MRL3702 LABOUR LAW SUMMARY NOTES & QUESTIONS

MRL3702 LABOUR LAW SUMMARY NOTES & QUESTIONS. STUDY UNIT 1 THE PROTECTION OF THE EMPLOYEE AND THE EFFECT OF COMMON LAW ON THE CONTRACT OF EMPLOYMENT Study:  chapters 2 and 3 of t/book  definition of “employee” in sections 200A and 213 of LRA and section 1 of the BCEA Note – only employees are protected by labour legislation (therefore important to draw a distinction between employees and other workers, for eg. independent contractors). Furthermore, only when a relationship is labelled an employment relationship does it fall under the protective scope of labour laws. The employment relationship in SA is regulated by the following three main sources:  the Constitution  labour legislation  law of contract (which is regulated by common law) 1. EXCLUSIVE PROTECTION FOR EMPLOYEES IN TERMS OF LEGISLATION 1.1. An employee and an independent contractor (paragraphs 1 & 2, chapter 2 of t/book) Labour laws are protective by nature – (picture employment law as an umbrella – only people standing under the umbrella are protected against the rain. People not under the umbrella will either get wet and cold or have to find another or different umbrella to provide protection).  Iow – if a person is an employee – he/she is protected by labour law. People not covered by labour laws will NOT be protected and will have to find other laws to protect themselves. Primary aim of the Labour Relations Act, 1995 (LRA) – to promote sound relations between employers and employees in the workplace (section 1).  Workers who are not employees fall outside the scope of the LRA and are, amongst others, not entitled to protection against unfair dismissal.  For this reason – is NB to distinguish between employees and other workers who do not qualify as employees, so-called “independent contractors”. Labour Law – Joanne Study Notes Page 2 It is sometimes difficult to distinguish between an employee and an independent contractor because they closely resemble each other: (1) an independent contractor is contracted to perform a specified task or to produce a specific result; (2) an employee is appointed to render personal services ito a job description. Eg of this close resemblance: X appoints Z as a handyman to do specific tasks (for eg fixing the gutters and the roof of a house). X’s gardener S is also asked to fix things around the house. Although Z and S are doing similar jobs, Z will be an independent contractor and S will be an employee. The LRA, Basic Conditions of Employment Act, 1997 (BCEA), the Employment Equity Act, 1998 (EEA) and the Skills Development Act, 1998 (SDA) all use the same definition of “employee”. Section 213 of the LRA defines “employee” as follows: Part (a) of the definition Part (b) of the definition “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;” “any other person who in any manner assists in carrying on or conducting the business of an employer…” This part of the definition indicates the following:  it includes both employees in the private sector (‘who work for another person’) and in the public sector (‘or for the State’);  it includes domestic and farm workers as employees;  it incorporates the common-law contract of service (the location conductio operarum in common law) and excludes the contract of work (the location conductio operis in common law), which relates to an independent contractor. Although this part of the definiton seems to widen the scope of part (a) of the definiton, it should still be interpreted in the context of the tests developed by the courts to determine whether someone is an employee or not. Independent contractors would, therefore, still be excluded from the definition of employee. NB – there are certain categories of employees which can more easily be confused with independent contractors.  Eg: temporary employees, casual workers, contract workers, part-time employees, seasonal employees or those working from home. The difficulty of determining who qualifies as an employee and who does not, has prompted the court to formulate various tests to distinguish between employee and independent contractors. Labour Law – Joanne Study Notes Page 3 The courts have given guidelines to distinguish between employees and independent contractors and have developed three tests in this regard. These are:  the control test;  the organisation test; and  the dominant impression test. Control test Organisation test Dominant impression test Looks at the control the employer has over the work the person does, the manner in which the work must be done, and when and where the work must be done. Looks at whether the person is part and parcel of the business or organisation of the employer. The person’s work must be integrated into the business of the employer and must not just be an accessory to the business. This test is favoured by the courts and considers the employment relationship as a whole, rather than concentrating on only one factor. These tests helped to distinguish between an employee from an independent contractor, but were not sufficiently clear to solve the problem.  Meant that an employee who sought a remedy ito labour legislation could only access the remedy once he/she could cross the hurdle of proving an employment relationship.  This burden of proof, placed on the employee, meant that access to the “umbrella” of protection of labour law was not easy. As a result – the LRA and BCEA were amended in 2002 to include a rebuttable presumption as to whom would be regarded as an employee.  The presumption implies that, as soon as one of the factors listed in section 200A of the LRA or section 83A of the BCEA, is found to exist in the relationship between the two parties, that relationship is presumed to be an employment relationship.  The other party then has the opportunity to show, on a balance of probabilities, that no employment relationship exists. Section 200A of the LRA reads as follows: “Until the contrary is proved, for the purposes of this Act…, a person who works for, or renders services to, any other person is presumed, regardless of the form of the contract, to be an employee, if any one or more of the following factors are present: (a) the manner in which the person works is subject to the control or direction of another person; (b) the person’s hours of work are subject to the control or direction of another person; (c) in the case of a person who works for an organisation, the person forms part of that organisation; (d) the person has worked for that other person for an average of at least 40 hours per month over the last three months; (e) the person is economically dependent on the other person for who she/he works or renders services; (f) the person is provided with tools of trade or work equipment by the other person; Labour Law – Joanne Study Notes Page 4 (g) the person only works for or renders services to one person.” Sections 200A and 83A should be read in conjunction with the Code: Who is an Employee?  The Code incorporates the three tests developed by the courts but it goes further and provides guidance for the possible interpretation and application of these tests in a modern context. As far as CONTROL is concerned, the Code determines:  control includes the right to determine what work the employee will do, in what manner and what the employee’s working hours will be; and  control may be a term of the contract, but even where it is not specified in the contract, it does not necessarily mean that a contract of employment does not exist. As far as the ORGANISATION TEST is concerned, the Code states, inter alia that:  the traditional workplace no longer exists and the employee does not need to work from the employer’s premises to indicate that there is an employment relationship; and  the tools of trade provided by the employer should not be interpreted narrowly and may range from a modem or cell phone package to a set of screw drivers. As far as the DOMINANT IMPRESSION TEST is concerned, the Code confirms the NBance of this test. It states that there is no single decisive factor to determine the existence or absence of an employment relationship.  Therefore, all factors should be taken into account when determining the type of the relationship. The Code also contains a table (developed from case law on the subject) which compares an employee to an independent contractor and points out the differences between these. The following table can be used to assist in the application of the dominant impression test: Employee Independent Contractor Object of the contract is to render personal services. Object of the contract is to perform a specified work or produce a specified result. Employee must perform services personally. Independent contractor may usually perform through others. Employer may choose when to make use of the services of employee. Independent contractor must perform work (or produce result) within the period fixed by the contract. Contract terminates on death of employee. Contract does not necessarily terminate on death of independent contractor. Contract also terminates on expiry of period of service in contract. Contract terminates on completion of work or production of specified result. Labour Law – Joanne Study Notes Page 5 The following example will illustrate the application of the various principles in practice:  Richard was a street vendor who sold newspapers for a Sunday newspaper, Paper Palace. This was his only source of income since he was unemployed during the week. Paper Palace had an area manager who phoned the vendors every Friday to arrange when and where they will be picked up. The vendors are paid on a commission basis. When Richard’s services were terminated, he claimed unfair dismissal.  The first step to get access to the “umbrella” of labour law protection is to show that one of the factors in the presumption had been present in the work relationship.  Richard held that he was an employee because he reported to the area manager, he was supplied with the tools of the trade (posters and the newspapers to sell), and he was economically dependent on Paper Palace.  Richard was consequently assumed to be an employee.  Paper Palace then had the opportunity to rebut this presumption. They had presented the following facts to the CCMA to show on a balance of probabilities that Richard was not an employee. They showed:  Richard did not form part of the organisation, the area manager was a mere contact person for practical arrangements;  The employer did not control the employee. The job necessitated that he worked on Sundays and that he must be available to sell newspapers from 05:00 to 15:00. If he sold no papers or chose to sit under a tree for the whole time, he would only lose commission, therefore the employer did not control what he did.  Richard was not economically dependent on Paper Palace as a result of their doing. He was allowed to work for any other employer during the week but since he was unemployed, the selling of newspapers was his only income. However, the employer did not force him to only use his economic capacity for this purpose.  The court, therefore, held that the dominant impression test indicated that Richard was not an employee. He was not allowed to pursue his claim in terms of labour law since he was an independent contractor. The courts are generally in favour of a purpose and expansive interpretation rather than a restrictive approach to the definition of an employee in recent years.  Iow, they try to extend the umbrella as far as possible. Another NB question – whether a person becomes an employee upon concluding a contract of employment with the employer OR at the time the person commences work.  This question was answered in Wyeth SA (Pty) Ltd v Manqele where the court held that people who have signed contracts of employment, but have not yet started working, were employees for purposes of the LRA.  The court, in coming to this decision, took into account the fact that section 23 of the Constitution affords ‘everyone’ the right to fair labour practices.  When an interpretation has to be done, the definition of ‘employee’, the contract of employment, the Code, and the presumptions must ALL be considered together. Labour Law – Joanne Study Notes Page 6 Various terms are used for different categories of employees which lead to further confusion.  For eg – terms “temporary employee”, “casual worker”, “part-time employee” and “contract worker” are often used interchangeably, and these categories of workers are generally knows as temporary of atypical employees. In the Labour Relations Amendment Act (hereinafter “Amendment Act”) there is, for the first time, clarification on these concepts.  The Amendment Act determines that “non-standard forms of employment” relate to temporary employees, fixed-term employees and part-time employees. 1.2. Non-standard employees (paragraph 3, chapter 2) Chapter IX of the LRA regulates non-standard employment and proposed amendments to increase protection of vulnerable workers and to promote decent work.  The Act attempts to clarify confusion about atypical employees as far as their definition, purpose and rights are concerned. The Act creates three categories of non-standard employment:  Temporary employment services (TES) (commonly called labour brokers) and employees employed by them are temporary employees;  Fixed-term employees; and  Part-time employees. 1.2.1. Temporary employment services (TES) Who is a temporary employee? This refers to employees supplied to a client by a TES/labour broker. Such a relationship is characterised by its triangular form. The Act defines ‘temporary employment services’ as” “any person who, for reward, procures for or provides to a client other persons who render services to, or perform work for, the client; and who are remunerated by the temporary employment service.” Labour Law – Joanne Study Notes Page 7 When will it be allowed? An employer may make use of a TES/labour broker, but the Amendment Act sets restrictions as far as the duration of these services is concerned. An employer may appoint a temporary employee for a limited or an unlimited duration, provided that it complies with the following restrictions:  Limited duration: An employee is provided for the client:  For a period of three months or  As a substitute of an employee of the client who is temporarily absent.  Unlimited duration:  An employee is supplied for any period of time but on a temporary service basis.  Exactly what temporary service is, will be determined by the relevant bargaining council/sectoral determination/Minister of Labour (MoL). o Note – Employees who earn more than the BCEA threshold are excluded from these restrictions. What will happen if there is non-compliance with the LRA? As long as the parties comply with the Act and appoint temporary employees for the right reasons (for limited and unlimited periods of time), there will be no problem.  Iow, as long as the employer (TES) and client comply with the LRA, the temporary employee is regarded as an employee of the TES. If there is non-compliance, for eg, where the employee is not really performing a temporary service for the client, he/she will be deemed to be the employee of the client and employed on an indefinite basis.  Iow, the temporary employee with become a permanent employee of the client and no longer work for or be supplied by the labour broker/TES. 1.2.2. Fixed-term employees Who is a fixed-term employee? This refers to a contract of employment that terminates on/at: Temporary employee Temporary employment service (TES) Client Labour Law – Joanne Study Notes Page 8  the occurrence of a specified event;  the completion of a specified task or project; or  a fixed date, other than an employee’s normal or agreed retirement age. The following employees are EXCLUDED from the restrictions with regard to fixed-term employees: (1) Employees earning more than the threshold set in the BCEA, namely R205 433 per year (2) An employer that employs fewer than 10 employees; or (3) An employer that employs less than 50 employees and whose business has been in operation for less than two years, unless the employer conducts more than one business; or the business was formed by the division or dissolution for any reason of an existing business; (4) An employee employed ito a fixed-term contract permitted by any:  statute;  sectoral determination; or  collective agreement. Note – there is no triangular relationship with a fixed-term contract – it is the employer and employee who conclude a contract of employment which will terminate at some set stage. When will it be allowed? A fixed-term contract would be allowed if the employee is appointed for a period of three months or less. An employer may employ an employee on a fixed-term contract or successive fixed-term contracts for longer than three months only if: (1) the nature of the work for which the employee is employed is of a limited or definite duration; or (2) the employer can demonstrate any other justifiable reason for fixing the term of the contract. The employer who wants to offer an employee employment on a fixed-term contract or to renew or extend a fixed-term contract, will be required to do so in writing and state the reasons for it. The Act determines that justifiable reasons for a fixed-term employee will be where such an employee: (1) is replacing another employee who is temporarily absent from work; (2) is employed on account of a temporary increase in the volume of work which is not expected to endure beyond 12 months; (3) is a student/recent graduate who is employed for purposes of being trained or gaining work experience; (4) is employed to work exclusively on a specific project that has a limited or defined duration; (5) is a non-citizen who has been granted a work permit for a period; (6) is employed to perform seasonal work; (7) is employed for the official public works or similar scheme; (8) is employed in position which is funded by an external source for a limited period; or (9) has reached the normal or agreed retirement age applicable in the employer’s business and continues to perform work for that employer. Labour Law – Joanne Study Notes Page 9 If so required in any proceedings – employer will have to prove that there was a justifiable reason for fixing the term of the contract and that both parties agreed about such term. The Act also determines the following with regard to remuneration and terms and conditions of a fixedterm employee: “where a fixed-term employee is appointed for longer than three months, the employer must treat such employee in the same way as a permanent employee performing the same or similar work.” The employee may only be treated less favourably where there is a justifiable reason, for eg, seniority, experience, length of service, merit, and similar criteria. If an employee has been employed for longer than 24 months on a fixed-term contract he/she will be entitled to severance pay when the employment is terminated (except in cases where the employer arranges alternative employment for such employee).  The severance pay is calculated according to the formula in the BCEA. Employers will also be required to give employees on fixed-term contracts equal access to opportunities to apply for available vacancies. What will happen if there is non-compliance with the LRA? If a fixed-term contract does not comply with the above provisions, it will be deemed to be of indefinite or permanent duration.  Iow, the fixed-term contract worker will become a permanent employee of the employer. 1.2.3. Part-time employees Part-time employee = an employee who is remunerated wholly or partly by reference to the time that the employee works, and who works less hours than a comparable full-time employee.  This will typically be a domestic, casual or piece worker. Since a part-time employee is a permanent employee, the Act does not extend further job security protection. It focuses more on ensuring equal treatment as far as terms and conditions of employment, remuneration, promotion and skills development are concerned. These employees should be treated, on the whole, not less favourable than a comparable full-time employee doing the same/similar work, unless the employer can provide valid reasons justifying such different treatment.