GOWORA
JA:
This
is an appeal against the whole judgment of the Labour Court which
dismissed an appeal against an Arbitral award issued in the
respondents' favour.
The
salient facts in this matter are
the
following.
In
1995 the appellant employed the respondents as shelf packers and they
rose through the ranks. At the commencement of the dispute they were
employed as Section Managers at TM Supermarket, Lobengula Street,
Bulawayo under the M2 Grade in terms of the appellant's grading
system. Their remuneration was paid in accordance with their
contracts of employment and in conformity with the relevant
Collective Bargaining Agreement.
In
2009 the appellant offered increments to all its Section Managers in
the fifty branches it operated nationwide based on monthly sales
performance of the respective branches. In order to give effect to
this the appellant grouped the branches into four categories. The
branch which recorded the highest sales would earn its managers a 20
percent bonus, the second highest 15 percent, the third 10 percent
with the lowest earning 5 percent. Based on this formula the
Lobengula branch received a bonus of 15 percent during the period in
question.
On
22 November 2011, the respondents addressed a letter to the
appellant's Managing Director in which they alleged that they had
discovered that since January 2010, some Section Managers were being
paid a monthly salary that was higher than what the respondents were
earning. They also stated that they had previously written to the
Human Resources Officer-Southern Region and the Human Resources
Manager concerning their grievance but they had not received a
response.
There
was no response from the Managing Director and in January 2012 the
respondents lodged a complaint of unfair labour practice with a
Labour Officer. They claimed the difference between their salaries
and what the highest performers were being paid. The parties were
invited to attend conciliation proceedings which failed to achieve a
positive result and consequently a certificate of no settlement was
issued. Thereafter, the matter was referred to compulsory arbitration
for the arbitrator to determine whether the respondents were entitled
to back-pay and the quantum
thereof.
Before
the arbitrator, the respondents contended that in November 2011, most
Section Managers under the M2 grade were earning salaries ranging
from US$400.00 - US$450.00 per month whilst they were earning
US$360.00 per month. They argued before the arbitrator that there was
no rational basis for the distinction. They also suggested that in
November 2011 following their complaint, each of their accounts was
inexplicably credited with the sum of US$40.00. It was also the
respondents' contention that in February 2012 they were demoted to
Grade 10 without consultation. In the result, the respondents claimed
back-pay in the sum of US$2,390.00 each and prayed that the appellant
be ordered to stop acting unilaterally in violation of the labour
laws.
Per
contra, the appellant averred that initially the
Section
Managers were paid equitably and the decision to pay them based on
branch performance was reached sometime in December 2010. The
appellant also submitted that the respondents were in grade C2 in
terms of the “Patterson” grading system and that, as they were
managerial employees, their salaries were negotiated on an individual
basis. Contrary to the respondents' contention, the appellant
claimed that the US$40.00 deposited in the respondents' accounts
were given to every employee of the appellant. It submitted that
there was no back-pay due to the respondents because it was
gravitating towards the normal payment system where employees are
paid the same regardless of performance.
The
arbitrator found that, in the circumstances in casu,
the performance-based bonus constituted a contravention of the audi
alteram partem
principle as the respondents had not been afforded an opportunity to
be heard concerning the new grading salary scales. He therefore held
that the appellant was committing an unfair labour practice in terms
of section 6 of the Labour Act in that the respondents were being
underpaid for the period in question. In addition he held that the
appellant's conduct in this regard was criminal which rendered it
liable for prosecution.
As
a consequence, he ordered that each of the respondents be paid
US$2,390.00 as back-pay. He also ordered that the appellant should
normalise the compensation system for the respondents.
The
appellant was aggrieved and appealed against the Arbitral award to
the Labour Court. In essence, the grounds of appeal were that the
arbitrator erred in finding that the appellant committed an unfair
labour practice by implementing a performance-based incentive bonus
scheme. It also argued that the Arbitrator exceeded his terms of
reference when he ordered it to normalise its payment scheme.
The
Labour Court upheld the finding by the arbitrator that the appellant
had committed an unfair labour practice by implementing a
performance-based bonus scheme. On the issue relating to the
Arbitrator exceeding his terms of reference, the court a
quo
found that it was inconceivable that the appellant would raise such a
ground of appeal when it was common cause that it had, subsequent to
the arbitration proceedings, started a process towards normalising
its remuneration system. In the result, the appeal was dismissed in
its entirety.
Aggrieved
by the decision, the appellant, with the leave of this Court, has
appealed on the following grounds:
1.
The court a
quo
erred in law in effectively coming to the conclusion that it was
unlawful for appellant to pay its employees performance-based
salaries.
2.
Having come to the conclusion that what the respondents were being
paid was in accordance with their contracts of employment, the court
a
quo
erred in law in holding as valid an award which entitled them to be
paid on a salary scale that was not contractual and which related to
different employees.
3.
The court a
quo
erred in failing to make a determination on whether the arbitrator
was entitled to stray from the terms of reference in the manner that
he did and whether he was at large to afford relief which had not
been motivated.
From
the grounds of appeal, there are essentially two issues for
determination and these are:
1.
Whether the court a
quo
erred in holding that it was unlawful for the appellant to pay its
employees performance-based bonuses.
2.
Whether the court a
quo
erred by failing to make a determination on whether the arbitrator
strayed from his terms of reference.
Whether
the court a
quo
erred in holding that it was unlawful for the appellant to pay its
employees performance-based bonuses
The
appellant contends that the court a
quo
erred in holding that it was unlawful for it to implement a
performance-based bonus scheme because there was nothing unlawful
about the measures it adopted in putting in place such a scheme as
long as the emoluments which the employees are paid as a minimum
comport with what is set out in the relevant Collective Bargaining
Agreement. The respondents, per contra, contend that putting in place
a performance-based salary system is unfair as it contravenes section
5(d) of the Labour Act [Chapter
28:01],
(the “Act”) which prohibits discrimination on matters relating to
employment, wages and benefits.
A
bonus is what can generally be termed a benefit. The implication that
can be drawn is that the grant of a bonus per
se
is not illegal and an employer cannot generally be held to have
committed an unfair labour practice by setting up a bonus scheme. The
rationale to this principle is that every employee has the right to a
performance based incentive and if they work well, they will be paid
well without any reference being made to their class, race, tribe or
any other factor on the basis upon which discrimination can
competently be committed. Thus, the grant of a performance based
bonus is therefore not proscribed by law.
It
is only where the awarding of the bonus constitutes an unfair labour
practice that would render the bonus illegal.
It
should be noted, however, that a
court will interfere with a decision which involves the exercise of
discretion in very limited circumstances. These were set out by this
Court in Barros
& Anor v
Chimphonda
1999
(1) ZLR 58 (S) at p 62-63, where the Court said:
“The
attack upon the determination of the learned judge that there were no
special circumstances for preferring the second purchaser above the
first – one which clearly involved the exercise of a judicial
discretion – may only be interfered with on limited grounds. See
Farmers'
Co-operative Society
(Reg.)
v Berry
1912 AD 343 at 350. These grounds are firmly entrenched. It is not
enough that the Appellate Court considers that if it had been in the
position of the primary court, it would have taken a different
course. It must appear that some error has been made in exercising
the discretion. If the primary court acts upon a wrong principle, if
it allows extraneous or irrelevant matters to guide or affect it, if
it mistakes the facts, if it does not take into account some relevant
consideration, then its determination should be reviewed and the
Appellate Court may exercise its own discretion in substitution,
provided always has the materials for so doing. In short, this court
is not imbued with the same broad discretion as was enjoyed by the
trial court.”
It
is trite that the grant of a benefit is at the discretion of the
employer and cannot be interfered with unless the employer has, in
granting the benefit exercised his discretion capriciously or on a
wrong principle. This position was buttressed in First
Mutual Life Ltd v Muzivi
SC 09-07 where CHEDA JA stated:
“Payment
of an annual bonus, is generally discretionary on the part of the
employer. It could not be said that the employee would have been
awarded a bonus under all circumstances. A bonus would have depended
on a clear record of performance. Having been suspended, it could not
be said that the employee performed so well that he would have been
entitled to a bonus.”
The
above dictum
amplifies the principle that the decision to grant or award a bonus
to its employee is entirely within the employer's discretion and is
dependent on the employee's performance.
What
can be gleaned from the above is that the Arbitrator as well as the
court a
quo
could only interfere with the appellant's decision to implement a
performance-based bonus scheme if it was found that an error had been
made or if the employer, in implementing the scheme, had acted on the
wrong principle or if the employer allowed extraneous or irrelevant
factors to guide or affect it or if it did not take into account some
relevant consideration.
Regarding
the performance-based bonus system, the Labour Court held as follows;
“I
agree with the arbitrator that failure to appraise employees of
putting such a system in place and go on and base the salaries on the
system is unfair and unjust and not in keeping with the Labour Act.
Section 5 of the Labour Act prohibits discrimination on any other
matter related to employment and in any matter relating to wages and
benefits. The employer has an obligation to advise the employee in
writing of the remuneration and how it shall be arrived at.”
It
is evident from the remarks above that the court a
quo
upheld the Arbitrator's decision that declared the bonus illegal on
the premise that the respondents were not informed about the scheme
prior to it being implemented. It is my view that the finding by the
court a
quo
cannot be assailed because employees have a right to be informed
about decisions pertaining to their employment conditions of service
even if the decisions are made in the exercise of an employer's
discretion. The appellant as the employer had a duty to notify all
employees about its decision to start a performance-based bonus
scheme before implementing it.
However,
that said, the court a
quo
erred in upholding the order awarding the respondents back-pay. As
correctly argued by the appellant, once the court a
quo
found that the performance-based bonus scheme was illegal, it should
not have upheld an order awarding back-pay based on an illegal
scheme. A finding that an arrangement is turpious is incompatible
with an order enforcing the same as was done in casu
by requiring that the employees be paid in terms of an allegedly
unlawful arrangement. This is what is referred to as the ex
turpi
causa principle. The order of the arbitrator and that of the court a
quo
upholding the former, contravenes this principle, and as a
consequence, the principle is offended by an order enforcing what has
been held to be illegal. In addition a court cannot lend itself to an
illegality. See Dube
v Khumalo
1986 (2) ZLR 103; Foroma
v Min of Public Construction & Anor
1997 (1) ZLR 447 (H).
The
court a
quo
failed to appreciate the point that an Arbitral award cannot be
founded on an illegality. An illegal act is void and cannot be
enforced. As LORD DENNING stated in MacFoy
v United Africa Co Ltd
[1961] 3 All ER 1169 (PC) at 1172I:
“If
an act is void, then it is in law a nullity. It is not only bad, but
incurably bad. There is no need for an order of the court to set it
aside. It is automatically null and void without more ado, though it
is sometimes convenient to have the court declare it to be so. And
every proceeding which is founded on it is also bad and incurably
bad. You cannot put something on nothing and expect it to stay there.
It will collapse.”
The
above dictum is apposite.
In
casu,
once the Labour Court found that the performance based scheme was
illegal, which bonus scheme the Arbitrator had declared illegal, it
was incumbent upon it as an Appeal Court to set aside the arbitral
award upon which the back-pay was awarded. The court however,
notwithstanding its finding of illegality, went ahead to uphold the
award. In this respect, the court a
quo
erred.
In
an appeal this Court will not simply deal with the direct dictates of
an order but also its effects. In Williams
& Anor v Msipa N.O. & Ors
SC 22/10, the court said:
“The
court must be able to intervene not only against the direct dictates
of the judgment of the lower court but also against its effects. See
Macdonald
v Canada (AG)
(1994) I SCR 311 @ 329”.
The
effects of the judgment of the court a
quo
is to sanction an illegality. The judgment does not serve the law.
Rather it enforces what it has itself found to be void. There is a
patent contradiction. Accordingly its decision should be set aside on
that basis.
Whether
the court a
quo
erred by failing to make a determination on whether the arbitrator
strayed from his terms of reference
The
appellant submits that the court a
quo
erred in failing to make a determination on the issue whether the
Arbitrator went outside his terms of reference. This issue was raised
as a ground of appeal in the court a
quo
and the court stated the following regarding the same:
“It
is inconceivable that the Appellant argues that the arbitrator erred
in delving into the issue of normalising the compensation system when
it was not asked to do so, yet the employer tried to normalise the
system before going to arbitration by paying unexplained $40.00 to
each employee that would put the respondents' salary at $400.00
from $360.00.”
The
only issue on the terms of reference to the arbitrator was whether or
not the respondents were entitled to back-pay.
A
perusal of the ruling by the arbitrator shows that he indicated that
the appellant was gravitating towards “a normal payment system.”
Thereafter the arbitrator ordered the appellant to normalise its
remuneration system. This was not part of his terms of reference.
A
reading of the remarks by the learned Judge shows that she failed to
appreciate the issue that was before her. The court a
quo
presumed that the appellant was aggrieved by the fact that it was
ordered to normalise the system. In making that presumption, it
failed to appreciate that the grievance was that the arbitrator did
not have the power to make such an order as the issue had not been
placed before the arbitrator for determination.
The
court a
quo
fell into the same error as the arbitrator. Instead of determining
the ground of appeal raised on the arbitrator's alleged departure
from his terms of reference, the court a
quo
found that the order granted by the arbitrator was already being
implemented. It commented that the employer was already gravitating
towards a normal payment system. It in effect refused to deal with
the issue placed before it.
The
gravamen of the complaint by the appellant was that the arbitrator
had given an award on a matter that was not placed before him. He had
departed from his terms of reference and the order that he gave was
in breach of the law. It had no basis in law. It behoved the court a
quo
to consider that ground and properly find that the order was unlawful
and as a consequence set it aside. In consequence, the court a
quo
did not determine the issue that was before it. This was a serious
misdirection that warrants interference by this Court. The failure by
a court to appreciate the issues before it is a just cause for
setting aside its order.
It
follows that the judgment of the court should be set aside in its
entirety.
In
the result, the following order will issue:
1.
The appeal is allowed with costs.
2.
The judgment of the court a
quo
is set aside and in its place is substituted:
“(i)
The appeal be and is hereby allowed with costs.
(ii)
The arbitral award by the learned arbitrator, I Bonda, dated 23
October 2012, be and is hereby set aside.”
GARWE
JA: I
agree
BERE
AJA: I
agree
Coghlan
& Welsh,
appellant's legal practitioners
ZFTU,
for the respondents
