Zapop (Pty) Ltd v CCMA (CA21/2014) [2016] ZALAC 16 ; [2016] 9 BLLR 910; (2016) ILJ 1882 (LAC) (12 May 2016) per Sutherland JA [Davis and Musi JJA concurring]

Commission claim allowed: After being unfairly dismissed an employee claimed, in addition to other claims, commission earned prior to her dismissal.  The claims were based on unlawfulness, coupled with the claim based on unfairness.  Commissioner Maritz correctly held that the CCMA had the necessary jurisdiction and power to grant the claims in terms of s 74(2) of the BCEA.  This finding was upheld by the LAC because commission was part of remuneration and a claim for an amount owing in terms of the BCEA.  The amount awarded by the CCMA was R1,806,520.92 together with interest thereon at the legal rate calculated from 20 November 2011.

See Du Toit et al Labour Relations Law: A Comprehensive Guide 6th edn (LexisNexis, 2015) at pages 126, 153, 187, 524, 622 and 625.

See also ZaPop (Pty) Ltd v CCMA (C941/2011) [2014] ZALCCT 54 (31 July 2014).

Comment:

Dismissed employees have a number of possible claims, but until now the belief was that only claims for unfair dismissal could be referred to the CCMA.  Claims can arise in terms of the:

  • common law,
  • Labour Relations Act [LRA], and
  • Basic Conditions of Employment Act [BCEA].

Overlap ignored

It has been argued for some time that when the new labour laws were introduced after 1994 the overlap between common law and the various statutes was overlooked.  The policy was to clothe the CCMA with the jurisdiction and power to deal only with claims based on unfairness, but not unlawfulness.  In other words employees relying on the statutory right ‘not to be unfairly dismissed’ could refer disputes to the CCMA, but were precluded from claiming any other relief based on any breach of the employment contract.

Unlawfulness ignored

So the CCMA effectively ignored unlawfulness and the common law.  This resulted in an ‘all or nothing approach’ to dismissals.  But a true holistic approach demands that the interests of both employers and employees have to be balanced.  That means that even when there is a valid and fair reason to dismiss, employees are still entitled to reasonable notice pay.  They only forfeit that right under the common law and the BCEA when their behaviour is gross.  In other words when they materially breach the employment contract.

Future claims

As a result of this landmark LAC judgment it can be expected that the CCMA will consider not only claims based on unfairness but also unlawfulness.  This will enable the CCMA to achieve a true balance between competing interests.  A fair dismissal will not necessarily result in employees forfeiting reasonable notice pay.  Obviously employees whose behaviour is gross cannot expect to receive any notice pay.  But the fairness of the dismissal will not deprive employees of any other contractual rights, such as commission earned prior to dismissal.

LAC summary:

“Appeal against an order of the Labour Court refusing to review arbitrator’s decision to hold dismissal unfair and award 4 months compensation and commission earned prior to dismissal and cross appeal against Labour Court’s order to refer certain issues about computation of commission back to arbitration.

Interpretation of sections 35(4) and 74(2) of the BCEA considered

On the facts as regards the unfair dismissal dispute, held that arbitrator’s award not unreasonable – employee dismissed for disclosure of confidential information to an alleged competitor and for disparagement of her two managers in a private email communication – arbitrator concluding employee “guilty” of the alleged misconduct – in absence of a cross appeal against the decision of the labour court accepting

(i)the correctness of the conclusion that confidential information had indeed been disclosed to a person who was indeed a competitor and

(ii) the correctness of the conclusion that disparagement of an employer in a private communication not intended for publication could constitute misconduct,

the appeal had to be considered on that footing, despite reservations about such findings –

The misconduct had occurred years before and the arbitrator held that the disclosures to the particular competitor, did not expose the employer to any risk because the alleged competitor was a sales agent who exited the business  immediately thereafter and the specific prejudice relied on, ie that an unfavourable employment contract with a person recruited from the competitor/agent was caused by the disclosure, was unproven; these factors, and other related considerations, weighed with the arbitrator in assessing that dismissal was inappropriate because it was disproportionate to the gravity of the misconduct – in the absence of a prayer for reinstatement, the unfairness warranted compensation in a sum equivalent to four months remuneration – on appeal it was held that such a conclusion satisfied the Sidumo test

The employee also claimed a substantial amount in commission earned before the date of dismissal but which became payable at a time after date of dismissal – dispute of fact about whether her entitlement to payment of such commission was forfeited upon dismissal resolved in favour of a preserved entitlement

The finding by the arbitrator and the Labour Court that the CCMA had jurisdiction to entertain commission claims as part of remuneration as contemplated by Section 74(2) of the BCEA upheld

The Arbitrator had awarded the sum agreed between the parties as being the sum of compensation due – Labour Court holding that section 35(4) of the BCEA capped the sum awarded to the amount equivalent to the last 13 weeks of employment and the only competent order had to be calculated in terms of that formula, whereupon the issue of computation was referred back to the CCMA – cross appeal against such interpretation upheld – no cap exists and an award of an agreed sum is appropriate and in accordance with the BCEA

Costs award – respondent  an individual litigant who had been obliged to defend an award obtained – costs of labour court review proceedings and of appeal granted to respondent”.

Excerpts

“The Question about the Money claims

(a) Does an arbitrator have jurisdiction to adjudicate commission payments?

[31] The principal dispute referred to arbitration was about unfair dismissal. The money claims for pay during suspension, accrued leave pay and commission, were not dependent on the merits of that dispute and were put before the arbitrator pursuant to Section 74(2) of the BECA which provides that;

‘If an employee institutes proceedings for unfair dismissal, the Labour Court or the arbitrator hearing the matter may also determine any claim for an amount that is owing to that employee in terms of this Act if the claim has not prescribed.’ (Emphasis supplied)

[32] The jurisdictional controversy is confined to whether the section contemplates a commission claim. No genuine debate exists that the commission was not part of Cunningham’s remuneration. Section 1 of the BECA provides:

‘remuneration’ means any payment in money or in kind, or both in money and in kind, made or owing to any person in return for that person working for any other person, including the State, and ‘remunerate’ has a corresponding meaning;

[33] However, it is argued by Zapop that, having regard to section 74(2), a commission payment is not an amount “owing [to Cunningham] in terms of this Act”. This submission is premised on the cited phrase meaning that an entitlement to an “amount” is limited to a statutorily prescribed entitlement. The argument runs that the BCEA does not prescribe an entitlement to “commission”, as distinct from entitlements, e.g., to accrued leave pay and ordinary remuneration.

[34] This argument overlooks the fact that it is a contravention of the BCEA to fail to pay an employee remuneration that is due. The legal obligation to pay remuneration, apart from contract itself, is contained in section 32 of the BCEA.[3]

Section 32(4) in particular requires an employer to effect payment not later than seven days after the completion of the period for which the remuneration is payable. That period, in Cunningham’s case, is when Zapop is paid by the client and the commission falls due to be paid.

It is common cause that the period elapsed and the commission was due for payment, assuming there was no binding forfeiture provision in the contract of employment by reason of a “policy” change or a “practice”, issues addressed elsewhere in this judgment.

The ancillary argument that because on termination, an employer must pay all remuneration due to an employee within seven days, and because the “cycle” of events for a commission payment to fall due could occur only after such seven day period somehow supports the notion that commissions could not have been contemplated by section 32 is fallacious. Properly read, the section can be purposively interpreted to encompass entitlements that fall due later than a default period.

Self-evidently, the due date for payment triggers the obligation to pay, and the duty of the employer to pay must be fulfilled within seven days of that date.

[35] Revelas J in Schoeman and Another v Samsung Electronics SA (Pty) Ltd,[4] held in distinguishing a “benefit” from “remuneration” that:

‘Commission is encapsulated by the notion of remuneration. Commission payable by the employer forms part of the employee’s salary. It is a quid pro quo for services rendered, just as much as a salary or a wage. It is therefore part of the basic terms and conditions of employment….’

[36] This must be correct.[5]

[Note see fn: Caution should be exercised in reading the Schoeman judgment in relation to what is stated about the character of a “benefit” as later jurisprudence has not adopted the stance articulated by Revelas J; see Apollo Tyres (Pty) Ltd v CCMA and Others (2013) 34 ILJ 1120 (LAC).

The fact that the form of the computation of remuneration is in the form of a percentage of sales achieved, or the market value of the harvest as determined by the Co-|Operative, or any other variable is beside the point.

The arbitrator had jurisdiction to adjudicate a claim for remuneration, including the commission.

(b) Is there proof of entitlement to be paid commission that became payable post-termination?

[37] The critical question is what the terms of Cunningham’s employment agreement provided at the relevant times.

[38] At the time of the conclusion of Cunningham’s employment contract in 2007, and retrospectively effective to 2006, no forfeiture term was stipulated, even orally, nor could one have been tacitly inferred from what was agreed.

[39] The agreement included a clause in which policies were incorporated by reference. However, even on the premise that the policies were incorporated, the policy in 2006 did not address forfeiture, and eventually only after Dewar had resigned in 2010, and complained about non-payment of commissions that fell due after her termination, was a forfeiture “policy” added and circulated for staff to acknowledge formally. At best, this innovation might have had prospective effect.

[40] Zapop fell back on a practice of forfeiture to justify non-payment. This must fail too. During the period of Cunningham’s employment, the evidence shows that there was no practice of forfeiture, rather, there was a capricious decision-making process prevalent about post-termination payments of commission. It is common cause that Deidre Davel was paid her commission that fell due for payment after her termination. It was common cause that Tina Bailey was also paid her commission. Afterwards, a letter was sent to Bailey saying it was paid in error and asking for repayment. Not fortuitously, the request for a refund was sent only after Dewar claimed payment and was refused. Nothing was done to enforce a refund from Bailey. A passing reference to two other persons not fully and properly identified who had according to Labuschagne not been paid their commissions post-termination was made but no case was advanced that they were indeed owed any commissions. Thus the consistency necessary to found a contention of a practice of forfeiture is absent.

[41] That leaves only the notion that by unilateral decision in adding a policy of forfeiture Cunningham was retrospectively bound, based on the provision in her contract that she was bound by policies. Several problems beset this idea.

  • First, if the mere amendment of the policies on such a matter bound her, why require her to accept it?
  • Secondly, a “policy” per se is not self-evidently a term of employment, still less is it plain that by a “policy” an anterior substantive right or entitlement which is indeed a term of the agreement, i.e. remuneration, can be amended.
  • Third, even it be taken for granted that the amounts of the targets and the rates of the threshold for commission to be earned could be unilaterally changed in respect of future transactions, the idea of a forfeiture of remuneration already earned is in different class. If it did not exist to begin with, it needed the employee’s assent, which was withheld.

[42] Hence, in my view, the existence of a forfeiture term in the agreement of employment binding Cunningham, was not proven. No bar exists to her claim.”