THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case no: J 2055 /2014
In the matter between:
P LEBELO AND 407 OTHERS Applicants
And
CITY OF JOHANNESBURG
METROPOLITAN MUNICIPALITY Respondent
Heard: 9 – 12 October and 28 November 2023
Delivered: 22 January 2024
This judgment was handed down electronically by consent of the parties’
representatives by circulation to them via email. The date for hand -down is
deemed to be 22 January 2024.
JUDGMENT
PRINSLOO J
Introduction
[1] The Respondent ( Municipality) took a decision in 2003 to make use of fixed
term contracts for certain of its positions. In application of this decision, the
Respondent invited existing permanent employees to convert their permanent
contracts of employment into fixed term contracts, and after the decision was
implemented, fixed term contracts were offered to newly recruited employees.
[2] All permanent employees who took up positions as fixed term contract
employees would have their guaranteed remuneration calculated on an annual ‘ total
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cost to company’ basis, which would cover both the basic salary and all the allowances
and benefits that permanent employees were entitled to. It was a general principle of
conversion that when an employee took up a fixed term contract, they should be no
worse off than before the conversion and their total remuneration after conversion
should incorporate all the allowances they had previously received as permanent
employees. The Respondent offered an incentive, or “sweetener” of a salary increase
of between 5% and 10% to employees who were prepared to convert their contracts
of employment to fixed term.
[3] The permanent employees who converted to a fixed term contract, were offered
certain advantages, such as additional variable pay in addition to their guaranteed pay,
in the form of an annual performance bonus if they met certain performance standards
during the year; they were offered flexibility to structure their monthly remuneration as
they wished and they could, for example, designate part of their remuneration as a cell
phone or entertainment allowance, which advantage was not available to permanent
employees and they received annual wage increases applied to their total
remuneration and not simply their basic salary.
[4] The Respondent’s decision to make use of fixed term contracts was challenged
by IMATU and SAMWU and the said unions referred a dispute about it to arbitration
in 2004.
[5] In 2006, a representative of the South African Local Government Association
(SALGA) purported to reach a settlement on behalf of all its member municipalities,
including the Respondent, but without a mandate from either SALGA or any of the
municipalities. In 2008, review proceedings were launched in this Court to set aside
the settlement agreement and in August 2012, the Respondent and the unions agreed
to resolve the dispute and they entered into a collective settlement agreement (the
collective agreement). The parties agreed that the settlement concluded in 2006 would
be treated as null and void, the Municipality would withdraw the review application
launched in 2008 and all the Respondent’s employees identified in the collective
agreement would have their fixed term contract employment converted into permanent
employment on the terms set out in the collective agreement.
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[6] The relevant terms of the conversion were set out in clause 7 of the collective
agreement, which provided inter alia as follows:
6.1. All affected employees would be converted to permanent status on the effective
date – which was 1 October 2012 (Clause 7.1 read with clause 2.2.9);
6.2. The affected employees would retain their total package remuneration (clause
7.2) and this would be inclusive of “ the basic salary, allowances, subsidies, benefits
(employer and employee contributions) and the service bonus” (clause 7.3);
6.3. In respect of future wage increases, these would be applied to the affected
employees’ basic salary, not their total remuneration, as was done with all permanent
employees. In order to determine this basic salary, the collective agreement included
a method of calculation to break down an affected employee’s annual total
remuneration package into a basic remuneration, or technical basic salary, and
benefits, as set out in annexure D to the collective agreement (clause 7.4);
6.4. Where the affected employee’s basic remuneration exceeded the salary band
for his or her position, the ‘s unset clause’ would be implemented and the employee
would not be granted a salary increase until his or her basic remuneration fitted into
the approved salary band for the position, as adjusted annually (clause 7.5 read with
clause 2.2.23);
6.5. All the fixed term contract employees would be placed in positions in the
Respondent’s approved structure, without any reduction in remuneration, even if the
new position was at a lower level than the fixed term contract position (clause 7.15).
[7] The dispute before this Court has its genesis in the conversion of fixed-term
contracts to permanent employment, which took place on 1 October 2012.
[8] It is common cause that the Applicants were all previously fixed-term employees,
prior to becoming permanently employed. There are however two categories of
employees for purposes of this judgment. The first category is the previously permanent
employees, (such as Mr Lebelo) whose permanent employment was converted to fixed
term contracts in terms of the process that took place in 2003 and 2004 (after the 2003
decision of the Respondent) and who converted back to become permanent employees
in 2012, in terms of the collective agreement . The second category of employees is
those who were newly recruited (after the 2003 decision of the Respondent) and
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employed on fixed term contracts and whose contracts were converted to permanent
employment in 2012, in terms of the collective agreement.
[9] The parties have agreed that a representative witness may be called to represent
each category of Applicants. Mr Lebelo gave evidence for both categories and Ms Fuhri
was the witness for the second category of employees.
The pleaded case
[10] The Applicants’ pleaded case is that they were fixed term employees, who were
converted to permanent employees and that , e xcept for the applicants, all other
permanent employees of the Respondent have been paid service bonuses and wage
increases for the year 2012/13. The R espondent refused to pay wage increases and
annual service bonuses to the A pplicants and c onsequently, the A pplicants have
suffered discrimination in the provision of benefits on the grounds of their status as
previous fixed term contract workers.
[11] The Applicants’ case is premised on the provisions of section 6(1) of the
Employment Equity Act
1 (EEA). They pleaded that they have been discriminated
against on the basis of their prior status as fixed term employees . This is not a listed
ground of discrimination but is an analogous ground to the grounds listed in section
6(1), as the discrimination is arbitrary, offensive and has been applied to a vulnerable
class of employees, namely fixed term employees. The discrimination is unfair and not
justified and the Applicants pleaded that there is no warrant to refuse to compensate
them for service and inflation, but do so for other permanent employees , the
Respondent’s conduct offends the dignity of the Applicants and they have always
received annual salary increases and bonuses as fixed term employees, which they
no longer receive.
[12] In short: t he Applicants should be entitled to the same bonuses and salary
increases provided to other permanent employees in the workplace.
1 Act 55 of 1998, as amended.
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[13] T he Applicants seek orders from this Court declaring that the failure to pay them
annual wage increases and service bonuses from 2012 – 2022 constitutes unfair
discrimination, directing that they each be paid wage increases for every year from
2013 to 2022 and an annual service bonus for every year from 2013 to 2022. They
also seek payment of compensation.
[14] In its response to the statement of claim, the Respondent denied that it has
engaged in any form of discrimination. The Respondent’s case is that the Applicants’
remuneration is a total package, inclusive of basic salary, allowances, subsidies,
benefits and the annual service bonus. In respect of the annual wage increase, the
Respondent in the alternative pleaded that any discrimination that it may have
engaged in was not unfair.
The evidence adduced
The Applicants’ case
[15] Mr Lebelo is the General Manager Corporate Services since 2019 and before
that, he was the Respondent’s D irector: Employee Relations. He is familiar with both
categories of Applicants – those who were permanent and converted to become fixed
term employees and those who were employed as fixed term contract employees.
[16] Mr Lebelo was permanent and he converted to a fixed term contract employee
in 2004. Fixed term contract employees were entitled to a performance bonus, which
permanent employees were not entitled to. Permanent employees were entitled to an
annual service bonus. Fixed term contract employees had the flexibility to structure
their salaries as they wanted, something permanent employees could not do. He
conceded that the salaries of the permanent employees who converted to fixed term
contracts were increased by 10% as an incentive to convert and his own salary was
increased and adjusted accordingly.
[17] Mr Lebelo did not structure his salary as a fixed term contract employee to
include a service bonus, because a performance bonus was provided for.
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[18] The ‘SALGBC Joburg Division conditions of service, national disciplinary
procedure and code collective agreement and grievance procedure’ ( Joburg
Conditions of Service) provides for the payment of an annual service bonus to full -
time, part-time and seasonal employees. It does not include fixed term contract
employees.
[19] The mayoral committee report of 28 May 2003 on the remuneration of
employees indicated that the Municipality operates on a total cost to company package
(CTC), an annual guaranteed bonus or thirteenth cheque is not included as part of the
remuneration, notwithstanding the fact that an employee can structure their package
over 12 or 13 months . Mr Lebelo testified that this was in place at the time he had
signed a fixed term contract with the Respondent.
[20] In December 2006, Mr Lebelo became the Director: Labour Relations and he
signed a fixed term contract, confirming that he was paid a total cost to employer
remuneration package and that he could receive an annual performance bonus. Mr
Lebelo testified that when he had signed the contract, it was not discussed how the
CTC package was calculated and no service bonus was discussed.
[21] In respect of the second category of applicants, Mr Lebelo testified that he was
aware of the terms of their contracts and those contracts too were quiet on the issue
of an annual service bonus.
[22] The contracts in the two categories contain, in substance, similar clauses, inter
alia that the Respondent shall pay the employee a total cost to employer remuneration
package, that the employee is entitled to an annual performance bonus to the maximum
of 15% of the package, to be determined with reference to fulfilment of such
performance agreements concluded annually.
[23] The Applicants continued on a fixed term contract basis until the collective
agreement was concluded in October 2012. The collective agreement dealt with the
conversion of fixed term contract employees . It provided for a ‘sunset clause’ to be
implemented where the affected employee’s basic remuneration exceeded the salary
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band for his or her position, and the employee would not be granted a salary increase
until his or her remuneration fitted into the salary band for the position, as adjusted
annually. “TCTC” is defined to mean total cost to company remuneration package,
which include d the affected employee’s basic salary, allowances, benefits and
employer and employee contributions.
[24] Mr Lebelo testified that before 2012, fixed term contract employees received
salary increases and performance bonuses, but after 2012, no fixed term contract
employee received a service bonus. Mr Lebelo did not receive a salary increase until
July 2017, when he received a 4,7% increase, as the sunset clause applied to him. All
other permanent employees received service bonuses and annual increases.
[25] In cross-examination, Mr Lebelo was referred to the SALGBC ‘salary and wage
collective agreement’ (wage agreement) which provided for salary and related
increases for the financial years 2012/2013, 2013/2014 and 2014/2015. The said
agreement made provision for applications for exemption from any or all of the
provisions of the wage agreement and it prescribed a procedure for an application for
exemption, set out criteria and other factors to be considered by the exemptions
committee and provided for an application for condonation i f an application for
exemption was referred outside of the prescribed time limits . It is undisputed that the
Respondent applied for and was granted an exemption for 2013/2014. The next wage
agreement was signed in August 2015 and it provided for salary and related increases
for the financial years 201 5/2016, 2016/2017 and 2017/2018. It also made provision
for applications for exemption from any or all of the provisions of the wage agreement
and it prescribed a procedure for an application for exemption and set out criteria and
other factors to be considered by the exemptions committee. It is undisputed that the
Respondent applied for and was granted an exemption for 2015/2016, 2016/2017 and
2017/2018. The exemption so granted applied to all the Respondent’s employees who
were subject to the sunset clause, including Mr Lebelo.
[26] Clause 7 of the collective agreement recorded ‘the placement principles’ and
clause 7.3 specifically stated that:
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‘The affected employee’s total package remuneration is inclusive of the basic salary,
allowances, subsidies, benefits ( employer and employee contributions) and the
service bonus.’
[27] Mr Lebelo denied the correctness of clause 7.3 and insisted that the service
bonus was not included in the Applicants’ remuneration after their conversion to
permanent employees. In cross- examination, he however conceded that the
conversion and subsequent placement happened in terms of the collective agreement
and the placement principles set out in the collective agreement. The parties entered
into a new agreement in terms of which the affected employees would retain their total
remuneration packages, which included a service bonus, as per clause 7.3. of the
collective agreement.
[28] Paragraph 7.4 of the collective agreement recorded that the affected
employees’ remuneration, as calculated in accordance with annexure ‘D’, would form
the basis of calculations related to salary increases and benefits, where applicable,
with effect from 1 October 2012. Annexure D sets out the fixed term contract
conversion calculation. Mr Lebelo conceded that permanent employees could only get
a medical aid contribution if they belonged to a medical aid but for fixed term contract
employees, it was included as a cash amount, irrespective of whether they belonged
to a medical aid or not, which was an advantage fixed term contract employees
enjoyed. He did not dispute that the fixed term contract employees had more
advantages than the permanent employees.
[29] Mr Lebelo was referred to the ‘ fixed term contract dispensation’ presentation
that was done by the Respondent’s city manager during September 2012 regarding
the conversion process. The following was explained in respect of the sunset clause:
‘Parity in salaries: The City shall either claim back the 10% salary enhancement added
to the converted employees’ remuneration packages at the time of converting them to
FTC or place a moratorium on salary increments for a period equal to there being
parity in the salary scales i.e sunset clause.’
[30] Mr Lebelo conceded that he knew by October 2012 that the sunset clause was
going to be applicable to him. He knew that the conversion would take place on the
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terms and conditions set out in the collective agreement and at the time of the
conversion, Mr Lebelo earned a salary of 33% (R 19 238,94 per month) more than a
permanent employee on the same salary band.
[31] The presentation also dealt with the principles for conversion and recorded that:
‘● Convert to permanent status;
• Fairness and equity;
• Retain same annual total package;
• Total cost to company inclusive of basic salary, benefits, allowances and
service bonus (13th cheque).’
[32] Mr Lebelo conceded that he understood that his total package would include
an 8,33% service bonus and that the sunset clause would apply by November 20 12.
He further conceded that aft er the 2013 wage increase, his salary was still 24,8%
higher than the maximum salary for his salary band and as such, he was not paid the
annual wage increase in 2013. In 2017, Mr Lebelo received a partial wage increase
and in 2018 he received the full wage increase and he conceded that it was because
he was earning above the maximum in his salary band for permanent employees.
[33] Mr Lebelo conceded that on 1 March 2013, he accepted the offer of placement,
wherein it was specifically recorded that the conditions of the collective agreement and
the placement principles referred, and were as such, applicable.
[34] He claimed that they suffered discrimination because they were employees of
the same employer , but treated differently for untenable reasons and the different
treatment is the fact that a service bonus is not included in the Applicants’
remuneration, but it is paid to all other permanent employees. According to Mr Lebelo,
the Respondent’s policy is clear on the fact that a service bonus cannot be included in
salary and as the Applicants no longer receive performance bonuses, they are
prejudiced.
[35] Mr Lebelo testified that he is frustrated, and he feels degraded by the fact that
he is not treated the same as other permanent employees. He lost his house, he had
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to relocate, had to move his children from their school and he had to sell a vehicle. He
further testified that the Applicants are mocked by employees who did not convert to
fixed term contracts, he feels betrayed and degraded and his morale was very low. In
cross-examination, the aforesaid issues were painted in a different light and the reality
was rather that Mr Lebelo sold his house for a profit and moved one of his children to
another, but similar, school as it was closer to their new house. He was unable to
explain how he was mocked when he earned 33% more than the permanent
employees on his level, who did not convert to a fixed term contract.
[36] Mr Lebelo testified that a service bonus is paid to every employee as a reward
for completing a year of service with the Municipality, but the Applicants do not receive
such a bonus for their years of service and they feel like “black sheep or an unwanted
child”.
[37] In respect of the M unicipality’s defence that the Applicants are bound by the
terms of the collective agreement, Mr Lebelo testified that the parties could not
contract to be discriminated against and where the collective agreement does not
comply with the law, it must be challenged.
[38] Mr Lebelo referred to Ms Petersen and Mr Semako, who were also fixed term
contract employees who converted to permanent employees , yet service bonuses
were paid to them, as reflected on their salary advice . Mr Lebelo’s salary advice
indicated no payment that was made in respect of a service bonus. In cross-
examination, it was put to Mr Lebelo that the positions of Ms Petersen and Mr Semako
were different from that of the Applicants in that Ms Petersen and Mr Semako were
employed as fixed term contract employees, but they applied for permanent positions
and after their applications were successful, they were promoted to higher, permanent
positions. They were not part of the conversion process which took place in terms of
the settlement agreement, but they were promoted to permanent positions in terms of
a different process and on different dates than the Applicants. Mr Lebelo could not
dispute the version put to him and in fact , he accepted that the promotion of Ms
Petersen and Mr Semako was distinguishable from t he conversion of the Applicants.
The effect of this is that Ms Petersen and Mr Semako cannot be considered
comparators in casu.
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[39] Ms Fuhri testified that she joined the Respondent in 2004 on a one -year fixed
term contract. She was employed as a legal advisor and the position was advertised
as a CTC all- inclusive package, with no mention of a service bonus. After the expiry
of her first fixed term contract , she entered into further fixed term contracts with the
Respondent, the third one was signed in April 2011 and terminated on 31 May 2015.
[40] Ms Fuhri was not subject to the sunset clause and she received annual wage
increases. Her c laim is in respect of the payment of the service bonus, which she
testified was never included in her remuneration.
[41] Ms Fuhri testified that the collective agreement is discriminatory because the
Applicants are part of a vulnerable group of employees. Her dignity was affected, and
she felt that she was not worth working for the Municipality, she felt cheated and misled
and it had a bad impact on her life. In 2016 she was at a low point in her life and had
to go for debt review.
[42] She testified that as fixed term contract employees, they received performance
bonuses, which assisted in paying for things that could not be paid for from their
salaries and a 13
th cheque would have helped with her financial position. She went for
debt review before she lost her house and her car.
[43] Ms Fuhri denied that an annual service bonus was included in her CTC and
that she received it in monthly instalments together with the rest of her monthly
remuneration. Instead, after the conversion the performance bonus was taken away
and it was not replaced by anything else.
[44] Ms Fuhri testified that even after being converted to permanent employees,
they never felt part of the M unicipality’s permanent employees, they were treated
unfairly and in a discriminatory manner. Her morale, self-respect and productivity had
been affected.
[45] In cross- examination, Ms Fuhri conceded that they experienced insecurity
being employed on fixed term contracts and that the conversion to permanent
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employment provided a sense of job security. She also confirmed that fixed term
contract employees could structure their CTC packages for purposes of tax benef its,
a flexibility which permanent employees did not have.
[46] Ms Fuhri structured her salary to include allowances for entertainment, travel
and a cell phone and she agreed that the ability to structure her salary as such, gave
her more money in her pocket, although she had to provide for her own medical aid
and pension fund. This was not a benefit other permanent employees enjoyed. Ms
Fuhri conceded that the total CTC could have been structured to include a 13th cheque,
but she insisted that a service bonus was not included in her remuneration. She also
conceded that the allowances she structured, such as an entertainment allowance,
were merely an allowance in name and for purposes of obtaining a tax benefit, as she
never entertained as part of her job and never used the allowance for that purpose.
[47] The Respondent’s 2003 remuneration policy provided for guaranteed pay
which included items such as basic salary, car allowance, medical aid, retirement fund
and guaranteed allowances and variable pay which takes the form of either a bonus
or an incentive and is over and above guaranteed remuneration. It was put to Ms Fuhri
that a performance bonus was part of variable pay and a service bonus is included in
guaranteed pay. She disagreed and insisted that a service bonus was not included in
guaranteed pay.
[48] In respect of the collective agreement, Ms Fuhri disputed clause 7.3 thereof and
testified that she never gave a mandate for the collective agreement and the trade
unions had never explained the terms and conditions of the collective agreement to
her. She also testified that she did not attend the presentation by the municipal
manager and the content of the presentation was never communicated to her.
[49] Ms Fuhri received a conversion letter in November 2012, wherein there was a
breakdown of her salary. In the calculation, the formula as per A nnexure D to the
collective agreement, was applied. It is evident from the calculation that the total was
divided by factor 1.2333, which is a service bonus of 8,33% and a pension fund of
15%.
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[50] Ms Fuhri’s salary was confirmed in March 2013 to be a total annual package of
R 479 684 and a monthly salary of R 23 103. Ms Fuhri was employed on salary level
6 and the Respondent’s approved all-inclusive salary scales for October 2012
indicated that the all-inclusive package, including benefits and a service bonus of
8,33% and pension fund of 15% , for salary scale 6 was R 23 103 monthly and R
479 684 annually. It was put to Ms Fuhri that after the conversion to permanent, she
received the maximum package on the minimum band which a permanent employee
on salary level 6 could earn, including the service bonus and pension fund and she
was unable to dispute it.
[51] In cross- examination, Ms Fuhri accepted that since her conversion to
permanent, the amount she received annually as remuneration was the equivalent of
what a permanent employee would receive, including an 8,33% service bonus.
[52] Ms Fuhri conceded in cross-examination that she understood since November
2012 that the conversion to permanent would be on the terms and conditions set out
in the collective agreement and she knew that her salary would be calculated to include
a service bonus. She also agreed that the Respondent converted the Applicants to
permanent employees on the basis that they accepted the terms of the settlement
agreement.
The Respondent’s case
[53] Ms Pienaar , the Respondent’s D irector: Strategic Management Services,
testified that she first joined the Midrand Council in 1996 and was transferred to the
Respondent in 2001 when the Midrand Council amalgamated with the Respondent. In
2003, her permanent position was converted to a fixed term contract.
[54] In 2012 she was subject to the conversion project and at the time, she held the
position of Deputy Director: Management Support. She was involved in the technical
rollout of the conversion project and the placement of employees.
[55] Ms Pienaar testified that when they converted from permanent to fixed term
contract employees in 2003, they received a 10% salary increase incentive and her
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salary too was increased. She interrogated her new salary before she signed the fixed
term contract and it was explained to her that the package was calculated as a total
CTC and it included a basic salary, pension fund employer contribution, medical aid
employer contribution, an annual service bonus (13th cheque) and other allowances.
[56] Ms Pienaar explained that the 2003 remuneration policy made provision for
guaranteed pay , which included a basic salary and the service bonus as well as
variable pay, which was a performance bonus. A performance bonus was not
guaranteed, as opposed to the service bonus, as it was only payable if certain goals
were achieved and it was only applicable to fixed term contract employees , in terms
of a separate performance management policy.
[57] The 2003 remuneration policy also permitted fixed term contract employees to
structure their salaries . Permanent employees were not permitted to structure their
salaries – they received their basic salary and the employer’s contribution on benefits
they qualified for, for instance, a permanent employee had to belong to a medical aid
to receive the employer’s contribution for medical aid. Fixed term contract employees
could structure their salary packages over 12 or 13 months to provide for a 13 th
cheque.
[58] In respect of the 2012 conversion process, Ms Pienaar testified that at the time,
she was employed in the human resources department and the implementation of the
collective agreement fell within the remit of her department and they were involved in
the rollout and the placement of employees. The affected employees were first handed
conversion letters, whereafter they received placement letters . Ms Pienaar testified
that after the collective agreement was concluded, it was distributed to the
Respondent’s employees, and she had several discussions with employees regarding
the terms of the settlement agreement.
[59] Ms Pienaar testified about the placement principles, as set out in the collective
agreement, and confirmed that the affected employees retained their total
remuneration packages, which were inclusive o f basic salary, allowances, subsidies,
benefits and the service bonus. The calculation of salary was done in accordance with
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Annexure D to the collective agreement. The ‘factor’ referred to in Annexure D is the
fixed percentage pension (15%) and service bonus (8,33%).
[60] Ms Pienaar testified in respect of Ms Fuhri’s salary that to get to an annual CTC
package of R 479 684,09, as Ms Fuhri earned after the conversion, it had to include
an additional 8,33%, which represents the service bonus.
[61] She explained that the fixed term contract employees who converted to
permanent had a more beneficial dispensation than permanent employees. Converted
employees retained the flexibility to structure their salary packages to get the best
possible tax benefit, other permanent employees could not do this. Converted
employees received allowances as part of their total remuneration packages ,
calculated at the maximum of the allowance whereas other permanent employees
received allowances based on actuals . For instance, the medical aid allowance for
permanent employees was calculated, based on their actual medical aid contribution.
For converted employees the allowance was calculated at its maximum, irrespective
of whether the affected employee belonged to a medical aid or not.
[62] Ms Fuhri did not belong to a medical aid, yet the maximum employer
contribution of R 3 440 was included in her CTC package.
[63] In September 2012, the city manager made a presentation to inform the fixed
term contract employees about the content of the settlement agreement and how it
would affect them. Ms Pienaar was present when the presentation was made and she
testified that all the affected fixed term contract employees were supposed to attend
the presentation. The city manager explained that the affected employees would retain
the same annual package and that the CT C would include a basic salary, benefits,
allowances and a service bonus.
[64] Ms Pienaar testified that the sunset clause affected only 97 of the Respondent’s
employees. The Respondent applied for exemption from the payment of salary
increases, as agreed to in the wage agreement, in respect of the 97 employees , who
were subject to the sunset clause. T he bargaining council granted the exemption for
2015 – 2018. The sunset clause applied to Ms Pienaar until July 2015.
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[65] Ms Pienaar agreed that there is a differentiation between the employees who
were affected by the sunset clause and other permanent employees. The r oot cause
of the sunset clause was the fact that in 2003, when permanent employees were
invited to convert to fixed term contracts of employment, they were offered an incentive
of a 10% salary increase to convert, which rendered their salaries higher than that of
the other employees who remained permanent.
[66] In cross-examination, Ms Pienaar was questioned about the 2003 remuneration
policy, which provided that , in respect of non- bargaining unit employees , the
municipality operated on a total annual cost to company package and that an annual
guaranteed service bonus or 13
th cheque is not included as part of remuneration and
the Respondent’s version that the Applicants received a service bonus, included in
their remuneration. Ms Pienaar conceded that there was a contradiction but insisted
that the annual bonus is included in the CTC and she said that a calculation of the
package showed that an 8,33% service bonus is included.
[67] Ms Pienaar was given a fixed term contract in 2003 which was similar to Mr
Lebelo’s fixed term contract. She agreed that an annual service bonus was payable to
permanent employees, irrespective of their salary scale and the fact that Mr Lebelo
earned above the maximum threshold for his salary level was irrelevant to the question
as to whether he would be entitled to receive a service bonus. A service bonus is
payable after a year of service and the collective agreement on conditions of service
provides that the annual service bonus is payable to permanent employees in the
month following their qualifying date – the qualifying period is each completed year of
service, terminating on 31 October, wherefore the service bonus is paid in November
to qualifying employees. It was put to Ms Pienaar that the Respondent’s version that
the Applicants were effectively paid their service bonus on a monthly basis, as it is
included in their CTC remuneration, is at odds with the aforesaid collective agreement,
which provides that the annual service bonus is payable annually to qualifying
employees and is inconsistent with the remuneration structure agreed to. Ms Pienaar
did not respond to the proposition put to her.
General principles
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[68] The issue to be decided is whether the Respondent’s failure to pay some of the
Applicants’ annual wage increases and all of the Applicants’ service bonuses for the
years 2012/2013 and further, in circumstances where other permanent employees
were paid annual wage increases and service bonus es, constitutes unfair
discrimination in terms of section 6(1) of the EEA. I will deal with these issues in turn,
but before deal ing with the merits of this case , it is prudent to set out the general
principles applicable where unfair discrimination based on an arbitrary ground is
alleged.
[69] The EEA does not prohibit differentiation, it prohibits unfair discrimination. More
specifically, section 6(1) of the EEA does not prohibit differentiation or arbitrariness, it
prohibits unfair discrimination on an ‘arbitrary ground’. ‘Arbitrary ground’ as provided
for in s ection 6(1), read in conjunction with s ection 11(2), makes it clear that the
irrationality of differentiation per se will not win a discrimination case based on an
arbitrary ground. The conduct complained of must amount to unfair discrimination in
that it must cause an injury to human dignity.
[70] Differentiation per se does not constitute discrimination. Differentiation on a
specified ground of discrimination is presumed to constitute unfair discrimination,
which presumption is rebuttable. Given that an arbitrary ground is synonymous with
an unlisted/unspecified ground, the test for whether discrimination is established is as
set out in Harksen v Lane NO and others
2 (Harksen), namely, if there is differentiation
based on an unspecified ground, then whether or not there is discrimination will
depend upon whether, objectively, the ground is based on attributes or characteristics
which have the potential to impair the fundamental dignity of persons as human beings
or to affect them adversely in a comparably serious manner.3
[71] Section 6(4) of the EEA does not impose a blanket prohibition on wage
differentiation. It prohibits such differentiation where it is directly or indirectly based on
any one or more of the grounds listed in section 6(1). An applicant pursuing a claim in
2 [1997] ZACC 12; 1998 (1) SA 300 (CC).
3 Naidoo and others v Parliament of the Republic of South Africa (2019) 40 ILJ 864 (LC) ( Naidoo).
18
terms of section 6(4) of the EEA must demonstrate more than mere differentiation.
Such an applicant must not only clearly identify and plead an identifiable ground of
discrimination that qualifies as an arbitrary ground, within the contemplation of section
6(1), but must also prove that the differentiation is based on such an arbitrary ground.
[72] In Naidoo and others v Parliament of the Republic of SA,
4 this Court considered
the interpretation of the phrase any arbitrary ground and held that:
‘[36] Given that an arbitrary ground is synonymous with an unlisted/unspecified
ground, the test for whether discrimination is established, is that set in Harksen,
namely, if there is differentiation based on an unspecified ground, then whether or not
there is discrimination will depend upon whether, objectively, the ground is based on
attributes or characteristics which have the potential to impair the fundamental dignity
of persons as human beings or to affect them adversely in a comparably serious
manner.
[37] Although the Constitutional Court did not provide a comprehensive description
of what ‘attributes and characteristics’ would comprise, it held that:
5
“What the specified grounds have in common is that they have been used (or misused)
in the past (both in South Africa and elsewhere) to categorise, marginalise and often
oppress persons who have had, or who have been associated with, these attributes
or characteristics. These grounds have the potential, when manipulated, to demean
persons in their inherent humanity and dignity. There is often a complex relationship
between these grounds. In some cases they relate to immutable biological attributes
or charac teristics, in some to the associational life of humans, in some to the
intellectual, expressive and religious dimensions of humanity and in some cases to a
combination of one or more of these features.”
[38] The test set out in Harksen v Lane NO and others
6 will apply and, in order for
the alleged grounds of arbitrary discrimination to qualify as such, they must,
objectively, constitute grounds based on attributes and characteristics which have the
potential to impair the fundamental human dignity of persons as human beings or to
affect them adversely in a comparably serious manner to a listed ground. In short: the
4 Naidoo at paras 36 - 38, which was upheld by the Labour Appeal Court in Naidoo and others v
Parliament of the Republic of South Africa [2020] ZALAC 38; (2020) 41 ILJ 1931 (LAC).
5 Harksen v Lane NO and others 1998 (1) SA 300 (CC) at para 50.
6 ibid.
19
unequal treatment must be based on attributes and characteristics attaching to a
person before it will fall within the meaning of ‘discrimination’.’
[73] In Naidoo and others v Parliament of the Republic of South Africa,
7 the Labour
Appeal Court (LAC) endorsed the narrow compass interpretation of the phrase ‘any
other arbitrary ground’ in section 6(1) of the EEA.
[74] The LAC considered whether there was a cognisable case pleaded on the
narrow compass interpretation and held that:
‘[29] The next step is to consider whether, upon the narrow compass construction of
s 6(1), the appellants have pleaded a cognisable case. What exactly is averred by the
appellants? Allusions are made to nepotism, differences in years of service and
recruitment of the chamber support officers from the ranks of persons who were
members of the SAPS at that moment of recruitment. The responsibility for this
grievance is alleged to be the brainchild of their manager, Van der Spuy. A fair reading
of these averments reveals that the critical allegation is that a group of persons have
been given preferential treatment based on their affinity with Van der Spuy who is a
fan of the SAPS: in a word, this is nepotism.
[30] Do these averments that the protection officers are the victims of nepotism meet
the test in Harksen v Lane NO? in my view they do not. Nepotism, in any case, cannot
be countenanced, even more so in the case of parliament. However this court is
required to determine this dispute in terms of the EEA and nepotism is not a necessary
affront to human dignity, in neither the sense contemplated by s 9 of the Constitution,
nor in s 6(1) of the EEA. To be neglected because of nepotism implies no characteristic
of a person so victimised nor does it invoke any pejorative perspective of such person,
whether inherent or adopted. Nepotism differs from, for example racism, where the
bearer of authority or of power rejects X because of X’s race and prefers Y because
of Y’s race. If what Van der Spuy has done is indeed to prefer his chums to the
appellants, ie behaved nepotistically, th at conduct, however wrongful, is not unfair
discrimination within the purview of s 6(1).’
7 (2020) 41 ILJ 1931 (LAC)
20
[75] In short: it is not sufficient to simply allege differentiation or that the
differentiation is arbitrary or that a n employee’s dignity has been impaired. An
applicant must allege a specific ground of discrimination, and must prove that the
pleaded ground of discrimination is the basis for differentiation and that it is unfair.
There is a distinction to be drawn between differentiation and discrimination and
differentiation per se does not constitute discrimination on an arbitrary ground, which
must be clearly identified and pleaded.
[76] The Applicants’ case is that they are discriminated against on the basis of their
prior status as fixed term contract employees. It is not a listed ground of discrimination,
but a ground analogous to the grounds listed in section 6(1) of the EEA and the
Applicants’ case is that the discrimination is arbitrary, offensive and has been applied
to a vulnerable class or category of employees, namely fixed term contract employees.
The conduct complained of is unjustified, unfair and irrational as there is no justifiable,
fair or rational reason to refus e to compensate the Applicants , but to do so for other
permanent employees and it offends the dignity and the right to equality of the
Applicants.
[77] I already alluded to the fact that the Harksen test will apply in a case such as
this one. Not every differentiation is discrimination and to qualify as such, the ground(s)
for discrimination relied upon must, objectively, constitute a ground(s) based on
attributes and characteristics which have the potential to impair the fundamental
human dignity of persons as human beings or to affect them adversely in a comparably
serious manner to a listed ground. The unequal treatment must be based on attributes
and characteristics attached to a person before it fall s within the meaning of
‘discrimination’, as contemplated in the EEA.
[78] The Appellant’s witnesses testified about the fact that they have less spending
power than the comparator employees, that they are unhappy about their level of
earnings, and that they feel that their dignity has suffered as a result of their lower level
of earnings. They further explained how they are adversely affected by the wage
differentiation and how they feel prejudiced by that, but the reality is that an arbitrary
ground for discrimination cannot be established by the existence of prejudice , or put
differently, by the mere fact that an employee testifies that his or her dignity has
21
suffered. The fact that an employee may profess to have suffered an insult to his or
her dignity is not sufficient to establish discrimination, as outlawed by the EEA – more
is indeed required.
[79] Irrational differentiation does not automatically constitute unfair discrimination ,
just as rational differentiation might nevertheless amount to discrimination. As was
held in Harksen:
‘If it is not on a specified ground, then whether or not there is discrimination will depend
upon whether, objectively, the ground is based on attributes and characteristics which
have the potential to impair the fundamental human dignity of persons as huma n
beings or to affect them adversely in a comparably serious manner.’
[80] To succeed with their case, the Appl icants must prove all three elements set
out in section 11(2) of the EEA.
The applicable test
[81] The applicable test is as per Harksen8 where it was held as follows:
‘(a) Does the provision differentiate between people or categories of people? If so,
does the differentiation bear a rational connection to a legitimate government
purpose? If it does not then there is a violation of s 8(1). Even If it does bear a rational
connection, it might nevertheless amount to discrimination.
(b) Does the differentiation amount to unfair discrimination? This requires a two-
stage analysis:
(i) Firstly, does the differentiation amount to ‘discrimination’? If it is on a specified
ground, then discrimination will have been established. If it is not on a specified
ground, then whether or not there is discrimination will depend upon whether,
objectively, the ground is based on attributes and characteristics which have the
potential to impair the fundamental human dignity of persons as human beings or to
affect them adversely in a comparably serious manner.
(ii) If the differentiation amounts to ‘ discrimination’, does it amount to ‘ unfair
discrimination’? If it has been found to have been on a specified ground, then
8 Harksen supra at para 54.
22
unfairness will be presumed. If on an unspecified ground, unfairness will have to be
established by the complainant. The test of unfairness focuses primarily on the impact
of the discrimination on the complainant and others in his or her situation.
If, at the end of this stage of the enquiry, the differentiation is found not to be unfair,
then there will be no violation of s 8(2).
(c) If the discrimination is found to be unfair then a determination will have to be
made as to whether the provision can be justified under the limitations clause (s 33 of
the interim Constitution).’
[82] D ifferentiation must be established in the first place.
[83] If differentiation is established, the second question is whether the
differentiation bears a rational connection to a legitimate purpose, or put differently,
whether the conduct complained of is rational. Even if it is rational, it might still amount
to discrimination.
[84] The last question is whether the conduct constitutes unfair discrimination . To
determine whether the differentiation amounts to unfair discrimination, a two- stage
analysis must be followed. The first stage is to determine whether the differentiation
amounts to discrimination and if it does, the second stage is to determine whether the
discrimination is unfair.
Analysis
Wage increases
[85] It is undisputed that permanent employees are entitled to receive an annual
wage increase, as per the various national wage agreements that have been
periodically concluded between SALGA, IMATU and SAMWU in terms of the Main
Collective Agreement, concluded between them in June 2007.
[86] The ‘sunset clause’ in the collective agreement however qualified this
entitlement. It provided that where a converted employee’s technical basic salary
exceeded the maximum basic salary for the employee’s level, then the employee
23
would not be awarded a salary increase until their calculated basic salary fell within
the maximum basic salary for their level.
[87] The sunset clause applied to 97 of the 916 employees who were converted to
permanent employment (the sunset employees). Only a few of the sunset employees
are applicants before this Court. Mr Lebelo is one of them and he testified on behalf
of this category of the Applicants. Mr Lebelo’s technical basic salary at the time of
conversion was 33% higher than the maximum basic salary for his level.
[88] The clause did not apply to all the sunset employees for the same period as the
clause operated only for as long as the converted employees’ calculated basic salary
exceeded the maximum basic salary for their level. The amount by which the
remuneration of the converted employees subject to the sunset clause exceeded the
maximum basic salary differed from employee to employee. For example, Mr Lebelo
was subject to the operation of the sunset clause until July 2017, because he was
earning so much more than the maximum for his level, whilst other sunset employees
were only subject to the operation of the clause for one or two wage increases , such
as Ms Pienaar, who testified on behalf of the Respondent.
[89] The differentiation with respect to the sunset employees is admitted. They were
denied a wage increase for a period until their basic remuneration fitted into the
approved salary band for the positions they occupied. It is undisputed that t he
Applicants who were subject to the operation of the sunset clause were treated
differently from other permanent employees in that they did not receive the wage
increases the other permanent employees received.
[90] The Applicants’ case is that the only basis for the denial is their status as fixed
term employees as the denial was based only on the fact that they had negotiated and
agreed to fixed term contracts with higher salaries. The denial is arbitrary and irrational.
[91] As differentiation is established, the second question is whether the
differentiation bears a rational connection to a legitimate purpose, or put differently,
whether the conduct complained of is rational.
24
[92] It is common cause that i n 2003 when the sunset employees converted from
permanent to fixed term contract employees, they were offered an incentive, or
“sweetener” of a salary increase of between 5% and 10% to convert their contracts of
employment to fixed term. The effect of this was that the converted employees earned
approximately 10% more than the permanent employees, and this gap increased even
more over time when the fixed term contract employees were given annual salary
increments on their total packages.
[93] Mr Boda for the Applicants submitted that the 10% increase which was offered
as an incentive at the time of conversion from permanent to contract, was not a
selective offer, but was an offer made to all employees in the same grades, hence it
was not rooted in discrimination . He submitted that the offer and acceptance were
rational and that in this, the Respondent achieved the benefit that it extracted better
performance at a lower cost because the fixed term contract employees had to work
harder to obtain performance bonuses. Mr Boda submitted that the Respondent’s
denial of wage increases to the sunset employees was based on a flawed and
discriminatory premise that it was obliged to suspend salary increases to them to
achieve equality. He argued that it was nothing but an attempt to claw back what was
agreed.
[94] The Respondent’s case is that the application of the sunset clause was
necessary, fair and rational. The sunset clause provided a mechanism to equalise the
limited number of converted employees whose remuneration exceeded the maximum
permissible remuneration for their level in order to bring them back within the agreed
salary bands for the level they were on.
[95] In my view, the sunset clause is rational as it bears a rational connection to a
legitimate purpose, namely to serve as an equalisation process.
[96] The rationale for the sunset clause is evident - the sunset employees were
being paid well above their pay grade upon conversion, and as such, they were in a
position far more advantageous than the other permanent employees. The operation
of the sunset clause had a limited effect and it did no more than place each affected
employee in the same position as the highest-paid permanent employee on the same
25
level. It did so in the least intrusive way as the sunset clause did not require that the
remuneration of any converted employee be reduced but rather provided that the
converted employee would not receive further salary increases for a limited period in
the future. The result is that the converted employees continued to be paid above the
maximum remuneration for their level for the entire duration of the sunset clause.
[97] Mr Lebelo continued to receive an annual total remuneration that exceeded the
maximum remuneration that an ordinary permanent employee at his level could earn
for some four years after conversion. He was earning 33% more than the maximum
remuneration of an equivalent permanent employee. It took equivalent permanent
employees four years (assuming they received maximum benefits) to reach the salary
level Mr Lebelo was enjoying from the date of conversion.
[98] There is no merit in the argument that the M unicipality was attempting to claw
back what was agreed. The offer to pay a 10% increase as an incentive to convert
from permanent employment to fixed term contract, was offered at the time when a
specific conversion process was embarked upon. When the converted employees,
many years later converted back to permanent employment, the incentive was no
longer relevant. It was not intended to be implemented on a permanent basis but was
specifically offered to employees to convert to fixed term contracts. The 10% incentive
was not only applicable to the conversion as aforesaid, but it resulted in a
differentiation, to the benefit of the fixed term contract employees. When those
employees converted back to permanent employment, their positions had to be
equalised with those of other permanent employees, because they were no longer in
a different category, but they too became permanent employees.
[99] The dispensation in terms of which the Applicants were entitled to a salary of
10% higher than permanent employees, ended when they converted back to
permanent employment in 2012 and the Municipality had to equalise the position of all
permanent employees.
[100] Having found that the differentiation was rational, the next issue for
consideration was whether the differentiation amounted to discrimination because
even if the differentiation is rational, it might still amount to discrimination.
26
[101] The Constitutional Court has interpreted ‘discrimination’ and concluded that the
word ‘discrimination’ is used in a pejorative sense, and not in a merely neutral sense.
In Prinsloo v Van der Linde and another,
9 the Court considered the concepts of
differentiation and discrimination, and it was held that:
‘T he proscribed activity is not stated to be “unfair differentiation” but is stated to be
“unfair discrimination”. Given the history of this country we are of the view that
“discrimination” has acquired a particular pejorative meaning relating to the unequal
treatment of people based on attributes and characteristics attaching to them.’
[102] The Constitutional Court confirmed that the right to equality means the right to
be treated as equals, which does not always mean the right to receive equal treatment.
[103] This Court observed in Ntai and others v SA Breweries Ltd
10 (Ntai):
‘However, it also means that a mere differentiation in pay between employees who do
similar work or work of equal value does not mean, in itself, that an act of discrimination
is being perpetrated. It is only when such differentiation is based on or linked to an
unacceptable ground that it becomes discrimination within its pejorative meaning.’
[104] The Applicants’ alternative suggestion for equalisation was that the
Respondent should have increased every permanent employee’s remuneration at the
time of conversion to match the converted employees. This suggestion was put to Ms
Pienaar in cross-examination. This was obviously possible in principle, as Ms Pienaar
acknowledged.
[105] In my view, the proposed alternative of increasing salaries across the board so
that every employee received a basic salary that was higher than the maximum for
their level, would be a nonsensical solution to the problem. It would have been
outrageous to increase salary levels across the board (increasing salaries by up to
33%) to accommodate 97 out of the 916 employees who were converted, a figure that
would be much higher if the other existing permanent employees were also included.
9 [1997] ZACC 5; 1997 (3) SA 1012 (CC) at para 31.
10 [2000] ZALC 134; (2001) 22 ILJ 214 (LC) at para 17.
27
Such would have exposed the Municipality to a significant increase in its wage bill and
would have undermined the very purpose of having salary scales at all.
[106] Be that as it may, the relevant question is whether what the Respondent did
amounted to unfair discrimination. To determine whether the differentiation amounts
to unfair discrimination, a two- stage analysis must be followed. The first stage is to
determine whether the differentiation amounts to discrimination and if it does, the
second stage is to determine whether the discrimination is unfair.
[107] The question at the first stage of the enquiry was whether, objectively, the
arbitrary ground alleged by the Applicants, is based on attributes and characteristics
which have the potential to impair the fundamental human dignity of persons as human
beings or to affect them adversely in a comparably serious manner.
[108] Following the Harksen test, an applicant for relief arising from discrimination on
an arbitrary ground must show that the differentiation is based on attributes and
characteristics which impair the fundamental dignity of persons as human beings or
affect them adversely in a comparably serious manner. An attribute or characteristic
is an immutable human characteristic or a quality or attribute which belongs to a
person and which is inherently part of someone and it should be this characteristic or
quality that is the reason for the differential treatment.
[109] In my view, the application of the sunset clause did not constitute discrimination.
The clause was not based on any immutable human characteristic or attribute, but it
was based on the need to ensure equality amongst permanent employees, working
for the same employer and performing similar or the same functions.
[110] In Ntai, the Court remarked that
‘The premium placed on the achievement of equality is evident where this ideal is
identified as a value on which the democratic South African state is founded (in terms
of section 1(a) of the Constitution). In other words, not mere formal equality but
28
substantive equality is the constitutional goal in the sense of outcome of results and
not merely equality of treatment…’11
[111] The Applicants failed to establish the cumulative requirements that the
differentiation is not rational and that it amounts to discrimination and they failed to
prove that the differentiation caused by the implementation of the sunset clause
amounts to discrimination. In the absence of a finding that discrimination exists, there
is no need to consider the second stage of the enquiry, namely whether the
discrimination was unfair. That is the end of the enquiry.
Annual service bonus
[112] I t is common cause that the Joburg Conditions of Service provides that
permanent employees are entitled to receive an annual service bonus for each
completed year of service terminating on 31 October, in the month following that date.
The service bonus is equivalent to 1/12
th of the employee’s annual salary and it is paid
as an 8,3% proportion of the basic salary.
[113] As fixed term contract employees, the Applicants were entitled to performance
bonuses, but upon conversion to permanent employment, their entitlement to
performance bonuses ceased. Since the Applicants became permanent employees,
they accept that they cannot continue to receive a performance-linked bonus and their
case is that they should be treated in the same manner as other permanent employees,
and receive an annual service bonus, thus being treated with equality regarding this
benefit.
[114] The Applicants’ case is that they do not receive an annual service bonus as
provided for in the Joburg Conditions of Service and that it demoralised them, and
caused them to suffer indignity and financial prejudice, as they were in effect earning
less than before, since they did not receive any bonus.
11 Ntai at para 14.
29
[115] The Respondent’s case on the other hand is that the annual service bonus is
included in the total annual remuneration package that the A pplicants receive as
permanent employees. They receive a portion of the bonus each month as part of their
monthly remuneration . The Respondent submitted that the only way the Applicants
were treated differently from other permanent employees in respect of the annual
service bonus , is that they receive their bonus as instalments with their monthly
remuneration, while other permanent employees receive it as a lump sum at the end of
the year. The Respondent’s case is articulated as:
‘The respondent has treated all of the applicants in exactly the same manner. The
respondent admits that in 2013 [it] differentiated between the applicants and other
permanent employees in relation to the manner in which their annual bonuses were paid
and the manner in which their entitlement to an annual increase was determined. The
respondent however denies that such differentiation amounts to discrimination. The
basis on which the applicants were treated differently is as follows: in respect of the
annual bonus that all permanent employees are entitled to receive, the only basis on
which the applicants were treated differently is that they received their bonus in monthly
instalments, together with the rest of the monthly remuneration, where other permanent
employees receive their bonus as a lump sum at the end of the year.’
[116] In Mbana v Shepstone & Wylie,
12 the Constitutional Court held that:
‘[26] The first step is to establish whether the respondent’s policy differentiates
between people. The second step entails establishing whether that differentiation
amounts to discrimination. The third step involves determining whether the
discrimination is unfair. If the discrimination is based on any of the listed grounds in s
9 of the Constitution, it is presumed to be unfair.
[27] It must be noted, however, that once an allegation of unfair discrimination based
on any of the listed grounds in s 6 of the EEA is made, s 11 of the EEA places the
burden of proof on the employer to prove that such discrimination did not take place
or that it is justified. Where discrimination is alleged on an arbitrary ground, the burden
is on the complainant to prove that the conduct complained of is not rational, that it
amounts to discrimination and that the discrimination is unfair.’
12 [2015] ZACC 11; (2015) 36 ILJ 1805 (CC) at paras 26 - 27.
30
[117] The Applicants’ case is that they were not paid service bonuses at all and as
such, they were treated differently from other permanent employees and in a manner
that is irrational and/or unfair . S uch differentiation will amount to arbitrary unfair
discrimination.
[118] The Respondent’s case is that the only way the Applicants were treated
differently from other permanent employees, is that they received their bonus as
instalments with their monthly remuneration, while other permanent employees received
it as a lump sum at the end of the year.
[119] The first question to be considered is whether the Applicants were treated
differently from other permanent employees in respect of the payment of an annual
service bonus. T he first step is to establish whether the Respondent differentiated
between the Applicants and other permanent employees in respect of the payment of
an annual service bonus.
[120] The Applicants submitted that they want to be treated the same as other
permanent employees in respect of the payment of an annual service bonus . The
annual service bonus is equivalent to 1/12
th or 8,3% of an employee’s basic salary and
in my view, the pertinent question is whether the Applicants’ total CTC remuneration
includes the 8,3% service bonus or not. If it is not included in the Applicants’ total CTC
remuneration, the Applicants are entitled to it, as are all permanent employees, but if
the 8,3% is indeed included, their claim must fail as they are not entitled to receive
8,3% more than other permanent employees – on their own version, they deserve
equal treatment and they are only entitled to the same. In short: the Applicants must
get what other permanent employees get.
[121] If this Court finds that there was no differentiation, the effect is that an essential
element of the Applicants’ case is not established. Mr Boda conceded that if the
service bonus is indeed included in the Applicants ’ remuneration, there is no
differentiation and that would be the end of the case.
[122] Is there merit in the Respondent’s case that the Applicants’ annual service
bonus is indeed included in their total CTC remuneration?
31
[123] The conversion to permanent employment happened in terms of the collective
agreement. Clause 7 of the collective agreement provided that notwithstanding their
conversion to permanent employment, all converted employees would continue to be
remunerated on an annual total cost to company basis, expressed as a single annual
amount. Other permanent employees are not paid on this basis. They receive a
monthly basic salary, contributions from the Respondent in the form of allowances and
benefits insofar as they qualified for them and a service bonus once a year. Ms Pienaar
explained that the effect of the c ollective agreement was that the existing annual
remuneration of each converted employee was to be equalised so that it matched the
total remuneration to which a permanent employee would be entitled if they received
the maximum benefits and allowances to which they were entitled.
[124] Clause 7.3 of the collective agreement provided that the total remuneration
package of the affected employees is inclusive of “ the basic salary, allowances,
subsidies, benefits (employer and employee contributions ) and the service bonus.”
Annexure D to the collective agreement provided the actual formula to be used for this
purpose.
[125] The Applicants all expressly consented to the conversion of their fixed term
contracts to permanent employment and accepted the placement principles and the
terms and conditions of the conversion, as set out in the collective agreement.
[126] The evidence presented showed that the calculation , in accordance with the
aforesaid formula, starts with the total package of the fixed term contract employee. It
then deducts the maximum amounts a permanent employee could receive as an
employer contribution to medical aid, a housing subsidy and a travelling allowance. It
was not in dispute that these are all the allowances and subsidies that a permanent
employee is entitled to. The calculation then treats the nett amount as comprising the
basic salary, the pension fund contribution and the service bonus, as the pension fund
contribution and service bonus are paid as a proportion of the basic salary, at 15%
and 8.3% respectively. To determine the basic salary, the nett amount is then divided
up into these three separate components (basic, pension fund and service bonus).
The calculated “technical basic salary” can then be compared to the maximum
32
permissible basic salary for the relevant level of the employee, as per the approved
salary scales.
[127] The calculation includes an amount for the annual service bonus when making
the comparison between the actual remuneration being paid to the fixed term contract
employee and the maximum remuneration that an equivalent permanent employee
could earn. The formula in Annexure D makes clear that the amount of the annual
service bonus was recognised as a component of the total remuneration which all fixed
term contract employees, including the Applicants, would receive after their conversion
to permanent employment.
[128] The annual service bonus was included when the total annual remuneration a
permanent employee could earn, was calculated. This appears from the formula set
out in Annexure D to the collective agreement. It was confirmed in the application of
the formula to all of Ms Pienaar, Mr Lebelo and Ms Fuhri, where remuneration included
the basic salary, the maximum benefits and subsidies that a permanent employee
could receive, as well as the amount (8,3%) that such an employee on the same level
would receive as an annual service bonus.
[129] Although Ms Fuhri insisted that her total remuneration after conversion did not
include an amount in respect of the annual service bonus , mathematically this is not
possible. It was evident from the calculations presented in Court that it was only
possible to achieve an annual remuneration of R479 684.09 from a basic salary of
R23 103 per month if the service bonus is included as part of the remuneration
calculation. The basis for Ms Fuhri’s denial was simply that she was not told that the
annual service bonus was included in her remuneration, and this also did not appear
on her payslip. However, Ms Fuhri acknowledged that the descriptions of the
components of her remuneration on her payslip were not necessarily a reflection of
reality. They were structured for tax purposes, and she was at liberty to structure her
salary and descriptions the way she deemed fit.
[130] Ms Fuhri testified that the Applicants as fixed term contract employees are a
vulnerable class of employees . This might be so, but the c ollective agreement
converted them to permanent employees and removed that vulnerability.
33
[131] It is undisputed that the annual service bonus is equivalent to 1/12 th of an
employee’s annual salary and it is paid as an 8,3% proportion of the basic salary. To
show differentiation, the Applicants must show that they were paid 8,3% of their basic
salaries less than other permanent employees. The labels attached to the ‘allowances’
and ‘bonuses’ are meaningless and insignificant, as the Applicants were allowed to
structure their remuneration packages, to include for instance a computer or
entertainment allowance, which was nothing more than to name or create a label in
respect of certain portions of their salaries, primarily for tax purposes.
[132] The Applicants’ case is not about a breach of contract, or the unlawfulness of
or non-compliance with a collective agreement or a policy, but it is a claim for unfair
discrimination. It is not a claim about the label that was used to structure portions of
their total remuneration, and even if a wrong label was used, it does not constitute
discrimination. The substance of the claim is differentiation in that the Applicants were
not paid what was paid to other permanent employees and that they received less
than other permanent employees.
[133] The Applicants could not show that the Respondent did not pay them an annual
service bonus, as the evidence adduced, showing the inclusion of an 8,3% bonus in
the Applicants’ total remuneration packages, as a matter of mathematical calculation,
was not seriously challenged or rebutted during the trial. This must be distinguished
from what the Applicants perceived to be the factual case, from their contention that it
was not discussed with them or the ver sion that they did not make the calculations
themselves.
[134] The question of whether or not the service bonus is included in the Applicants’
total remuneration and therefore paid to them, does not hinge on the Applicants’
subjective beliefs or perceptions, but is a factual and objective one.
[135] The Applicants stated that they must get what other permanent employees get.
They are not entitled to a further lump sum service bonus payout, in addition to the
service bonus amount already built into their total packages , as that would create
differentiation and be unfair towards other permanent employees, who would not earn
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this additional amount, over and above the 8,3% bonus component they are currently
enjoying.
[136] Following the Harksen test, an applicant for relief arising from discrimination on
an arbitrary ground, has to show that the differentiation is based on attributes and
characteristics which impair the fundamental dignity of persons as human beings or
affect them adversely in a comparably serious manner. Put differently: the Applicant
must show that they were treated differently from other permanent employees, in a
manner that is irrational and unfair, and that such differentiation amounted to arbitrary,
unfair discrimination.
[137] In my view, the Applicants failed to show that there is differentiation in respect
of the annual service bonus. There is a difference in the way the annual bonuses were
paid, but the evidence showed that the Applicants received remuneration which
included 8,3% of their basic salary, which is the equivalent of the annual service bonus,
irrespective of what label wa s attached to it or how the Applicants were permitted to
structure their packages for tax purposes. The difference in manner of payment is not
differentiation for purposes of establishing a claim for discrimination in terms of the
EEA.
[138] Neither of the parties sought a cost order and in my view, this is a matter where
the interests of justice and fairness will be best served by making no order as to costs.
[139] In the premises, I make the following order:
Order
1. The Applicants’ case is dismissed;
2. There is no order as to costs.
Connie Prinsloo
Judge of the Labour Court of South Africa
Appearances:
For the Applicant: Advocate F A Boda SC
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Instructed by: Dockrat Inc Attorneys
For the Respondent: Advocate M Wesley SC with Advocate Y Peer
Instructed by: Mchunu Attorneys