respondents were in all three
fixed-term contracts earning R2000.00 per month and worked 8 (eight)
hours a day. Under the first two contracts, the first respondents’
salaries were paid by the appellant and by the GEP under
the third
contract.
[7]
On
1 April 2015, the first respondents referred a first dispute to the
second respondent, the South African Local Government Bargaining
Council (‘SALGBC’). The dispute was conciliated and
referred for arbitration (‘the first arbitration’).
This
dispute dealt with whether the first respondents were permanently
employed by the appellant pursuant to section 198 A of the
Labour
Relation Act (‘LRA’)
[2]
[8]
On 8 June 2015, and whilst employed in
terms of the second fixed-term contract, the first respondents
received letters of termination
of employment at the expiry of the
contract on 30 June 2015. The first respondents tendered their
services to the appellant on
30 June 2015 but were turned away
because their fixed-term contracts had terminated by effluxion of
time.
[9]
On 7 September 2016, the first respondents
referred a second dispute to the SALGBC and classified the nature of
the dispute as a
dismissal (‘the second arbitration’). On
22 February 2018 and upon an application by the first respondents,
the arbitrator
(‘the third respondent’) issued a ruling
consolidating the two disputes.
The arbitration award.
[10]
The issues to be determined in respect of
the first arbitration were whether the first respondents were
dismissed by the appellant
on 30 June 2015, and if they were
dismissed, whether there was a fair reason for their dismissal and
whether the dismissals were
preceded by a fair procedure.
[11]
The issue to be determined in respect of
the second arbitration was whether the first respondents were deemed
to be permanently
employed by the appellant when their fixed-term
employment contracts with Hlaniki expired on 31 August 2016.
The first arbitration
award.
[12]
At
the arbitration hearing, it was contended on behalf of the first
respondents that they were dismissed by the appellant when they
were
prevented to work when their second contract ended on 30 June 2015.
The dismissals aforementioned were predicated squarely
on the
submission that at the time of the alleged dismissal, the employment
contracts were deemed to be of indefinite duration
as contemplated by
section 198 B (5) of the LRA.
[3]
[13]
The first respondent’s’ second
fixed-term employment contract with the appellant exceeded three
months (i.e. 2 March
2015 to 30 March 2015), and in order to
determine whether their contract could be “deemed to be of
indefinite duration,”
the arbitrator was to determine whether
the nature of the work for which the employees were employed was of a
limited or definite
duration or the employer can demonstrate other
justifiable reason for fixing the term of the contract.
[14]
The
unequivocal evidence of the witnesses who testified on behalf of the
first respondents was to the effect that during both contracts
the
work the first respondents did for the appellant entailed cleaning
streets, storm water drains, municipal parks, municipal
stadiums, old
age homes, etc. The arbitrator found that the nature of the
work was ongoing and it is axiomatic that it is
not of a limited or
definite duration.
[4]
[15]
Section 198B (3) of the LRA will not be
contravened if the employer can demonstrate any other justifiable
reason for fixing the
term of the contract. The fact of the matter is
that in terms of the second contract, the appellant engaged the
service of the
first respondents to perform work of an ongoing
nature, and it was the appellant which was obliged to remunerate
them. The arbitrator
found that in the circumstances, section
198B(4)
(g)
of
the LRA has no application to the second contract and that the fixed
duration of the second contract was not justified.
[16]
The arbitrator found that the first
respondents had accordingly discharged the onus on them to prove that
they were dismissed when
the second contract ended and the appellant
failed to adduce any evidence to prove that there was a fair reason
for the first respondents’
dismissals, or that the said
dismissals were preceded by a fair procedure.
[17]
On 7 June 2018, the arbitrator issued an
arbitration award in terms of which he found that on 30 June 2015,
the first respondents’
dismissals were both substantively and
procedurally unfair and awarded a compensation equal to three months’
remuneration
to each of the first respondents.
The
second arbitration
.
[18]
The first respondents, relying on section
198A and 198B of the LRA contended that, in essence, since they are
deemed to be permanently
employed by the appellant, they were in fact
dismissed when the appellant refused to allow them to render services
when the third
contract ended.
[19]
The arbitrator found the above-mentioned
contention to be inherently difficult in that the deeming clause
embodied in section 198A(3)
(b)
of
the LRA can only apply when there is a tripartite relationship
between employees, a temporary employment services (‘TES’),
and a client. The internship contract which was concluded between on
the one hand, Hlaniki and GEP, and on the other hand the first
respondents did not create a tripartite relationship as stated above.
There was in short no TES and no client, and the employment
relationship
apropos
the third contract was one between the first respondents, Hlaniki and
GEP.
[20]
The arbitrator found that the first
respondents, having failed to establish that they were permanently
employed by the appellants,
therefore failed to discharge the onus on
them to prove the existence of the alleged dismissal.
The Court
a quo
.
[21]
On 27 August 2018, the first respondents
issued a review application to review and set aside the arbitrator’s
award of three
months’ compensation for their unfair dismissal
and finding that no employment service relationship existed between
the appellant
and the first respondents. The appellant opposed the
application.
[22]
Sitting in the court
a
quo
, Patel AJ agreed with the
arbitrator when he concluded that the reinstatement was not
reasonably practicable because there was
never any intention by the
appellants to employ the first respondents permanently. He, however,
found that the first respondents’
length of service, the manner
in which their contracts were terminated, and the reasons for their
termination are the reasons to
replace the arbitrator’s three
months’ compensation with a just and equitable 12 months’
remuneration to each
of the first respondents.
[23]
Regarding the question of the employment
service under the third contract, Patel AJ found that for Hlaniki to
be regarded as a TES,
there must exist a client, and that the first
respondents have provided insufficient legal reasons why he should
ignore the express
written terms of the Service Level Agreement, the
commercial relationship which existed between Hlaniki and GEP, and
the fact that,
there was no contractual or commercial relationship
between the appellant and Hlaniki, and dismissed the review against
this award
The Appeal.
[24]
It
is submitted on behalf of the appellant that it is trite that when
awarding compensation, the commissioner exercises a discretion
which
should not be too readily or easily interfered with by the Labour
Court.
[5]
The appellant contends
that the court
a
quo
had no power to interfere with the quantum compensation awarded by
the arbitrator, and in this regard relies on
Kukard
v GKD Delkor (Pty) Ltd
[6]
wherein the court held that:
‘…
the
court’s power to interfere with quantum of compensation awarded
by an arbitrator under s 194(1) of the LRA is circumscribed
and can
only be interfered with on the narrow grounds that the arbitrator
exercised his or her discretion capriciously or upon
the wrong
principle, or with bias, or without reason or that she adopted a
wrong approach. In the absence of one of these grounds,
this court
has no power to interfere with the quantum of compensation awarded by
the commissioner…It is, therefore, for
Delkor to persuade this
court that the quantum of compensation awardee by the commissioner
may be impugned on one of the narrow
grounds referred to above’
[25]
It is the appellant’s case that the
court
a quo
did not advance any special circumstances justifying the 12 months’
remuneration award, nor did it furnish reasons as to
the factors that
led to such compensation. Counsel for the appellant contends that a
consideration of compensation in this matter
should be limited to the
last fixed-term contract concluded between the appellant and the
first respondents, which was a subject
of the arbitration, and was
for a period of four months, commencing on 3 March 2015 and
terminated on 30 June 2015. It is further
argued that the first
fixed-term contract was concluded prior to the amendment of the LRA.
Therefore, such contract was not impacted
by the amendments or the
deeming provisions of section 198B of the LRA.
[26]
In his judgment, Patel AJ correctly agreed
with the arbitrator’s conclusion that reinstatement is not
reasonably practicable
because there was never an intention by the
appellant to employ the first respondents permanently.
[27]
It is trite that the determination of the
quantum of compensation is limited to what is ‘just and
equitable’. What this
court should consider in making a
determination of an award is the contract entered into for the four
months’ period from
March 2015 to June 2015. The amendment of
the LRA is therefore applicable insofar as this contact is concerned.
[28]
It
is also trite that when awarding compensation, the commissioner
exercises a discretion which should not be easily interfered
with by
the Labour Court on review. Compensation must be just and equitable
and a number of factors must be taken into account
when quantifying
the compensation (solatium).
[7]
[29]
On
the facts set out in this matter, when granting an award of 12
months’ compensation, the court
a
quo
did not advance any special circumstances justifying such a startling
award given the provisions and the nature of the first respondents’
employment. The court
a
quo
did not indicate whether the arbitrator’s exercise of his
discretion was capricious, based on wrong principles, biased or
whether the arbitrator misconducted himself.
[8]
The court
a
quo
therefore erred in interfering with the three months’
compensation award without factual or legal basis for such an
interference.
There was no logic to grant 12 months’
compensation, and in exercising his discretion the arbitrator did not
act capriciously,
upon the wrong principle, with bias, without
reason, nor did he adopt a wrong approach. As a result, there is no
reason to interfere
with the decision to award three months’
compensation to the first respondents and the Labour Court erred in
finding differently.
The first respondents’
cross-appeal
[30]
The cross-appeal is against the court
a
quo
’s judgment and order
pertaining to the second period of employment, and the court
a
quo
’s failure to find that the
first respondents were deemed permanent workers of the appellant. The
issue arising from the second
period of employment was whether the
first respondents were unfairly dismissed when their contracts ended
on 16 August 2016 because
they were in fact employed in terms of
section 198A(3)
(b)(
i)
and (ii) despite having signed the contracts with Hlaniki. The
arbitrator found that Hlaniki was not a temporary employment service
(TES), and accordingly found against the first respondents.
[31]
Hlaniki and GEP contracted with the
appellant to project manage and effect job programmes. In contrast to
the first period of employment,
the first respondents signed their
contracts of employment with Hlaniki and GEP, and not the appellant.
The first respondents spent
the majority of that time doing the same
cleaning work, they had done during the previous employment period.
The contracts terminated
by effluxion of time.
[32]
The primary issue that arises is whether
Hlaniki was a temporary employment service (TES). The first
respondents accepted that Hlaniki
was to act as a project manager but
argue that the realities of the relationship between themselves and
Hlaniki were wholly at
odds with the contractual role accorded to
Hlaniki. On this basis, the first respondents argue that Hlaniki was
in reality a TES.
It is also argued that because the job creation
programme was so non-functional as to be abortive, it did not
constitute a justifiable
reason for fixing the terms of their
contracts.
[33]
In dealing with the question whether
Hlaniki was a TES, the arbitrator found as follows;
The deeming clause
embodied insection198A (3) (….) of the LRA can obviously only
apply when there is a tripartite relationship
between the workers, a
temporary employment services provider, a client. The internship
contract which was concluded between, on
the one hand Hlaniki and the
Gauteng Enterprise Propeller, and on the other hand the applicants,
did not create a tripartite relationship.
The applicants were
employed by Hlaniki and the GEP, not by the Municipality’’.
[35]
The court
a quo
concluded similarly, placing equal emphasis on
the contracts;
[38] The services level
agreement concluded between the third respondent and the fourth
respondent, following a tender process,
appointed the fourth
respondent as the project management company to manage the Lungile
Mtshali Poverty Alleviation Project on
behalf of the third respondent
for the period 11 December 2015 until 11 December 2018. A reading of
this agreement shows that the
fourth respondent is not operating as a
temporary employment service, but as a project manager. The fourth
respondent’s core
business as agreed upon by the applicants is
not the provision of labour. If this is not the fourth respondent’s
core business,
it cannot be regarded as a Temporary Employment
Service Provider’’.
[36]
Counsel for the first respondents argued before this court that the
approach adopted by both
the arbitrator and the court
a quo
was
wrong in law, having failed to assess the realities of the
relationships at play. Counsel contends that the true relationships
between Hlaniki, GEP, the appellant and the first respondents were
obscured by a complicated web of at least five different contracts
concluded between different parties at different points over the
course of two years, and the true nature of the relationships
was
further impacted by the “degeneration of job creation programme
into a shamble”.
[37]
it is common cause that Hlaniki was contractually appointed to
“manage and provide technical
assistance and effectively run
the project”. The primary objective of the programme that
Hlaniki was managing was to “upskill
and train the
beneficiaries so that, they can be employable or even become
entrepreneurs”. GEP provided financial and non-financial
support to the SMMES and co-operative emerging from the project that
was supposed to be project managed by Hlaniki.
[9]
[38]
The second period subsisted for eight months and the training
received was superficial. It is
argued on behalf of the first
respondents that at the end of the eight months, the first
respondents emerged with no useful business
knowledge, let alone an
ability to start a business. The court
a quo
was asked to
determine that Hlaniki was a TES, despite contractual agreements
indicating that it was not.
[39]
Counsel for the first respondents relied on
David
Victor and 200 others v Chep South Africa Ltd and Others
[10]
as
a ringing endorsement of the court’s use of purposive approach
in assessing the true nature of the contract between the
alleged TES
and the alleged client. The court cautioned against permitting
“restrictive interpretations” of section
198A of the LRA.
Counsel argues that the approach adopted in
Chep
was
correct and that courts are enjoined to look past contractual
agreements when evaluating TES relationships.
[40]
In my view,
Chep
is distinguishable from this case. The
distinguishing element lies in the relationship between the dictate
of the contracts and
the reality of the employment relationship. In
this case, the job creation programme did not achieve its objectives.
The first
respondents’ submission is that having regard to the
fact that they did not benefit from the programme, and the protective
purpose of section 198A, this court should disregard the contracts in
favour of evaluating the substance of this relationship.
[41]
There is no merit in the argument that the substance of the
relationships reveal that Hlaniki
was active as a TES, and that when
the purported fixed-term contract terminated by effluxion of time on
31 August 2016, the workers
were permanent workers of the appellant.
[42]
The deeming clause embodied in section 198A(3)
(b)
of the LRA
can obviously apply when there is a tripartite relationship between
employees, TES and a client, which was not the case
in the third
contract. The internship contract which was concluded between
Hlaniki, GEP and the first respondents did not create
tripartite
relationship as stated above. There was no TES and no client, and the
employment relationship concerning the third contract
was between the
first respondents as employees, and Hlaniki and GEP as employers, and
not the appellant.
[43]
The first respondents accepted that the intention of the internship
contract was to provide training
and entrepreneurial assistance to
the first respondents and the appellant was not signatory to the
contract. Hlaniki however, did
not perform its role as a contract
manager despite having been paid a substantial amount of the tax
payers’ monies. The first
respondents were then left to do
cleaning work for the appellant.
[44]
Hlaniki should have managed the project, organised the training and
overseen its success but
dismally failed to do so. It is unfortunate
that the first respondents should have been upskilled and either
employable or part
of co-operatives or SMMES, which is not the case.
This does not however qualify Hlaniki as a TES, an entity that
procures or provide
workers to a client for a reward. There was no
disguised employment relationship in this case, and the cross-appeal
must fail.
[45]
The appellant is not asking for any costs order against the first
respondent, and in the circumstances,
no costs order will be made.
[45]
In the result the following order is made:
1.
The appeal is upheld.
2.
The cross-appeal is dismissed.
3.
The order of the court
a
quo
is set aside and replaced with the
following order:
“
The
review application to set aside the arbitration award is dismissed”.
4.
There is no costs order in respect of the
appeal and the cross-appeal.
D S Molefe
Acting Judge of the
Labour
Appeal Court
Waglay
JP and Savage AJA concur.
APPEARANCES:
FOR THE APPELLANT:
Koketso Pooe
Instructed by Majang Inc
Attorneys
FOR THE FIRST RESPONDENT:
Jessica Lawrence
Instructed by Lawyers for
Human Rights
[1]
Gauteng
Enterprise Propeller as a separate entity established in terms of
section 2 of the Gauteng Enterprise Propeller Act no
5 of 2005 of
the Gauteng Legislature.
[2]
Labour
Relations Act 66 of 1995
, as amended.
[3]
Section
198
B (5) of the LRA reads: “Employment in terms of a
fixed-term contract concluded or renewed in contravention of
subsection
(3) is deemed to be of indefinite duration.”
Subsection (3) of
section 198B
of the LRA will be contravened if an employee’s
fixed term employment contract is for a period of longer than 3
months
and:
·
The nature of work is not “of a
limited or define duration” (vide
section 198B(3)(a)
of the
LRA
·
The employer cannot “demonstrate any
other justifiable reason for fixing the term of the contact
[4]
Section
198(3)(a)
of the LRA.
[5]
Kemp
t/a Centralmed v Rawlins
(2009)
30 ILJ 2677 (LAC).
[6]
(
(2015)
36 ILJ 640 (LAC) at para 35
[7]
Tshishonga
v Minister of Justice & Constitutional Development & another
(2009) 30 ILJ 1799 (LAC).
[8]
Kemp
t/a Centralmed supra
.
[9]
MOA
between GEP and the Municipality; Record Volume 3, page 293.
[10]
2020
JA 55/2019 (LAC) (
Chep
).