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[2016] ZALAC 63
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Vermooten v Department of Public Enterprises and Others (JA91/2015) [2016] ZALAC 63; (2017) 38 ILJ 607 (LAC); [2017] 6 BLLR 606 (LAC) (14 December 2016)
IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA, BRAAMFONTEIN
Reportable
Case no: JA 91/2015
In the matter between:
Dr
JOACHIM
VERMOOTEN
Appellant
and
DEPARTMENT OF PUBLIC
ENTERPRISES
First Respondent
JN MATSHEKA NO
Second Respondent
THE GENERAL PUBLIC
SERVICE SECTOR BARGAINING
COUNCIL
Third Respondent
Heard:
22 September 2016
Delivered:
14 December 2016
Summary:
Where parties in a relatively equal bargaining position choose to
enter into a consultancy agreement
and not a contract of employment
and the consultancy agreement is not a sham, then in the absence of
any overriding policy considerations,
neither a tribunal nor a court
may ignore its terms. Held the person in question was not an
employee.
Coram:
Waglay JP, Ndlovu JA, and Landman JA
Neutral citation:
Dr Joachim Vermooten v Department of Public Enterprises and others
(LAC
:
JA 91/2015)
JUDGMENT
LANDMAN JA
Introduction
[1]
Dr Joachim Vermooten, the appellant, appeals against a judgment of
the Labour Court (Fourie AJ) that reviewed and set aside
an award by
an arbitrator, the second respondent, acting under the auspices of
the General Public Service Sector Bargaining Council,
the third
respondent (the Bargaining Council), that held that the appellant was
an employee of the Department of Public Enterprises,
the first
respondent (hereafter the DPE). The appeal is with leave of the court
a quo
.
[2]
The appellant filed its notice of appeal late but as there was no
objection and a full explanation for the delay was provided,
condonation was granted.
The
issue in dispute
[3]
This appeal relates to the issue whether the appellant is an employee
of the DPE. Section 213 of the LRA defines an employee
as:
‘
(a)
any person, excluding an independent contractor, who works for
another person or for the
State and who receives, or is entitled to
receive, any
remuneration
;
and
(b)
any other person who in any manner assists in carrying on or
conducting the business
of an employer.’
[4]
The issue arose this way. The DPE advertised a post for Director
Aviation. The appellant applied for the post and was interviewed.
During the interview, he stated that he could not accept the
remuneration that was offered. Later the DPE offered him a contract
as Specialist Aviation Consultant for a period of 12 months with
effect from 9 October 2006. Further contracts followed until March
2011 when the DPE decided against renewing the contract.
[5]
The appellant was dissatisfied and referred a dispute to the
Bargaining Council concerning a unilateral variation of a contract
(but, as Mr Gerber who appeared for the appellant, stated the
appellant contends that he, as an employee, has been unfairly
dismissed).
At the commencement of the arbitration, the DPE raised a
point
in limine
that the appellant was not an employee of the
DPE; rather he was an independent contractor and therefore the
Bargaining Council
did not have jurisdiction to arbitrate the
dispute.
[6]
The DPE made certain submissions to the effect that the appellant was
not an employee but led no evidence in support of its
preliminary
point. The appellant testified about the circumstances leading to his
appointment as a consultant, his work experience,
his other income
stream and generally, why he should be regarded as a public servant.
The arbitrator found in favour of the appellant.
The DPE successfully
reviewed the finding of the arbitrator.
A
jurisdictional fact
[7]
The question whether an applicant is an employee is a jurisdictional
fact that must be determined, in the event of a dispute,
by a
competent court. On what facts must this decision be made? In
Distinctive
Choice 721 CC t/a Husan Panel Beaters v The Dispute Resolution Centre
(Motor Industry Bargaining Council) and Others,
[1]
it was observed that:
‘
73.
In
Sanlam Life Insurance Ltd v
Commission for Conciliation, Mediation and Arbitration and Others
the Labour Appeal Court held that where the applicant disputed that
there was an employer-employee relationship (and therefore
that the
CCMA had jurisdiction) the Labour Court was called upon ‘to
decide de novo’ whether an employer-employee relationship
existed.
74. On the other hand, in
Phera v Education Labour Relations Council and Others,
Tlaletsi AJA also faced with the question of whether an
employer-employee relationship existed held that the question which
the
Labour Court had to consider when reviewing an arbitrator’s
award on the question of jurisdiction, was ‘whether the
material that was placed before the commissioner’ established
that the CCMA or bargaining council, as the case may be, had
jurisdiction to entertain the dispute.
75. In general, the
approach adopted by the Courts appears to have been to determine the
jurisdictional fact on the record which
served before the arbitrator
without being bound by any of the findings made by the arbitrator in
respect of that jurisdictional
fact. This is the approach I will
adopt for the purpose of this case, having proper regard to the
applicable principles relating
to the resolution of factual disputes,
but I do not think that the issues which I have raised above have
been authoritatively resolved.’
[Footnote omitted] S
[8]
There is no contradiction between these approaches. In both cases,
the Labour Court determines the question of jurisdiction,
as always,
on the basis of the evidence before it. Sometimes a party may seek to
place new evidence before the court. In many cases,
the parties are
content with the evidence relating to jurisdictional facts adduced
before a commissioner of the Commission for
Conciliation, Mediation
and Arbitration (CCMA) or an arbitrator at a bargaining council. In
this case, no new evidence was led.
The
facts
[9]
The DPE advertised a post for Director: Aviation. This was to be a
post on the establishment of the DPE. A five-year contract
was
envisaged. The appellant applied on form Z83 and was interviewed.
During the interview, he stated that he could not accept
the salary
attached to the post as it was too low. The representatives of the
DPE, at the interview, responded that a solution
could be found. This
solution would circumvent the restrictions of the PERSAL system
(Personnel and Salary System). But it was
the appellant who suggested
to the representatives of the DPE that the remuneration issue could
be solved by approaching it as
a specialist function because the DPE
had in its service a number of specialists who operated outside the
formal structure.
[10]
The DPE later offered him a contract as Specialist Aviation
Consultant for a period of 12 months with effect from 9 October
2006.
He was informed that this was the only way the DPE could pay the
desired salary as the PERSAL system would not permit the
DPE to pay a
higher salary than that attached to the post of Director: Aviation.
The appellant would be obliged to submit an invoice
monthly in order
to receive payment. The appellant accepted the contract.
[11]
When the first contract expired, the appellant was offered and
accepted a second contract on the same basis. The agreement
was
amended and extended until 31 March 2011. During March 2011, the DPE
informed the appellant that it would not be renewing the
contract.
[12]
The appellant testified that normally when a consultant is engaged
there is a tender process and terms of reference are provided
and a
bid committee adjudicates the tender. This was not done in his case.
[13]
The appellant described his duties. He said that he took the lead for
the DPE in a number of transactions; including routine
matters and
those relating to the annual business plan of the SAA. He was engaged
in the monthly monitoring of the SAA and the
monitoring of the
quarterly reports. He was also involved in financial transactions. He
reported to the Deputy Director-General
of the Department of Public
Enterprises. His reports were supervised and edited by the Deputy
Director-General.
[14]
He was provided with a cellphone and a 3G card. He was given a
computer. Staff were allocated to him as well as files. He was
required to apply for leave. He did not receive a pension. Nor did he
receive medical aid. PAYE at 25% was deducted from his remuneration
He said that he was required to sign a work performance agreement,
but was unable to produce a copy of such an agreement. He earned
about R60 000 from accounting work that he did for family companies
involving his siblings. He was sometimes designated as an acting
Deputy Director-General for the purpose of making submissions to
Parliament.
Submissions
on behalf of appellant
[15]
Mr Gerber took a multipronged approach to the issue whether the
appellant was an employee of the DPE. He contended that this
Court
should pay regard to substance rather than form. Undoubtedly, this is
the correct approach.
[16]
Mr Gerber impressed upon us that although section 200A of the Labour
Relations Act 66 of 1995 (LRA), which provides a rebuttable
presumption as to who is an employee was not applicable in the case
of the appellant on account of his earnings, it was permissible
to
use the presumption as a guide for determining whether a person is,
in reality, an employee or an independent contractor. See
Denel
(Pty) Limited v Gerber (Denel
).
[2]
In the same vein, we were referred to the Code of Good Practice: “Who
is an Employee?” published in terms of section
200A(4) read
with section 203 of the LRA.
[3]
[17]
It is unnecessary to set out the details of the presumption or that
of the Code because I accept that, absent the consultancy
contract,
the appellant would be performing the duties of an employee.
[18]
Mr Gerber referred to the various tests, which had been adopted by
the courts of law in order to determine whether a person
is an
employee, including the dominant impression test, the organisational
test and the economic dependency test as outlined in
the
Denel
decision (supra). The
Denel
judgment was in turn, adopted by this Court in
State
Information Technology Agency (SITA) (Pty) Ltd v CCMA and
Others
[4]
.
[5]
The weakness in the economic dependency test, which describes itself
as a reality test, is that it does not pay attention to all
the facts
including the contractual relationship between the parties.
[6]
But this test needs not be applied where the person in question is,
in reality, an independent contractor, then he or she is not
an
employee as defined by the LRA.
[19]
In
Chirwa
v Transnet Ltd and Others,
[7]
Ngcobo J (as he then was) quoted the Explanatory Memorandum
[8]
to the LRA that:
‘
The
political dimension of the state as employer, more particularly the
fact that its revenue is sourced from taxation and that
it is
accountable to the Legislature, gives rise to unique and distinctive
characteristics of state employment. For example, the
state can
invoke legislation to achieve its purposes as employer and its levels
of staffing, remuneration and other matters are
often the product of
political and not commercial considerations. This uniqueness
does not, however, justify a separate legal
framework.’
[20]
Unlike the private sector, a State department such as the DPE may not
remunerate employees as it sees fit. The doctrine of
legality and
legislation dictate that only the remuneration that is prescribed,
from time to time, may be paid. The PERSAL used
by the civil service
is based on and reflects the authorised remuneration payable to a
civil servant on a specific rank. Remuneration
bands are linked to
the ranks within a State department. A civil servant may only be
remunerated through the PERSAL system. PERSAL
also functions as a
means of ensuring that State departments abide by the law as regard
remuneration of their officials.
[21]
There were several legitimate ways for the DPE to utilise the special
knowledge and experience of the appellant. The two that
the DPE
considered were to employ the appellant as an employee on a contract
basis or as a consultant on a different contractual
basis.
[22]
The appellant declined the first option because the level of
remuneration was too low. Given his qualifications and level of
expertise, it is understandable that he valued his services at a
higher rate. The DPE wished to acquire his labour and expertise
but
it was not legally possible to remunerate him as their Director:
Aviation on a salary scale other than the one prescribed for
Directors in the civil service. The DPE accepted the appellant’s
suggestion for his appointment as a consultant at a higher
rate than
was applicable to the post envisaged. The appellant was clearly in a
good bargaining position and able to influence his
rate of
remuneration.
[23]
Mr Gerber submitted that the consultancy contract was a valid one. He
is correct. Although the motive for entering into a consultancy
agreement was to avoid the limitations of the remuneration prescribed
for the post, that was not an illegal purpose. See the remarks
in
Automotive
Tooling Systems (Pty) Ltd v Sarel Johannes Wilkens and Others
:
[9]
‘
The
court below held the service agreements unenforceable in their
entirety because, they had been concluded in
fraudem
legis
, to circumvent the provisions of
the Labour Relations Act 66 of 1995 (in particular those relating to
collective bargaining.) The
grounds for that conclusion were that
they purported to create relationships of independent contractors
between the appellant and
each of the first and second respondents
whereas the substance of the relationship was one of employment. This
does not appear
to me to be a sound conclusion. The mere fact that a
contract is unsuccessfully designed to escape the provisions of the
law does
not in itself render it unenforceable. It is unenforceable
only if the true nature of the relationship is one that the law
forbids…’
[Footnotes omitted]
[24]
Mr Gerber submitted that there was no need to link the appellant to a
post within the structure of the DPE. He contended that
the appellant
could simply be declared an employee of the DPE. There may be room
for this approach in different circumstances eg
should a third party
seek to hold the DPE liable for acts performed by the appellant in
the scope and course of carrying out or
formulating policy on behalf
of the DPE. But it is not legally permissible for the DPE to have an
employee in the Department without
a rank and a prescribed level of
remuneration.
[25]
Finally, there can be no doubt that the appellant and the Department
consciously and deliberately elected to structure their
relationship
as one other than an employment relationship. It is permissible to do
this.
See
Universal Church of the Kingdom of God v Myeni and Others
.
[10]
[26]
The consultancy agreement was not a sham. Therefore, in the absence
of any overriding policy considerations, neither a tribunal
nor a
court may ignore its terms. Where the parties are in a relatively
equal bargaining position and consciously elect one contract
or
relationship over another, the legal effect should be given to their
choice. To allow one of these parties to change or contend
that the
legal relationship between them is something else holds important
implications for the integrity of the legal framework
of departments
of State. The appellant seeks to be defined as an employee and so, it
seems to me, to achieve what could not be
achieved when negotiations
began ie to be the Director: Aviation at a remuneration level
exceeding double the prescribed remuneration
and with the inclusion
of all the benefits which were previously excluded by reason of the
consultancy agreement. In other words,
he wishes to become part of an
organisation which could not and still cannot, accommodate him at his
desired remuneration level.
[27]
In the result, the appeal must fail. There is no reason why costs
should not follow the result.
Order
[28]
I make the following order:
The
appeal is dismissed with costs.
______________
AA Landman
Judge of the Labour
Appeal Court
I
concur,
_____________
B Waglay
Judge President of the
Labour Appeal Court
I
concur,
_______________
SK Ndlovu
Judge
of the Labour Appeal Court
APPEARANCES:
FOR THE
APPELLANT:
Adv H Gerber
Instructed by O J Botha
Attorneys, Pretoria
FOR THE FIRST
RESPONDENT:
Adv F J Nalane
Instructed
by Molefe Dlepu Attorneys, Pretoria
[1]
(2013) 34 ILJ 3184 (LC).
[2]
2005 (26) ILJ 1256 (LAC).
[3]
See GN 1774 in Government Gazette 29445 of 1 December 2006.
[4]
[2008] BLLR 611
(LAC).
[5]
See the remarks by N Countouris in ‘Uses and Misuses of
“Mutuality of Obligation” and the Autonomy of Labour
Law’ UCL Labour Rights Institute On-Line Working Papers –
LRI WP1/2014.
[6]
See A van Niekerk ‘Personal Service Companies and the
definition of “Employee”’ 2005 (26) ILJ 1904-1908.
[7]
[2007] ZACC 23
;
2008 (4) SA 367
(CC);
2008 (3) BCLR 251
(CC) at para 101.
[8]
Para 54 of the Memorandum reproduced at 2005 (26) ILJ 1094.
[9]
Unreported
judgment of the Supreme Court of Appeal dated 28 September 2006,
under case no 581/05)
2007
(2) SA 271 (SCA)
at
para 6.
[10]
[2015] 9 BLLR 918
(LAC); (2015) 36 ILJ 2832 (LAC) (28 July 2015).