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Test for incompatibility: "Man, what do you have to do to get some recognition in this place?"

Test for incompatibility: "Man, what do you have to do to get some recognition in this place?"

In this matter, an employee of middle-management rank was dismissed on grounds of incompatibility in that he lacked the capacity to be compatible with senior management and colleagues to the extent that his behaviour and approach was regarded as dysfunctional to the effective operation of the mill. It was further regarded that the employment relationship had become too strained and intolerable to continue further. While on the facts of this case, the employee was deemed to have been unfairly dismissed; the Arbitrator clearly sets out the current legal position on dealing with employees who are incompatible.

Incompatibility as a ground for dismissal is not without difficulty (see Subrumuny and Amalgamated Beverages Ltd (2000) 21 ILJ 2780 (Arb) 2789D-G). Section 188 of the LRA establishes only three legitimate grounds for a fair dismissal: misconduct, incapacity and operational requirements. Each ground triggers a distinct procedure before a fair dismissal can be effected.

The Respondent did not specifically categorise the grounds of the Applicant’s dismissal, but the use of the disciplinary procedure to effect the dismissal indicates that the Respondent opted to regard the conduct as misconduct. This was not the only option. In Wright v St Mary’s Hospital (1992) 13 ILJ 987 (IC) dismissal for incompatibility was held to be a form of dismissal for operational requirements, although this judgment cannot now be followed in the light of the narrow definition of "operational requirements" in s 213 of the LRA 1995.

There was also the option to regard the alleged incompatibility as incapacity, requiring compliance with Section 8 and 9 of the Code of Good Practice: Dismissal (Schedule 8, LRA 1995). Le Roux and van Niekerk in The South African Law of Unfair Dismissal (1994) 285-6 appear to accept that incompatibility is a form of incapacity. Du Toit et al Labour Relations Law (3 ed 2000) 376-378 classify incompatibility as a form of incapacity because it relates wholly to the subjective relationship between the employee and others in the enterprise and bears no relation to the definition of operational requirements.

The categorisation of incompatibility as incapacity may not necessarily be a neat fit. Incapacity, in terms of the Code of Good Practice, concerns poor work performance and, despite knowledge of the performance standard, counselling, and time to improve, the inability or unwillingness to comply with the performance standard.

It may be inappropriate to regard compatibility, which is essentially an attitudinal problem, as poor work performance, particularly where the employee’s technical performance is highly competent. While it may validly be argued that compatibility is in itself a performance standard, particularly for a manager, the wilfulness inherent in incompatibility suggests that on occasions it should more appropriately be categorised as misconduct.

In this case it was not argued that the Applicant’s incompatibility constituted incapacity on his part to function properly in the technical sense. Mr Lawrence, on behalf of the Respondent, argued that in this particular case, whether or not the employer sought to treat the Applicant’s conduct as misconduct or incapacity is neither here nor there and is merely of technical relevance. He argued that in essence, the Respondent has followed what is clearly a graduated and progressive approach as suggested in Schedule 8 of the Code of Good Practice by having counselling sessions, review meetings and giving the Applicant sufficient opportunity to improve.

What, then must an employer do to establish that a dismissal is justified on the basis of incompatibility? The following guidance is given from cases and other authorities:

The starting point is that an employer is entitled to insist on reasonably harmonious interpersonal relationships within its business (Erasmus v BB Bread Ltd (1987) 8 ILJ 537 (IC) 544C). Just as the employer has an obligation not to destroy or damage the relationship of confidence and trust, so too there is an implied term that the employee must not act in a way which results in disharmony and a breakdown in the relationship (Council of Scientific & Industrial Research v Fijen [1996] 6 BLLR 685 (AD) 691).

Incompatibility has been defined as ‘the inability on the part of an employee to work in harmony either within the "corporate culture" of the business or with fellow employees’. (Le Roux and van Niekerk in The South African Law of Unfair Dismissal (1994) 285-6)

The essence of incompatibility has been seen to be an irremediable breakdown in the working relationship caused through personality differences, an inability to work together in harmony, friction between employees, a discordance in approaches and so on (Lubke v Protective Packaging (Pty) Ltd (1994) 15 ILJ 422 (IC)).

Incompatibility can be a nebulous concept and the effect of incompatibility often cannot be explained and articulated in clear and objective terms (Subrumuny and Amalgamated Beverages Ltd (2000) 21 ILJ 2780 (Arb) 2789G-H).

Assessing compatibility of managerial interaction necessarily involves the exercise of a subjective judgment. For this reason there must at least be some other evidence besides the opinion of the employer to establish incompatibility. However, the formulation of compatibility must, for business and economic reasons, be left to the employer to decide. "It is not for a Court to second guess these decisions to decide upon the appropriate cause of action de nova. Nevertheless an Adjudicator should at least ensure that the employer’s standards are attainable.

Provided the employer acts in good faith and has reasonable and supportable grounds for concluding that the employment relationship cannot be continued, interference is unwarranted. In determining whether a dismissal is unfair one must be guided by the principal that reasonable people may differ as to what is appropriate under the circumstances". (Subrumuny and Amalgamated Beverages Ltd (2000) 21 ILJ 2780 (Arb) 2789G- 2790A).

The golden rule is that prior to reaching a decision to dismiss, an employer must make some "sensible, practical and genuine efforts to effect an improvement in interpersonal relations when dealing with a manager whose work is otherwise perfectly satisfactory" (Lubke v Protective Packaging (Pty) Ltd (1994) 15 ILJ 422 (IC) 429D-E; Hapwood v Spanjaard Ltd [1996] 2 BLLR 187 (IC) 196-7). The offending employee has to be advised what conduct allegedly causes disharmony, who is upset by the conduct, and what remedial action is suggested to remove the cause of the disharmony. A reasonable period must be allowed for the employee to make amends.

Odd or eccentric behaviour of an employee, even if he or she happens to be a manager or a senior executive, cannot, per se, give rise to a ground for dismissal. Mild or harmless eccentricity should of course be distinguished from extreme forms of unacceptable behaviour. Dismissal may be appropriate only where the employee’s eccentric behaviour is of such a gross nature that it causes consternation and disruption in the work-place, and then only after he or she has been properly counselled or warned (Joslin v Olivetti Systems & Networks Africa (Pty) Ltd (1993) 14 ILJ 227 (IC) 230 F-J).

In order to justify dismissal, incompatibility must be entirely or substantially attributable to the employee. (McDuling and MIF (1998) 7. CCMA 8.3.1; Visagie & Andere v Prestige Skoonmaakdienste (EDMS) Beperk (1995) 16 ILJ 421).

The incompatibility that causes the breakdown in a working relationship must be irremediable (Wright v St Mary’s Hospital (1992) 13 ILJ 987 (IC) 1004A). Dismissal is regarded as a last resort (Hapwood v Spanjaard Ltd [1996] 2 BLLR 187 (IC) 198C-D).

# COFESA, Contractors, and contracts of employment

Determining the existence of a contract of employment has always been difficult. Over the years, the courts have developed several tests to assist them in identifying a contract of employment as opposed to a contractual relationship of another form. These tests have included the control test, the organisational rest and the dominant impression test. Of all of these tests, the dominant impression test is the one that has gained most currency, although some doubts have recently been expressed about its usefulness.

The courts have recently had occasion to consider the terms of a so-called independent contractors agreement concluded by employers with the assistance of an employer's organisation, the Confederation of Employers of South Africa ("COFESA").

In both instances, the courts held that despite the wording of the contract, the true relationship was one of employment and that the contracts were a sham. The first case, Building Bargaining Council (Southern and Eastern Cape) v Melmons Cabinets CC & another (2001) 22 ILJ 120 (LC), concerned a dispute between the bargaining council and Melmons, a manufacturer and installer of cupboards.

Melmons had persuaded the majority of its hourly paid employees to resign and to enter into a standard form of contract supplied by COFESA in terms of which they purportedly became contractors, who provided services to Melmons for an indefinite period. The bargaining council alleged that the so-called contractors were employees, and subject to the bargaining council agreement.

The Labour Court in the course of review proceedings, had to decide on the nature of the relationship between Melmons and the "contractors". Judge Landman noted that the definition of an "employee" in section 213 of the Labour Relations Act specifically excluded an independent contractor from its ambit.

The Labour Court used as a starting point the terms of the contract of employment between Melmons and a particular "contractor", a Mr Mawa. The contract envisaged a sophisticated relationship in terms of which the contractor was obliged to deliver certain specified services to his "client". The contract contained indemnities in respect of claims from the Receiver of Revenue, VAT, accident insurance, regional councils, etc. It also provided for the letting and hiring of office/factory space, and entitled the contractor to employ other persons to assist him provide the services that he is required to provide in terms of the agreement.

An examination of the reality of the situation revealed a relationship of an entirely different nature. The "services" that the "contractor" was required to provide included cleaning cupboards sing a rag and thinners. The equipment and/or tools referred to in the agreement and the undertaking to keep that equipment washed and cleaned according to the manufacturer’s specifications related to equipment that was recorded to comprise "een sak lappe, een besem, vyf liters thinners".

The court noted that while the agreement recorded that Melmons was a client of the contractor this was nothing less than "a cruel hoax" perpetrated on Mr Mawa. This had been done with the assistance of COFESA. While Mr Mawa believed that he was a self-employed entrepreneur earning more than he did as an employee, he was blissfully ignorant of his newly acquired obligations and the loss of his rights and privileges as an employee. The court concluded that the agreement that purported to be an independent contract/principal relationship "is a sham and it remains a sham even though Mr Mawa has consented to it". In truth, Mr Mawa is an employee and Melmons is his employer. The court concluded that Melmons was required to comply with the bargaining council's collective agreement and ordered Melmons to pay the costs of the proceedings.

The second case, this time decided in the Natal Provincial Division of the High Court, concerned a similar contract and a claim for payment of levies by a bargaining council on the basis that certain persons described as "independent contractors" were in fact employees.

While the court noted as a general rule, the legal relationship between the parties must be gathered primarily from a construction of the contract which they conclude, this is not the end of the matter. The court is always entitled to discover the true relationship between the parties, and to have regard to the realities of that relationship despite what the parties have decided to call it. In other words, a label is of no assistance if it is used to disguise the real relationship between the contracting parties.

In this instance, the COFESA agreement entitled "independent contractor memorandum of agreement" did not, stated the court, necessarily mean that that is the substance of the contract.

After an examination of the terms of the contract and a review of the evidence, the court found that "the contract is not only a subterfuge but a bizarre one, designed to strip the workers of the protection to which they are entitled according to law and fair labour practice and to place the worker at the mercy of the defendant".

The court had no hesitation in concluding that the persons described as contractors were employees in terms of the definition of employee in the Labour Relations Act and not independent contractors. The company was ordered to pay the council's costs, including the costs of two counsel.

The clear lesson to be drawn from these decisions is that the High Court and the Labour Court will not hesitate, in appropriate instances, to look behind the form of a contract between two parties to establish the real relationship between them. In other words, the form of any agreement in terms of which one party agrees to provide services to another must yield to substance when the true relationship is one of employment.

The abuse of the definition of "employee" contained in the current legislation has led to a series of amendments both to the Labour Relations Act and the Basic Conditions of Employment Act. In terms of the Amendment Bill adopted by the National Council for the Provinces on 28 February 2002 and likely to become law before mid-2002, if a party is able to establish any one of seven factors, that person will be presumed to be an employee for the purpose of the relevant Acts, unless that presumption can be rebutted. The factors are broadly expressed and will in practice, be fairly easily satisfied.

Employment is presumed if any one or more of the following are present:

>> The manner in which the person works is subject to the control or direction of another person

>> The person's hours of work are subject to the control or direction of another person

>> In the case of a person who works for an organisation, that person forms part of the organisation

>> The person has worked for the other person for an average of at least 40 hours per month over the last three months

>> The person is economically dependant on the other person for whom she or he works or renders services

>> The other person provides the person with the tools of trade, or work equipment

>> The person only works for or renders services to one person

It should be recalled that the establishment of any one or more of these factors does not definitively establish an employment relationship. It is simply an evidentiary device, intended to assist parties to establish a relationship of employment. The definition of "employee" both in the LRA and the BCEA remain unaffected by the amendment.

While it can be appreciated that the creation of a presumption of employment was necessary to combat the subterfuges perpetrated by organisations such as COFESA, the far-reaching nature of the amendments might be questioned in the light of the courts clear inclination to intervene and to expose disguised contractual relationships for what they are in reality. Be that as it may, the nature and extent of the factors on which the existence of an employment relationship will now be argued will inevitably mean that the employer party will be on the defensive in virtually each instance where the nature of a contractual relationship to provide services is challenged.

Gary Watkins

Gary Watkins

Managing Director

BA LLB

C: +27 (0)82 416 7712

T: +27 (0)10 035 4185 (Office)

F: +27 (0)86 689 7862

Website: www.workinfo.com
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