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Employment and Labour Law

What is Poor Work Performance? A Case of Missed Sales Targets

By | Employment and Labour Law

“…the employer has a duty to investigate all possible alternatives short of dismissal, and this duty accords with the onus of proving the fairness of the dismissal” (extract from judgment below)

An employee who fails to perform adequately at work is by definition not fulfilling his or her side of the employment bargain, but that doesn’t mean that dismissal is necessarily an appropriate remedy.

Guidelines for dismissal

The onus is on you as employer to prove that the dismissal was fair, and the “Code of Good Practice on Dismissals” provides these guidelines –

“Any person determining whether a dismissal for poor work performance is unfair should consider –

  1. Whether or not the employee failed to meet a performance standard; and
  2. If the employee did not meet a required performance standard whether or not – 
    1. The employee was aware, or could reasonably be expected to have been aware, of the required performance standard; 
    2. The employee was given a fair opportunity to meet the required performance standard; and 
    3. Dismissal was an appropriate sanction for not meeting the required performance standard.”

A good example of how that works in practice comes from a recent Labour Law judgment…

The sales reps fired for missing their targets

  • A group of sales representatives failed to meet their (newly-introduced) sales performance targets.
  • They were given letters warning of poor work performance, followed a month later by a final ultimatum giving them the opportunity to make written representations with reasons for failing to meet their targets. 
  • They did so, referring to a list of challenges they said they were faced with, but the employer found their explanations unacceptable and they were served with notices to attend performance enquiries which resulted in their dismissals.
  • The CCMA (Commission for Conciliation, Mediation and Arbitration) found the dismissals to have been substantively unfair (although procedurally fair) and ordered the employer to reinstate the employees with full back pay. 
  • On review in the Labour Court the employer argued that the performance targets were reasonable and achievable (other employees were achieving them) and that it had to introduce the targets in order to “improve cash flow for survival.” 
  • The Court in the end result confirmed the reinstatement order, finding that –
    • The employer failed to show that the employees were given sufficient training, guidance, support, counselling and reasonable time to improve their performance. 
    • The employees had genuine concerns that were outside their control and could have been managed with the employer’s assistance. 
    • The employer had failed to explore alternative measures short of dismissal, like training. 
  • The employer had accordingly failed to show that dismissal was an appropriate sanction.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Employers: What is Your Duty to Accommodate Religious Beliefs?

By | Employment and Labour Law

“The employer has a duty to reasonably accommodate an employee’s religious freedom unless it is impossible to do so without causing itself undue hardship. It is not enough that it may have a legitimate commercial rationale. The duty of reasonable accommodation imposed on the employer is one of modification or adjustment to a job or the working environment that will enable an employee operating under the constraining tenets of her religion to continue to participate or advance in employment” (Extract from judgment below)

Our law makes a dismissal automatically unfair if ‘… the reason for the dismissal is that the employer … unfairly discriminated against an employee, directly or indirectly, on any arbitrary ground, including, but not limited to race, gender, sex, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, political opinion, culture, language, marital status or family responsibility” (emphasis added).

Employers need to tread with extreme caution here, as a recent Labour Appeal Court decision once again warns…

Dismissed for refusing to work on Saturdays 
  • A manager was required, along with all other managers, to work on Saturdays doing stock-taking.
  • She refused on the basis that she was a Seventh Day Adventist, a religion requiring her to observe the period between sundown on Friday and sundown on Saturday evening as the holy Sabbath, during which time she was not permitted to work. Her various suggestions on how she could be accommodated were rejected by her employer. 
  • She was dismissed for “incapacity” and her dispute over the fairness of that dismissal eventually reached the Labour Appeal Court.
  • The Court held her dismissal to have been automatically unfair, and ordered her employer to pay her 12 months’ remuneration plus costs.
Who must prove what? 

The actual outcome of this particular case was largely dependent on its specific facts, so as always take legal advice on your own situation.

But the Court’s findings provide a good example of how our laws on automatic discrimination are applied in practice –

  • Firstly, it was for the employee to show that her religion was the “true or real or dominant reason for her dismissal and that a sufficient [connection] exists between her dismissal and her religion”. She had to produce evidence “which is sufficient to raise a credible possibility that an automatically unfair dismissal has taken place”, whereupon the employer could “prove the contrary by producing evidence to show that the reason for the dismissal did not fall within the circumstances envisaged … for constituting an automatically unfair dismissal”.
  • The Court rejected the employer’s claim that the employee’s refusal to do the stock take was the dominant reason for the dismissal rather than her “personal convictions that underlay it”. She was, it held, “dismissed and discriminated against for complying with and practicing the tenets of her religion”.
  • Next, said the Court, “the decisive enquiry … is whether the discrimination is fair, rationally connected to a legitimate purpose and does not unduly impair or impact on [the employee’s] dignity”, it being up to the employer to prove such a defence. 
  • In particular, a dismissal “may be fair if the reason for the dismissal is based on an inherent requirement of the particular job”, but then the employer would also have to prove “that it is impossible to accommodate the individual employee without imposing undue hardship or insurmountable operational difficulty”.  
  • On the basis of the evidence available to it, the Court found that the employer did not “reasonably accommodate” the employee. The dismissal was accordingly automatically unfair.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Equal Pay for Equal Work – Can You Differentiate Without Unfairly Discriminating?

By | Employment and Labour Law

“Prohibition of unfair discrimination: No person may unfairly discriminate, directly or indirectly, against an employee, in any employment policy or practice, on one or more grounds, including race, gender, sex, pregnancy, marital status, family responsibility, ethnic or social origin, colour, sexual orientation, age, disability, religion, HIV status, conscience, belief, political opinion, culture, language, birth or on any other arbitrary ground” (from the Employment Equity Act)

Our employment laws and labour courts come down heavily on any unfair discrimination in the workplace, but it’s not always easy to decide whether “differentiation” between employees is or is not “unfair discrimination”.

Take for instance a recent Labour Court case where a black female employee complained to the CCMA (Commission for Conciliation, Mediation and Arbitration) about the higher salary paid to her white male colleague.

They were both employed as “surveillance auditors” in a casino with the same job descriptions, doing the same work on a daily basis, graded at the same level, and reporting to the same surveillance shift manager. Nevertheless her remuneration package was nearly half of her colleague’s – unfair discrimination, she said, on the grounds of race and gender.

The CCMA agreed with her and ordered her employer to (1) place her in the same salary bracket as her colleague and (2) pay her a once-off amount of the annual difference in their packages.

Requirements and defences

The Labour Court however set aside the CCMA’s award and ordered a re-hearing before a different commissioner. Its decision, although based on “reviewable irregularities” in the CCMA (in itself a topic of interest to labour lawyers more than to their clients) neatly summarises the legal principles as they applied in this case. Principles important to both employers and employees –

  1. Where unfair discrimination is alleged, the onus is on the employer to prove that the discrimination did not take place or that any discrimination that did take place was rational and not unfair, or is otherwise justifiable.
  2. There is a general requirement on employers to “ensure that employees are not paid different remuneration for work of equal value based on race, gender or disability”.“Work of equal value” means work that –

  1. Is the same as the work of another employee of the same employer, if their work is identical or interchangeable;
  2. Is substantially the same as the work of another employee employed by that employer, if the work performed by the employees is sufficiently similar that they can reasonably be considered to be performing the same job, even if their work is not identical or interchangeable;
  3. Is of the same value as the work of another employee of the same employer in a different job, if their respective occupations are accorded the same value …”.(In this case of course there was no dispute that the first category – same work – applied, so the other categories were not analysed by the Court, but in many workplaces they will be highly relevant.)

  1. Where there is differentiation, an employer can raise various defences to justify it – seniority, length of service, qualifications and the like. In this case the employer relied on the male employee’s superior (30 years’ worth) relevant experience in security, much better qualifications and “market forces” which it said forced it to match his existing package in order to recruit him.The commissioner’s failure to adequately address these defences was central to the Court’s decision here, but the practical issue is that as an employer, whatever defence/s you raise, you will have to prove “rationality, fairness or other justifiability”.

As always, our labour laws being as complex as they are (the above is of necessity just a brief summary of a particular case), and the penalties for getting them wrong potentially so costly, take specific legal advice in any doubt!

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Expats and Employers: Plan Now For the New Expat Tax Changes

By | Business, Employment and Labour Law, Tax

“An income tax form is like a laundry list – either way you lose your shirt” (Comedian Fred Allen)

This article is important to you if you are either a South African working abroad or an employer of one. If you don’t fall into either of those categories, but know someone who does, please think of passing this on.

As an employee earning foreign remuneration (salary, leave pay, bonuses, allowances, commission etc), you currently enjoy an uncapped tax exemption (on that remuneration only, not on other foreign income) provided that you work overseas –

  • For more than a total of 183 days during any 12 month period, and
  • More than 60 of those days are consecutive.

That however is set to change from 1 March 2020, when only the first R1m p.a. of your earnings will be exempt – you will pay tax on anything over that. With the Rand’s weakness showing little sign of abating, a lot of expats and their employers are going to be affected. 

Are you a “tax resident”? 

Only “tax residents” are affected, so the first thing you should establish is whether you are still a tax resident or not. That’s not always easy, so take professional advice in any doubt.

To illustrate some of the complexities involved, both physical emigration/relocation and “financial emigration” are different concepts to “tax emigration”. Moreover the Income Tax Act’s tests for tax residency are hardly a model of clarity – you are a “resident for tax purposes” if you are either an “ordinary resident” or a resident in terms of the “physical presence test” –

  1. You are, says SARS, an “ordinary resident” if South Africa is the country to which you “will naturally and as a matter of course return after [your] wanderings’, your “usual or principal residence”, or your “real home”.
  2. Even if you aren’t an “ordinary resident”, you will still be a resident under the “physical presence test” if you are physically present in South Africa for more than –
    1. “91 days in total during the year of assessment under consideration; and
    2. 91 days in total during each of the five years of assessment preceding the year of assessment under consideration; and
    3. 915 days in total during those five preceding years of assessment.”       

      Under the physical presence test however if you are outside the country for a continuous period of at least 330 days you are not regarded as a tax resident.

Should you “tax emigrate”?

If you are indeed a tax resident, don’t think of changing that status without taking full advice. “Tax emigration” and “financial emigration” are complicated processes and full of pitfalls. For example you could be entitled to foreign tax rebates or other relief on your taxable (i.e. +R1m) foreign earnings, or there may be other benefits to remaining a tax resident. So it is important to have an expert look at your specific situation and determine what is best for you overall.

The big thing is to be aware that change is coming. Some long-range planning is the only way to be certain that there are no unpleasant surprises waiting to spring out on you down the line.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Losing Your Licence with AARTO Demerits: More Danger than You Thought, and The Wheels are Turning

By | Employment and Labour Law, General Interest, Road Traffic

“The one thing that unites all human beings, regardless of age, gender, religion, economic status, or ethnic background, is that, deep down inside, we all believe that we are above-average drivers” (humourist Dave Barry) 

AARTO (the Administrative Adjudication of Road Traffic Offences Act) has been partially in force for years, but its demerit provisions have been on ice for so long now that many of us have lost sight of just how seriously it will impact both ourselves as individuals, and our businesses. 

Every individual and every business is at risk

Law-abiding motorists will no doubt welcome the crackdown on serial traffic offenders, but we also need to manage the risks.  

Every motorist, every vehicle owner, every professional driver and every transport operator will be at serious risk of losing their licences/permits/operator cards.  Even businesses outside the transport sector will need to manage this – what happens if your sales people are grounded or your office staff can’t drive to work?

The wheels are turning fast now, with amendments to the Act at long last passed by Parliament, and set to come into law when signed by the President. 

Will it be delayed yet again?

The demerit proposal has been bouncing around for a decade, with several false starts and there is talk of court challenges, plus the commencement date may or may not be delayed.

But at long last the wheels are definitely turning, and turning fast. 

Be prepared! 

Unlucky 13 – easier to reach than you thought

The demerit system is complicated, but in a nutshell you will in addition to paying a fine incur demerit points for a whole range of offences. 

And anyone with 13 or more demerits will have their driver’s licence/professional driving permit/operator card automatically suspended (3 months’ suspension for every point over 12).  And 3 suspensions will result in full cancellation.  

Don’t think that 13 demerits will necessarily take the average driver a long time to accumulate. Consider the demerit points applicable to some sample offences (there are many thousands of them – the table below gives just a few examples).

Sample offences and demerit points
Reducing demerit points, and discounts on fines 

You are also rewarded for obeying the law –
Any demerit points you have picked up are reduced by one point per 3 month period you remain offence-free. 

Early payment of fines will earn you a 50% discount. Set up a payment control system so you don’t miss payment deadlines.

Businesses and employers – manage your risks

Think now about how you will manage the risk of your employees (especially those employed as drivers) repeatedly offending –
How will you monitor your drivers’ demerit points?  Although for many offences both driver and operator will incur demerits, some driver offences will apply to the driver only.  

Are your employment contracts correctly structured to ensure you have access to your employees’ demerit points’ status? And to deal with the consequences if they have their licences suspended or cancelled? 

Check your insurance policies – must you disclose any changes in your employees’ demerit status?  Are you at risk of losing cover? 

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Employers: When Should You Sue Rogue Employees? A R33m Example

By | Employment and Labour Law, Litigation

“It is the duty of an employee when rendering his or her services always to act exclusively in the interest of the employer … an employee is not entitled to use his or her employment relationship with the employer without the employer’s permission to make a profit or earn commission for his or her own account” (Extracts from judgment below)

Employees have very strong rights in our law, but employers also have effective remedies when employees “go rogue”.

A recent case, in which an employee was ordered to repay his employer R33m in “secret profits” including R9m in damages, provides a good example.

Diverted sales opportunities and secret profits
  • A manufacturer employed a “Key Accounts Manager” as its agent in dealing with customers. He was trusted with an “almost unlimited discretion” and minimal management oversight to act in his employer’s interests.
  • His employer sued him in the High Court on allegations that he breached both his employment contract and his duty to his employer, firstly by selling product to customers at below-minimum prices, and secondly by selling through his own companies to secretly profit thereby. 
  • The employee’s denials of wrongdoing cut no ice with the Court, which held that he “was clearly under a general obligation to do his best for his employer and to conduct the plaintiff’s business in good faith and for its benefit” but “was in breach of his fundamental obligation of loyalty and good faith which he owed to … his employer”.
  • The secret profits claim. Ordering the employee to “disgorge” his secret profits of R33,291,599.24 (less any “amounts paid in making such profits” which the employee is able to prove), the Court held that the employer had proved the three elements needed to succeed in such a claim –
    • The employee owed it a “fiduciary obligation” (a duty to act honestly and in utmost good faith),
    • In breach of that obligation he placed himself in a position where his duty and his personal interest were in conflict, and
    • He made a secret profit out of corporate opportunities belonging to the employer.
  • The damages claim was for losses on product sold to customers at prices well below the employer’s base price “in order to further [the employee’s] secret profit-making activities.” Finding that but for the employee’s wrongdoing the customers would have bought product at no less than the base price, the Court awarded the employer R9,407,651.05 in damages (to be credited, when paid, to the R33m claim). 
Rubbing salt in…

To really rub salt into the employee’s wounds, he was ordered to pay costs, and the bill will be a big one, including –

  • Costs on the punitive “attorney and client” scale, an appropriate order said the Court “given the secret and unlawful nature of the scheme which the defendant ran for four years at the expense of his employer”, 
  • The cost of audio visual equipment used in the trial, and
  • The (no doubt substantial) travel and subsistence costs of both the employer’s legal team and its six witnesses, all of whom travelled from Gauteng to Cape Town for the trial.  

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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