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Employee Status: Commission-only Employee

Employment Law , , , ,

Some questions linger with regards to the legal employment status of an employee who is remunerated on a 100% commission basis, especially during the COVID-19 lockdown. The question of whether a commission-based employee is considered an employee is a prevalent one, especially in the South African employment environment where many employers try to circumvent he Labour Relations Act (LRA) in how they describe persons who perform services to their business. (Also read: “The Perpetual Independent Contractor,” 12 March 2020.)

According to Section 1 of the LRA, an employee is defined as:

Any person, excluding an independent contractor, who works for another person, or for the State, and who receives, or is entitled to receive, any remuneration, and any other person, who in any manner, assists in carrying on or conducting the business of an employer.

In addition, Section 83A of the Basic Conditions of Employment Act states that a person is presumed to be an employee of any other person to for whom they work or to whom they render services until the contrary is proven, regardless of the form of contract, if one of the following factors are present:

  • the way in which the person works is subject to the direction or control of another person
  • the person’s working hours are subject to the control or direction of another person
  • where a person works for a business or organisation, the person is a part of that business or organisation
  • the person has worked for another person an average of 40 hours per month for the preceding 3 months
  • the person is economically dependent on the person for whom they work or renders services
  • the person is provided with tools or equipment with which to perform the work or services by the other person
  • the person only works for or renders services to 1 (one) person,

These factors are referred to collectively as the “Section 83A Presumption.” This presumption is however not applicable to person who earn above the threshold of R205 433.30 per year, as per section 6(3) of the Basic Conditions of Employment Act.

A commission-only employee is a person who derives their entire income from the commission they earn on the work performed or services rendered to another person.

Commission-only employees typically have flexible working times and the way their work is performed, or services rendered may be left to the employee’s discretion and are not usually controlled by the employer.  The BCEA does not, however, set a required minimum time that an employee must work and only provides for limits on work time in terms of chapter 2 of the Basic Conditions of Employment Act.

Considering the application of the Section 83A Presumption, a commission-only employee will likely meet the basic requirements to be deemed an employee. Therefore, employers must ensure that commission-only employees are provided the minimum rights as per the Basic Conditions of Employment Act.

In terms of the COVID-19 lockdown, it is important to keep in mind that according to the National Minimum Wage Act (NMWA) of 2018, all commission based employees are legally entitled to receive at least the minimum wage and the commission payment in terms of their agreement with the employer. Section 3 of the NMWA provides that the laws relating to minimum wages apply to all employees and their employers.  This means that every employee is entitled to receive no less than the national minimum wage. The Act takes precedence over any contrary provision in any contract of employment and cannot be waived. Thus, commission-only employees are entitled to some form of income during this lockdown whether from mandatory paid annual leave or through the COVID-19 Temporary Employer/Employee Relief Scheme (TERS).

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Employers and POPIA

Employment Law , ,

The Protection of Personal Information Act (POPIA) has been in partial effect since November 2013. As of 01 July 2020, most of the remaining sections has commenced, and these sections bear relevance to employers.

The POPI Act is formulated based on the provision of the Constitution of the Republic of South Africa (Section 14, 1996) which provides that everyone has the right to privacy, including protection against any unlawful collection, retention, dissemination or use of personal information.

The Act itself promotes the protection of personal information processed by both public and private institutions. It establishes minimum requirements for the processing of personal information and provides for the establishment of an Information Regulator to exercise certain powers and to perform certain duties and functions in terms of the Act as well as the Promotion of Access to Information Act (2000), the issuing of codes of conduct, the rights of persons regarding unsolicited electronic communications and automated decision making and to regulate the flow of personal information across the borders of the Republic and all connected matters. It applies to the processing of personal information of all personal data that is entered into a record by or for a responsible party through either manual or automated means.

These provisions also impact the means and methods employers, as the responsible party, use to gather, record, store, and use employee records. Anything that the employer collect that contains an employee’s personal information is governed by this Act. Personal information includes an employee’s application file, personal file, payroll information, leave/medical file, and any other information the employer has about the employee. In other words, anything that employer collects that contains an employee’s personal information.

The POPI Act defines “personal information” in very broad terms to include any information relating to the identity of a person as well as any information that can be used to identify a person, such as race, gender, sex, marital status, nationality, ethnicity, sexual orientation, physical or mental health, disability, religion, culture, language, education, medical, financial, biometric, criminal or employment information, identifying number, symbol, e-mail address, location, opinions, confidential correspondence, etc.

It is a fundamental principle of POPIA that an employee must consent to the processing of his/her personal information. This means that he/she must be fully informed of the scope and nature of the processing. Consent must also be given voluntarily for a specific process. Consent gained by an employer using an unequal negotiating position, will not meet the definition of consent according to the POPIA.

POPIA in practise

Employers must ensure that staff responsible for processing personal employee information, as described by the Act, are aware of the conditions and requirements imposed on employers by the Act.

Employers should review all data records to determine what personal and/or sensitive information it has for employees and where the information is stored. Where information is being processed without consent, employers should determine what the legitimate basis is for doing so, and if the processing is based on the “legitimate interest” of the employers, this should be documented. Employees should be notified of the scope and nature of personal information processing and their consent to do so must be gained for processing any information that has not been obtained or kept legitimately.

Notify employees of the nature and scope of processing and gain consent to the extent that any employee data is not being processed for any reason other than a legitimately sound one.

Data privacy policies should be drafted, and all employees must be trained with regards to the content of the policy. This policy should include steps by which employees can lodge complaints against the processing of personal information.

Employment contracts should be reviewed and updated where necessary to include wording in compliance with the principle of consent by the employee to process specific personal information, as required to enter into a contractual relationship – including full information of the scope and nature of the processing. An employment contract cannot include a general consent clause with the intent to cover ongoing information processing during the period of employment. POPIA defines ‘consent’ as “any voluntary, specific and informed expression of will in terms of which permission is given for the processing of personal information.” A general consent would not satisfy the requirement of specificity to every instance of information processing.

This article is offered only as an introduction to the implications of POPIA and its impact on employment. Employers have a 12-month grace period from the commencement of the act to reach compliance and are strongly encouraged to consult with a labour and personal information specialist. Contact our Cape Town office for assistance 021 919 6418.

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Theft in the Workplace

Employment Law , , , ,

Theft is accepted as one of the more egregious transgressions in the workplace. It speaks to the root of the employment relationship which binds the employer and employee to act in good faith towards each other in the common interest of both parties. When one party breaks that trust, the working trust relationship between the employer and employee could be unsalvageable thus the well-known sanction of a summary dismissal for theft.

Unfortunately, employers very often act in the heat of the moment, reacting to the distress of discovering a theft, immediately dismissing an employee without following a fair procedure. Summary dismissal without having a disciplinary hearing process could, and often does, lead to the employee referring a dispute to the CCMA for unfair dismissal based on the procedural fairness being challenged. This will almost guarantees that the employer will lose the case in spite of the merits of the case for theft against the employee. When the CCMA has to look at unfair dismissal dispute they need to decide on a substantive and procedural fairness of the case. And in such an instance, the employer would have failed on a procedural fairness.

It is crucial that employers keep in mind that, according to the Labour Relations Act (Schedule 8) an employee may only be dismissed on the grounds of the conduct or capacity of the employee, or the operational requirements of the employer. Also, dismissal is unfair if it is not for a fair reason and in accordance with a fair procedure. This means that even though there may be concrete evidence that an employee did commit a theft, an employer is still required to follow a fair procedure prior to dismissing an employee.

Therefore, a disciplinary code is vital to ensure that the rules of the workplace are clear to both employees and employers. There should be a rule in place, the employee should have been aware of the rule and the employee should have broken the rule. Such a policy must make it possible for an employer to, in the case of serious misconduct, to proceed directly to a disciplinary hearing. The disciplinary hearing must follow a set standard and must allow the accused employee to state his or her case. (Refer: Procedurally fair disciplinary hearings)

To prove the substantive part of the accusation, an employer must be able to prove that:

  • the employee took goods or property that did not belong to him/her,
  • the employee knew that permission was required to take the goods or property, and did not have the necessary permission to do so,
  • that by taking the goods or property, the employee deprived the employer the use or benefit of the good or property, and
  • the employee had no intention of returning the goods or property to the employer.

It is also important to keep in mind that, when an employee is dismissed, that the charge on which the guilty verdict leads to the sanction of dismissal is correctly formulated. In other words, if an employee is accused of misconduct for theft, but dismissed because it is determined that the trust relationship between the employer and employee is irreparably broken, may lead to a finding of unfair dismissal at the CCMA.

In a reading of case law, it becomes clear that there are no clear rules for a sanction of dismissal in the case of theft, and employers are advised to examine all the circumstances related to the incident as well as the circumstances of the of the employee to determine whether the trust relationship is irreparably broken. Employers should also consider whether progressive discipline, such as a final warning, may not be more appropriate to the circumstances.

Irrespective of the investigations done, processes followed, and considerations allowed, employers must treat every dismissal as a potential, if not probable, CCMA case and ensure that all policies and procedure are followed and documented.

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Constructive Dismissal

Employment Law , , , ,

A successful claim for Constructive Dismissal against an employer can be an extremely costly penalty, and not just in financial terms. Following on from the need for a solid grievance policy, as well as dealing with harassment and victimisation quickly and fairly, it is important to take note of the very real threat of facing a claim for Constructive Dismissal.

Constructive dismissal, according to Sections 186 (1)(e) and 193 of the Labour Relations Act (LRA), is when “an employee terminates a contract of employment with or without notice because the employer made continued employment intolerable for the employee”. In other words, the employee felt that, due to the environment created by the employer s/he had no other option but to resign.

This does not mean that any situation with which an employee is unhappy would be eligible to be deemed a basis for Constructive Dismissal. Common complaints about aspects of their work, their employer, or their duties and tasks does not automatically mean that it has become intolerable for the employee to continue employment. For a Constructive Dismissal to occur, the intolerable circumstances must have been created by the employer due to which the employee feels the only recourse left to them is to resign. Complaints and grievances that are considered valid to be deemed intolerable include (but are not limited to) assault, sexual harassment, victimisation, or harassment. Many of these complaints potentially have separate claims but can also form the basis for a claim of Constructive Dismissal.

For a claim of a Constructive Dismissal to be successful, the employee will have to prove to the Commissioner that there were no ulterior motives behind his/her resignation, in other words, that but for the intolerable circumstances being alleged, the employee would have remained in the employ of the employer indefinitely.

The Commissioner will look for the following five elements to prove a Constructive Dismissal:

  • The circumstances at work were so intolerable that the employee could not continue.
  • No reasonable alternative was available to the employee at the time and resignation was the only way the employee could escape the circumstances.
  • The intolerable circumstances were the reason the employee resigned.
  • The employer caused the intolerable working situation.
  • The employer was in control of the intolerable working situation.

Ideally, any serious grievance an employee lodges should be resolved in a fair and equitable manner within the company. It is difficult for employees to prove Constructive Dismissal at the CCMA if they had not exhausted all internal procedures, where it is a reasonable option. By example, it would not be considered reasonable for an employee to lodge a serious grievance, such as sexual harassment, where the employee is employed in a small business and the alleged harasser is the employer.

A company that does not have a grievance procedure or internal complaints policy, could find themselves in jeopardy as an affected employee could cite this as a reason that they had no other options available to them to resolve the conflict, and resigned to escape the situation. This again emphasises the necessity for an established and robust company grievance policy, and the need for a Human Resource support structure or agency, and employers are strongly advised to implement such measures.

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Legal implications of “bullying” in the workplace

Employment Law , , , ,

Bullying is a term usually associated with schoolchildren i.e. taunting, pushing, shoving, and picking on the new or different kid in the class. However, bullying is also a reality amongst adults in the workplace. These actions are more commonly referred to as harassment and victimisation.

Under current labour laws, including the Labour Relations Act (LRA), the Basic Conditions of Employment Act (BCEA), or the Employment Equity Act, bullying is not explicitly defined. However, section 6(1) of the Employment Equity Act does contain a prohibition against unfair discrimination:

“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.” Section 6(2) adds: “Harassment of an employee is a form of unfair discrimination and is prohibited on any one, or a combination of grounds of unfair discrimination listed in subsection (1).”

Ordinarily, bullying will be deemed harassment, and therefore will fall under the ambit of unfair discrimination, even if the reason for the bullying is not one of the grounds listed under section 6(1) of the Employment Equity Act. If the reason for the harassment can be demonstrated, a case for harassment/bullying can be made.

Bullying often rears up when an employer wishes to force an employee to resign without reason or provocation, thus not having a justifiable reason or sufficient evidence of misconduct to follow the correct disciplinary procedure to remove the employee from the workplace. The Employer then resort to aggressive and harassing behaviour to make continued employment for the victim unbearable.

Therein lays the real risk to Employers. According to the CCMA, employers have a duty of care to protect their employees from bullying, harassment, and victimisation. Under the umbrella term “harassment” this is classed as unfair discrimination due to a violation of human rights.

When employees are unfairly discriminated against in this way, they should have the normal company grievance procedure available to them to resolve the matter. Employers are obligated to investigate the case and where necessary, take disciplinary action against the harasser. If the matter cannot be resolved within the company’s internal structures, the complaint can be referred to the CCMA for conciliation. If a resolution is still not reached, the matter will then be referred to the Labour Court for arbitration. In the case where harassment led to, or influenced, a dismissal the matter may be an automatically unfair dismissal which falls under the exclusive jurisdiction of the Labour Court.

Employers should also take note of the Protection from Harassment Act (Act no. 17 of 2011) which could have even further detrimental implications to a business should they fail to take adequate action on a complaint of harassment (victimisation or bullying). The provisions of this act make it possible for an employee to obtain a protection order against an abusive supervisor or colleague. Such an order, and some of the protective measures deemed necessary by the court, may cause the day to day running of the business to become impractical.

Employers are advised to draft and implement harassment policies as well as training and awareness campaigns in the workplace and to deal with complaints as quickly as possible.

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