Case Number: PSES 166 KZN
Applicant: MR S L NAIDU
Respondent: DEPARTMENT OF EDUCATION
Issue: Unfair Dismissal - Constructive Dismissal
Award Date: 6 June 2001
Arbitrator: DR R J T McCANN
EDUCATION LABOUR RELATIONS COUNCIL
CASE NUMBER : PSES 166 KZN
In the arbitration between:
MR S L NAIDU APPLICANT
DEPARTMENT OF EDUCATION RESPONDENT
1 . DETAILS OF HEARING AND REPRESENTATION
.1 This arbitration hearing commenced on 27 February 2001 and continued on 10 April 2001. Closing arguments were then submitted by the Respondent on 26 April 2001 and by the Applicant party on 26 April 2001.
.2 The Applicant party was represented by Mr D Maharaj, Shop Steward for the Association of Professional Educators for KwaZulu-Natal (APEK). The Respondent party was represented by Mr S A Govender and Mr S Naidu. The venue for this arbitration hearing was at the Durban College of Education, corner of Nicholson and Queen Mary Roads, Umbilo.
2 . ISSUE TO BE DECIDED
The issue to be decided was one concerning salary and employment benefits.
In this regard there were three different sub-issues :
.1 The first sub-issue concerned pension moneys paid to Mr Naidu from the Pension Fund, which had been taxed as a lump sum payment and which Mr Naidu claimed ought not have been taxed. Furthermore, he claimed that a two-third contribution, which he believed should have been made by the Respondent as the Respondent’s contribution, had not been paid to him.
.2 The second sub-issue was that the State claim that they had overpaid Mr Naidu to the amount of R624,00 and then withdrew this from his salary. Mr Naidu contested this.
.3 The third sub-issue was that in November 1997 Mr Naidu was paid out a lump sum of R202 640,79 (i.e. everything else owing to him but the pension). However he claimed he should have been paid R206 000,80. Thus he was claiming a shortfall of R3 359,01. The Respondent contested this.
.4 Therefore, what needs to be decided, is the following:
.1 Whether or not Mr Naidu was entitled to the Respondent’s contribution (i.e., a two-third contribution) in regard to his Pension Fund during the time that he was classified as a key personnel.
.2 Whether or not the State was entitled to withdraw R624,00 from his salary due to a claim that he had been overpaid.
.3 Whether or not Mr Naidu is entitled to an alleged shortfall of R3 359,01 in regard to his lump sum payout which occurred in November 1997.
3 . BACKGROUND TO THE ISSUE
Mr Naidu worked for the Department of Education for a number of years prior to being appointed on a contract basis between 1 October 1997 to 30 June 1999. During this time period he was appointed as a key personnel. Thus, it was the Applicant party’s contention, that his appointment was “extended”. Therefore what is being contested, is whether his conditions of service should remain the same or whether they should have changed. Furthermore, if they had changed, whether or not it should have been drawn to his attention. This then led to the dispute in regard to the first issue raised.
4 . SURVEY OF EVIDENCE AND ARGUMENT
Issue One : Pension Issue
THE RESPONDENT PARTY
.1 Due to the onus being on the Respondent to show that it behaved fairly the Respondent commenced giving evidence in chief.
.2 The Respondent submitted that the Applicant had applied for a severance package. Thus, it was submitted that people who turned 55 and who took early retirement, could get a voluntary severance package. Thus, they would get a monthly annuity with a lump sum payment. In this regard reference was made to HRM Circular No 5 dated 17 July 1996 wherein the conditions of voluntary severance were set out.
.3 It was also submitted that those persons prior to the age of 55 could also experience the option to take a severance package and that Mr Naidu had elected to take a lump sum prior to reaching the age of 55.
.4 It was further submitted that in the cases of people who were 55 and over, an identified as key personnel, they could then be appointed on a contract basis for a further period of 12 months. It was stated that such a contract could not be extended beyond that additional twelve month period.
.5 Thus, it was submitted that Mr Naidu elected to take the severance package which it was said was just a lump sum benefit.
.6 It was accepted that it was true he was appointed as key personnel and retained in the Department thereafter. The Respondent’s representative also said that it was true the Respondent had started deducting pension from his salary for the duration of his contract. However, it was later discovered that the pension deduction should not have occurred. Thus, at the end of the period his pension contribution was refunded to him less the fax he paid.
.7 It was then submitted that the Respondent made enquiry after enquiry for Mr Naidu to the Department of Pensions. They had in turn said the deduction of pension should not have taken place in Mr Naidu’s case.
.8 Thus, he said the Respondent had written a letter on 10 April 2000 to the Department of Pensions. This letter was directed to the attention of Ms Geraldine Joubert for the Chief Directorate of Pensions Administrations in the Department of Finance in Pretoria, pertaining to Mr S L Naidu and his appointment on contract. Thus, the letter set out that Mr Naidu had retired in terms of the voluntary severance package with the close of duty being 30 September 1997. If further set out that subsequently Mr Naidu was retained as a key personnel and appointed on contract with the effect from 1 October 1997 to 30 June 1999. It stated that during this period Mr Naidu contributed to the Pension Fund. This letter then asked for the Office to be informed as to whether the Z102 form could be completed for the payment of Mr Naidu’s pension payout. It was further requested that should the Respondent have to refund the pension deductions in view of the voluntary severance clauses, that the Office be furnished with the applicable rules and regulations which states that any persons who are discharged in terms of the voluntary severance package cannot be re-employed and in that regard cannot contribute to the pension Fund twice.
.9 The Respondent’s representative then referred to an affidavit that he received from Mr Burger van der Merwe from the National Treasury. Thus, he submitted this affidavit on behalf of the National Treasury: Pensions Administration. In this affidavit he said the Educators Employment Act provides for the appointment of contract workers as key personnel subsequent to the entitlement of a severance package in respect of previous service for the period that is recognised as a “pensionable service” as defined in the Government Employees Pension Law 1996 (Proclamation 21 of 1996).
.10 He made specific reference to Section 5(d) of the Government Employees Pension Law 1996 Proclamation 21 of 1996, which he said reads as follows:
“Persons excluded from membership of Fund.
Any person who is employed in the service of the Respondent, but -
(d) is employed under a contract of service excludes him or shall not be eligible for membership of the Fund”.
.11 He further submitted in his affidavit that a contract worker who enters into an agreement with the contractor will render his or her service for a specific time or for a specific purpose, and as soon as the period expires and/or the purpose for which his/her contract ceases to exist the contract will be terminated. He said it further flows from the above that the intention of the contractor is not to provide the same benefits (e.g., leave, medical aid or pension benefits) to the contract worker as to the employee of the Respondent, due to the duration and nature of the contract. He then stated that the law does not prohibit a contract worker from becoming a member of the Government Employees Pension Fund (GEPF), with the consequential effect that the pension contributions should be deducted from his or her remuneration. He said that, should a contract worker then wish to become a member of the Fund, both parties (i.e. the contractor and the contract worker) should have a mutual agreement to this effect, and it must be a term of the contract. He further said that the GEPF will only admit a contract worker as a member to the Fund should the contract provide specifically for such a dispensation, together with the validity requirements of a contract.
.12 In closing he further stated that the Respondent/contractor load instructions on PERSAL for the deductions of pension contribution, and not the Fund. Should the Respondent/contractor erroneously pay moneys over to the Fund as either Respondent/contractor or employee/contract worker contributions, the Fund will pay the money back upon the sufficient proof of the erroneous conduct by the party, because the money cannot be allocated to the “pensionable emoluments” of a member. This affidavit had been signed before a Commissioner of Oaths.
.13 Thus, on the basis of this affidavit, it was the Respondent’s contention that this matter would fall within the ambit of National Treasury - and hence the affidavit from Mr Burger van der Merwe. From this affidavit it was the Respondent’s contention that Mr Naidu was not entitled to a State contribution from the Directorate that they received from the National Treasury as contained in exhibit C.
.14 It was further submitted that if the arbitrator was to rule in favour of the Applicant, then they would argue that the most that the Applicant would be entitled to was twelve months in terms of HRM Circular No 5. Thus, it was submitted that the Respondent was contained by the constraints of the voluntary severance package to go further than twelve months.
5 . APPLICANT’S RESPONSE ON ISSUE 1 : PENSION MATTER
.1 The Applicant’s representative said that he wanted the arbitrator to note that they were not disputing Mr Naidu wanting the lump sum benefit and not the annuity/gratuity option. In this regard, the Applicant was saying that there was nothing in the Regulations that prevented Mr Naidu from exercising that option as it best suited his needs. Thus, the Applicant said that the contention that we have here is that Mr Naidu did not identify himself as a key personnel. Instead, it was his employer, the Respondent who identified him as such. The Applicant’s representative said they had no problem with HRM Circular No 5 other than to say that the Respondent had failed and was thereby remiss in the first instance in not upholding the provisions of their own regulations. Thus, it was submitted that they ought to have indicated to Mr Naidu because he had applied for a lump sum benefit, this contract could only be extended for a period of twelve months.
.2 It was submitted that they ought to have told him during this period of twelve months that they had to negotiate a new contract in regard to this. Thus, it was submitted that the Applicant was not told any of these things - and what happened was that they sent him a letter indicating that his contract had been extended.
.3 It was the Applicants contention that the understanding was that when you extend someone’s contract, then what happened is that the service benefits that he enjoyed in terms of the previous contract he enjoyed, should apply - and if for any reason that was not to be the case, then the Applicant ought to have been informed. Thus, what happened to him was that he received a salary advice, which advice indicated that a Government Applicants Pension Fund (GEPF) deduction was being made. It was stated that the affidavit submitted by the Respondent indicated clearly as well that the Applicant can be admitted to the Fund. In this regard reference was made to exhibit C (clauses 6, 7 and 8).
.4 It was thus submitted that the Respondent had therefore seriously undermined the Applicants rights as an Applicant. Thus, it was contended by the Applicant’s representative that in the given circumstances the Respondent:
“(1) Ought to have acted in terms of their own regulation - and their failure to do that has prejudiced the Applicant;
(2) Ought to have negotiated a new contract”.
.5 However, because they did not do that the Respondent further prejudiced the Applicant. Thus, it was submitted in view of the above two facts, the prayer was made that Mr Naidu be paid out in full all moneys owing to him, including actuarial interest for all of the 21 months of which his contract was extended as a key personnel.
6 . RESPONSE FROM RESPONDENT
.1 The Respondent’s representative said that he was surprised to hear that Mr Naidu did not know about the twelve month period (i.e. that the maximum period he could extend his contract for could not be more than twelve months). He said this is so because it was Mr Naidu who had given the Respondent a copy of that circular. Therefore the Respondent assumed that he was au fait with it. Where it set out the period of employment on contract was not more than 12 months from the day that the severance was granted.
.2 It was agreed that it was true Mr Naidu’s services were wrongly extended beyond the twelve month period because the Respondent could not do so as per the rules for severance packages. Thus, the Respondent had appointed him beyond the period of twelve months. Thus, he said otherwise the Respondent would have acted ultra vires.
7 . APPLICANTS RESPONSE
.1 The Applicant requested to be able to respond to what the Respondent had said. This was granted.
.2 The Applicant said that one must take note of the fact that Mr Naidu was not extending his own contract. Thus, the issue is that for the period his contract was extended, he was entitled to be admitted to the Government Applicant Pension Fund. Hence, it was said that the Circular says someone can only be extended for twelve months’ was wrongly applied. However it was submitted that the fact is that for 21 months for which he was employed, if there was a separate contract negotiated between the Respondent and the Applicant, then he would have been admitted to the Fund and would have had actuarial interest, for which he is now praying for.
.3 It was submitted that the regulations are very clear on the last matter and that even someone employed on a special contract can be admitted to the Fund - and that change in the regulation was proclaimed in the Government Gazette Number 17135 dated 19 April 1996 (see exhibit D)
8 . RESPONDENTS RESPONSE
.1 The Respondent party said they did not believe that there was an entitlement to being appointed to the GEPF - particularly where people had voluntarily given up their Government Service Employment. Thus, it was submitted that the purpose of the voluntary severance package was to reduce the Public Service in terms of numbers. This was precisely the reason why, even though certain people were needed in ‘key personnel’ positions, limitations were put on their conditions of employment and their contract.
.2 It was submitted that while it may be true that the Respondent continued to employ Mr Naidu on contract beyond the 12 month period, they were contending that the employment should have been a contract that fell outside the scope of admission to the GEPF, as the Respondent did not have the power to go beyond the twelve month period.
.3 In closing the respondent’s representative said that they had not had sight of Government Gazette 17135 - and therefore were not sure of any conditions there regarding admission to the Government Applicants Pension Fund.
9 . APPLICANTS FINAL RESPONSE
The Applicant’s representative said he wanted to respond to the Respondent’s assertion that no one as a key personnel has entitlement not to belong to the Company Applicant Pension Fund. Thus, it was contended that the Respondent ought to reveal this, or else this would be an unfair labour practice.
The second issue : Overpayment Claim
.1 The Applicant’s representative submitted that this was computed in August 1999 when the Applicant was not in the employ of the Respondent. Thus, it was submitted that the Respondent cannot give an explanation of who got the voucher and who got the payment. In written closing arguments, the Applicant party submitted that the Respondent had agreed that on issue two it would provide necessary evidence to indicate:
“when the electronic transfer or warrant voucher was made and to investigate the matter to provide proof of when the cheque was cash or a withdrawal made. Failure of the Respondent to provide such evidence by 27 April 2001 will then allow the arbitrator to rule accordingly. We, however, reserve the right to rebut any evidence presented by the Respondent which we did not have sight of previously”.
The Respondent’s Version
.2 At the arbitration hearing on 10 April 2001, the Respondent’s representative said that their Head Office in Pietermaritzburg could not confirm yet what form it took (i.e. a voucher, electronic transfer, cheque or whatever). Hence they were still busy investigating it at that point in time.
.3 In written arguments submitted on 26 April 2001, the Respondent party stated that it had proof of ACB transaction for an amount of R1 262,21 to the Standard Bank, Overport City, with the account of Mr S L Naidu. Furthermore, proof of an ACB transaction amount of R624,70 was made to the Standards Bank, Overport City with the account of Mr S L Naidu. These bank statements were submitted as evidence. Thus, it was the Respondent party’s submission that the above documents were in their view a clear indication that these amounts were paid to Mr Naidu. Thus, it was argued that the onus now rests with Mr Naidu to prove that such amounts were not deposited into his bank account.
Issue Three : Shortfall Regarding a Lump Sum Claim
.4 The nub of this issue is what the correct lump sum amount should be.
10 . THE APPLICANTS EVIDENCE
.1 The Applicant said the difference was R3 359,01. Reference was made to two different amounts stated by the Respondent. Thus, the Respondent stated there were two amounts, amounting to R2 481,00 in regard to arrears in salaries as well as a bonus of R878,01. This made a total amount of R3 359,01. The Applicant agreed that he received a bonus of R878,01 - and said that he had the salary advice to show this.
.2 In respect of the remaining R2 481,00, he said the Respondent had no explanation again as to whether his account was credited or a cheque was paid out. Thus, it was submitted that it fell within the same category as issue two. Hence it was submitted that the amount in dispute in regard to issue three was no R2 481,00 and no longer R3 359,01.
.3 In closing arguments submitted on 26 April 2001, the Applicant’s representative stated: ”on issue three the Respondent agreed to indicate what the correct amount was and the reason for the shortfall on 27 April 2001. They again reserve the right to rebut any evidence that we have not had sight of previously. Again, failure by the Respondent to provide convincing evidence to indicate why the lesser of the two amounts is the correct amount, we ask the Honourable Arbitrator to rule that the Respondent pays out the higher amount. We need to re-emphasise that the Applicant denies receiving any payment and he remains convinced that he is owed the higher amount as far as gratuities are concerned”.
11 . RESPONDENTS VERSION
.1 The Respondent party submitted written arguments on 26 April 2001. Thus, it said that it provided proof of an ACB transaction in the amount of R1 262,21 to the Standard Bank, Overport City with the account of Mr S L Naidu. Thus, the Respondent party claimed that, in their view, this was a clear indication that this amount had been paid to Mr Naidu and that the onus would then rest with Mr Naidu to prove that such an amount was not deposited.
.2 However, this does not meet up to the amount of the shortfall of R 2481,00 claimed by Mr Naidu and instead still leaves a shortfall of R1 218,79 when one deducts the amount of R1 262,21 from the amount claimed of R2 481,00
12 . ANALYSIS OF EVIDENCE AND ARGUMENT
Issue One : Pension Issue
.1 From the evidence before me it is evident that Mr Naidu took a voluntary severance package with his closing date of duly being 30 September 1997. Thus, Mr Naidu concluded his contract of employment with the Respondent on that day. Thus, my understanding of the evidence before me is that he was no longer entitled to be a member of the Government Applicants Pension Fund. Thereafter he was appointed as key personnel and appointed on a contract with effect from 1 October 1997 through to the 30th June 1999. From the evidence before me it would appear that this was in violation of the Respondent’s own rules as a person is only supposed to be appointed as key personnel for twelve months and not twenty-one months. Hence an error was apparently made by the Respondent in allowing him to continue after one year of working as key personnel.
.2 Bet his as it may, the affidavit of Mr Burger van der Merwe from the National Treasury, provided useful information in that it was clear from his affidavit that a person who continued as key personnel after they had taken a severance package, was not automatically entitled to continue as a member of the Government Applicants Pension Fund. Instead, he said that, should a contract worker then wish to become a member of the Fund, both parties (i.e., the contractor and the contract worker) should have a mutual agreement to this effect, and this should be a term of their contract. Clearly this did not happen in the case of Mr Naidu. It is difficult to establish who was at fault in this regard. However, as it was not an automatic appointment to the Government Applicants Pension Fund, it would seem that the onus lay with Mr Naidu to have sorted this out before he continued as a contract worker in the form of key personnel. He did not do this while he was working in this capacity and hence was not a member of the Government Applicants Pension Fund for the duration of the period that he was on contract as key personnel. Thus, not being a member of the GEPF for this period meant that he is not entitled to any such benefits that might arise from this Fund for the period of time that he was working as a key personnel.
.3 What further complicated this matter was that initially an error was apparently made by the Respondent in that deductions were made for the GEPF. However, when the Applicant realised an error was made in this regard, apparently such money’s were then refunded to Mr Naidu - which should have happened in the case of an incorrect deduction being made. Therefore, I find that Mr Naidu was not a member of FEPF between 1 October 1997 and 30 June 1999, and Thus, was not entitled to a two-third contribution by the Respondent.
Issue Two : Overpayment Claim
.4 From the evidence submitted by the Respondent, it presents that an amount of R624,70 was paid to Mr S L Naidu’s bank account at the Standard Bank, Overport City. Thus, it presents that the Respondent has already remedied this issue by paying into Mr Naidu’s account, the money they had apparently withdrawn from his salary. Therefore I do not find that the Respondent owes Mr Naidu any money in regard to the second issue (i.e., the overpayment claim).
Issue Three : Shortfall Regarding Lump Sum Claim
.5 In regard to the third issue regarding the shortfall for the lump sum claim, the evidence before me indicates that the Respondent did made a payment to Mr Naidu’s account at the Standard Bank in Overport City, to the amount of R1 262,21. This still leaves a shortfall of R1 218,79 in regard to the final amount claimed (i.e., being R2 481,00). The Respondent brought no evidence to indicate that Mr Naidu was not entitled to this full amount and hence I find that the Respondent still owes Mr Naidu the amount of R 1 218,79 as the remaining shortfall in regard to this issue.
13 . AWARD
.1 Issue 1 : Pension Matter - Case Dismissed.
.2 Issue 2 : Overpayment Claim - Case Dismissed.
.3 Issue 3 : Shortfall Regarding Lump Sum Claim - The Respondent to pay Mr S L Naidu the amount of R1 218,79 by the 30th June 2001.
DR R J T MCCANN
DATED: 6 JUNE 2001
EDUCATION LABOUR RELATIONS COUNCIL
CASE NUMBER PSES 166 KZN
APPLICANT MR S L NAIDU
RESPONDENT DEPARTMENT OF EDUCATION
NATURE SALARY AND EMPLOYMENT BENEFITS
ARBITRATOR DR R J T McCANN
DATE OF ARBITRATION NOT MENTIONED
APPLICANT MR D MAHARAJ (APEK)
RESPONDENT MR S NAIDU & MR S A GOVENDER
1. Issue 1 : Pension Matter - Case Dismissed.
2. Issue 2 : Overpayment Claim - Case Dismissed.
3. Issue 3 : Shortfall Regarding Lump Sum Claim - The Respondent to pay Mr S L Naidu the amount of R1 218,79 by the 30th June 2001.
DATE OF AWARD 6 JUNE 2001