Court Considers Definition of 'Employee' under Labour Relations Act - International Law Office

International Law Office

Employment & Labour - South Africa

Court Considers Definition of 'Employee' under Labour Relations Act

May 21 2008

Facts
CCMA Decision
Labour Court Decision
Comment


A recent judgment in the Labour Court of South Africa, Discovery Health v Commission for Conciliation, Mediation and Arbitration,(1) has determined that the definition of an 'employee' in terms of the Labour Relations Act is not limited to the existence of a common law contract of employment. Even in circumstances where continued employment constitutes a breach of national immigration laws, an illegally employed alien will still enjoy the rights to fair labour practices and access to the statutory dispute resolution mechanisms.

Facts

The application for review concerned whether South African employment law applied to an Argentine national, Mr German Lanzetta. Lanzetta’s employment with Discovery Health (Pty) Ltd, a major South African healthcare provider, was terminated with immediate effect on January 14 2006, due to the expiry of his work permit.

Lanzetta in response referred a dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA), alleging unfair dismissal. Discovery Health raised the absence of jurisdiction as a preliminary point before the CCMA. It contended that the definition of an 'employee' in Section 213 of the act contemplates an underlying contract of employment. Since the contract with Lanzetta was void ab initio (ie, from the outset), he could not be said to be an 'employee'. Lanzetta’s representation argued in response that the definition of an 'employee' in the act contemplates the existence or otherwise of an employment relationship that transcends the contract. While a contract entered into with a foreign national who does not hold a current work permit is invalid, the employment relationship still persists.

CCMA Decision

The CCMA found that while an employer cannot continue the employment of a foreign national without proper authorization, “that does not mean that the protections afforded to employers by the act cannot apply to such foreigners prior to decisions being made in this regard”.

As the Labour Court subsequently noted, this decision ran against the thrust of a line of earlier jurisdictional disputes. The CCMA has traditionally adopted the view that illegal aliens are not employees in terms of the act because their contracts are null and void ab initio. As a consequence, the CCMA has no jurisdiction to determine unfair dismissal disputes in such circumstances.

Lanzetta’s arbitration hearing was postponed pending the outcome of the review to the Labour Court. In this application, Discovery Health sought to review and set aside the CCMA’s jurisdiction ruling.

Labour Court Decision

The Labour Court approached the review by embarking upon two separate but related enquiries. The first was whether the contract of employment concluded between Discovery Health and Lanzetta was valid. The second concerned whether the definition of 'employee' in terms of Section 213 of the act must be underpinned by a common law contract of employment. If this second question is answered in the negative, then the legality of the employment contract is not decisive of whether that person is an employee. However, if the statutory definition of an 'employee' requires a valid common law contract of employment, then where the underlying contract is invalid, that person can never be an employee.

After considering the relevant statutory requirements, the Labour Court held that the Immigration Act does not expressly prohibit contracts concluded where the engagement is not authorized; nor does it suggest that contracts are not enforceable in these circumstances. The court then considered whether an employment contract is void if only one party is exposed to a criminal penalty, establishing authority that the contract is not necessarily void in such circumstances. The court found that by criminalizing only the conduct of an employer that employs a foreign national without a valid permit and by failing explicitly to void such contracts of employment, the legislature did not intend to render invalid the underlying contract. For this reason, the contract concluded between Discovery Health was, in the Labour Court’s view, valid and binding, and remained so until termination by Discovery Health on January 5 2006. Lanzetta was therefore an 'employee' as defined in the Labour Relations Act and the CCMA had jurisdiction to determine the unfair dismissal dispute referred to it. Despite this finding, and in view of the commissioner’s ruling that an employment relationship in any event contends contract, the court also determined whether the commissioner’s finding that there was an employment relationship between Lanzetta and Discovery Health was correct.

An 'employee' is defined in terms of Section 213 of the act as:

(a) 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

(b) any other person who in any manner assists in carrying on or conducting the business of an employer.

As is immediately apparent from this definition, no reference is made to a contract of employment. Despite this, South African courts have interpreted the definition so as to apply only to persons engaged in terms of a common law contract of employment. As a consequence, much South African jurisprudence has interpreted the definition through the law of contract. The Labour Court, however, referring to leading academic Paul Benjamin, agreed that these earlier cases had not been located within a constitutional context; nor had a constitutionally required purposive approach been applied to the interpretation of the definition. The purposive interpretation, according to Benjamin, would require that the statutory provision be interpreted to give effect to the Constitution and the underlying purpose of the statute.

The Constitution is relevant to the case in two respects. First, Section 23(1) provides that everyone has the right to fair labour practices. Since the right Lanzetta sought to enforce was clearly one that related to labour practices, the question was thus how the definition of 'employee' in the Labour Relations Act should be interpreted in light of the obviously more expansive 'everyone'. Second, the Constitution accords international law a particular status by requiring its application when interpreting South African legislation. Following both an analysis of the constitutional issues and relevant international standards, and a consideration of domestic constitutional jurisprudence, the court held that even if the contract concluded between Discovery Health and Lanzetta were invalid, only because Discovery Health was not permitted to employ him under Section 38 of the Immigration Act, Lanzetta nonetheless was an 'employee' as defined by Section 213 of the Labour Relations Act. That definition is not dependent on a valid and enforceable contract of employment.

Comment

This case centred on whether the invalidity of an employment contract would disqualify a person from claiming to be a statutorily defined and protected 'employee'. Although the commissioner did not base his decision on the existence of a valid contract of employment, but relied quite loosely on the concept of an employment relationship, the Labour Court held that his decision reflected the correct outcome. The commissioner’s finding did not, in terms of the current test for review, represent a conclusion that no reasonable decision-maker could reach.

The review application was accordingly dismissed and the matter remitted back to the CCMA for determination on the merits. Only time will tell whether the matter will now proceed to an appeal or be settled. Little purpose would be served by a full arbitration on the merits. The facts are, in main, common cause between the parties and the only issue in dispute might be the extent of compensation due to Lanzetta on the basis of procedural unfairness. However, Lanzetta has contended on the merits that the failure to secure a valid permit was due to tardiness on the part of Discovery. If so, could reinstatement come into play? This would certainly inspire greater interest in the case.

The decision is not without controversy and concern, and its potential application in respect of certain less savoury activities falling within the grey zone may well prove problematic. Despite the comprehensive analysis given to the constitutional issues, historical precedent and international law, the employment law bottom line is that the legislature’s original intention to extend the net of work security through the post-1994 new labour laws rights to as broad a class of work as possible - typical and atypical - is firmly advanced by this decision.

For further information on this topic please contact Rob Perrot at Perrott Van Niekerk Woodhouse Matyolo Inc by telephone (+27 21 418 3611) or by fax (+27 21 418 3683) or by email (perrott@elaw.co.za).

Endnotes

(1) Case JR2877/06 – unreported.


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