Pay Back the Money, for Back Pay
In the recent case of National Union of Metal Workers of South Africa obo Moses Fohlisa & 41 Others/Hendor Mining Supplies (A division of Marschalk Beleggings (Pty) Limited), the Constitutional Court had to grapple with an employer's failure to reinstate its employees and pay their remuneration in the intervening period, before reinstating them.
Hendor Mining Supplies (the employer), dismissed 42 of its employees for participating in a strike on 1 January 2007. When NUMSA and the dismissed employees took the employer to the Labour Court to challenge the fairness of the dismissals, the court ordered that the employees be reinstated, in accordance section 193(1)(a) of the Labour Relations Act, 1995.
Section 193(1)(a) provides:
(1) If the Labour Court or an Arbitrator appointed in terms of this Act finds that a dismissal is unfair, the Court or the arbitrator may - (a) order the employer to reinstate the employee from any date not earlier than the date of dismissal.
Following judgment in the court, the employees were requested to report for work on 23 April 2007. When returning to work on such date, the employer refused to reinstate the employees, pending the outcome of an appeal to the Supreme Court of Appeal. After the employer was unsuccessful in its appeal to the SCA, the employees were reinstated on 29 September 2009. Upon reinstatement, however, the employer refused to pay the employees back pay from 1 January 2007 to 28 September 2009.
The employer ignored a letter from the employees' attorney, which demanded payment of remuneration for a period of 1 January 2007 to 28 September 2009.
The employer based its argument on the fact that back pay from 1 January 2007 to 28 September 2009 had prescribed. The court held that the back pay was a judgment debt and only prescribed after 30 years. The Registrar of the court issued a writ of execution in respect of this arrear remuneration. The employees sought a declarator from the court that the employer was liable to pay the employees' remuneration of the dates above.
On appeal to the Labour Appeal Court, it was held that the claim for back pay for 1 January 2007 to 22 April 2007 was a judgment debt and had not prescribed. The LAC however, declared that the arrear remuneration for the 23 April 2007 to 28 September 2009 period had prescribed.
The Appeal to the Constitutional Court
The employees sought leave to appeal from the CC, where the court was asked to grapple with whether the prescription period in respect on the unpaid remuneration was three years or 30 years. Put differently, the CC was required to determine whether the 23 April 2007 to 28 September 2009 remuneration constituted a judgment debt.
Although the court was split in its decision, the court found that the arrear wages were due in terms of the reinstatement order, which constitutes a judgment debt and only prescribes after 30 years.
Madlanga J held that 'reinstate' means to put an employee back into the same job or position s/he occupied before the dismissal, on the same terms and conditions. The obligation comprises of two prongs, which are bound inextricably and are not mutually exclusive. The court found that for the intervening period before reinstatement, the obligation to reinstate and effect the concomitant payment could only be a judgment debt, as the order of the courts did not reinstate the employees, but it was the employer who ought to have.
As reinstatement only took place on 29 September 2009, the entitlement to back pay flows from a contractual obligation, which flows from the contracts of employment and arose on reinstatement. Only upon reinstatement, was payment for the intervening period due to the employees.
The court held that the employer was ordered to pay the employees, their weekly wages plus any other amount (like 'leave pay' and 'leave enhancement pay') not forming part of the wages, which the employee would have been entitled to from 1 January 2007 to 15 April 2007, with interest of 15.5% per annum, calculated from 16 April 2007 to date of payment.
Further, the employer was liable to pay their weekly wages, plus any other amount not forming part of their wages to which the employee would have been entitled to from 16 April 2007 to 28 September 2009, together with interest of 15.5% per annum calculated from the dates on which their weekly wages and other amounts would have been due to date of payment.
The matter was dismissed with costs in the LAC and the CC and that of two counsel.
Employers should tread carefully in refusing to reinstate employees. If the employer fails to do so, it may be liable for back pay with interest, even for back pay not envisaged in the arbitration award. This may potentially cripple the business operations financially, in instances where the matter involves a number of employees in a prolonged litigation process.