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Home Library - Legal

Legal

It is easy to decide to convene dismissal proceedings for proved dishonesty or gross insubordination. But what can an employer do for conduct such as late-coming, absenteeism, sleeping on duty and abscondment?

Minor instances of absence from the workplace or workstation, which cause little prejudice to the employer, require corrective disciplinary action. Repeated absenteeism, after corrective disciplinary action, will probably justify dismissal.

Absence from the workplace is perhaps the most common form of absenteeism that an employer experiences. This can be the “Monday blues” absence from work or the failure to report to work or following a long weekend.

At the bottom end of the scale is late coming. This is a form of absenteeism because the employee is absent from work when he or she is contractually obliged to render service. If there is no reasonable excuse for their absence, steps may be taken.  Isolated instances of late-coming would generally not justify dismissal. A sympathetic employer would begin with counselling to find out whether there are family or other circumstances causing personal difficulties for the employee and if something can be done to help.

Persistent late coming would however require the employee to be given a verbal warning. If the late-coming persists notwithstanding the warning and without any justification proved by the employee further sanctions would include a final written warning and ultimately the dismissal of the employee. In all cases discussed in this paper where dismissal is the possible result, an employer is not entitled to dismiss the employee without certain procedural requirements and ensuring that the dismissal process is fair. Among other things the employer would be expected to listen to the employee’s side of the story although the burden of proving justification for any absence rests with the employee.

A similar problem is absence from the workstation. In this new era of smoke-free buildings, this can occur when employees are constantly away from their workstations on smoke breaks. An employer would rarely be entitled to dismiss employees who are not at their workstations during working hours for significant periods. Again, a gradual form of corrective action ought to be put in place in order to give the employee an opportunity to correct the behaviour.

Another form of absenteeism which would be dealt with in this manner would be where the employee is physically present at work but mentally absent for instance, sleeping on duty. The employer dealing with a problem such a sleeping on duty would have to ensure that the working hours and conditions of the employees are lawful. Employees have been reinstated in the past where, although guilty of sleeping on duty, the work hours were too long and accordingly prohibited.

A more serious form of absenteeism is abscondment when the employee has expressly or impliedly intimated that he or she does not intend to return to work in breach of the contract of employment. The labour courts have held that the cancellation of a contract of employment because of desertion/abscondment amounts to dismissal. In SABC v CCMA (2001) (22) ILJ 487 (LAC) an employee had been dismissed for failing to return to work after being ordered to do so after a dismissal had been withdrawn. The SABC contended that it was not necessary to afford the employee who deserted a hearing because dismissal had not occurred.

The court found that desertion is a breach of the contract of employment. A breach of contract, however material, does not automatically bring about its termination. It is not the act of desertion that terminates the contract of employment but the act of the employer who elects to exercise its rights to terminate the contract after notice to the employee requiring the employee to return to work. This termination therefore constitutes a dismissal. Because it is a dismissal the employer should if possible convene a disciplinary enquiry.

This may not be possible because the employee remains away from the workplace and their whereabouts may be unknown or the employee may be out of reach. Nonetheless procedures have to be followed in order to terminate the contract. If the employee’s whereabouts are known the employee should be given notice of the dismissal proceedings and should be invited to show cause why he or she should not be dismissed. If this is not done the dismissal will be found to be procedurally unfair and will not be upheld. The court found that where an employer has an effective means of communicating with the employee who is absent from work, the employer has an obligation to give an effect to the rule of fairness requiring the employee’s side of the story to be heard before the employer can take the decision to dismiss.

Thus, as in all dismissals due to absenteeism (in all its forms described above) and desertion a measure of procedural fairness is required. Counselling may be appropriate where there is little prejudice to the employer and a possible good reason for the conduct. The aim is to ascertain whether there is fault on the part of the employee. If there is fault, corrective disciplinary action ought to take place in the form of verbal warnings, written warnings, final warnings and finally dismissal. Most disciplinary codes recognise this approach. Each case has to be treated on its own merits however.

Whether desertion justifies dismissal depends on the reason for the employee not reporting for work. If there is no fault on the part of the employee (for instance the employee is in prison) there is no intention to desert or abandon work. Dismissal maybe possible because it would be unreasonable to expect the employer to hold the position vacant for a prolonged period of time whilst the employee served a sentence in jail. It would still remain a question as to how long is unreasonable in the context of the employer’s business and the nature of the work done by the employee.

The most unacceptable thing to do, and commonly done, is to assume because of the employee’s absence that they have intentionally breached the contract and that the contract is at an end.

Joe Mothibi is the labour director at Deneys Reitz (www.densysreitz.co.za).

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Legal

An employer can be held liable for acts of sexual harassment committed by its employees on their colleagues. Furthermore, the employer may be liable for personal damages suffered by the aggrieved employee as a result of sexual harassment committed by a fellow employee.

These were the findings of the Labour Court in the case of Ntsabo vs Real Security CC.

Facts
The Applicant in the matter, Ms Ntsabo, was employed as a security guard. The evidence accepted by the Labour Court was that she had been sexually harassed by a senior co-employee over a period of some six weeks, which culminated in sexual assault on 15 December 1999. During the six-week period preceding the sexual assault, the Applicant had reported the incident of sexual harassment to the Respondent. The Respondent failed to take action against the senior co-employee. Furthermore, after the sexual assault of December 1999, the Applicant had again brought the sexual assault to the attention of the Respondent, which again failed to assist the Applicant. Instead, the Respondent exacerbated matters for the Applicant by moving her to a different workstation and placing her on night shift. This made her feel penalised, and as a result she resigned from the Respondent's employ. The Applicant claimed compensation for unfair constructive dismissal as well as damages for medical costs incurred as a result of the sexual harassment, as well as a claim for general damages in respect of pain and suffering.

Findings
Having found that the Applicant had indeed been harassed and that she had sought assistance from the Respondent which turned a deaf ear to her plight, the Court held that the Applicant had been constructively dismissed. Had the Respondent taken action to protect her from the sexual harassment, she most probably would not have resigned. That omission by the Respondent was unfair and led to the resignation of the Applicant. She was awarded twelve months' compensation for unfair constructive dismissal.

The enquiry, however, did not end here. The Court then had to decide whether it could hold the Respondent liable for the damages that the Applicant claimed from it as a result of the sexual harassment committed by the Respondent's employee. In making a determination in this regard, the Court had regard to s60 of the Employment Equity Act ("EEA"), which provides that:

60. "Liability of Employers
(1)   If it is alleged that an employee, whilst at work, contravened a provision of (the EEA), or engaged in any conduct that, if engaged in by that employee's employer, would constitute a contravention of a provision of this Act, the alleged conduct must immediately be brought to the attention of the employer.
(2)   The employer must consult all relevant parties and must take the necessary steps to eliminate the alleged conduct and comply with the provisions of (the EEA).
(3)   If the employer fails to take the necessary steps referred to in (2), and it is proved that the employee has contravened the relevant provisions, the employer must be deemed also to have contravened that provision.
(4)   Despite (3), an employer is not liable for the conduct of an employee if that employer is able to prove that it did all that was reasonably practicable to ensure that the employee would not act in contravention of (the EEA)."
The Court found that the conduct of the senior employee contravened the provisions of the EEA. In making this finding, it had regard to s6(3) of the EEA, which provides that:
"(3)  Harassment of any employee is a form of unfair discrimination and is prohibited on any one, or a combination of grounds of unfair discrimination listed (in the EEA)."

Accordingly, and having regard to s60(3) read together with s6(3) of the EEA, the Court found that the sexual harassment experienced by the Applicant amounted to unfair discrimination in contravention of the EEA. Furthermore, it rejected the Respondent's contention that it ought not to be held liable for the unfair discrimination because the Applicant had not reported the sexual harassment to it immediately, as is required in terms of s60(1) of the EEA. The Court found that it was sufficient for the Applicant to have reported the sexual harassment to the Respondent within a reasonable time. It held that the requirement that the infringement ought to be reported immediately could not be construed to mean within minutes of the incident happening. What will constitute "reasonable time" will differ from case to case.

Having found that sexual harassment constitutes unfair discrimination and that this unfair discrimination had been reported within a reasonable time to the Respondent which turned a blind eye to it, it held that the Respondent had contravened the EEA.

It then turned to consider what remedy, if any, it ought to attach to the Respondent's act of unfair discrimination based on sexual harassment. In this regard, it considered s50(2) of the EEA which empowers the court, among other things, to award compensation and damages to the Applicant.

It awarded the Applicant damages of R20 000 for future medical costs which would be incurred by her for treatment of post traumatic stress disorder. It also awarded her an amount of R50 000 for general damages. In awarding general damages, the Court recognised that:
"It becomes difficult to assess damages because, while the experience might have been horrifying, rape would have been much worse. Nonetheless the sequelae are not much different from those which one would expect in the case of actual rape."

Conclusion
Line managers, and indeed all the company's employees, must be made aware of the company's sexual harassment policy.

Where complaints of sexual harassment are made, they must be dealt with promptly. This is because an employer would escape liability if it can show that it did all that was reasonably practicable to eliminate the sexual harassment. If there is a complaint, it must be investigated, and if found to be legitimate, disciplinary action must be taken.

Whilst in this case future medical costs were relatively low, one can only imagine that they could be much higher if in a similar case matters culminate with the victim being raped by the perpetrator, especially with the prevalence of HIV/Aids in our society. The damages in such a situation would be high, not only in respect of medical costs but in respect of general damages for the trauma, loss of life expectancy and indignity that would be suffered by the victim.

Written by Joe Mothibi, Director, Deneys Reitz Inc.

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Legal

What are the tax implications for residential accommodation of expatriate employees?

It is a common practice for expatriate employees in South Africa to be provided with residential accommodation. The tax implications of this practice were recently considered in a case before the Tax Court. In this case, the South African Revenue Service (SARS) contended that such accommodation was a taxable benefit for an expatriate.

A South African company, to which the expatriate was seconded by his UK employer, had leased the accommodation.  It had then deducted employees’ tax from his remuneration, based on a notional value that it had attributed to the accommodation (being the rental grossed up for tax). It had not paid any amounts to the expatriate.

The expatriate acknowledged that the accommodation represented a benefit to him. He argued, though, that no value should be placed on the benefit for tax purposes. This was in terms of a provision in the tax legislation, to the effect that no value shall be placed on accommodation provided away from an employee’s usual place of residence.  In this case, the expatriate stated that his usual place of residence remained in the UK.

The Court found that the expatriate’s usual place of residence did remain in the UK. He had retained his home there and returned to it on completion of his secondment. A temporary secondment was differentiated from a permanent transfer.  In the former, an expatriate would have to find accommodation away from his usual place of residence. In the latter, he would effectively have to change his usual place of residence.

SARS’ policy is to exempt from tax, accommodation provided to expatriates for up to 12 months. The Court acknowledged that there may be a need to limit the relevant time period, but stated there cannot just be a random determination by SARS. In this case, the expatriate was on a 30 month secondment.

It is worth noting that the tax treatment of the benefit by the company caused serious problems. SARS stated that if the company believed the benefit to be non-taxable, then it should have treated it in this way. The company’s treatment also gave the impression that it was paying the expatriate an actual allowance. The company treated the benefit as it did, because it believed that to do so would be safer. The Court saw merit in SARS’ statements, but fortunately the evidence confirmed the expatriate’s version of the facts.

Tim Desmond is a Director - Tax and Commercial Departments with Durban law firm Garlicke & Bousfield (www.gb.co.za).

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Legal

Effective use of international arbitration improves risk management and enhances shareholder value.

International arbitration, a valuable tool for resolving cross border disputes between parties from different countries, is receiving significant support from global businesses, according to a ground-breaking study, sponsored by PricewaterhouseCoopers and conducted by the School of International Arbitration, Queen Mary, University of London.

Companies are frequently preferring this more flexible method of dispute resolution to the alternative of litigating in the national courts.

As South African companies become more international, increasing their trade and investment flows abroad, international arbitration as a means of solving complex disputes becomes a meaningful and ideal risk management tool.

The survey explores some of the perceptions of international arbitration, and highlights the advantages of such a procedure. Global businesses choose the international arbitration route because of flexibility of procedure, enforceability of awards, privacy, and the opportunity to choose arbitrators to suit the dispute.

International arbitration is important to South African companies. The study indicates that managing international arbitration well can have a positive impact on the bottom line. We expect to see a rise in South African companies involved in international arbitration cases overseas.

The many benefits clearly outweigh the main disadvantages of international arbitration which could include expense, length of time to resolve, risk of court intervention and the occasional difficulties of binding parties into an arbitration process at the outset.

Clear upfront dispute resolution policies produce cost savings either through effective management of the dispute process or by helping to minimise the risk of dispute escalation. Well thought-out arbitration clauses can give a prepared party a significant advantage should a dispute arise.

Legal considerations attached to the “seat” of arbitration are the most important reasons for a corporation’s choice of venue for international arbitration proceedings, with the four most popular venues being England, Switzerland, France and the United States. However, the tactical significance of the seat of arbitration does not appear to be fully appreciated by some corporations.

There is reason to be optimistic regarding the role South Africa can play in the development of international arbitration. Johannesburg would be well equipped to become a recognised seat of international arbitration in the future, once appropriate legislation is in place here.

In the survey, many of the in-house lawyers called for the development of stronger regional arbitration institutions in order to move the process closer to home – but they accepted that many of these had some way to go before demonstrating the track record necessary to instil confidence in potential users.

The outlook for international arbitration is extremely positive as 95 % of companies intend to continue using this tool to resolve their complex cross border disputes. As arbitration law and practices develop according to the needs of multinationals, this route will become even more suitable for the international business community.

PwC is increasingly being instructed to provide expert evidence to corporations and their legal advisors to quantify loss and damage or to give opinions on valuation, economic or accounting issues arising in international arbitration cases around the world.

Colm Tonge is a Partner Forensic Services at PricewaterhouseCoopers South Africa (www.pwc.co.za).

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Legal

South African companies that bring foreign workers into the country to make up for local shortages of skills need to be aware of potential problems in terms of immigration laws.

Firms awarding tenders or partial tenders to foreign contractors must get permission from government for these contractors to bring their staff members into South Africa.

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South African law states very clearly that no foreign national may be in the country in contravention of the Immigration Act and Regulations - and, if they are, they can be deported summarily.

In addition, those foreign nationals who are allowed into the country must abide by the strict terms and conditions of their permits.

Awarding a tender to a foreign entity does not entitle that entity to simply import labour as and when it pleases.

There is a process to be followed. Approval must be obtained from the Departments of Home Affairs, Labour, and Trade and Industry. This process can be time consuming, and can often lead to delays in the completion of a project, with costly penalties being levied against the parties concerned.

South African companies should be careful not to be seen to be aiding and abetting illegal foreigners by entering into agreements with them to conduct any type of business. Companies could be breaking the law if, for example, foreign nationals they make deals with are in the country without the correct permit.

There are considerable advantages to skilled foreigners entering the country, such as expediting new projects and transferring skills into the local labour pool. However, the downside to not following correct immigration procedures and falling foul of the law is also significant.

Jaco van der Merwe is a manager at PricewaterhouseCoopers (www.pwc.com).

 

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