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[2011] ZALCJHB 148
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Workforce Group (Pty) Ltd v Commission for Conciliation Mediation and Arbitration and Others (J2699/09) [2011] ZALCJHB 148; (2012) 33 ILJ 738 (LC) (22 September 2011)
VAN NIEKERK J
Not reportable
IN THE LABOUR COURT OF
SOUTH AFRICA
HELD AT JOHANNESBURG
CASE NO J2699/09
In
the matter between:
THE
WORKFORCE GROUP (PTY) LTD
.....................................................
APPLICANT
and
THE
COMMISSION FOR CONCILIATION,
MEDIATION
AND ARBITRATION
....................................................
1
ST
RESPONDENT
COMMISSIONER
F VAN DER MERWE N.O
...................................
2
ND
RESPONDENT
JOHNATHAN
MALKIN 3
RD
RESPONDENT
Date
of hearing: 26 August 2011
Date
of judgment: 22 September 2011
JUDGMENT
VAN
NIEKERK J
Introduction
[1] The applicant seeks
to have a ruling made by the second respondent (‘the
commissioner’) reviewed and set aside.
In his ruling, the
commissioner found that the third respondent was an ‘employee’
as defined in by the Labour Relations
Act (‘LRA’). On
that basis, the commissioner ruled that the first respondent, the
CCMA, had jurisdiction to entertain
an unfair dismissal dispute
referred to the CCMA by the third respondent.
[2] Both parties had
filed heads of argument in the present proceedings on the erroneous
assumption that the review was to be heard
on the basis that the
reasonableness test established by the judgment in
Sidumo &
another v Rustenburg Platinum Mines Ltd & others
[2007] 12
BLLR 1097
(CC) applied. At the hearing of the application, I raised
with counsel the decision by the Labour Appeal Court in
South
African Rugby Players Association & others v SA Rugby (Pty) Ltd &
others
(2008) 29
ILJ
2218 (LAC), in which the LAC held
that in regard to a commissioner’s finding on jurisdiction, the
question is not whether
the commissioner’s finding was
reasonable but whether on the facts the applicant was an employee.
The basis of this approach
is that a ruling on jurisdiction made by
the CCMA is made for convenience – the CCMA is a creature of
statute and cannot
decide its own jurisdiction. Whether the CCMA has
jurisdiction is a matter for this court to decide. In other words,
the issue
before the court is whether objectively speaking, there
existed facts would give the CCMA the jurisdiction to entertain the
dispute
i.e. that established that the third respondent (Malkin) was
an employee as defined by s 213 of the LRA.
[3] The parties agreed
that I should reserve judgment in the application and that they would
file supplementary heads of argument
addressing in the issue as
defined in paragraph [2].
Reviewing incomplete
proceedings
[4] Mr Bagraim, who
appeared for the third respondent, submitted that as matter of
general principle, the court ought not to intervene
in uncompleted
arbitration proceedings and on that basis, the application should be
dismissed and the mater remitted to the CCMA.
Generally speaking,
this is the correct approach and one that is consistently applied by
this court. The difficulty I have is that
the ruling under review was
made in 2009. Should the matter be remitted, there is little doubt
that it will be referred to this
court on the same point. In my view,
while the applicant is to be admonished for what amounts to a
piece-meal review, it is in
the interests of justice and the
expeditious resolution of the dispute between the parties that I make
a decision on the merits.
Applicable legal
principles
[5] The scope of the
definition of ‘employee’ in s 213 of the LRA was recently
discussed in
Pam Golding Properties (Pty) Ltd v Erasmus &
others
(2010) 31
ILJ
1460 (LC). In that decision, the
court referred to
State Information Technology Agency (Pty) Ltd v
Commission for Conciliation, Mediation and Arbitration & others
(2008) 29
ILJ
2234 (LAC), where the LAC applied three
criteria to determine the existence of an employment relationship for
the purposes of s
231: the employer’s right of supervision and
control, whether the employee forms an integral part of the
organisation, and
the extent to which the employee was economically
dependent on the employer. In his article ‘An Accident of
History: Who
is (and Who Should Be) and Employee under South African
Law’ (2004) 25
ILJ
787, Paul Benjamin argues, at p 803:
A genuinely
self-employed person is not economically dependent on their employer
because he or she retains the capacity to contract
with others.
Economic dependence therefore relates to the entrepreneurial position
of the person in the marketplace. An important
indicator that a
person is not dependent economically is that he or she is entitled to
offer skills or services to persons other
than his or her employer.
The fact that a person is required by contract to only provide
services for a single ‘client’
is a very strong
indication of economic dependence. Likewise, depending on an employer
for the supply of work is a significant
indicator of economic
dependence.
[6] It is also well
established that when the existence or otherwise of an employment
relationship is determined, the court has
regard to the substance
rather than form. The terms of any agreement between the parties, the
labels that they use to define their
relationship and use of any
vehicle through which services are rendered by one to the other are
of no consequence – what
matters is the reality of the
relationship between them (see
Denel (Pty) Ltd v Gerber
(2005)
26
ILJ
1256 (LAC)).
Evidence
[7] Only Malkin and a Mr
Ferreira, the applicant’s legal manager, gave evidence at the
arbitration hearing. Malkin testified
that he was employed by the
applicant in September 2008 at a salary of R45 000 per month, as a
procurement manager. He did not
sign a contract of employment, and
there had been no discussion on a consultancy arrangement. He told
the previous CEO, Katz, that
he wanted a salary of R45 000 net; Katz
told him that he would have to invoice the company, adding VAT. He
did so. Malkin also
testified that he was listed in the applicant’s
internal telephone directory as the ‘procurement department’,
that he worked office hours, took leave and was paid, and that he was
paid a cell phone, car and petrol allowance with effect from
December
2008. Malkin testified that he was under the chief financial
officer’s supervision and control, that he worked an
average of
45 hours per week that he earned no other income and that he
submitted reports on the applicant’s stationery and
used the
applicant’s letterheads. He was totally dependent on the
applicant. During November 2008 the auditors began asking
questions
about the fact that no PAYE was deducted and paid over on his behalf.
In May 2009, a new CEO, Diamond, was appointed.
Various meetings were
held with Diamond, who produced a consultancy agreement for Malkin to
sign. It is common cause that Malkin
did not sign the agreement. In
July 2009, Malkin became ill. The tax issue was never resolved. He
was not paid for July 2009 and
was presented with a letter
terminating his contract on grounds of repudiation.
[8] Mr Ferreira, the
applicant’s legal manager, testified on behalf of the
applicant. He stated that he was called to Katz’s
office and
introduced to the third respondent, and instructed to draft a
consultancy agreement. He stated further that he gave
a copy of a
draft agreement to the third respondent, who stated that he wished to
consider the tax implications of the agreement.
Despite numerous
requests for Malkin to sign the agreement, he failed to do so.
Ferreira testified that if Malkin had been engaged
as an employee, he
would have been requested to sign an employment contract, which would
have made provision for standard benefits
applicable to employees,
including retirement and health care funding. Ferreira stated further
that Malkin had consulted an attorney
and tax adviser shortly after
receiving the consultancy agreement and that he was advised to
produce an invoice because he was
a consultant and not an employee.
Further, Malkin had been employed on a specific project, he was not
under the direct control
of the applicant and he was free to render
services to other parties.
[9] Much of the evidence
concerns the terms on which Malkin was paid. It is common cause that
he sent invoices to the applicant,
in which VAT was included. What is
in dispute is whether this was the agreed basis of payment, or
whether Malkin was simply acting
on Katz’s instruction. In my
view, the answer to that question is not relevant to a determination
on the facts as to the
existence of an employment relationship. Nor
is the correspondence between the parties and their advisers or the
nature of the
advice sought by either of them relevant. How the
applicant and the third respondent respectively viewed the nature of
their relationship
or how they preferred it to be constructed is not
determinative. What is relevant for present purposes, in terms of the
approach
adopted in the
SITA
judgment, is the reality of the
relationship as determined by the factual circumstances in which the
third respondent provided services,
and an evaluation of those facts
in terms of the criteria listed by Davis JA.
[10] Turning to the
present matter, perhaps the first point that should be made is that
even if, as the applicant contends, Malkin
was engaged for a fixed
term for the duration of a specific project, it does not follow that,
for that reason, he was not an employee.
On the contrary, the LRA
acknowledges relationships of this nature and extends protection
against the unfair deprivation of work
security to them.
[11] Secondly, while it
may be correct that Malkin at no stage alerted anyone to the fact
that he should have received an employment
agreement, or that there
had been a mistake in giving him a consultancy agreement, or that he
never asked why he was not in receipt
of medical aid or retirement
benefits, it does not necessarily follow that Malkin was not an
employee as defined by the Act.
[12] Malkin’s
evidence that he was part of the organisation was not seriously
challenged. In particular, he was provided with
an office and his
tools of trade, a telephone, an email address, use of the internet,
and he generally kept office hours. The significant
degree of
integration into the applicant’s organisation is indicative of
the existence of an employment relationship. Similarly,
the nature
and extent of the control and direction over Malkin’s
activities, especially by Van Wyk, the chief financial officer,
were
not seriously challenged. Nor was Malkin’s evidence that he
devoted his full time and attention to the applicant’s
business
and that he was economically dependent on the applicant seriously
challenged. While on the applicant’s version Malkin
had the
right to perform work for other parties, the fact of the matter is
that he did not. He clearly depended on the applicant
for his work
and his income.
[13] In these
circumstances, in my view, Malkin has discharged the onus of
establishing that he was an ‘employee’ as
defined by the
LRA. It follows that the matter should be remitted to the CCMA for
the arbitration hearing to continue.
[14] In relation to
costs, the court has a wide discretion in terms of s 162 to make
orders for costs according to the requirements
of law and fairness.
Ordinarily, on the basis that costs follow the result, the applicant
would be liable for the third respondent’s
costs. When this
matter was called on 26 August 2011 and the parties directed to file
supplementary heads of argument to deal with
the issue before the
court, they were expected to interrogate the evidence before the
commissioner and to make submissions on the
question whether
objectively speaking, there were facts before the commissioner that
served to establish that Malkin was an employee.
The heads filed on
behalf of Malkin failed to address this point, and were confined to
an attack on the piecemeal nature of the
review. In these
circumstances, I intend to make no order as to costs.
I make the following
order:
The third respondent was
an employee of the applicant.
The matter is remitted
to the first respondent for a continuation of the arbitration
proceedings before the second respondent.
There is no order as to
costs.
ANDRE VAN NIEKERK
JUDGE OFTHE LABOUR
COURT
Appearances:
For the applicant: Adv K
Lapham, instructed by Hunts (inc. Borkums) Attorneys
For
the respondent: Mr M Bagraim, Bagraims Attorneys
5