The Labour Court recently considered whether years of erroneous payments by an employer to its employees could result in the payments forming part of the employees’ terms and conditions of employment.

In Cele and Others v Eskom Holdings SOC Ltd, the National Union of Metalworkers of South Africa (NUMSA) argued on behalf of the Eskom employees that, due to the longevity of the payments, an erroneous payment the employees had been receiving from Eskom for over ten years, now formed part of the employees employment contracts.  Eskom had introduced a new shift system in 1999 whereby the employees in question were paid a shift allowance.  Eskom continued to pay this shift allowance for the following ten years, even though the shift system was discontinued in 2002.  When Eskom picked up this error (following an audit), the employees were informed that the shift allowance that was being paid to them would be phased out in six months.  NUMSA referred a dispute relating to an alleged unilateral change to terms and conditions of employment. The matter could not be resolved by the CCMA and the dispute was referred to the Labour Court in terms of the provisions of the Basic Conditions of Employment Act.

The Court stated that:

“Whether the continued payment constituted a term and condition of employment needs to be looked at in context. Most terms and conditions of employment are usually established in a written contract…The written terms and conditions of employment may be supplemented by implied terms and conditions, which are understood to exist because of the conduct and behaviour of the parties or because there is an expectation or assumption by both parties. In some instances, parties may rely on the concept of custom and practice, which is essentially a practice that has developed over a period of time or by arrangement, that has never been specifically agreed between the employer and the employee, but can be argued to have formed part of the terms and conditions of employment…”

The Court referred to the case of Pikitup Johannesburg (Soc) Ltd v South African Municipal Workers Union and Others, where the court in that case had regard to the distinction between terms and conditions of service and mere work practices, where terms and conditions must concern the terms under which employees work, or their benefits, rather than a mere working practice.  The Court cited that the difference between terms and conditions of employment and working practices is “generally determined by whether the employees are able to demonstrate that the changes affect their contractual rights, whether emanating from their individual contracts of employment or from a collective agreement.”  In making this determination, the Court stated that the following must be examined:

• The employees' contracts of employment;
• Any other document regulating the relationship such as collective agreements; and
• Any additional terms that can be implied from the parties' conduct or from custom and practice in the workplace.

The Court found that a change to shift systems is not in itself a unilateral change to an employee’s terms and conditions of employment but merely a change to the employer’s work practice.  According to the Court, in the absence of a contractual right to work the previously agreed shift pattern, the regulation of shift times constitutes a work practice and falls within management’s prerogative to change.  What was put in place with the new shift system amounted to a work practice which was compensated with a shift allowance and was subject to management's prerogative to change.

The Court also dismissed the argument put forward that when the name of the payments changed, the employees had assumed that the payments continued as a gratuity (for assisting Eskom to get rid of its backlog).  The Court pointed out that, once it was assumed that payments were meant as gratuities, there was no obligation on the respondent to continue making those payments.  Also, the fact that it took Eskom over ten years to rectify the error did not create a legal obligation on it to continue to make the payments.

Based on this case, it is important for employers to note that the introduction of something new into the workplace does not always amount to a change to employees’ terms and conditions of employment. The detail of the change and the circumstances in which it is introduced is material. It is best to discuss this with your attorney before introducing the change to avoid any dispute.

Written by the Employment Law team at Shepstone & Wylie Attorneys