Amcu v Wozani Berg Gasoline

An experienced commissioner pondered about the difficulty faced by senior management when faced with rewarding longer service. ‘If the finding was that the differential between the wages of the higher paid four Comparator Employees and the balance of the employees amounted to unfair discrimination and must therefore end, the employer should then have the option of dealing with this in a businesslike manner having regard to the operational needs of the business and either, if that is practical, raise everyone’s wage to the higher level so all are equal, or drop the wage of those who are paid more with their agreement.’

Essence

Dilemma facing senior management and possible need to terminate anyone based on operational reqirements without rewarding longer service or increasing wages to higher levels.

Decision

CCMA KNDB3048-18 : [2020] 9 BALR 905 (CCMA) : 2 February 2020

Order:

Refused application without any order as to costs.

Judges

Bess Pillemer : Commissioner

Related books

Darcy du Toit et al Labour Relations Law: A Comprehensive Guide 6ed 925 pages (LexisNexis 2015) at

Darcy du Toit et al Labour Law Through The Cases – loose-leaf service updated 6 monthly (LexisNexis 2020) EEA 6(1) and (4)

Van Niekerk and Smit (Managing editors) et al [email protected] 5ed (LexisNexis 2019) at

Reasons

“10.6 The first question is whether there is a rational reason for the differentiation. The reason appears to be historical and arises out of the relationship of trust that developed over the years that the four comparator employees worked with Gregory. He had run similar businesses and the four comparator employees had been employed in them.

There is a sound reason to retain a loyal employee’s service. From the point of view of the employer it makes good business sense to retain the employee in a new business operation because the employee has a history and is for example regarded as loyal, trustworthy and reliable.

As a matter of fairness the employer should assist such an employee to remain in employment if he can.

A decision to do this has a rational purpose and achieves a business-like result. One can ask the rhetorical question – What is one supposed to do in such a situation, where such an employee has historically been paid more than the other employees in the workplace when the person with whom he or she has worked takes over a new workplace and the employees follow?

Must everyone else’s salary be raised even if it makes the business uncompetitive or must the loyal employee face a reduction of salary or be dismissed for operational reasons if he or she is unwilling to accept that result? It seems to me that allowing loyal employees to follow and to retain their salary is not irrational.

If there is a rational reason for the differentiation, then the applicant fails at the first hurdle of the onus it bears in terms of section 11(2) of the Act.

This must be so because if there is a rational reason for the higher salary paying it is not arbitrary nor capricious.”

Quotations from judgment

Note: Footnotes omitted and emphasis added

[1] Details of hearing and representation

1.1 The arbitration was held at the CCMA Durban on 31 July 2019 and on 15 and 16 January 2020.
1.2 Both parties were legally represented. Ms Poppesqou of Futcher & Poppesqou Attorneys represented the applicant and Ms Grundlingh of Annelie Grundlingh Attorneys represented the respondent.
1.3 AMCU is the applicant and referred the dispute on behalf of forty-eight of its members. Two of its members testified at this arbitration, namely Mandla Bekwa and Sandile Mvunyiswa. For ease of reference, I refer to the members of AMCU in this award as the applicant employees.
1.4 Twelve of the forty-eight applicant employees are no longer employed by the respondent but persist with their claim seeking relief for the relevant period of their employment.

[2] Issues to be decided

2.1 Whether the respondent employer, who admittedly pays the applicant employees less than four other employees doing similar work, falls foul of section 6 of the EEA. The question I have to decide is whether the distinction drawn in fixing the salary of the applicant employees, who are employed as drivers, and the four comparator employees, who are also drivers, but are paid more than they are, is legitimate in law having regard to subsections 6(1) and (4) of the Employment Equity Act (as amended) (“the EEA”).
2.2 The applicants’ case is that the reason for the differentiation in salary is arbitrary and it is based on attributes of the applicant employees which constitutes discrimination against them that is unfair.
2.3 The respondent disputes that the differentiation in salary is based on an arbitrary ground. The basis for the differentiation emerged from the evidence of a director, James Gregory. The four comparator employees, who earned a wage higher than the applicant employees employed by the respondent had a history with Gregory and essentially followed him when he returned to take over the respondent after it fell into operational difficulties, and were retained on their historical remuneration. Their wage was not reduced and as the rest of the drivers were paid at the bargained rate, which was lower, they were paid more than their co-drivers employed by the respondent. The respondent contended that this reason was rational and not arbitrary and that what was being done did not amount to unfair discrimination.

[3] Background to the issue

3.1 The salient underlying facts were common cause and mostly agreed. I set these out below:

(a) The comparator employees, as set out in the pre-arbitration agreement, are:
(i) SA Scott
(ii) A Albers
(iii) SS Makhubo
(iv) P Edwardes
Albers, Edwardes and Makhubo testified at the arbitration. Scott, who is no longer employed by respondent, did not. The applicant employees and the comparator employees, are currently, or were employed, by respondent as Category Code 14 Ultra-Heavy Motor Vehicle Drivers, as defined in the National Bargaining Council for the Road Freight and Logistics Industry Collective Agreement.
(b) The applicant employees and the comparator employees provide substantially the same services.
(c) James Gregory was originally party to the establishment of the respondent. In 2004 he sold his shares in the business to his partner. The business failed and he returned to rescue the business during 2013 that at the time employed in excess of 200 employees. He met with his co-Directors in a business known as Burgasoline and they agreed to pull all resources from the companies group to rescue the respondent. Because of this decision shares in 777 (Pty) Ltd were sold and the proceeds of the sale were utilised to rescue the respondent.
The comparator employees were retrenched and moved from 777 (Pty) Ltd to Kanquip on fixed-term contracts of employment from 1 June 2013 until 28 February 2014 because of the uncertain financial position of the respondent, and the fear it would be liquidated. Kanquip, inter alia, provided support services to the respondent.
They were employed on the same salary as that at 777 (Pty) Ltd. Gregory in his evidence said it would have been unfair to do otherwise because of their years of loyal service and experience at 777 (Pty) Ltd. Albers and Edwardes had almost fifteen year’s service while Makhubo had almost thirteen year’s service. Kanquip’s business included delivery of petroleum products to clients, to depots and service stations. By December 2013 respondent had shown tremendous growth. Kanquip was made dormant and its staff distributed on their same salaries to other companies in the group. The four Comparator Employees were moved to the respondent which employed them at the salary they had earned at Kanquip, which was higher than the salaries being paid to the existing drivers employed by the respondent.
3.2 Considerable evidence was given and time spent during the arbitration on two aspects.
(a) The first was whether the unfair differentiation in pay impaired the dignity of the applicant employees. Bekwa and Mvunyiswa testified that it did. They testified that the difference in pay entitled the Comparator Employees to a higher standard of living, and they were able to afford, inter alia, better food, housing, retirement benefits, pension and education for their children. This led to them, they said, feeling undermined and undervalued. The respondent disputed their averments, and its witnesses testified as to why that was not the case. I do not set that evidence out in the body of the award. Four thousand rand proportionally at the level of the salaries paid to drivers is a huge amount and obviously having, or not having, the extra income would impact on their respective standards of living.
(b) The second issue on which a great deal of time was spent was whether certain applicant employees had the responsibility of training the comparator employees when they arrived at respondent in January 2014. The applicant employees claimed that the comparator employees were new to the transport of fuel to service stations, and that it had been their responsibility to provide them with the necessary training. The respondent and the comparator employees disputed this in evidence.
In my assessment the evidence, verbal and documentary, overwhelmingly established that the comparator employees were experienced drivers, had been responsible, inter alia, for the transfer of fuel to service stations and depots for many years, and had the necessary certification to enable them to do that. The probabilities are strongly against the applicant employees’ version in this respect. When training was provided the evidence was that this was done by the various petroleum companies and by specialist trainers, and not by other drivers themselves. This dispute has little relevance to the question in the arbitration and I do not deal with this aspect further in this award.
3.3 Although the comparator employees had been in employment at respondent since 2014 the respondent did not reduce the gap in remuneration between the comparator employees and the applicant employees.

[4] Evidence

4.1 The underlying facts are mainly common cause and I do not repeat those that I have set out under issues and background above.

[5] Applicant’s evidence

5.1 Applicant adduced the evidence of four witnesses. These were Adrian Parker, a candidate attorney, Albert Masuku, a union official, and two applicant Employees, Mandla Bekwa and Sandile Mvunyiswa.
5.2 Parker highlighted the difference in salary between the Comparator Employees and the applicant Employees. Masuku covered the background to the dispute and described unsuccessful attempts to settle the dispute contending that the respondent was responsible for that failure. I have set out a summary of Bekwa’s and Mvunyiswa’s evidence above in paragraph 3.2 and do not repeat their evidence in this section.

[6] Respondent’s evidence

6.1 Respondent led the evidence of four witnesses. These were three of the four comparator employees, Alex Albers, Samuel Makhubo and Peter Edwardes. James Gregory, a director of respondent, also testified.
6.2 The three comparator employees did not understand the nature of their transfer from one business to another, from 777 (Pty) Ltd to Kanquip and then to respondent. They said it was only Gregory who would be able to explain why and how they were transferred from one business to another. They had all worked for Gregory for many years, as drivers responsible for transporting fuel to both service stations and depots.
6.2.1 Respondent’s primary witness was Gregory. He described in some detail the history of his family’s involvement in various companies and businesses including the respondent and I have set out the crux of that and how it relates to the employees in (3.1)(c) above. Gregory described the comparator employees as being long service, loyal workers and as he moved them from company to company, he did so on the same terms and conditions of employment. He testified that the comparator employees had many years of service, had proved that they were capable and had received increases over the years. There was an apparent salary increase for Scott that Gregory could not explain when he was questioned in cross-examination.
6.2.2 There was an apparent misunderstanding of instructions by the respondent’s attorney as at the commencement of the arbitration it was alleged that the four were taken over by reason of the business being taken over as a going concern, which was plainly never the situation. They moved with James Gregory for the reasons he gave, essentially their loyal long service to companies in which he was involved and they essentially kept their salaries that had grown with increases over time when they arrived at the respondent in January 2014.

[7] Argument

7.1 Both parties submitted helpful detailed written argument. I summarise the arguments briefly.

[8] Applicants’ argument

8.1 The applicants’ case is that in paying the comparator employees a little less than forty percent more than the applicant employees doing similar work the respondent had discriminated against them on an arbitrary ground, which discrimination they submitted is on-going. The arbitrary ground is that the comparators were paid more merely because of their employment at a previous company, 777 (Pty) Ltd in which a director of respondent, James Gregory, had an interest.

The applicants claim the differentiation in salary is not rational, amounts to discrimination, which discrimination is unfair. The applicants argue that it is discrimination that adversely impairs their human dignity. The applicants submit that the respondent’s defence, that the Comparator Employees were subject to a section 197 transfer was not proved, and that the transfer that took place was not on the same terms and conditions of employment. The applicants argued that even if there had been a transfer in terms of section 197, that this in the event is not a valid defence to an unfair discrimination claim such as this.
8.2 The applicant employees presently in the employment of the respondent sought redress for the alleged unfair discrimination on an arbitrary ground on the following basis:
(a) That they be remunerated on the same basis as the comparator employees from the date of the arbitration award, or from the date six months prior to the referral to the CCMA, which is 26 February 2018 or from such date as deemed reasonable by the Commissioner.
(b) That the applicant employees who are no longer employed by the respondent be paid those amounts they would have received had they been remunerated equally with the comparator employees during the period of their employment.
(c) Alternatively, the applicant employees sought reasonable compensation.

[9] Respondent’s argument

9.1 The respondent admits that the applicant employees are paid less than the comparator employees. It contends that there is a rational, justifiable and fair historical reason for the differential payment and that it is not an arbitrary, or a prohibited ground, and that it has not discriminated against the applicant Employees. The respondent disputes that the differential pay impairs the human dignity of the applicants. Its case is that the comparators had initially been employed at 777 (Pty) Ltd, but after that was sold as a going concern, through a section 197 process, the Comparator Employees did not wish to remain with 777. Consequently they were absorbed into another company, Kanquip, on the same terms and conditions of employment as existed prior to the section 197 process at 777. When Kanquip became dormant, the Comparator Employees were absorbed into respondent again on the same terms and conditions of employment.
Respondent claimed it was unlawful and unfair for it to do otherwise. Respondent argued that the evidence of Gregory established that the Comparator Employees had worked for him for some time in various companies in which he had an interest, prior to them being employed by the respondent. When previous companies were sold, or closed, he would move what he described as long serving and loyal employees to another company of Gregory, to provide them with work.
9.2 The respondent submits that the transfer of the comparator employees on the same salary from 777 (Pty) Ltd to Kanquip and thereafter to respondent, and on salaries they accrued at the point of transfer from Kanquip to respondent, is the cause for the differentiation in remuneration, and that does not constitute an arbitrary process. Respondent asked that the application be dismissed.
9.3 Respondent suggested that should the Commission find in favour of the applicants that:
(a) The Commission take into consideration the impact of an award on the sustainability of the business operations and job security of the employees.
(b) That it would be in the interests of all parties to order that the respondent increase the applicant employees’ remuneration gradually/annually to the level of the Comparator Employees by “red-circling” the Comparator Employees’ salary.

[10] Motivation and analysis of evidence and argument

10.1 Subsections 6(1) and (4) of the Employment Equity Act (“EEA”) as amended provide as follows:

“[1] No person may unfairly discriminate, directly or indirectly, against an employee, in any employment policy or practice, on one or more grounds, including race, gender, sex, pregnancy, marital status, family responsibility, ethnic or social origin, colour, sexual orientation, age, disability, religion, HIV status, conscience, belief, political opinion, culture, language, birth or on any other arbitrary ground; and
. . .
[4] A difference in terms and conditions of employment between employees of the same employer performing the same or substantially the same work or work of equal value that is directly or indirectly based on any one or more of the grounds listed in subsection (1) is unfair discrimination.”

10.2 Section 11(2) deals with the burden of proof and provides as follows:

“If unfair discrimination is alleged on an arbitrary ground, the complainant must prove, on a balance of probabilities that –
(a) The conduct complained of is not rational;
(b) The conduct complained of amounts to discrimination;
(c) The discrimination is unfair.”

10.3 The applicant relies upon discrimination on an arbitrary ground. So, what had to be proved were all three elements in section 11(2) in relation to the common cause fact that there is a difference between the wages of four drivers and the rest of the drivers employed by the respondent. That difference is significant and arises out of the fact that the four comparator employees essentially followed Gregory, who is a director of the respondent from other businesses he operated.

10.4 The applicants’ case is that the reason for the differentiation is not rational and therefore arbitrary or capricious, that it is based on an attribute or characteristic of those who are paid less than the four, namely that they did not have a prior relationship with James Gregory and did not follow him from business to business and is thus discrimination and since the reason is arbitrary such discrimination is unfair.

10.5 The proper approach to the question of whether or not differentiation amounts to unfair discrimination on an arbitrary ground has been decided in the Labour Court in the case of Naidoo and others v Parliament of the Republic of SA (2019) 40 ILJ 864 (LC) [Note: Appeal disallowed by LAC on 7 May 2020 per Sutherland JA reported at [2020] 10 BLLR 1009 (LAC)].

This is set out in the judgment as set out below:

“[35] ‘Arbitrary ground’ provided for in s 6(1), read in conjunction with s 11(2), makes it clear that the irrationality of differentiation per se will not win a discrimination case based on an arbitrary ground. The conduct complained of must amount to unfair discrimination in that it must cause an injury to human dignity. Discrimination has to exist to begin with before rationality is considered. Irrationality does not win a case, the irrationality of discrimination does.

[36] Differentiation per se does not constitute discrimination. Differentiation on a specified ground of discrimination is presumed to constitute unfair discrimination, which presumption is rebuttable. Given that an arbitrary ground is synonymous with an unlisted/unspecified ground, the test for whether discrimination is established, is that set in Harksen, namely, if there is differentiation based on an unspecified ground, then whether or not there is discrimination will depend upon whether, objectively, the ground is based on attributes or characteristics which have the potential to impair the fundamental dignity of persons as human beings or to affect them adversely in a comparably serious manner.

[37] Although the Constitutional Court did not provide a comprehensive description of what ‘attributes and characteristics’ would comprise, it held that:

‘What the specified grounds have in common is that they have been used (or misused) in the past (both in South Africa and elsewhere) to categorise, marginalise and often oppress persons who have had, or who have been associated with, these attributes or characteristics. These grounds have the potential, when manipulated, to demean persons in their inherent humanity and dignity. There is often a complex relationship between these grounds. In some cases they relate to immutable biological attributes or characteristics, in some to the associational life of humans, in some to the intellectual, expressive and religious dimensions of humanity and in some cases to a combination of one or more of these features.’

[38] The test set out in Harksen v Lane NO & others will apply and, in order for the alleged grounds of arbitrary discrimination to qualify as such, they must, objectively, constitute grounds based on attributes and characteristics which have the potential to impair the fundamental human dignity of persons as human beings or to affect them adversely in a comparably serious manner to a listed ground. In short: the unequal treatment must be based on attributes and characteristics attaching to a person before it will fall within the meaning of ‘discrimination’.

[39] Fourthly, the Explanatory Memorandum, in respect of adding the phrase ‘or any other arbitrary ground’ to s 6(1) of the EEA, explained that it was added, inter alia, to bring s 6(1) of the EEA in line with the formulation of s 187(1)(f) of the Labour Relations Act 28 (LRA).

In New Way Motor & Diesel Engineering (Pty) Ltd v Marsland, the Labour Appeal Court, when interpreting s 187(1)(f) of the LRA, which provides for unfair discrimination on any arbitrary ground, accepted that an arbitrary ground is one which has the potential to impair the fundamental human dignity of persons as human beings or to affect them adversely in a comparably serious manner. I can see no reason not to accept the same interpretation of the phrase ‘any arbitrary ground’ as provided for in the EEA.

[40] Lastly, arbitrary or irrational differentiation per se is not elevated to discrimination and should not be interpreted in that sense. ‘Arbitrary’ in itself is not a ground of discrimination and should s 6(1) of the EEA be interpreted to, in effect, include a general right to rational differentiation, it would have a sweeping effect on the employment landscape. The differentiation tail should not wag the discrimination dog.”

10.6 The first question is whether there is a rational reason for the differentiation. The reason appears to be historical and arises out of the relationship of trust that developed over the years that the four comparator employees worked with Gregory. He had run similar businesses and the four comparator employees had been employed in them. There is a sound reason to retain a loyal employee’s service. From the point of view of the employer it makes good business sense to retain the employee in a new business operation because the employee has a history and is for example regarded as loyal, trustworthy and reliable.

As a matter of fairness the employer should assist such an employee to remain in employment if he can. A decision to do this has a rational purpose and achieves a business-like result. One can ask the rhetorical question – What is one supposed to do in such a situation, where such an employee has historically been paid more than the other employees in the workplace when the person with whom he or she has worked takes over a new workplace and the employees follow?

Must everyone else’s salary be raised even if it makes the business uncompetitive or must the loyal employee face a reduction of salary or be dismissed for operational reasons if he or she is unwilling to accept that result? It seems to me that allowing loyal employees to follow and to retain their salary is not irrational. If there is a rational reason for the differentiation, then the applicant fails at the first hurdle of the onus it bears in terms of section 11(2) of the Act. This must be so because if there is a rational reason for the higher salary paying it is not arbitrary nor capricious.

10.7 Although this finding is the answer to the application and the reason why in my view it must fail, I deal in the paragraphs that follow with the situation as I see it if I am wrong in finding that the differentiation is not arbitrary and examine, if it is arbitrary, whether the test with regard to discrimination based on an attribute or characteristic similar to the listed grounds has been proven.

10.8 If I am incorrect and the decision to pay the four employees who followed Gregory what they were earning before (which is higher than most of the drivers) is not a rational reason and is arbitrary, the next question that has to be asked is whether or not the unequal treatment is based on attributes and characteristics attaching to a person of a kind similar to those of the listed categories.
The historical fact that most of the drivers did not have a history of employment with Gregory is not an attribute or characteristic of a kind similar to race or religion and any of the other listed grounds as described by Harksen which objectively has the potential to “impair the fundamental dignity of persons as human beings or to affect them adversely in a comparably serious manner” as a listed ground.

There is nothing in the attributes or characteristics of the applicant employees that is the reason for them being paid less than the four. I understand that those who earn less would feel that they would be much better off if they were earning more and that it is likely that there will be jealousy and a feeling that the differentiation is unfair, but I do not see how it can lead the workforce to feel demeaned or for their dignity and feelings of self-worth to be impaired because of some personal attribute that is being used to demean them.

There are four people out of a workforce of over forty who for historical reasons are overpaid significantly, because they followed a director and historically earned more and were not forced to take a reduction or give up their employment.
Objectively the fact that they earn more than their colleagues is due to their good fortune but not because of conduct or for a reason based on the attributes of their colleagues that would demean.

I conclude that even if the differentiation is arbitrary on the narrow test set out in the Naidoo case, applying the test in Harksen, the applicants have not shown that the differentiation amounts to discrimination under the Act.

10.9 If I am wrong and what is happening does amount to unfair discrimination then it seems to me that the remedy would not simply be an award that everyone should be paid at the higher rate. That makes no sense from a business view.
If the finding was that the differential between the wages of the higher paid four Comparator Employees and the balance of the employees amounted to unfair discrimination and must therefore end, the employer should then have the option of dealing with this in a businesslike manner having regard to the operational needs of the business and either, if that is practical, raise everyone’s wage to the higher level so all are equal, or drop the wage of those who are paid more with their agreement.
Failing agreement the employer would be entitled to dismiss them for operational reasons because the operation cannot afford all the drivers to be paid the higher wage that four earn for historical reasons, and which are not market related, and would not be realistic for all the employees to be remunerated at that level.

10.10 This is not the kind of case where costs should be awarded. There is no order as to costs.

[11] Award

11.1 The application is dismissed.