Metro Cash and Carry v Molikoe and Another (LC/REV 62 of 2007) [2008] LSLC 5 (10 April 2008)

IN THE LAB O U R COU R T OF LE S O T H O LC/RE V/62/2007 HELD AT MA S E R U IN THE MATT E R BET W E E N MET R O CA S H & CAR R Y APPLI C A N T AND HE N R Y MOLI K O E THE AR BI T R A T O R (MS MA S H E A N E ) 1 ST RE S P O N D E N T 2 ND RE S P O N D E N T JUDGMENT Date : 13/03/08 Review of DDPR award – Employee claiming entitlement to severance pay upon termination of his contract – Employer exempted from effects of sec.79 – Arbitrator concluding exemption not applicable because benefits under the scheme have become less than severance pay – Interpretation of the Arbitrator is contrary to the rules of the fund as to what constitutes benefit under the fund – Furthermore arbitrator is enjoined to give effect of the exemption granted by the Labour Commissioner – It is irregular for the learned arbitrator to ignore it or to pronounce that benefits under the fund are less 1. 2. 3. favourable than severance pay – Only the Labour Commissioner can say so – award reviewed, corrected and set aside. This is a review application which arises out of the award of the 2nd respondent dated 10th May 2007. By consent of Counsel for both sides the record of the arbitration proceedings conducted by the 2nd respondent was not filed. Parties contended that they were only going to argue a point of law. In this review application the applicant is essentially challenging the approach of the learned arbitrator in arriving at the decision which is the cause of this review application. The facts are briefly that the 1st respondent was employed by the applicant herein from April 1983. He was initially employed as a Clerical Assistant. In 2001, he was promoted to the position of Branch Manager. This is the position he held until September 2005 when his employment with the applicant terminated. The circumstances of that termination have not been disclosed by either party. The applicant operated a staff pension scheme. In June 2004, the applicant applied to the Labour Commissioner for exemption from the requirements of section 79(1) of the Labour Code Order 1992 (the Code). The said section provides that: “(1) An employee who has completed more than one year of continuous service with the same employer shall be entitled upon termination of his or her services, a severance payment equivalent to two weeks’ wages for each completed year of continuous service with the employer.” 4. The employer petitioned the Labour Commissioner for exemption from the obligation to pay severance pay in terms of section 8 of the Labour Code (Amendment) Act No.9 of 1997 (the Act) which provides: 3 “(7) Where an employer operates some other separation benefit scheme which provides more advantageous benefits for an employee than those that are contained in subsection (1) he may submit a written application to the Labour Commissioner for exemption from the effect of that subsection. “(8) An application under subsection (7) shall “(9) contain full particulars of the scheme operated by the employer and shall be accompanied by a certified copy of the rules. If upon considering an application under subsection (7) the Labour Commissioner is satisfied that the scheme operated by the employer offers better advantages to the employee, the Labour Commissioner shall exempt the employer from the effect of subsection (1).” 5. 6. It is common cause that after considering the application the Labour Commissioner granted applicant an exemption. The letter of exemption had the following rider: “in case whereby the benefits under the fund are less than severance pay, then the exemption ceases to apply. You shall comply with the provisions of section 79 in such cases.” The cause of action in this matter arises from the interpretation of this rider. Following his termination the 1st respondent was admittedly paid pension benefits in the amount of M129,901.15. This figure is admitted by both parties and it is proved by a letter from Alexander and Forbes Financial Services dated 30th June 2006 and addressed to the 1st respondent through management of the applicant. This letter is attached to the review application as annexure “A”. The letter does not say how the figure is arrived at. 7. 8. 9. It appears from the award of the learned arbitrator that 1st respondent presented material before her which was to the effect that the figure was made up of M71,329.72 of his own contributions and M46,091.03 of the employer’s contributions. 1st respondent went on to aver that this meant that the benefit due to him under the scheme was only M46,091.03 which was less than the severance pay for the 22 years of service which amounted to M96,866.66 in terms of the 1st respondent’s own calculations. He argued that this is an appropriate case where the benefits under the fund are less than severance pay and that the provisions of section 79 should apply. The learned arbitrator agreed with the 1st respondent and concluded that the exemption certificate rightly did not apply and that the benefits payable in terms of section 79(1) were applicable. Learned arbitrator’s own calculation of the severance pay due to 1st respondent gave her M90,369.23. She proceeded to deduct the M46,091.03 which 1st respondent had already got under the scheme and ordered that he be paid M44,278.20 which was the difference. Assuming that the approach of the learned arbitrator was correct, the figure which she concluded that it was due to the applicant should certainly be far lower than the one she ordered. The basis for saying this is that the learned arbitrator did not take account of section 79(6) of the code which provides: “(6) The right to severance pay in accordance with this section shall apply as from the date of entry into force of this part of the Code. Rights to severance pay accrued under the Wages and Conditions of Employment Order 1978 shall be enforceable under the terms of that Order notwithstanding its repeal.” This means that only persons who qualified to be paid severance pay in terms of the 1978 Order are entitled to claim it under that order. Persons who did not qualify 5 are not in any way given retrospective rights to claim. Their right to claim only arises under the Code which no longer has salary limitations. 10. As of 1st April 1993 when the Code commenced operation the relevant Wages Order which governed eligibility to severance pay was the Wages and Conditions of Employment Order 1991 (LN NO72 of 1991). The Order put the limits of entitlement to severance at a monthly salary of M1,000.00 and less. Persons earning above that figure were not eligible to be paid severance pay upon termination of their service. 11. From the arbitrator’s own calculations at page 2 of her award, it is apparent that in 1991 the 1st respondent was earning M4,450.00 per month. This placed him well above the qualifying limit for the period between 1983 and March 1993. His qualifying period by law only started to run from 1st April 1993, when the Code commenced operation. Applying their own formula for determining severance pay the 1st respondent would be eligible for a severance pay of M49,292.30. When that figure is subtracted from what the applicant has already got under the scheme the 1st respondent would be left with a paltry sum of M3,201.28. As we said this is if the approach of the learned arbitrator were to be upheld. 12. Counsel for the applicant contended that the approach of the learned arbitrator is altogether not commendable. He averred that the arbitrator erred in looking at the benefit payable under the scheme in terms of separate contributions of the parties and not in a wholesome manner. He contended further that the arbitrator erred in holding that the exemption did not apply without first setting aside the exemption. 13. The learned arbitrator sought to interpret the exemption certificate which had granted the applicant conditional exemption. It is questionable whether it was the right thing for the Labour Commissioner to grant applicant a 6 conditional exemption in the light of the wording of subsection (9) which says that if the Labour Commissioner is satisfied that the scheme offers the employee better advantages he or she shall exempt the employer. 14. We have highlighted the word “shall” to underscore the mandatory nature of the provision. If she is satisfied that the scheme offers the employee more advantages than severance pay, the Labour Commissioner must exempt the employer. As to what should happen in the unlikely event of the scheme becoming less favourable it is not stipulated what should happen. We say unlikely event in the light of the fact that the scheme’s benefits improve with time unlike the severance pay which is stagnant, except in the event of rise in salary. But even when the salary is increased the benefits under the scheme grow even more. Accordingly, it is difficult to fathom how in June 2004, the Labour Commissioner could have found that the scheme offered the staff, 1st respondent included, better advantages than severance pay and only a year later i.e. September 2005, the advantages under the scheme have fallen below those offered by severance pay. 15. This in our view shows that there is something materially wrong with the approach of the learned arbitrator. It is doubtful if she was correct to accept the figures given to her by the 1st respondent and on the basis thereof seek to conclude that one represented a benefit under the scheme and the other did not. First of all these figures would appear at best to be 1st respondent’s own say so. They are not supported for instance by the letter from Alexander Forbes. Secondly, the letter from Alexander Forbes starts as follows: “we have pleasure in confirming that an electronic transfer has been made to this member’s bank account representing the benefit payable from the fund on 30/09/05.” 7 The gross benefit before deductions is given as M129,901.15. The fund administrators have not split it as 1st respondent has attempted to do. Clearly 1st respondent’s approach which was countenanced by the learned arbitrator amounts to distortion of the rules of the fund which is a clear irregularity that calls for the interference with the award. 16. Furthermore, the exemption was granted by the Labour Commissioner exercising a power vested in her by a statute. Once granted it cannot but be implemented save where it has been set aside by way of a review by a court vested with that jurisdiction. The learned arbitrator had no power to ignore the exemption, nor was she entitled to pronounce that in the circumstances the benefits under the fund are less favourable than severance pay. That is the exclusive preserve of the Labour Commissioner to decide upon if after considering the application she “….is satisfied that the scheme….offers better advantages to the employee….” Clearly the learned arbitrator navigated the area she had no jurisdiction to navigate and in the process erroneously ignored an exemption certificate she was bound to give effect to. These constituted a gross irregularity. 17. Applicant had two other grounds of review namely that the award does not disclose whether the mandatory conciliation step was complied with before getting to arbitration of this dispute. It was further contended on behalf of the applicant that it was irregular for the 2nd respondent to have proceeded with arbitration and issued an award because the act provides for a criminal sanction. 18. Both these grounds lack merit. The first one concerning conciliation, there is no rule requiring that an award should show that conciliation was done and that it failed. Procedurally such a step should be borne by the record. In the absence of a record we cannot without entering into speculation determine whether conciliation was done or not. Finally section 226(2)(c) of the Labour Code 8 (Amendment) Act 2000 as amended by Act No.5 of 2006 gives the DDPR power to arbitrate any “dispute concerning the under payment or non payment of any monies due under the provisions of the Act.” 19. There can be no argument that severance pay is money payable under the Code as amended. The fact that section 80 provides for a penalty which can only be imposed by a court clothed with criminal jurisdiction does not prevent the same claim to be recoverable through civil process. This approach is supported by section 58(3) and (4) of the Code which provide: “(3) Where criminal proceedings are brought (a) under this section in respect of an offence consisting of failure to pay at least the statutory minimum wage then, after notice so to do has been served summons warrant or complaint: evidence may, once the employer or any other person has been found guilty of the offence be given of any like contravention in respect of any period during the 12 months immediately preceding the date of the offence; and (b) on proof of the failure the court shall order the employer to pay such sum as is found by the court to represent the difference between the amount which ought to have been paid by such employer…. (c) The power given by this section for recovery of sums due from the employer to an employee shall be in addition to and not in derogation of any right to recover such sums by civil proceedings, however no person shall be liable to pay twice in respect of the same cause of action.” 20. It is clear therefore that these two last grounds of review fall to be dismissed. They are accordingly dismissed. However in the light of what was said earlier regarding what constitutes benefits under the scheme and whether 9 the learned arbitrator had the power to put aside the certificate of exemption, there were obviously gross irregularities in those respects. So gross are the irregularities that the conclusion reached by the learned arbitrator is simply not justifiable in the circumstances. In the premises the award in Referral No. E022/06 is reviewed corrected and set aside. THUS DONE AT MASERU THIS 10TH DAY OF APRIL 2008 L. A. LETHOBANE PRESIDENT M. THAKALEKOALA MEMBER I CONCUR D. TWALA MEMBER I CONCUR FOR APPLICANT: FOR RESPONDENT: MR. MOLETE MR. THOAHLANE 9