The LAC in North West Provincial Legislature v NEHAWU [2023] 8 BLLR 745 (LAC), recently found that once an employer has paid salaries in full to striking employees, the right to implement a ‘no work no pay’ policy is forfeited, and the employer is not permitted at a later stage to automatically effect salary deductions to recover the monies paid. Employers would first be required to approach the court for an order that declares the deductions lawful, and which quantifies the value of the wages lost during strike action. Arguably, an employer would then be entitled to effect the deductions from wages.
The constitutionally entrenched right to strike is a bedrock of our labour law regime. Exercise of the right takes place in the context of collective bargaining and involves an economic powerplay between business (the employer) and labour (the employees).
Given the competing interests of business and labour, industrial action is largely about who can withstand the most pressure or, put differently, who can endure the most suffering. Remuneration is paid in terms of a contract of employment as a quid pro quo for services rendered. It follows that when employees do not work, they are not entitled to the concomitant benefit of payment for work done.
During industrial action, employees leverage their demands/requests by withholding labour to the economic detriment of the employer’s business. An employer, on the other hand, may withhold payment of a striking employee’s salary by quantifying the employee’s daily salary and docking a day’s pay for each day they participate in the strike. This is known as a ‘no work no pay’ policy, which may be implemented by an employer seeking to mitigate the damaging effects of a strike, by exerting pressure on striking employees to return to work.
The no work no pay principle is codified in Section 67(3) of the Labour Relations Act, 1995 (“LRA”), which provides that “an employer is not obliged to remunerate an employee for services that the employee does not render during a protected strike”. The same is true of an unprotected strike.
The Labour Appeal Court (“LAC”) in North West Provincial Legislature v NEHAWU [2023] 8 BLLR 745 (LAC). recently had an opportunity to determine whether an employer is entitled to rely on the no work no pay principle as a ground for making deductions from employees’ salaries after the employer had paid the employees in full during the course of the strike action.
At the end of 2020, employees of the North West Provincial Legislature (“NWPL”) engaged in unprotected strike action. The employees were members of the National Union of Education, Health and Allied Workers Union (“NEHAWU”).
At the onset of the industrial action, the NWPL notified staff members that the principle of no work no pay would apply to those employees who did not attend work. The strike was subsequently interdicted and declared unlawful. However, in contrast to the communique issued to staff, the NWPL paid all striking workers in full due to administrative oversight (it had failed to halt its payroll run).
Having missed the opportunity to dock pay during and immediately after the strike, the NWPL subsequently informed employees that it would deduct the remuneration paid to employees who had been on strike, from their salaries over a number of months. A dispute ensued and in January 2021, the NWPL agreed to suspend these deductions until negotiations between the parties had been concluded. Once the negotiations (predictably) failed, the NWPL, in November 2021, informed employees that three working days’ remuneration would be deducted monthly over the course of the next six months.
In response, NEHAWU approached the Labour Court on an urgent basis under Section 77(3) of the Basic Conditions of Employment Act, 1997 (“BCEA”) seeking to interdict and/or restrain the NWPL from effecting the deductions.
The Court a quo found that deductions to remuneration must be effected in accordance with Section 34(1) of the BCEA, which prohibits deductions of remuneration, unless an employee has agreed to the deduction, or the deduction is required or permitted in terms of a law, collective agreement, court order or arbitration award. Unless these legislative exceptions apply, deductions will be unlawful.
The Labour Court held that no agreement had been concluded and that no law permitted a deduction from the salary of any employee. As such, the deduction of remuneration by the NWPL was not permitted. The Labour Court found there to be no conflict between Section 67(3) of the LRA and Section 34 of the BCEA. The deductions the NWPL intended to make were accordingly unlawful, and the NWPL was interdicted from effecting deductions until it had complied with Section 34 of the BCEA.
On appeal before the LAC, the NWPL argued that Section 34 of the BCEA does not apply where the principle of no work no pay finds application; alternatively, that the no work no pay principle constitutes a law as contemplated in Section 34(1)(b), and as a result, deductions were in compliance with the BCEA. In the NWPL’s view, the entitlement to withhold remuneration from a striking employee was to be equated with the recovery of remuneration already paid, and as such they should not be prohibited from recovering remuneration already paid due to a “mere coincidence of timing”.
NEHAWU maintained that section 34 bars any deduction from an employee’s remuneration unless one of the four statutory exceptions are met, regardless of whether the no work no pay principle applies.
The LAC held that even though the NWPL was not obliged to remunerate the employees for services that they did not render during the strike, it did so, and subsequently sought to deduct such remuneration paid from their salaries unilaterally, without agreement or an order obtained through an adjudicative or judicial process. In the LAC’s view, effecting a deduction in this manner would contravene the rule against self-help, which is necessary for the protection of the individual against arbitrary and subjective decisions, and serves as a guarantee against partiality and the consequent injustice that may arise.
The LAC disagreed with the NWPL’s contention that the payments to employees did not constitute the payment of ‘remuneration’, given that it was not (so argued the NWPL) a payment made as a quid pro quo in return for labour. The Court found that having paid such remuneration, it did not matter that payment was made during the course of a strike. It remained remuneration paid to employees and any deductions made thereafter were governed by the requirements of Section 34 of the BCEA, which the Court found had not been satisfied.
The LAC found that there was no conflict between Section 67(3) of the Labour Relations Act and Section 34 of the BCEA, and that to find that Section 67(3) of the LRA trumped Section 34 of the BCEA 34 would be to permit self-help in a manner expressly rejected by the Constitutional Court in Public Servants Association on behalf of Ubogu v Head of the Department of Health, Gauteng (2018) 39 ILJ 337 (CC).
The NWPL contended in the alternative that compliance with Section 34 was to be found in the fact that the principle of no work no pay is a “law” contemplated by Section 34(1)(b), section 67(3) or the common law and that, if an employer is permitted to withhold the payment of salary on the basis of such law in its application of the no work no pay principle, there is no reason why unearned salary cannot be treated similarly and recovered on the same basis. The LAC rejected this argument out of hand as it failed to appreciate the distinction between the entitlement not to make payment to employees during strike action (as found in Section 67 LRA), and the entitlement to deduct remuneration under specified circumstances (Section 34, BCEA).
Furthermore, it did not matter that the NWPL had negotiated extensively with NEHAWU prior to informing employees of the deductions, as no agreement was ultimately concluded.
In light of all the above, the LAC dismissed the appeal and upheld the findings of the Labour Court. The NWPL was accordingly interdicted from effecting any deductions until it had complied with the provisions of Section 34.
The finding of the LAC differs somewhat from the matter of Mpanza v Minister of Justice & Constitutional Development & Correctional Services (2017) 38 ILJ 1675 (LC), which was a matter in which employees were found to have failed to and/or refused to tender their services to the employer. The employer invited the employees to make representations regarding why amounts paid to the employees during their absences from work should not be recovered by the employer by way of deductions to their salaries. The employer maintained that it was entitled to effect deductions in this manner on the basis of the no work no pay principle.
The employer subsequently effected the deductions and when this was challenged by the employees in the Labour Court, the learned Cele J held that the employer had followed a fair procedure in making the deductions against the salaries of the employees, and therefore Section 34(2)(b), which provides deductions are permissible where the employer has followed a fair procedure and has given the employees a reasonable opportunity to show why the deductions should not be made, had been complied with. The deductions were declared lawful. It is worth mentioning that this case was not dealt with in the context of a strike.
The Mpanza matter was referred to in the judgment of NEHAWU obo Mamogale v Northwest Department of Community Safety and Transport Management (2022) 43 ILJ 2369 (LC), a matter in which the employer had made deductions from the salaries of employees, premised once again on the no work no pay principle, on the basis of the employee’s unauthorised absence from the workplace. NEHAWU approached the Labour Court for an order that the deductions were in contravention of the BCEA and thus unlawful, and that the employer be directed to reverse the deductions made. The Court per Langrange J found in favour of NEHAWU, declined to follow the reasoning of the court in Mpanza on the basis of distinguishable facts, and approached the matter in a similar fashion to that of the LAC in North West Provincial Legislature, finding as follows:
“The consequence is that deductions being implemented to recover the overpayment of salaries and which the department plans to continue are unlawful. However, that has no bearing on remuneration which is not paid in the month it falls due because remuneration is only due when services are tendered. Accordingly, had the department only paid the traffic officers what they were actually due when paid their April and May salaries, there would be nothing improper about that.” [our emphasis]
The LAC’s North West Provincial Legislature judgment accords with the reasoning of the Court in the Department of Community Safety matter, and confirms that Section 67 of the LRA entitles an employer to withhold the payment of remuneration at the first possible opportunity (i.e., the first payroll run). If the employer makes payment of the remuneration in full under circumstances where it was not obliged to, it will not be permitted to later effect deductions in the absence of an agreement or a law, collective agreement, court order or arbitration award requiring or permitting the deduction.
Arguably, where the employer wishes to make these deductions as a means of recovering salary paid in a case where the employees did not work, and the employees do not agree to the deductions, it is advisable for the employer to first approach the Labour Court for a declaratory order in terms of Section 158(1) (a)(iv) of the LRA, in order to obtain a court order that (1) declares that deductions may be made on the basis of the no work no pay principle; and (2) quantifies the amounts that may be deducted.
Also arguable is that an employer in the position of the NWPL, who has paid employees notwithstanding that the employees have not tendered their services, may approach the Labour Court in terms of Section 77(3) of the BCEA, claiming damages/loss sustained as a result of a breach of the employment contract by the employees who did not work. Noting the inherent dispute of fact in such a case, the matter would be dealt with as a trial, and the Court would then be in a position to determine whether the employer is entitled to recover amounts paid to the employees and if so, the precise quantum thereof.