This post was contributed by Teneille Govender and Kate Paterson

In a landmark judgment, the Labour Appeal Court has found a company’s decision not to extend a benefit to an employee in terms of a discretionary policy to be unfair. In terms of the Labour Relations Act withholding a benefit may be an unfair labour practice, but this is the first case in which a court has held that a “benefit” can include something offered at the discretion of the employer – whether through a formal policy or only through a practice.

In this case, the employer introduced an early retirement scheme where monthly paid employees between the ages of 46 and 59 could apply for early retirement at the discretion of management.

The employee, a 49 year old woman, applied but was denied this benefit on the basis that an employee younger than 55 had to be ill in order to qualify for the scheme.  The company also stated that it would have had to hire someone to replace her if she went off on early retirement.

The employee successfully took the matter to the CCMA, which declared the refusal to be unfair.

On review, the employer argued that a “benefit” in terms of the LRA could not include a discretionary early retirement scheme.  The argument failed in the Labour Court.

The employer appealed against this judgment, maintaining that their scheme could not constitute a “benefit” for the purposes of the LRA.

The Labour Appeal Court dismissed the employer’s argument, saying that the LRA must be interpreted to include all provisions of benefits, including those where the application of the benefit is expressly left to the employer’s discretion.  The Court found the employer in this case to be constantly shifting the boundaries of the scheme in what seemed to be an attempt to justify decisions they’d already taken.

The courts and the CCMA may therefore interfere with decisions taken in terms of discretionary policies where they are not satisfied that the discretion has been exercised fairly.  Employers must therefore take care in exercising their discretion, and in initiating discretionary schemes.

Leave a Reply

Your email address will not be published. Required fields are marked *