Workers win battle over unilateral 13th cheque withdrawal

Where a 13th cheque forms part of an employment contract, an employer cannot unilaterally withdraw it, the Labour Court recently ruled.

The Labour Court, sitting in Cape Town, rejected the employer’s claim that the 13th cheque benefit was merely a workplace practice. It also found that the unilateral withdrawal of this benefit amounted to a breach of the Basic Conditions of Employment Act.

The ruling was prompted by a labour union representing workers at Barrs Pharmaceutical Industries Ltd. Avacare Health Group was also cited as a party to the proceedings.

The matter concerned the application of the Basic Conditions of Employment Act regarding a dispute which arose between the applicants (the workers) and their employer regarding terms and conditions relating to their 13th cheque, and whether this was a term and condition of their employment contract to which they were entitled.

The applicants asked the court to enforce their right to payment of a 13th cheque in terms of their contract of employment. They asked the court to declare that their employer’s unilateral abolition of the payment of their bonuses with effect from December 2021 is a breach of contract.

The dispute arose during wage negotiations between the company and its employees when Barrs unilaterally decided that it would no longer pay its employees a 13th cheque. Instead, it replaced this perk with a performance-based bonus system.

Barrs also offered employees who accepted this unilateral change without challenging it, a 5.5% salary increase. This is referred to by the applicants as the “carrot and stick approach”.

The employees argued that they are contractually entitled to payment of a 13th cheque annually in December. In 2021, Barrs issued a letter to the employees amid wage negotiations, advising that the company intended to discontinue the 13th cheque and replace it with a performance-based bonus.

Employees were urged to accept this revised structure, effective from January 2022. Employees who refused the proposal would not qualify for the 5.5% increase, it was said. They were also told that any strike action would be pointless.

The employees initially stood firm and rejected the proposed change, maintaining their contractual entitlement to a 13th cheque. They communicated their rejection of the proposed performance bonus change, but Barrs implemented this change.

The company subsequently failed to pay the 13th cheque. Instead, employees received a discretionary, ex gratia payment of R3,000.

By the time the matter reached the Labour Court, about 159 of the original 214 employees withdrew from the dispute and accepted Barrs’ terms, forfeiting their contractual right to a 13th cheque in exchange for the 5.5% wage increase.

According to the court, this is unfortunate and appears yet again to highlight the disparate and unequal bargaining power employers have in relation to their employees who are reliant on a monthly salary.

Barrs essentially contended that the payment of the 13th cheque was not a contractual right but instead a workplace practice which had developed and was implemented over time. Therefore, it said, the employees have no right to enforce payment of the benefit.

The applicants contend that this version has been put up for the first time in this application, and it is a belated attempt by Barrs to subvert its contractual obligations to its employees.

The Labour Court said that after careful consideration of the arguments and applicable authorities, there can be no doubt that the employees are contractually entitled to a 13th cheque.

The court noted that during the CCMA process, Barrs conceded the contractual right to a 13th cheque, and the court said it cannot go back on its word.

The company was ordered to pay the remaining 45 applicants a 13th cheque for each year it has failed to pay, from 2021 to the date of final payment.

Cape Times