Employers in the retail sector face

Transcription

1 Contemporary Labour Law Shrinkage and dismissal Vol. 18 No. 1 August 2008 Have the rules relating to theft and dismissal changed? by Carl Mischke Managing Editor: P.A.K. Le Roux Contributing Editor: Carl Mischke Hon.Consulting Editor: A.A.Landman Published by Gavin Brown & Associates Box Tokai Tel: cll@workplace.co.za Employers in the retail sector face some unique challenges and addressing pilfering or shrinkage is one of them. Shrinkage is another name for small-scale theft: employees remove merchandise stocked by the employer without paying - in most cases the items removed are of relatively low value. This notwithstanding, the offence is one relating to dishonesty on the part of the employee; the essence of the offence being that the employee removed or consumed (in the case of food sold by the employer) merchandise without paying and without permission of the employer. For the most part, an employer s response to theft in the workplace has been relatively straightforward: given that theft destroys the trust relationship between the employer and employee, dismissal was almost invariably seen as being the only appropriate disciplinary sanction. The seriousness of theft as a disciplinary offence was well known amongst employees. Even in situations where the employer had not formulated disciplinary rules in a disciplinary code, employees were expected to know that theft could and would lead to dismissal. Mitigating factors were hardly considered - given the seriousness of the offence itself, its impact on the employment relationship and the view that a continued employment relationship would hardly be possible, factors such as the employee s personal circumstances, length of service or disciplinary record were not relevant. The irrelevance of mitigation Recent decisions of the Labour Court offer ample authority for the view that dishonestyrelated offences, such as theft, are of such a serious nature that mitigation is hardly possible. In Kalik v Truworths (Gateway) & Others [2008] 1 BLLR 45 (LC) the employee was disciplined and dismissed for dishonesty on a charge that she had removed an item from the shop in which she worked without permission. The CCMA Commissioner found that the dismissal was fair, but the employee raise certain procedural issues on review. The Labour Court held that it is not necessary to hear mitigating circumstances where the relationship between the employer and the Inside... Illegal employment and its consequences: The Labour Court and "Kylie" p6 Page 1

2 worker has irretrievably broken down due to misconduct relating to dishonesty: [27] An employment relationship broken down as a result of an act of dishonesty can never be restored by whatever amount of mitigation. The underlying reason for this approach is that an employer cannot be expected to keep dishonest workers in his/ her employ. The other reason for this is to send an unequivocal message to other employees that dishonesty will not be tolerated... The rationale for this approach is also informed by the consideration that a worker with an unblemished record cannot, after an incident relating to an act of dishonesty, continue to be trusted. It is the operational risk to the business of an employer that arises from the dishonest conduct which cancels off whatever good record the worker may have had before the commission of the offence. In other words, there would be no purpose in conducting an inquiry into mitigating circumstances where a worker is guilty of misconduct relating to dishonesty. However, this would not apply in cases involving other forms of misconduct. These sentiments echo a long line of decisions stretching back many years, and in previous cases the Labour Court and the Labour Appeal Court have emphasised the fact that the core issue is not vengeance or moral outrage; instead, in cases such as these involving dishonesty, the employer s operational requirements are at stake. A decision almost invariably cited in this context is De Beers Consolidated Mines Ltd v CCMA & Others (2000) 21 ILJ 1051 (LAC), where the Labour Appeal Court held that an employer s act of routinely dismissing supermarket shelf-packers who steal small items constitutes a sensible operational response to risk management in the particular enterprise. Dismissal as the employer s response to theft is not about morality, said the Court, it is all about the employer s operational needs. Other cases have become almost as famous. In an oftcited dictum, the Labour Appeal Court, in Metcash Trading Limited t/a Metro Cash and Carry & Another v Fobb & Another (1998) 19 ILJ 1516 (LAC), said that theft is theft and it does not become less so because of the size of the article stolen or misappropriated. Trust is the core of the employment relationship and the employee s dishonest conduct breaches the trust the employer places in the employee. And so one could turn back through the pages of history and find case after case dealing with the dismissal of an employee for theft in retail operations. With the passage of time, however, slight changes appeared. The recent decision in Hulett Aluminium (Pty) Ltd v Bargaining Council for the Metal Industry & Others [2008] 3 BLLR 241 (LC) raised a number of issues, including that of the alleged inconsistent treatment of employees. In this case the CCMA Commissioner had concluded that even though the employee was guilty of the dishonesty she had been charged with, dismissal was too harsh a sanction. At this point the effect of the Constitutional Court s decision in Sidumo & Another v Rustenburg Platiunum Mines Ltd & Others [2007] 12 BLLR 1097 (CC) had begun to make its influence felt. The Labour Court still places considerable emphasis on the seriousness of the offence and its effect on the employment relationship: [42] Turning to the issue of the seriousness of the offence, the presence of dishonesty tilts the scales to an extent that even the strongest mitigating factors, like long service and a clean record of discipline are likely to have minimal impact in the sanction to be imposed. In other words, whatever the amount of mitigation, the relationship is unlikely to be restored once dishonesty has been established in particular in a case where the employee shows no remorse. The reason for this is that there is a high premium placed on honesty because conduct that involves corruption by the employees damages the trust relationship which underpins the essence of the employment relationship. There is a slight but still discernible shift taking place - the language used in this decision is markedly less categorical than the language that characterises earlier decisions. It is now recognised that even though minimal, mitigating factors may still have an impact; the relationship is unlikely (but not impossible) to be restored and the presence of dishonesty does not do away with the scale altogether, it merely tilts the scale. There is a softening in the Court s language, perhaps not necessarily, in this judgment at least, erasing the Page 2

3 basic principles. It would be up to the Labour Appeal Court to upset the apple cart. Conflicting LAC decisions Most recently, the issue of the appropriate sanction for a case of theft in a store was raised in Shoprite Checkers (Pty) Ltd v Commission for Reconciliation [sic], Mediation & Arbitration & Others (unreported, JA08/ June referred to as Shoprite 2). In November 2000, the employee was charged with dishonesty (or breach of the employer s rules) in that he consumed company property without paying. The second charge was that he consumed food and drink in places not designated for that purpose. He was charged, found guilty and dismissed. The CCMA Commissioner came to the conclusion that the employee was not guilty on the charges and ordered his reinstatement. In September 2003, the Labour Court, on review, found that the Commissioner s findings in respect of the employee s guilt were open to attack, but, in any case, the sanction of dismissal would be unfair under the circumstances. The Labour Court substituted the Commissioner s reinstatement with a final written warning. On appeal, it was conceded on behalf of the employee that he was guilty as charged. This meant that, for the purposes of the Labour Appeal Court decision, all that remained was the issue of sanction. Just as well, said the Labour Appeal Court, as the employer had installed video surveillance cameras and the employee had been clearly captured on these cameras contravening the employer s policies. The disciplinary infraction in this case consisted of the employee s theft of food and consuming the food in the preparation areas. The employee s response to the charges was unsatisfactory, but the CCMA commissioner uncritically accepted the employee s version of events. It was also clear that the Commissioner had not taken into account the fact that there were clear and published rules relating to where employees were permitted to eat. The Labour Appeal Court summarised a number of earlier decisions relating to trust, dishonesty and the appropriate sanction. It also noted that in October 2000, the employer s store had lost 2.95% of turnover due to shrinkage. This amounted to a loss of about R Employees had been made aware of the shrinkage problem: it had been raised in several meetings and results were posted on notice boards after every stock take. Feedback meetings were held, notices were displayed and the contents of the notices were routinely reinforced by the manager. The video surveillance was installed with the aim of curbing shrinkage even more. The employee had a clean disciplinary record and had worked for the employer for a period of nine years. Even so, the Labour Appeal Court found that he had acted in flagrant violation of the employer s rules which had been implemented for clear and justifiable operational reasons. Other employees who had been found guilty of similar offences had been dismissed and evidence had been led specifically to the effect that the trust between the parties had broken down. Enter the reasonable decision-maker But as alike as the cases may seem, things were different in the case of an employee who had served the employer for 30 years with a clean disciplinary record. The facts in Shoprite Checkers (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration & Others (JA46/05 of 21 December referred to a Shoprite 1) are startlingly similar. Again the employee was charged with eating the employer s food without authorisation in areas where eating was prohibited. The employee was found guilty and dismissed. Two arbitration processes followed. The CCMA Commissioner presiding over the first arbitration (April 2001) found that the employee s dismissal had been both substantively and procedurally unfair and the employer was ordered to reinstate the employee. On review, the Labour Court concluded that the arbitrator had committed gross misconduct in relation to her duties as arbitrator and the award was set aside. The Labour Court remitted the matter to the CCMA to be heard afresh by another Commissioner. The second arbitration duly took place and the second CCMA Commissioner again found that the employee s dismissal was both substantively and procedurally unfair. However, the CCMA Commissioner did not find the employee innocent on the charges put to him - on the contrary, he rejected a number of aspects of the employee s version. The Commissioner found that dismissal was not automatically required in terms of the employer s disciplinary code if an employee was found guilty of breaching the rules the employee had been charged with breaching. The Commissioner, stating that Page 3

4 discipline had to be applied progressively, took into account that the employee had thirty years of service and that he was, as he put it, a first offender. The sanction of dismissal was too severe, and he ordered the employee to reinstate the employee - with no retrospective effect. The employee was also to be given a severe final warning. The effect of this award would be that the reinstatement of the employee, had it taken place, would have been before the end of August But then a second review application followed: this time both parties were aggrieved. The employee was unhappy because he had been found guilty of misconduct and because he had been reinstated without retrospective effect. He was also dissatisfied because he had been given a severe final warning. The employer attacked the Commissioner s finding that the sanction of dismissal was too severe and the order that the employee be reinstated. The review application came before the Labour Court and before the same judge that had heard the first review application. The tape recordings of the CCMA arbitration were missing, and only the CCMA Commissioner s notes were presented as record of the arbitration proceedings (by agreement between the parties). At this stage it was common cause between the parties that the alleged misconduct for which the employee had been dismissed consisted of his eating in parts of the employee s premises in which employees were not allowed to eat and the only questions were whether the employee had been authorised to eat in those areas. On review the Labour Court found that the Commissioner s award was unassailable, but then added that there was discontent on the part of both parties and Contemporary Labour Law is published monthly from August to July of each year. Visit our website at for further information and subscription details. Subscription Enquiries : Tel : (021) Fax : (021) workplace.co.za ISSN X Copyright held by the authors. No part of this publication may be reproduced in any form without the prior written consent of the publishers. that this was compounded by the absence of a proper record. The best thing to do would be to refer the matter back to the CCMA to be arbitrated afresh before a third CCMA Commissioner. Based on the allegations made by the parties and the fact that the summarised transcript did not provide sufficient details to decide in favour of one or the other, the Labour Court said that it would be inappropriate to allow the award to stand or to grant the relief sought by either party. The Labour Court issued its order in August that would have been three and a half years since the employee had been dismissed. And so the Labour Appeal Court was seized of the matter. The employer s case was that the sanction of dismissal was appropriate for the misconduct of which the employee was guilty. The Labour Appeal Court found that the decision of the Commissioner that dismissal was too harsh was reasonably reasoned. It would survive the test of justifiability in relation to the reasons given for it. It would also pass the test laid down by the Constitutional Court in the Sidumo case. Indeed, said the Labour Appeal Court, there is no prospect that a reasonable decision-maker (including a CCMA Commissioner) could on the facts of this case find that dismissal was a fair sanction. The focus fell on the Commissioner s decision not to award backpay - the stated reason for this was that the employee had consumed company products without permission. It was part of the penalty or sanction fashioned by the CCMA Commissioner. But was it justifiable, rational or reasonable for the Commissioner to have done so in addition to the severe final warning? At the time the second Commissioner issued the award, the employee had been out of work for about two and a half years. The Labour Appeal Court s reasoning in this regard focuses on a number of issues, including the employee s length of service and the value of the items: [25] The fourth respondent had been working for the previous 30 years and suddenly he was without employment for two and a half years. Living without income must be very difficult for anybody. It would even be more difficult for a person who for 30 years had always had a job. The suffering that the fourth respondent must have gone through for that period of two and a half years when he had to live without income is suffering which could not and cannot be undone by any compensation that he could Page 4

5 have been or can be awarded or any retrospective operation of the order of reinstatement that could have been made in his favour.... In addition to all that I have said, it must be remembered that neither the appellant nor anybody [else] was able to say what the value was of the company food that the fourth respondent ate in so far as it was company food. It could have been worth R10,00 or R20,00. If one has regard to the evidence it seems that on at least two of the occasions which the appellant relied upon the fourth respondent was very much like a customer, while shopping in a shop such as Shoprite Checkers, picks up a grape here or a grape there and eats it. If one were to assume that the company food that the respondent ate could be valued at R10,00 which is possible and that the fourth respondent s monthly salary was R1000,00, the effect of the commissioner s decision that he should not be paid compensation and that the order of reinstatement should not operate retrospectively is that the appellant does not have to pay him about 33 months salary and amount of R33 000,00. This, said the Labour Appeal Court, could not be right - it is neither justifiable nor reasonable. For the employer, it was not about the monetary value of the food the employee ate; instead, it is about a principle and the real problem of shrinkage that the employer and other businesses face every day. But then the Labour Appeal Court took a new (and troubling) line: [26] I am not ignoring any of this. I am mindful of it but, nevertheless, when all the relevant circumstances are taken into account I am of the opinion that a reasonable decision-maker could not, in the circumstances, of this case, have concluded that an employee who had a clean disciplinary record such as the fourth respondent and had 30 years of service should, in addition to getting a severe final warning for this type of conduct, also forfeit about R33 000,00 for eating food that could well have cost less than R20,00. I do not think that a reasonable decision maker could have sought to impose any penalty in addition to the severe final warning.... It was necessary to interfere with that part of the CCMA Commissioner s award which ensured that the employee did not receive back pay. This led to the question of remedy and whether it was practical for the Court to order the employee s reinstatement. In a few unfortunate passages the Labour Appeal Court then briefly mentioned the Supreme Court of Appeal s decision in Republican Press (Pty) Ltd v Chemical Energy Printing Paper Wood & Allied Workers Union & Others (2007) 28 ILJ 2503 (SCA), and, without any further to-do or considering whether reinstatement was practical, made an order reinstating the employee with full retrospective effect to the date of his dismissal. The decision of the Labour Appeal Court in Shoprite 1 was something the Labour Appeal Court then again had to face in Shoprite 2. The Labour Appeal Court held that Shoprite 1 appeared to run counter to the longestablished jurisprudence but succeeded in distinguishing Shoprite 2 from Shoprite 1 on the basis of the facts. In the earlier decision, the employee had claimed that he had been authorised to taste food and he had, in respect of one occasion, claimed that he had eaten his own food. In Shoprite 2, the employee had gone further and produced manufactured evidence that was manifestly concocted in order to support his own mendacious account. Theft is theft is theft unless For employers the most burning question is whether the rules relating to dismissal for theft, especially in the context of a retail operation, have changed. Should employers, at their own peril, ignore the decisions of the Labour Appeal Court? Will it always be possible to distinguish the decision of the Labour Appeal Court in Shoprite 1 from other cases? For the first time, the decisions of the Labour Appeal Court seem to suggest that the value of the item stolen, the employee s service record and the length of service will now play a role when it comes to considering the appropriateness of dismissal. This is, indeed, contrary to the established jurisdiction of the Labour Court and the Labour Appeal Court, and no doubt most employers will hope that this decision will not lead to a re-writing of all the rules. If this decision ushers in a change, however, it may well mean that theft is no longer theft and that theft in itself will no longer necessarily warrant dismissal. Carl Mischke Page 5

6 Illegal employment and its consequences The Kylie judgment on the illegality of employment by Carl Mischke This was one Labour Court case that almost everyone talked about, a case almost everyone had a view on, and a decision that everyone read eagerly the moment it began to do the rounds. Perhaps the sensational nature of the case, the titillating fact that one of the parties was a self-confessed prostitute and the other party the owner of a brothel and the prospect of some salacious bits and pieces from the shadowy underworld raised expectations a bit too high. Because there can be no doubt that the Labour Court s decision in Kylie v Commission for Conciliation, Mediation and Arbitration & Others (C52/07) disappointed some and surprised many. Kylie performed sexual services for reward; she was employed in a massage parlour and she offered a variety of services, some of which, by her own admission, contravened some sections of the Sexual Offences Act 23 of She was paid a salary and worked 14 hours a day, for the most part, seven days a week. On the uncontested facts before the Court there was no doubt that she was an employee. She lived on the premises and she was subject to rules and fines. She was dismissed because of alleged breaches of these rules and approached the CCMA with an unfair dismissal dispute. The CCMA Commissioner came to the conclusion that Kylie s work was prohibited by the Sexual Offences Act and that her contract of employment was therefore invalid. Neither the Labour Relations Act, 66 of 1995, nor s 23 of the Constitution applied to workers who did not have a valid and enforceable contract and therefore the CCMA had no jurisdiction. This award was then taken on review to the Labour Court. What the Court s decision does not say The Labour Court was at pains to point out what its decision was not about. It does not, for instance, decide whether or not a sex worker is an employee for the purposes of the Labour Relations Act of 1995 (the LRA). The decision does not (and this is a fundamentally important point) decide whether the definition of an employee as it appears in the LRA applies to those people in an employment relationship without a valid contract of employment. The list continues: the decision does not decide whether a sex worker enjoys protection offered by the Basic Conditions of Employment Act of 1997 (the BCEA), occupational health and safety legislation, workers compensation or unemployment insurance. Whether sex workers are entitled to protection under these other pieces of legislation must, said the Court, be determined by looking at each statute individually. In the Court s own words, the decision holds that neither the CCMA nor the Labour Court should enforce the statutory right to a fair dismissal under the LRA. This is an extremely narrow focus, and a focus that may be easy to overlook, especially if one seeks to draw parallels between this decision and another important recent decision of the Labour Court in Discovery Health Ltd v CCMA & others JR2877/06 of 28 March 2008). The argument raised on behalf of the employee (the matter was not opposed by the respondents) was that both the Constitution and the LRA extend to cover sex workers, despite the illegality of their work - should there be public policy concerns regarding the enforcement of illegal contracts, these should be left to a decision-maker (such as an arbitrator) to decide. A sex worker, in other words, is an employee like any other in terms of the LRA, but an arbitrator faced with an unfair dismissal claim brought by a sex worker may, on public policy grounds, decline to reinstate the sex worker and may order compensation instead. The Court provides an outline of its reasoning at the start of the judgment. The first consideration is that organised prostitution is prohibited by the Sexual Offences Act 23 of That courts should neither encourage nor sanction illegal activity is the second consideration: this principle (now sourced in the Constitution) applies also to claims based on statutory Page 6

7 "The common law regards commercial sex of such turpitude to render its transactions as void. The legislature is taken to know the common law when it legislates. If it intended that the penalty for participation in a brothel was to be limited to that provided in the Act, it would have had to expressly undo the common law s approach to prostitution. It did not." Kylie v CCMA & Others rights. This implies, thirdly, that subject to the Constitution, a sex worker s claim to the statutory right to a fair dismissal in terms of the LRA unenforceable. As a matter of principle, the scope of the labour rights in s 23 does not include sex workers and brothel keepers as rights holders; the Sexual Offences Act also constitutes a justifiable limitation on the right to fair labour practices. The net result was that the employee s claim for compensation based on the LRA was unenforceable. Sanctioning illegal activity The cornerstone of the Labour Court s judgment is that there is a fundamental principle of public policy that courts should not encourage or sanction illegal activitycases to that effect go all the way back to 1926, there are even older principles of the common law, such as the rule that no action arises from a base or illegal act or contract. For the Labour Court, this is also a constitutional principle: [30] It is a principle that has a long and distinguished progeny. It is applied by courts in all legal systems based on the rule of law. It is a necessary incident of the rule of law in the same way as the doctrines of legality and rationality are. It is one of the fundamental values on which our democratic republic is based. The importance of these values is evident from the fact that section 1 is more firmly entrenched than other provisions of the Constitution. As the Constitutional Court states in Minister of Home Affairs v NICRO the values enunciated in s 1 of the Constitution are of fundamental importance. They inform and give substance to all the provisions of the Constitution. There are specific common law rules that prohibit the enforcement of an illegal or immoral contract, and if a contract is illegal, the general position is that the contract is void and unenforceable. The Court also considered a number of common law principles and concluded that the courts have not, in the past, enforced contracts that directly or indirectly involve prostitution or recognised a claim based on the earnings of prostitution. The common law position is clear - a court will not enforce a contract by compelling a party to perform an action that is prohibited by statute; nor will a court recognise a claim made by a contracting party if the intention of the statute was to prohibit the activity. For many, one of the surprising aspects of this decision may be the extremely close attention paid by the Court, at least in the early stages of the judgment, to the principles of the common law (this entails that the judgment contains considerably more Latin phrases than one is used to in Labour Court judgments). Two provisions of the Sexual Offences Act 23 of 1957 were relevant in this case. Section 3(a) contains a presumption that any person who resides in a brothel is presumed to keep a brothel (unless he or she proves his or her ignorance of the character of the house or place). Section 20(1)(1A) provides that any person who is over the age of 18 years who has unlawful carnal intercourse or commits an act of indecency with any other person for reward is guilty of an offence. The question is whether the statute also renders a commercial sexual transaction void. The Labour Court had no hesitation in finding that it does: [45] The common law regards commercial sex of such turpitude to render its transactions as void. The legislature is taken to know the common law when it legislates. If it intended that the penalty for participation in a brothel was to be limited to that provided in the Act, it would have had to expressly undo the common law s approach to prostitution. It did not. The fact that it Page 7

8 did not do so either in respect of the new crime of prostitution in section 20(1)(1A) suggests too that the legislature, as recently as 1988 (when the crime was introduced) and 2007 (when the Act was amended to expand the crime to clients) did not see any reason to alter the common law s take on the legality of the contracts that facilitate the prohibited activity. There was no escaping the conclusion, held the Court, that taking into account the provisions and purpose of the legislation, the language used in the legislation and the common law s approach to prostitution that the Legislature intended one thing only: that a contravention of the provisions of the Sexual Offences Act results in a void contract if it is in pursuit of or associated with the prohibition. Section 23 The next question the Court turned its attention to was whether sex workers and their employers are covered by s 23 of the Constitution. The Court s conclusion in this regard was that neither sex workers nor brothel keepers were rights holders in terms of s 23. While the purpose of s 23 is to protect workers and their associations, not everyone who works is covered by s 23 (the relationship between a member of the permanent force and the Defence Force is only related or akin to an employment relationship; it mirrors an employment relationship). The s 23 rights do not apply to persons who own and work in their own businesses, nor does it apply to judges or to cabinet members. The s 23 rights relate to two aspects: who holds rights and the contents of those rights. In the present case, both aspects are at stake: whether sex workers and brothel keepers are holders of s 23 rights and whether the right to fair labour practices applies to sex work in contravention of both legislation and the common law. The question of s 23 rights must also be seen within the context of the value system of the Constitution, for present purposes dignity, equality and the rule of law. Courts and quasi-judicial bodies (such as the CCMA) effectively supervise the employment relationship under s 23(1) of the Constitution and under the LRA. If sex workers were also rights holders in terms of s 23, courts and the CCMA may well find themselves implicated in dealing with that employment relationship. An example had been given by the CCMA Commissioner in this case: if the CCMA has to arbitrate disputes over the dismissal of sex workers, it would have to deal with the anomaly that a sex worker who refuses to obey an instruction sanctioned by what purports to be an employment contract will have the legal right to refuse to obey that instruction because the instruction is itself illegal. Accordingly, said the Court, the enforcement of the right to fair labour practices will lead to the Labour Court and the CCMA sanctioning or encouraging organised prostitution in contravention of the Sexual Offences Act. Would the core of the s 23 rights be undermined or frustrated if sex workers were excluded from their ambit? In answering this question the Labour Court again draws an important distinction between its decision and the earlier Discovery Health decision: [70] There is no question that sex workers are a vulnerable group and subject to exploitation but so are those illegally employed as foreign workers and child workers. It is a consequence of illegality that they are exploited. The difference is that the prohibition in respect of foreign workers and child workers is a prohibition aimed at who does the job rather than the job itself. This means that illegally employed foreign workers and child workers compete with workers in legal employment for jobs. The withdrawal of labour rights in these in instances will create an incentive to employ illegal workers in place of legal ones. The ability to pay less than the established rates of pay in respect of foreign and child workers doing the same work as those in legal employment without the risk of having to be held to the established rate of pay undermines the established rate, threatens the employment and pay security of those in legal employment and encourages the employment of illegal workers the very thing that the Immigration Act and the prohibitions on the employment of children seek to prevent. (emphasis added) The distinction here may be easy to overlook, but it is pivotal nevertheless: in the case of foreigners and children, the disqualification is focused on the person; in the case of sex workers, the focus of the prohibition is on the job, not the person. There is another difference: Page 8

9 the employment of sex workers does not have the same effect as the employment of foreigners or children. It does not undermine pay rates of those legally employed or threaten the job security of legal workers. The Labour Court, concluded its interpretation of the scope of s 23, by stating that the scope of the s 23(1) protection does not include those engaged in prohibited work and this means that as long as Parliament considers organised prostitution a crime, sex workers and brothel keepers fall outside the ambit of protection. Next up in the Labour Court s consideration was whether the Sexual Offences Act could be seen as a reasonable and justifiable limitation on s 23 of the Constitution - in other words, whether the Sexual Offences Act complied with the requirements of s 36 of the Constitution. This is essentially the flip-side of the Court s analysis of s 23 by scope and content: it now looks at the limitations on that right imposed by legislation. On this point the Labour Court found considerable guidance in the Constitutional Court s judgment in S v Jordaan & others 2002(6) SA 642 (CC) where the Constitutional Court had upheld the constitutionality of the prohibitions contained in the Sexual Offences Act. The Sexual Offences Act was challenged in this case on a number of grounds, including the right to economic activity (contained in the Interim Constitution of 1993) and the right to privacy of sex workers. As regards the latter argument, the Constitutional Court came to the conclusion that the Sexual Offences Act represent a justifiable limitation on the right to privacy. The Sexual Offences Act was also challenged on the basis that it infringed the right to dignity. On this point the Constitutional Court held that it was not the Sexual Offences Act that caused the loss of dignity, but the nature of the work itself. The question before the Labour Court was whether the limitation of s 23 was reasonable and justifiable in an open and democratic society based on human dignity equality and freedom, and taking into account the factors listed in s 36 of the Constitution. The Court considered each of the factors listed in s 36: the nature of the right, the importance of the purpose of the limitation, the nature and extent of the limitation, the relationship between the limitation and its purpose and, finally, whether there are less restrictive means to achieve the same purpose. The Court came to the conclusion that, given the legislative choice to prohibit commercial sex, the limitation of s 23 would be justifiable because it gives effect to a fundamental principle of the rule of law: that courts should not condone or encourage illegal activity. Return to the employment contract There is, in principle, nothing preventing the legislature from extending the right not to be unfairly dismissed (s 185 of the LRA) to workers who do not fall under the ambit of s 23 of the Constitution, unlikely as this may be. When it comes to the LRA itself, the Court it is clear that the wording of the definition of an employee (in s 213 of the LRA) is wide enough to include those without a valid contract of employment. But this alone does not mean that the right not to be unfairly dismissed applies to those without a valid contract of employment. The Court seems to be saying that: the right not to be unfairly dismissed does not apply to those without a valid contract of employment: [90] It is clear from the definition of dismissal in section 186(1) of the LRA that the existence or prior existence of a valid contract of employment is the necessary condition to found the statutory right to fair dismissal. Section 186(1)(a) states that dismissal means that the employer has terminated a contract of employment with or without notice. Section 186(b),(e),(d) and (f) are all premised on the existence of a contract of employment. Paragraphs (c) and (d) relate to defined circumstances relating to the failure to re-engage or re-employ employees that were in employment. The definition in section 186(1) is not open ended because it s opening phrase dismissal means that limits the definition to the specific instances recorded in paragraphs (a) to (f). There is a real tension, in this decision, between the Court s explicit avowal that the decision does not decide that a sex worker is or is not an employee for the purposes of the LRA (at paragraph [4]) and the Court s statement that the wording of the definition of an employee in the LRA is certainly wide enough to encompass those without a valid contract of employment (at [89]). Page 9

10 Nevertheless, the Court continues to state that reading the LRA to include an unenforceable employment relationship would violate the text of the LRA, but there are, said the Court, two further reasons for not doing so. The first reason is that, given the Court s analysis of the scope and limitation of s 23 of the Constitution, there is no constitutional imperative to interpret the LRA in this way. The second reason is that the principle of the rule of law prevents such an interpretation: if a court will not enforce an employee s contractual right to a fair pre-dismissal procedure on the grounds that the contract is void, there seems to be no reason why the statutory right to a fair pre-dismissal procedure should not be treated in the same way. Or, as the Court put it, if a court will not recognise a sex worker s claim for damages for a material breach of his or her contract of employment with a brothel, why should a court or arbitrator recognise and enforce that sex worker s claim for compensation for unfair dismissal arising from that breach of contract? Naturally, the question of remedies also arises. In terms of the LRA, reinstatement is the primary remedy, and if an employee insists on being reinstated, a court or an arbitrator may have little choice but to order reinstatement. But ordering a brothel keeper to reinstate a sex worker would be requiring the employer to break the law or to effectively to reinstate a contract the common law and legislation considers void. Beyond the light of the law Living in a dark and shadowy world often linked to organised crime and drug dealing, there can be no doubt that sex workers are still workers in many cases. They are remunerated by the brothel keeper and they are subject to rules; they are paid for rendering services and they work set hours (which, in this case, up to fourteen hours a day and initially for seven days a week). Just as there are workers in this context, so there are employers who can either be fair or unfair to those they employ. As the Courts have pointed out (and these sentiments are echoed by the Labour Court in this decision), sex workers still have the right to be treated with dignity by both the police and their clients. They are entitled to equality and access to the courts. There are limitations, however. The Labour Court states, in passing, that it would constitute a condonation of organised prostitution if a trade union of sex workers or an employer s organization of brothel owners were registered. Given that the enforcement of a contract between a sex worker and her client would also constitute encouraging that activity, one can only conclude that the enforcement of a collective agreement setting terms and conditions of employment for sex workers would be the same. The Labour Court s judgment starts and ends with the common law principle that courts or tribunals should not encourage or sanction illegal activity this is an oft repeated theme in the judgment. And this is, perhaps, the most important difference between this decision and. the Discovery Health decision. Except for a reference in passing, the Labour Court does not engage with this earlier decision and neither expressly agrees or disagrees with what had been decided in the Discovery Health decision. Given the fact that both decisions dealt with the question of illegal or invalid contracts of employment, criminal provisions contained in legislation and questions relating to the definition of an employee for the purposes of the LRA and the right to fair labour practices, this decision confirms, in a wider sense, what the Labour Court in this case itself said: the guarantee of fair labour practices in s 23(1) is unchartered territory. Yet it is into this very same unchartered territory that our courts now have to venture, and some further challenges in this journey may still await them in the future. This decision should, in the final analysis, be seen as a step in one of those journeys. This case was not so much about the LRA and its definition as it was a case relating to the core of s 23 of the Constitution, the principles and values of the Constitution as a whole as well as the question of criminal activity and how it taints employment relationships. For the time being, the criminal prohibitions eclipsing the lives of sex workers and the Court s interpretation in this may well mean that sex workers remain in that dark and shadowy world we ve come to associate them with. Carl Mischke Page 10