The Employment Law Review - ENS

ens.co.za

The Employment Law Review - ENS

The

Employment

Law Review

Third Edition

Editor

Erika C Collins

Law Business Research


The Employment Law Review

Reproduced with permission from Law Business Research Ltd.

This article was first published in The Employment Law Review,

3rd edition (published in March 2012 - editor Erika C Collins).

For further information please email

Adam.Sargent@lbresearch.com

ii


THE

EMPLOYMENT

LAW

REVIEW

Third Edition

Editor

Erika C Collins

Law Business Research Ltd


Publisher

Gideon Roberton

business development manager

Adam Sargent

marketing ManagerS

Nick Barette, Katherine Jablonowska

marketing assistant

Robin Andrews

editorial assistant

Lydia Gerges

production manager

Adam Myers

production editor

Davet Hyland

subeditorS

Anna Andreoli, Caroline Rawson, Charlotte Stretch

editor-in-chief

Callum Campbell

managing director

Richard Davey

Published in the United Kingdom

by Law Business Research Ltd, London

87 Lancaster Road, London, W11 1QQ, UK

© 2012 Law Business Research Ltd

www.TheLawReviews.co.uk

No photocopying: copyright licences do not apply.

The information provided in this publication is general and may not apply in a specific

situation. Legal advice should always be sought before taking any legal action based

on the information provided. The publishers accept no responsibility for any acts

or omissions contained herein. Although the information provided is accurate as of

February 2012, be advised that this is a developing area.

Enquiries concerning reproduction should be sent to Law Business Research, at the

address above. Enquiries concerning editorial content should be directed

to the Publisher – gideon.roberton@lbresearch.com

ISBN: 978-1-907606-27-4

Printed in Great Britain by

Encompass Print Solutions, Derbyshire

Tel: +44 870 897 3239


acknowledgements

The publisher acknowledges and thanks the following law firms for their learned

assistance throughout the preparation of this book:

Ali Budiardjo, Nugroho, Reksodiputro

ALRUD LAW FIRM

Baker & McKenzie

BASHAM, RINGE Y CORREA, SC

BAYKANIDEA LAW OFFICES

BORENIUS ATTORNEYS AT LAW

BRISTOWS

CASTEGNARO

CONSORTIUM CENTRO AMÉRICA ABOGADOS – EL SALVADOR

CONSORTIUM CENTRO AMÉRICA ABOGADOS – LACLÉ & GUTIÉRREZ

– COSTA RICA

Consortium RodrÍguez, Archila, Castellanos, Solares &

Aguilar, SC

Consortium Taboada & Associates

Cuatrecasas, Gonçalves Pereira

DELOITTE ADVOKATFIRMA AS

DITTMAR & INDRENIUS

Edward Nathan Sonnenbergs

Estudio Bergstein

ESTUDIO GRAU AbOgados

v


Acknowledgements

Freehills

GEORGE Z GEORGIOU & ASSOCIATES LLC

Gianni, Origoni, Grippo, Cappelli & Partners

Giese & Partner

Graf & Pitkowitz Rechtsanwälte GmbH

HEENAN BLAIKIE LLP

KGDI Law Firm

KOCHHAR & CO

KROMANN REUMERT

Law Firm Šafar & Partners, Ltd

MANNHEIMER SWARTLING ADVOKATBYRÅ AB

Marval, O’Farrell & Mairal

MATHESON ORMSBY PRENTICE

NESTOR NESTOR DICULESCU KINGSTON PETERSEN

PALACIOS, ORTEGA Y ASOCIADOS

PAUL HASTINGS

Paul Hastings LLP

PAUL HASTINGS (Europe) LLP

PAUL HASTINGS LLP SHANGHAI REPRESENTATIVE OFFICE

PBBR – PEDRO PINTO, BESSA MONTEIRO, REIS, BRANCO, ALEXANDRE

JARDIM & ASSOCIADOS

PINHEIRO NETO ADVOGADOS

SAYENKO KHARENKO

SHIN & KIM

SKRINE

SNR Denton & Co

vi


Acknowledgements

SOŁTYSIŃSKI, KAWECKI & SZLĘZAK

TAYLOR WESSING

TSMP Law Corporation

Urenda, Rencoret, Orrego y Dörr

VAN DOORNE NV

Van Olmen & Wynant

WALDER WYSS LTD

vii


Contents

contents

Editor’s Preface

Chapter 1

Chapter 2

xiii

Erika C Collins

EMPLOYMENT ISSUES IN CROSS-BORDER

M&A TRANSACTIONS 1

Erika C Collins and Michelle A Gyves

SOCIAL MEDIA AND INTERNATIONAL

EMPLOYMENT 8

Suzanne Horne and Eleni Konstantinou

Chapter 3 Argentina 22

Enrique Mariano Stile

Chapter 4 Australia 34

Miles Bastick, Shivchand Jhinku and Alison Eveleigh

Chapter 5 Austria 47

Jakob Widner

Chapter 6 Belgium 67

Chris Van Olmen

Chapter 7 Brazil 83

Luís Antônio Ferraz Mendes and Maurício Fróes Guidi

Chapter 8 Canada 95

Jeffrey E Goodman and Christopher D Pigott

Chapter 9 CHILE 109

Francisco della Maggiora M

Chapter 10 CHINA 122

K Lesli Ligorner

Chapter 11 COSTA RICA 139

Carolina Soto Monge

Chapter 12 CYPRUS 152

George Z Georgiou, Anna Praxitelous and Natasa Aplikiotou

viii


Contents

Chapter 13 Czech Republic 167

Kamila Roučková

Chapter 14 DENMARK 179

Marianne Granhøj and Tommy Angermair

Chapter 15 EL SALVADOR 192

Diego Martín-Menjívar and Carlos Roberto Rodríguez Salazar

Chapter 16 Finland 207

Petteri Uoti and Loviisa Härö

Chapter 17 France 217

Deborah Sankowicz and Jérémie Gicquel

Chapter 18 Germany 234

Thomas Griebe and Jan-Ove Becker

Chapter 19 Greece 257

Effie G Mitsopoulou, Nicholas C Maheriotis and Ioanna C Kyriazi

Chapter 20 Guatemala 275

Lionel Francisco Aguilar Salguero

Chapter 21 HONG KONG 282

Michael J Downey

Chapter 22 INDIA 299

Manishi Pathak

Chapter 23 INDONESIA 315

Nafis Adwani

Chapter 24 Ireland 330

John Dunne

Chapter 25 Italy 347

Raffaella Betti Berutto and Filippo Pucci

Chapter 26 JAPAN 360

Setsuko Ueno and Yuko Ohba

Chapter 27 KOREA 375

Young-Seok Ki and John Kim

Chapter 28 Latvia 386

Sigita Kravale

ix


Contents

Chapter 29 Luxembourg 401

Guy Castegnaro, Ariane Claverie, Alexandra Castegnaro, Céline

Defay, Nadège Arcanger, Christophe Domingos and Lorraine Chery

Chapter 30 MALAYSIA 421

Siva Kumar Kanagasabai, Selvamalar Alagaratnam and Foo Siew

Li

Chapter 31 Mexico 439

Jorge G De Presno Arizpe

Chapter 32 NETHERLANDS 452

Els de Wind

Chapter 33 Nicaragua 472

Bertha Xiomara Ortega

Chapter 34 Norway 482

Gro Forsdal Helvik

Chapter 35 Peru 494

José Burgos C

Chapter 36 Poland 508

Sławomir Paruch and Roch Pałubicki

Chapter 37 Portugal 522

Inês Reis and Sofia Costa Lobo

Chapter 38 ROMANIA 535

Monica Elena Preoţescu, Iurie Cojocaru, Alexandru Lupu and

Patricia-Sabina Măcelaru

Chapter 39 Russia 547

Irina Anyukhina

Chapter 40 Singapore 565

Ian Lim, Nicole Wee and Andrew Purchase

Chapter 41 Slovenia 578

Vesna Šafar and Martin Šafar

Chapter 42 South Africa 596

Susan Stelzner, Stuart Harrison, Brian Patterson and Zahida

Ebrahim

x


Contents

Chapter 43 Spain 616

Juan Bonilla

Chapter 44 Sweden 632

Henric Diefke

Chapter 45 SWITZERLAND 643

Ueli Sommer

Chapter 46 TAIWAN 656

Seraphim Mar

Chapter 47 TURKEY 669

Serbulent Baykan and Handan Bektas

Chapter 48 Ukraine 680

Svitlana Kheda

Chapter 49 United arab emirates 694

Ibrahim Elsadig

Chapter 50 UNITED KINGDOM 704

Linda Farrell and Charlotte Halfweeg

Chapter 51 UNITED STATES 720

Patrick Shea and Mitch Mosvick

Chapter 52 Uruguay 735

Gabriel Ejgenberg

Chapter 53 VENEZUELA 745

José Manuel Ortega P

Appendix 1 About the Authors 763

Appendix 2 Contributing Law Firms’ Contact Details 799

xi


Editor’s preface

Erika C Collins

Employment relations in 2011, and legislative and judicial developments in the area of

labour and employment law, continue to be coloured by the financial downturn that

began in 2008 along with related economic uncertainty, including the recent sovereign

debt crisis throughout the Eurozone. As was the case last year, the ‘Year in Review’ and

‘Outlook’ sections of nearly every chapter in this edition detail efforts by countries

both to address the continuing effects of the economic downturn and to implement

regulations aimed at preventing similar crises in the future. Governments continue to

seek ways to decrease financial burdens on businesses, including the costs of labour, in an

apparent effort to increase competitiveness and stimulate business. In Italy and Greece,

for example, new rules regarding collective bargaining permit companies to agree to

company-level collective labour agreements that are less favourable to employees than

the sector-level collective agreements that otherwise would govern. And in the United

Kingdom, the government confirmed its commitment to the Red Tape Challenge, a

deregulation programme expressly aimed at reducing the burdens on businesses. On

the flip side, many governments also sought to implement rules and regulations aimed

at preventing the types of behaviour that are viewed as having caused or contributed

to the ongoing financial crisis. In Brazil, for example, the Central Bank has approved

a resolution aimed at reducing risk-taking in banking activity by tying executive

compensation to long-term results, through the requirement that specified percentages

of incentive compensation are paid in company equity and/or deferred over a period of

several years. And in Ireland, the Prevention of Corruption (Amendment) Act 2010,

signed into law in December 2010, and the Criminal Justice Act 2011 both provide for

protection for whistle-blowers who report certain offences.

Another trend during 2011 has been an increasing focus, in a number of

jurisdictions, on privacy and protection of individuals’ personal data – a topic that can

be of utmost importance to employers, who typically collect and hold a great deal of

personal, and sometimes sensitive, information about their employees. There has long

been a dichotomy between the US and EU approaches to data privacy. In the US

the workplace is not considered private, and the US has taken a sectoral, ‘patchwork’

iii


Editor’s Preface

approach to data protection that consists primarily of reacting to data privacy issues as

they have arisen in various industries. Accordingly, where privacy rights exist in the US

they are largely the product of industry-specific laws. In the EU, by contrast, there is an

overarching right to privacy stemming from the European human rights charter that

all European countries are party to, and the EU data protection directive applies to all

handlers of personal data, whether they are financial institutions, employers or internet

retailers. It appears from recent developments that the EU approach is winning the day.

In the last year, a number of countries – including, notably, India, Korea, Malaysia,

Mexico and Singapore – have passed or implemented data privacy and protection laws

that follow the EU model.

The third edition of The Employment Law Review includes several enhancements

meant to better serve employers and employment-law practitioners operating in the

global arena. These include two general-interest chapters – one addressing employment

issues in cross-border mergers and acquisitions and the other social media in the

workplace – as well as a new section in each country chapter addressing translation

requirements for employment documents. This edition also boasts the addition of seven

new countries, bringing the number of covered jurisdictions to 51. As with the first two

editions, this book is not meant to provide a comprehensive treatise on the law of any

of these countries but rather is intended to assist practitioners and human resources

professionals in identifying the issues and determining what might land their client or

company in hot water.

The third edition of The Employment Law Review has once again been the product

of excellent collaboration, and I wish to thank our publisher and all of our contributors,

as well as Michelle Gyves, an associate in the international employment law practice

group at Paul Hastings, for their tireless efforts to bring this book to fruition.

Erika C Collins

Paul Hastings LLP

New York

January 2012

iv


Chapter 42

South Africa

Susan Stelzner, Stuart Harrison, Brian Patterson and Zahida Ebrahim 1

I

INTRODUCTION

South Africa has a Constitution 2 that entrenches fundamental rights and contains several

provisions that are relevant to employment and labour. Section 23 deals specifically

with labour relations and confers upon ‘everyone’ the right to fair labour practices. It

also provides for freedom of association for workers and employers and the right to

participate freely in the activities of a trade union or employer’s organisation. Trade

unions and employers’ organisations have the right to form and join federations and to

engage in collective bargaining. The Constitution provides for the enactment of national

legislation to inter alia regulate collective bargaining, and the legislation so enacted is the

Labour Relations Act No. 66 of 1995, as amended (‘LRA’).

The LRA also provides for resolution of labour disputes through inter alia the

establishment of the Commission for Conciliation Mediation and Arbitration (‘CCMA’),

the Labour Court and the Labour Appeal Court. It is possible to appeal further to the

Supreme Court of Appeal, and to the Constitutional Court where the dispute involves

a constitutional issue. Employees can also enforce contractual employment rights in the

High Court (as well as in the specialised forums referred to above).

1 Susan Stelzner was a director and Stuart Harrison, Brian Patterson and Zahida Ebrahim are

directors at Edward Nathan Sonnenbergs. Susan Stelzner sadly passed away on 5 January 2011

but this chapter continues to reflect her prior invaluable contribution and it remains dedicated

to her memory.

2 The Constitution of the Republic of South Africa, 1996.

596


South Africa

The LRA provides protection for employees against unfair dismissal and unfair

labour practices, with further guidelines supplied in Codes of Good Practice. The LRA

extensively regulates dismissals on the basis of the operational requirements of the

employer (retrenchments), the rights of employees and the obligations of employers in

the context of the transfer of a business (or part of a business) as a going concern.

Minimum conditions of employment are regulated by the Basic Conditions of

Employment Act No. 75 of 1997 (‘the BCEA’). The BCEA applies to all employers and

employees except ‘soldiers and spies’ and unpaid volunteers working for charity. The BCEA

does not set minimum wages. It regulates working time, leave, particulars of employment

and the keeping of records regarding remuneration, termination of employment (notice

and severance pay), and the prohibition of child and forced labour. It provides for basic

conditions to be varied in different ways (such as by collective agreement) and for its

monitoring and enforcement. Under the variation provisions, a particular sector or

industry can regulate its own terms via a bargaining council agreement, which then takes

precedence over the BCEA. A bargaining council comprises representative employers

and unions in the industry concerned. In addition, the Minister of Labour may make

sectoral determinations for a sector and area, a number of which have already been made.

Discrimination and affirmative action issues are regulated by the Employment

Equity Act No. 55 of 1998 (‘EEA’). The Occupational Health and Safety Act No. 85

of 1993 (‘OHSA’) imposes on all employers a general duty to provide and maintain a

working environment that is safe and without risk to employees’ health. In addition,

there are a number of specific regulations published under the OHSA. Work-related

injuries and illnesses are covered by the Compensation for Occupational Injuries and

Diseases Act No. 130 of 1993 (‘COIDA’).

Unemployment benefits are regulated by the Unemployment Insurance Act No.

63 of 2001 and the Unemployment Insurance Contributions Act No. 4 of 2002. Both

the employer and the employee must make monthly contributions to the unemployment

insurance fund, which provides unemployment benefits to individuals who are

temporarily unemployed. Retirement funding and provision for medical insurance in

South Africa is private unless regulated under a bargaining council agreement.

II

YEAR IN REVIEW

The start of 2011 was characterised by controversy regarding the publication of various

proposed amendments to key employment legislation. The proposed amendments

related to various issues governed by the LRA, the BCEA and the EEA. In addition,

new legislation in the form of the Employment Services Bill was proposed, which would

extensively regulate recruitment and job placement. The proposed amendments were

controversial because they sought to introduce material changes to the employment law

landscape. Among the more controversial proposals was the banning of any form of

agency work (known locally as labour broking), significant restrictions on the employment

of employees on fixed-term contracts, the criminalisation of non-compliance with the

BCEA and a substantial fines regime (e.g., starting at 2 per cent of annual turnover) for

non-compliance with the EEA. A large outcry against the proposals (which had also

597


South Africa

been very poorly drafted) resulted in the draft amendments being sent back for extensive

reconsideration.

The 2011 strike season was once again a turbulent one in which various industries

and sectors where affected by significant strikes, including the mining and petroleum

industries, the energy sector and the public sector, to name but a few. In July 2011, about

170,000 workers from the National Union of Metalworkers of South Africa and other

unions embarked on strike action, demanding wage increases ranging from 10 per cent

to 13 per cent, and a ban on labour brokers. Several other unions from the chemical,

transport, petroleum, and energy sectors subsequently joined the strike action. Also, in

July 2011 more than 200,000 gold miners began to strike in one of the largest labour

strikes the country has experienced in recent years.

National and regional strike action involved an unfortunately high incidence of

violent conduct by strikers, causing damage to property and physical harm. In August

2011, for example, municipal workers took to the streets of Cape Town in a protest

march in support of their strike, during which street vendors’ stalls along the route were

destroyed and looted, transport companies were threatened, and tyres and bins were set

alight. There have been increased calls as a result for measures to be introduced to hold

unions liable for the damage caused by such unlawful behaviour.

With effect from 1 July 2011, the earnings threshold for employees provided

for in Section 6 of the BCEA was raised to 172,000 rand per annum. It was last raised

in 2008, when it was set at 149, 736 rand. The earnings threshold excludes employees

earning more than the threshold from certain statutory basic conditions of employment

which would otherwise apply to them in terms of the BCEA. For example, the BCEA

limits on maximum ordinary working hours (45 hours per week, with a maximum of

nine hours per day if an employee works five days a week or less, etc.), overtime hours (10

hours a week and three hours a day), overtime rates of pay (one-and-a-half times their

ordinary wage) etc., do not apply to employees earning above the earnings threshold,

unless the employer agrees with them otherwise.

The Department of Health published a draft policy paper setting out the

government’s intended implementation of national health insurance (‘NHI’) in the years

to come. South Africa currently does not have compulsory national health insurance and

the NHI proposals are aimed at financing universal healthcare for all South Africans.

This is the first step in the process towards legislation aimed at the ultimate establishment

and implementation of a compulsory NHI system. It is a long-term project anticipated

to take 14 years to complete and it will significantly affect the current private medical aid

and health insurance landscape in South Africa

The Ministry for Women, Children and People with Disabilities announced

that it is developing new legislation to enhance (and indeed compel) the application of

the principle of gender equality in South African society. The Ministry indicated that

a Gender Equality Bill will be submitted to Cabinet by March 2012 in this regard.

Indications are that it will include new obligations on employers in relation to the

advancement of women in the workplace and their appointment to senior positions,

both in the public and private sectors.

The Commission for Conciliation Mediation and Arbitration (‘CCMA’) published

Guidelines on Misconduct Arbitrations (‘Guidelines’) that will come into effect on 1

January 2012. The CCMA is the statutory dispute resolution body that deals with the

598


South Africa

overwhelming majority of labour disputes. The Guidelines regulate the manner in which

statutory arbitrations (regarding unfair dismissals for misconduct) should be conducted,

the evaluation of evidence, assessing procedural and substantive fairness and determining

appropriate remedies. The Guidelines have been drafted taking into account prevailing

legislation and recent case law and they aim to promote consistent decision-making by

arbitrators.

The Immigration Amendment Act 13 of 2011 was assented to on 21 August 2011

and will come into effect on a date to be proclaimed by the President.

Some of the significant changes proposed include the following:

a It will no longer be possible to bring applications for a change in status or changes

to the conditions of a permit while in South Africa without the approval of the

Minister of Home Affairs.

b Applicants for visas and temporary residence permits will have to visit offices of

the Department of Home Affairs or a foreign embassy to apply in person for their

permits.

c The quota work permit and exceptional skills work permit categories will be

combined under the critical skills work permit category.

d Corporate permits only be issued to companies that conduct business in particular

sectors.

e Anyone who overstays their visa a prescribed number of times will become an

undesirable person and therefore ineligible for a permit, visa, admission to the

Republic or permanent residence. This is particularly challenging if one considers

the number of overstays currently being caused by the Department’s own inability

to renew visas in good time.

f Maximum sentences for contraventions of various sections of the Act have been

increased.

III

SIGNIFICANT CASES

The decision of the Labour Appeal Court (‘LAC’) in Aviation Union of SA v. South

African Airways and others (2009) 30 ILJ 2849 (LAC) was discussed in the 2009 review.

In this case the LAC decided, adopting a purposive interpretation, that Section 197 of the

LRA (the transfer of undertaking provision) can apply to second-generation outsourcing

(i.e., where a service that was previously outsourced is either taken back by the original

employer or passed on to a new service provider).

At issue in the matter was whether the termination of the outsourcing agreement

with an outsourced service provider gives rise to a transfer of a business in terms of

Section 197 back to the entity that originally outsourced the services or, in the alternative,

a transfer of a business in terms of Section 197 to the new outsourced service provider

subsequently appointed by the entity that originally outsourced the services. In other

words, does this ‘second-generation outsourcing’ constitute a transfer of a business as

contemplated by Section 197 of the LRA, which would have the effect of the employees

being transferred from the first service provider to the new service provider? The LAC

had held that if a business is transferred as a going concern in a second-generation

outsourcing situation, such a transfer would fall within the ambit of Section 197.

599


South Africa

The matter went on appeal to the Supreme Court of Appeal (‘SCA’), which

overturned the LAC’s findings.

The SCA held that the choice of language by the legislature in Section 197 is plain

and unambiguous and should be given its ordinary meaning. By the deliberate use of

the word ‘by’ in the definition of ‘transfer’ in Section 197 (which reads ‘the transfer of a

business by one employer (‘the old employer’) to another employer (‘the new employer’)

as a going concern’), the legislature showed that it intended Section 197 to apply to a

situation where there are at least two positive actors in the process. The SCA found that

the ordinary meaning of the word ‘by’ required positive action from the old employer

who transfers the business to the new employer. Reading the word ‘by’ to mean something

different was simply not legitimate, the SCA felt, and would be tantamount to usurping

the role of the legislature. In the circumstances, it concluded that Section 197 applied

only where there was a transfer of a business as a going concern, made by an old employer

to a new employer, which typically did not occur in a second-generation outsourcing.

That was not the last word on the matter, however, as it then went on appeal in

November 2011 to the Constitutional Court (‘CC’) in AUSA v. SAA and others (CCT

08/11), and the CC overturned the SCA findings and declared that it was clear from the

particular cancellation arrangements in the contract in place between the two employer

parties involved that a transfer of a business as a going concern occurred from the service

provider back to the original outsourcer. The CC found that the definition of ‘transfer’

in Section 197 did not operate to exclude second-generation outsourcing transactions

in principle. Therefore, where second-generation outsourcing transactions in substance

result in the transfer of a business as a going concern, Section 197 will operate to transfer

the employees in the business automatically.

There was also an important case in the area of fixed-term contracts of employment

and the extent of protection afforded to fixed-term employees whose contracts are not

renewed. In University of Pretoria v. CCMA & Others (JA38/2010) [2011] ZALAC 25

(4 November 2011), the University of Pretoria (‘University’) approached the LAC after

both the CCMA and the LC found in favour of an employee who claimed that she had

been dismissed in terms of Section 186(1)(b) because she had a reasonable expectation

of being employed on an indefinite employment contract at the expiry of her fixed-term

contract and the University had not given her such employment. The LAC confirmed

that the issue in question related to whether or not a reasonable expectation of indefinite

employment could constitute a dismissal in terms of Section 186(1)(b). Prior to this case,

there were two key LC judgments on the subject, namely the judgments in the matters

of Dierks v. University of South Africa and McInnes v. Technikon of Natal. In the Dierks

case, the Labour Court had found that there could only be a dismissal in terms of Section

186(1)(b) where the employee reasonably expected the employer to renew the fixed-term

contract of employment on the same or similar terms, and not where the expectation was

for permanent employment. In the McInnes case the Court went the other way finding

that in principle there could be a dismissal in terms of Section 186(1)(b) where the

fixed term employee has an expectation of permanent employment and he or she is not

appointed permanently, particularly if the employee had been engaged in an advertised

permanent position. In this case, the LAC found that the only interpretation which

could be given to Section 186(1)(b) was that there could only be a dismissal in terms

thereof where the fixed-term employee enjoyed no more than an expectation to a further

600


South Africa

fixed-term contract on the same or similar conditions. It dismissed the contention made

on behalf of the employee that, by being employed on the basis of a series of fixed-term

contracts, an employee has – without more – a reasonable expectation of a permanent

appointment, and made the point that the distinction between a fixed-term contract

and a permanent contract has a clear economic rationale. This declaratory order has

hopefully settled the long-standing legal debate on this subject (or at least until the next

round of amendments to the LRA).

In Booysen v. The Minister of Safety and Security & others [2011] 1 BLLR 83 (LAC),

the LAC had to determine whether the Labour Court had the jurisdiction to deal with a

matter where the employee had not yet been dismissed (i.e., prior to the completion of

the disciplinary proceedings to which the employee was subject). Mr Booysen (Booysen)

had been charged with fraud, corruption and perjury and was suspended without pay.

The hearing was originally scheduled for August 2007 but was postponed on numerous

occasions because Booysen was suffering from post-traumatic stress disorder that resulted

in him being incapable of attending the hearing. On the basis that the hearing had been

postponed on several occasions, the chairperson requested that Booysen be examined by

an independent medical practitioner who could determine if he was fit to appear at the

hearing. The chairperson, after considering the medical evidence before her, decided that

Booysen was fit to participate in the hearing and scheduled the new disciplinary hearing

for 13 February 2008. On 12 February 2008, Booysen launched urgent proceedings in

the Labour Court to have the hearing postponed, which was dismissed by the Labour

Court on the basis that it lacked jurisdiction to hear a matter about an employee who

had not yet been dismissed. Booysen then approached the High Court seeking the same

relief, which was also dismissed. With nowhere else to go, Booysen approached the LAC,

taking the original Labour Court decision on appeal. The LAC held that the effect of

the decision of the Labour Court was that the court could not come to the assistance

of an employee before he or she has been dismissed. The LAC held that possible future

litigation to appeal the decision of the disciplinary committee could be prevented if

the relief was granted at an early stage. The LAC ultimately concluded that the Labour

Court has jurisdiction to interdict, in appropriate circumstances, unfair conduct that

takes place in the course of disciplinary proceedings prior to a dismissal.

In Gary Shane Allpass v. Mooikloof Estates (Pty) Ltd t/a Mooikloof Equestrian Centre

JS178/09 (unreported), handed down on 16 February 2011, the Labour Court had to

decide on the fairness of the dismissal of an employee who disclosed his HIV status and

whether his dismissal constituted an act of unfair discrimination in terms of the EEA. The

employee did not originally disclose his HIV status in his interview with his employer,

but later did so in a document which he assumed to be a confidential information sheet.

When the employer came to learn of his HIV status, he was summarily dismissed on

the basis that he failed to make a material disclosure as to the status of his health. The

issues to be decided by the Labour Court were essentially whether the dismissal of the

employee was automatically unfair and whether he was unfairly discriminated against on

the basis of his HIV status. The court concluded on the facts that the true reason for the

dismissal was in fact the employee’s HIV status and that the employer had failed to show

how an inherent requirement of the job could justify the dismissal. The dismissal of the

employee was found to be automatically unfair and the employer was ordered to pay 12

months’ pay as compensation.

601


South Africa

IV

BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP

i Employment relationship

The existence of an employment contract is not a prerequisite for an employee to qualify

for statutory employment rights. The definition of an employee under most South African

employment legislation is wide enough to include persons (excluding independent

contractors) who assist in carrying on or conducting the business of the employer even

though they may not be formally employed by the employer. Most employees in South

Africa are, however, employed under employment contracts.

It is preferable for an employment contract to be in writing and signed by both

parties. Signatures on a contract are not legally required, subject to two limited exceptions,

namely merchant seaman (for whom written employment contracts are required under

the Merchant Shipping Act No. 57 of 1951) and learners (also referred to as apprentices)

under the Skills Development Act No. 97 of 1998 (‘the SDA’).

In terms of the BCEA, employers are obliged to provide their employees with

written particulars of their employment conditions once the employee commences

employment including, but not limited to: the occupation of the employee or a brief

description of the work for which the employee is employed; the employee’s ordinary

hours of work and days of work; the employee’s wage or the rate and method of calculating

wages; any deductions to be made from the employee’s remuneration; the leave to which

the employee is entitled; the period of notice required to terminate employment, or if

employment is for a specified period, the date when employment is to terminate; a list of

any other documents that form part of the employment contract and indicating a place

that is reasonably accessible to the employee where a copy of each may be obtained.

The conditions of employment provided for under the BCEA constitute the

basic terms of any employment relationship except to the extent that any other law

or terms of the employment contract provide for more favourable terms, or where the

basic condition has been varied in terms of the BCEA. Collective agreements, where

applicable, can also vary the terms of employment contracts between the employers and

employees who are bound by them.

An employment contract can either provide for employment to be for a fixed

period or on an indefinite basis. Fixed-term employment will usually be for a period that

is of limited duration and which expires on the happening of an objectively ascertainable

event, such as a date or a particular event (e.g., the completion of a project with a client,

etc.). Indefinite employment endures until retirement, unless terminated prior thereto

either through an employee’s resignation or by the employer for a fair reason recognised

in law as sufficient grounds for termination.

Parties to an employment contract can only amend the contract by agreement.

Agreement is obtained either through negotiation or, if this fails, after taking certain

procedural steps parties can resort to industrial action (i.e., a strike in the case of

employees or a lock-out in the case of employers) aimed at compelling the other party

to agree.

602


ii

Probationary periods

South Africa

Probation periods are permitted for newly hired employees. The purpose of probation

must be to give the employer an opportunity to evaluate the employee’s performance

before confirming his or her appointment. The period of probation should be determined

in advance, be of a reasonable duration, and should be determined with reference to the

nature of the job and the time required to ascertain the employee’s suitability for the job.

The employee’s performance should be assessed during the probationary period

and employers are required to give the employee reasonable evaluation, instruction,

training, guidance or counselling in order to allow the employee to render satisfactory

service. If the employer determines that the employee’s performance is below standard,

the employer should advise the employee of the aspects in which it considers the employee

to be failing to meet the required performance standards and, after having afforded the

employee the opportunity to make representations in this regard, the employer may then

either extend the probationary period or dismiss the employee. The extension of the

probationary period should not be disproportionate to the legitimate purpose that the

employer seeks to achieve.

An employer must therefore have a fair reason and follow a fair procedure before

effecting the dismissal of a probationary employee. The only real dispensation given

to employers who terminate the employment of an employee on probation is that the

reasons for the dismissal of an employee on probation can be ‘less compelling’ than

would be the case in dismissals effected after the completion of a probation period

and that there is no obligation to adapt the employee’s duties to overcome his or her

shortcomings. The minimum notice periods for termination of employment described

in Section XII , sub-section (i), infra, also apply to employees on probation.

iii Establishing a presence

A foreign employer can hire employees and engage independent contractors in South

Africa without being required to set up a local entity or to officially register. In terms

of the Income Tax Act, a non-resident employer is not obliged to withhold employees’

tax from remuneration (provided that it does not have a representative employer in

South Africa). The employees themselves will be required to settle their tax liabilities in

respect of the remuneration they receive from the non-resident employer for the services

that they render in South Africa. Generally, this will be done through provisional tax

payments.

If a foreign employer appoints a South African resident entity to pay remuneration

on behalf of the foreign employer, the South African entity will be regarded as a

representative employer and will be required to register as the employer and withhold

employees’ tax from remuneration.

A foreign employer will be liable for tax on South African-sourced income.

However, if there is a double taxation agreement in place between the jurisdiction within

which the foreign employer is tax resident and South Africa, and the income of the

foreign employer comprises business profits, then the double taxation agreement would

allocate taxing rights to the country in which the foreign employer is a tax resident,

unless the foreign employer carries on business in South Africa through a permanent

603


South Africa

establishment. (Most of South Africa’s double taxation agreements are based on the

Organisation for Economic Co-operation and Development Model Tax Convention).

The existence of a permanent establishment is determined with reference to Article

5 of the Model Tax Convention. Generally, however, what is required for permanent

establishment is a fixed place of business where the business of the enterprise is carried

out. There must be a fixed location or facility used for the conduct of business activities,

and it must be utilised for continuous business operations. Generally, business is regarded

as being carried out through the employees of the enterprise, but a business may also be

carried on through agents or other representatives of the enterprise, particularly where

those representatives are dependent on the enterprise.

In addition, if employees of a foreign employer spend significant periods of time

in South Africa, it is possible that these employees will create a permanent establishment

for the employer in South Africa. If so, then the profits of the foreign employer that are

attributable to the permanent establishment may also be taxed in South Africa.

Therefore, if employees of a foreign employer spend significant periods in South

Africa and carry on the business of the foreign employer in South Africa, their presence

may create a permanent establishment for the foreign employer in South Africa.

The South African Companies Act also requires an entity to register as an external

company (commonly referred to as a ‘branch’) with the South African Registrar of

Companies within 21 days of establishing a ‘place of business’ in South Africa. A place

of business is defined as a place where the company transacts business or holds itself out

as transacting business.

If a South African resident company employs employees in South Africa, whether

the employees are foreign or local, employees’ tax must be deducted at source and the

employer is responsible for reporting and withholding the employees’ tax. Employers are

required to provide few statutory benefits. There is no general minimum wage (although

some industries have compulsory wage-regulating measures in place) nor is there a general

obligation to provide medical aid or retirement fund benefits. However, the BCEA does

stipulate maximum working hours, overtime and the like, and minimum leave, notice

periods and severance pay benefits apply.

There is no social security as such in South Africa. Nevertheless, a South African

employer is liable to make contributions to the Unemployment Insurance Fund, pay a

skills development levy and make contributions to the Workmen’s Compensation Fund.

V

RESTRICTIVE COVENANTS

Restraint of trade (i.e., a non-compete or restrictive covenant) clauses can be included

in employment contracts, usually for more senior employees who are privy to the

employer’s most confidential information or critical customer relationships. Such clauses

are in principle valid and enforceable and, as such, many restraints are enforced in South

African courts every year. Nevertheless when the employer seeks to enforce restraint

provisions the courts retain discretion as to whether to enforce the restraints and they

will not enforce them if, in a particular case, such enforcement would be unreasonable

or contrary to the public interest.

604


South Africa

The reasonableness of a restraint is judged both on the broad interests of the

public and the interests of the contracting parties themselves. Reasonableness as between

the parties themselves depends on many factors, the most important of which is whether

the employer has a proprietary interest that may legitimately be protected by means of a

restraint agreement. Proprietary interests include confidential information and customer

connections. The geographical area and duration of the restraint must also be reasonable.

It is not a prerequisite for the employer to financially compensate the employee

in exchange for the employee undertaking restraint of trade obligations, although where

such payments are made, this enhances the enforceability of the restraint.

VI

WAGES

i Working time

Generally, no employee may work more than 45 ordinary hours per week and nine hours

per day if he or she works a five-day week, alternatively the employee may not work more

than eight hours per day if he or she works a six-day week. Total working hours may not

exceed 12 hours a day. Wage regulating measures specific to industries can have different

provisions regulating working hours.

Night work, which is defined as work performed after 6:00pm and before

6:00am the next day, may only be done with the employee’s consent and they must

be compensated with an allowance, which may be a shift allowance or a reduction of

normal working hours, and transport must be available between their residences and the

workplace at the commencement and conclusion of the shift. If employees perform night

work on a regular basis (i.e. work of longer than one hour after 11:00pm and before

6:00am at least five times per month or 50 times per year), the employer must inform

them of health and safety hazards associated with night work and of their right to request

a medical examination at the employer’s expense. If a regular night worker suffers from

a health condition associated with the performance of night work, the employer must

transfer the employee to suitable day work within a reasonable time if it is practicable

to do so.

ii Overtime

Employees generally enjoy the following statutory overtime benefits (excluding those

who are not senior managerial employees, sales staff who travel to customers’ premises

and regulate their own working hours, employees who work for less than 24 hours a

month, or employees who earn above an earnings threshold (currently 172 000 rand per

annum:

a An employer can only require an employee to work overtime where the employee’s

agreement to do so has been obtained. If the employee’s agreement is obtained on

commencement of employment or within three months thereof, the consent shall

lapse after 12 months and must be secured again by the employer, whereafter the

consent does not lapse. An employer must pay an employee at least one-and-ahalf

times the employee’s wage for overtime worked or grant the employee paid

time off (e.g., 90 minutes off for every 60 minutes overtime worked).

605


South Africa

b

Employees are not permitted to work more than 10 hours overtime a week or

three hours overtime in a day if they work a nine-hour day.

VII

FOREIGN WORKERS

The employment of non-South African citizens is governed by the Immigration Act 2002,

which imposes record-keeping and sanction provisions on every employer, regardless of

the business’s size or number of employees, although stricter compliance is required of

any employer with more than five employees or that has been found guilty of a prior

offence under the Act.

To ensure regulatory compliance, an employer in South Africa must maintain

documentary records for each foreign employee for two years after the termination of

employment. The employer must also report to the authorities the termination of a foreign

worker’s employment and any breach by the worker of his or her permit arrangements.

Employers must also make a reasonable effort in good faith to ensure that they have no

illegal foreigners in their employ and to ascertain workers’ status or citizenship.

There is no restriction on the number of foreign workers that an employer may

employ or on the number of work permit categories under which work permits may

be applied for. Nonetheless, the work permit process guards against employing foreign

nationals in positions that can be filled by locals. For example, an application for a

general work permit must include proof of advertisement of the position and must be

accompanied by a letter of motivation disclosing the details of all unsuccessful applicants

for the position and justifying the need to employ a foreign national in that position.

There is no general legislative cap on the period for which a foreign worker may

be employed in aggregate, although the Immigration Act does provide maximum periods

for which certain categories of work permits may be granted. For example, a visitor’s visa

with consent to work may be issued for a maximum of 90 days and can be renewed once

for a further 90 days. A quota work permit is usually first issued as a three-month work

seeker’s permit, which may be extended for up to five years once employment is secured

(it may also be renewed if the qualification remains an identified scarce skill). A general

work permit is usually granted for a maximum of five years and may be renewed.

Intra-company transfer work permits may be issued for a maximum of two years,

although legislation is currently pending to amend this period to four years, and cannot

be renewed. Upon expiry of the permit, the holder must either depart from South Africa

or apply for a change of conditions to a different category of permit if they are required

to remain in South Africa. A corporate permit can be open-ended, allowing a company

to employ a number of foreign workers in specific pre-determined positions over a

period, but the corporate employee’s permit is generally limited to three or five years.

The Department of Home Affairs has, however, indicated its intention to move away

from issuing open-ended corporate permits.

Any foreigner who is not a permanent resident and wishes to render services in

South Africa needs to obtain a work permit or visa. Both criminal and civil sanctions

against employers of foreign nationals can be imposed for non-compliance with their

obligations in this regard.

606


South Africa

South African employment laws are of universal application for employees that

fall within their jurisdiction. They therefore apply to foreign nationals working in South

Africa, even if the foreign nationals are working illegally.

As indicated in Section IV, sub-section (iii), supra, a South African-resident

company is obliged to pay taxes and statutory benefits for all its employees working in

South Africa, whether the employees are foreign or local.

VIII GLOBAL POLICIES

Employers are under no legal obligation to have internal discipline rules. It is up to

individual employers to decide whether they want to establish rules to regulate conduct

in the workplace and in most cases there are clearly advantages in doing so.

In general an employer does not require the approval or agreement of its employees

or their representative body when deciding to introduce discipline rules. There is also no

requirement for the rules to be filed with or approved by any government authorities but

such disciplinary rules must be lawful and fair. The approval or agreement of employees

may, however, be required where the rules form part of their employment contracts and

the employer wishes to amend the rules. Approval and agreement may also be required

where there is a collective agreement between the employer and the representative

body stipulating that employees or their representative body must approve or agree to

discipline rules before the rules may be introduced or amended. Nevertheless, this type

of agreement in respect of discipline rules is rare.

Although there are no mandatory discipline rules, issues of discrimination and

sexual harassment are prohibited by specific legislation, most notably the EEA and codes

published pursuant to the EEA. Employers must also report acts of corruption to the

authorities.

There is no requirement that the rules governing discipline in the workplace

be signed. It is nonetheless good practice to get employees to sign some form of

acknowledgement that they are aware of the existence of the rules and have been given

an opportunity to familiarise themselves with them. This may be done electronically.

The rules should be accessible to all employees and, if possible, copies of the

rules should be given to all employees. If this is not possible, then copies should be

available from designated persons, such as human resources managers, for inspection by

employees. An intranet site is insufficient if the employees do not have access to it or do

not know how to access it.

Individual employers are free to decide whether or not they want to incorporate

the disciplinary rules into employees’ employment contracts, but generally it is not

advisable to do so. In cases where the disciplinary rules are incorporated into the

employee’s contract of employment, any minor breach of the rules will constitute a

breach of contract that may be actionable. In addition, the rules will then become part

of the employees’ terms and conditions of employment and may not be changed without

the employees’ consent. Disciplinary rules, codes and procedures ought in most cases to

serve as a guideline to ensure that the employer fulfils its statutory obligations in respect

of fair labour practices rather than be elevated to contractual conditions.

607


South Africa

IX

TRANSLATION

Even though it is highly recommended, there is no legal requirement that employmentrelated

documents be translated unless the employee is not able to understand it, in

which case the employer should ensure that the contents of the documents are explained

to the employee in a language and in a manner that the employee understands.

There are no penalties if the document is not translated. However, if it is not

translated (in circumstances where it is required as described above), the risk is that the

employer may be directed by the Department of Labour to translate the documents or

they may be unenforceable against the employee in question. For example, while there

is no legal requirement that laws be written in the local language, to hold employees

to account for breaches of such, the employer would need to show that the employees

were aware or ought reasonably to have been aware of the roles. Therefore, it would be

advisable for the roles to be communicated in a language that the employees understand.

X

EMPLOYEE REPRESENTATION

Employees are permitted to form and join a registered trade union of their choice.

Employees, through their trade unions, are also permitted to establish workplace forums

in their workplace where the employer employs more than 100 employees to consult on

numerous defined workplace issues. Such workplace fora are rare.

A majority union in a workplace in which at least 10 of its members are employed

may elect union representatives from its members in accordance with the following ratio:

a 10 members in the workplace: one representative;

b more than 10 members: two representatives;

c more than 50 members: two representatives for the first 50 members plus 1

representative for every additional 50 members (with a maximum of 7);

d more than 300 members: seven representatives for the first 300 members plus 1

representative for every additional 100 members (with a maximum of 10);

e more than 600 members: 10 representatives for the first 600 members plus 1

representative for every additional 200 members (with a maximum of 12); or

f more than 1000 members: 12 representatives for the first 1000 members plus 1

representative for every additional 500 members (with a maximum of 20).

The constitution of the trade union will govern the nomination, election, term of

office and removal from office of the representatives. It will also regulate the holding of

meetings and the issues related thereto.

Representatives have the right to assist and represent employees in grievance and

disciplinary proceedings, to monitor the employer’s compliance with labour laws and

any collective agreements and to report any contraventions of these laws and agreements.

They also have the right to perform any other functions as agreed with the employer

and to take reasonable time off work for trade union activities. Representatives may not

be discriminated against in any way, or dismissed, for their involvement in trade union

activities.

Depending on the level of representation of the union, an employer must allow

it access to the workplace in order to recruit members, communicate with them, hold

608


South Africa

meetings, and otherwise serve them and grant stop orders due to the union from the

employees’ wages.

XI

DATA PROTECTION

i Requirements for registration

There is currently no legal obligation on employers to register with a data protection

agency or other government bodies in connection with data protection. Nevertheless,

new and comprehensive legislation regulating data protection is due to be introduced in

the near future (the Protection of Personal Information Bill, 2009 has been drafted and

is scheduled to be considered by Parliament). The proposed legislation is designed to

regulate the protection of personal information in the public and private sector and will

provide employees with a number of rights and employers with a number of obligations

regarding how the information is handled. It will be enforced by an Information

Protection Commission established under the proposed legislation.

The proposed legislation does not require employers to register with a data

protection agency or other government bodies; however, employers can only collect

and store personal information about its employees if it has notified the Information

Protection Regulator and the employees, where the information collected is necessary

or related to a lawful and permitted purpose under the legislation. The collection of

information must also not unreasonably intrude on the employee’s privacy.

Personal information may only be collected by an employer directly from and with

consent of the employee, who must be informed of the purpose of any collection and

who the intended recipients are when the information is collected. Personal information

should not be kept for longer than necessary to achieve the (permitted) purpose for

which it was collected and it must be distributed in a way which is compatible with the

purpose for which it was collected. The employer must take reasonable steps to ensure

that the information is accurate, up to date and complete.

Under the proposed legislation the employer must ensure that the employee’s

information is protected against risks of loss, damage destruction or unauthorised access.

The employees must also be allowed to access their personal information and can demand

that their information be corrected if it is found to be inaccurate.

ii Cross-border data transfers

The Protection of Personal Information Bill, 2009 prohibits cross-border (and onward)

transfers of personal information to countries that do not have substantially similar

protections for the information (except under limited circumstances). Notification of

such transfers must be given to the Information Protection Regulator as well as to the

employee. The employee’s consent to the transfer is generally required. The transfer must

also be necessary under contractual arrangements involving the employee.

iii Sensitive data

The Protection of Personal Information Bill, 2009 considers the following information

to be ‘special personal information’ for which additional protections are required: (1)

609


South Africa

information concerning children; (2) religious or philosophical beliefs; (3) race or ethnic

origin; (4) trade union membership; (5) political opinions; (6) health etc.

This special personal information may not be processed by an employer unless

specifically permitted under exemptions provided for in the legislation. An examples

of an exemption would be the processing of racial information because the employer

is required to comply with laws designed to protect or advance persons from groups

historically disadvantaged by unfair discrimination (in terms of the EEA).

iv Background checks

Background checks are generally permitted to the extent that it does not involve checks

that amount to unfair discrimination under the EEA. For example, an educational

background check is generally acceptable, if aimed at selecting the job applicant who best

satisfies the requirements of the job, but an employer must assess an applicant’s ability

to do the job not only with reference to formal qualifications, but also with reference to

prior learning, relevant experience or the capacity to acquire the relevant skills within a

reasonable time the capacity to do the job.

A Code of Good Practice issued under the EEA stipulates that an employer should

only conduct an integrity check – such as verifying the qualifications of an applicant,

contacting credit references and investigating whether the applicant has a criminal record

– if this is relevant to the requirements of the job. The National Credit Act No. 34 of

2005 also stipulates that a credit bureau can only issue a credit report to a prospective

employer when the employer is considering the candidate for a position that requires

trust and honesty and entails the handling of cash or finances, and only with the prior

consent of the candidate.

Medical testing is only permitted if legislation permits or requires it or if it is

justifiable in the light of medical facts, employment conditions, social policy, the fair

distribution of employee benefits, or the inherent requirements of the job. Testing an

employee for his or her HIV status is prohibited unless determined to be justifiable by

the Labour Court. Psychological testing and other similar assessments are also prohibited

unless the test has been scientifically shown to be valid and reliable and that it can

be applied fairly to all employees and is not biased against any employee or group of

employees.

XII

DISCONTINUING EMPLOYMENT

i Dismissal

Employees in South Africa may not be dismissed without cause. An employer is

prohibited from dismissing an employee unfairly and thus must have a fair reason and

follow a fair procedure before it can lawfully dismiss an employee.

There are no requirements to notify government authorities of dismissals. When

dismissing an employee, however, the employer should notify the employee of his or

her right to refer a dispute about an alleged unfair dismissal to the applicable statutory

dispute resolution body. In some instances, an employer must consult a trade union

about pending dismissals, for example where the employee is a trade union representative

or where union members are to be made redundant.

610


South Africa

The grounds upon which an employer can fairly dismiss an employee are

misconduct, incapacity (which can be in the form of medical incapacity or poor

performance) and the operational requirements of the employer (i.e., redundancy, which

is dealt with below in more detail). Whether a dismissal for misconduct (which would be

pursuant to a disciplinary process) or for poor performance (pursuant to a performance

management process) is for a fair reason and following a fair procedure is determined

by the facts of the case and the appropriateness of dismissal for the misconduct or poor

performance. ‘A Code of Good Practice: Dismissal’, issued pursuant to the LRA, provides

some elaboration on how employers might handle these grounds of dismissal.

Dismissal may be summary where this is warranted (e.g., in cases of serious

misconduct) but otherwise the employee must be given notice (the BCEA stipulates

minimum notice periods of one week for employees with less than six months’ service, to

two weeks for employees with service between six months and one year, and four weeks

for employees with service over a year). Employers may pay their employees in lieu of

notice.

An employee whose employment is fairly terminated for misconduct or poor

performance is not entitled to any separation or severance pay. For the severance pay

requirements in cases of redundancy, see the section below. It is possible for employers to

conclude separation or settlement agreements with departing employees.

ii Redundancies

An employee may be dismissed for a reason relating to the employer’s operational

requirements. Operational requirements are defined in the LRA as requirements based on

the employer’s economic, technological, structural or similar needs, usually in the context

of closure of operations, downsizing or restructuring of business activities, resulting in

the contemplation of retrenchment. A dismissal based on operational requirements must

be both procedurally and substantively fair, as is the case with any other dismissal in

South Africa. Therefore, the employer must be able to show the operational or business

rationale for the decision leading to job losses. If the decision to retrench is not shown,

on the facts, to make business sense, the dismissal could be set aside by the Labour

Court. The courts are, however, loath to interfere with the employer’s prerogative to run

the business as it sees fit and have also held that it is not unfair to retrench even when the

business is financially sound but wishes to become more profitable.

The process that must be followed when considering dismissals for operational

reasons is set forth in Section 189 or 189A of the LRA. The basic Section 189

provisions apply to all retrenchments and Section 189A imposes additional procedural

requirements, where large businesses conduct large-scale retrenchments. An employer is

a large employer if it employs 50 or more employees. A retrenchment is identified as large

or small-scale depending on the number of employees to be retrenched with reference to

both the current retrenchment exercise and to any employees retrenched in the preceding

12 months.

Section 189 requires consultation with the employees who may be affected or

their representatives on the proposed retrenchments. The employer must consult with

the first body on the following list that applies to it:

611


South Africa

a

b

c

d

any person (or body, such as a trade union) with whom it is required to consult

pursuant to a collective agreement;

a workplace forum, if there is one, which applies to the workplace where the

employees it proposes retrenching work, and any registered trade union whose

members are likely to be affected by the proposed retrenchments;

where there is no workplace forum, any registered trade union whose members

are likely to be affected by the proposed retrenchments; or

the employees likely to be affected or their representatives, nominated for that

purpose.

There is no requirement to notify a works council or the government.

The employer must commence the consultation process as soon as it contemplates

retrenchments. The employer must consult on ways to avoid retrenchment, to minimise

the number of retrenchments, to change the timing of retrenchments, to mitigate

the hardships caused to employees who are retrenched, to select the employees to be

retrenched, and on severance pay. Consultation must commence with the employer

issuing a written notice inviting the other party to consult and disclosing relevant

information to enable the other consulting party to engage in the consultation process.

Section 189(3) of the LRA provides that the notice must, at a minimum, cover the

following:

a the reasons for the proposed retrenchments;

b the alternatives the employer considered before proposing retrenchment, and the

reasons for rejecting each of them;

c the number of employees likely to be affected, and their job categories;

d the criteria the employer proposes using to select which employees to retrench;

e when retrenchments are likely to take effect (a specific date or a period of time);

f the severance pay proposed for retrenched employees;

g any assistance that can be offered to employees likely to be retrenched;

h the possibility of future re-employment of retrenched employees;

i

j

the number of employees employed by the employer; and

the number of employees the employer has retrenched in the last 12 months (the

last two points are included so that the employees or their representatives can

identify whether a large-scale retrenchment is applicable and whether Section

189A procedures should be followed).

There is no fixed rule in ordinary retrenchments as to how long the consultation must

last but there must be proper consultation and canvassing on all the relevant issues. If

the union or the employees make representations during the process, the employer must

respond to them and state reasons for disagreeing, if applicable. If representations are

made in writing, the employer must respond in writing. Facilitation is an additional

(voluntary) process available to the parties to a large-scale retrenchment on request.

Facilitation occurs alongside the normal consultation process. If a facilitator is appointed,

then the employer may not give notice of dismissal until 60 days have elapsed from the

date on which the Section 189(3) notice was sent. The period of notice given must be

the statutory minimum or the contractual notice period if longer; however, the employer

may elect to pay in lieu of notice. If a facilitator is not appointed, a party cannot refer

612


South Africa

a dispute to a council or the CCMA unless 30 days have elapsed from the date on

which the Section 189(3) notice was given. Thereafter, a further 30 days must elapse or a

certificate indicating that the dispute has not been resolved must be issued, before notice

of termination can be given. Practically this usually amounts to the same 60-day period.

If the employer falls under a bargaining council, it is advisable to check whether or

not the bargaining council agreement has any special provisions relating to retrenchment

with which it must comply. For example, some agreements require that notice of any

retrenchments also be given to the bargaining council. The agreement will provide what

form the notice must take and when it must be given.

No social plan is required but as part of its duty to avoid retrenchment wherever

possible the employer must explore alternatives to retrenchment. Where the employer has

alternative work that an affected employee can do (even if some training is required), the

employer should accommodate the affected employee. The employer must also consult

about the method of selecting employees to be retrenched and in the absence of agreed

criteria must adopt fair and objective criteria. There is no category of employee protected

by law from retrenchment where genuine operational requirements exist. Nevertheless,

it is possible to provide for protection to certain categories within the selection criteria

proposed, for example to protect an employer’s employment equity (affirmative action)

programme.

There are statutory rights to severance pay for retrenched employees. An employer

must pay an employee dismissed for operational requirements severance pay equal to

at least one week’s remuneration for each completed year of continued service with

that employer. Remuneration for purposes of the severance pay calculation means any

payment in money or in kind made or owing to the employee in return for the employee

working for the employer. Where the employer and employee have agreed, in advance

or otherwise, to a higher amount of severance pay, the rights under such agreement are

unaffected by the lower statutory minimum. Employees who unreasonably refuse offers

of alternative employment with the retrenching employer, or any other employer, are not

entitled to severance pay.

The employer must consult about the possibility of rehiring retrenched employees

if business picks up or if it is later considering hiring people for the sort of work that

the retrenched employee performed. Usually the parties agree on how long the rehiring

arrangement will apply and make it subject to the employees remaining contactable.

Employers may conclude settlement agreements with retrenched employees that

entail a release of claims from the former employee. To ensure that such a settlement is

valid and binding the usual requirements relating to compromise agreements apply. The

parties to the agreement must understand its terms, for example, that they are giving up

potential claims and conclude it voluntarily and without duress (i.e., their consent to the

agreement must be informed).

XIII TRANSFER OF BUSINESS

In terms of Section 197 of the LRA , if a transfer of a business takes place, unless otherwise

agreed, the new employer is automatically substituted in place of the old employer in

respect of all employment contracts in existence immediately before the date of transfer

613


South Africa

and all rights and obligations between the old employer and an employee at the time of

the transfer continue to be in force, as if they had been rights and obligations between

the new employer and the employee.

Various statutory requirements must be met in order for a transaction to fall

within the ambit of Section 197 of the LRA. Whether Section 197 of the LRA applies to

a specific transaction, depends on the following:

a the relevant business transaction must be a ‘transfer’ envisaged by Section 197

which means that the business must be transferred as a ‘going concern’; and

b the entity being transferred must be a ‘business’ (which is defined to include a part

of a business, a trade, an undertaking, or a service).

The test for whether or not there is a going concern transfer is an objective one, where the

substance of the transaction is considered, rather than its form. The courts have recently

formulated a test that involves taking a ‘snapshot’ of the entity before the transaction

and assessing its components. This is then compared with a ‘snapshot’ picture of the

business after the transaction is concluded to establish whether it is essentially the same

business but in different hands. There is, however, no inflexible test and each transaction

is considered on its own merits.

The buyer of the transferred business (the new employer), must provide employees

with terms and conditions that are generally not less favourable than those that applied

before the transfer. However, the buyer can transfer employees to different retirement

plans or similar schemes. Employees cannot be dismissed due to the transfer of a

business or any reason related to the transfer. 3 A dismissal that breaches this provision is

automatically unfair.

It is possible to contract out of the provisions of Section 197 but only if the

requirements of Section 197(6) are met. This means that the employers must negotiate

with the same body that would have had to be consulted in the event of a retrenchment

and must make full disclosure of all relevant information during the negotiation process.

XIV

OUTLOOK

It remains the case that employers who make regular and extensive use of labour

brokers should start considering contingency plans for how they will meet their staffing

requirements in future in the event that the use of labour brokers is banned or, more likely,

increased regulation makes it unpalatable to continue using them. The use of labour

brokers will remain a hot topic irrespective of whether such brokers are subjected to

increased regulation or banned outright. If a ban is introduced, this will, in all probability,

be challenged in the Constitutional Court on the basis of an alleged infringement of the

constitutional right to freely choose a trade, occupation or profession.

The use of fixed-term contracts of employment is also likely to be subject to

increased regulation in the forthcoming period, which may also cause employers to

reconsider whether it still makes sense to use such contracts.

3 Section 187(1)(g) of the LRA.

614


South Africa

The focus on the achievement of the government’s affirmative action objectives

is also likely to be increased. South Africa has for a long time had affirmative action

legislation requiring certain designated groups (‘Black people’, defined in the legislation

to mean African, coloured and Indian people; women; and people with disabilities) to

be affirmed in employment. However, sanctions for non-compliance with these laws

are likely to increase and there will also probably be a greater emphasis on enforcement.

There is also now a new ministry, the Ministry for Women, Children and People with

Disabilities, dedicated to advancing the interests of women, children and people with

disabilities, and the new legislation that it proposes to introduce (referred to earlier in

this chapter) will compel the application of the principle of gender equality in South

African workplaces through measures such as: making affirmative action mandatory for

all employers as a strategy to achieve gender equality and the empowerment of women;

identifying processes and sanctions for enforcement and accountability in relation to

the goal of 50/50 gender parity; making mandatory gender audits and gender analysis

of workforces and compulsory reporting on progress attained and the imposition of

material sanctions for non-compliance; broadening the definition of discrimination to

include a definition of discrimination against women that encompasses practices that are

discriminatory in their effect even though they may not be intended to discriminate, such

as perceived sexual harassment; and having compulsory involvement of women in the

development, formulation, planning and implementation of policies in the workplace

in order to ensure women’s representation in all spheres and facets of workplace policy.

615


Appendix 1

About the Authors

Stuart Harrison

Edward Nathan Sonnenbergs

Stuart has over 17 years of experience in all aspects of employment law and leads

the employment law department nationally. He has advised employers in managing

discipline, poor performance, absenteeism and other forms of incapacity and rooting

out theft rings operating within workforces. He has also led large-scale retrenchment

exercises for employers to successful conclusions.

Stuart generally runs his litigation himself and has appeared in the Labour Court,

the High Court and the CCMA, and conducted matters in the Labour Appeal Court

and the Land Claims Court.

He has particular experience in restraint of trade and in employee benefits and

pension law, including acting as an independent trustee for a group of five commercial

umbrella pension, provident, preservation and retirement annuity funds.

He has also worked extensively on issues surrounding restructuring in the

public sector as well as board and executive responsibilities under the Public Finance

Management Act. He also deals frequently with the employment law considerations and

consequences of mergers and acquisitions, including pension fund arrangements.

Some of his more unusual experience includes dealing with and litigating on

interesting aspects of discrimination law, drafting unusual employment contracts

(including split employment contracts for employees working partially in SA and

partially in foreign countries, agreements with temporary employment services or service

providers, constitutions for employers’ organisations and bargaining councils, and

bargaining council main agreements.

He also specialises in litigation involving the eviction of dismissed former

employees and other occupiers under the onerous security of tenure legislation applicable

to farm land in South Africa.

He has contributed the chapter on pension law in the Juta’s annual labour law

publication since 2002 and has contributed to Labour Law for Managers: A Practical

763


About the Authors

Handbook and to various international publications on comparative labour law. He is

also a regular presenter at seminars, training courses and workshops for clients and a

speaker at public seminars and conferences on numerous issues, including white-collar

crime, pension law and ensuring legal and tax compliance in employment contracts and

policies. He practises out of both Cape Town and Johannesburg.

Brian Patterson

Edward Nathan Sonnenbergs

Brian has over 25 years’ experience in employment law in South Africa and was previously

head of employment law at another large national law firm. He had developed that firm’s

employment and labour division advising the firm’s corporate client base on all aspects

of employment law over many years. This has included providing high-level, strategic

and practical advice in respect of collective bargaining matters, strategy and tactics,

organisational rights issues, closed and agency shops, employment equity, affirmative

action, discrimination, occupational health and safety matters and pension law. Brian

also has close links with UK and US law firms and provides employment and labour

law advice to many international corporations that do business in South Africa. He has

consistently been ranked as one of the top employment lawyers in South Africa.

Zahida Ebrahim

Edward Nathan Sonnenbergs

Zahida Ebrahim has nine years’ experience and heads up the firm’s Immigration Unit.

She specialises in immigration law and civic services, with a particular emphasis on

the immigration requirements of multinational companies. Zahida has contributed

to a number of texts and publications and has presented at numerous seminars on

immigration issues. She is on the Regional Committee of the South African Business

Women’s Association.

She has contributed the South African chapter to a number of international

publications including the PLC Cross-border Handbook on Labour and Employee Benefits

and Getting the Deal Through – Labour & Employment.

She has presented to the Parliamentary Portfolio Committee charged with

oversight of the Department of Home Affairs, with regard to changes to the immigration

legislation.

Edward Nathan Sonnenbergs

150 West Street

Sandton 2196

Johannesburg

764


About the Authors

Postal address:

PO Box 783347

Sandton 2146

South Africa

Tel: +27 11 269 7600

Fax: +27 11 269 7899

1 North Wharf Square, Loop Street

Foreshore 8001

Cape Town

Postal address:

PO Box 2293

Cape Town 8000

South Africa

Tel: +27 21 410 2500

Fax: +27 21 410 2555

1 Richefond Place, Ridgeside Office Park

Umhlanga Rocks, 4320

Durban

Postal address:

PO Box 3052

Durban 4000

South Africa

Tel: +27 31 301 9340

Fax: +27 31 301 9343

La Gratitude, 95 Dorp Street

Stellenbosch, 7600

Postal address:

PO Box 940

Stellenbosch 7599

South Africa

Tel: +27 21 808 6620

Fax: +27 21 808 6633

info@problemsolved.co.za

www.problemsolved.co.za

765

More magazines by this user
Similar magazines