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[2017] ZALCJHB 318
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Sekhute and Others v Ekhuruleni Housing Company SOC (J1862/17) [2017] ZALCJHB 318 (5 September 2017)
Of
interest to other judges
THE
LABOUR COURT OF SOUTH AFRICA,
HELD
AT JOHANNESBURG
Case No: J 1862/17
In
the matter between:
BRENDA
SEKHUTE
First
Applicant
KGABO
SEBOLA
Second
Applicant
TEBOHO
MOFOKENG
Third
Applicant
MOLOKO
BAHOLO
Fourth
Applicant
MACSEAN
FAVER
Fifth
Applicant
PORTIA
MOKHELE
Sixth
Applicant
RAPAPA
MAMOEPI
Seventh
Applicant
and
EKHURULENI
HOUSING COMPANY SOC
Respondent
Heard
:
22 August 2017
Delivered
:
05 September 2017
Summary:
(Urgent – interdict to prevent salary deductions to repay
disputed overpayment of remuneration –
deductions to be made
for equivalent number of months that alleged overpayment took place –
employee’s refusing to
consent to deductions – whether
employer’s remuneration policy prevented such deductions –
s 34(5) of the BCEA
– failure to establish prima facie right to
prevent repayments in the absence of written authorisation – no
irreparable
harm - overpayment due to alleged fraud not recoverable
as overpayment in error)
JUDGMENT
LAGRANGE
J
Background
[1]
This is an urgent application launched on 8 August 2017 requiring the
respondent to file an answering affidavit by 15 August
and committing
the applicants to filing any replying affidavit by 18 August. The
applicants are employees of the respondent (“EHC”).
Pending final relief declaring the respondent’s decision to
deduct monies from the applicants’ salaries for alleged
overpayments made in error to be unlawful, the applicants want
interim relief preventing future deductions and reversing deductions
already made. Although another Court might disagree, I accept that
the application was urgent.
[2]
Following a regrading of the applicants’ posts in 2016, EHC’s
board resolved that the applicants’ remuneration
should be
improved in line with the regrading of their posts. The second to
seventh applicants received letters from the CEO confirming
that the
board of directors had approved the new job evaluations and pay
scales on the 10 November 2016 and that they would receive
payment on
the new salary scales with effect from February 2017 but backdated to
1 December 2016. Although the first applicant,
the HR Officer, did
not receive a similar letter, her name appeared on a list of names of
the persons whose salaries were to be
adjusted with a new salary
scale. She claims this list was drawn by her supervisor, the Acting
Manager: Corporate Support, Mr Bopape
Salaries of the applicants were
duly increased in February 2017 and between then and the end of June,
the applicants effectively
received increased remuneration backdated
to December 2016.
[3]
On 1 July 2017, the applicants received letters indicating that an
overpayment had occurred in February 2017 due to an error
in the
payroll processing. The amount of the alleged errors appear to have
been substantial and the applicants were requested to
complete a
salary deduction form in terms of which they agreed to repay the
amount over a period of seven months. The applicants
refused to sign
these. They contend that there was no error in the February payments
and argued that the payments received were
a result of giving effect
to the new salary scale implemented on their revised job grading. As
a result of the deductions been
implemented, the applicants claim
that they now receive less than what they did before their salaries
were improved.
[4]
The applicant’s claim that the deductions were unlawful because
they were contrary to clause 13.2 of the respondent’s
HR policy
which states that “no deductions unless in the form of a legal
instruction such as a collective agreement, Court
order or
arbitration award will be made from an employee’s salary
without the authority of the employee.” There is
no dispute
that the applicants did not consent to the overpayments, though a few
other employees appear to have signed the consent
forms.
[5]
Notwithstanding their failure to sign the forms, EHC proceeded to
commence deductions when it paid salaries on 26 July 2017.
On 28
July, the applicants’ attorney wrote to EHC demanding the
reversal of the deduction and a cessation of future deductions
on the
basis that no salary calculation error had been made.
[6]
In response, EHC requested the applicants to give it until 14 August
2017 when a meeting would be held with the chairperson
of the board,
but the applicants felt that would be too late given that the August
pay date would be approaching soon thereafter.
Consequently, they
proceeded to launch this application on 8 August 2017.
[7]
The respondent denies that the application is one for interim relief
as no other processes has been initiated by the applicants
to resolve
the dispute by the time the matter was argued. The respondent also
claims that overpayments had resulted because Medical
Aid and
Provident Fund contributions had been added to the new remuneration
scales and paid out as part of the applicants’
gross
remuneration instead of being deducted therefrom. Thus for example,
the salary adjustment schedule detailed the salary adjustment
for the
fifth respondent thus:
Basic salary
R 25 462, 70
Provident fund (Co
Portion)
R 2
259, 22
Medical aid (Co
Portion)
R 2
401,00
TCTC
R 30 122,92
Evaluation
[8]
According to EHC, the fifth respondent’s initial salary before
the improvement was R 21,574.41 and that the new basic
salary of R
25,462.70 represented the salary after the re-grading adjustment. The
two amounts reflecting the company’s new
contributions to the
Provident fund and medical aid were part of the total cost company of
her remuneration package, but were erroneously
added to the fifth
respondent’s basic salary as if they were part of her direct
remuneration. The basic salary adjustment
ought to have been an
increase of R 3,888.29, but instead she received an amount equivalent
to the new medical aid and Provident
fund contributions over and
above that of R4, 660.22. Although there may be some calculation
errors in the table appearing in Annexure
“MP 2”, which
was attached to the respondent’s answering affidavit, it is
sufficiently clear that the applicants
were erroneously paid out
Provident and medical aid fund contributions due by the employer as
part of their remuneration. Those
amounts should only have appeared
in the fringe benefit column of their pay slips. In effect, the
applicants were given double
recognition of the employer’s
contribution to fringe benefits: once, as part of their gross
remuneration, and again as a
fringe benefit. As a result, instead of
a salary adjustment of 18% in the case of the fifth respondent, her
salary increased by
just under 40%.
[9]
I am satisfied on the evidence,
albeit
that, it could have
been better presented, that the applicants have not established that
they were entitled to the full amounts
paid to them as part of their
salary since February 2017. On the papers, I am satisfied that a
genuine overpayment error was made
and that it is disingenuous of the
applicants to effectively insist that they ought to have received the
corresponding employer
contributions to their Provident fund and
Medical aid as part of their salary and not simply as fringe
benefits. Accordingly, whatever
the position is regarding recovery of
overpayments made, the respondent is not obliged to perpetuate the
overpayment error going
forward and is only obliged to pay the agreed
revision of remuneration in line with the upgrading of posts: it is
not obliged to
continue paying the applicants amounts equivalent to
the employer’s contribution to their Medical aid and Provident
fund
as part of their direct salary.
[10]
What still remains to be determined is whether the respondent is
entitled to recover those overpayments, which have already
been
made, in equal amounts over a period equivalent to the seven months
period for which they were overpaid, even if though the
applicants
have not consented to such repayments. The applicants maintain that
clause 13.2 of the remuneration policy prevents
the employer from
doing so without their consent. It provides:
“
13.2 General
deductions
No deduction, unless in
the form of a legal instruction such as a collective agreement, court
order or arbitration award, will be
made from an employee’s
salary without the authority of the employee. The HR department will
ensure that employees complete
a “deduction from salary”
form which must be signed by the employee or any deduction, other
than those specified above,
can be made.”
[11]
Both parties place much store on their respective interpretations of
the phrase ‘legal instruction’ in the provision
above.
The applicants maintain that the meaning of the phrase must be
cleaned from the illustrative examples which follow and those
examples do not assist the respondent in this instance. The
respondent argues on the other hand that the phrase encompasses an
employer’s ‘requirement’ under section 34 (5) (a)
of the Basic Conditions of Employment Act, 75 of 1997 (‘the
BCEA’) that any employee should repay overpayments resulting
from an error in calculating an employee’s income. On
a plain
reading of s 34(5) (a) on its own, it appears to authorise an
employer to require an employee to repay overpayments made
as a
result of a calculating error. The question which arises is whether
this provision is compatible with section 34(1)(b) of
the BCEA. To
place that provision and s 34(5)(a) in its proper context, it is
useful to cite the full text of s 34:
“
34
Deductions and other acts concerning remuneration
(1)
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.
(3) A deduction in terms
of subsection (1) (a) in respect of any goods purchased by the
employee must specify the nature and quantity
of the goods.
(4) An employer who
deducts an amount from an employee's remuneration in terms of
subsection (1) for payment to another person must
pay the amount to
the person in accordance with the time period and other requirements
specified in the agreement, law, court order
or arbitration award.
(5) An employer
may
not require or permit an employee to –
(a)
repay any remuneration except for overpayments resulting from an
error in calculating the employee’s remuneration.
(b)
acknowledge receipt of an amount greater than the remuneration
actually received.”
(emphasis added)
[12]
The first thing to note is that, all the subsections except for s
34(5) are concerned with deductions made in terms of section
34 (1).
Section 34(1) identifies two classes of deductions which may be made.
The first (s 34(1) (a)) is a deduction which may
be made for an
acknowledged debt and which specifically requires the employee to
authorise the deduction in writing. The second
(s 34(1) (b)) is a
deduction which does not require the employee to authorise the
deduction personally in writing before it can
be made. This second
type of deduction may be mandated by other legal instruments such as
a law, Court order or collective agreement.
It is noteworthy, that
this second type of deduction does not presume the existence of an
acknowledged debt.
[13]
The
application of section 34 (5), has been considered in a number of
cases. In
J
onker
v Wireless Payment Systems CC
[1]
,
Molahlehi J held
“
[21] In support of
her case that her right had been interfered with the applicant relied
on the provisions of
s 34(1)
of the
Basic Conditions of Employment
Act. That
section prohibits an employer from making any deductions
from an employee's remuneration unless the employee agrees in
writing.
It is indeed correct that as a general rule the Basic
Conditions Employment Act prohibits deductions from employees'
salaries without
their prior consent. However, deductions without
consent are permitted where they are permitted by the law, a
collective bargaining
agreement and a court order or arbitration
award. In these instances all that the employer needs to do is to
advise the employee
of the error in payment and the deduction made or
to be made. See
Papier & others v Minister of Safety &
Security & others
(2004) 25
ILJ
2229 (LC).
[22] In
Sibeko v CCMA
(2001) JOL 8001
(LC) Revelas J in dealing with the issue of the
deductions said:
'It is indeed so that in
terms of the
Basic Conditions of Employment Act, an
employer may not
deduct amounts from the salary or remuneration of an employee without
the employee's consent. Where an employee
was however overpaid in
error, the employer is entitled to adjust the income so as to reflect
what was agreed upon between the
parties in the contract of
employment, without the employee's consent.'
[23] The e-mail which the
applicant addressed to the respondent on 1 June 2009 does not support
the version of the applicant that
the respondent was not entitled to
deduct the overpayment which was made to her erroneously. The
administrative error arose when
the applicant was granted a company
vehicle. At that point the car allowance which was paid to the
applicant should have been discontinued…”
[2]
[14]
In
Padayachee
v Interpak Books (Pty) Ltd
[3]
Whitcher AJ (as she then was)
observed :
“
[27] It is
noteworthy that the drafters of
s 34
chose to identify and deal
separately with a number of different types of deductions. This must
mean that the purpose of the provision
is to regulate these
deductions.
[28] It thus follows that
any enquiry into
s 34
should commence by identifying the nature and
purpose of the deduction in dispute and then ascertain whether the
section requires
employers to regulate such deductions in a
particular manner.”
[4]
Nguckaitobi,
AJ in
SA
Medical Association on behalf of Boffard v Charlotte Maxeke
Johannesburg Academic Hospital & others
[5]
also appeared to accept, albeit perhaps
obiter
that, repayment of overpayments made in error could warrant
deductions without the requirements of
s 34(1)
(a) being met. In
particular, commenting on
Jonker
and
other decisions, he observed:
[39]
It is apparent from these decisions that the view taken by the Labour
Court is that an overpayment as a result of an administrative
error
does not
constitute remuneration
as
defined in terms of the BCEA
.
Since it
is outside the parameters of the BCEA, an employer is not required to
obtain the consent of an employee before effecting
the deductions as
required by
s 34(1)
of the BCEA
.”
[6]
[15]
I believe
the trend discernible from the judgments cited is that repayment of
overpaid remuneration is a
sui
generis
category of money lawfully recoverable by an employer from an
employee and, on the same reasoning as that in the
Boffard
,
is a way of recovering undue remuneration. At the very least, I
believe
s 34(5)
was clearly intended to authorise a particular type
of deduction for amounts due to an employer not arising from debts of
the kind
contemplated by
s 34(1)
and even if
s 34(5)
must be read as
subject to
s 34
(1), then
s 34(5)
is a provision of ‘a law’
contemplated in
s 34(1)
(b) which permits recovery without consent.
At common law, t
he
obligation of an employee to refund an employer for an overpayment
made in error in essence would appear to be an obligation
that could
found an action based on unjust enrichment in the form of
the
condictio
indebiti.
[7]
It
would serve little purpose if
s 34(5)
was included simply to reaffirm
the existence of a common law right to recover payments made in
error. The more plausible interpretation
of the provision is that the
legislature intended it to specifically authorise deductions for
overpayments of remuneration.
[16]
In this
application, the applicants have not challenged the deductions based
on non-compliance with s 38 of the Public Service Act
(Proclamation
103 of 1994), as was the case in
Boffard
,
or more recently as an illegality as was the case in
Public
Servants Association v Department of Home Affairs and Another
.
[8]
While conceding that the first sentence of clause 13.2 of the EHC’s
remuneration policy closely mimics the wording of s 34(1)(b)
of the
BCEA, the applicants argue that in this case, the policy stated in
clause 13.2 of the remuneration policy is more favourable
because the
term ‘legal instruction’ cannot be equated with the
phrase ‘a law’ in s 34(1)(b) and the only
exceptions to
the rule that employee must specifically authorise a deduction are
those specifically stated namely; no deduction,
unless in the
form of a collective agreement, court order or arbitration award or
similar legal instruction. It is odd that the
employer did not use
the term ‘a law’ in clause 13.2, but it is even stranger
to argue that even though a collective
agreement is defined as an
example of a ‘legal instruction’ in terms of that clause,
‘a law’ such as the
BCEA which contains the provision s
34(5) of the BCEA should not be viewed in the same light. In my view,
such an interpretation
would be a contorted one. On this basis, I am
satisfied that the applicants have failed, even on a
prima
facie
basis,
to establish that clause 13.2 prohibits the respondent from
recovering overpayments made to the second and further respondents
in
equal amounts over the same length of time that they were originally
made.
[17]
In relation to the first applicant, the respondent had claimed that
she was not entitled to any increase at all. The applicants
ingeniously argued that if her overpayment was a result of her
purported fraud as the respondent claimed, it could not claim that
the additional payments she received were overpayments made in
error. If she was responsible for engineering an overpayment
she was not entitled to then that was not an overpayment caused by an
error in calculation but was a consequence of deliberate
misconduct.
Accordingly they argue that the respondent cannot rely on clause 13.2
to recover the money without obtaining an acknowledgment
of debt or a
court order. In respect of the first applicant, they are correct as
far as the recovery of arrear undue payments is
concerned. However,
that still does not mean the respondent is obliged to continue to pay
her remuneration at the increased scale
going forward if in fact she
was never entitled to it.
[18]
Quite apart from the absence of a
prima facie
case being
established, I am not satisfied that the applicants had demonstrated
that they would suffer irreparable harm if the
repayments were
effected in the manner proposed. The second to further applicants
will continue to enjoy the substantial benefit
of the re-grading
which led to the legitimate rise in their salaries. They simply will
no longer benefit from the additional undue
‘windfall’ of
pension and medical aid contributions being erroneously paid to them
as part of their remuneration in
addition to the respondent paying
those amounts to the respective funds.
[19]
I am not satisfied that this is a case where the applicants should
not bear the costs of this application, notwithstanding
the fact that
there is an ongoing relationship. They were disingenuous in trying to
retain the undue benefit they had received
and the terms on which
repayments were to be made were not onerous.
Order
[1]
The application is dismissed.
[2]
The applicants are jointly and severally liable for the respondent’s
costs, the one
paying, the others to be absolved.
_______________________
Lagrange
J
Judge
of the Labour Court of South Africa
APPEARANCES
APPLICANTS:
S
T Mosomane of Mosomane Attorneys Inc.
RESPONDENT:
I
Gwaunza of Edward Nathan Sonnenbergs Inc.
[1]
(2010) 31 ILJ 381 (LC)
[2]
At
386
[3]
(2014) 35
ILJ
1991
(LC)
[4]
At 1996.
[5]
(2014) 35
ILJ
1998
(LC)
[6]
At
2008
[7]
Willis
Faber Enthoven (Pty) Ltd v Receiver of Revenue
[1992]
4 All SA 2
(A), 1992 (4) SA 202 (A)
and more generally see LTC Harms
,
Amler’s
Precedents of Pleadings,
(Lexis-Nexis), 2015, (8 ed) at 92-3.
[8]
(J189/2012) [2015] ZALCJHB 406 (12 November 2015)