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[2012] ZALCJHB 133
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Independent Institute of Education (Pty) Ltd v Mbileni (1660/10) [2012] ZALCJHB 133; [2013] 3 BLLR 290 (LC); (2013) 34 ILJ 1538 (LC) (9 November 2012)
13
REPUBLIC OF SOUTH AFRICA
IN THE LABOUR COURT OF SOUTH
AFRICA, JOHANNESBURG
JUDGMENT
Reportable
case no: JR 1660/10
In the matter between:
THE INDEPENDENT INSTITUTE OF
EDUCATION (PROPRIETARY) LIMITED
........................................................
Applicant
and
MBILENI, N
...........................................................................................
First
Respondent
WILSON, M
.....................................................................................
Second
Respondent
THE COMMISSIONER FOR CONCILIATION
MEDIATION AND ARBITRATION
......................................................
Third
Respondent
Heard: 21 June 2012
Delivered: 9 November 2012
Summary:
Review of award – jurisdictional ruling –
whether the second respondent an employee at the material time –
cases
such as ‘Kylie’ and Wyeth distinguished
JUDGMENT
RabkinNaicker, J
[1] This is an application to review
and set asidean arbitration award issued by the first respondent (the
Commissioner) in respect
of an alleged unfair dismissal dispute. The
Independent Institute of Education (Pty) Ltd (the applicant)
challenges the award on
a number of grounds. The award reads as
follows:
“
6.1 I therefore order the
respondent, Independent Institute of Education to pay to the
applicant, Myles Wilson compensation equal
to 11(eleven) month’s
salary, which was his outstanding term of contract.
6.2 The amount translates to
R44 443-60 per month + R488 879-60 (Four hundred and eighty
eight thousand and eight hundred
and seventy nine rand and sixty
cents which will be payable within 14 (Fourteen) days of the award
being served on the parties.
[2] The Commissioner determined that
the issues to be decided in the arbitration proceedings were whether
the second respondent
(Wilson) was an employee as defined by the
Labour Relations Act, and if so, whether the termination of his
contract was unfair.
[3]
The issue of whether Wilson was an employee remains one that this
court has to consider in determining whether the CCMA had
jurisdiction to arbitrate the matter. In this regard, in view of the
jurisprudence on jurisdictional challenges in review applications,
the parties were agreed I have to determine whether the
jurisdictional finding by the Commissioner was correct or not.
1
As far as the findings on the fairness
of the dismissal, the enquiry,if necessary, will be founded on the
review tests enunciated
by this court and the Labour Appeal Court.
[4] In the Award, the Commissioner
reasons as follows on the jurisdictional issue:
“
5.1 The issue to be determined
is whether the applicant was an employee and whether his contract
should have been terminated in
accordance with section 188 of the
Labour Relations Act, Act 66 of 1995.
5.2 It is common cause that the
applicant had entered into a contract of service with the respondent.
According to my understanding
of the respondent’s argument, the
contract of service provided for both a fixed term contract as an
employee until the handover
period which ended on the 31
st
December 2008, and a contract for service which was due to be
terminate on the 31
st
December 2010.
5.3 The status of the applicant was
not defined in the contract. It was however defined in the Agreement
of Sale as that of an employee
even though it was for a limited
period. The question still remains did this definition apply after
the handover period ? The issue
is not clear from the service
contract itself. The first paragraph of the service contract read as
follows:
“
The terms defined in the Sale
of Business Agreement to which this agreement is Annexure 04, shall
bear the same meaning in this
annexure”
5.4 The Sale Agreement defined the
applicant as an employee and according to the Service Contract the
terms defined in the Sale
Agreement bears the same meaning. I then
looked at the Sale of Business Agreement on page 41 clause 16, it
stated as follows:
“
With effect from Effective
Date, Ron, Herbie, Tony and Miles undertake to enter into written
contracts of employment with the purchaser
in terms of annexure ’01’
to ‘04’ hereto”. [The applicant’s contract is
termed annexure”04”].
5.5 Reading from the above clause, one
would interpret the intentions of the parties as being that of
entering into a contract of
employment. A further question is whether
the parties conducted the said relationship as that of employment or
not.”
[5]
Having considered relevant case law relating to a contract of
employment and a contract of service
2
and the various tests enunciated
including the dominant impression test, the Commissioner went on to
find as follows:
“
5.8 The most important
consideration is whether the person who alleges to work for another
actually places his productive capacity
at the disposal of the other.
5.9 In casu the contract stated that
the applicant may not work for any other person during the period in
question. He further could
not work for the respondent unless
specifically instructed. He was required to apply for leave and make
himself available at the
behest of the respondent for job interviews.
He was taxed as an employee and received a salary advice. He also
paid Unemployment
Insurance Fund, which is meant for employees.
5.10 It is therefore my view that the
applicant was an employee of the respondent at the time of
termination of his contract.”
Background to the dispute
[6] Wilson was employed as the
Financial Director of Trinity House Schools. During 2008, the
applicant acquired the business consisting
of the Trinity House
Schools in terms of a written ‘Sale of Business’
agreement dated 22 May 2008. Wilson was a 12%
shareholder in the
vendors of the Trinity House business and therefore derived financial
benefit from the proceeds of the sale.
[7] In the terms of the Sale of
Business agreement, the applicant and Wilson concluded an agreement
entitled a “fixed term
service agreement” (the service
agreement). It was submitted on behalf of Wilson that the service
agreement in effect, and
in law, attempted to disguise what was in
fact an employment relationship. The service agreement read as
follows:
“
The
terms defined in the Sale of Business Agreement to which this
agreement is annexure “04” shall bear the same meaning
in
this annexure.
INTRODUCTION
Pursuant
to the acquisition by the company of the Business as defined in the
Sale of Business Agreement; the Company and Miles agree
to enter into
the following agreement which is recorded in writing as follows.
DURATION
Unless
as elsewhere provided herein, this agreement shall commence on the
Effective Date and terminate on 31 December 2010.
DUTIES
Pursuant
to the Sale of Business Agreement, the Company will utilize Miles in
his current capacity as Financial Director of the
Business for a
period of four months from the Effective Date in order to ensure a
smooth transition and handover of the Business
to the Company, which
period may be extended by written agreement between the parties (the
“Handover Period”). During
the Handover Period Miles
shall-
report
to the Chief Executive Officer of the Schools Division of the
Company, Mr. Alexander Isaakdis, or his nominee;
3.1.2
Comply with all reasonable instructions issued to hiM from time to
time by the company;
Render
his services to the Company for a minimum period of 4(four) days
per week, which days will be determined by the Company;
and
adhere
to the terms and conditions of the Company’s Code of Conduct
and Policies.
RETAINER
AND/OR REMUNERATION
During
the Handover Period, the company will pay Miles an amount of R
55 000.00 per month, monthly in arrears. In addition,
the
Company will pay Miles’ contributions to his medical aid and
provident fund.
Upon
completion of the Handover Period and unless as otherwise provided
in this Agreement, the Company will pay Miles a monthly
retainer of
R 35, 000.00 (Thirty Five Thousand Rand), which will be paid in
arrears. In addition, Miles shall remain on his
current medical aid
and provident fund, the contributions of which will be paid by the
Company.
ALTERNATE
APPOINTMENT
The
parties record and agree that-
theCompany
operates a number of educational institutions. If the company is
in a position, prior to 31 December 2010 and following
completion
of the Handover Period, to secure suitable, alternate employment
on terms and conditions acceptable to the Company
and Miles at
another educational institution of the Company, this Agreement
shall either terminate on the date of such appointment
of Miles to
that position, or be suspended whilst Miles remains employed in
that position. In the event of a termination
or temporary
suspension of this agreement arising under this clause 5.1.1, the
Company sell not pay the retainer referred
to in 4.2 above to
Miles;
if
the Company cannot procedure suitable alternate employment for
Miles in terms of 5.1.1 above, it is recorded that the Company
is
associated to a company that operates a number of recruitment
businesses, who will assist Miles, upon completion of the
Handover
Period, in finding suitable alternate employment and Miles
undertakes to co-operate in this process. If Miles is
placed in
suitable alternate employment, this agreement shall terminate upon
Miles commencing employment in such position
and neither party
have any claim against the other arising from the termination
thereof; or
if
Miles, of his own accord, secures suitable alternate employment
with a third party prior to 31 December 2010, this agreement
shall
terminate and neither party shall have any claim against the
arising from the termination thereof, provided however
that Miles
undertakes not to procure alternate employment prior to completion
of the Handover Period.
ANNUAL
LEAVE
Miles
shall be entitled to 20 (twenty) working days leave per twelve- month
cycle which shall be Governed in terms of the Company’s
leave
policy. All annual leave will be taken during School holiday and
subject to the approval of Mr.Isaakidis or his nominee.
AUTOMATIC
TERMINATION
Notwithstanding
anything else contained in this agreement, this agreement will
automatically terminate-
if
any of the Resolutive Conditions and pursuant to the Sale of
Business Agreement occur, in which event, neither party shall
have
any claim against the other arising from the termination of this
agreement.
If
Miles commits a breach of any of his obligations under this
agreement;
In
any circumstances justifying such termination at common law;
If
Miles is guilty of conduct which is likely to bring himself or the
Company into disrepute;
If
Miles is convicted of an offence involving dishonesty; or
If
Miles becomes precluded in terms of any statute from holding
office as a director.”
[8] In as far as the applicant was
concerned the agreement of service terminated automatically in terms
of clause 7 above, in that
Wilson breached his obligations when he
made no effort to co-operate with the applicant in finding
alternative employment.
[9]
In
City of Tshwane
Metropolitan Municipality v SA Local Government Bargaining Council &
Others
3
the court found that in a
jurisdictional review its task was to determine whether on an
assessment of the facts and relevant considerations
the arbitrator
had jurisdiction to arbitrate the dismissal dispute. Myburgh AJ was
of the view however, that a reviewing court
was not necessarily
confined to the record of the proceedings and could admit extrinsic
evidence regarding the true facts in deciding
whether an arbitrator
has exceeded his jurisdiction in making an award.
4
In this matter, I will first have
regard to the Record of the arbitration proceedings in order to
examine those facts relevant to
my determination on the
jurisdictional issue.
[10] The Record reveals that the
attorney representing Wilson in the arbitration, Mr. Graham, elicited
certain information from
aMs Durand, the senior HR manager of the
schools division of applicant. It was Ms Durand's evidence that
Wilson when challenged
as to whether he was cooperating in finding
new employment,had stated that he'd been having a "gap year".
The cross-examination
of Ms Durand reads as follows:
“
Mr. Graham: you see I've put it
to you that what the respondent is now seeking to do is over –
dramatize this gap year. The
fact of the matter is, he could not work
for anybody else could he?
Ms Durand: He could have.
Mr. Graham: Well turn to your…
Ms Durand: Had he got another position
okay he could have as per my e-mail and as per the service contract.
Mr. Graham: Let us qualify that.
Ms Durand: Sure.
Mr. Graham: Until he found what is
called alternative employment in the contract he could not do any
work could he?
Ms Durand: He could not do temporary
work because otherwise he would have forfeited the amount of what
that we were paying him every
month.
Mr. Graham: So whilst he was looking
for work he could do what he liked, could he not?
Ms Durand: Correct.
Mr. Graham: And so he was quite
entitled to do what he liked.
Ms Durand: As per my e-mail to him he
said does that mean then that I can go and play golf or do whatever
and correctly so. However,
in that we did state okay and to the best
of my knowledge my understanding was that if you take a gap year and
you are required
to look for employment you should at least be
looking for it. That is my – as I say that is just my
understanding.”
[11] A further part of the Record of
the examination in chief of Wilson deals with the requirement of
finding suitable alternative
employment as provided for in the
service agreement:
“
Mr. Graham : Let us just slow
down. How was that described in the contract? It was described as and
the words at the end of the
first paragraph……starting
from ‘suitable’ The next three words, just emphasize
those please
Mr. Wilson: To secure suitable
alternative employment on terms and conditions……..
Mr. Graham: Again, alternative for
what? Alternative to what? What was that?
Mr. Wilson: Well, alternate to what I
was currently doing.
Mr. Graham: And what were you
currently doing?
Mr. Wilson: Well, I was earning a
retainer and not doing anything.”
[12] It is common cause that during the handover period which
terminated on 31 December 2008, the applicant continued to pay Wilson
the salary he had earned before the sale of the business. After
completion of the handover period on the 31 December 2008, on
applicants version, Wilson was not required to work for applicant and
nor did he work for it. He was instead paid a monthly retainer
of
R35,000.00, which was less than his former salary. It was further
common cause that Wilson had signed a restraint of trade agreement
as
part of the sale of the business agreement.
[13] The payment of the retainer of R35,000.00 per month was subject
to the obligation on Wilson to cooperate with the applicant
to find
employment not in breach of the restraint. It is submitted in the
founding papers that after the handover period, the agreement
between
them was that a retainer was paid to Wilson for a fixed period of
time, unless suitable alternative employment was secured,
for Wilson
within that period, in which event the obligation to pay the retainer
would cease.
[14] A key allegation by the applicant was that after 31 December
2008 Wilson did not perform any work for the applicant, nor did
he in
any manner assist in carrying on or conducting the business of the
applicant. During 2009, the applicant alleges that Wilson
was not
contactable, and did not return calls and was not cooperating in
seeking potential employment opportunities. As a consequence
of this
non – cooperation, the service contract was terminated with
effect from 31 January 2010 and the payment of the retainer
was
stopped.
[15] In his answering affidavit,
Wilson avers: " (I) continued to work for the applicant for
around three months after the
handover period to assist with
reconciling the receipts and payments of the old Trinity with those
of the new Trinity in order
to finalize the adjustment account in
accordance with clause 9 of the sale agreement. It is correct that
over and above these duties,
I was never asked to work the applicant
again."
[16] Clause 9 of the Sale Agreement
deals with the adjustment account and provides for the Purchasers and
Sellers to prepare and
verify in writing an account as at
finalization of the sale in terms of which final adjustments were
made to the Purchase consideration.
It is important to remember that
Wilson was one of the shareholders of the business and a recipient of
part of that consideration.
[17] The evidence given by Wilson
relating to work done after the handover period is extrinsic to the
Record. Accepting this evidence
in terms of the Plascon Evansrule
i.e. that he did work after the handover period, when payment to him
had dropped to the retainer
level, this was on the probabilities done
because the necessary work in terms of clause 9 was essential to
complete before the
finalization of the purchase consideration of
which he was a beneficiary. It was done
qua
seller of the
business and not
qua
employee. This finding is consistent with
Wilson’s evidence at arbitration relating to his unwillingness
to do work for the
applicant after the handover for no extra monies,
a concern which he raised with the applicant at a meeting as
reflected in the
Record:
“
Mr WILSON: … because my
salary had been dropped from R55 000.00 to R35 000.00 I
wanted to understand because they
could call on me that if they
called on me whether I was actually going to get paid for the time I
was called in because otherwise
they could call me in every day and
pay me substantially less than what I used to be paid, so the idea
was to try and understand
that if they were going to use my services
whether they were actually going to pay me a market –related
and in that I did
refer to it as an hourly rate as a contractor.
MR GRAHAM: And that is your email?
MR WILSON : That is my
email..(INAUDIBLE)..
MR GRAHAM: And what was their response
to that?
MR WILSON : Okay. The response to me
there was:
“
Yes but only if this work
relates to work for the 2009 financial period”
Whichwas thenew one –
“
and not for outstanding work or
queries relating to the 2008 financial year.” Which was the
hand-over period.
MR GRAHAM: And was there any reference
to a rate?
MR WILSON : Well it never ever
happened because they did not call on me so there was no reference to
a rate…”
[18] In its replying papers the
applicant deals with the allegation that Wilson worked after the
handover period stating that: “This
new allegation was not
presented as evidence during the hearing. It is directly contradicted
by the second respondent’s evidence
during the hearing. As
such, I submit that the second respondent is attempting to mislead
the court by changing his version from
what is recorded in the
transcribed record. I refer to paragraph 9 of the supplementary
affidavit and to the transcribed record
from which it is clear that
the second respondent admitted under oath that after 31st of December
2008, being the end of the handover
period, he was never requested
nor required to work by the applicant and he did not further the
business of the applicant."
[19] Indeed, the Record reflects that
when asked whether he conceded that after 31 December 2008, i.e.
after the end of the handover
period, he was never asked by the
respondent to work again, Wilson stated: " that is right, yes."
Evaluation
[20] The LRA defines an employee as
follows:
“
(a) any person, excluding an
independent contractor, who works for another person or for the State
and who receives, or is entitled
to receive, any remuneration; and
(b) any other person who in any manner
assists in carrying on or conducting the business of an employer,
and 'employed' and 'employment' have
meanings corresponding to that of 'employee';”
[21] I am quite satisfied on the
evidence before me that after the handover period and at the time of
the termination of the service
contract, Wilson did not work for the
applicant, nor did he assist in terms of the wider clause (b) of the
definition, in carrying
out or conducting its business. The question
as to whether he received ‘remuneration’ at the relevant
time, needs to
be considered. The LRA provides that 'remuneration'
means “any payment in money or in kind, or both in money and in
kind,
made or owing to any person in return for that person working
for any other person, including the State, and 'remunerate' has a
corresponding meaning;” Again, the requirement of working for a
person applies, and in view of the above I find that the
retainer he
received did not constitute remuneration.
[22]
It was submitted on behalf of Wilson that the court should take
cognizance of the widening ambit of the definition of an employment
relationship by this court and the LAC.
5
The ambit of the alleged employment
relationship in this matter should, it was argued, be interpreted
with a constitutional slant.
[23]
I find that this matter stands to be distinguished from those cases
which have dealt with illegal contracts and protection
of vulnerable
workers.
6
In this case, we are considering
whether the service agreement between the parties was at the relevant
time a disguised employment
contract, and whether the relationship
between the parties was one of employment after the short term
employment contract ended
with the completion of the handover period.
[24]
This matter also falls to be distinguished from the factual matrix in
Wyeth SA (Pty) Ltd v
Manqele& others
7
in which the LAC was concerned with
whether a person who had not yet commenced employment i.e. who had
not strictly performed work
for the employer, could be ‘dismissed’
in terms of the LRA. The LAC found per Nkabinde AJA, that the
definition of
an employee in s213 of the LRA can be read to include a
person or persons who has or have concluded a contract or contracts
of
employment, the commencement of which is or are deferred to a
future date or dates.
8
Such a reading was consistent with the
values of the Constitution.
[25]
In contrast to the
Wyeth
,
on the evidence before me and in terms of the service agreement,
Wilson did render services to the applicant in terms of a short
term
contract of employment until the end of the handover period, and
after the end of the handover period he no longer rendered
any
services qua employee or contractor. This is reflected in the
distinction made in the service agreement between the word
‘remuneration’
attached to the salary paid to him during
the handover period, and the word ‘retainer’ describing
the lower amount
he was paid after the handover period in terms of
that agreement to which he was signatory.
[26] In my judgment, this case is not
one in which the Court should search for a constitutional slant in
order to further expand
the meaning of ‘employment
relationship’ in our law. I find that Wilson was not an
employee at the time of termination
of the service agreement and was
not dismissed. He did not enjoy the protection of section 23 of the
Constitution – the right
to fair labour practices. In addition,
he was far from belonging to a vulnerable group in our society, such
as those accorded limited
protection in Kylie by dint of the use of a
constitutional slant. The CCMA had no jurisdiction over the dispute
in question.
[27] Given my findings above there is
no need for me to consider the further grounds of review raised in
this application. I therefore
make the following order:
The award under case number
GAJB55-44-10 is hereby reviewed and set aside.
The Second Respondent is to pay the
costs.
_____________________
H. RabkinNaicker
Judge of the Labour Court
Appearances
Adv J Brickhill instructed by Bowman
Gilfil n Inc. for the applicant
Adv,GFourie instructed by Donald
Graham Attorneys for the Third Respondent
1
SA
Rugby Players Association and Others v SA Rugby (Pty) Ltd and
Others; SA Rugby Players Union and Another (2008) 29 2218 (LAC)
2
Denel
(Pty) Ltd v Gerber (2005) 26 ILJ 1256 (LAC); SABC v McKenzie (1999)
20 ILJ 585 (LAC)
3
(2012)
33 ILJ 191 (LC)
4
At
paragraph 5
5
For
example in ‘Kylie’ v CCMA & Others (2010) 31 ILJ
1600(LAC)
6
Such
as Kylie supra and Discovery Health v CCMA & Others (2008) 29
ILJ 1480 (LC)
7
(2005)
26 ILJ 749 (LAC)
8
At
paragraph 45