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Guideline for employment problems / PREVENTING: 1.2 Fairness standards for benefits provided to employees by the employer
During the orientation process of the available literature, we identified the following interventions as most plausible for preventing, managing, and resolving conflicts on unfair employment benefits:
The case examples showed that the prevention, management and resolution of a conflict on unfair employment benefits do not simply depend on an agreement between the employer and the employee on a clear definition of the employee benefits in the employment contract. Indeed, there is what is called the employer’s discretionary power, which sometimes is hidden in the contract. If, in certain cases, these benefits, depending on the employer’s discretion, are mentioned in the contract, they are granted on the sole will and decision of the employer. For example, if the results were achieved. However, the employer is responsible and accountable for using this discretionary power. The employer may be judged on the fairness or unfairness of this power on the employee.
Aadil Patel gives us an example: “In Protekon v CCMA [2005] 7 BLLR 703 (LC), the Court held that certain travel concessions constituted ‘benefits’ within the meaning of the LRA, even though those concessions were not contractually due to the employees. In this case, the employer’s unilateral withdrawal of this benefit, without consultation with the relevant employees, was considered an unfair labour practice and the employees were compensated accordingly. In the recent case of IMAATU v Umhlathuze Municipality (unreported case D 644/09), the Court follows the decision in Protekon, stating that withholding an acting allowance that was granted to the same employee on a different occasion constituted an unfair labour practice (notwithstanding that the acting allowance was never contractually due to the employee).
The judges in IMAATU and Protekon consider that HOSPERSA too narrowly confines the definition of interest-based disputes. They consider that interest-based disputes should further be divided into instances where a) the employer regularly exercises a discretion to provide a non-contractual benefit, and b) where no such benefit has existed before. While the latter should probably be the subject of negotiation, the judges consider that the former may be adjudicated on by the CCMA because the LRA demands that such a discretion be exercised fairly.”[1]
Thus, it can be understood that the employer’s discretion regarding the provision of benefits falls within the scope of interest-based benefits. Interest-based benefits can be divided into two categories. One, is those for which the employer exercises discretion to provide the employee with a benefit not mentioned in his or her employment contract. Two, those that do not exist, neither in the employment contract nor in policy or practice. The latter are subject to collective bargaining or negotiation between the employee and the employer – and would not need an arbitrator; the former are justiciable and subjected to a duty of fairness.
What does ‘fairness’ mean? N. Kewaj gives a definition: “When considering the notion of fairness, a number of terms come to mind. In her thesis, Loots[2] refers to words such as ‘equitable’, ‘equity’, ‘unbiased’, ‘reasonable’, ‘impartial’, ‘balanced’, ‘just’, ‘honest, ‘free from irregularities’, ‘according to the rules’, ‘equality’”. Cooper [3] explains that the concept of fairness in the context of labour should be seen as relating to practices which are in line with tenets of justice. Unfairness bears a converse meaning. Du Toit et al [4] define the concept as ‘a failure to meet an objective standard and may be taken to include arbitrary, capricious, biased or inconsistent conduct, or conduct based on insubstantial reasons or wrong principles, whether negligent or intentional’[5].
K.Newaj explains that this definition has been referred to in cases such as Apollo Tyres South Africa, for example. The facts were as follows: Hoosen, a 49-year-old woman, was employed by Apollo Tyres South on 1st April 1984. Apollo Tyres, a tyre manufacturer struggling with economic pressures, introduced an early retirement scheme for some employees, applicable only to staff aged 46 to 59 and paid on a monthly basis. Individuals would receive two months of additional salary and an ex-gratia payment based on a scale based on age. Hoosen was refused entry into the scheme and was informed that to be eligible for early retirement, applicants had to be between 55 and 59 years old. She inquired whether she could appeal the decision on the grounds of abuse of management discretion.
Hoosen resigned and referred an unfair labour practice dispute to the CCMA, which has jurisdiction to resolve such dispute, to examine the employer’s fair conduct when exercising a discretionary power under a law or contract. Hoosen was not contractually entitled to early retirement benefits and the granting of this benefit was subject to the employer’s discretion. The only thing to consider is whether the discretion was exercised fairly or unfairly. K.Newaj concludes: “The LAC in Apollo Tyres South Africa (Pty) Ltd v CCMA (Apollo Tyres) found that the employer’s decision not to grant the employee early retirement benefits constituted an unfair exercise of discretion, as there was no acceptable, fair or rational reason why the employee was not permitted to participate in the early retirement scheme” [6].
E.Fourie comes to the same conclusion, “Only two qualifying criteria for the early retirement benefits were conveyed to the employees, namely age and being an employee paid on a monthly basis. It was only later on, that the disqualifying age factor (between 55 years and 59 years old) was added, and that in order to qualify if aged below 55 the employee must suffer from ill-health. The employer kept on changing the criteria. It was evident that there was no fair, acceptable or rational reason to deny the respondent participation in the scheme. The employer was not exercising his discretion fairly. It was decided that the employer in this case had committed an unfair labour practice relating to the provision of benefits in terms of section 186(2)(a)”.
However, even though the employer’s unfair conduct was taken into account, the Court did not rule on the standards of fairness applicable to benefits disputes. So, what are these standards? And does the application of the standards that determine the (un)fairness of the employer’s conduct, concerning the provision of benefits, prevent and resolve disputes related to benefits and guarantee protection to the employee?
For the purpose of the PICO question, we compare applying standards to determine the fairness of the employer’s conduct relating to the provision of benefits with not applying standards.
For parties to an unfair employment benefits dispute, is applying standards to determine the fairness of the employer’s conduct relating to the provision of benefits more effective than not applying standards for conflict prevention, management and resolution and employee protection?
The databases used are: HeinOnline, Westlaw, Wiley Online Library, JSTOR, Taylor & Francis, and ResearchGate.
For this PICO question, keywords used in the search strategy are: employment, labour, disputes, conflicts, benefits, unfair, fair, solutions, standards, procedures, practices, employee, employer.
The main sources of evidence used for this particular subject are:
K.Newaj is one of the few authors to suggest a reflection on the concept of ‘fairness’ in providing employment benefits. His thinking is based on an analogy between the fairness standards applied in the context of dismissals and those developed in South Africa and New Zealand. K.Newaj takes the example of “The Code of Good Practice: Dismissal Based on Operational Requirements”[7] contained in the Labour Relation Act (LRA) 66 of 1995 in South Africa and the New Zealand’s “Justification test” [8].
The Code of Good Practice: Dismissal Based on Operational Requirements states:
The aim of this exploration is to establish to what extent fairness imperatives documented in this Code contained in the LRA regarding unfair dismissals are applicable to benefits disputes and against which employer conduct must be measured. In support of various court decision examples, the study recommends that clear fairness guidelines be developed for benefit disputes. According to the author, these fairness guidelines for the provision of benefits should include the elements synthesised below.
Standards of substantive fairness
Standards of procedural fairness
K.Newaj emphasized the need for a consultative process to resolve employee benefits and dismissal conflicts. Some form of consultation is required to encourage and engage each party in a joint consensus-building process on the issues concerned. This consultation is important because it requires engagement and communication with the employee. The author even proposes a succession of steps to carry out a fair consultation process in the context of a conflict in providing benefits. The steps are as follows:
“However, the consultation process outlined above will not apply to all benefit disputes. It will only apply to decisions in relation to benefits provided for in terms of a policy; in terms of an established practice; or subject to the exercise of employer discretion (whether in terms of a contract; collective agreement; legislation; policy or past practice). This is because under these circumstances consultation is sufficient, as there is no legal obligation to obtain the consent of the employees. If, on the other hand, the decision is in relation to a benefit provided for in a contract of employment, collective agreement or legislation, a consultation process will not suffice”[10].
In other words, in an employment contract, any changes to the terms and conditions previously agreed to can only be made by agreement between the parties. If the employee does not agree, these changes cannot be applied. Similarly, K.Newaj explains that collective agreements are the result of collective bargaining that takes place through negotiation and agreement between the parties. Hence, any changes to the terms and conditions agreed to collectively must be made by consent. Finally, any intended change to a benefit provided by the legislation can only be made by Parliament, the national legislative assembly, the only body competent to make the necessary legislative changes. Therefore, employers are only required to implement the legislation and not to amend it by negotiation and agreement with the employee.
New Zealand Justification Test
Newaj continues the comparison between dismissals and benefits disputes by focusing on New Zealand’s approach to assessing fairness. Since 2011[11], New Zealand has allowed employees to file personal claims when they feel the employer’s actions put them at a disadvantage. Our interest here is to know the principles that can be used in formulating fairness requirements for benefit disputes.
“For the purposes of section 103(1)(a) and (b), the questions of whether a dismissal or an action was justifiable must be determined, on an objective basis, by considering whether the employer’s actions, and how the employer acted, were what a fair and reasonable employer ‘would’ have done in all the circumstances at the time the dismissal or action occurred.”[12] The goal of the legislators was to develop a test that would assess the justifiability of the employer’s actions as objectively as possible. So, the special feature of this test was to evaluate the justifiability of the employer’s actions by determining what a hypothetical employer would have done, even substituting the hypothetical actions of that employer with the actions of the actual employer. The test applied is, therefore whether the employer’s actions and how the employer acted were what a fair and reasonable employer “could have” done in all the circumstances at the time of the action.“ Even though the wording of the justification test did not refer to substantive and procedural fairness, these standards of fairness were implicit in the test.”[13]
K.Newaj concludes that “there are a number of similarities between New Zealand’s justification and the test employed in South African labour law for misconduct dismissals (…) Essentially the justification test confirms the justifiability of employing standards of both substantive and procedural fairness in determining benefit disputes (…) New Zealand’s justifiability test endorses substantive fairness in assessing personal grievance cases (…) New Zealand’s justifiability test endorses the use of procedural fairness in assessing personal grievances. It essentially requires that the employee be given an opportunity to make representations prior to a decision being taken.”[14]
Quality of evidence and research gap
According to our research method, we grade the evidence comparing applying standards to determine the fairness of the employer’s conduct relating to the provision of benefits with not applying standards, for conflict prevention and resolution and employee protection, as high. The limited resources available are of high quality consisting of recent medium-sized/large empirical research, mainly thesis and scholarly articles in internationally reputable periodicals on law. The research team has upgraded the evidence as it provides evidence, recommendations and guidelines.
Few resources address this topic. First, much of the most relevant research relates to South Africa, given its experience in the prevention, resolution and management of conflict in the workplace. Moreover, most of the available work deals with the issue of equity in the workplace generally from the point of view of dismissal cases, but not with equity in the provision of benefits. K.Newaj, on whom we relied largely, is one of the few authors to address the issue of equity in relation to the provision of benefits. We found his study interesting because it drew a parallel between the treatment of dismissal cases and those relating to benefits by comparing the experience of South Africa with New Zealand. Although we relied largely on this one author, the author’s arguments are largely sufficient as they provide evidence, recommendations and guidelines to be followed in implementing the principle of fairness in the provision of benefits.
Applying standards to determine the fairness of the employer’s conduct relating to the provision of benefits | Not applying standards to determine the fairness of the employer’s conduct |
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These standards prevent any conflict related to the provision of benefits because it requires the employer to respect and apply the standards of fairness in force within his/her organization. Plus, the employee is protected from any abuse of one’s rights over benefits because the employer must produce evidence to justify any decision. The definition and application of standards of fairness related to the provision of benefits ensures the legitimacy of any decision made by the employer towards the employee since that decision will have been made as per standards of fairness.
| In some cases, it is preferable not to apply standards of fairness because if the employer fails in this task, the consequences can be more harmful to employees, in the long term, than in the opposite situation, as suggested by the following research in the field of social psychology. First, the steepest decline in organizational commitment occurred when employees who started with a high level of trust in their management experienced unfair work processes combined with unfavorable outcomes. (…) the failure to establish clear rules about procedures and outcomes represents a threat, as it can severely harm employee commitment if unfair procedures and unfair or unfavorable outcomes are meted out”[17].
|
In addition, research in the field of social psychology suggests that, more broadly, the introduction of the concept of fairness in the organizational structure of an organization reinforces the commitment and performance of employees, in particular in ‘low-trust environments’. In low-trust environments, establishing clear rules about procedures and outcome distributions represents an opportunity, as this can have a strong positive effect on employee commitment to the extent that fair procedures and fair or favorable outcomes can be delivered.”[15]. These studies suggest that employees’ commitment and performance are, among other things, closely linked to the degree of trust they place in their employer: “The more trust employees have in their managers, the more likely the employees are to expect organizational outcomes to be favorable and the more likely they are to expect that the procedures used by authorities to plan and implement decisions will be fair. That finding suggests that employees who expect their line managers to be untrustworthy are more likely to be disloyal toward the organization and exhibit lower levels of motivation, which may ultimately result in suboptimal work performance. According to several studies, untrusting employees who show a low level of commitment are likely to be treated less positively by their superiors, which in turn discourages the employees from being more committed. In other words, employees who show low commitment as a result of not trusting management are often caught in a vicious cycle. Our research generally confirmed the view that workers who show a high level of trust in management are more committed toward their organization than those who mistrust their superiors.”[16] | In the case of a dispute between the employer and the employee based on unfair benefits, the absence of fairness standards would be an advantage insofar as the parties to the dispute would not have to go through a procedure deemed complex by its bureaucratic nature, its slowness and its cost. This fairness process could indeed imply employers to train employees on fairness norms and procedures even if it may be costly to provide a training expert, for example. |
Applying standards to determine the fairness of the employer’s conduct relating to the provision of benefits | Not applying standards to determine the fairness of the employer’s conduct |
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Introducing the concept of fairness requires a fair culture in a company or an organizational change toward integrating fairness in the workplace. Introducing the concept of fairness related to the provision of benefits in an organization is not self-evident. The adoption and application of this concept can only really take place in an environment where there is already an organizational culture of fairness: “In sum, our findings point to how important it is for executives to proactively manage organizational fairness. Doing so requires a coordinated organizational effort that should be embedded in a company’s values and traditions.”[18]. If not, an organizational change towards integrating fairness in the workplace will need to be implemented before fairness can be applied to the provision of benefits. And not all employers will be ready or permeable to this change.
| The lack or absence of fairness standards related to the provision of benefits removes the employer’s obligation to be fair and accountable to his/her employee and does not shield the employee from any abuse by his/her employer in the provision of his benefits. This situation would encourage conflicts and would not facilitate the management of possible conflicts in the absence of standards on which the employer and the employee should be able to refer in case of dispute. Therefore, any decision of the employer will be called into question because it is not based on any evidence justifying its viability and legitimacy.
Research in the field of social psychology suggests that “the failure to establish clear rules about procedures and outcomes represents a threat, as it can severely harm employee commitment if unfair procedures and unfair or unfavourable outcomes are meted out”[19]. |
Taken together, the available research suggests that (substantive and procedural) standards of fairness related to the provision of benefits impose rules and steps on the employer to ensure the fairness and legitimacy of any future decision concerning the provision of employee benefits. These standards thus make it possible to prevent any conflict on the ground of unfair labour practice and protect the employee from any abuse of the employer. These standards require the employer to justify its decisions, by providing evidence and guaranteeing the employee a right of reply.
Each party must undertake to respect and apply these standards. In the case of a dispute, the court will refer to these standards to judge the fairness or unfairness of the employer in the provision of benefits. But doing so requires an organizational change towards the integration of fairness in the workplace, an organizational effort for fairness to be embedded in a company’s values and traditions. Not all employers are ready or permeable to this change. Moreover, it has been shown that the failure to establish clear rules about procedures and outcomes of fairness represents a threat, as it can severely harm employee commitment if unfair procedures and unfair or unfavorable outcomes are meted out.
However, our research has shown that the lack or absence of fairness standards related to the provision of benefits removes the employee’s obligation to be fair and accountable to his/her employee and does not shield the employee from any abuse by his/her employer in the provision of his benefits. This situation would encourage conflicts and would not facilitate the management of possible conflicts without standards to which the employer and the employee should be able to refer in case of dispute. Therefore, any employer decision will be called into question because it is not based on evidence justifying its viability and legitimacy. Thus, applying standards to determine the fairness of the employer’s conduct relating to the provision of benefits is preferred.
Taking into account the balance of outcomes, the benefits for parties to an unfair employment benefits dispute and the quality and consistency of the evidence, we make the following recommendation: For parties to an unfair employment benefits dispute, applying standards to determine the fairness of the employer’s conduct relating to the provision of benefits is more effective than not applying standards.
Thus, we recommend that clear fairness guidelines be developed for benefit disputes.
[1] A. Patel, “Unfair labour practice: Benefits-where are we?”, October 2011.
[2] Loots BE., “Public Employment and the Relationship Between Labour and Administrative”
[3] Cooper C. “The Boundaries of Equality in Labour Law” (2004) 25 Industrial Law Journal
[4] Du Toit D., Bosch D., Godfrey S., Cooper C., Giles G., Cohen T., Conradie B. and Steenkamp A., Labour Relations Law: A Comprehensive Guide Lexis Nexis (2015)
[5] K.Newaj, “An appraisal of the provision of benefits as an unfair labour practice in South African labour law”, June 2019, p.162
[6] K.Newaj, “An appraisal of the provision of benefits as an unfair labour practice in South African labour law”, June 2019, p.165
[7] CODE OF GOOD PRACTICE: DISMISSAL (labourguide.co.za)
[9] The author often refers to the Protekon case, which, according to his remarks, served as a basis for defining and applying the standards of procedural fairness and substantive benefits. For more informations on Protekon case : Protekon (Pty) Ltd v Commission for Conciliation Mediation and Arbitration and Others (C335/2003) [2005] ZALC 75 (17 May 2005) (saflii.org).
[10] K.Newaj, “An appraisal of the provision of benefits as an unfair labour practice in South African labour law”, June 2019, p. 179.
[11] The Test is found in section 103A of the Employment Relation Act (ERA) 2000 but was inserted into the Act in 2004 and amended (expanded) in 2011: Test-of-Justification – Test of Justification How to raise a Personal Grievance.
[12] K.Newaj, “An appraisal of the provision of benefits as an unfair labour practice in South African labour law”, June 2019, p.181.
[13] K.Newaj, “An appraisal of the provision of benefits as an unfair labour practice in South African labour law”, June 2019, p.182.
[14] K.Newaj, “An appraisal of the provision of benefits as an unfair labour practice in South African labour law”, June 2019, p.186-188.
[15] How Workplace Fairness Affects Employee Commitment | How Workplace Fairness Affects Employee Commitment (oreilly.com)
[16] Ibid.
[17] Ibid.
[18] Ibid.
[19] Ibid.
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