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[2019] ZALAC 29
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Solidarity obo Scholtz M v Gijima Holdings (Pty) Ltd (JA131/2017) [2019] ZALAC 29; (2019) 40 ILJ 1216 (LAC); [2019] 8 BLLR 774 (LAC) (26 February 2019)
IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case
no: JA131/2017
In
the matter between:
SOLIDARITY
OBO scholtz m
Appellant
and
gijima
holdings (pty) ltd
Respondent
Heard:
06 November 2018
Delivered:
26 February 2019
Summary:
Claim for unlawful
deduction – the employer and the employee concluding an
Employee
Loyalty Incentive Scheme Agreement (the ELISA)
in terms of which the employee would
remain in the employ of the employer for a period of 12 months
following the payment of a retention
bonus – employer notifying
the employee of the termination of the ELISA – employee urging
the employer to pay the bonus-
the employer complying with the
request by effecting payment of the bonus– thereafter the
employee resigning – the
employer deducting the retention bonus
paid to employee-
Held
that:
The
purpose of the ELISA is to pay the retention bonus in advance of the
services to be rendered by an employee in order to incentivise
or
encourage such an employee to remain in employment for the retention
period as specified in the agreement – further, there
can be no
question that the ELISA is a reciprocal contract. Properly construed
Clause 7.1 of the ELISA makes it plain that where
a beneficiary
terminates his/her employment with the employer, after the effective
date and before the expiry of the retention
period of 12 months,
he/she shall repay the full amount of bonus received.
Held
further that - it was difficult to discern, in the context of a
bilateral contract in issue, that there could be performance
without
any counter-performance. The two were inextricably linked. The
employer performed in terms of the ELISA thus employee had
to
reciprocate by tendering his counter-performance. This meant that he
had to continue rendering his services to the employer
for a period
of at least 12 months following the payment of the retention bonus.
Labour
Court’s judgment upheld and appeal dismissed with costs.
Coram:
Phatshoane ADJP, Sutherland JA and Kathree-Setiloane AJA
Judgment
PHATSHOANE
ADJP
[1]
Solidarity, a
trade union acting on behalf of Mr Mornѐ Scholtz, the
appellant, instituted proceedings in the Labour Court
claiming
payment in the amount of R115 448.99 together with interest,
less tax and other statutory deductions. It contended
that Gijima
Holdings (Pty) Ltd, the respondent, unlawfully deducted the aforesaid
sum from the last salary payable to Mr Scholtz.
On 18 November 2016,
the Labour Court (
per
Molahlehi J) dismissed the claim with costs. This appeal lies against
that decision with leave of the Labour Court.
[2]
Mr Scholtz
commenced employment with the respondent as a programmer on 01 June
2004. On 18 September 2012 he concluded an agreement
with the
respondent styled an Employee Loyalty Incentive Scheme Agreement
(ELISA) also referred to as the “Retention Bonus.”
Clause
3 of the ELISA captures the recital as follows:
‘
The
company is committed to managing the continuity of its workforce by
means of
inter alia
,
the grant of a Retention Bonus to beneficiaries of choice to retain
the services of the said beneficiaries and subsequently protect
its
market position within the Information Technology Industry vis-à-vis
its main competitors. The company has elected to
grant such benefit
to the beneficiary and the beneficiary has accepted the said grant on
the basis as morefully stipulated in this
agreement. The investment
made by the company shall be realised through the continued rendering
of specific services by the beneficiary
for the specific period(s)
and according to the specific terms and conditions contained in this
agreement and in the annexure hereto.’
[3]
Clause 5.1 of
the ELISA stipulates that the retention bonus is equal to 50% of the
beneficiary’s annual guaranteed salary
as at the effective date
and as contained in annexure A to the agreement. The respondent
undertook to pay Mr Scholtz a retention
bonus in September of each
year of the contractual period with the first payment being due and
payable in September 2012 and the
final payment in September 2015.
[4]
The ELISA
would remain valid for a period of 36 months from the effective date
unless terminated in accordance with its terms. It
does not have a
termination clause. However, Clause 8.2 thereof provides that “…
any
deletion or cancellation of this agreement shall only be of effect
when reduced to writing, signed by both the company and the
beneficiary and added hereto as an addendum.”
More pertinently, Clause 7 encapsulates certain conditions precedent
to the termination of the scheme. It stipulates in part:
‘
In
the event of termination of this agreement, the following conditions
shall prevail:
7.1
Where the beneficiary terminates its employ with the company after
the effective date and before the expiry of the initial period
of
12(twelve) months, (the “initial Period”), the
beneficiary shall repay the full amount received by the beneficiary
in terms of A.5.1 of annexure A;
7.1.2
Where the beneficiary terminates its employ with the company during
12 (twelve) month period subsequent to the initial period,
the
beneficiary shall forfeit the amount reserved for such subsequent
period and no pro-rata payment of the amount shall apply;
and…’
[5]
Apparent from
Clause 7 above is that a beneficiary of the scheme, having received a
benefit in advance, before the commencement
of the relevant retention
cycle, would be required to remain in the employ of the respondent
for a period of 12 months in respect
of each retention bonus already
paid.
[6]
Mr Scholtz
received his first retention bonus in the amount of R36 590.40
on 18 September 2012, the effective date. He further
received a
retention bonus in the amount of R73 180.80 at the end of
September 2013.
[7]
In a letter
dated 18 June 2014 all beneficiaries of the scheme, including Mr
Scholtz, were notified by the respondent that the scheme
was
terminated and that any associated agreements, that may have arisen
as a result of their participation in the scheme, were
equally
terminated. On that same date, Mr Scholtz and one of his colleagues
met Ms Julia De Vries, the Human Resource Business
Partner of the
respondent, to express their dissatisfaction with regard to the
cancellation of the scheme. They were aggrieved
by the short notice
received and that they would forfeit the bonus at the end of
September 2014. Ms De Vries informed them that
the matter would be
escalated to the Executive Committee of the respondent.
[8]
Subsequent to
discussions by the Executive Committee a further letter dated 20 June
2014, couched in similar terms as the previous
letter of 18 June
2014, was directed to the employees of the respondent. The relevant
part reads:
‘…
We
hereby advise you that the current Employee Loyalty Incentive Scheme
is hereby terminated and that any associated agreements
that may have
arisen as a result of your participation within the scheme is equally
terminated.
The payment to the value of
R109 771.20 that was payable to you in September will be paid to you
as part of September 2014 payroll
.’
(My emphasis)
[9]
At the end of
September 2014, as advised in the aforesaid letter of 20 June 2014,
Mr Scholtz duly received his third and final retention
bonus in the
amount of R109 771.20. Following this, at the end of October
2014, he tendered his resignation from the services
of the
respondent, with his last day of work being on 28 November 2014.
[10]
Mr Scholtz’s
remuneration for November 2014 was R66 812.99 and his leave pay
R52 207.08. The respondent deducted
its retention bonus in the
amount of R109 771.20 from this salary package or terminal
benefits and therefore did not receive
any payment. Although Mr
Scholtz’s claim is for the payment of the amount of R115 448.99
he conceded during the trial
that the amount deducted from his
terminal benefits was the retention bonus in the amount of
R109 771.20.
[11]
The
respondent, on the one hand, contended that it was entitled to effect
the deduction in terms of Clauses 7.1 and 7.1.2 of the
ELISA because
Mr Scholtz was bound to remain in its employ for a period of 12
months following the payment of the retention bonus.
Solidarity and
Mr Scholtz, on the other, argued that the deduction ought not to have
been made because on 20 June 2014 the respondent
unilaterally
cancelled the ELISA and Mr Scholtz was consequently no longer bound
by its terms.
[12]
On 15 April
2015 Solidarity and Mr Scholtz proceeded to demand payment of the
amount of R115 448.99 from the respondent. When
this was not
forthcoming, they filed a Statement of Case with the Labour Court on
13 May 2015 claiming payment of the amount in
question.
[13]
The Labour
Court found that the respondent’s termination of the ELISA
without Mr Scholtz’s consent amounted to breach
of the
contract. It explored the options available to an innocent party
faced with the breach. It observed that he or she could
either accept
the breach and sue for breach of contract or institute a delictual
claim for damages or reject the breach and hold
the offending
employer to the contract by demanding specific performance.
Alternatively, the innocent party may persuade the offending
party to
comply with the agreement. The Court remarked that the latter option
appeared to have been what had transpired in this
case. It found that
the respondent acceded to Mr Scholtz and the other employees’
plea that it complies with the terms of
the scheme by paying them
their retention bonuses at the end of September 2014. The Labour
Court took the view that the respondent
complied with the terms of
the scheme and that Solidarity and Mr Scholtz were not entitled to
claim specific performance.
[14]
The Labour
Court concluded that the respondent was justified in deducting the
retention bonus from Mr Scholtz’s salary following
his untimely
resignation. This did not offend against s34 of the BCEA because
s34(1) allows an employer to make a deduction from
the salary of an
employee by agreement. The Labour Court furthermore accepted the
respondent’s contention that the deduction
in issue did not
constitute “loss or damage” suffered by the respondent as
envisaged in s34(2) of the BCEA. As already
alluded to, the Labour
Court dismissed the claim by Solidarity and Mr Scholtz with costs.
[15]
Solidarity and
Mr Scholtz contended, before us, that the ELISA was unilaterally
terminated by the respondent. They argued that the
Labour Court
failed to attach sufficient weight to the contents of the
respondent’s notices of termination of the ELISA as
contained
in its letters of 18 and 20 June 2014. Therefore, the Labour Court
erred in holding that the deduction of R109 771.20
was based on
an agreement. They also argued that Mr Scholtz was, in any event, not
bound by the ELISA with effect from 30 June
2014 because he accepted
the respondent’s cancellation of the agreement.
[16]
Solidarity and
Mr Scholtz’s further argument focussed primarily on s34 of the
BCEA. They contended that their claim is not
one of specific
performance or delictual damages but has its origin in s34 read with
s 77(3) of the BCEA. They argued that the
respondent did not specify
in its pleadings whether it relied on s34(1)(a) or s34(1)(b) of the
BCEA in effecting the deduction
and neither did the Labour Court
identify a section in the BCEA justifying the deduction. They
furthermore contended that the Labour
Court failed to appreciate that
the respondent ought to have sued Mr Scholtz for breach of contract
or instituted a delictual claim
for damages. Lastly, it was
contended, assuming that the respondent was entitled to make the
deductions, that it could not have
deducted more than a quarter of Mr
Scholtz’s remuneration as this is precluded by s34(2)(d) of the
BCEA.
[17]
The key issue
arising for determination is whether the respondent was entitled to
deduct its retention bonus in the amount of R109 771.20
from Mr
Scholtz’s terminal remuneration following his resignation from
its service before the expiry of the 12 months’
period as set
out in the ELISA.
[18]
Solidarity and
Mr Scholtz gave various versions, during the trial, pertaining to
their entitlement to retain the bonus following
Mr Scholtz’s
resignation, which were not supported by the case they made out in
their papers. For instance, Mr Scholtz testified
that the payment of
the retention bonus was a compromise reached in light of the abrupt
termination of the ELISA by the respondent.
As his evidence
progressed he intimated that it had never been said by the respondent
that this was a compromise. He also indicated
that the respondent
cancelled the ELISA and he accepted the repudiation by signing the
letter of 20 June 2018. He later said that
he signed the letter
merely to acknowledge its receipt. When Solidarity and Mr Scholtz
were asked what their course of action was
they stated: “
the
case is premised on an unlawful deduction which was done in November
not September monies that should have been paid. The monies
were
paid
.”
This makes no sense as the deduction that was made in November 2014
was in respect of the retention bonus that was paid
in September
2014.
[19]
Section 34 of
the BECA provides in part:
’
34
Deductions and other acts concerning remuneration
(1)
An employer may not make any
deduction from an employee's remuneration unless-
(a)
subject to subsection
(2), the employee in writing agrees to the deduction in respect of a
debt specified in the agreement; or
(b)
the deduction is
required or permitted in terms of a law, collective agreement, court
order or arbitration award.
(2)
A deduction in terms of
subsection (1)
(a)
may be made to reimburse an employer for
loss or damage only if-
(a)
the loss or damage
occurred in the course of employment and was due to the fault of the
employee;
(b)
the employer has
followed a fair procedure and has given the employee a reasonable
opportunity to show why the deductions should
not be made;
(c)
the total amount of
the debt does not exceed the actual amount of the loss or damage; and
(d)
the total deductions
from the employee's remuneration in terms of this subsection do not
exceed one-quarter of the employee's remuneration
in money.’
[20]
It is set out
perfunctorily in the pre-trial minutes that the Labour Court has
jurisdiction to hear the matter in terms of ss 34,
77(3) and 77A(e)
of the BCEA. However, it was never Solidarity and Mr Scholtz’s
pleaded case that the deduction of the retention
bonus was
impermissible in terms of s34 of the BCEA nor was this framed as an
issue for determination by Labour Court in the minutes
of the
pre-trial conference. In terms of the minutes of the pre-trial, the
Labour Court was required to determine whether: (a)
Mr Scholtz was
entitled to the payment of the retention bonus; (b) the respondent
had failed and/or neglected to pay him his “outstanding
remuneration”, and (c) the payment was due and payable. In my
view, Solidarity and Mr Scholtz’s argument on the applicability
or otherwise of s34 of the BCEA is misplaced and unsustainable. A
deduction in terms of s34 of the BCEA is made to reimburse the
employer for loss or damage in circumstances set out in s34(2) and
finds no application here.
[21]
In
the main, the purpose of the Employee Loyalty Incentive Scheme
Agreement (the ELISA) is to pay the retention bonus in advance
of the
services to be rendered by an employee in order to incentivise or
encourage such an employee to remain in employment for
the retention
period as specified in the agreement. In
Bonfiglioli
SA (Pty) Ltd v Panaino,
[1]
this Court expressed the nature of a retention bonus as follows:
‘
A
retention bonus, as the phrase suggests, is paid in order to retain
the services of an employee for a specified period. Payment
of the
retention bonus is contingent upon the employee entering into an
agreement with the employer to complete a specific period
of service
with the employer. The bonus can be paid after the expiration of the
period, during the period or at the beginning of
the period,
depending on the agreement between the parties. The purpose of a
retention bonus is,
inter alia
,
to avoid instability caused by employees, especially senior
employees, who would constantly search for greener pastures; to
retain
institutional memory and to promote a seamless continuity of
operations.’
[22]
Furthermore
in
Renaissance
BJM Securities (Pty) Ltd v Grup,
[2]
this Court held:
‘
Retention
agreements are therefore hand-outs with handcuffs or cheques with
chains. The employee is given money and in return, he/she
must give
up his/her freedom to leave the employ of the employer. It curtails
the employee's right to jump ship even when the ship
is being steered
straight in the direction of an iceberg.’
[23]
To
determine whether the respondent was entitled to make a deduction in
respect of the retention bonus already paid to Mr Scholtz
requires
the interpretation of the ELISA itself. In the oft-quoted
dictum in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[3]
the Court held as follows with regard to the interpretation of words
used in legislation or a contract:
‘
Whatever
the nature of the document, consideration must be given to the
language used in the light of the ordinary rules of grammar
and
syntax; the context in which the provision appears; the apparent
purpose to which it is directed and the material known to
those
responsible for its production. Where more than one meaning is
possible each possibility must be weighed in the light all
these
factors. The process is objective, not subjective. A sensible meaning
is to be preferred to one that leads to insensible
or unbusinesslike
results or undermines the apparent purpose of the document. …
The inevitable point of departure is the
language of the provision
itself, read in context and having regard to the purpose of the
provision and the background to the preparation
and production of the
document.’
[24]
In
the case of reciprocal contracts, one party undertakes to perform
specifically in exchange for a particular counter-performance
by the
other. In such cases, the principle of reciprocity applies: the first
party is not entitled to demand counter-performance
from the other
party unless the first party has himself or herself performed,
or is prepared to perform, as the case may be.
Whether the
obligations are reciprocal depends on the terms of the contract,
actual or implied. In each instance, it is basically
a question of
interpretation whether the obligations are so closely linked that
there exists the relation that one was undertaken
specifically in
return for the other.
[4]
[25]
There can be
no question in this case that the ELISA is a reciprocal contract.
Properly construed Clause 7.1 of the ELISA makes
it plain that where
a beneficiary terminates his/her employ with the company, after the
effective date and before the expiry of
the retention period of 12
months, he/she shall repay the full amount received in terms of A.5.1
of the annexure A to the agreement.
This much was conceded to by Mr
Scholtz. He went on to say that the retention bonus was paid in terms
of the ELISA which would
have endured for a period of four years. In
return for the payment, he had a corresponding duty to remain in
employment but did
not. When he realised that he had painted himself
into a corner he changed his tune by saying that the ELISA was
unilaterally cancelled
by the employer. His epic dilemma here is that
he did not accept the impugned repudiation. On the contrary, he urged
the respondent
to perform in terms of the accord. Regard being had to
Clause 8.2 of the ELISA, its cancellation “
shall
only be of effect when reduced to writing, signed by both the company
and the beneficiary and added hereto as an addendum.”
As to the acceptance of the repudiation, see
Lawsa
3
ed Vol 9
at 305 para 411, where the following is stated:
‘
Traditionally
it is said that repudiation is only “completed” or
rendered “absolute” or “definite”
by its
acceptance by the innocent party. Until there has been such
acceptance the repudiation may be nullified or undone by the
unilateral act of the innocent party (rejection of the repudiation)
or the repudiator him-or herself (retraction of the repudiation).
A
repudiation is also said to lapse if it is not acted upon by the
innocent party within a reasonable time.’
[26]
It is
difficult to discern, in the context of a bilateral contract such as
the present, whether there could be performance without
any
counter-performance. The two are inextricably linked. The payment to
Mr Scholtz of his third retention bonus at the end of
September 2014
by the respondent, after it had purportedly rescinded the ELISA, was
not a gift or a donation; in addition, Mr Scholtz
did not produce a
shred of evidence to substantiate his allegation that a compromise
had been reached between the parties, which
circumstance would have
extinguished his obligation to counter-perform.
[27]
By virtue of
the fact that the respondent performed in terms of the ELISA it
follows that Mr Scholtz had to reciprocate by tendering
his
counter-performance. This meant that he had to continue rendering his
services to the respondent for a period of at least 12
months
following the payment of the retention bonus. By appending his
signature to the ELISA and enjoying its concomitant benefits
he
consented that the amount of retention bonus paid out to him could be
deducted from his salary if he terminated his services
precipitately,
in other words, prior to the lapse of the retention period.
[28]
Mr Scholtz
acted in bad faith by accepting the payment of the retention bonus
and a month subsequent to that tendering his resignation.
If he did
not wish the agreement to be binding on him, he should not have urged
the respondent to pay him the bonus or, at least
upon its receipt, he
should have refunded the respondent. He did none of this. The Labour
Court correctly found that Mr Scholtz
ought to have appreciated that
the consequences of accepting the payment meant that he would have to
remain in the service of the
respondent for a given period, failing
which negative consequences would follow.
[29]
Solidarity and
Mr Scholtz’s claim was correctly dismissed by the Labour Court.
It follows that the appeal must fail. T
here
is no reason why the costs of the appeal should not follow the
result. I make the following order.
Order
1.
The appeal is
dismissed with costs.
_________________________
MV
Phatshoane
Acting
Deputy Judge President - The Labour Appeal Court
Sutherland
JA and Kathree-Setiloane AJA concur in the judgment of Phatshoane
ADJP
APPEARANCES:
FOR
THE APPELLANT:
Mr GJ Visser (Solidarity)
Instructed
by Solidarity
FOR
THE RESPONDENT:
Mr RJC Orton
Instructed
by Snyman Attorneys
[1]
(2015)
36 ILJ 947 (LAC)
954
E-G
para 25.
[2]
(2016)
37 ILJ 646 (LAC) at
650-651
para 17.
[3]
2012
(4) SA 593
(SCA) at para 18.
[4]
See ‘
Contract'
Vol 9
LAWSA
3ed para 379 -
By
ADJ van Rensburg, JG Lotz & TAR van Rhijn (updated by RD
Sharrock).