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[2013] ZALCJHB 96
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Naidoo v The Careways Group (Pty) Ltd and Another (J945/13) [2013] ZALCJHB 96; [2014] 1 BLLR 69 (LC); (2014) 35 ILJ 181 (LC) (29 May 2013)
REPUBLIC OF SOUTH AFRICA
THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Reportable
Case no: J 945/13
In the matter between -
DR SAMANTHA NAIDOO
..........................................................................
Applicant
And
THE CAREWAYS GROUP (PTY) LTD
.........................................
First Respondent
CAREWAYS (PTY) LTD
...........................................................
Second
Respondent
Date heard: 17 May 2013
Date delivered: 29 May 2013
Summary: Deducting full salary of applicant and setting off
against unpaid tax. Contravention of section 32 and 34 of the Basic
Conditions of Employment Act. Employer entitled to deduct tax
irrespective of an agreement to the contrary between the parties.
______________________________________________________________
JUDGMENT
______________________________________________________________
MOLAHLEHI J
Introduction
This is an application in terms of which the applicant seeks an
order compelling the respondents to pay her the salary for the
month
of April 2013. The applicant further seeks an order directing the
respondents to pay her monthly salary of R 198-000, 00
pending the
outcome of the arbitration proceedings soon to be instituted.
At paragraph 7 of the founding affidavit the applicant states that
she relies on the provisions of section 77 (1) and (3) read
with
section 5 of the Basic Conditions of Employment Act 75 of 1997. (the
BCEA)
The parties
The respondents in this matter are two companies registered in terms
of the South African Companies Act. The first respondent
is a
company wholly owned by the Mexican and businessmen, Mr Larrea. The
first respondent owns 74% of the shares in the second
respondent.
The applicant is employed by both the first and second respondents
as Chief Executive Officer (CEO) on a fixed term contract
which is
to expire in September 2016.
The background facts
The applicant states that towards the end of January 2013 she
received a telephone call from Dr Larrea informing her that she
was
no longer wanted as the CEO of the respondents and that she should
no longer report for duty. She was informed that the reason
for the
termination was because of her incompatibility with Dr Larrea.
The applicant was subsequently barred from having access to the
premises of the respondents and other employees were instructed
not
to communicate with her. However, despite these the respondents
continue to pay the applicant’s salary for the months
of
February and March 2013. The payment of the salary was however
stopped in April 2013 and despite numerous demands the respondents
have refused and or failed to pay the applicant's salary.
In opposing this application the respondents relies on three main
grounds. The first ground is that the claim of the applicant
as
formulated, is not based on the provisions of
section 34
of the
Basic Conditions of Employment Act but
rather it is a claim for
contractual damages. Second ground is based on the allegation that
the applicant has approached the
court with "dirty hands."
The third ground relates to the issue of urgency.
Evaluation
In dealing first with the issue of urgency, I agree with Mr Cassim
that the issue was not finally determined by Cele J when he
postponed the matter and said that
prima facie
the matter was
urgent. There are no reasons given for saying that the matter was
prima facie
urgent. Considering the matter in its totality I
am of the view that the matter is indeed urgent and will accordingly
be treated
as such. This issue will receive further attention later
in this judgment.
The contention that the applicant came to court with dirty hands and
therefore does not deserve assistance from the court is
in my view
ill-conceived. The complaint that the applicant has failed to pay
tax on her monthly salary was reported to SARS and
the South African
Police Services during April 2013 by the Strategic Manager: Legal
and Governance of the respondents. The report
made to the South
African Police relates to the accusation that the applicant has
contravened the provisions of the Income Tax
Act.
The SARS has subsequent to receiving the complaint about the
non-payment of tax by the applicant, requested that further
information
regarding the consultancy agreement between the parties
including the IRP 5 forms and invoices submitted by the applicant.
The other issue related to the alleged "dirty hands" of
the applicant has to do with the contention that the applicant
sought to mislead the Court by claiming that she was unmarried and
that the partner she was staying with was not supporting their
minor
child.
In response to the above allegation regarding the issue of
non-payment of tax the applicant addressed a letter to the
respondents
which read as follows:
‘
We as
the accountant, have no issue with your(sic) referring this matter to
SARS as a SARS had no issues regarding the information
submitted to
them. Dr Naidoo has abided to all SARS requirements.’
In addition the applicant’s accountant in the confirmatory
affidavit states the following:
"13.9.1 the Respondents are
certainly not liable to SARS for the amount alleged;
13.9.2. the simple solution for
the Respondents is to seek SARS’ guidance in this matter, given
that the have prove of all
income that I have declared;
13.9.3. if there's any liability
by the Respondents to SARS, the Respondents should provide us with a
copy of correspondence from
SARS confirming that fact;
13.9.4. from the Respondents'
allegations, it is apparent that the are being advised by a person
who is not suspicion his in tax
matters;
13.9.5. the tax assumptions
calculation made by the Respondents in Annexure “AA9” are
incorrect and not enough convincingly
the SARS’ regulation
calculation
.”
The law regarding legal
deductions and in particular as concerning tax deductions by an
employer is well established in our law.
In this respect this court
in
Barnard v Shellard
Media (Pty) Ltd
,
1
was faced with a situation where an employee objected to the
employer deducting tax from a settlement amount of R65,000.00. The
employer had deducted the sum of R22 843.32. In objecting to the tax
deductions the employee argued that the employer was not
entitled to
deduct tax from the settlement amount as there was no common
intention between the parties to make the incidence
of income tax to
be applicable to the settlement agreement. In considering whether
the law import into the settlement agreement
as a matter of course
an implied term that the employer is obliged to deduct tax from the
settlement amount, the court held that:
‘
In
terms of Schedule 4 Item 2 (1) of the ITA (Income Tax Act), an
employer who pays ‘any amount by way of remuneration to
an
employee . . . shall deduct or withhold from the amount by way of
employee’s tax an amount which shall be determined as
provided
for in paragraph 9, 10, 11 and 12 whichever is applicable, in respect
of liability for normal tax of that employees
. . .’
The court further obsessed that:
‘
It is
clear that the obligation (to deduct tax) arises when the employer
pays or becomes liable to pay ‘remuneration’
to an
employee.’
In dealing with an express term in an agreement that seeks to
exclude or prohibit an employer from deducting tax from the income
of an employee the Court held that
:
‘
In my
view the unexpressed claim relating to deduction of tax is imported
into this agreement by Schedule 4 of the ITA. In general
in cases of
this nature, the provisions of ITA nullify any attempt by parties to
exclude in their agreements tax obligations. .
. It suffices to
mention that item 8 of schedule 4 of the ITA prohibits an employee
from recovering any amount deducted as tax
from the employer’.
It would appear that the person responsible for the deduction of tax
from the applicant’s salary and making the contribution
thereof to the SARS is Mr Schalkwijk. It is alleged that the reason
for not effecting the deduction of tax from the applicant’s
salary is because the applicant had told Mr Schalkwijk not to do so
and it was for this reason and fear of losing his employment
that he
complied with the instruction.
In my view, even if the version of the respondent was to be
accepted, it does not provide the basis for the non-payment of the
salary of the applicant. The deduction that the applicant instructed
Mr Schalkwijk not to deduct tax, at best indicates some
form of
misconduct which the respondents are entitled after following due
processes, to act upon.
The accusation that the applicant has instructed Mr Schalkwijk not
to effect a tax deduction remains an allegation and can therefore
not serve as a basis that she approached the court with dirty hands.
The respondents contended that the applicant is not entitled to the
relief sought as her case in the founding affidavit is based
on a
claim for contractual monies arising from a written agreement. In
other words the respondents defence is that the applicant
is not
entitled to the relief sought because she has failed to make out a
case in the founding papers. In this respect the respondent
contended that, what is pleaded in the notice of motion is not in
line with the contents of paragraph 8 of the founding affidavit.
Paragraph 8 of the founding affidavit reads as follows:
‘
On or
about 11 November 2011, the First Respondent and I entered into a
consultancy agreement/employment contract
. . . ’
The key issue in this matter is whether the applicant has made out a
case that satisfies the requirements of an urgent application.
I
have already indicated that I was satisfied on the facts and the
circumstances of this case, that the applicant has made out
a case
for urgency in particular when taking into account the approach
adopted by the authorities referred to by the applicant,
which are
discussed later in the judgment.
The respondents’ attacks the case of the applicant on the
basis that the applicant relies on the "Consultancy Agreement."
The respondents do not dispute that the applicant is an employee
neither do they dispute that her salary of R198, 000.00 has
been
stopped.
It is trite that failure by an employer to pay the salary of an
employee amounts to a breach of contract. In the event of breach
of
contract of employment an employee has an election to either accept
the repudiation and cancel the contract or to hold the
employer to
the contract.
The payment of remuneration of employees is regulated by section 32
(3) of the BCEA which provides as follows:
“
(1) An
employer must pay to an employee any remuneration that is paid in
money -
(a) in South African currency;
(b) daily, weekly, fortnightly
or monthly; and
(c) in cash, by cheque or by
direct deposit into an account designated by the employee.
(2) Any remuneration paid in
cash or by cheque must be given to each employee -
(a) at the workplace or at a
place agreed to by the employee;
(b) during the employee’s
working hours or within 15 minutes of the commencement or conclusion
of those hours; and
(c) in a sealed envelope which
becomes the property of the employee.
(3) An employer must pay
remuneration not later than seven days after -
(a) the completion of the period
for which the remuneration is payable; or
(b) the termination of the
contract of employment.
(4) Subsection (3) (b) does
not apply to any pension or provident fund payment to an employee
that is made in terms of the
rules of the fund.”
Mr Cassim, for the respondents
conceded that suspension without pay is unlawful. The authorities
relied upon by Mr Seleka, not
only do they confirm that an employer
has no right to suspend an employee without pay and they have also
treated issue of suspension
without pay as a matter of urgency.
2
The Court in
Hospersa
and Another v MEC for Health: Gauteng Provincial Government,
3
held in relation to failure to pay the salary of the employee, that:
‘
An
employee has the common law right to be paid her salary. If, through
the default on the part of the employee, his or her services
are not
rendered, this must be diminished in proportion to the time during
which the services when not rendered. This position
is however, a
different where the employee’s is inability to perform her
duties is her employer's doing. . .
In terms of common law, the
unilateral suspension of an employee also does not relieve the
employer of the duty to pay the employee.
It is also accepted in our
Labour Law that an employer may not suspend an employee without pay
and the only do so if they have
contracted to the effect.’
The respondent contends that the
deduction is made as a set-off against payment of taxation which the
applicant is owing to the
SARS. As indicated above, the law in
relation to the duty of an employer in relation to deducting tax
from an employee’s
salary is clear. The employer has a duty to
make deductions from the employee’s salary in terms of the
Income Tax Act.
There are however limits to the amount which may be
deducted from the employee’s salary. A deduction from an
employee’s
salary is governed by section 34(1) and (2) of the
BCEA.
4
An employer is not permitted to deduct an amount exceeding one
quarter of the total salary of the employee, in terms of section
34
(2)(d) of the BCEA.
There are two principles to
apply in this matter. The first and key principle relates to the
right of the applicant as an employee
to receive her salary from the
respondents. The second principle relates to the duty of the
respondents as an employer of the
applicant to deduct from her
salary an amount that does not exceed the quarter of her salary for
the purposes of contributing
it to SARS as payment of tax. This duty
arises
ex lege
and therefore any provisions in an agreement between the parties
relating to non-deduction of tax from the applicant salary is
irrelevant and of no force and effect.
I see no reason in fairness why the respondents should not be
ordered to pay the costs.
In light of the above reasons, the following order is made:
The first and second respondents are ordered to pay the applicant
her monthly salary of R198-000, 00 less any legal deductions
including Pay as You Earn Tax for the month of April.
The first and second respondents are ordered to continue paying
the applicant her monthly salary of R198-000, 00 less any
legal
deductions including Pay as You Earn Tax, pending the outcome of
the arbitration proceedings to be instituted in
terms of the
agreement between the parties.
The first and second respondents are ordered pay the costs of
these proceedings the one paying the other to be absolved.
_________________
Molahlehi J
Judge of the Labour Court of South Africa
Appearances:
For the Applicant: Knowles Husain Lindsay Inc
For the Respondent: Goldman Judin Inc
1
(2000)
ZALC 57.
2
Singh
v SA Rail Commuter Corporation Ltd
t/a Metrorail (2007) 28 ILJ
2067 (LC)
Hospersa and Another v MEC for Health Gauteng
Provincial Government:
[2008] ZALC 45
;
(2008) 9 BLLR 861
at para 17
3
Supra
footnote 1 above.
4
Section
34 (1) and (2) of the BCEA reads as follows:
An employer may not make any deduction from an
employee’s remuneration unless -
(a) subject to subsection (2), the employee in writing
agrees to the deduction in respect of a debt specified in the
agreement;
or
(b) the deduction is required or permitted in terms of
a law, collective agreement, court order or arbitration award.
(2) A deduction in terms of subsection (1) (a) may
be made to reimburse an employer for loss or damage only if -
(a) the loss or damage occurred in the course of
employment and was due to the fault of the employee;
(b) the employer has followed a fair procedure and has
given the employee a reasonable opportunity to show why the
deductions
should not be made;
(c) the total amount of the debt does not exceed the
actual amount of the loss or damage; and
(d) the total deductions from the employee’s
remuneration in terms of this subsection do not exceed one-quarter
of the employee’s
remuneration in money.