Sneller Verbatim/ssl
IN THE LABOUR COURT OF SOUTH AFRICA
(HELD AT BRAAMFONTEIN)
BRAAMFONTEIN CASE NO: J2175/98
2002-03-15
In the matter between
J F E GERBER Applicant
and
DENEL (PTY) LTD Respondent
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J U D G M E N T
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REVELAS J:
1. The applicant commenced employment as a personnel
manager with Atlas Aircraft of South Africa (Pty) Ltd
on 1 March 1990 and thereafter she performed the same
functions for its successor in title, the respondent.
The applicant contends that she was an employee of the
respondent in terms of Section 213 of the Labour
Relations Act 66 of 1999, (“the Act”), where
an employee is defined as:
"'(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 or
conducting the business of the employer.'"
2. The respondent contends that the applicant is not an
employee but a subcontractor.
3. The applicant's case in the pleadings and her testimony
is that she performed her functions at the respondent
in terms of three agreements between three corporate
entities, in which she was involved, and the respondent
and its predecessors in title.
4. The first agreement was concluded between Atlas
Aircraft Corporation of South Africa (Pty) Ltd (Atlas)
and Ultimate Holdings (Pty) Ltd (“Ultimate”). Mr
Langner signed on behalf of the respondent, and Mr
Gerber, the applicant's husband, signed on behalf of
Ultimate. The agreement was operative for the period
March 1990 until April 1993.
5. On 3 April a second agreement was reached between Denel
(Pty) Ltd and Datacare CC. The applicant signed the
agreement in her capacity as a member of Datacare CC, a
close corporation. At this stage Atlas had become
Denel (Pty) Ltd.
6. The third agreement was concluded between Denel (Pty)
Ltd trading as Denel Aviation, and Multicare Holdings
(Pty) Ltd. The applicant signed this agreement on
behalf of Multicare Holdings (Pty) Ltd (“Multicare”) as
a director of that company on 29 September 1997.
7. As from 1 October 1997 the applicant acted as the
Executive Manager Human Resources, for the respondent.
She applied for this position when it was advertised in
September 1997.
1. 8. The respondent had also in the interim embarked on a
retrenchment exercise on which a moratorium was placed
on 18 March 1998.
9. This moratorium was extended on 7 May 1998 and was
lifted on 29 May 1998.
10. On 24 February 1998 the applicant was advised that the
respondent had decided on an acceleration of
affirmative action in all human resources departments
of the respondent.
11. On 18 April 1998 the applicant's services were
terminated by the respondent, and to quote the words in
the applicant’s statement of case, the respondent
'purported' to terminate her fixed term contract. She
did not accept the termination.
12. The Group ExecutiveDirector confirmed this termination
on 4 May 1998 and on 15 May 1998 the applicant was
informed that the reason for the termination of her
employment was that the respondent had to implement a
drastic cost cutting excercize and that in turn led to
a drastic reconstruction of the corporate structure and
that her position had become redundant. She was given
the option to take up another post at less the
remuneration than she was earning or a package in terms
of which she was to receive a severance package of two
weeks' remuneration per completed year of service. The
two options were rejected by the applicant.
1. 13. On 4 June 1998 a meeting was held where she was
informed of the respondent's stance. I do not wish to
deal with those facts at this stage save to mention
that the respondent treated the applicant as if it had
retrenched her.
14. In limine, the respondent raised the point that the
applicant was not an employee, and this is the question
that I now have to decide upon. The questions of
fairness and so forth are not relevant at this stage.
15. The applicant argues that on the undisputed facts led
by her in evidence and confirmed by Mr Langner (of the
respondent) who was subpoenaed to give evidence, she
was an employee. It was argued in the alternative that
in the event of my finding that the applicant was not
an employee, the respondent was essentially stopped
from denying it, based on the representations made to
the applicant by respondent which caused her to act to
her detriment.
16. The applicant was remunerated and taxed through the two
companies and the close corporation (Ultimate, Datecare
and Multicare”) throughout her working relationship
with the respondent and its two predecessors in title
(Atlas and Denel Aviation). As far as the South
African Revenue Services was concerned, she was an
employee of the aforesaid three entities for the period
relevant to the dispute which is now come before the
Labour Court.
17. The respondent referred to the last contract between
Multicare and Denel Aviation and made the following
points:
Multicare provided the services of a personnel
management consultant to Denel Aviation.
The agreement could be terminated by either party
giving 30 days' notice of such termination.
The agreement was for a fixed period which commenced on
1 October 1997 and ceased on 31 March 2000.
Multicare was paid an inclusive rate of R200,72 per
hour excluding VAT, in relation to the services
provided by Multicare.
All taxes applicable to the remuneration paid to
Multicare were to be borne by Multicare.
In the event of Multicare lodging with Denel Aviation,
a directive issued by the Department of the Commission
Inland Revenue, exempting Multicare from the
requirement for P.A.Y.E. and SITE to be deducted, Denel
Aviation could not make deductions from the
remuneration payable to Multicare.
Payment to Multicare was to be made within seven days,
after receipt of an invoice of Multicare.
The prevailing conditions applicable to Denel
Aviation's fulltime employees were not applicable.
The services to be provided in terms of the agreement
did not have to be provided or performed on Denel
Aviation's premises.
18. It is common cause that the applicant carried out
Multicare's obligations in terms of the agreement. In
terms of clause 3.3 of the agreement the applicant
provided Denel Aviation with directives from the South
African Revenue Services stating that as Multicare and
Datacare CC, through which the applicant previously
contracted her services to Denel Aviation, carried on
an independent trade, payments made by clients did not
represent remuneration and were consequently exempt
from the deduction P.A.Y.E. In the circumstances no
P.A.Y.E. was deducted from the remuneration paid to
Multicare. Multicare submitted monthly invoices to
Denel Aviation in respect of services provided by the
applicant and Multicare charged Denel Aviation VAT in
relation to the services provided by her.
19. According to the respondent it had terminated its
contract with Multicare on or about 19 April 1998.
20. The respondent argued that as the terms of the
agreement with Multicare are clear and unequivocal the
document should accordingly be accepted as the sole
evidence of the terms that the parties had decided to
agree upon. In support of its case the respondent
relied on the Parol Evidence Rule as set out in
Johnston v Leal 1980 (3) SA 927 AD at 943B as follows:
1. "It is clear to me that the aim and effect of this rule is to
prevent a party to a contract which has been integrated into a
single and complete written memorial from seeking to
contradict and/or to modify the writing by reference to
extrinsic evidence and in that way to redefine the terms of the
contract."
21. The respondent argued further that the only manner in
which a party to such a contract can by way of evidence
state that the written terms do not truly reflect the
real intention of the parties is through either
misinterpretation, fraud, duress, undue influence or
illegality. The applicant obviously has not done this,
the respondent argues, and she has not pleaded the
aforesaid and accordingly the point in limine should
succeed.
22. The facts relied upon by the applicant are however
relevant to the inquiry in this matter, specifically as
estoppel was raised. When the applicant was in effect
retrenched by Atlas and received a retrenchment
package, she structured her employment relations with
the respondent by performing functions for it through a
company, because the pension fund benefits at that time
were very unfavourable to women. This evidence was
corroborated by Mr Langner. Furthermore the applicant
was part and parcel of the respondent's organisation,
infrastructure and hierarchy.
1. 23. The applicant worked there exclusively and full
time and was subject to the control and discipline of
the respondent who instructed her when, where and how
to work and the sequence of work she filled acting
positions with the respondent. This evidence was
corroborated by Mr Langner and presented by him as
such. The applicant was not only operational but also
participated in the strategic management of the
respondent. She had delegated authority, controlled
budgets, represented the respondent in various
contractual arrangements, acted in a very senior
position for an extensive period of time and was
presented by the respondent as an employee both
nationally and internationally. The documentation
demonstrated that the respondent paid for the
applicant's business and travelling, entertainment and
cellular telephone expenses.
24. It was argued that the respondent made a significant
investment in the applicant personally. That is not the
case with independent contractors or for consultants as
was the case in the matter of CMS Support Services
(Pty) Ltd v Briggs (1998) 19 ILJ 271, (LAC). In that
matter the tax position and the remuneration position
of the consultant (Briggs) were similar to the
applicant's in this matter. However, Briggs was
employed as a consultant. Factually the applicant was
no subcontractor. The applicant was even required to
evaluate other employees. Clearly her duties were in
consistent with those of a subcontractor.
25. In the CMS Support Services judgment (supra), Myburgh
JP referred with approval to the remarks of Bulbulia DP
in a similar case of Cullinan v Tee Kee Borehole
Casings Ltd & Another (1992) 13 ILJ 1544 IC at 1550DE
and quoted the following:
1. "The Court accepts that the applicant formed his close
corporation in a bona fide belief that it will assist him with
easing his tax burden. It does not appear that it was his
express intention to defraud the fiscal authorities. Having said
that, I must also point out that the applicant cannot have his
proverbial cake and eat it. He cannot say that he was not the
respondent's employee as a machinist for a purpose of taxation
(all for wishing to avoid the pension scheme of the Industrial
Council) but simultaneously be regarded as an employee for
the purpose of the Labour Relations Act."
26. In the first instance I must mention that the case I
just referred to was decided when the Labour Relations
Act 28 of 1956 still had application and the definition
of an employee in that Act is different from the
definition contained in Section 213 of the current Act.
Furthermore I have already indicated that the facts of
the two matters are different in terms of the duties of
the applicants concerned.
1. 27. Insofar as the respondent is concerned, it can
also not have its cake and eat it. For purposes which
did not only suit the applicant, but suited the
respondent as well there was a moratorium at some
stage on new appointments the applicant had to
perform her duties as an employee. Yet at the same
time, the respondent did not have to incur the
responsibilities imposed on an employer by Labour
Legislation. The applicant should not be criticised
for wanting to structure her salary in a way she deemed
fit. She also stated, and this was not disputed by any
witness on behalf of the respondent, that the contracts
in question were entered into each time, when the
respondent underwent structural changes and it was the
respondent's wish to have the contracts and the
payments structured as it was in this matter.
28. Mr Langner also gave evidence that the applicant did
not fall foul of the provisions relating to the South
African Revenue Services since a tax directive was
given which permitted the financial arrangements
between the parties. He testified that the individuals
who are permanent employees, as this was also in the
case of the applicant, obtain tax directives from the
Revenue Services so that no tax can be deducted.
29. The applicant's attorneys argued that in determining
the true nature of the relationship between the parties
the issue of tax is accordingly mutual. The fact that
the respondent did not deduct P.A.Y.E. from the
remuneration paid to the companies and the CC in
question, was because of tax directives issued by the
SARS based on the Income Tax Act and their own policies
and procedures.
30. I would not in this judgment wish to make any
pronouncements upon the applicant's relationship with
the Receiver of Revenue. I believe that it would
perhaps be prudent to send a copy of this judgment to
the South African Revenue Services.
31. On the facts and the dominant impression gained by all
the facts which are common cause, the applicant is an
employee and not a subcontractor.
1. 32. I do not believe that I should make a costs order
in this matter, therefore the question of costs should
be reserved.
33. I make the following order:
1. The point in limine raised by the respondent is
dismissed.
2. Costs are reserved.
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E. Revelas