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[2018] ZALCJHB 38
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Johannesburg Water (SOC) Limited v Commission for Conciliation, Mediation and Arbitration and Others (JR428/16) [2018] ZALCJHB 38; (2018) 39 ILJ 845 (LC) (8 February 2018)
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case
no: JR428/16
In the matter between
:
JOHANNESBURG
WATER (SOC) LIMITED
Applicant
and
COMMISSION
FOR CONCILIATION
First Respondent
MEDIATION
AND ARBITRATION
DANIEL
DU PLESSIS
Second
Respondent
CYRUS
TAVARIA
Third Respondent
INDEPENDENT
MUNICIPAL AND ALLIED
TRADE
UNION Fourth
Respondent
Heard:
7
December 2017
Delivered:
08 February 2018
Summary:
Section 186(2)(a) review application – jurisdictional issue of
condonation cannot be raised
for the first time during review.
Payment
of bonus – the employer is bound by the Policy – decision
to deviate must not be arbitrary and capricious.
JUDGMENT
NKUTHA-NKONTWANA.
J
Introduction
[1]
This review
application turns on the interpretation of the applicant’s
(Johannesburg Water) Remuneration Policy in respect
of the exercise
of its discretion to selectively pay performance bonuses.
Johannesburg Water is a public entity meant to render
basic service
of water delivery to the citizenry of Johannesburg. It has a grading
system comprising of 29 bands, with 29 being
the highest band. The
third respondent (Mr Tavaria) is currently in the employ of
Johannesburg Water as a Financial Manager, a
position placed on grade
27.
[2]
In December
2014, the Board of Directors of Johannesburg Water (the Board) made a
decision to pay performance bonuses to all qualifying
employees with
the exclusion of employees occupying positions in grades 27 to 29,
referred to as members of management. According
to Johannesburg
Water, the rationale behind the decision not to pay performance
bonuses to grades 27 to 29 for the financial year
2013/2014, was due
to the fact that the overall performance of the organisation had been
declining and that decline could only
be attributed to the members of
management, specifically the incumbents of the positions in grades 27
to 29.
[3]
Mr Tavaria
together with the colleagues who fell within the affected grades,
were not paid the performance bonuses. The Board’s
decision was
communicated to the affected employees on 19 December 2014.
[4]
On 8 July
2015, the fourth respondent (IMATU), on behalf of Mr Tavaria,
referred the unfair labour practice dispute in terms of
section
186(2)(a) of the Labour Relations Act (the LRA)
[1]
to the Commission for Conciliation Mediation and
Arbitration (the CCMA) claiming that the dispute arose on 23 June
2015. The issue of condonation was never raised during the CCMA
proceedings.
[5]
The second
respondent (the commissioner) found that Johannesburg Water committed
an unfair labour practice in relation to provision
of a benefit by
failing to pay Mr Tavaria a performance bonus for the financial year
2013/2014.
Review
[6]
Johannesburg
Water seeks an order reviewing and setting aside the award issued on
11 February 2016 by the commissioner under case
number GAJB14278-15
in terms of section 145 of the LRA.
[7]
The
application is hinged on two main grounds of review.
7.1.
Firstly,
that the commissioner committed a misconduct and/or a gross
irregularity in the proceedings. Johannesburg Water argued
that the
commissioner placed undue weight on the evidence that it did not
consult with the affected employees before making its
decision not to
pay bonuses whilst disregarding the evidence to the contrary; he
misconstrued the Remuneration Policy; and failed
to take due
cognisance that the decision not pay bonuses was not capricious or
unreasonably applied only in respect to Mr Tavaria,
but to all
employees within grades 27 to 29.
7.2.
Secondly,
the commissioner exceeded his powers by determining the dispute
without the requisite jurisdiction owing to the fact that
the dispute
arose on 19 December 2014 and IMATU referred the dispute on 8 July
2015 without applying for condonation.
[8]
In
Gold
Fields Mining South Africa (Pty) Ltd (Kloof Gold Mine) v Commission
for Conciliation Mediation and Arbitration and Others,
[2]
the
Labour Appeal Court (the LAC) as per Waglay JP contextualised the
review test as postulated in
Sidumo
and Another v Rustenburg Platinum Mines Ltd and Others
[3]
and stated that:
‘
[14]
Sidumo
does
not postulate a test that requires a simple evaluation of the
evidence presented to the arbitrator and based on that evaluation,
a
determination of the reasonableness of the decision arrived at by the
arbitrator.
The court
in
Sidumo
was
at pains to state that arbitration awards made under the Labour
Relations Act
(LRA)
continue to be determined in terms of s145 of the LRA but that the
constitutional standard of reasonableness is “suffused”
in the application of s145 of the LRA. This implies that an
application for review sought on the grounds of misconduct, gross
irregularity in the conduct of the arbitration proceedings, and/or
excess of powers
will
not lead automatically to a setting aside of the award if any of the
above grounds are found to be present. In other words,
in a case such
as the present, where a gross irregularity in the proceedings is
alleged, the enquiry is not confined to whether
the arbitrator
misconceived the nature of the proceedings, but extends to whether
the result was unreasonable, or put another way,
whether the decision
that the arbitrator arrived at is one that falls in a band of
decisions to which a reasonable decision-maker
could come on the
available material.’
[9]
In
Head
of the Department of Education v Mofokeng
,
[4]
the LAC, endorsing the above judgment, stated that:
‘
[30]
The failure by an arbitrator to apply his or her mind to issues which
are material to the determination
of a case will usually be an
irregularity. However, … this court in
Gold
Fields
… held that
before such an irregularity will result in the setting aside of the
award, it must in addition reveal a misconception
of the true enquiry
or result in the setting aside of the award. It must in
addition reveal a misconception of the true enquiry
or result in an
unreasonable outcome…
[31] …
Moreover, judges of the Labour Court should keep in mind that it is
not only the reasonableness
of the outcome which is subject to
scrutiny. As the SCA held in
Herholdt
,
the arbitrator must not misconceive the inquiry or undertake the
inquiry in a misconceived manner. There must be a fair
trial of
the issues.
[32] …
To repeat: flaws in the reasoning of the arbitrator, evidenced in the
failure to apply
the mind, reliance on irrelevant considerations or
the ignoring of material factors etc must be assessed with the
purpose of establishing
whether the arbitrator has undertaken the
wrong inquiry, undertaken the inquiry in the wrong manner or arrived
at an unreasonable
result …
[33]
Irregularities or errors in relation to the facts or issues,
therefore, may or may not produce
an unreasonable outcome or provide
a compelling indication that the arbitrator misconceived the
inquiry. In the final analysis,
it will depend on the
materiality of the error or irregularity and its relation to the
result. Whether the irregularity or
error is material must be
assessed and determined with reference to the distorting effect it
may or may not have had upon the arbitrator’s
conception of the
inquiry, the delimitation of the issues to be determined and the
ultimate outcome. If but for an error
or irregularity a
different outcome would have resulted, it will
ex
hypothesi
be material to
the determination of the dispute. A material error of this
order.’
Evaluation
[10]
I deal
first with the second ground of review. It is apparent from the
record that the issue of late referral and condonation application
was never raised during the arbitration proceedings. It is raised for
the first time in the founding affidavit launching these
proceedings.
Clearly, this Court is bound by the LAC’s decision in
Fidelity
Guards Holdings (Pty) Ltd v Epstein NO & others
,
[5]
which is still good law. The LAC stated that:
‘
[12]
In my view the language employed by the legislature in s 191 is such
that, where
a dispute about the fairness of a dismissal has been
referred to the CCMA or a council for conciliation, and the council
or commissioner
has issued a certificate in terms of section 191(5)
stating that such dispute remains unresolved or where a period of 30
days has
lapsed since the council or the CCMA received the referral
for conciliation and the dispute remains unresolved, the council or
the CCMA, as the case may be, has jurisdiction to arbitrate the
dispute.
That the dispute
may have been referred to the CCMA or council for conciliation
outside the statutory period of 30 days and no application
for
condonation was made or one was made but no decision on it was made
does not affect the jurisdiction to arbitrate as long as
the
certificate of outcome has not been set aside. It is the setting
aside of the certificate of outcome that would render the
CCMA or the
council to be without the jurisdiction to arbitrate
’
(Emphasis added).
[11]
Similarly,
in the present case, the fact that the dispute was referred outside
of the statutory period of 90 days in terms of section
191(1)(b)(ii)
of the LRA did not unclothe the CCMA its jurisdiction to arbitrate
the matter.
[12]
Coming to
the first ground of review, the Remuneration Policy provides that:
’
11.
Short Team Incentive
Johannesburg Water will provide a
performance related incentive bonus for the reward of high level
performance
Johannesburg Water budgets 3.5% of the
payroll budget for performance bonuses. Performance bonuses are
however only payable if Johannesburg
Water achieves the performance
hurdle based on the overall organisations Corporate Scorecard. The
setting of budgets and the evaluation
of Corporate Scorecard will be
conducted by the Board. Should the agreed target be achieved or
exceeded the Board mat declare that
bonuses be payable up to 3.5 of
the payroll based on each individual employees’ performance
rating. The benchmark is that
the company has to achieve at least 85
percent of its performance target before any funds for bonus payment
are released. The release
of funds will be at the discretion of the
Board of directors and will include prorating the amount based on the
maximum of 3.5
percent of the payroll and the Company scare based on
its Balanced Score Card Results...
Should a situation occur where the
budgeted amount (i.e. 3,5% of the annual remuneration budget for
performance bonuses) or that
allocated by the Board of directors
prove to be insufficient to reward deserving staff at that levels
mentioned above, Johannesburg
Water will have to manage the situation
by scaling down the applicable percentages to be granted or setting
tighter standards for
the granting of the performance rewards…’
[13]
It is
common cause that Mr Tavaria did qualify for the performance bonus as
he had achieved a performance rating score of 107% which
was ‘clearly
outstanding’ and qualified for 8% allocation in terms of the
Remuneration Policy. it is also common cause
that Johannesburg Water
had reached the organisational performance benchmark of 85%.
[14]
The
commissioner found that the affected employees were presented with a
fait
accompli
as the decision not to pay the bonuses was not preceded by any
consultation. He further found that, once the benchmark of 85% has
been achieved, the Board had no discretion to decide not to pay
performance bonuses to qualifying employees like Mr Tavaria as
its
discretion was limited to the amount of bonuses to be allocated. He
also rejected the reason that provided by Johannesburg
Water that the
employees in grades 27 to 29, were subjected to a collective
punishment for the unsatisfactory organisational performance.
[15]
The
performance bonus is clearly meant to incentivise the individual
performance subject to the organisational performance on the
threshold set by the Board. In the event, the organisation fails to
meet the performance threshold of 85%, no bonus would be paid.
Also,
even if the organisation performance threshold is met, if there are
budgetary challenges, Johannesburg Water has a discretion
to reduce
the percentage to be allocated or set tighter standards for the
granting of the performance reward.
[16]
In my view,
the interpretation accorded to the Remuneration Policy by
Johannesburg Water is inconsistent with its letter and spirit
and was
correctly rejected by the commissioner.
[17]
The
Remuneration Policy does not provide for any other mechanism of
incentivising performance. If the Board wished to introduce
a new
standard of performance for employees in management, it ought to have
notified them in time and, where applicable, consult
with them or
their trade unions. Fairness dictates that the affected employees
should have been given the opportunity to perform
in terms of the new
standard.
[18]
Mr Tavaria
could not have known that he was going to be held responsible for the
performance of his colleagues in grades 27 to 29.
It is inescapable
that the decision not to pay the bonuses to grades 27 to 29 was
injudicious
as it deprived deserving employees like Mr Tavaria a well-entrenched
benefit as defined in
Apollo
Tyres South Africa (Pty) Ltd v Commission for Conciliation, Mediation
and Arbitration and
Others.
[6]
Pertinently, the LAC
stated that:
‘
[50] In
my view, the better approach would be to interpret the term benefit
to include a right or entitlement
to which the employee is entitled
(
ex contractu
or
ex lege
including
rights judicially created) as well as an advantage or privilege which
has been offered or granted to an employee in terms
of a policy or
practice subject to the employer’s discretion. In my judgment
“benefit” in section 186(2)(a) of
the Act means existing
advantages or privileges to which an employee is entitled as a right
or granted in terms of a policy or
practice subject to the employer’s
discretion.’
[19]
To
sum up, the Board’s decision not to pay Mr Tavaria his
performance bonus
for
the financial year 2013/2014 is
patently
arbitrary, capricious and inconsistent with the Remuneration Policy
and constitutional imperatives.
[7]
Conclusion
[20]
In
all the circumstances,
the
commissioner’s findings cannot be faulted and as such the
application stands to be dismissed.
[21]
On the
issue of costs, IMATU was not legally represented and in any event,
this Court is reluctant to award costs in instances where
the parties
are involved in persisting collective bargaining relationship.
[22]
In the
premises, I make the following order:
Order
1.
The
review application is dismissed with no order as costs.
__________________
P
Nkutha-Nkontwana
Judge
of the Labour Court of South Africa
Appearances:
For the
applicant:
Advocate T Navsa
Instructed
by:
Bowman Gilfillan Attorneys
For the fourth
respondent:
Mr M Steyn (union official)
From:
IMATU
[1]
Act 66 of 1996 as amended.
[2]
[2013] ZALAC 28
;
[2014] 1 BLLR 20
(LAC); (2014) 35 ILJ 943 (LAC) at para
14.
[3]
(2007) 28 ILJ 2405 (CC).
[4]
Mofokeng
[2015] 1 BLLR 50
(LAC) at paras 30 to 33; see also
Herholdt
v Nedbank Ltd (Congress of South African Trade Unions as amicus
curia)
[2013] 11 BLLR 1074
(SCA).
[5]
[2000] 12 BLLR 1389
(LAC) at para 12; see also
SABC v CCMA and
Others
[2002] JOL 9838
(LAC).
[6]
[2013] 5 BLLR 434
(LAC) at para 50.
[7]
Supra
at paras 42 and 53.
See
also
NEHAWU v University of Cape Town and Others
2003
(2) BCLR 154
(CC) at para 34.