Contractual Rights and Reduced Salaries

The impact of the National Lockdown on 27 March 2020, is far from over. Hundreds of MISA members were retrenched during National Large Scale Retrenchments and others through the restructuring or closure of smaller business structures. Those who did not lose their employment, had to face other challenges such as reduced working hours; short-time and reduced salaries.

Salary reductions implemented during the gradual phasing out from Level 5 to Level 1 lockdown, remains a bone of contention. Justifiably so! The question that remains is whether your employer has the right to reduce your salary? No one answer fits all, as there are a number of elements that needs to be considered and each answer will be custom made for the specific scenario surrounding the reduction.

Contractual Rights

Some of the elements to be considered are your contractual rights such as your hours of work, your salary/remuneration, the employer’s rationale and the process that was followed. Ultimately salaries may be reduced through negotiations, consent or operational requirements, specifically as a result of financial distress.

Duty of good faith is a phrase that you have heard numerous times the past eight months in the articles that we have shared with you through our social media networks. Fact is, not only do you have a duty of good faith towards your employer, alternatively it is also the employer’s duty of good faith towards you as employee. It remains a two way street.

From the date of employment, both you and your employer entered into contractual rights and obligations. Your salary and hours of work are some of the rights and obligations agreed to in terms of your employment contract, regardless whether verbally or in writing. You were for instance employed for a specific reason/duty, at a specific salary, with specific benefits and your employer has an obligation to remunerate you accordingly. Throughout your employment, annual performance appraisals might have resulted in salary increases and adjustments, which is if your salary/wage is not governed by the MIBCO Main Collective Agreement.

These rights and obligations can only change through negotiations, consent or operational requirements:

• Negotiation:

Wikipedia define negotiations as ‘a dialogue between two or more people or parties intended to reach a beneficial outcome over one or more issues where a conflict exists with respect to at least one of these issues.’  Your right to your monthly remuneration, after fulfilment of your obligations towards your employer, cannot under common law mero motu, which is at your employer’s own free will, be changed. The first instance through which your remuneration or benefits may be altered or reduced, is negotiations.  

Once an employer informs you of the possibility of altering or changing terms and conditions of your employment, you must engage and actively participate. This important aspect was highlighted in Putco (Pty) Limited v Transport and Allied Workers Union of South Africa and Another [2015] 8 BLLR 783 (LAC). In this instance the Labour Appeal Court held that the employee’s claim of ‘unilateral changes to his terms and conditions of employment’ lacks foundation as a result of his failure to object to the proposed change and his failure to engage in the extensive consultative processes.

• Consent:

In its simplest form, consent means that you decide to give permission for something to happen, or you decide to agree to something. In this regard the most important thing for you to remember is that the decision is yours and that with every decision taken there is consequences or responsibilities that goes with that. Saying yes or signing consent without establishing all the facts and the impact on you, may have dire results. A word of caution, do not sign unless you have all the facts, understand the impact when you sign and when you don’t, only sign when you agree.

An important aspect to take note of is that when you consent to a change in any one term and condition of your employment, your contract has been changed.  You now have new rights and new obligations.

• Operational Requirements

This is the most controversial way as you might be left with a subjective feeling or view of being treated unfairly or unjustified. Sad to say, there might be instances where the altering or changing of your terms and conditions, such as your salary, might have been done through ulterior motives. This is where objectivity must enter the field.

NUMSA took a ‘Automatically Unfair Dismissal’ dispute all the way to the Constitutional Court, National Union of Metal Workers of South Africa and Others v Aveng Trident Steel (a division of Aveng Africa (Pty) Ltd) and Another 2021 (2) BCLR 168 (CC) (27 October 2020). The crux of the dispute filed by NUMSA was that Aveng Steel dismissed their members for ‘a refusal by the employees to accept a demand in respect of any matter of mutual interest between the employer and the employee’ in terms of the Labour Relations Act 66 of 1995 (LRA) section 187(1)(c). 

The Constitutional Court confirmed the findings of the Labour Court and the Labour Appeal Court. In objectively scrutinising the rationale for the proposed changes in the terms of conditions of the employees, including salaries, by Aveng Trident Steel and the employees’ subsequent dismissal as a result of their refusal, cannot be found to be automatically unfair. The courts all recognised, through the evidence, the dire financial situation that Aveng Trident Steel found themselves in, the fair and transparent process followed, the rationale of the restructured proposal, namely to ensure that it survived its economic distress and the refusal to accept that unfortunately led to the employees’ dismissal as a result of operational requirements.

The Supreme Court of Appeal in Mazista Tiles (Pty) Ltd v NUM (2004) 25 ILJ 2156 (LAC) (Mazista Tiles) held that ‘The [employer] could still decide its business required that the employees’ terms and conditions of service be changed in order to be more profitable and more competitive.  If the employees rejected the proposal on changing terms and conditions, as it was the position in this matter, then the [employer] would be entitled to dismiss them for operational reasons under section 189.’ (Paragraph 57) (Own Emphasis) An unreasonable refusal to accept a reasonable alternative position with altered terms and conditions, might result in retrenchment.

Reduction in Salary 

Numerous employers had discussions since May 2020 in regard to reduced salaries. Where MISA was invited to consult on your behalf, we always established the duration of the proposed reduction, always negotiating on severance pay to be paid on the salaries, prior to reduction, should retrenchments become inevitable. Most members received letters/communication stating the rationale for the reduction in salary being as a result of the COVID-19 Pandemic and subsequent lock-down.

Most of these changes took place during Level 5 to Level 3 of lockdown to prevent retrenchments and to sustain employers’ businesses. In those circumstances it did make sense and the rationale seems to be transparent, reasonable and temporary. Members might have signed acknowledgement or acceptance of a reduced salary or working hours, motivated by fear of ‘dismissal’ or as a result of the situation they found themselves in during Level 5 to Level 3 lockdown. The Labour Court in Entertainment Catering Commercial & Allied Workers Union of SA v Shoprite Checkers t/a OK Krugersdorp (2000) 21 ILJ 1347 (LC) the Labour Court (paragraph 27) held that ‘…where the amendment to the terms and conditions is proffered by an employer as an alternative to dismissal during a bona fide retrenchment exercise and it is a reasonable alternative based on the employer’s operational requirements, the employer will be justified in dismissing employees who refuse to accept the alternative on offer.’ (Own Emphasis) The key words in this reference is ‘bona fide’ (genuine, real, without intention or deceit) retrenchment exercise and reasonable.

Conclusion

MISA members in KZN on whose behalf MISA did want to lodge a dispute in regard to the reduced salaries that has not yet been re-enacted, refused to give us a mandate. Don’t fall in the same trap! The article addressed and highlighted a number of critical elements and realities that you may face currently. If your salary has been reduced or substituted by an incentive during lockdown and not yet re-enacted, you need to speak to MISA. Let us look at the letter or correspondence from your employer and ascertain what you did agree to with your signature.

MISA is only a phone call or an e-mail away!

Kindly utilise the following e-mail addresses and links for assistance during this time: 

Legal/Labour-related enquiries                      Legal@ms.org.za  

Legal Reception                                                011 476 3920

MISA Benefit claim-related enquiries            Claims@misa.org.za   

Any other enquiries                                          Info@ms.org.za  

Website                                                              www.misa.org.za    

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