Longer service, more pay – is this unfair discrimination?

The case is one of the first appeals to be decided by the Labour Court under an amendment to the Employment Equity Act, No 55 of 1998 (EEA) which was introduced on 1 August 2014. The amendment affords parties dissatisfied with an award relating to alleged unfair discrimination to launch an appeal before the Labour Court.

WAR had referred an alleged unfair discrimination dispute to the CCMA on behalf of seven of its members. The alleged unfair discrimination arose out of the application by Pioneer Foods of the terms of a collective agreement. The collective agreement entered into between Pioneer Foods and the Food and Allied Workers Union (FAWU) provides that Pioneer Foods pays newly appointed drivers 80% of the salary paid to its longer serving drivers. This applies during the first two years of employment.

The commissioner found in favour of WAR reasoning that the differentiation in payment for work of equal value was a breach of s6(4) of the EEA. Section 6(4) regulates equal pay for work of equal value and provides that a difference in terms and conditions of employment between employees of an employer performing the same or substantially the same work or work of equal value based on any of the grounds listed under the EEA (including, eg race, gender, language or any other arbitrary ground) is unfair discrimination. The commissioner found that the treatment was unfair and not based on rational grounds, particularly as the employees had previously performed work for Pioneer Foods through a labour broker and were therefore not new employees in the true sense of the word. In making this finding the commissioner referred to s198A of the Labour Relations Act, No 66 of 1995 which provides that after three months, the client is deemed to be the employer of an employee employed by a temporary employment service, and must be treated on the whole not less favourably than employees of the client doing the same or similar work, unless there is a justifiable reason for different treatment. The commissioner ordered the payment of damages and the correction of the rate of pay to 100%.

The Labour Court did not agree with the commissioner’s reasoning and finding. In evaluating WAR’s claim the court found that WAR did not allege discrimination on any of the listed grounds eg race and gender and that as a result it bore the burden of proving, on a balance of probabilities that the conduct is not rational, amounts to unfair discrimination and is unfair. More specifically WAR was required to identify and prove the arbitrary ground on which the employees alleged discrimination and in order to prove that the differentiation amounts to unfair discrimination, show that the arbitrary ground on which the differentiation is based impairs the dignity of the employees and is a barrier to equality.

The court referred to the two-stage test laid down in Harksen v Lane N.O. 1998 (1) SA 300 (CC). Firstly, does the differentiation amount to discrimination? If it is on a specified ground then the discrimination will have been established. If it is not a specified ground then whether or not there is discrimination will depend on whether objectively the ground is based on attributes and characteristics which have the potential to impair the fundamental human dignity of persons as human beings or to affect them adversely in a comparably serious manner. Secondly, if the differentiation amounts to discrimination does it amount to unfair discrimination? If it is found to have been on a specified ground then unfairness will be presumed. If on an unspecified ground unfairness will have to be established by the complainant. The test of unfairness focuses on the impact of the discrimination on the complainant and others in his or her situation.

Applying the two-stage test the court found that differentiation on the basis of being newer employees is not an unlisted arbitrary ground of discrimination and a practice of paying newer employees at a lower rate for a two year period is in any event neither irrational nor unfair. The Code of Good Practice on Equal Pay/Remuneration for Work of Equal Value states that such differentiation is not unfair discrimination if the difference is fair and rational and is based on any one or a combination of various factors including the individuals’ respective seniority and length of service.

The court concluded that length of service is not an arbitrary ground and that paying newly appointed employees 20% less than their longer serving colleagues does not amount to unfair discrimination, even if the new employees have the same level of experience and expertise as the longer serving employees. In fact, and as the court said, ‘this is a classic example of a ground for differentiation which is rational and legitimate and, indeed, exceedingly common’. The longer serving employees are rewarded for their loyalty. This case confirms that differentiation is not always unfair and does not always amount to a breach of the EEA.