In Abrahams v Drake & Scull Facilities Management (SA) Pty Ltd (C 1105/10) [2011] ZALCCT 30; [2012] 5 BLLR 434 (LC); (2012) 33 ILJ 1093 (LC) (11 November 2011) per Steenkamp J) the Labour Court was faced with a situation where the employer consulted with an employee and then unilaterally reduced the employee’s monthly salary by about 75%.

The employee refused to accept the change but continued to tender her services and was allowed to continue working despite only being paid the reduced amount.

Employers need to carefully consider correcting situations of unequal pay for work of equal value that may have developed over time.

The employer realised that a number of employees who were doing the ‘same work’ were being paid considerably less than the employee with more than 30 years’ service. For that reason the employer decided that it was necessary to ‘bring the employee into line’.

The employee referred a dispute to the CCMA claiming a unilateral change of conditions (section 64(4) of the LRA) but the dispute was not resolved at the conciliation stage.

The employee applied to the Labour Court for interim relief pending a final order ordering, inter alia, the employer to restore and comply with the terms and conditions of her employment contract and pay her the income she had lost.

Steenkamp J granted an order in those terms after deciding that it was unlawful, impermissible and unfair for the employer to have unilaterally changed her contract of employment . Specific performance of the contract was granted in the terms sought by the employee.

Steenkamp J stated that the employer

“could have embarked on a process in terms of s189 of the LRA; but it elected not to do so, and nor did it follow the lock-out route in terms of section 64” [41].

Given that there was only one employee involved it is debatable whether it is feasible and lawful to lockout only one employee. Clearly all the appropriate procedures would have to be followed to ensure that the lockout is protected.

Collective bargaining suggests that there should be more than one employee, but if one employer is not prevented from locking out employees does it mean that an employer is allowed to lockout one employee. Although the statement by Steenkamp J was not part of his reasoning for his finding, it must carry considerable weight.

What is of real concern is how employers should determine whether employees are being remunerated equally for the same work or work of equal value?  Long service should not be the only reason for adjusting salaries upwards each year.

The Public Investment Corporation (PIC), a major shareholder and guardian of the investments of most of the public sector employees and retirees, seems to be under the impression that there is no scientific way of arriving at the right salary for any employee, including senior executives. See report in Business Day yesterday “PIC is analysing top salaries, says CEO”.

In fact the Employment Equity Act of 1998 obliges businesses to eliminate ‘disproportionate income differentials’. The EEA seeks to ensure internal equity with external parity and there are ‘scientific’ ways to of creating generic and scalable measurement tools.

For instance assume all judges of the High Court earn the same basic salary despite their individual work-loads being different because they happen to have been appointed to different centres of the Republic. In other words there would be a completely flat ‘curve’ with no differentiation. That complies with the law because there is no difference in pay, let alone any disproportionate income differential.  See: Occupational and pay levels: Important differences

Take the example of a couple of universities, previously advantaged and disadvantaged. The first has a differential of about 24% whereas the latter is about 15%. Those differentials are both acceptable provided they are proportional. It is also essential that there are defined institutional processing levels (otherwise known as occupational levels). EEA 9 shows six such levels but it can be forcibly argued that there should be seven.

The benefit of such a system of measurement is that a framework of ‘internal equity’ can be created that is both logical and transparent. Clearly employers need to apply ‘external parity’ to align with market forces, and any market ‘premium’ that has to be paid to an employee should be recovered through additional income to justify the premium. Bench-marking can also be achieved once competitors assess jobs on the same basis.

There also needs to be a distinction between salaries and bonuses. Salaries need to be based on the framework whereas a bonus should only be earned if the employee can be shown to have objectively and directly influenced the basis on which the bonus was calculated. If the increase is attributable to the business then all employees should share in that bonus.