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[2009] ZALCD 5
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Minny and Another v Smart Plan CC (D14/07, D15/07) [2009] ZALCD 5 (3 June 2009)

IN
THE LABOUR COURT OF SOUTH AFRICA
HELD
AT DURBAN
CASE
NO: D14/07 AND D15/07
REPORTABLE
In
the matters between:
JURY
JOHANNES MINNY

Joint

applicants
and
BURKHARD
GOTTSMANN
and
SMART
PLAN CC

Respondent
JUDGMENT
VAN
NIEKERK J
Introduction
[1]
Section 20 of the Basic Conditions of Employment Act, 75 of 1997
(BCEA) requires an employer to grant an employee, in each annual

leave cycle, 21 consecutive days’ leave on full pay. The
employer must grant annual leave not later than six months after
the
end of a leave cycle, defined as the period of 12 months’
employment with the same employer immediately following the

employee’s commencement of employment, or the completion of
that employee’s prior leave cycle. Section 21 of the BCEA

requires that an employer must pay an employee leave pay at least
equivalent to the remuneration that the employee would have received

for working for a period of annual leave. Leave pay must be paid
before the beginning of the period of leave, or by agreement,
on the
employee’s usual pay day (s 21(2)). On termination of an
employee’s employment, s 40 of the BCEA requires an
employer to
pay the employee the value of any annual leave that is due to the
employee in respect of a prior leave cycle but which
the employee has
not been taken, as well as the value of leave accrued during any
current but incomplete cycle.
[1]
[2]
In these proceedings, the applicants claim the value of annual leave
that they contend accrued to them in the leave cycle prior
to their
respective resignations from the respondent’s employ, and the
value of leave accrued during the cycles rendered
incomplete by
virtue of the termination of their employment.
Matters
of common cause
[3]
It is common cause that Gottsmann was employed by the respondent from
1 September 2001, and Minny from 18 November 2002. Both
resigned with
effect from 28 February 2006. In a statement of agreed issues, the
parties agreed that the applicants’ claims
were claims brought
in terms of sections 20, 21, 35 and 40 of the BCEA. The parties have
also reached agreement on the quantum
of each of the applicants’
claims.  Minny avers that in respect of the leave cycle that
commenced on 18 November 2004
and ended on 17 November 2005, he was
granted 5 days leave, during January 2006. He deducts the value of
that leave and an amount
of R3274 paid by the respondent on
termination of his employment in respect of accrued leave, and claims
a balance of R20 054.00.
Gottsmann claims that in respect of the
annual leave cycle that commenced on 1 September 2004 and ended on 31
August 2005, he was
granted 10 days leave during November and
December 2005. He deducts the value of this leave and the payment of
R3286.98 made to
him by the respondent on termination of his
employment in respect of accrued leave and claims a total R23 899.65.
[4]
The sole issue to be determined in these proceedings is whether the
respondent is indebted to the applicants for the leave pay
that they
claim. The applicants contend that the annual leave taken by them was
without pay, and that they were not paid the full
value of the annual
leave that had accrued to them prior to their resignation. The
respondent contends that it is not indebted
to the applicants, on the
basis that each of the respondents was paid a fixed hourly rate of
remuneration that was calculated to
be an all-inclusive rate,
including payment in respect of annual leave and sick leave. Put
another way, the respondent’s
case is that the applicants’
remuneration packages were structured so as to pay them the value of
their annual leave, as
it accrued from month to month, in advance of
their taking leave. It was accordingly for the applicants (who to
some extent regulated
their own working hours) to manage their
finances so that when they took annual leave, they had the resources
to do so.
[2]
Jurisdiction
[5]
I deal first with the question of jurisdiction. The applicants’
baldy assert that this court had jurisdiction to entertain
their
claim pleaded, as it is, in the form of a complaint under the BCEA of
a failure by the respondent to comply with section
21 of the Act. The
provisions of the BCEA that concern the enforcement of basic
conditions of employment require that allegations
of non-compliance
with the Act must in the first instance be referred to a labour
inspector and dealt with in terms of s 68 of
the Act. If necessary,
the inspector must issue a compliance order in terms of s 69. Section
70 places limitations on the powers
of labour inspectors to issue
compliance orders. Section 70 (b) provides that if the employee
making the complaint is a senior
managerial employee, or if the
employee concerned earns remuneration in excess of a prescribed
threshold, then the labour inspector
may not issue a compliance
order.
[3]
[6]
How then must employees subject to these limitations, whether by
virtue of their occupation or the level of their remuneration
enforce
their rights to basic conditions of employment? The BCEA is not
entirely clear. When an unfair dismissal claim is referred
to this
court, s 74 empowers the court to determine any claim for an amount
owing to an employee in terms of the BCEA provided
that the claim is
referred in terms of s 191, that the amount had not been owing for
more than a year prior to the date of dismissal,
and that no
compliance order had been made or other proceedings instituted to
recover the amount. These would appear to be the
only circumstances
where this court, as a court of first instance, may determine any
claim under the BCEA.  In a case such
as the present, where no
unfair dismissal is claimed, the only remedy available to an employee
who wishes to recover an amount
that the employee contends is owing
under the Act is a contractual remedy. Section 4 of the Act provides
that a basic condition
of employment (defined in section 1 to include
a provision of the Act that stipulates a minimum term or condition of
employment)
constitutes a term of every contract of employment. There
are certain exceptions to this provision, including a term of a
contract
that is more favourable to the employee than a basic
condition of employment (see section 4(c)). Section 77(3) of the Act
confers
concurrent jurisdiction on this court (with the civil courts)
to hear and determine any matter concerning a contract of employment,

irrespective of whether a basic condition of employment constitutes a
term of the contract.  Any claim to enforce a provision
of the
Act in circumstances where the employee is denied access to the
enforcement measures established by Part A of Chapter 10
of the Act,
must therefore be brought under section 77(3) as a claim of breach of
contract.
[7]
This claim has a long history, having initially been made in the
Magistrates’ Court, and for reasons that are not apparent,

withdrawn and thereafter filed in this court. Although the applicants
claim is not specifically pleaded as a contractual claim
(the
language of their respective statements of claim is that of reliance
on a statutory entitlement) the papers filed are such
that I am able
to regard references to statutory entitlements (in the form
specifically of rights under ss 20 and 21 of the BCEA)
as references
to the terms of the applicants’ respective contracts of
employment. Little purpose would be served in further
delaying the
determination of this matter only to require the applicants to
formulate their claim with more precision.  I
intend therefore
to treat this matter as a contractual claim brought under s 77(3) of
the Act, and to determine it on that basis.
The
onus of proof
[8]
In relation to the onus of proof, the applicants submit that section
81 of the BCEA provides that a party that alleges a right
conferred
by the Act must prove the facts that constitute the infringement, and
that the party allegedly engaged in the conduct
in question must then
prove that the conduct did not infringe the Act. On this basis, the
applicants contend that to the extent
that they have adduced facts to
establish that they have been denied payment of the value of the
annual leave that has accrued
to them, the respondent bears the onus
to establish that its conduct does not infringe any provision of the
Act. There is no merit
in this submission. First, the nature of the
applicants’ claim, for the reasons recorded above, is not one
that arises from
the Act rather than from their contracts of
employment. Secondly, and in any event, s 81 applies only to Part C
of Chapter 10 of
the Act, a part concerned with the protection of
employees against discrimination for exercising rights under the Act,
or, in other
words, victimisation. The applicants’ do not claim
that they have been victimised for exercising a statutory right -
they
in effect seek to have a right afforded them by the statute
enforced as a contractual term. In so far as the applicants’
claim is based on a contractual term and a breach of it, they
accordingly bear the onus of proof to establish both the terms of
the
contract and the breach. In these proceedings, the terms of the
contract between the applicants and the respondents are not
in
dispute, at least not as far as any entitlement to annual leave is
concerned. The respondent accepts that the applicants are
entitled to
21 consecutive days’ annually leave in each leave cycle, and
that the applicants are entitled to be paid for
that leave. The
applicants’ claim is that the respondent breached their
contracts by failing to pay them for annual leave
taken and accrued.
It is incumbent on the applicants to establish that breach.
Brief
summary of the evidence
[9]
I do not intend to summarise all of the evidence given at the hearing
of this matter. Much of the evidence given by the applicants
related
to the bundles of documents prepared by each of them, replete as they
were with clocking histories, time sheets and payslips.
Mr Cecil
Smart, the sole member of the respondent, gave evidence which largely
concerned the nature of the “all inclusive
rate” that the
respondent contends was paid to the applicants. It is common cause
that the respondent operates as a labour
broker (or a temporary
employment service, to use the language of section 198 of the Labour
Relations Act). The applicants were
initially employed in terms of a
standard form contract of employment, for a fixed term of twelve
months. In relation to remuneration,
paragraph 4.2 of the contract
provides:
“
Remuneration
for hours worked shall at all times be, subject to an official
Timesheet approved by the CLIENT/EMPLOYER”.
Paragraph
13 deals with leave of absence. That paragraph reads:
“
13.1
The EMPLOYEE shall give two weeks notice of intended absence from
work, no leave other than leave for expected illness will
be
acceptable. In case of absence without appropriate leave, paragraph
14 shall apply.
13.2
Leave conditions are strictly on “No work No Pay principle”.
[10]
It is common cause that both Gottsmann and Minny remained employed by
the respondent long after the lapse of the fixed term,
and neither
party disputed that the terms of the contract continued to regulate
the applicants’ employment. During the course
of their
employment, the applicants’ services were placed at the
disposal of a number of the respondent’s clients.
Gottsmann
testified that prior to his resignation, he was engaged at the
Hillside Aluminium site. His hours of work were recorded
by a
clocking system, on the basis of which he completed a time sheet that
was submitted to the respondent. Gottsmann stated that
he was paid
for hours worked - hours worked were “booked” to the
project concerned, and on the basis of the time sheets
submitted to
the respondent, the respondent paid him an agreed hourly rate, the
total for each month being consolidated and reflected
on a monthly
payslip, reflecting deductions in respect of PAYE, UIF, etc.
Gottsmann testified further that the terms of his employment
were
such that a principle of “no work, no pay” applied - if
he took annual leave, no time sheet was submitted for
the period of
leave and he was not paid for that period. In 2005, the respondent
approached him with what was termed a “collective
agreement”.
The agreement records that in the past, the respondent agreed to pay
an all-inclusive hourly rate without separately
reflecting annual
leave, and that with effect from 1 January 2006,  the leave and
sick leave component previously added to
the hourly rate would be
separated from that rate, reflected separately on pay slips, and that
leave and leave pay would be administered
in terms of the Act. Sick
leave not taken during any year would be paid out the employee
concerned at the end of each year. A revised
contract of employment
reflecting these terms was also presented to Gottsmann for signature.
Gottsmann refused to accept the new
system and in the face of the
respondent’s insistence that he do, he resigned. On his final
payslip, dated 25 February 2006,
an amount of R3286.98 was paid to
Gottsmann, and reflected as “leave pay paid out”.
[11]
Minny’s evidence reflected that of Gottsmann in so far as the
basis of payment was concerned. He also disputed that he
had been
paid for days that he was absent from work. He too refused to accept
the new terms in relation to leave pay and sick leave
tabled in
November 2005, and resigned in the face of the respondent’s
insistence that he accept them. He was paid an amount
of R3274.00 in
February 2006, reflected as “Leave pay paid out (terminate)”.
[12]
Smart testified that while the respondent initially utilised the
services of TES’s, it later engaged in the business
of contract
work on projects in circumstances where the services of its employees
were placed at the disposal of the client. At
this time, the
respondent’s employees were offered a choice in the manner in
which their remuneration packages were to be
structured. In effect,
employees could elect to have the value of annual leave deducted from
their rate of remuneration, and have
the deducted amounts paid out
when the took leave. Alternatively, no deductions for the value of
annual leave would be made, but
in those circumstances, employees
would have to exercise the necessary financial prudence and
discipline to ensure that they were
able to fund periods of annual
leave. Smart testified that all of the respondent’s employees,
including the applicants, chose
the latter option and were paid on
that basis.
[13]
Smart stated further that the nature of the agreement between the
respondent and its clients was that the respondent would
be paid an
agreed rate for each hour that the applicants worked. The applicants’
charge out rate at the time of their resignation
was R180 per hour,
i.e. the amount paid to the respondent by the client for each hour
that the applicant rendered services to the
client. The agreement
between the respondent and each of the applicants was that they would
be paid an amount of R162 per hour
for each hour that they worked,
being the charge out rate less 10 per cent.  From the 10 per
cent difference between the charge
out rate and the rate of
remuneration paid to the applicants, the respondent met the cost of
various statutory contributions (including
Unemployment Insurance
Fund contributions) and the cost of administering the relevant
contracts (in total these amounted to approximately
6 per cent of the
charge out rate), with the remaining 4 per cent making up the
respondent’s profit. Smart produced invoices,
dated 20 December
2005, issued to a client (Hillside) in respect of services rendered
by Gottsmann and Minny respectively. The
invoice reflects a charge
for “Hiring of draughtsperson”, the number of hours
charged (in Gottsmann’s case 187
and in Minny’s 218), at
a unit price of R180.00.
[14]
At some point during mid-2005, the respondent, after taking advice
from a labour consultant and the Department of Labour, adopted
the
view that this arrangement amounted to a contravention of the BCEA.
The respondent then offered to contract with all of its
employees,
including the applicants, on the basis that it would each month
deduct from their remuneration the value of annual leave
and sick
leave accrued during the current month, and that these monies would
be paid to the employee concerned when the employee
was granted
annual leave, or when the employee became entitled to sick leave. The
applicants refused to agree to this revised arrangement,
and demanded
that their employment continue without any deductions being made from
their remuneration. When the respondent refused
to accede to this
demand, the applicants resigned and obtained employment with another
labour broker who was prepared to contract
with them on the terms
that they demanded of the respondent. The applicants then sued the
respondent in the Magistrates’
Court for the value of annual
leave which they alleged had accrued to them during the course of the
last annual leave cycles of
their employment with the respondent, and
which they alleged had not been paid to them on termination of their
employment.
[15]
Finally, Smart provided an explanation for an anomaly that the
applicants highlighted in their evidence. Both applicants had

testified that in their final month of employment, they “took a
chance” and decided to claim leave pay when submitting
their
time sheets. This strategem had “paid off” because in the
February pay month, each of them had received an amount
in respect of
leave pay, reflected in the February salary advice. Smart stated that
the claims for leave pay had gone through unnoticed
at first. When
they were detected, he decided that given the circumstances in which
he had been attempting to come to some accommodation
with the
applicants, and as a gesture of goodwill, he would not seek to
recover the money. The cost of this payment was for the
respondent’s
account, since it could not be recovered from the client.
The
issue
[16]
The respondent does not dispute that the applicants were entitled to
leave pay, or to be paid the value of any accrued leave
pay on
termination of their employment. The crisp issue to be decided is
whether, as the applicants contend, the respondent breached
their
contracts of employment  by failing to pay them leave pay when
they resigned, or whether, as the respondent contends,
they were paid
their leave pay in advance with the result that nothing further was
owing to them on the date of the termination
of their employment
Analysis
[17]
I deal first with the general principles regulating the payment of
leave pay. In so far as s 4 of the Act, read with s 21,
requires an
employer to pay an employee leave pay equivalent to the remuneration
that the employee would have received for working
the period of
annual leave either before the beginning of the period of leave, or,
by agreement, on the employee’s usual
pay day. In my view,
there is nothing in principle in this formulation that precludes an
employer from paying an employee an all-inclusive
rate, i.e. a rate
of remuneration that includes the value of leave as accrued from week
to week, or month to month, as the case
may be. In effect, by doing
so, the employer discharges its obligation to pay leave pay at a date
earlier than that required by
the BCEA. Payment for annual leave is
on these terms is likely, generally speaking, to be more favourable
to the employee than
the terms stipulated by the Act.
[4]
[18]
I am mindful that payment of leave pay in advance may potentially
undermine the protections established by the Act. Employees
engaged
on terms and conditions of employment that contemplate payment of an
all inclusive rate per hour and under pressure to
maximise their
earnings might elect not take annual leave, or be reluctant to avail
themselves of sick leave when they are incapacitated.
A financial
incentive for employees not to take leave thus potentially undermines
the recreational and restorative purposes that
underlie the right to
annual leave. However, the Act requires employers to grant annual
leave, and it is incumbent on them to discharge
their statutory
obligations to ensure that employees take the leave to which they are
entitled. Equally, employees are entitled
to insist on their rights
to paid leave within the periods contemplated by the Act. As Franklin
AJ pointed out in
Jooste v Kohler
Packaging Ltd
[2003] 12 BLLR 1251
(LC),
the BCEA constitutes social legislation and prohibits the parties
from contracting out of its main provisions. The Act does
not
contemplate that annual leave will not be taken (at para 3.4 of the
judgment). In the present instance, the applicants are
skilled
employees, and sufficiently financially astute to regulate their
financial affairs so as ensure that they take the leave
to which they
are entitled, and to set aside the leave pay component of their
remuneration packages to fund periods of leave.
[19]
To sum up: in principle, a term of a contract of employment that
requires an employer to pay remuneration for a period of annual
leave
as part of an inclusive rate for work done, in circumstances where
that remuneration is paid as when annual leave accrues
and in advance
of it being taken, does not contravene s 21 of the BCEA.
[20]
I turn now to the crux of this case, i.e. the dispute as to whether
the applicants were paid for the periods of annual leave
taken and
accrued by them. The applicants point to the terms of the fixed term
contract of employment originally signed by them,
which they aver
does not establish the system of payment for which the respondent
contends. To refer to this document as a contract
of employment
bestows undue credit on the drafter - conceptually, the document is
confused and stylistically, it is a shambles.
Clause 13, which seeks
to regulate rights to annual leave, does not specifically establish
the remuneration structure contended
for by the respondent. However,
there is nothing in the clause that is inconsistent with the
respondent’s version that an
all-inclusive rate would be paid
to the applicants. The stipulation that “leave conditions are
strictly on a ‘no work,
no pay’ principle” is
consistent with Smart’s evidence that since the value of leave
pay was incorporated into
the rate paid to the applicants, they would
receive “double pay” should the respondent be required to
remunerate them
for any days that they took annual leave.
[21]
The so-called “collective agreement” between the
respondent and its employees intended to introduce the arrangements

to apply after 1 January 2006 is an equally dismal effort at
capturing the respondent’s intention. Although the applicants

refused to accept the dispensation introduced by the agreement, the
preamble to the agreement and its terms are consistent with
Smart’s
version that prior to 2006, the respondent’s employees were
paid an hourly rate that was inclusive of leave
pay.
[22]
Finally, the applicants’ evidence ultimately amounts to a
denial that they were ever paid leave pay, but for the sum
paid to
each of them in respect of the last month of their employment. In his
evidence in chief, for example, when Minny was asked
how he would
respond to a proposition that he had agreed to payment of an
all-inclusive rate, he responded that this had never
been stipulated
or mentioned. Similarly, Gottsmann did not deny that the rate paid to
him was all-inclusive; he testified only
that he was not paid for
periods of annual leave that he took, begging the question as to
whether his rate of remuneration was
all-inclusive or not. Both
applicants were clearly unhappy with the arrangement that Smart
insisted should apply from January 2006.
[23]
The tenor of the respondents’ evidence (and this is reflected
in the terms of their respective letters of resignation)
is that the
real source of their unhappiness was the fact that the new
arrangement would have the effect of reducing their net
income, at
least until the completion of a leave cycle and their taking annual
leave. On the other hand, Smart’s explanation
for the
all-inclusive rate, the basis on which it was paid, the reasons for
it and the rationale for changing it are all consistent
with the
documentary evidence, in particular, the invoices addressed to the
respondent’s clients and the  records of
the hourly rates
paid to the applicants. Smart’s evidence was not seriously
called into question during cross-examination
and the over-riding
impression left with the court is that the applicants were labouring
under a misconception as to the terms
of which their remuneration
package was structured.
[24]
On balance, I find that the applicants were paid a rate of
remuneration that was inclusive of the value of annual leave accrued

by them, and that the respondent is accordingly not indebted to them.
The parties agreed that costs should follow the result.
I
accordingly make the following order:
The
applicants’ claims are dismissed, with costs.
ANDRE
VAN NIEKERK
JUDGE
OF THE LABOUR COURT
Date
of Judgment: 3 June 2009
Appearances
For
the Applicant: Advocate P Haasbroek instructed by Schreiber Smith
Attorneys
For
the Respondent: Advocate M M Posemann instructed by F C Eicker
Attorneys
[1]
An employee’s claim is limited to the value of leave in the
preceding leave cycle and on a pro rate basis, leave accrued
in any
incomplete leave cycle. See
Jooste
v Kohler Packaging Ltd
[2003] 12 BLLR 1251
(LC).
[2]
Although the facts of this case have an obvious impact on the
applicants’ entitlement to payment for sick leave taken
during
the course of their employment, their claim is confined to payment
for annual leave. Payment of an all-inclusive rate
for sick leave
raises different and significant difficulties since unlike annual
leave, it is not leave to which all employees
will necessarily
become entitled during any sick leave cycle. The extent of sick
leave taken is hardly foreseeable, and will
vary from employee to
employee. Is the employee to refund any amount paid in advance for
sick leave if no sick leave is taken
in a three-year sick leave
cycle? See s 22  of the BCEA.
[3]
It
is common cause that the applicants earned in excess of the
threshold fixed by s 6(3) and which applied at the time of the

termination of their employment.
[4]
There
may be at least one potential difficulty that may face an employer
seeking to pay an all inclusive rate. The first is that
s 21 (1)
requires an employer to pay leave pay at the employee’s rate
of remuneration immediately before the beginning
of the period of
annual leave. It is conceivable that an employee receiving an all
inclusive rate of pay will be prejudiced if
that employee, during an
annual leave cycle, receives an increase in remuneration. If, for
example, an employee earns a daily
rate of Ra and a month before
taking leave the employee receives a 10 per cent salary increase,
the value of accrued leave
on an all inclusive basis will be
calculated at 11 months (say 238 working days) / 17 days x Ra, plus
1 months (say 21.67 working
days) / 17 days x (Ra X110%). This will
inevitably be less favourable to the employee than the formula of 15
working days x (Ra
X110%) whether the employee takes leave or on
termination of employment, or on termination of employment claims
the value of
leave accrued but not taken.   In these
circumstances, the employer will have failed to comply with s
21(1)(a) and/or
s 40 (c). In the present instance, the applicants
have not claimed that they were prejudiced in this way, and I take
this issue
no further.