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[2019] ZALAC 59
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Masoga and Another v Pick n Pay Retailers (Pty) Ltd and Others (JA14/2018) [2019] ZALAC 59; [2019] 12 BLLR 1311 (LAC); (2019) 40 ILJ 2707 (LAC) (12 September 2019)

IN THE LABOUR APPEAL
COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case no: JA 14/2018
In the matter between:
LETHABO
MASOGA

First
Appellant
LEBOHANG
MAELESO

Second Appellant
and
PICK
‘N PAY RETAILERS (PTY) LTD
First
Respondent
ASSIST BAKERY 115 CC

Second Respondent
COMMISSION FOR
CONCILIATION,
MEDIATION

AND
ARBITRATION

Third Respondent
COMMISSIONER DJ
NGWENYA N.O.

Fourth Respondent
Heard:          15
May 2019
Delivered:    12
September 2019
Summary: Appeal
against review and setting aside of arbitration award dismissed; s22B
not to be used generally to determine who
the employer is.
CORAM: Waglay JP,
Jappie
et
Coppin JJA
JUDGMENT
COPPIN JA
[1]
This is an appeal against the order of the Labour Court (Moshoana J)
reviewing and setting
aside an arbitration award of the fourth
respondent (“the commissioner”), acting under the
auspices of the third respondent
(“the CCMA”), in favour
of the appellants. Leave to appeal to this Court having been granted
by the Labour Court.
[2]
Ultimately, the main issue in
this appeal is quite crisp, and it is whether the commissioner
acted
reasonably by applying section 200B of the Labour Relations Act
[1]
(“LRA”) to find that the appellants were to be
permanently employed by the first respondent (“PnP”),
rather
than by the second respondent (“AB”), in
circumstances where the appellants never invoked, or expressed
reliance on
the section. The Labour Court held,
inter
alia
,
that it was not reasonable for the commissioner to have done so. As
will be discussed, the answer to the question seems to me
to lie in
what exactly the dispute was that the appellants had referred to the
CCMA and whether there was a proper evidential basis
for applying the
section.
The background facts
[3]
PnP itself is a major retailer, operating a large number of hyper and
supermarkets
throughout South Africa. It sources most of its products
from third party manufacturers or wholesalers, but in certain retail
stores,
it operates in-store bakeries to produce baked goods. In
addition, it operates three manufacturing facilities separately from
its
retail stores and these facilities also produce goods
specifically for PnP. One of these facilities is a bakery
manufacturing plant.
It initially operated from PnP’s premises
in Meadowbrook, but at the time of the review it operated from
premises in Isando.
[4]
From the outset the bakery plant was operated on an outsourced basis.
Subsequently,
a decision was made to operate the plant as part of an
empowerment initiative where previously disadvantaged persons could
be trained
to operate self-standing bakeries capable of operating
independently of PnP (“the empowerment scheme”).
[5]
As part of this empowerment scheme, PnP contracted with AB to produce
certain baked
products for PnP for five years. AB is a separate legal
entity (close corporation) owned by its members and at the time of
the
review contracted about 30 persons, including the appellants, as
employees.
[6]
It is not disputed that the basis of the empowerment scheme was that
a business that
contracted with PnP under the scheme, such as AB, was
required to operate as an independent business, providing specific
products
to PnP for a period of five years. During this period, PnP
was to empower such a business with all the skills required to run a

self–standing bakery and this included management and technical
skills. In the course of the five years, the business had
to save
sufficient funds (capital) to enable it to function as self-standing
bakery independent of PnP at the end of that period.
There were a
total of six entities, including AB, involved in the scheme with PnP.
[7]
There were three agreements in place that regulated the empowerment
scheme between
PnP and AB. They were entered into on 1 August 2014
and more specifically are the following: a participation agreement
(concluded
between PnP, AB and its four members), a manufacturing and
supply agreement (concluded between PnP and AB), and lastly, an
association
agreement (concluded between AB and its four members).
[8]
AB was more specifically involved in the mixing of baking ingredients
which would
be supplied to the other five empowerment entities that
did the actual baking of the products that would then be supplied to
PnP.
As contemplated in the scheme agreements referred to, PnP
provided AB with access to its manufacturing facility in Isando, a
workplace,
a business infrastructure, intellectual property,
equipment and utensils, ingredients, packaging and labels, training,
mentorship
and general assistance. PnP also invoiced AB for various
services, and AB managed its own payroll.
[9]
The appellants had been engaged by AB as bakery assistants, although
they really worked
as “pickers”, whose function was to
pick ingredients from stores and to deliver them to AB’s
workplace where
AB’s other employees would mix the ingredients.
Their employment was in terms of written fixed term contracts of 12
months’
duration entered into on 1 March 2015. The terms of
their employment contracts were in all material respects the same and
are signed
by them. AB is described in those contracts as “the
employer” and the contracts were to commence on 1 March 2015
and
terminate on 1 March 2016.
Referral to the CCMA
[10]
On 17 November 2015, apparently acting in person (i.e. without legal
or union representation),
the appellants referred a dispute to the
CCMA in which they cited both, PnP and AB, as the “other party”
whom they
were in dispute with. In the referral form (which is signed
by the first appellant, but in which the second appellant is
described
as the other applicant) they state,
inter alia
, the
following: (a) that the “other party” is “an
employer”; (b) that PnP is the owner/or the person in
control
of the premises where they work; (c) that a temporary employment
service (“TES”) is involved and that AB is
that TES; (d)
under the heading “nature of the dispute”, they ticked
the box indicating that it is a section 198A LRA
( i.e., labour
broker) dispute. (The form contained several other boxes, including
one designated as “section 198C (part
– time
employment)”, one as “section 198 LRA” and one as
“section 198B (fixed term contract)”,
but those boxes
were not ticked); (e) that the dispute was about the
“interpretation/application of section 198A”;
and (f)
under the heading “result required”, that “applicants
to be deemed permanent by the client company”.
[11]
On 9 December 2015, the CCMA commissioner issued a certificate of
outcome following conciliation.
On the certificate, he indicates,
inter-alia
, that the dispute relates to “section 198B
and D”, i.e., of the LRA and that it may be referred to
arbitration.
[12]
On that same day, the appellants made a written request for
arbitration. In their request under
the heading “Dispute
Details” they indicate that the dispute relates to sections
198B and D of the LRA, i.e. as per
the certificate of outcome. Under
the heading “What decision would you like the Commissioner to
make” they state the
following in manuscript: “We would
like the commissioner to make [PnP] sign us permanently and make
[PnP] pay us for operating
reach truck an[d] forklift and same salary
as [PnP] Permanent and Benefits Thanks”. In the form, they
again describe the
“other party” as PnP and AB.
[13]
In a written notice dated 25 January 2016, the CCMA informed the
appellants, PnP and AB,
inter alia
, that the arbitration was
set down for 17 February 2016 and indicates that the primary issue
was “198B – fixed-term
contracts with employees earning
below earnings threshold”.
[14]
On 29 January 2016, AB, in writing, informed the appellants,
respectively, that their contracts
with AB were coming to an end on
29
February 2016, and that AB was offering them permanent
employment. These letters also indicated to the respective appellants
that
their basic employment terms and conditions will remain
unchanged and what their starting salary per month would be. In
addition,
the letters require the appellants to indicate their
acceptance of the offer by signing and returning copies of the offer
attached
to the letter.
The Arbitration
[15]
On 17 February 2016, the arbitration commenced before the
commissioner. In his opening statement,
the legal representative, for
both PnP and AB, stated that AB accepted that the appellants were, in
terms of section 198B(5) of
the LRA, permanently employed by it. The
legal representative, however, also indicated that PnP disputed that
it was the employer
of the appellants. He stated,
inter-alia
,
that for the appellants “to make that contention it would need
to be shown” that AB “is a labour broker or a
temporary
employment service”, which it was not.
[16]
In his award dated 1 March 2016, the commissioner identifies the
issue  as being “the
identity of the true employer”
of the appellants and also identifies the issue to be decided being
whether PnP was the employer
of the appellants, and if so, whether
the appellants were entitled to “parity within the meaning of
section 198”.
[17]
In his analysis of the evidence and the argument, the commissioner
states concerning the agreements
the following: “18. There was
no dispute that the Agreement forms the basis for the relationship
between [PnP] and [AB].
There was no dispute about the fact that in
terms of the agreement [AB] enterprise was to supply baking
ingredients to [PnP]. 19.
The general tenor of the Agreement
indicates that [PnP] is the dominant party in this relationship. In
terms of the agreement,
[PnP] is entitled to the disclosure of the
financial statements of [AB]. [PnP] also has a right to monitor [AB]
in the conduct
of its business. [AB] is not permitted to conduct any
other business whatsoever during the period of the Agreement. [AB]
[is] also
required to account in full to [PnP] for the financial
position of its business and as such audited by [PnP’s]
auditors.
These aforementioned provisions indicate that [AB] is not
an independent entity but subservient to [PnP] and conducted its
business
at the bidding of the latter.”
[18]
Turning to the other, and oral, evidence, the commissioner found:
“Furthermore [AB] carried
on its business inside the premises
rented by [PnP]. Undisputed evidence also established the fact that
[PnP] supplied the equipment
and tools that enabled [AB] to carry out
its obligations in terms of the Agreement. There was uncontested
evidence that the employees
of [AB], including the applicants,
performed their duties under the supervision and direction of [PnP]
management. There was also
the undisputed evidence that the
applicants’ leave forms were submitted and approved by [PnP]
management.”
[19]
In light of the agreements and the evidence, the Commissioner
concluded as follows: “21.
All the aforementioned facts
establish the close association of the business of the respective
enterprises – [PnP] and [AB].
It further establish[es] the fact
that the reality of the facts is that there is an employment
relationship between [PnP] and the
applicants despite the Agreement
stipulating otherwise. One can thus deduce that the agreement was
concluded to conceal the identity
of the true employer thereby
avoid[ing] the application of the Act. 22. Section 200B was enacted
to counter this strategy…”
[20]
The commissioner then went on to quote section 200B of the LRA and
proceeded to find as follows:
“23. It is patent that section
200B introduced and recognize[s] the concept of co-employers where
the latter’s business
activity is, firstly, entwined to the
extent that both are in the position to manage and control the
performance of an employee.
Secondly, where the arrangement and or
activity has, inter-alia, the effect of defeating the purpose of the
Act. In the present
case, the interrelationship of the business
arrangement via the Agreement has the effect of prejudicing the
rights of the applicants
to be treated on an equal footing with the
employees of [PnP] while they are performing same and or similar work
thereby defeating
the purposing of the Act. Sec 200B thus finds
application in this instance and [PnP] is thus determined to [be] a
co-employer of
the applicants. Accordingly, [PnP] and [AB] are
jointly and severally liable to effect parity of treatment between
the applicants
and [PnP’s] comparator permanent employees.”
[21]
The commissioner then went on to make the following award: “24.
The respondents ([PnP]
and [AB]) are joint or co-employe[rs] of the
applicants (Messrs Lethabo Masoga and Lebohang Moeleso) within the
meaning of section
200B. 25. Both respondents are thus jointly and
severally liable to accord to the applicants the comparable treatment
no less favourable
than their counterparts who are the permanent
employees of [PnP] while performing the same or similar work. The
order [is] to be
effected from 1 March 2015.”
The Review in the Labour
Court
[22]
PnP and AB brought separate applications to review and set aside the
award. These applications
were subsequently consolidated by the
Labour Court and were heard together as opposed reviews. Essentially,
two grounds of review
were relied upon by both, PnP and AB. The first
ground was that the commissioner failed to identify the dispute,
alternatively,
that he did not understand it (i.e. that the
misconceived the required enquiry), and the second ground being,
essentially, that
the commissioner failed to understand the evidence,
that he had misconstrued it, or had unreasonably ignored aspects of
it, resulting
in an unreasonable, alternatively wrong, and reviewable
conclusion.
[23]
The Labour Court upheld these grounds of review. It held that the
true dispute was about the
interpretation and application of section
198B of the LRA, which deals with fixed-term contracts, and that one
of the issues that
arose related to section 198B(3) that requires the
identification of “the employer” referred to in that
subsection.
It also held that the appellants had alleged a breach of
section 198B(5) and had contended that they were permanent employees.
Thus, it is only AB that could have contravened that subsection
because it employed both appellants in terms of written fixed-term

contracts for a period of 12 months. Since AB had conceded, in
effect, that those contracts contravened section 198B(5), because
it
exceeded the three-month period and had accepted that the appellants
were its permanent employees, the commissioner ought to
have issued
an award to the effect that AB is deemed to be their employer for an
indefinite period. By so doing the commissioner
would have
interpreted and applied the section which was in dispute before him.
[24]
The Labour Court found that in light of that, it was unclear why the
commissioner still had to
determine whether PnP was an employer, when
it had already found that AB is the one that had contravened the law.
It held that
by embarking on that enquiry the commissioner dealt with
“an extraneous question” and really arbitrated the wrong
dispute,
with the result that the award was a nullity. The Labour
Court found that, in any event, the commissioner’s finding -
that
there was an employment relationship between PnP and the
appellants was not only “without warning” or without
having
given PnP “an opportunity to lead evidence” on the
criteria set by this Court for determining whether such a
relationship
exists- but amounted to a gross irregularity. According
to the Labour Court, PnP did not “enjoy a fair trial of [the]
issues”.
[25]
Regarding the commissioner’s application of section 200B of the
LRA – the Labour
Court held, essentially, the following: that
the section had “far-reaching” implications and that
there were “serious
reputational implications” for a big
corporation which is found to have contravened the law; thus, the
section required “strict
purposive interpretation” and
“ought to be invoked when all the requirements of it are met in
full”. The Labour
Court further found that a failure to do so
“constitutes a serious and material error of law which on the
correctness, or
reasonableness test, vitiates the award”.
[26]
Having analysed and identified the elements of section 200B and the
purpose of the LRA, the Labour
Court found, in effect, that the
commissioner had erred in finding, without proof, that the intention
(or effect) of the empowerment
scheme was to defeat the purposes of
the LRA. The invocation by the commissioner of section 200B was
“misguided” and
an irregularity. The Labour Court further
found that “it is crystal clear” that the commissioner in
this matter interpreted
the law incorrectly and that award was not
correct. The Labour Court held that “an incorrect award is not
awaited from a
reasonable commissioner, nor does it fall within the
bounds of reasonableness”.
[27]
The Labour Court found that it was pointless to refer the matter back
to the CCMA – even
though the commissioner had arbitrated a
wrong dispute, because there was no longer a live dispute about the
interpretation and
application of section 198B as AB had regularised
the matter before the arbitration, i.e. by accepting that the
appellants where
its permanent employees. Having found that the award
was a nullity, the Labour Court, nevertheless, considered whether PnP
was
an employer of the appellants “for completeness sake and
solely to avoid further litigation”, and concluded that there

was not a shred of evidence that PnP was a “client” of AB
or that AB was a TES, as contemplated in section 198A(1)
of the LRA.
The Labour Court thus reviewed and set aside the award and replaced
it with an order that PnP is not an employer of
the appellants. It
also ordered the parties to each bear their own costs.
The Appeal
[28]
The appellants, essentially, contend that the Labour Court was wrong
and that the commissioner
was correct. According to the appellants,
there were, basically, two issues in dispute before the commissioner:
the first being
whether AB contravened section 198B of the LRA and
whether the appellants ought to be regarded as permanent employees;
and the
second being about whose permanent employees they were, and
whether PnP should be regarded as the employer. According to their
argument, the first issue was conceded by the legal representative of
PnP and AB and it was left to the commissioner to determine
the
second issue. In respect of that issue, the commissioner was entitled
to rely on section 200B to determine the dispute before
him.
According to this argument, the commissioner interpreted section 200B
correctly and reasonably found that the section was
applicable. The
appellants further contend that the contractual arrangements between
PnP and AB had the effect of defeating the
purpose of the LRA,
insofar as its “effect was to insulate the true bearer of power
in the work relationship from any liability
in respect of the
appellants.”
[29]
Further with regard to the application of section 200B – the
argument made on behalf of
the appellants was that it was their case
all along that the contractual form of the employment relationship
had to be disregarded
and that it was to be found that PnP was their
employer. While the referral forms served as a useful guide in
determining the nature
of the dispute – they were not pleadings
and could not dictate the parameters of a party’s case as
pleadings would.
Similarly, the only significance the certificate of
outcome had was to certify that a particular dispute was conciliated
on a particular
date and the notice of set down according to this
argument “does little to chart the terrain of the legal
contest.”
[30]
The appellants argue that the only way that it would be determined
whether PnP was there employer
was through the application of section
200B. According to them, the commissioner was obliged to apply the
relevant law and there
was no requirement that a party had to
expressly invoke the section before it could be applied. It was
submitted on their behalf
that the Labour Court’s reliance on
this Court’s decision in
Association
of Mine Workers and Construction Union (“AMCU”) and
others v Buffalo Coal Dundee (Pty) Ltd and another
[2]
(“
Buffalo
Coal
”)
for the proposition that the party had to invoke the section, is
based on a misleading of the section and of the decision.
According
to this argument,
Buffalo
Coal
was distinguishable on the facts, in that there a party did in fact
expressly rely on section 200B, whereas that was not the situation
in
the present matter. The legal representative of PnP and AB understood
the second issue to have been whether PnP was avoiding
its
obligations under the Labour legislation by means of the empowerment
scheme agreements, because he addressed the commissioner
on that
point.
[31]
It was further submitted on behalf of the appellants that the
commissioner’s interpretation
of section 200B was correct, and
that he correctly found that the contractual arrangement between PnP
and AB had the effect of
defeating the purpose of the LRA “in
that the appellants were entitled to be regarded as permanent
employees of [PnP] and
to be treated on an equal footing with its
employees and because the Commissioner had found that there was an
employment relationship
between the appellants and [PnP]. The
prevailing tests to establish whether there was such a relationship
could not be regarded
as adequate, because if that was the case then
there would have been no need for the Legislature to introduce
section 200B into
the LRA. The appellant’s counsel submitted
that there was a “great deal of evidence” to sustain a
finding that
section 200B was triggered. In that regard, reference
was made to what the appellants stated in the answering affidavit in
the
review, deposed to by the first appellant, even though this was
not evidence at the arbitration.
[32]
In addition to that “evidence”, counsel for the
appellants also referred to the following
“observations”,
as fortification for the finding that they were employed by PnP,
namely: that the appellants reported
to one, Wayne, a manager of PnP
and not to Miss Mzamo, who, on her own evidence, was not always in
the area where the appellants
worked; that the appellants’
leave forms were dealt with by PnP employment and that those forms
were on a PnP letterhead;
that the appellants’ contracts of
employment stipulated that they would be cancelled if AB lost the
contract with PnP; and
lastly, that Mr Stroebel’s evidence, on
which AB relied, but which the commissioner did not rely on, was
largely descriptive
of the contractual arrangements, but did not make
those arrangements less susceptible to being overridden by section
200B. The
appellants submitted that in light of all those facts, the
Labour Court ought to have dismissed the review applications.
[33]
Heads of argument had been filed on behalf of PnP and AB which,
basically, were in support of
the Labour Court’s decision.
However, when the matter was argued before this Court we were
informed that AB had withdrawn
from the appeal and was in the process
of de-registering. The argument made on behalf of PnP was,
fundamentally, the following:
the dispute related to section 198A(3)
(i.e. dealing with a temporary service, or TES) and/or section 198B
(i.e. dealing with fixed-term
contracts), read with section 198D
(i.e. general provisions applicable to sections 198A to 198C of the
LRA). Since there was no
merit in the dispute (i.e. particularly
after AB had accepted that the appellants were its permanent
employees) the commissioner
should simply have dismissed the matter.
The commissioner was not entitled to rely on section 200B of the LRA,
because there was
no dispute before him concerning that section and
there was no breach of the LRA by, either PnP, or AB, and the
appellants had
never invoked that section.
[34]
In any event, so it was argued on behalf of PnP, the commissioner
made a material error of law
in his interpretation of section 200B –
since, firstly, it could not apply in the absence of proof that AB
had breached the
LRA; and secondly, the commissioner’s finding,
that PnP is the actual employer or co-employer of the appellants
falls outside
the scope of section 200B; and thirdly, the appellants
have no right to be treated the same as PnP’s employees, as
section
198A(5) was not applicable; and that could also not serve as
a basis for finding that the intention or effect of the contractual

relationship between PnP and AB was to defeat the purposes of the
LRA. Furthermore, it was argued that the factual findings the

commissioner made that led to him concluding that section 200B was
triggered, were unreasonable; there was no evidentiary basis
for
finding that the empowerment scheme was a sham or a simulated
agreement.
Evaluation
[35]
It follows axiomatically that there has to be a dispute for the CCMA
to resolve as part of its
dispute resolution function. This is
apparent from various provisions of the LRA including sections 133 to
139 of the LRA. The
nature or the dispute or the issue to be
determined has to be ascertained.
[3]
This is not only necessary for jurisdictional purposes, because
disputes, depending on their nature, may require different procedures

for their resolution – but, so that appropriate enquiries are
conducted for their resolution. Our courts have recognised
that an
employee/ complainant’s description, or characterisation of a
dispute may not be correct or accurate. Therefore,
there is a duty on
a CCMA commissioner or arbitrator, who is expected to be more
familiar with the LRA and different kinds of disputes,
to determine
the true nature of the dispute that requires resolution – not
only to establish whether the CCMA (or the bargaining
council) has
jurisdiction in the matter, but also to enable him or her to conduct
the appropriate enquiry or enquiries. The nature
of the dispute
defines the parameters of his or her brief.
[36]
In an arbitration, a commissioner is to deal with the substantial
merits of the dispute and this
is only feasible if the real nature of
the dispute is ascertained. Although the commissioner or arbitrator
in deciding what the
true nature of the dispute is, is not bound by
the description given to the dispute in the referral form, or by the
legal representatives,
he may not ignore those descriptions. It is
also important to bear in mind that the labels attached to a dispute
cannot change
the true nature of the dispute. And it is established
that in determining the true nature of the dispute the commissioner
or arbitrator
is required to take all facts into
consideration.
[4]
[37]
In light of the facts of this case, another aspect of this process of
establishing the true nature
of the dispute, needs mentioning. An
award should not be founded on matters (including the real nature of
the dispute) that occur
to the arbitrator after the hearing, but in
respect of which the parties had no opportunity to address him or her
on.
[5]
The parties ought to know
what the real dispute is so that they are not taken by surprise, or
treated unfairly in that they are
made to believe that the dispute is
one thing while the arbitrator or commissioner goes on to find in his
or her award that it
is something else that was not anticipated, and
in respect of which the parties were not given an opportunity to deal
with. That
would be grossly unfair and result in the setting aside of
the award.
[6]
[38]
As mentioned when discussing the background facts, in their referral,
the appellants characterised
the dispute as one in terms of section
198A of the LRA. They indicate in the referral form that PnP is the
owner or the person
in control of the premises where they work and
portray it as a “client” of AB, and that AB is a
temporary employment
service (TES). They did not mark any of the
other boxes to indicate that it was any other kind of dispute, even
though it was open
for them to do so. However, the certificate of
outcome makes no mention at all that it is a section 198A dispute.
Instead, it states
that the dispute relates to sections 198B and D of
the LRA. In their request for arbitration the appellants indicate
that the dispute
relates to sections 198B and D, and the CCMA notice
of set down confirms that it is a section 198B dispute.
[39]
In his opening address, the legal representative of PnP and AB,
having conceded on behalf of
AB that the appellants were its
permanent employees (as contemplated in section 198B(5)), went on to
point out that PnP disputed
that it was the employer of the
appellants and submitted that the only basis on which the appellants
could contend that PnP was
the employer was if they could prove that
AB was a labour broker, or a TES (i.e. as contemplated in section
198A) and that there
was no such proof. A contrary viewpoint is not
stated by the appellants, or the commissioner. It is thus clear that
at the outset
of the arbitration the parties and the commissioner
shared the view that the true nature of the dispute turned around
sections
198B and D, and possibly also section 198A of the LRA.
[40]
What is significant is that in all of this time, starting from the
referral to the conclusion
of the hearing, there was no mention at
all of section 200B of the LRA, or evidence to the effect that the
empowerment scheme was
simulated or a sham, or that the appellants’
employment contracts with AB were not genuine or
bona fide
.
The first time section 200B is mentioned is in the commissioner’s
award. It appears from the award that the commissioner
did not only,
out of his own, invoke section 200B, but that his award is founded
upon it.
[41]
The commissioner seems to have found as a fact (albeit implicitly)
that the scheme was simulated
and a sham, even though this had never
been an issue before him, and even though the parties had never been
given an opportunity
to address the applicability of section 200B and
its ramifications. The application of that section is clearly
something that occurred
to the commissioner after the conclusion of
the proceedings when he was preparing his award. The failure to give
the parties an
opportunity to address those matters, before making
conclusive findings based on them, was grossly unfair and reviewable,
as pointed
out earlier.
[42]
For the appellants to have succeeded under section 198A of the LRA,
it would have had to be shown
that AB was a TES and that PnP was its
client. In terms of section 198(1), a TES means “any person
who, for reward, procures
for and provides to a client other persons
– (a) who perform work for the client; and (b) who are
remunerated by the temporary
employment service”. There was no
such proof. Even though the appellants referred to AB in the referral
form as a TES, they
could not prove that as a fact. Thus, it is
hardly surprising that they “jettisoned” their initial
characterisation
of the dispute and re-characterised it as a section
198B and D dispute.
[43]
Section 198B of the LRA deals with fixed term contracts of employees
earning below a threshold
prescribed by the Minister. Section 198B(3)
provides: “[a]n employer may employ an employee on a fixed term
contract or successive
fixed term contracts for longer than three
months of employment only if – (a) the nature of the work for
which the employee
is employed is of a limited or definite duration;
or (b) the employer can demonstrate any other justifiable reason for
fixing the
term of the contract.” Subsection (4) gives a list
of possible justifications for employing an employee on a fixed term
contract,
but it is not a closed list. Subsection (5) provides that
employment in terms of a fixed-term contract that has been concluded
or renewed in contravention of subsection (3) “is deemed to be
of indefinite duration.” By virtue of the wording of
the
subsections, it seems that subsection (3) would have to be read with
subsection (4) although I make no finding in that regard.
[44]
Both appellants were employed by AB in terms of written fixed-term
contracts. We do not know
if AB could have justified employing them
on such a basis, but what we do know is that AB offered the
appellants permanent appointments.
It is not known if they had
reacted to those offers, but what is clear is that the appellants
persisted with the dispute. And at
the arbitration, it was confirmed
on behalf of AB that the appellants were its permanent employees.
That resolved the dispute between
the appellants and AB, and in the
absence of proof that AB was a TES and PnP its client, that should
indeed have been the end of
the matter.
[45]
The appellants had been very vague about who their employer was. At
the outset they did not outrightly
claim that PnP was the employer –
instead, they expressed a desire to be employed by PnP on a permanent
basis. Their prospects
of achieving that through section 198A were
not good, and they could not have been assisted in that regard
through sections 198B
and D. However, the commissioner in his award
used the provisions of section 200B as a test to find that PnP was
their employer
(together with AB).
[46]
Section 200B(1), is relatively wide, and open-ended. It provides:
“for the purposes of
this Act and any other employment law,
‘employer’ includes one or more persons who carry on
associated or related activity
or business by or through an employer
if the intent and effect of the doing so is or has been to directly
or indirectly defeat
the purposes of this Act or any other employment
law.” While that may seem to be a test, read with section
200B(2) it is
clear that section 200B of the LRA does not postulate a
general test for determining whether a particular person or entity is
the
true employer of a particular employee. Section 200B(2) provides:
“[i]f more than one person is held to be the employer of
an
employee in terms of subsection (1), those persons are jointly and
severally liable for any failure to comply with the obligations
of an
employer in terms of this Act or any other employment law”.
[47]
The effect of section 200B, while crucial, is merely to fix or extend
the liability that would
ordinarily be that of the employer, as per
the traditional tests, to another or others, who carry on as an
associated or related
activity or business by or through an employer.
They are regarded as employers for the purposes of liability. But it
is only if
they are in an associated or related business with the
employer which is intended to defeat, or has the effect of defeating,
the
purposes of the LRA or any other employment law, either directly
or indirectly, that they would be treated as the employer. The

purpose for this is clear from section 200B(2). They are regarded or
treated as such for the purposes of liability – they
are held
jointly and severally liable for a failure to comply with the
obligations of an employer in terms of the LRA or any other

employment law. In other words, section 200B(1) defines “employer”
for a very specific purpose and that purpose is
found in section
200B(1) read with section 200B(2). The section cannot be utilised
generally for making persons or entities the
employer(s) of others.
[47]
That section 200B was not intended as a general test is further borne
out by the wording of that
section. It, effectively, contains a
deeming provision. While it contemplates that a single person may be
the employer, it does
not provide criteria for determining what makes
that one person the employer, other than for the purposes of
liability in a situation
where that one person is party to a
simulated arrangement or sham, the true intent, or effect of which is
to defeat the purposes
of the LRA, or any other employment law; and
there is a failure by that person to comply with the obligations of
an employer (i.e.
in terms of those provisions). Any other person or
entity which is complicit in this subterfuge is treated as an
employer for the
purposes of liability. She, he, or it is jointly and
severally liable with anyone else held to be an employer, in terms of
the
section, and in respect of the employer’s obligations under
the LRA and /or those laws.
[49]
The rationale for section 200B is set out in the memorandum of
objects that accompanied the 2014
LRA Amendment Bill. The purpose of
the section is said to be: “to prevent simulated arrangements
or corporate structures
that are intended to defeat the purposes of
the LRA or any other employment law, and to provide for joint and
several liability
on the part of persons found to be employers under
this section for any failures to comply with an employer’s
obligations
under the LRA or any employment law. This is particularly
important in the context of subcontracting and outsourcing
arrangements
if these arrangements are subterfuges to disguise the
identity of the true owner.”
[50]
Because of its breath, section 200B could be used to scrutinise any
conceivable relationship
or arrangement for purposes of liability,
provided that a case for such scrutiny has been made out, and it is
done fairly. It is
one of a suite of provisions whereby the
Legislator seeks to stop complex contractual and other schemes used
by true employers
to avoid their obligations under the Labour
legislation. It is conceivable that it may not be easy to determine
who the true employer,
or owner, is for the purposes of liability
arising from a failure to comply with the obligations in terms of the
LRA, or other
employment laws. This may be due to the complexity of
the stratagems, or devices used by those wanting to avoid their
obligations.
[51]
Section 200B, which is based on law and equity, is intended to assist
in that regard. For example,
it is likely that the difficulty this
Court grabbled with in
Buffalo
Signs Co. Ltd and others v De Castro and Another
[7]
,
regarding the liability of a holding company and its subsidiary to
compensate employees of a subsidiary of the subsidiary, would
have
been easily resolved if section 200B was available at the time. The
majority of this Court
[8]
overturned an order of the Industrial Court that held the holding
company and its subsidiary jointly and severally liable, on the

ground,
inter
alia
,
that even if the former was complicit in the latter’s deceit to
avoid its obligations under the LRA, that did not make the
former the
employer; because there was no such thing as a fictional employer and
an employer was one that fitted the description
of an employer in the
Labour Relations Act of 1956
[9]
.
In terms of section 200B, the holding company and its immediate
subsidiary would be jointly and severally liable to compensate
the
employees.
[51]
There was no suggestion, let alone credible averment in the dispute
before the commissioner that
PnP and AB engaged in subterfuge by
utilising an empowerment scheme for deceitful purposes, or more
particularly, that PnP was
using the scheme and AB as a sham to avoid
its legal obligations toward its employees
[10]
,
or that the scheme had that effect. The scheme has not been shown as
one that was not a genuine empowerment initiative that provided
real
and meaningful opportunities for the development and empowerment of
disadvantaged individuals
[11]
.
In terms of the scheme, which was temporary, interaction between the
employees of PnP and AB (and the other beneficiaries/participants
in
the scheme) was inevitable.
[52]
The genuineness of the written employment contracts entered into
between the appellants and AB
were also never placed in issue. Miss
Mzamo testified that the appellants reported to her on a daily basis,
and Ms Bryant explained
how the leave forms had been signed by
mistake. They were ordinarily signed off by Miss Mzamo of AB, but she
was not present on
the day in question and the details had not been
verified. There is no reason to doubt the veracity of that
explanation. Mr Stroebel’s
evidence, which also dealt with the
scheme, was apparently also not taken into account by the
commissioner. Significantly, it was
not put to any of these
witnesses, or at all, that the scheme was had the effect, or was
intended to be utilised by the employer
to avoid its obligations
under the LRA, or other labour laws.
[53]
In seeking to justify his application of section 200B, the
commissioner only considered singular
provisions in the participation
agreement and failed to take into account the other agreements of the
scheme. The fact that AB
carried on business in PnP’s premises
and that PnP supplied AB with equipment and tools was entirely
consistent with the
workings of a genuine empowerment scheme.
Further, a “close association” between the nurtured
business (AB) and PnP
is clearly not sinister when viewed in the
proper context, and as a necessary attribute of an empowerment
scheme.
[54]
Taking the facts, the law and fairness into account, a costs order is
not appropriate.
[55]
In the result, the following order is made:
1.
The
appeal is dismissed.
2.
No
order is made in respect of the costs of the appeal.
___________________________
P
Coppin
Judge
of the Labour Appeal Court
Waglay
JP and Jappie JA concur in the judgment of Coppin JA.
APPEARANCES:
FOR THE
APPELLANTS:         Adv
Craig Bosch
Instructed
by Lawyers for Human Rights
FOR THE
RESPONDENT:       Anton Myburgh SC
Instructed
by Bowman Gilfillan Attorneys
[1]
Act
66 of 1995.
[2]
[2016]
9 BLLR 855
(LAC) (“
Buffalo
Coal Dundee
”)
para 28.
[3]
See,
inter
alia
,
Coin
Security Group (Pty) Ltd v Adams and Others
[2000] 4 BLLR 371
(LAC) (“
Coin
Security
”)
and the cases cited there.
[4]
See
Coin
Security
(above) para 15;
CUSA
v Tao Ying Metal Industries
[2009] 1 BLLR 1
(CC) paras 65-66;
NUMSA
obo Sinuko v Powertech Transformers
[2014] 2 BLLR 133
(LAC) para 17.
[5]
See;
Steeledale
Cladding (Pty) Ltd v Parsons NO
2001 (2) SA 663
(D) at 672F-673C (“
Steeledale
Cladding
”).
[6]
Compare:
inter
alia
,
Portnet
(A division of Transnet Ltd) v Finnemore and Others
[1999] 2 BLLR 151
(LC) paras 14-16;
Reunert
Industries (Pty) Ltd t/a Reutech Defence Industries v Naicker and
Others
[1997] 12 BLLR 1632
(LC) 1637I-1638B;
AA
Ball (Pty) Ltd v Kolisi and Another
[1998] 6 BLLR 560
(LC) 562 C-G;
Steeledale
Cladding
(above) and
Tao
Ying Metal Industries (Pty) Ltd v Pooe NO and Others
[2007]
7 BLLR 583
(SCA) para 6.
[7]
(1999)
20 ILJ 1501 (LAC).
[8]
Per
Conradie JA (Ngcobo AJP concurring), especially paras 12- 14 and 20.
[9]
Contrast:
the minority judgment of Froneman DJP paras 21-30.
[10]
Compare,
Buffalo
Coal Dundee
(above) para 50.
[11]
Compare:
Phaka
and Others v Bracks and Others
(2015) 36 ILJ 1541 (LAC).