About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Johannesburg Labour Court, Johannesburg
SAFLII
>>
Databases
>>
South Africa: Johannesburg Labour Court, Johannesburg
>>
2012
>>
[2012] ZALCJHB 56
|
|
Protect A Partner (Pty) Ltd v Machaba-Abiodun and Others (JR2062/2010) [2012] ZALCJHB 56; (2013) 34 ILJ 392 (LC) (22 June 2012)
Reportable
REPUBLIC OF SOUTH
AFRICA
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Case no.: JR2062/2010
PROTECT A PARTNER
(PTY) LTD
….............................................................
Applicant
and
LAURA MACHABA-ABIODUN
….......................................................
First
Respondent
COMMISSION FOR
CONCILIATION
MEDIATION &
ARBITRATION
…...................................................
Second
Respondent
SMIT, MARGARET NO
…..................................................................
Third
Respondent
Heard: 24 May 2012
Delivered: 22 June
2012
Summary: Employee –
Director and significant shareholder - Determination – Section
213 of LRA 1995 – Reality test
adopted – Three criteria
applied to determine existence of employment relationship –
Focus on nature of control element
for the purposes of director
JUDGMENT
GAIBIE, AJ
Introduction
The applicant seeks to
review and set aside the ruling made by the second respondent (‘the
commissioner’) under the
auspices of the third respondent
(‘the CCMA’) on 20 July 2010 under case number GAJB
42640/09 in terms of section
158(1)(g) of the Labour Relations Act
66 of 1995 (‘the LRA’). The commissioner ruled that the
first respondent, Ms
Laura Machaba Abiodun (‘Abiodun’),
was an employee in terms of section 213 of the LRA, and that the
CCMA, accordingly,
had jurisdiction to entertain an unfair dismissal
dispute referred by her.
Both parties had filed
heads of argument in the present proceedings on the erroneous
assumption that the review test in respect
of this jurisdictional
matter was that established by the judgment in
Sidumo
and Another v Rustenburg Platinum Mines and Others
.
1
During the course of
argument, it became apparent to the parties that the
Sidumo
test was inapplicable,
and that the test established by the Labour Appeal Court in
SA
Rugby Players Association and Others v SA Rugby (Pty) Limited and
Others
2
was the applicable test.
In respect of jurisdictional matters, the question is not whether
the finding was reasonable, rational
or justifiable but whether on
the facts,
the
applicant was an employee.
In
SARPA
, the LAC
dealt with the provisions of section 186(1)(e), and in the context
of determining whether a dismissal had occurred,
Tlaletsi AJA held,
on behalf of the Labour Appeal Court, that:
‘
[39] The
issue that was before the commissioner was whether there had been a
dismissal or not. It is an issue that goes to the jurisdiction
of the
CCMA. The significance of establishing whether there was a dismissal
or not is to determine whether the CCMA had jurisdiction
to entertain
the dispute. It follows that if there was no dismissal then the CCMA
had no jurisdiction to entertain the dispute
in terms of section 191
of the Act.
[40] The CCMA is a creature of statute
and is not a court of law. As a general rule, it cannot decide its
own jurisdiction. It can
only make a ruling for convenience. Whether
it has jurisdiction or not in a particular matter is a matter to be
decided by the
Labour Court.’
Van Niekerk J in
Workforce
Group (Pty) Limited v CCMA and Others
3
had regard to the
SARPA
judgment and 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 individual was an employee:
‘
In other
words, the issue before the court is whether, objectively speaking,
there existed facts which would give the CCMA the jurisdiction
to
entertain the dispute, ie that established that
the...respondent...was an employee as defined by section 213 of the
LRA.
’
4
In further amplification
of the test, Steenkamp J in
ASARA
Wine Estate and Hotel (Pty) Limited v Van Rooyen and Others
5
also had regard to the
SARPA
matter and stated the
applicable test in respect of jurisdictional matters in the
following terms, albeit that it was in relation
to an issue of
constructive dismissal:
‘
The test I
have to apply, therefore, is not whether the conclusion reached by
the commissioner was so unreasonable that no commissioner
could have
come to the same conclusion, as set out in
Sidumo
,
but whether the commissioner correctly found that Van Rooyen had been
dismissed.’
I proceed therefore to
enquire whether the commissioner correctly found that the applicant
was an employee in terms of section
213 of the LRA.
Background facts
The applicant was
represented, in its review pleadings, by its Chief Executive Officer
(‘CEO’), Ms Marthie Claasens
(‘Claasens’).
In addition to her role as the CEO, she described herself as a 55%
shareholder, employee and director
of the applicant. The only other
director and 45% shareholder was Abiodun. The CEO contends that
whilst she is an employee of
the applicant, Abiodun is not.
Arbitration
proceedings
On 1 December 2009,
pursuant to a disciplinary process, Claasens dismissed Abiodun
summarily from her employment. On 10 December
2009, Abiodun referred
an unfair dismissal dispute to the CCMA. A conciliation meeting was
held on 3 February 2010, and on the
same day Abiodun referred the
dispute to arbitration.
Claasens launched an
application in terms of rule 31 of the CCMA Rules (‘the Rule
31 Application’ or ‘the Rule
31 Affidavit’) in
which she disputed Abiodun’s status as an employee, after she
had received legal advice to do so.
Abiodun chose to lead
viva voce
evidence at the CCMA proceedings and whilst the
applicant cross-examined Abiodun, it did not lead any evidence on
behalf of the
applicant. Accordingly, what is before this court for
the purposes of determining the jurisdictional point is the
applicant’s
rule 31 application, the transcript of the
arbitration proceedings and the review application in this matter.
Further supplementary
affidavit
The applicant also
submitted a second supplementary affidavit in which it purported to
rely on evidence that was not before the
CCMA for the purposes of
the jurisdictional point. The applicant argued that in light of the
dictum
in
Workforce Group
, the Labour Court was
enjoined to determine the matter afresh and that it was accordingly
appropriate for it to take into account
evidence that was not before
the CCMA. I will deal with this issue later in this judgment.
The contractual
relationship between the applicant and Abiodun
The applicant commenced
its business as a close corporation in 2004. Its main business was
the provision of technical assistance,
training and assurances to
auditors in respect of commercial audits.
During early 2007,
Claasens met Abiodun and invited her to join the company because she
would make a material contribution to
the business of the applicant
as a BEE partner. According to Claasens, in February 2007, she
entered into a verbal agreement
with Abiodun in terms of which the
latter would: act as a non executive director; acquire the ‘title’
of chairperson
of the Board of Directors (‘the Board’);
and acquire shares in the applicant as soon as it was converted into
a private
company. In return, Abiodun was required to spend one day
a week ‘to further the applicant’s business’ and
she received a monthly gross salary of R30 000 subject to the
usual statutory deductions, including PAYE and UIF.
In October 2007, the
applicant’s status changed from a close corporation to a
private company with limited liability. Claasens
contends that, at
that stage, the applicant had entered into a further verbal
agreement with Abiodun in terms of which she acquired
a 26% share in
the applicant, and the remaining 19% was acquired by a close
corporation known as AMC International (the ‘CC’)
in
which Abiodun and her husband were members. This evidence is
contradicted by the shareholder’s agreement which records
that
the shares in the applicant’s business are held only by
Claasens and Abiodun respectively in the ratio of 55% : 45%.
Claasens assisted
Abiodun to obtain a loan so that she could acquire the 45%
shareholding at a cost of some R2.8million.
From October 2007,
Abiodun continued to receive the monthly salary of R30 000, and
in addition thereto received an amount
of R90 000 for
consultancy services. In return, Abiodun was required to spend at
least 3 days a week in the office and according
to her she was
required to ‘facilitate various meetings and to enhance the
business opportunities of the applicant’.
Claasens expected
Abiodun to ‘promote the applicant’s business, source
work and market the applicant’s services
to her connections’.
She also anticipated that Abiodun might ‘expand the
applicant’s business via strategic
business diversification
and training initiatives’.
According to Claasens,
Abiodun did not contribute to the applicant’s business
materially, nor did she secure business opportunities
for the
applicant. In any event, Claasens did not suggest that either she or
the applicant took any action against Abiodun in
consequence
thereof.
On 2 October 2009, the
relationship between Claasens and Abiodun had ‘crossed a
certain Rubicon’. According to Claasens,
Abiodun accused her
of fraud and corruption, and Abiodun enlisted the services of a
forensic audit company to audit the books
of the applicant. Claasens
stated that it was during this debacle that certain irregularities
pertaining to Abiodun came to her
attention, and in consequence
thereof Abiodun was suspended, charged and ultimately dismissed.
Abiodun did not
participate in the disciplinary hearing because she was of the view
that the decision to terminate her employment
was a
fait
accompli
.
16 charges of misconduct
were levelled against Abiodun, which included allegations of
dishonesty, fraud, disposition of company
monies without authority,
loss of business, passing off, acts in contravention of statutes,
insubordination, insolence and incompatibility.
It is necessary, to
quote relevant parts of the charges, to capture the terminology and
tenor of speech used therein in light
of the issues raised in this
matter. The relevant parts thereof read as follows:
‘
Insubordination
Charge 13
On 16 October 2009 you were given a
direct instruction from Marthie Claasens, the CEO of the company...
to give feedback on the
following:
Work sourced since 2007 clearly
indicating on a schedule:
Date of meeting
Contact person....
Further work being sourced:
On which date
Negotiated with whom...
You failed and/or neglected to make
the requested information available.
You then undertook to make it
available on 23 October 2009.
The abovementioned incidents of
insubordination has resulted in the employment relationship being
strained and intolerable which
has resulted in business suffering
potential loss.
Insolence
Charge 14
On 22 October 2009 it is alleged by
your co-employees and senior professional staff that you made
yourself guilty of gross misconduct
by being rude, abusive, and
insulting and treated them with disrespect.
In March/April 2009 you attended to a
tender in Mmbatho with Accountant General of the North West Province
and gave undertakings
and made promises without communicating this to
the staff resulting in this tender being abandoned.
....
The abovementioned incidents of
insolence has resulted in the employment relationship being strained
and intolerable which has resulted
in business suffering potential
loss.
Incompatibility
Charge 15
Failure to maintain cordial and
harmonious relationships with employees and co-directors, resulting
in business unit being dysfunctional.
Failure to engage constructively or
refusal to engage with CEO and other directors.
You in your capacity as chairperson,
shareholder and director of the company failed and/or neglected to
advance the interest of
the company and its reputation by making
false statements on 2 October 2009 in that your co-directors made
questionable transactions
without proper consultation with
co-directors.
...
The abovementioned incidents of
incompatibility have resulted in the employment relationship being
strained and intolerable which
has resulted in business suffering
potential loss.’
Abiodun was found guilty
of all the charges proffered against her and the chairperson
concluded that she should be summarily dismissed.
On 1 December 2009, the
CEO informed Abiodun about the termination of her employment in the
following terms:
‘
You are
hereby informed that you have been summarily dismissed on 1 December
2009 after a proper disciplinary hearing was convened
and chaired by
an independent chairperson. Therefore your last day of employment is
today, being 1 December 2009.
...
You will receive your normal
remuneration for the period up to and including 1 December 2009.’
As indicated above, the
applicant for the first time contested Abiodun’s status as an
employee in terms of a rule 31 application
at the CCMA arbitration
proceedings. On the basis of the
dicta
in
State
Information Technology Agency (Pty) Ltd v Commission for
Conciliation, Mediation and Arbitration and Others
,
6
and
Workforce
Group
,
the applicant contended that Abiodun was not an employee. In that
regard, the applicant contended that Abiodun: was not subject
to the
supervision or control of the applicant; was not
part
of the organisation of the applicant; nor economically dependent on
the applicant.
It is, in my view,
necessary to examine the relevant aspects of the relationship
between the applicant (represented by Claasens)
and Abiodun in order
to determine the jurisdictional issue.
Payments to Abiodun
Prior to the applicant’s
conversion into a private company, Abiodun received a monthly salary
of R30 000.
From October 2007,
Abiodun received an additional R90 000 which was paid to her
CC, and which brought her total earnings
to R120 000 per month.
Claasens stated in the review application that the amount of
R120 000 was made up of: R30 000
(a director’s fee);
R65 000 (to assist with the repayment of the loan used to
purchase her 45% shareholding); and
R25 000 (for consultancy
services).
In contrast, Abiodun
testified that the R30 000 was paid to her directly and the
R90 000 was paid into the CC’s
account for the purposes
of discharging the loan. She also testified that Nick Claasens, the
Chief Financial Officer (‘CFO’)
of the applicant, was
responsible for structuring packages and that her package was
structured in the same way as Claasens’
package with a view to
securing the most beneficial tax structure available.
The following additional
factors indicated that the applicant considered the monthly payment
to Abiodun as a composite figure
of her entitlement to remuneration.
For instance:
In reference to the
amount of R90 000, Claasens indicated in paragraph 18 of
her founding affidavit that this amount
‘constituted 75%
of her total remuneration from the applicant’
.
On 24 November 2009,
Abiodun was suspended from her employment with immediate effect
and on ‘on full pay’.
The chairperson of
the disciplinary hearing recorded the following in relation to
Abiodun’s earnings:
‘
The accused
had been in employment for almost 3 years. She is in a very senior
position at the company and earning R156 000
per month. No
previous disciplinary action has been taken against the accused. The
financial position of the accused is unknown
to the complainant, but
she is married and her husband owns a successful company. She also
serves on the board of other companies.’
In the circumstances,
and on a balance of probabilities, it is clear that Abiodun received
an amount of R120 000 which was
later increased to R156 000
as remuneration per month. It is perhaps more than coincidental that
paragraph 9 of the unsigned
draft employment agreement reflected the
amount of R30 000 as “remuneration”. I return to
the relevance of the
unsigned employment agreement later in this
judgement.
There is one additional
factor that requires a brief mention. It was Abiodun’s
uncontested evidence that she was reimbursed
for any travel expenses
for work purposes from the beginning of 2009. The only relevance of
this reimbursement to the jurisdictional
issue is that it is
referred to as an entitlement in paragraph 10 of the unsigned
employment agreement.
Control and
supervision
The applicant averred
that the commissioner erred when she found that Abiodun was under
its control, and that the commissioner
was only able to find one
incident, being the disciplinary process, as an example of her
submission to Claasen’s authority.
Claasens contended both in
the Rule 31 application and in the review application that Abiodun
performed her tasks in circumstances
that were not subject to her
control, direction or supervision. I deal with each of the issues
raised by her in her affidavit
that have a bearing on the issues of
control or supervision below.
Hours of work and
leave
It was common cause that
Abiodun’s hours of work were not regulated, controlled or
monitored, and that she was not required
to submit timesheets like
the rest of the staff. According to Claasens, Abiodun was initially
required to spend one day a week
to ‘further the applicant’s
business’ and from October 2007 she was required to spend
three days a week to
‘facilitate various meetings and to
enhance the business opportunities of the applicant’, amongst
other things. Claasens
did not specify whether there was any
agreement between them as to how this time would be computed, and it
is accordingly not
clear on what basis Claasens was able to contend
in the rule 31 affidavit, that Abiodun ‘did not spend in
excess of an
average of 40 hours per month in furthering the
[applicant’s] business’.
Whilst there was a
dispute as to whether Abiodun was entitled to annual leave, it was
clear that Abiodun was entitled to her monthly
remuneration whether
or not she rendered services to the applicant. In the circumstances,
she continued to receive her monthly
remuneration despite her
absence, at some stage, when she travelled to the USA.
Services to be
rendered or work to be performed
According to Claasens,
Abiodun was required, in the main, to ‘further the applicant’s
business’, to promote
and market it, and to source work for
the applicant. Claasens did not provide any particularity as to how
these tasks should
have been achieved except for a broad and bold
expectation that Abiodun was required to ‘promote the
applicant’s
business, source the work and market the
applicant’s services to her connections’.
It is arguably more than
coincidental that para 3.5 of the unsigned employment agreement
echoed Claasens’ understanding
of Abiodun’s tasks in the
following terms:
‘
The duties,
functions and tasks of the EMPLOYEE shall be to .... strategic
marketing of the firm’s business.’
It was Abiodun’s
uncontested evidence that she did more than just the strategic
marketing of the applicant’s business.
According to her she:
dealt with
recruitment of staff - for instance, she together with Claasens
interviewed a potential candidate for the post
of CFO;
attended various
meetings with Claasens, including meetings with customers;
cashed payments at
the Auditor General; she negotiated with SARS in respect of
taxes that were owing by the applicant
but were outstanding for
years and months;
had to evaluate
employees on their performance; and she was required to assess
the applicant’s operating model and
determine whether it
was effective; and
was responsible for
‘firming up’ existing contracts, such as the
contract with the Auditor General where the
applicant got 90% of
its income, and for heading a project aimed at obtaining
contracts with the Department of Labour.
It is also apparent from
the provisions of the shareholders agreement that both Claasens and
Abiodun were responsible for the
day to day management of the
applicant. In this regard, paragraph 13 of the shareholders
agreement is significant. The relevant
parts thereof provide as
follows:
‘
13
MANAGEMENT OF THE COMPANY
13.1 Control and management of the
Company will vest in the Board.
13.2 The Board will be responsible for
and have the following powers and authority –
13.2.1 the management of the Company;
13.2.2 determining the strategic
policy of the Company and preparing the Annual Budget from time to
time; and
13.2.3 ensuring compliance with any
approvals framework agreed to by a Special Majority of the
Shareholders from time to time.
13.3 The day to day management of the
Company will be –
13.3.1 subject to the policies and
principles determined from time to time by the Board; and
13.3.2 the governance and oversight
responsibility of the Executive Chairman who will be appointed from
among the Directors, who
will initially be Machaba-Abiodun;
13.3.3 the responsibility of a Chief
Executive Officer who will be appointed from among the Directors, who
will initially be Claasens.’
In the context of this
evidence, it is necessary to ask whether Abiodun had performed her
tasks under any supervision or control.
Under cross-examination,
Abiodun conceded that she was not under the supervision or control
of Claasens but that she was answerable
to the Board, even if the
Board was made up of Claasens and herself. According to her, the
Board ‘had to agree on the strategic
direction ... and once
that was agreed, I execute that. I will not execute anything outside
of the Board, that was not agreed’
.
Abiodun’s
evidence in this regard is in sync with the provisions of paragraph
13 of the shareholders agreement quoted above.
It is in this context
that Abiodun testified that she was under Claasen’s command in
so far as she executed the Board’s
instructions, and that in
all other circumstances they were peers who worked in collaboration
with each other.
It was, in any event,
not disputed that Abiodun was reflected as an employee in the ‘top
management’ of the applicant
in a document which was submitted
by the applicant to the Department of Labour in respect of its BEE
status.
Despite this evidence,
Claasens persisted with her view, in the Rule 31 application and the
review application, that Abiodun was
no more than a non-executive
director. This view is not only underscored by Abiodun’s
uncontested testimony (captured above,
in particular, at para 36)
but also by clause 13 of the shareholders agreement.
Tools of trade
It was common cause that
the applicant had provided Abiodun with an office and office
equipment which she used for the performance
of her tasks and
function and for matters that related to her status as a
non-executive director of external entities. Abiodun
testified that
Claasens also used her computer for other business activities. This
evidence was not contested.
Part of the
organisation
Claasens contended that
Abiodun did not form part of the organisation of the applicant. This
contention rested on two propositions:
first, that Abiodun was not a
qualified auditor and that she was therefore unable to partake in
the core business of the applicant;
and second, that Abiodun was not
obliged to devote her time and energy to the applicant’s
business on a full time basis.
Abiodun on the other
hand contended that she was completely part of the organisation,
that when she started with the applicant
she engaged with the
employees and once she had made a financial contribution to the
shareholding of the applicant, she explained
her commitment to the
business of the applicant in the following resounding terms:
‘
Imagine that
at time I as working ... it was positioning outside, at this time we
wanted to get into the skin of the company, how
the operatives run,
how the finances run, because the operative model was not sustainable
that is what we were concerned about,
like any equity shareholder, we
want to make sure that it is a sustainable model.
Three days in the office, what we have
agreed on and continuing to do the strategy of marketing and the
position in the company’.
Economic dependence
It was common cause that
Abiodun sat on numerous other boards as a non-executive director and
that she received substantial income
in consequence thereof. Abiodun
however maintained that the ‘lion share’ of her income
came from her employment with
the applicant. The applicant argued
that her income from the other entities, albeit in the form of a
non-executive director’s
fee, was indicative of the fact that
she was not economically dependent on the applicant.
The various agreements
It was common cause that
an employment agreement and a consultancy agreement were drafted by
the applicant but that these were
not concluded or signed by the
parties. The parties did however conclude a shareholders agreement
and apart from the relevance
of clause 13 referred to above, clause
3.1.2 indicated as a ‘condition precedent’ that Claasens
and Abiodun should
conclude employment agreements with the applicant
by 17h00 on 31 October 2007’. Claasens maintained that she was
an employee
of the applicant and that Abiodun was not, in the
absence of any allegation that she had concluded an employment
agreement with
the applicant.
The main issue
The central question in
this case is the following: Are directors employees? More
specifically, are permanent part-time directors
and significant
shareholders employees for the purposes of the LRA? The traditional
answer to this question is that some are
and some are not. However,
since directors are legal persons separate from the entity, the
possibility arises that they may be
its employees. Our courts have
on several occasions held that directors should be regarded as
employees in appropriate circumstances.
7
It is a general and well
established principle of law that a company is a separate legal
person, and there is a fundamental difference
between its rights,
duties and acts to those of others, including its directors and
shareholders.
In general, there are
essentially two types of directors, more commonly known as
non-executive and executive directors. The directors
of an
organisation are the persons who are the members of its board. An
executive director, sometimes also referred to as an
“inside
director” is a director who is often an employee, officer,
significant shareholder, or someone similarly
connected to the
organisation. Inside directors or executive directors represent the
interest of the entity’s stakeholders,
and often have special
knowledge of its inner workings, its financial or market position,
its vision and its mission. Typical
executive directors would
include: a chief executive officer who may also be the chairman or
chairperson of the board, other
executives of the organisation, such
as its chief financial officer or any other director tasked with the
management of the entity’s
operations. A non-executive
director is usually referred to as a member of the Board who is not
otherwise employed by or engaged
with the entity or the
organisation, and does not generally represent any of its
stakeholders. A typical example would be a director
who is president
of a firm or entity in a different industry.
The question as to
whether a director, albeit a permanent part-time director, is an
employee will always be coloured by the context
in which the
question of the director’s work status has arisen and the
answers will highlight conflicting factors that
may operate in any
given situation. The Court has to consider the relevance of all of
these factors, decide what weight should
be given to each of them
and then balance one against the other to arrive at an appropriate
conclusion.
Against that brief
background it is also necessary to take judicial recognition of the
overall employment background and the nature
of employment
relationships in modern day. In his article
8
Professor Paul Benjamin
(‘Benjamin’) indicates that the statutory definition of
an employee draws the line between
employment and self-employment.
Benjamin recognises that in recent years –
‘
...this line
has become an increasingly contested terrain. Factors such as
globalisation, deregulation and technological change
have combined
greatly to increase the variety of forms of employment. An increasing
number of workers are now located in a grey
area between employment
and self employment. In addition, many employers have adopted
strategies to disguise employment as self
employment so as to avoid
the requirement of labour law.
This shift has been described as the
rise of “atypical” or “non-standard” forms of
employment. These terms
are generally taken to encapsulate employment
other than full time employment for a single employer who controls
the workplace.
As Clive Thompson has commented: “The standard
model of employment is now one of inherent variability. Work has
changed and
is changing for both better and for worse”.’
Benjamin also indicates
that the negative implications of these developments have been
recognised in government policy documents
and he records the
following excerpt from the green paper
9
which preceded the
promulgation of the Basic Conditions of Employment Act 75 of 1997
(‘the BCEA’):
‘
The current
labour market has many forms of employment relationships that differ
from full-time employment. These include part-time
employees,
temporary employees, employees supplied by employment agencies,
casual employees, home workers and workers engaged under
a range of
contracting relationships ...’
In her article,
10
Professor Rochelle Le
Roux also comments on the diverse forms in which labour presents
itself:
‘
Until
recently there has been very little difficulty in using the contract
of employment to draw that line. However, work continuously
presents
itself in new and diverse forms, and the reality must have dawned on
even the most conservative labour lawyer that the
continued reliance
and the contract of employment will render labour law less and less
relevant. So where and how should the line
be drawn now?’
Applicable legal
principles
The scope of the
definition of
‘
employee
’
in section 213 of the
LRA was recently discussed in
Workforce
Group
.
11
In that decision, the
Court referred to the
Sita
judgment, where the LAC,
without indicating the relative weight that should be accorded to
each factor, identified the primary
criteria for the purposes of
determining an employment relationship as:
The employer’s
right of supervision and control;
Whether the employee
forms an integral part of the organisation with the employer;
and
The extent to which
the employee was economically dependent upon the employee.
The LAC, in developing
the reality test, cited with approval, Benjamin’s article.
Benjamin clearly indicates that it is
not necessary to establish the
existence of all three criteria for the purposes of deciding whether
an employment relationship
exists. In this regard, he makes the
following proposal:
‘
It is
suggested that the presence of any of these should, in normal
circumstances, indicate that the person is an employee. The
presence
of a right of control should point to an employment relationship
covered by labour legislation, unless the employer can
show aspects
of the relationship that make this inappropriate. It will be for the
courts to delineate those factors that indicate
that an employment
relationship does not exist despite the presence of control. Where
this is not the case, the courts could utilise
the presence of
economic dependence or the person’s integration into the
employer’s organization to determine whether
they should
receive the protection of labour law.’
12
According to Benjamin,
therefore, no one factor is decisive and it is possible in certain
circumstances to declare that an employment
relationship exists if
only one of the three factors is satisfied.
Depending on the
context, the three criteria must be applied in circumstances where
there is a recognition that there may be many
factors to be taken
into account in relation to each of those criteria with different
priority being given to those factors depending
on the facts of each
individual case.
Element of control
First, the element of
control will be important. Traditionally,
this
element is determined by enquiring who makes the decision about what
is to be done, the way in which it is to be done, the
manner or the
means by which it is to be done and/or the time when it is to be
done? In addition, questions must be asked about
who hires and fires
the persons who must perform what is to be done, and who provides
the material, the equipment or the tools
to be used in performing
what is to be done? These questions are,
in
the context of the control element,
easy
to answer in respect of employees who are either unskilled or semi
skilled precisely because such employees fit neatly into
the typical
master-servant relationship. From time to time,
our
courts have, depending on the nature of the employment relationship,
attempted to define the control element in narrower terms,
requiring
in its basic form some element of hierarchical authority or
subordinate relationship.
13
In the context of
skilled or expert employees,
the
element of control may not be decisive precisely because the
employer may be less skilled or less experienced than the skilled
employee and may not have the appropriate skill or discretion to
decide how the work should be done. This was recognised in
Medical
Association of S.A. and Others v Minister of Health and Another
.
14
Whilst it is settled law
that some form of control is necessary for an employment
relationship to exist, the exact nature, form
or extent of control
required in any particular case is less clear.
Much
will depend on the nature of the work to be performed and the
relationship between the parties.
In such cases,
the control element must
be broadened to ask questions that are context appropriate. In the
case of skilled employees, the appropriate
question was posed by the
Court of Appeal in
Lane
v Shire Roofing Company (Oxford) Limited
[1995] EWCA Civ 37
;
[1995]
IR LR 493
(CA), where Henry LJ stated that:
‘
In such
cases the question is broadened to ask whose business was it? Was the
workman carrying on his own business or was he carrying
on that of
his employers? The American Supreme Court, in
United
States of America v Silk
[1947] USSC 104
;
(1946) 331 US 704
, asks the question whether the men were employees
“as a matter of economic reality”. The answer to this
question may
cover much of the same ground as the control test (such
as whether he provides his own equipment and hires his own helpers)
but
may involve looking to see where the financial risk lies, and
whether and how far he has an opportunity of profiting from sound
management in the performance of his task.’
A similar approach was
adopted by Cooke J in
Market Investigations v Minister of Social
Security
[1969] 2 QB 173
(HC), where he indicated that:
‘
The most
that can be said is that control will no doubt always have to be
considered, although it can no longer be regarded as the
sole
determining factor; and that factors, which may be of importance, are
such matters as whether the man performing the services
provides his
own equipment, whether he hires his own helpers, and what degree of
financial risk he takes, what degree of responsibility
for investment
and management he has, and whether and how far he has an opportunity
of profiting from sound management in the performance
of his task.’
The above approaches to
the element of control are also congruent with section 213 of the
LRA which
inter
alia
defines
an employee as any other person who in any manner assists in
carrying on or conducting the business of the employer.
The Employment Appeal
Tribunal in the UK in
Buchan
v Secretary of State for Employment; Ivey v Secretary of State for
Employment
15
suggested that in its
most reduced form the element of control would be reflected in the
employer’s power to terminate the
employment relationship.
In the context of this
case, it is apparent that:
the authority for
hiring Abiodun lay within the domain of the applicant and so did
her firing. To the extent that the
applicant was of the view
that Abiodun did not comply with any mandate or instruction, she
was subject to the disciplinary
control of the applicant and was
ultimately dismissed in terms of thereof;
the applicant
provided Abiodun with office space and equipment in order to
‘further the applicant’s business’;
Abiodun invested a
huge amount of money in the purchase of her shareholding in the
applicant and was responsible for governance
matters in relation
to the Board and for the management of the entity subject to the
Board’s direction.
In all of these respects
she was subject to the control of the applicant.
Organisation test
The applicant contended
that Abiodun did not form part of the organisation as she was not a
qualified auditor, and was therefore
unable to partake in the core
business of the applicant. In addition, the applicant contended that
she was not obliged to devote
her time and energy to the applicant’s
business on a full time basis. This contention misses the point. An
employee does
not form part of the organisation simply because he or
she performs the same services or tasks as other employees in the
organisation
or because she does not do so on a fulltime basis. On
the contrary, both the BCEA and LRA acknowledge part time employment
relationships
and extend protection against the unfair deprivation
of work security to them.
According to Benjamin,
‘...integration into the employer’s organization is now
a factor that may be taken into account
in cases in which the
conventional aspect of control and supervision are not present. The
criticism of the organisation test
in Smit must now be tempered by
the fact that the statutory definition of an employee requires a
court to consider whether the
employee is assisting the employer
conduct its business, an issue to which the “organisation”
test addresses itself
.
’
16
Abiodun’s evidence
that she was part of the organisation was not seriously challenged.
On Claasen’s version, Abiodun
effectively assisted the
applicant in conducting and furthering its business. In addition,
she was provided with an office and
a computer to do so. The nature
of the tasks and services that she rendered and in respect of which
she gave testimony indicates
a significant degree of integration
into the applicant’s organisation which is indicative of the
existence of an employment
relationship.
Economic dependence
The applicant contended
that because Abiodun had alternative means of earnings independently
of her employment with the applicant,
she was not economically
dependent. However, and despite her alternative means of earnings,
Abiodun’s evidence that the
lion share of her income emanated
from the applicant was uncontested.
In any event, and on the
basis of the reality test, Abiodun has satisfied both the control
and the organisation tests, and she
has established that her income
from the applicant was the dominant form of her earnings. To that
extent she has satisfied that
criteria too. However, and in so far
as a contrary view exists in relation to determining the notion of
‘economic dependence’,
17
it is clear that Abiodun
has discharged the onus, at the very least, in relation to the first
two criteria.
Conclusion
As it will appear from
my assessment of the evidence in this matter, I intermittently
referred to the unsigned employment agreement
and the signed
shareholders agreement. I did so to indicate, at appropriate stages,
the relevance of those agreements to the
reality of the relationship
between the parties.
During the course of
argument, the applicant’s counsel suggested that I should
disregard the shareholders agreement in so
far as it may have any
relevance to the jurisdictional issue, notwithstanding the fact that
the agreement was valid and enforceable.
In this regard, she
referred to the following excerpt of Van Niekerk J, in
Workforce
Group
,
18
in support of her
argument that any agreements relevant to this matter should not be
relied upon for the purposes of determining
the jurisdictional
issue:
‘
When the
existence or otherwise of an employment relationship is determined,
the court has regard to substance rather than form.
The terms of any
agreement between the parties, the labels that they use to define
their relationship and the use of any vehicle
through which services
are rendered by one to the other are of no consequence – what
matters is the realty of the relationship
between them...’
I do not understand this
dictum
to
suggest that any documents, including the terms of an agreement
between the parties will always be irrelevant in these
circumstances,
but rather that a holistic approach should be adopted
in these circumstances to arrive at a reasonable and equitable
conclusion
about the reality of the relationship between the
parties.
19
The suggestion was, I
believe, opportunistic especially because on a closer examination of
the facts in this matter the reality
of an employment relationship
was echoed by the relevant provisions of the shareholders agreement
and was indicative of an employment
relationship envisaged in the
unsigned employment agreement.
In the circumstances of
this matter, I am of the view that Abiodun has discharged the onus
of establishing that she was an ‘employee’
as defined in
the LRA. It follows that the matter should be remitted to the CCMA
for the arbitration hearing to continue.
There is one final issue
that needs to be dealt with before I deal with the issue of costs.
The applicant served and filed a second
supplementary affidavit in
which it purported to attach evidence of Abiodun’s income from
alternative sources. Such evidence
was not placed before the
commissioner and I was requested to admit the affidavit on the basis
that this Court was required,
for the purposes of the jurisdictional
issue, to determine the matter afresh. Whilst this Court is enjoined
to consider the matter
afresh, it does so under the review
provisions provided in section 158 of the LRA and to that extent it
does so on the basis
of the evidence that was presented to the CCMA.
In the circumstances I am of the view that the second supplementary
affidavit
cannot be admitted. However, and for the reasons alluded
to above, even if I was of the contrary view, the information
contained
in that affidavit, does not change the outcome of the
jurisdictional issue.
In terms of section 162
of the LRA, this Court has a wide discretion to make orders of 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 first respondent’s
costs. In this regard, I
must take cognisance of the fact that the applicant wished to test
its case in terms of an approach
which is not entirely incompatible
with sentiments expressed before in respect of the status of a
director in terms of the LRA.
The application is
accordingly dismissed with costs.
_____________
GAIBIE, AJ
Acting Judge of the
Labour Court
For the Applicant: AC
Soldatos from Fluxmans Incorporated
For the Respondent: Adv
JM Bezuidenhout – Instructed by Spector Attorneys
1
2008
(2) SA 24
(CC); (2007) 28 ILJ 2405 (CC);
[2007] 12 BLLR 1097
(CC).
2
(2008)
29 ILJ 2218 (LAC).
3
(2012)
33 ILJ 738 (LC)
4
Id
at para 2.
5
(2012)
33 ILJ 363 (LC) at para 23.
6
(2008)
29 ILJ 2234 (LAC).
7
See
Boumat Ltd v Vaughan
(1992) 13 ILJ 934 (LAC);
PG
Group (Pty) Ltd v Mbambo NO and others
(2004)
25 ILJ 2366 (LC);
South
African Post Office Ltd v Mampeule
(2010)
10 BLLR 1052
(LAC); and
Chillibush
Communications (Pty) Ltd v Johnston NO and Others
(2010)
31 ILJ 1358 (LC)
8
Benjamin,
P. ‘An Accident of History
: Who is (and Who should be) an
employee under South African Labour Law,
’ (2004) 25 ILJ
787 at 789-790.
9
Id
at 790.
10
Le
Roux, R. ‘The Meaning of ‘Worker’ and the Road
Towards Diversification
: Reflecting on Discovery, SITA and
Kylie’,
2009 (30) ILJ 49.
11
Workforce
Group
(
supra
) at para 5.
12
Above
n 8 at 804.
13
Mhlongo
and Another N.O. v Minister of Police
1978 (2) SA 551
(A);
Roffey v Catterall, Edwards and Goudré (Pty) Ltd
1977
(4) SA 494
(N).
14
(1997)
18 ILJ 528 (LC).
15
[1997]
IRLR 80.
16
At
pages 803-804.
17
See
in this regard Paul Benjamin’s article at 803.
18
Workforce
Group
(
supra
)at para 6.
19
The
LAC in the
SITA
matter took cognisance of the relevant
documents and agreements to determine the jurisdictional issue.