Unlawful Deductions - the Labour Court Giveth Back What the Employer Tried to Taketh Away

The payroll departments of large employers are understandably under significant pressure at month-end. With the dawn of technology, many aspects of the monthly salary run are automated. This works like a charm on a regular basis but can pose difficulties when employees embark on a strike.

Written By of Cowan-Harper-Madikizela Attorneys

The extent of the difficulty recently arose in the case of North West Provincial Legislature and Another v NEHAWU obo 158 Members (JA17/22) (LAC). In this matter, the employees embarked on an unprotected strike. The principle of ‘no work, no pay’ applied. However, the employer erroneously paid all the striking workers as if they had been at work.

After finding itself in the soup, the employer notified these employees that it would deduct the amounts erroneously paid to them from their salaries over several months. A dispute regarding this arose and the employer agreed to suspend all deductions, pending negotiations between the employer and NEHAWU.

After negotiations failed, the employer gave notice that it would proceed to deduct these amounts, as previously stated. In response, NEHAWU approached the Labour Court and sought an Order interdicting and restraining the employer from making these deductions.

The Labour Court found that any deduction made by the employer in these circumstances would amount to a breach of section 34 of the Basic Conditions of Employment Act 75 of 1997 (“the BCEA”). It accordingly granted the Order sought by NEHAWU. The employer then appealed to the Labour Appeal Court (“the LAC”).

The employer made four arguments as to why it was permitted to deduct the erroneously paid amounts from the relevant employees’ remuneration.

Firstly, the employer alleged that it was entitled to make the deductions because section 34 of the BCEA does not apply to payments made ‘on the basis of the no work no pay principle’. The LAC rejected this argument and found that the ‘no work, no pay’ principle entitled an employer to withhold remuneration and not deduct remuneration erroneously paid to its employees.

Secondly, the employer stated that the amounts erroneously paid did not constitute ‘remuneration’ as defined in the BCEA because these amounts were not paid in return for work performed by those employees. The LAC also rejected this argument on the basis that it strains the language of the BCEA. Work need not be physically performed for remuneration to be payable (i.e. annual leave or sick leave).

Thirdly, the employer argued that the deductions to be made by it would not constitute self-help as ‘it concerns the deprivation of property in the form of the salary paid to employees’. The LAC found that as a dispute still existed as to which employees were on strike, any uniform deductions would be unfair, unjust and in violation of section 34 of the BCEA.

Although the affected employees had been given an opportunity to make representations as to why the deductions should not be made, the deduction itself had not been agreed with the employees. On this basis, section 34 of the BCEA was also offended.

Finally, the employer argued that the principle of ‘set-off’ applied. The LAC disagreed and found that set-off cannot be applied where there is a dispute as to the indebtedness of a party to the other. In these circumstances, the appeal was dismissed.

The employer’s approach was curious. The judgment makes no mention of whether it had sought to hold the employees accountable for misconduct by retaining amounts that they knew were not due to them (see, for instance, Theewaterskloof Municipality v SA Local Government Bargaining Council (Western Cape Division) & Others (2010) 31 ILJ 2475 (LC)). Furthermore, the employer appeared to ignore the provisions of section 34(5) of the BCEA which permits an employer to require an employee to repay any remuneration resulting from an overpayment due to an error in calculating that employee’s remuneration.

This dispute endured for eighteen months, only for the employer to come up short. For this reason, employers should take specialist legal advice when dealing with technical legal issues of this nature.

Neil Coetzer

Neil Coetzer
Head of Employment

Courtney Wingfield

Courtney Wingfield
Senior Associate of Employment

Anthony Andrews

Anthony Andrews
Candidate Legal Practitioner of Corporate Law and Commercial Litigation

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