Monday, 30 August 2021

Tunnel Vision? The effect of retrospective back pay awards

Written by
Natasha Govender, Consolidated Employers Organisation

Labour law is not punitive in nature as compared to civil or criminal law. As a result, when Commissioners consider the facts argued at arbitration, their awards need to be fair and reasonable. Careful deliberation needs to be made not to overstep their powers.

In general, a claim for damages can be instituted for reputational, medical, actual and patrimonial harm, to name a few. However, in labour law, the primary relief claimed by an aggrieved party is reinstatement. Reinstatement can be with or without back pay for the months the former employee was unemployed, particularly if the dismissal is found to be both substantively and procedurally unfair. What needs to be taken into consideration is the reasonability of the award, which we will examine as per the case law below.

In a recent judgment of Maroveke v Talane N.O and others (2021) JOL 50670 (CC), the Court had to determine the appropriateness of the back pay awarded to an employee whose dismissal had been declared unfair. Maroveke (the "applicant") was employed as an artisan and mine technician by Fermel (Pty) Limited, a company that provides technical services to mining companies. The Applicant commenced his employment on the 15th of October 2007. On the 25th of June 2009, the Applicant received a distress signal to attend to a breakdown in a mine. He was with a colleague when he drove a company vehicle through an underground tunnel. The company vehicle sank as the vehicle could not withstand the depth of water, and the Applicant was unable to drive it out. As a result, the engine failed. Later that day, the vehicle was towed to the workshop. One of the officials, namely Engelbrecht, had concluded that the Applicant was responsible for the damage to the vehicle and further told him that the cost of the repairs would be approximately R100 000. Engelbrecht produced a loan form for the amount and instructed the Applicant to sign it. The Applicant refused and demanded that the engine be inspected. He also sought a report setting out the extent and calculations of the damage. The Applicant was informed that due to his refusal to sign the document, he would be charged for misconduct and subjected to a disciplinary hearing. On the 6th of July 2009, a disciplinary hearing was held and he was found guilty on the basis that the applicant "could have foreseen that there could be potential damage to the vehicle after he drove it into the water". An expert report regarding the damage to the vehicle was not presented during the hearing, nor was a copy given to the Applicant. The Applicant was also not afforded an opportunity to deal with the report during his evidence. The chairperson of the hearing, however, considered the report during the determination of an appropriate sanction. On the 16th of July 2009, the Applicant was dismissed. The Applicant secured employment two months after his dismissal.

The matter was referred to the CCMA as an unfair dismissal dispute whereby the Commission viewed the Applicant's dismissal as both procedurally and substantively unfair on the basis that the damage report was not provided to the Applicant. As a result, the Commissioner awarded reinstatement. The company took the award on review to the Labour Court. The Labour Court held that the Commissioner's decision was fatally flawed and set aside the award and replaced it by stating that the Applicant's dismissal was procedurally and substantively fair.

The Applicant referred the matter on appeal to the Labour Appeal Court, which then found that not all evidence that was before the CCMA was before the Labour Court and decided to set the Labour Court's decision aside and remitted the matter back to the CCMA to be heard afresh by a new Commissioner.

On the 14th of October 2014, the matter came before a new Commissioner at the CCMA who held that the Applicant had, under the circumstances, acted as a reasonable driver and maintained his conduct in terms of the company policy. Therefore, negligence for the charge of misconduct had not been established. The Commissioner concluded that the employer had failed to prove the misconduct and accordingly held that the dismissal was substantively unfair. The Commissioner issued an award of reinstatement retrospectively from the 1st of November 2013 with back pay equivalent to 12 months' remuneration.

The Applicant applied for a variation of the award. This was on the basis that the back pay as per the award was calculated on the same scale from the date of employment to the date of the arbitration award. This was acceded to by the Commissioner. Thus, the back pay due to the Applicant increased from R135 536.28 to R469 256.88. The company took the award on review to the Labour Court, which agreed with the Commissioner's view that the dismissal was substantively unfair and that the order for reinstatement was appropriate.

Important to note, however, is that the Labour Court did not concur with the order for 12 months retrospective back pay. The Court further stated that in keeping with the established principle that reinstatement ought to neither impoverish nor enrich the employee but restore them to the position they would have been in, but for the dismissal. In this case, the employee was only unemployed for two months until he gained employment, and therefore, the retrospectivity was indeed unreasonable in the circumstances. The Labour Court set aside the CCMA award and replaced it with an order reinstating the Applicant with effect from the 14th of October 2014, being the date of the arbitration award, with back pay equivalent to two months' wages. The Applicant took the Labour Court's decision on appeal. The Labour Appeal Court, however, dismissed his application for leave to appeal.

The matter was taken by the Applicant on appeal to the Constitutional Court ("CC"), claiming an element of infringement of the right to fair labour practices. The CC considered the order by the LC and had a distinct issue with the portion of the order for retrospective back pay. The CC held that in restoring the Applicant to his previous position, this Court ought to have considered both the amount he would have earned but for his dismissal and what he earned while working at Gold Fields. As far as this is concerned, the Labour Court did not set out the facts it considered in terms of the Applicant's earnings. It was only alluded to from written submissions that the CC requested from parties that the Applicant earned considerably lower wages at the new employer than what he earned at the time of his dismissal.

The CC considered whilst employed by the previous employer, the Applicant earned R24 730.60 per month. At Gold Fields (new employer), he earned R15 000.00 per month. The difference between the salaries is R9 730.60 per month. This would mean that the total difference in earnings for the period of 10 months is R97 306. In the Court's view, the Applicant's diligence and good fortune in finding employment should not prejudice him from receiving what is due to him.

The Applicant was entitled to payment of R49 461.20, which was two months' back pay, and R97 306, being the total difference between what he earned whilst in the third respondent's employ and his earnings at Gold Fields for the period of 10 months. This means that the Labour Court had to set the order aside and replaced it with an order that the third respondent should pay the Applicant an amount of R146 767.20.

In conclusion, the Constitutional Court held that the Labour Court should have taken the salary difference into account when determining the back pay. Retrospective back pay should not be viewed through a ‘tunnel’ but rather seen from all angles in order to have reasonable and fair outcomes.

Article by:
Natasha Govender
Natasha is a Dispute Resolution Official and Collective Bargaining Co-ordinator for the Consolidated Employers Organisation (CEO SA)

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