Kruse v Gijima AST (Pty) Ltd [2010] 7 BLLR 722 ; (2010) ILJ 1898 ; [2010] JOL 24998 (LC) Pretorius AJ distinguished the LAC decision.

Do local South African labour laws apply to an employee who resides and works in another country, particularly when the salary is paid from South Africa?

The Labour Appeal Court [“LAC”] in Astral Operations Limited v Parry (2008) 29 ILJ 2668 (LAC) is authority for saying no they do not apply.   Parry was employed by Astral Operations Limited (African Operations) and the relevant contract of employment was entered into in South Africa.   The undertaking in which the employee worked in terms of this contract of employment was located in Malawi.   Although Parry reported to Astral’s head office in South Africa while he worked in Malawi, the company’s Malawian and South African operations were independent of each other.   It is not clear from the judgment whether Parry was also paid from South Africa.  The LAC held that the BCEA and the LRA had no application to a workplace outside South Africa since these Acts had no extra-territorial jurisdiction.   For this reason the LRA and in particular section 77(3) of the BCEA had no application.

However, in Kruse v Gijima AST (Pty) Ltd Pretorius AJ distinguished the LAC decision.

In Parry’s case, all his claims were based directly on a breach of the contract of employment or unfair conduct in relation thereto and was for payment of salary and  compensation for unfair dismissal from his employment.   In addition, Parry brought a claim based on section 23 of the Constitution in respect of the employer’s conduct in terms of that contract of employment.

Kruse was formerly employed by Gijima AST (Pty) Ltd [“Gijima”] and on 22 November 2001 and whilst still in their employ it was agreed that Kruse would accept employment with AST Namibia.   As part of this agreement Gijima  undertook that Kruse’s length of service would remain unchanged.   Pursuant to this agreement Kruse accepted employment with AST Namibia.   Both Gijima  and AST Namibia were part of the AST group of companies.

With effect from 31 May 2006 the services of Kruse were terminated by AST Namibia based on operational requirements and the termination was effected in terms of Namibian law and approved by the Namibian Labour Commissioner.

Kruse was paid severance pay for the period 1 November 1998 to 30 May 2006, being the period he had been employed by the respondent in South Africa in addition to the period he had been employed by AST Namibia.   He was not paid severance pay for the period of prior employment with Iscor.   Kruse had worked for Iscor for 33 years before his transfer to Gijima in terms of section 197 of the LRA.

Kruse claimed damages from Gijima for its failure to honour its undertaking to ensure that the full period of prior service would be recognised for the purpose of calculating severance pay if his services were terminated based on operational requirements in Namibia.

Pretorius AJ held that the written undertaking should be classed as a “collateral agreement” and that the Labour Court did have jurisdiction under section 77(3) of the BCEA to determine a dispute concerning that agreement.

With regard to the issue of territorial jurisdiction Pretorius AJ distinguished the Parry case on the basis that Kruse was not relying on any claim arising out of his employment contract in Namibia but on the “collateral agreement”.   Accordingly Kruse was entitled to rely on that “collateral agreement” entered into in South Africa and where the performance was contemplated by the parties to be carried out in South Africa.