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Author: MHI Law

WHAT TO LOOK OUT FOR BEFORE BUYING A PROPERTY

WHAT TO LOOK OUT FOR BEFORE BUYING A PROPERTY

You’ve searched far and wide for the perfect home for you and your family, and you’ve finally found it, or so you thought. Buying a home, especially for the first time, is as overwhelming as it is exciting.

You’ve viewed your dream home, but remember, you receive so much information during your viewing, that you could easily become overwhelmed and miss important details. Especially if you have fallen in love with your potential new home. It is important to remember that there are various “red flags” that you need to look out for before purchasing, as missing these “red flags” could have significant financial repercussions. Before signing, make sure to look out for the following:

1.Foundation and structural faults

What do you think is the most important part of a house? The double garage? The interior? How well-lit the rooms are? No. The most important part of the house, and arguably the costliest to repair, is the foundation of the house. Make sure to look out for large cracks in the walls, as this could be a sign of some serious structural problems with the foundation. Make sure to thoroughly investigate the door frames; if door frames don’t appear to be square or if the doors have difficulty closing, it could be a sign of structural problems.

2.Poor drainage/grading

In most cases, water problems in a house are directly related to poor drainage or grading. However, it is often difficult to detect if a house has poor drainage or grading. An obvious sign of the above-mentioned faults is pools of water or a bouncy bathroom floor which could indicate that there is a leaking shower drain. Make sure to also look out for overflowing gutters, water stains and cracks in the foundation.

3.Patches of fresh paint

A coat of fresh paint is an excellent and quick way to spruce up your home, but if there are random patches of fresh paint around the house, it could be cause for concern. Why? Because it is possible that the seller is trying to hide something beneath the coat of paint.

4.Faulty electrical wiring

If you are looking to buy an older home, make sure that the electrical wiring is not faulty, as house fires caused by faulty wiring is not as uncommon as we would hope. This is especially the case in older homes, as these homes don’t always have an ample supply of power and the number of electrical outlets like newer homes have. Also look out for any exposed wires, as this could cause significant harm to either the home or your family.

5.Neighbourhood condition

When looking for your perfect home, always remember that you are not only investing in the property itself, but also in the neighbourhood. Make sure to ask enough questions about the neighbourhood. For example, if you move into a neighbourhood that is deteriorating or crime-ridden, it could have a significant impact on your return on investment.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

EXCLUSIONARY CLAUSES IN HOSPITAL CONTRACTS

EXCLUSIONARY CLAUSES IN HOSPITAL CONTRACTS

The CPA contains certain outright prohibitions on the terms that can appear in contracts, the so-called “blacklist items”. Section 5(1) of the Act provides that a supplier (doctor/hospital) must not make a transaction or agreement subject to any term or condition if it directly or indirectly purports to waive or deprive  a consumer (patient) of a right in terms of the Act or avoid a supplier’s obligation or duty in terms of the Act, that would amount to an attempt to avoid a supplier’s obligation under the Act.

In terms of Section 54(1) of the Act, a hospital is also obliged to provide quality medical services. Upholding an exclusionary clause would shield the hospital from liability in breach of its duty to render quality medical services, which would be contrary to long-standing professional standards of conduct and ethical rules which all care services swear to uphold.

Section 51(3) of the Act also provides that exemption of liability for loss or damage due to gross negligence will no longer be permitted in the South African law of contract and such prohibited terms are void and unenforceable.

The regulations governing the Act also provide a list of contract terms which are presumed not to be fair and reasonable, namely Regulation 44(1) provides that a term in a consumer agreement between a business or professional and a consumer is presumed to be unfair if it has the purpose and effect of “excluding or limiting the liability of the supplier for death or personal injury caused to the consumer through an act or omission of that supplier”.

Sections 54 and 55 of the Act provide for both quality services as well as safe and quality goods for the consumer/patient. Section 56 creates an implied warranty as the supplier (amongst others) warrants that the goods comply with the required quality standards. In addition to the consumer/patient’s common law right to claim damages for breach of contract, the Act also warrants a consumer’s right to quality service “in a manner and quality that persons are generally entitled to expect”.

Only having regards to the above provisions, it is likely that the CPA will entirely abrogate the principles laid down by the SCA in the Afrox case. This will bring South Africa in line with foreign jurisdictions regarding medical liability, specifically in respect of exclusionary clauses in hospital contracts. In short, it can safely be assumed that exclusionary clauses in hospital contracts are no longer valid.

It can therefore be argued that it is likely that any type of exclusionary clause, at least where it appears in a hospital contract, will no longer be valid in light of the CPA, especially when regard is had to comparative case law dealing with what should be regarded as an unfair, unreasonable or unjust term.

The effect that the CPA will have on exclusionary clauses and the law of contract in a wider sense will have to be determined by the courts. Except in a few limited respects, the CPA does not apply retrospectively and, as such, contracts entered into prior to 1 April 2011 cannot be attacked on their exclusionary clauses in terms of the CPA. Case law such as the Afrox case will still be a determining factor in the outcome of these matters.

Reference List:

  • The Consumer Protection Act, 68 of 2008
  • Afrox Healthcare Beperk v Strydom 2002 (6) SA 21 (SCA)

 
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

ESTATE PLANNING AND THE IMPORTANCE OF THE SUBDIVISION OF AGRICULTURAL LAND ACT

ESTATE PLANNING AND THE IMPORTANCE OF THE SUBDIVISION OF AGRICULTURAL LAND ACT

Mr Reyneke owns a farm in South Africa and in terms of his last will and testament he bequeathed the said farm to his two sons in equal shares. Mr Reyneke died in 2019 and the executor of his estate requires clarification concerning the farm and the two sons.

Firstly, the distribution of a person’s estate when he dies is determined by the South Africa law of succession, subject to certain limitations. The South African law of succession is supported by the principle of freedom of testation in terms of which a person is given considerable freedom and discretion as to how his estate should be distributed at death.

One of the limitations to an executor’s freedom of testation is contained in the Subdivision of Agricultural Land Act 70 of 1970.  The Act prohibits the subdivision of agricultural land without the consent of the Minister of Agriculture. Without the consent of the Minister, the wishes contained in the will of Mr Reyneke cannot be carried out.

The following options are available to the testator and heirs:

  1. Redistribution agreement – the heirs can enter into an agreement whereby the land is registered in the name of one heir and the value of the one-half share is paid to the other heir. Both heirs must therefore inherit/benefit equally; or
  2. The land can be sold to a third party; or
  3. The heirs can create a company/trust whereby the heirs become shareholders/trustees and the entire farm is to be transferred to the said company/trust. The heirs can therefore work together as co-shareholders or co-trustees even though they may not own portions of the farm in their individual capacity.

It is therefore important to make use of a fiduciary specialist when drafting your last will and testament.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

LANDLORDS & TENANTS: CAN A TENANT CANCEL A LEASE?

LANDLORDS & TENANTS: CAN A TENANT CANCEL A LEASE?

When it comes to cancelling a lease early, both landlords and tenants must be aware of their responsibilities. It’s important to note that the Consumer Protection Act (CPA) has been put in place to protect consumers and it has changed the way that South Africans do business. The CPA also protects tenants in cases where they want to cancel a lease early.

According to the CPA, if a tenant provides the landlord with 20 business days’ notice, the tenant has every right to cancel the lease early. However, this does not mean that a tenant can just pack his/her bags and leave the property without facing some sort of penalty or financial repercussion. These penalties and financial repercussions can include a fair cancellation fee, cost of advertising as the landlord would have to advertise to find a new tenant to take the place of the old tenant, and any other costs deemed reasonable in the case that a landlord cannot secure a tenant in such a short time period.

It’s important to note, although a landlord can expect the abovementioned payments, a landlord cannot, under any circumstances, withhold a tenant’s deposit or expect the tenant to pay rent for the remainder of the lease. A landlord can also not charge a ridiculous and unreasonable cancellation fee. Additionally, a landlord may not withhold the deposit instead of charging a cancellation fee. Landlords tend to think that they can withhold deposits for almost any reason, and this is most certainly not the case.

Unfortunately, there are landlords who ignore the CPA and insist that the tenant pay rent until the lease comes to an end when a tenant cancels the lease early. So, is there anything a tenant can do if the abovementioned is the case? Yes. A tenant can approach the National Consumer Tribunal for assistance or contact the Rental Housing Tribunal.

Tenants need to ensure that they read the lease agreement very carefully before signing and to also make note of any provisions made in the lease agreement concerning the early cancellation of the lease as per the CPA. It is expected of landlords to be up to date and aware of the provisions laid out for early cancellation of the lease, but some are not, and this can cause immense problems for tenants. If your prospective landlord refuses to recognise the fact that you may cancel your lease early, consider renting another property. Also, consider renting a different property if the landlord insists on harsh repercussions in the case of early cancellation of the lease.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

DOES LIVING IN A SECURED ESTATE GIVE A FALSE SENSE OF SECURITY?

DOES LIVING IN A SECURED ESTATE GIVE A FALSE SENSE OF SECURITY?

Choosing to live in a secured residential estate in South Africa is becoming ever more popular with South Africans. Entering your estate whilst security guards watch out for unknown assailants that may enter, living in your home peacefully knowing that the security guards are ensuring that people may only enter with your permission, giving the home owners a sense of security. But is this a true sense of security or is it false, and if the unfortunate happens that you are robbed or assaulted in your home, who is responsible? The Home Owners’ Association? The security company?

A Home Owners’ Association (HOA) is a body/committee comprising of the home owners of a specific estate entrusted with the running of the estate and communal affairs of those that own homes there.

On the 28th of August 2018, Judge J Unterhalter of the Gauteng Local Divison High Court handed down judgment in a matter of Van der Bijl and Another vs Featherbrooke Home Owners’ Association and Another. The Van der Bijls, home owners in a secured estate, brought an action against the (HOA) and the security company for failing to secure their safety, as their property was invaded by robbers.

On the 8th of April 2014, robbers unlawfully gained access into the estate during the night and then proceeded to enter the Van der Bijls’ home. Mr Van der Bijl suffered a gunshot wound to his abdomen and Mrs Van der Bijl sustained injuries from being assaulted. Due to these injuries, the Van der Bijls claimed damages from the HOA and the security company, alleging that the HOA and security company were wrongful in their duty to care and were negligent as they failed to take measures to ensure their safety.

The HOA defended the action and took exception to the Van der Bijls’ cause of action, citing that the HOA did not have a legal duty to take steps to protect the Van der Bijls from the robbery, thus there was no wrongfulness or negligence on their part. The court’s stance is that wrongfulness and negligence are two separate requirements of Aquilian liability. Where wrongfulness concerns the issue as to whether the law imposes liability by recognising a legal duty resting upon the defendant to prevent the harm that the plaintiff suffered, negligence concerns the defendant’s conduct judged against the standard of whether a reasonable person would have foreseen the harm and guarded against it, inter alia, a defendant may be burdened with a legal duty to prevent a harm, but his/her conduct may be blameless because the harm was not reasonably foreseeable. Thus, a defendant may be negligent but not act wrongfully because there was no duty to prevent the harm.

The HOA took exception to the plaintiff’s particulars of claim inter alia, it did not have a legal duty to protect the Van der Bijls from the robbery, citing that the Van der Bijls did not make a case for Aqulian liability as there was no wrongfulness. The plaintiff’s counsel relied heavily on the decision of the Loureiro case, wherein the Constitutional Court held that a private security company, who was employed and remunerated for crime preventing, owed a duty to stop avoidable harm. The Constitutional Court went to express the opinion that there would be wholesome deterrent effect if private security firms were not insulated from their own mistakes. Thus, the plaintiff’s counsel submitted that, as in the Loureiro case, the security company employed by the HOA had a duty to protect the residents of the estate including the Van der Bijls and the HOA bears the same duty. But the two cases do not bear the same facts, inter alia, Loureiro did not decide that Mr Loureiro, by hiring a security firm, was under any duty to secure the house, it was the security company that owed the duty to protect Mr Loureiro and his family. So the fact that the HOA employed the security company to provide security for the estate does not simply follow on that the HOA owed the same duty as that assumed by the security company. Such a duty would have to be shown to exist apart from what the security company had undertaken to do. But yes, following the logic of Loureiro, it is the security company that owed a duty to the HOA and the members it represents.

Hence the Van der Bijls may have recourse against the security company and they are one of the defendants. Further, it was noted that the robbers/assailants that caused the harm were not sued and which the plaintiff will have a claim against.

While the Van der Bijls definitely enjoy fundamental rights to security of the person, bodily, physical and psychological integrity, dignity and privacy, and these rights were infringed by being assaulted in their home, the big question is from whom can these rights be claimed. The answer is, you will have a   claim against the assailants, and based on the Loureiro case, the security company, but the Judge failed to see how the HOA, which is an extension of the collective will of the estate home owners, is burdened with the duties to secure these rights. Should the home owners be burdened with these duties, then the question is, does my neighbour have a duty to protect me in my home? He or she may come to your aid and he/she may be described as being valiant to do so but it is not out of duty. Further, there was no contractual obligation, be it in the Memorandum of Agreement or written agreement  between the HOA and the home owners,  holding the HOA liable for protecting the Van der Bijls.

In conclusion, the court found that the plaintiff’s particulars of claim did not set out a cause of action, which follows that the HOA did not have a legal duty to protect the home owners, in particular, the van der Bijls, hence not wrongful.

So, the next time you are thinking of buying a property in an estate, make sure you read the Memorandum of Agreement and understand your rights as a home owner.

Reference List:

  • Van der Bijl and Another v Featherbrooke Estate Home Owners’ Association (NPC) and Another; In Re: Featherbrooke Estate Home Owners’ Association (NPC) v Van der Bijl (12360/2017) [2018] ZAGPJH 544; 2019 (1) SA 642 (GJ) (23 August 2018)

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

WHAT IS THE BUSINESS JUDGEMENT RULE?

WHAT IS THE BUSINESS JUDGEMENT RULE?

When running a business there are going to be times where the directors in charge will have to make difficult decisions and take risks in order to either save the company or to seal a big deal and gain financially, the notion of “risk for reward”.

As a director, one would be required to make a decision that would be in the best interest of the company, but sometimes these decisions end up being bad for the company, as it suffers financial damage and someone needs to take responsibility for it.

It is important for a director to be able to make decisions without fear, but how would one even take a risk with the “what if it fails” sword hanging over one’s head, knowing that you as a director might have to repay the monies the firm lost out of your own pocket.

This is where the Business Judgement Rule, introduced by the Companies Act 71 of 2008 (“the Act”) comes in, and it serves as protection for directors which allows them to make informed decisions without the fear of liability. However, the Business Judgement Rule can only be used if all the requirements as set out in the Act are complied with.

Section 76(3) of the Act deals with the respective duties of directors, and states that directors perform duties in good faith, in the best interest of the company and with care, skill and diligence that may reasonably be expected of a person carrying out the same functions in relation to the company as those carried out by that director and having the general knowledge, skill and experience of that director. This is subject to Section 4 and Section 5 of the Act in which the circumstances which indicate whether a director has acted responsibly are set out.

These circumstances are as follows:

Whether the director has taken reasonably diligent steps to become informed about the matter. This would require the director to actively do research about the matter in order to be adequately informed and bare the knowledge to act confidently.

Whether the director had no material personal financial interest in the matter of the decision and had no reasonable basis to know that any related person had a financial interest in the matter. The Act defines personal financial interest to mean a direct material interest of that person, of a financial or economic nature to which a monetary value may be attributed and it does not include any interest held by a person in a unit trust, unless that person has a direct control over the investment decision of that fund.

Whether the director complied with the requirements of Section 75 with respect to any interest contemplated in the abovementioned requirement.

Whether the director made a decision, supported a decision of a committee or board, with regard to that matter, and the director had a rational basis for believing, and did believe, that the decision was in the best interest of the company.

All of the above requirements have to be met in order for a director to be able to use the Business Judgement Rule as a defense and be excluded from liability for actions that were taken in good faith.

Reference List:

  • The Companies Act 71 of 2008

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

TRAVEL ALLOWANCE VS RIGHT OF USE OF MOTOR VEHICLE

TRAVEL ALLOWANCE VS RIGHT OF USE OF MOTOR VEHICLE

This article will outline the difference between a travel allowance and the right of use of a motor vehicle. There will also be a brief explanation of the travel expense deduction for income tax purposes.

The first distinction to be made between a travel allowance and the right of use of a motor vehicle is that the one is an allowance and the other is a fringe benefit. An allowance is an amount of money granted by the employer, to an employee, where the employer is certain that the employee will incur business-related expenditure on behalf of the employer, but where the employee is not obliged to prove, or account to the employer for the expenditure.

A fringe benefit refers to payments made to employees in a form other than cash. A taxable benefit is deemed to have been granted by the employer to the employee if such benefit is granted as a reward for services rendered or to be rendered.

Both the allowance and the fringe benefit are subject to pay-as-you-earn (PAYE).

Travel allowance:

A travel allowance is any advance granted or an allowance paid to the employee, by the employer, for the use of his or her private motor vehicle for the employer’s business purposes.

Previously an employee’s tax was based on 80% of the travel allowance and a provision was made where an employee’s tax may have been based on 20% of the allowance if the employer was satisfied that 80% of the time the motor vehicle was used for business purposes by the taxpayer.

As from 1 March 2018, this 80% rule does not apply anymore, and the travel allowance is based on the actual distance travelled.

Right of use of motor vehicle:

The right of use of a motor vehicle is classified as a fringe benefit. A fringe benefit is when an employee is granted the right of use of any motor vehicle that belongs to the employer for private or domestic purposes. This benefit shall be a deemed taxable benefit for the employee and although the benefit is usually not paid in cash it is still included in a taxpayer’s gross income.

The value of the benefit is calculated according to paragraph 7(4) of the Seventh Schedule and can be divided into three parts:

  1. Employer-owned or leased vehicle with no maintenance plan;
  2. Employer-owned or leased vehicle with a maintenance plan; and
  3. Vehicles held by the employer under an “operating lease” with a non-connected lessor.

In the instances of point 1 and 2, the amount of the fringe benefit is 3.5% (no maintenance plan) or 3.25% (maintenance plan) of the determined value of the motor vehicle for each month that the employee is entitled to use the vehicle for private purposes.

In the case of point 3, the fringe benefit is the actual cost incurred by the employer, under the operating lease plus the cost of fuel in respect of the vehicle.

Travel expense deduction for income tax purposes:

Travel allowance

A travel expense deduction is granted on a travel allowance for business travel expenditure and can be determined in one of the following two ways:

  1. Using actual figures, the taxpayer can provide actual business expenditure figures which are acceptable to the Commissioner and to do so, the taxpayer would have to keep a detailed record of all business expenditure; or
  2. Using actual business kilometres travelled and a deemed cost per kilometre.

In each of the above cases a logbook needs to be kept by the taxpayer for all business travel kilometres and expenditure.

Right of use of motor vehicle

The value of the fringe benefit must be reduced on assessment where accurate records have been kept in respect to distances travelled for business purposes by ratio that the business mileage bears to the total distance travelled during the year of assessment.

The value can further be reduced by costs such as license fees, insurance or maintenance, which the employee paid during the year of assessment. These costs are limited to the ratio that represents the business kilometres.

Conclusion

To conclude, when you drive with your own car, for business purposes, a travel allowance will be applicable and when you have a company-owned vehicle which you use for business and private use, the private use will be seen as a right of use of motor vehicle fringe benefit.

Although both the travel allowance and right of use of motor vehicle may seem like the same thing, it is important to distinguish what the differences are and how it should be treated differently for tax purposes.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

CORPORATE GOVERNANCE – DIVIDENDS

CORPORATE GOVERNANCE – DIVIDENDS

A dividend is the distribution of a reward from a portion of the company’s earnings and is paid to a class of its shareholders. Dividends are decided and managed by the company’s board of directors, though they must be approved by the shareholders through their voting rights.

Dividends can be issued as cash payments, as shares, or other property, though cash dividends are the most common.

While the major portion of the profits of a company is kept within the company as retained earnings, which represent the money to be used for the company’s ongoing and future business activities, the remainder can be allocated to the shareholders as a dividend.

The board of directors can choose to issue dividends over various time frames and with different payout rates. Dividends can be paid at a scheduled frequency, e.g. monthly, quarterly or annually.

Dividend payment procedures follow a chronological order of events and the associated dates are important to determine the shareholders who qualify for receiving the dividend payment. This chronological order consists of the following important dates;

  • The Announcement Date is the date on which the dividend is announced by the company’s management and must be approved by the shareholders before they can be paid.
  • The Ex-dividend Date, or simply put ‘ex-date’, is the date on which the dividend becomes ineligible. For instance, if stock in a company has a certain ex-date, then the shareholder who buys the stock on or after that ex-date will not qualify for the dividend as they are buying in on or after the dividend expiry date. Shareholders who own the stock prior to the ex-date, will receive the dividend.
  • The Record Date is the cut-off date, established by the company in order to determine which shareholders are eligible to receive a dividend or distribution.
  • The Payment Date is the date on which the company issues a payment of the dividend, and is the date on which the money gets credited to the investors’ accounts.

Section 46 of the Companies Act No 71 of 2008 (“the Act”) sets out the requirements that a company must meet before making a distribution. A company must not make any proposed distribution to its shareholders unless the distribution:

  1. Has been authorised by the board of directors by way of adopting a resolution;
  2. It reasonably appears that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution; and
  3. The board of the company acknowledges, by way of a resolution, that it has applied the solvency and liquidity test and reasonably concluded that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

WHO IS THE EMPLOYER? THE LABOUR BROKER OR THE CLIENT?

WHO IS THE EMPLOYER? THE LABOUR BROKER OR THE CLIENT?

I was employed by a Temporary Employment Service (“TES”) to work on a fixed-term basis for a company that manufactures stationery. After working for the same client continuously for six years, I was informed that my services will no longer be needed. I want to refer my matter to the Commission for Conciliation, Mediation and Arbitration, however, who will be the responsible party?

As a vast majority of employees in South Africa obtain employment through TES or commonly known as labour brokers, it is a predicament which many are faced with when the client of a TES, suddenly and sometimes without prior notice, decides to end the employment of the employee. As the employee was providing his labour to the client and not the TES, the question arises: who is then actually the employer of the employee?

The deeming provision in s198A(3)(b)(i) of the Labour Relations Act, 66 of 1995 (“LRA”) provides that an employee of a TES not performing a temporary service for the client is “deemed to be the employee of that client and the client is deemed to be the employer…”

In a recent series of cases between Assign Services (Pty) Limited and the National Union of Metalworkers of South Africa the Labour Court, Labour Appeal Court (“LAC”) and eventually the Constitutional Court were given the task to decide who will be deemed to be the employer of an employee who was employed through the use of TES.

The aforesaid section was the crux of the matter and the two main points of argument were: firstly, that once the deeming provision kicks in, the client of the TES becomes the sole employer of the employees, meaning that the TES employees are effectively “transferred” to the client. Secondly, that a dual employment relationship arose with both the TES and client as employers.

When the matter was referred to the Commission for Conciliation, Mediation and Arbitration, the commissioner held that the client becomes the sole employer of the placed TES employees for purposes of the LRA.

The matter was then taken on review to the Labour Court who rejected the argument that s198A(3)(b)(i) creates a sole employment relationship between the client and the placed employees. According to the Labour Court, the deeming provision augmented the employment contract between the TES and its employees and added the client as the party against whom the employees could claim their rights in terms of the LRA.

The Labour Court’s decision was then taken on appeal to the LAC. The LAC held that the TES is the employer of the placed employee until the employee is deemed to be the employee of the client and that the deeming provision becomes applicable after three months of continuous employment with the same client, the client becomes the statutory employer of the TES employee. The TES employees are deemed to be permanent employees of the client.

The matter was then referred to the Constitutional Court to make a final ruling on the matter. In a majority decision of the Constitutional Court, the ruling of the LAC was supported and accepted. The court supported its interpretation of the deeming provision by refereeing back to the whole idea of the legislator in providing protection to the TES employees. The court further held that the s198A must be contextualised within the right to fair labour practices in section 23 of the Constitution of the Republic of South Africa, 1996 and the purpose of the LRA as a whole. According to the court, a TES’s liability only lasts as long as its relationship with the client and while it continues to remunerate the employee. As soon as the client elects to remunerate the employee directly, the TES will then not be part of the employment relationship.

In light of the Constitutional Court judgment, as soon as the employee provides services to the client of a TES for a period longer than three months, the deeming provision will become applicable and the client will be faced with the duties and responsibilities of an employer. The employee automatically becomes employed on the same terms and conditions of similar employees, with the same employment benefits, the same prospects of internal growth and the same job security that follows. This will also mean that any legal action and liability that flows from the aforesaid will also be direct against the client.

Sources:

  • Labour Relations Act, 66 of 1995
  • Assign Services (Pty) Limited v National Union of Metalworkers of South Africa and Others 2018 (5) SA 323 (CC)
  • https://www.golegal.co.za/deeming-provision-lra/
  • The Constitution of the Republic of South Africa, 1996

 
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

PROPOSED HARSHER PENALTIES FOR APPLICANTS WHO LIE ON THEIR CVS

PROPOSED HARSHER PENALTIES FOR APPLICANTS WHO LIE ON THEIR CVS

According to an IOL report dated 31 January 2019, the number of false qualifications is on the rise in the country, with 97 national qualifications that were found to be fraudulent and misrepresented during the period of October-November 2018. Therefore, as a response to this shocking statistic, the National Qualifications Amended Bill was introduced into the National Assembly and the changes discussed hereunder could be effected.

The National Qualifications Framework Act No. 67 of 2008 (“The Act”) is proposed to apply to every qualification and/or part-qualification that must be registered in terms of the Act. The South African Qualifications Association (“SAQA”) must, in order to advance the objectives of the Act verify all qualifications or part-qualifications and make a decision on the status thereof.

Any person who claims that a qualification or part-qualification has been awarded to him/her by an educational institution, skills development provider or foreign institution whereas in fact no such qualification or part-qualification has been awarded, will be guilty of an offence and will be liable on conviction to any sentence which may be imposed for an offence of fraud. This means that if an applicant lies on his/her CV about whether having the necessary qualification will be guilty of the offence of fraud.

Any person or educational institution who claims that he/she/it is offering any qualification or part-qualification that is registered in terms of the Act, whereas such qualification or part-qualification is not registered, is guilty of an offence and is liable on conviction to any sentence that may be imposed for the offence of fraud.

Any person or educational institution who claims that he/she/it is accredited by a legally recognised body to offer any qualification or part-qualification whereas no such accreditation was granted, will be guilty of an offence and will be liable on conviction to any sentence that may be imposed for the offence of fraud.

Any person who produces a certificate, diploma, degree, computer printout and/or any falsified records in connection with a qualification or part-qualification, to the prejudice of any other person, will be guilty of an offence and will be liable on conviction to any sentence that may be imposed for forgery.

Any person who passes off a certificate, diploma, degree, computer printout or any falsified records in connection with a qualification or part-qualification, to the prejudice of another person, will be guilty of an offence and will be liable on conviction to any sentence that may be imposed for uttering.

What if I help someone or know of any person who has falsified or incorrectly misrepresented the presence of a qualification or part-qualification?

Any person who conspires with any other person and/or incites, instructs, commands or procures another person to commit an offence in terms of this Act, is guilty of an offence of aiding, abetting, inciting, conspiring another person to commit an offence in terms of this Act and is liable on conviction to a fine or imprisonment not exceeding 3 (three) years or to both such fine and imprisonment.

What factors will the court take into consideration when sentencing an individual who has lied on his/her/their CV?

A court which imposes any sentence in terms of this amendment bill must, without excluding any other relevant factors, consider aggravating factors such as the extent of the prejudice and loss suffered by the complainant as the result of the commission of such an offence; and the extent to which the person gained financially, or received any favour, benefit or reward from the commission of the offence.

The proposed Amendment Bill is a step in the right direction in the combat of fraud nationwide. This has specific bearing on those candidates in high-profile employment positions such as, but is not limited to, CEOs and politicians.

Reference List:

  • National Qualifications Framework Act 67 of 2008.
  • National Qualifications Framework Amendment Bill (Government Gazette No. 40430 of 18 November 2016).
  • IOL report: 31 January 2019.

 
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)