The Provision of Benefits – Employees Eventually in the Beneficial Driver's Seat

Section 186(2)(b) of the Labour Relations Act, 1995 includes unfair labour practices relating to "the provision of benefits".  The concept of a benefit has, however, been the subject of much contention since 1995.

In 2000, employers scored a victory when the Labour Appeal Court in HOSPERSA drew the distinction, which we have all over the years come to appreciate between cases in which employees seek to create rights, as opposed to those in which they seek to enforce those rights. Industrial action and particularly strikes have been the manner to enforce the creation of new rights, while arbitration presented the enforcement mechanism for the latter.

The decision in Department of Justice v CCMA the LAC in 2004 opened the door on a wider class of benefits disputes. A minority decision held that unfair labour practice claims must be wider than contractual or statutory claims as was decided by HOSPERSA.

While there had been some rumblings, the HOSPERSA decision created some certainty in relation to drawing the line on what constituted a benefits dispute. Employers knew that employees were only able to claim benefits to which they are entitled under contract or statute.

Earlier this year, in Apollo Tyres the Labour Appeal Court, however, reversed the employer gains of 2000 and put the employee in the beneficial driver's seat. The facts of Apollo Tyres are not novel. Apollo implemented an early retirement scheme for monthly-paid staff between the ages of 46 and 59 years. Ms Hoosen, aged 49, applied for the package. When she was told that she did not qualify because she had not reached 55, Ms Hoosen resigned. She simultaneously claimed the package. Needless to say, Apollo refused payment of the package. Ms Hoosen then referred a dispute to the CCMA alleging an unfair labour practice.  Predictably, Apollo argued that the dispute was not about a "benefit". The Commissioner dismissed the point and ordered the employer to pay the package.

A raft of Labour Court decisions will show that the Labour Court, despite the HOSPERSA decision, have not been satisfied by the strait jackets imposed by the LAC in 2000 and more so after the Department of Justice decision. The Labour Court has seen that benefits should be cast more widely. The most recent of these being a recent reported decision of Steenkamp J in Elton Jacobs v South African Post Office (where we successfully argued on behalf of SAPO that no benefits dispute arose in an acting allowance dispute claimed by Mr Jacobs. The court found that to be the case on the back of HOSPERSA but remarked that the law required further development). In Apollo the employers review application was dismissed.

On appeal the LAC held that HOSPERSA has been "diluted with the passage of time". Many employee benefit schemes confer rights and create obligations, or confer discretion on employers. One of the purposes of s186(2)(a), said the court, is to provide a remedy when such discretion is exercised unfairly. The LAC then went on to interpret the term "benefit" to include any benefit to which the employee is entitled by contract or statute as well as an advantage which the employee has been offered or granted in terms of a policy or practice subject to the employer's discretion.

Apollo now eventually opens the door to employees who seek to use the unfair labour practice jurisdiction to claim a benefits dispute in a wider sense and to challenge the fairness of the employer's conduct. Employees now need only prove that the employer acted unfairly in the non-provision of the benefit to succeed with a claim at arbitration.

In Ms Hoosen's case, the retirement benefit had been offered to all monthly-paid employees between the ages of 46 and 59. Ms Hoosen was 49 and was paid a monthly wage. The company had a discretion whether or not to grant the benefit. In the unfair labour practice claim, the issue was whether that discretion had been exercised unfairly. The court found that Apollo provided no credible reason for not granting Ms Hoosen an early retirement package for which she qualified and ultimately this amounted to an unfair labour practice.

So to sum up, Apollo now opens the unfair labour practice jurisdiction to claims where employees are entitled to benefits in terms of contract or statute and where the employer unfairly denies the employee benefits. The effect of the decision is that employers will now have to ensure that they act fairly in the non-provision of benefits (which could range from annual/performance bonuses, to early retirement schemes and anything in between).

Employers will now face more challenges at arbitration on benefits disputes and should be alive to such risks going forward and look at mechanisms to mitigate such claims.

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