Category: 2017 Case Law Review

“A reading of s 12B of the Labour Act and s 175 of the Companies Act shows that the provisions are inconsistent as they are mutually exclusive. Section 175 of the Companies Act seeks to limit the dismissal of a director in accordance with the procedure set out in that section i.e., by special resolution. On the other hand, the Labour Act provides for the dismissal of employees in terms of a code of conduct”.

Introduction

This case deals with situations where an individual is both an employee and a director of a company. It is common for companies to appoint an individual as a managing director and at the same time have the same person on a contract of employment. The question that then follows is whether the procedure in the Companies and Other Business Entities Act, 2019 or the Labour Act should be utilised in the event of separation. This case also dealt with the effect of handling a disciplinary hearing beyond the prescribed period in terms of the National Code.

The Facts

The appellant was engaged as the Managing Director for the respondent company. He was suspended and a disciplinary hearing was held in terms of the National Code.[2] He did not attend the disciplinary hearing which proceeded in his absence. He was found guilty and dismissed in absentia. Appeals to the appellate authority, arbitrator and the Labour Court failed to yield the desired results leading to the Supreme Court appeal.

The Law

The initial finding of the Supreme Court was that the appellant could not challenge the composition of a disciplinary hearing because he had not attended the hearing.

On whether the Companies Act or Labour Act should apply in the circumstances the court found that Labour Act took precedence over the Companies Act.  This was mainly because the appellant was an employee who had a contract of employment. He also earned a salary because of this contract.

The Supreme Court also made a finding that the hearing was conducted outside the 14 days provided in the National Employment Code of Conduct. The court found that such a delay does not end the disciplinary hearing. It only gives an employee the right to demand that the hearing be done. It rightly made use of the remarks of the court in the case of Air Zimbabwe v Mnesa & Anor SC 89-04, where the court remarked:

“A person guilty of misconduct should not escape the consequences of his misdeeds simply because of a failure to conduct disciplinary proceedings properly by another employee. He should escape such consequences because he is innocent.”

Conclusion

As a result of the above, the court concluded that the appellant was guilty of the offence charged and upheld the decision of the Labour Court.

Own Comment

This matter was determined at a time when the Companies Act (Chapter 24.01) was still operational. In 2019, the legislature introduced the Companies and Other Business Entities Act (Chapter 24:31). A perusal of this law shows that the section on the removal of directors is almost identical to the one that was in the now-repealed Companies Act. Besides the new legislation, the remarks of the court, in this case, are still watertight. If an individual is under a contract of employment the Labour Act determines how the relationship with the employer is to end.

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[1]           Benham G. Mombeshora v Institute of Administration and Commerce (Zimbabwe) SC 72 – 17.

[2]               Statutory Instrument 15 of 2006.

“The learned judge of appeal found that there was no legitimate expectation on the part of an employee to be paid more than what he is supposed to be paid simply because other employees may be receiving greater, seemingly unjustified benefits”.

Introduction

This case illustrates a common challenge in the process of managing pay equity. The common perception among employees is that if they are in the same grade, they should all get the same pay. This is not correct. The Supreme Court, in Thokozile Zinonda v Cafca Limited SC 64 -17, looked at the authorities that deal with this issue and concluded that employees in the same grade may get different salaries for as long as this does not violate any Collective Bargaining Agreement (CBA).

The Facts

The matter before the Supreme Court was an application for leave to appeal to it against a decision that was made by the Labour Court. We will not go into what led to this application as this is irrelevant to this discussion. What is important to note is that:

1. The employee was in grade C1 which was later upgraded to C3.
2. She reached her retirement age and was given a new contract.
3. She then came across a schedule of the employer’s pay schedule only to notice that she was the least paid in grade C3.
4. Believing this to be a mistake she approached management hoping that the salary will be reviewed upwards. This did not happen.
5. She took the legal route.
6. There were legal procedure non-compliance issues that then resulted in the current application.
7. We will focus on the set of facts outlined above and assess how the court concluded that she was not entitled to more salary.

The law

In an application of this nature, the court is required to assess whether there are any prospects of success on the part of the applicant. The court was therefore invited to assess whether the fact that the applicant had a lower salary than those who were in the same grade as herself was an unfair labour practice.

The Supreme Court noted that an employee receiving a salary in terms of a CBA cannot raise a claim for unfair labour practice even when other employees in the same grade are earning more. This position was explained as follows:

“It should be noted that CBAs stipulate minimum wages for any particular grade. An employer is only guilty of an unfair labour practice if he fails to pay the minimum salaries for a particular grade provided therein. It follows therefore that employees may receive different salaries despite being in the same grade. The actual amount of the salary depends on the employee’s negotiations with the employer in forming the employment contract”.

The court also looked at the principles of the law of contract which give reference to freedom of contract. It considered the South African Constitutional Court case which dealt with this freedom and said:

In Barkhuizen v Napier 2007 (5) SA 323 (CC), at page 57, the Constitutional Court of South Africa, explaining the freedom of contract principle, stated thus:

“Self-autonomy, or the ability to regulate one’s own affairs, even to one’s own detriment, is the very essence of freedom and a vital part of dignity. The extent to which the contract was freely and voluntarily concluded is clearly a vital factor as it will determine the weight that should be afforded to the values of freedom and dignity”

The conclusion is clear-cut if an employee agrees to a contract of employment, he or she is bound by the same. Failure to do so would amount to a breach of contract. Our courts are not empowered to rewrite contracts of employment as this is a role left to the parties. The role of a court is to interpret and enforce a contract duly agreed upon by the parties we submit therefore that the reasoning of the court cannot be faulted.

Conclusion

Employers can therefore give employees within the same grade different salaries as long as this does not violate a CBA.

Own Comment

This case should not be used as the basis for justifying wage discrimination based on gender. This is what we mean by such discrimination, if employee A is male and employee B is female, the expectation is that the two employees should get a similar salary or wage. This is so as a function of the statutory provisions in the Labour Act. Differentiating employee’s wages based on their gender is unlawful.

Section 5 (2a) of the Labour Act as amended in 2015 provided that:

No employer shall fail to pay equal remuneration to male and female employees for work of equal value.

When the same section was amended in 2021 the legislature amended the same section 5(2a) to provide:

“(2a) Every employer shall pay equal remuneration to male and female employees for work to which equal value is attributed without discrimination on the grounds of sex or gender.”

In terms of the definition work of equal value, section 2 of the Act provides that:

 “work of equal value”, for the purposes of subsection (2a) of section five, means work that involves similar or substantially similar skills, duties, responsibilities, and conditions;

It also goes on to provide that equal remuneration means:

“equal remuneration”, for the purposes of subsection (2a) of section five, means rates of remuneration that have been established without differentiation on the basis of gender;

What is clear in these provisions is that based on gender, an employer is precluded from differentiating wages and salaries between male employees and female employees. We submit that, perhaps, if the applicant in Thokozile Zinonda v Cafca Limited SC 64 -17 had couched her case along the lines of gender discrimination, provided the facts of her case supported this, her prospects of success would have been better.

 “The evidence as a whole in my view leads to one logical conclusion; that the appellant was well aware of what it was doing when it entered into the contracts and the legal consequences thereof. This appeal is, therefore, nothing more than an attempt to depart from a valid and legally binding agreement. Courts frown upon attempts to skirt one’s legal obligation and it is therefore proper that the appellant be made to pay the respondent’s costs.”

Introduction

This case is amongst a series of judgements passed by the Supreme Court of Zimbabwe supporting the argument that courts do not readily rewrite contracts between an employee and his or her employer. All things being equal, the court will readily accept all the terms and conditions in a document duly signed by the parties as binding. This is provided that the contract was not induced by malice like fraud and misrepresentation.

Facts

The major source of the dispute was the fact that the employee had signed two agreements governing his occupation of company-provided accommodation. The first agreement was a memorandum of agreement where the appellant company had agreed to sell its houses to its employees. In the second instance, there was a lease agreement also governing the occupancy of the same house. The lease stipulated the rentals that the employee was entitled to pay.

The employer started deducting money from the employee’s salary. These deductions were itemised as “rent to buy”. The same amounts were also stated in the initial memorandum of agreement as amounts payable on the sale of the said house. The employee’s contract ended on 4 June 2007 and the employer required the employee to vacate the house. Believing that he had made a full payment in purchasing the house, the employee refused to vacate. Eviction proceedings started in the High Court, but the court ruled in favour of the employee. It was based on this HC judgement that the appellant company approached the Supreme Court.

Court’s Reasoning

Role of court in contractual disputes

The SC ruled that its duty was never to write a contract but to interpret the same. In interpreting the contract, the court is duty-bound to uphold the intention of the parties, provided the contract is valid.

The court noted that the memorandum of agreement signed by the parties made up a valid contract of sale in that the parties agreed to buy and sell the house and agreed on a price. Once these requirements were met, the court will seek to uphold the agreement. It made an important remark:

“If the appellant is to persist with the argument, it can only be construed as contracting in bad faith and as stated in the above cases, courts are not there to absolve one party of its obligations to another, particularly where the other party contracted in good faith and carried out its side of the agreement.”

Caveat Subscriptor

This is the principle that a party to a contract is bound by his signature whether he has read and understood the contract. The SC argued that this principle buttressed the argument that the memorandum of agreement signed between the employer and the employee was a valid contract of sale because the document said so and that the parties had signed the agreement.

It further argued that the lease agreement signed by the parties only completed the sale because deductions were made from the employees’ salary showing that this was a “rent to buy” arrangement.

Based on the above, the Supreme Court dismissed the appeal with costs.

Own Comment

The biggest lesson one can learn from this case is that courts are bound by what parties would have agreed. The courts do not have a duty to rewrite contracts as their only role is to give meaning to their terms. This case confirms what the SC has held in a plethora of cases like Unilever Zimbabwe (Pvt) Ltd v Matsheza^[1], Magodora & Others v CARE International Zimbabwe^[2]  and Lawrence Shumbayaonda v Madhatter Mining (Private) Limited.^[3] Contracts duly agreed upon by the parties will be upheld.

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[1]           Unilever Zimbabwe (Pvt) Ltd. v Matsheza (SC 16/2017).

[2]           Magodora & Others v CARE International Zimbabwe (SC 191/13).

[3]           Lawrence Shumbayaonda v Madhatter Mining (Private) Limited (HH 147-2010).

 “In my view, the rights of the respondent are embodied in the contract which he signed. He cannot look outside the contract to add to its terms. The act of generosity by the appellant in awarding him an increase in his allowance cannot by any stretch of imagination be deemed to be an acknowledgement that the respondent was entitled to more than was agreed to in terms of the contract.”

Introduction

This case illustrates the legal implications associated with a mutual separation agreement validly agreed upon and signed between an employer and an employee. In terms of the National Code of conduct, an employer and an employee can mutually agree in writing to end a contract of employment.

The major question before the court was “whether the respondent was entitled to a higher retrenchment package than that agreed to in the retrenchment agreement concluded by the parties”. It was argued that once this agreement is put in place; no party can renege. All parties will be bound by the terms and conditions of what would be contained in the document governing the separation.

Facts

On 15 October 2015, the employer and the employee mutually agreed to end their employment relationship. The package given to the employee was in full and final settlement of all claims, present or future arising from the employment. When the mutual separation with the respondent employee had been finalised, the employer reviewed the basic salaries for the rest of its employees. It also increased the respondent’s retention allowance. The respondent appreciated the gesture but later he demanded that his package be reviewed in tandem with the reviews that had been received by the other employees. The employer did not agree. Aggrieved, the respondent employee brought the matter to the attention of a labour officer. Conciliation failed and this led to arbitration. The arbitrator argued that the retrenchment package had to be reviewed as per the employee’s demand. Labour court dismissed the appeal against the arbitrator’s decision leading to the current proceedings.

The court’s reasoning

Sanctity of contracts

The Supreme Court’s ruling was premised on the principle that contracts validly entered between parties should be respected. The court noted:

“A party who signs a contract is bound by its terms. That is trite. He cannot blow hot and cold by accepting his benefits under the contract and thereafter, as an afterthought, demanding benefits outside the contract. Once he signed the retrenchment package thus accepting its terms, he was no longer an employee of the appellant and was not entitled to any benefits awarded to the appellant’s employees.”

One cannot look elsewhere for conditions defining his or her separation from the employer if these are contained in a document validly signed and agreed upon by both parties.

Own Comment

The Supreme Court, in this case, confirmed the doctrine found in Magodora & Others v CARE International Zimbabwe^[1] wherein the court argued that it was not the duty of the courts to rewrite a contract. Employers and employees remain bound by what they would have agreed upon for as long as the said agreement did not result from fraud or duress or any other element that attacks the consensus between the parties.

This case must be read together with the Ashanti Golf Fields case discussed below, Both cases relate to the importance of abiding by a contract duly agreed upon by the parties. The law does not tolerate litigants that renege from contracts that they would have appropriately entered into.

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[1]           Magodora & Others v CARE International Zim (SC 191/13).

“Quite clearly the respondents were transferred, with the undertaking, to another employer.  Their employment was not terminated.  In terms of the contract and also by operation of s 16 of the Act, the respondents were transferred to Rutimba on terms not less favourable than they enjoyed in the employ of the appellant.   At the very least, they were transferred on the same terms.”

Introduction

This case also involved a transfer of an undertaking. It outlines the effect of the failure to consult the employees before an undertaking is transferred to a new owner. It also discusses the recourse for employees who are aggrieved by a completed transfer of an undertaking.

The Facts

L Tendere and 24 Others were former employees of Chemco Holdings (Private) Limited. Chemco Holdings (Private) Limited sold its timber building supplies division, T S Timbers, to Rutimba Housing (Pvt) Ltd as a going concern.  The Respondents registered a complaint with the labour inspectorate of the Ministry of Public Service Labour and Social Welfare,

alleging a case of ‘alleged unlawful transfer of undertaking’. This happened 10 months after the transfer. The arbitrator and the Labour Court concluded that the transfer had not been done correctly by virtue of the employer having failed to consult the employees concerned.

The Law

In dealing with this dispute the Supreme Court noted that Section 16 of the Labour Act only requires the employer to consult the employees. There is no mandate to accept what they propose. It added:

“The provision requires the employer intending to transfer ownership to afford, to members of the works council representing the workers committee, an opportunity to make representations and advance alternative proposals. The employer is placed under no obligation to accept the proposals. He simply has to give reasons for disagreeing with them. No power of veto is given by the statutory provision to the works council or to the employees”.

It was therefore wrong for the arbitrator to find that the failure to consult the employees resulted in the transfer becoming a nullity.

On assessing the award of terminal benefits to the respondents the court also realised that the Arbitrator had erred. Since the employees had been transferred together with the business, it was not competent for the former employer to be compelled to pay terminal benefits. The court realised that if the employees had any grievances, such were supposed to be addressed to the new employer, Rutimba. It buttressed the effects of the transfer of the undertaking in the following terms:

“Once the respondents moved from one employer to the other the latter, in terms of both the contract and s 16 of the Act, assumed all responsibility for the respondents. Rutimba, being the new employer, was obligated by s 16 to ensure that the conditions of service enjoyed by the respondents were no less favourable than those they enjoyed with their former employer, the appellant. The respondents’ cause of action, if any, lay against Rutimba, not against the appellant.”

What was clear in the eyes of the court was that the grievance had arisen after the transfer had taken place. Whilst section 16 allows the affected employees to proceed against the former employer this option is not available when the transfer is completed.

Conclusion

The court upheld the appeal and dismissed the award by the arbitrator.

Own Comment

This case is commendable. A works council is not clothed with the power to veto a sale of a business. The employer retains the right to consult the employees whereupon consider the options put on the table. Consideration, in this case, does not mean that the employer may end up stopping a transfer based on the options presented by the works council.

Once a transfer is completed there is no reason for holding a former employer accountable for the actions of the new employer. What is also apparent was the fact that the award of terminal benefits against the former employer was misplaced because the employees had already been transferred.

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[1]           Chemco Holdings (Private) Limited v L Tendere and 24 Others SC 14 – 17.