Litigation Update, Inspiring tomorrow’s businesswomen today, reported in Baywatch
written by, Megan Erasmus
The Zululand branch of the Business Women's Association (BWA) of South Africa held its annual 'Businesswomen of Tomorrow' event at the St Cathrine's school in Empangeni on Friday.
The event, which is inspired by the Cell C 'take a girl child to work day', gathers a group of intellectual and inspirational business women to speak to a group of grade 11 and 12 girls from a number of different schools in Zululand, to inspire them to reach higher and dream bigger.
Among the many speakers this year was Natasha Pedro from the Umfolozi Casino Resort, Bandile Xaba from Shepstone and Wylie Attorneys, entrepreneur Makhosi Mthiyane and Elena Mattioda.
Event coordinator, BWA's Sherry Bevan, says the function is always highly anticipated by all involved.
'Very often we have businesswomen contacting us as much as a year in advance saying they would like to speak, and the response for the girls is always positive.'
The schools that participated this year included the Richards Bay Secondary, Empangeni High, Hluma High, John Ross College, Betesda High and St Cathrine' s.
Snowy Mabaso of Betesda High says the event was very nice and informative.
'The speakers gave good advice about life in general.'
Hlume High's Sihle Mthethwa agrees, saying events like these show girls that they should stand up for themselves, and not be dependent on anyone.
Never a truer word has been spoken!
Corporate & Commercial Law, New Company’s Act Update, Sweeping Changes, reported in Financial Mail
It was almost a decade in the making, contains 225 sections over more than 200 pages, has undergone numerous rewrites and was amended even before it was finally signed into law three weeks ago.
From the outset, the legislation drew relentless criticism and most of the amendments, redrafting and delays were to correct a host of inconsistencies, ambiguities, technical problems and even spelling, grammar and typographical errors.
But, for business, the new Companies Act remains a source of lingering concerns, confusion and uncertainty This law, together with the Consumer Protection Act, presents companies with severely challenging corporate and commercial conditions. Among the sweeping changes are stricter personal liability for directors who make bad decisions. Anyone who has suffered damages can now institute action directly against a director or manager. This could result in fewer executives accepting board appointments. It is clear that the intention is to make directors more accountable to shareholders, but setting the standard so high could sway some directors from making difficult decisions that may expose the company, and themselves, to risk.
The new law also alters shareholder agreements and the way shares are issued, redefines mergers and acquisitions, and ends the further registration of close corporations. The act creates the new Companies & Intellectual Property Commission (CIPC) and disbands the almost dysfunctional Companies & Intellectual Property Registration Office (Cipro).
Newly appointed CIPC head Astrid Ludin admits that the ultimate success of the legislation will depend on smooth implementation.
Government has argued that the Companies Act simplifies the registration and administration of businesses, introduces greater flexibility in areas such as corporate auditing, and provides for innovative business rescue plans for financially distressed companies.
For the corporate sector, however, the drive to make things simpler has in fact compounded the complexity and increased the burden of compliance, making it more difficult to do business in SA.
It is too early to put a firm figure on the total cost of complying. But Kabby Esat, a partner at Shepstone & Wylie law firm, estimates that if each unlisted company spent on average R10 000 and each listed company R500 000 over two years on compliance, the costs could be anything between R2,5bn and R3bn.
"One of the intentions of this legislation is to make the registration and administration of businesses simpler, but … it actually adds a much larger layer of bureaucracy for companies."
Stephen Kennedy-Good, a director at Deneys Reitz, says one of the consequences of the added protection for minority shareholders could be to compromise a critical area of corporate activity — mergers and acquisitions (see box).
Another contentious area is section 45 of the act, which prohibits intercompany loans. Madelein Burger, a partner at Webber Wentzel, says that except under tight conditions, this section could seriously affect a company's credit status with financial institutions.
Previously, if companies within a group having the same shareholders or holding company wanted to make loans to each other or secure each other's debts, a board resolution was required. Now, any loan from one company to another in the same group, or any security provided for another company in the group, will need a special resolution that must be supported by 75% of voting shareholders.
"Can you imagine the cost implications and logistical challenges of getting board members and shareholders together to approve every transaction?" says Burger.
But Ludin is confident that most of these concerns can be addressed through focusing on education and compliance over the next six months. One of her first tasks since taking office two weeks ago was to establish a working group of various stakeholders that will address the more pressing issues.
Much of the success will depend on whether the new CIPC can overcome the fraught and often crippling problems that plagued the former Cipro, which compromised the security of a number of companies. "We realise there are ongoing concerns around the registration of companies, and this needs to be resolved," says Ludin. "Over time we need to build a strong and credible regulator. We know that credibility is key to both local and international business confidence."
Though it is likely that some of the more glaring ambiguities and contradictions in the legislation will be addressed through further amendments, other contentious areas will be settled by judicial rulings and interpretation by the courts. The battle has only begun.
Get agreements in order
Companies have been given a two year transitional period to bring shareholder agreements in line with the provisions of the new Companies Act. So, on May 1 2013, any provisions that are inconsistent with the legislation will become void.
Currently, a shareholders' agreement could include provisions that the company shall not perform certain acts, such as issuing shares, without prior written approval from shareholders or without a special resolution being passed.
Under the new act, the board of directors' authorisation is sufficient for an ordinary issue of shares, meaning that any provisions to the contrary in a shareholders' agreement will be void.
And if a company gives notice that it is intending to sell the majority of its assets, under the new act, minority shareholders have the right to force a buy-back of their shares at fair value.
During the transitional period, shareholder agreements will continue to have force. But in the event of a conflict between those provisions and the provisions of the company's memorandum of incorporation or the new act, the shareholders' agreement will prevail.
So company executives should review existing shareholder agreements and eliminate any inconsistencies. Shareholders should also be cautious about making any changes to agreements during this transitional period.
For the first time in SA law, a company can merge with another and transfer all assets and liabilities without the consent of creditors.
However, creditors are protected by additional provisions within the Companies Act in the area of fundamental transactions, which require that they must be informed of any merger plans.
But even with these safeguards, creditors could feel vulnerable, fearing that the mergers are a ruse by their debtors to transfer their liabilities to other companies.
Together with mergers and acquisitions, the new act defines three other distinct areas of fundamental transactions: disposal of all or the greater part of a company's assets; schemes of arrangement; and takeovers.
These activities will be regulated under the new Takeover Regulation Panel, which replaces the Securities Regulation Panel.
The legislation offers strong powers and rights to shareholders; all transactions will require 75% approval.
Where the transaction involves disposing of the majority of the holding company's assets, then the same level of shareholder approval is required. But if 15% or more of the shareholders veto the transaction, they have the right to have the transaction reviewed in court.
Should the minority shareholders not go the court route, they are protected by a provision that grants them appraisal rights, which compels the company to repurchase their shares at fair value.
The act also forbids directors or executives from taking any action that could negatively affect or deny shareholders the opportunity to assess an offer on its merits.
Kabby Esat, Partner
Contact: 031 575 7403 and firstname.lastname@example.org
Corporate & Commercial Update, IDZ to go solo, reported in the Zululand Observer
The Richards Bay Industrial Development Company (RBIDZ) is set to operate independently from the City of uMhlathuze in the future.
This after the City's Council resolved at its Executive Committee sitting on Tuesday that it was in favour of cancelling its 40% minority shareholding in the Company.
The decision was made after Council considered legal analysis from Attorneys – Shepstone and Wylie on the risks and benefits of Council's shareholding in the company. The report showed that such shareholding would most likely not be beneficial for Council.
Co-owners of the RBIDZ company comprise shareholders Ithala Bank (60%) and the City of uMhlathuze (40%).
On 30 November 2010, Council considered a report pertaining to the challenges, commitments and options of Council's shareholding in the RBIDZ.
Council also requested that a further report be submitted to advise them on the business and legal risks, as well as the potential benefits relating to Council's shareholding in the RBIDZ.
The City's decision to cancel it's shareholding in the RBIDZ is expected to prevent possible points of uncertainty and conflict between Council and the Company in the future.
The value of Council's 40% share in the restructured RBIDZ transaction equates to R57 140 000.
The arrangement will also result in the RBIDZ Company having to acquire any additional portions of land that it may need at the ruling market related value.
Council resolved that the concurrence of the RBIDZ Company be obtained to proceed with the legal requirements to cancel the Shareholding Agreement.
Restructuring – Earlier this year, the City approved the restructuring of the Land Sale Agreement and the related Services and Shareholding Agreements with the RBIDZ.
This allowed for the RBIDZ to take transfer of Phase 1A and Phase 1F in a phased approach.
Phases 1B, C, D and E would then remain with the City and would have to be de-proclaimed as the IDZ.
With the IDZ Company taking occupation of Phase 1 A in terms of the lease agreement, Council agreed on Tuesday that the RBIDZ should make payment of R34 510 000 due by them prior to transfer.
Council also agreed to the leasing of an approximate 18 hectare portion of land located between Phase 1A of the RBIDZ and the Mzingazi Canal to the company to enable them to incorporate the property into the adjacent industrial development
Corporate & Commercial Update, How the Consumer Protection Act favours the buyer, reported in th Witness
How the Consumer Protection Act favours the buyer
The Consumer Protection Act (CPA) introduces many changes that will benefit consumers (natural persons or small businesses with an asset value or turnover of less than R3 million). Some of them are:
You can cancel any agreement which you conclude after receiving marketing that promotes or offers goods or services, provided that you do so within five business day after concluding that contract or taking delivery of the goods. If you do so, you must return the goods and the supplier must give you a refund.
It is illegal for a supplier to charge you for any goods, repairs or maintenance services unless the supplier had first given an estimate that you accepted or you pre-authorised the work up to a maximum value and the cost does not exceed that amount, or you turned down the estimate. Nor can the supplier charge a fee for preparing that estimate unless that cost was also first disclosed and accepted by the consumer.
Genetically modified organisms
It is illegal to produce, supply, import, export, package, sell, distribute or market maize, soya beans and imported canola oil that contains more than five percent genetically modified organisms without a label that specifically says so. If those goods are intentionally and directly produced using genetic modification processes, then they must be labelled, "Produced using genetic modification".
If it is impossible or not feasible to test those goods for the presence of genetically modified organisms, then they must be labelled, "May contain genetically modified ingredients". These labels must be conspicuous, written in plain language and easily legible.
Unfair or unjust contract terms
The act requires that agreements with, and notices to, consumers are written in plain language. The act also requires prices and terms which are fair, reasonable and just. Provisions that limit the supplier's risk or liability or which result in the consumer accepting additional risk or liability or acknowledging any fact, must be specifically brought to the consumer's attention in a conspicuous manner in a notice, which is written in plain language, at the time that the consumer concludes the agreement or makes payment.
You have a right to receive goods which are reasonably suitable for their intended purpose, which are of good quality, in good working order, free of defects, usable and durable for a reasonable period of time. These provisions will not apply if you are informed that the goods are offered in a specific condition and you expressly agree to accept them in that condition, or act in manner consistent with doing so. Suppliers will have to specifically inform you of all defects, whether latent or patent.
These are just some of the rights available today to consumers in terms of the act. It is important that consumers learn as much as possible about their rights so that they can rely on the protections offered.
Cathryn Bode, Partner
Contact: 031 575 7407 and email@example.com
Corporate & Commercial Law, Tax Law Update Gordhan remodels retirement landscape, reported in Business Day Law & Tax Review
Gordhan remodels retirement landscape
Written by Anton Lockem, Shepstone & Wylie
The proposed changes to the taxation of retirement fund contributions announced by Finance Minister Pravin Gordhan in his February budget speech could change the retirement landscape. These changes, if the proposals are accepted, are expected to come into operation on March 1 2012.
At present employer contributions to pension and provident funds are not subject to fringe benefit tax in the hands of participating employees. On the other hand, employee contributions toward a pension fund qualify as a tax deduction provided the contribution does not exceed 7,5% of pensionable earnings, while employee contributions to a provident fund do not qualify for any tax relief.
Therefore many employer provident funds are structured on a non-contributory basis, that is only the employer contributes to the fund, while pension funds are structured on a contributory basis, that is both the employer and employee contribute to the fund. This is done in order to optimise the tax efficiency of the current retirement contribution regime.
The minister now proposes that all employer contributions should attract fringe benefit tax, and that employees will be allowed to deduct up to 22,5% of their taxable income for contributions to a retirement fund, with a cap of R200 000.
Should the proposed changes come into effect, most employer funds, including umbrella funds, would have to change their existing contribution design should they wish to optimise the tax benefits available.
From a legal perspective, the implementation of such changes could prove to be more challenging than meets the eye. Not only will the fund rules have to be amended to reflect the changes, the consensual framework that governs the relationship between the employer and employee would also have to reflect the changes.
From a practical perspective, employers would have to ensure that their payroll parameters and remuneration frameworks are adjusted to accommodate a new contribution regime, all of which will add further to the increasing cost of administration and compliance for business. It is proposed further that lump sum withdrawals from provident funds be subject to the same one third limitation that currently applies to retirement annuity and pension funds.
The proposed one third limitation on the commutation of provident fund lump sum benefits will not only undermine the reason why these funds were chosen as retirement vehicles in the first place, but ignores the reality that pensioners may have budgeted capital requirements at retirement.
Anton Lockem, Partner
Contact: 031 575 7413
Litigation Update, Brilliant and hard-working KZN Judge President dies, reported in the Witness
INGRID OELLERMANN and BONGANI HANS
Kwazulu-Natal Judge President, Herbert Msimang, died yesterday evening in the intensive care unit (ICU) at Midlands Medical Centre in Pietermaritzburg where he had been receiving treatment for a heart ailment.
The Witness was able to confirm Msimang's death with a close family friend and colleagues last night. He had been in the ICU since early February after reportedly suffering a second stroke. Msimang was appointed to the Bench in KwaZulu-Natal in January 2002, and was appointed Judge President of the High Court on April 29, 2010.
He came under intense public scrutiny during 2005 and 2006 when he presided over now-President Jacob Zuma's corruption trial in Pietermaritzburg. In September 2006 he struck the case off the court roll after refusing a request by the prosecution for a postponement. Msimang has been described by colleagues and former teachers as having a "brilliant legal mind" and an impressive memory. Msimang practised law in Pietermaritzburg for many years from about 1981 in the practice Rutsch and Msimang. The firm later amalgamated with Shepstone, Wylie &Tomlinson to become Tomlinson, Mnguni & James. Last year one of Msimang's four daughters, Ayanda, was admitted as an attorney. She is the only member of the family to follow in her father's footsteps. While Msimang's family was still too traumatised to comment last night, retired KwaZulu-Natal Judge President, Vuka Tshabalala, who preceded Msimang, last night paid tribute to him and described him as "brilliant and hard working". Tshabalala said Msimang's death was a sad loss to the province. "He introduced a number of changes into the court system, which seem to be working well." The office of KwaZulu-Natal Premier, Dr Zweli Mkhize, also sent astatement of condolence. "We have put in place laws, which protect the weak and vulnerable members of society — children, orphans, women, and people living with disabilities, ill-health and others. "Judge Msimang played a tremendous role during the creation of such laws," said the statement.
Msimang was a commissioner for the Independent Electoral Commission (IEC) in the province for the last five years. Head of IEC in KZN, Mawethu Mosery, said: "As the IEC commissioner, the judge was a strict person who made us respect the law especially when it comes to very contested matters. "He left us when we are closer to the elections, and we don't have time to find a person with his wisdom to replace him."
Also shocked by the death was Pietermaritzburg Judge David Ntshangase. "I did not know about his death. I'm shocked and out of words. "He had a vision of where to take our courts to," said Ntshangase.
According to the IEC's website, Msimang obtained law degrees at the University of Zululand (B. Juris), the Tulane University of Louisiana (LLM) and the University of South Africa (LLB). After lecturing in private law at the University of Zululand for a number of years, Msimang practised as an advocate at the Lesotho Bar in Maseru and as an attorney in what is now Mpumalanga and KwaZulu-Natal, prior to his appointment as judge of the High Court in the province.
Litigation Update, Baker throws counterpunch, reported in the Zululand Observer
The string of legal suits against the City of uMhlathuze continues to mount despite vigorous attempts by the leadership to extricate itself from its financial woes.
City Electrical Engineer Dwayne Baker brought an urgent interdict against the municipality in the Durban Labour Court on Wednesday.
Baker was supposed to appear before an internal disciplinary hearing on the same day, which was subsequently postponed after the pending application was served on the municipality.
Baker, through his attorneys Botha Incorporated, challenged the jurisdiction of the municipality to convene a disciplinary hearing against him without permission from the Bargaining Council as per the collective agreement.
In addition, the appointment of Senior Manager: Corporate Services Mbali Ndlovu as Presiding Officer was challenged which, according to Baker, constituted a clear breach of the express terms of the collective agreement that the presiding officer must be impartial.
Ndlovu had reportedly been involved in the formulating, signing and pursuit of previous charges against Baker on behalf of the municipality.
Demonstrating Mbali's involvement in the matter, Baker's legal team asked the court to disqualify her from being appointed to act as an impartial chair.
Interim – Baker requested the Labour Court to grant an interim relief pending the appropriate resolution of the dispute before the Bargaining Council.
The matter was then postponed to 29 April and the municipality has given an undertaking that they will not continue with disciplinary proceedings in the interim, conceding that Mbali would indeed be disqualified from acting as the presiding officer.
The municipality, represented by Shepstone and Wylie in Durban, are to file opposing papers by 15 April followed by a response from Baker's legal team by 26 April.
If the interim relief is granted, the City will also be ordered to pay legal costs.
The City Council had authorised the appointment of a Disciplinary Committee and a Prosecutor in December to deal with internal disciplinary proceedings against Baker.
This followed his sudden suspension along with four other senior officials at the City's Electrical Department late last year.
It is the contention of Baker that the municipality has failed to comply with the provisions of the Collective Bargaining Council Agreement and the matter has been referred to the Bargaining Council for dispute resolution.
Ratepayers have consistently questioned the City's exorbitant legal costs at the expense of citizens and latest proceedings will undoubtedly add to rising concerns.
Corporate & Commercial Law Update, Jitters over new law for consumers, reported in Business Report
THE CONSUMER Protection Act, which came into effect yesterday, presents substantial risk to business and although many retailers and suppliers have worked hard to comply, the broad scope of the act and the late publication of the regulations has made it difficult to manage this risk.
Added to this is that despite managements' best efforts to train staff, incorrect information from a frontline staff member to a customer could land a company in hot Water. Penalties for non-compliance can be up to 10 percent of turnover. or R1 million, whichever is higher.
Rosalind Lake, a director at law firm Deneys Reitz, said the Consumer Protection Act had increased risk for business and presented massive challenges in terms of implementation in some areas as the final regulations were only published on Friday.
Although given the late publication of the regulations the National Consumer Commission is expected to show some leniency initially.
"After all the act is about compliance not punishment," she said. But even with a period of grace in terms of implementing some of the regulations, many aspects of the act stand alone and are effective from April 1.
Lake said the new legislation put a lot of pressure on suppliers, as its scope was very broad, covering the promotion of products, contracts, warranties and liability.
The National Consumer Commission will act on behalf of consumers, so making a complaint will be a lot easier than previously when consumers had to go to court themselves.
A lot of the uncertainty relates to product liability, which gives consumers far more scope to claim damages against suppliers. Previously a consumer had to prove injury was caused by a factory defect, which was difficult given how hard it was to get that kind of information.
Now in terms of the new act it is up to the retailer, supplier or importer to prove why they are not accountable for the harm caused given their role in the supply chain.
"The liability section of the act is extremely broad and it will be interesting how it pans out," Lake said.
The ambit of this section will be determined by the courts, which are reluctant, unlike courts in the US, to award huge claims.
For businesses to manage their risk in terms of liability they will need to review their insurance policies, taking note of the wording of their insurance contracts, which usually have several exclusions.
They would also need to ensure they had indemnities protecting them from the actions of other businesses in their supply chain, Lake said. "There will be indemnities up and down the supply chain, but we will have to see how well they hold up in court," she said.
Tamra Veley, a Pick n Pay spokeswoman, said: "Our suppliers have always been responsible for the quality of goods supplied and this is reflected in the agreement they have entered into with Pick n Pay. This principle has not been changed by the Consumer Protection Act."
Graham Rebello, the channel executive for Massmart, said quality management systems within manufacturing facilities and through to retail stores were crucial to ensure product safety, quality and durability meet the requirements of the act.
"Buyers and sellers will be scrutinising product packaging, labelling, instruction manuals and warnings to ensure customers have the information required to make informed decisions," Rebello said.
Patricia Pillay, the head of retail council and legislative affairs at the Consumer Goods Council of South Africa, said one of the biggest risks for retailers was the high turnover of staff in this industry. A new a staff member, who had not yet been trained on the act, could give incorrect information to a customer that might have huge implications for the company.
Massmart, the owner of Game, Makro and Builders Warehouse, has spent over R1.5 million directly in implementing the act, excluding travel and training hours.
This was money well invested as companies did not want to face the penalties that could be imposed in terms of the act for non-compliance, Rebello said. Spending included developing training material and the hosting of five vendor conferences in South Africa and one in Asia.
The likes of Unilever, Pick n Pay, Shoprite Checkers, Clicks and others have also trained staff.
But Lake said for smaller businesses implementing the act was hugely problematic with training, the rewriting of contracts and reproducing labels being costly.
Big companies had had teams of attorneys advising them on the new act, but for small enterprises there was not enough information available on how to implement their provisions, Lake said.
Beware product liability under CPA – Section 61 of the Consumer Protection Act, 2008 introduces drastic remedies for consumers who suffer death, injury or illness, or the loss of, or physical damage to, movable or immovable property as a result of having been supplied unsafe or defective goods, or if they are given inadequate warnings or instructions regarding hazards which may arise from using the goods supplied. A consumer will be entitled to claim compensation for harm suffered in respect of any defective goods supplied to that consumer since April 24, 2010. In terms of section 61, all manufacturers and suppliers of the goods which have caused harm to consumers in the manner specified in the section, are jointly and severally liable for that harm, as well as for any economic loss which a consumer may suffer indirectly as a result of that harm. Section 61 applies to all goods which are supplied to a consumer.
Impact on retirement funds – The Consumer Protection Act is likely to have a major impact on retirement funds. The CPA aims to promote and advance the social and economic welfare of consumers, defined as any user of goods or services, or a person who has entered into a transaction with a supplier of goods and services. This will include all retirement fund members, pensioners and beneficiaries, such as those to whom a death benefit is paid, as well as small funds. Entities with assets or turnover in excess of R3 million have been excluded from the definition of consumer, so most retirement funds will fall into the category of "suppliers". Boards of trustees need to ensure compliance with the obligations imposed on suppliers except insofar as they relate to the provision of services under the Long-term Insurance Act.
The Consumer Protection Act has introduced a new set of considerations and requirements for franchisors and franchisees. Most importantly, the definition of "consumer" in the act includes a franchisee and, accordingly, the multiplicity of consumer protections and rights embodied in the act apply equally to franchisees in their dealings with their franchisor. The ones which may require many existing franchisors to amend their current business practices include:
- The consumer's right to select their own suppliers
- The consumer's right to return goods
- Cooling off
Future of fixed-term agreements – According to the draft regulations to the Consumer Protection Act, 2008 from March 31, 2011, suppliers of goods and services will not be permitted to conclude a fixed-term agreement to supply goods and/or services to a consumer for a period exceeding 24 months from the date on which the consumer signs the agreement. The act also provides that a consumer may cancel a fixed-term agreement at any time on 20 business days' notice to the supplier. This spells the end of the common practice of locking consumers into one-sided agreements from which they are unable to escape. Suppliers will have to constantly monitor the expiry dates of each of their fixed-term agreements. – Reports by Shepstone & Wylie
Employment & Pension Law Update, Social media comments can be a minefield, reported in Business Day Law & Tax Review
Social media comments can be a minefield
RUDE ONLINE REMARKS- Employees should beware of whinging about employers on the internet
By VERLIE OOSTHUIZEN Shepstone & Wylie Attorneys
Most employers and workplaces have strict rules and policies regarding intemet and computer resources. More often than not, social networking sites such as Twitter and Facebook are blocked on the company network to prevent employees wasting valuable work hours "tweeting" and connecting with "friends" in cyberspace. However, with the advent of smart phones it has become very easy for employees to surreptitiously log on to these sites and "update" their profiles from their mobile phones without their employer's knowledge. While it is difficult to discipline these employees unless their work is suffering, they may easily be charged with misconduct if they make derogatory comments about their employers. It was recently reported that a senior employee was dismissed from a theatre company for making slanderous and bigoted remarks about his superiors on his Facebook profile. It is our opinion that this type of misconduct is going to be a regular feature in workplaces. Many employees do not realise the sheer number of people who are witness to the complaints that they may post about their employers on social networking sites. It is very easy for their superiors to obtain this information and it provides ample evidence of a breakdown in the trust relationship. Employees may not be aware of the duty of good faith that they owe to their employer and that the very act of denigrating that employer, be it in frustration or in an attempt to be humorous, will be a breach of that duty or may amount to defamation. There will be very little that an employee will be able to do to defend themselves if it has been discovered that they are writing rude remarks about their company, superiors or even colleagues on a social networking site. Further, employees must remember that anything that is contained on those sites is very difficult, or even impossible, to permanently erase and a canny IT specialist may be able to find the offending comments long after they have been forgotten by their author. Employers are advised to take these types of incidents seriously in the workplace as the social media has been exhibited as an extremely powerful tool. If the company's name is being blackened by disgruntled employees disciplinary action can and should be taken against offenders.
Employment & Pension Law Update, Part-time employees pose pension problem, reported in Business Day Law & Tax Review
Part-time employees pose pension problem
Written by MAX ROWLEY Shepstone & Wylie
If the proposed amendment to the Basic Conditions of Employment Act relating to benefits offered to fixed-term employees is passed, employers will have to provide benefits similar to, or of equal value, as those for permanent employees. This will result in additional cost to employers, who may be required to offer similar contractual terms such as access to occupational pension funds. When employers contribute to pension funds on behalf of their permanent employees they may be required to offer fixed-term employees access to the pension fund and make similar contributions. In relation to pension-fund benefits, and particularly where an employee is on a short-term contract, that is three months, the administrative cost and burden involved in arranging for an employee to be admitted to a pension fund may not make business sense. Similarly, when the contract comes to an end and an employee withdraws from the fund a further administrative burden will be imposed. Employers will want to consider ways of avoiding having to arrange for these employees becoming members of the fend. In the UK, similar legislation is in place to protect fixed-term employees. Employers are required to treat these employees no less favourably than their comparable permanent employees unless there is an objective justification for doing so. The employer may be able to justify not allowing access to the fund to fixed-term employees based on cost and administrative concerns. This "objective justification" provision is excluded in the South African proposed amendment. In principle, however, while it is necessary to offer the same rights of access to the pension fund and the same benefits, it may be possible to offer access on different tents, providing the overall package of rights is comparable. From a South African perspective, the proposed amendments say that the benefits offered must be "similar or equal value". If for some reason it is not possible to offer fixed-term employees access to the pension fund it may be possible to offer equivalent contributions to a private arrangement such as a retirement annuity. Another alternative would be to pay fixed-term employees an additional amount on top of their salary equivalent to the value of the pension fund contributions made in respect of permanent employees, or to provide them with a total cost-to-company package that would include the value of the employer pension contribution. The employer may also wish to introduce a waiting period for access to the pension fund. This is where both permanent and fixed-term employees would only be allowed access to the pension fund and the employer obliged to make contributions after being in service for a certain period, for example a year. Therefore, although employers will have to provide similar benefits to fixed-term employees as that of permanent employees, from a pension benefit perspective they may not have to provide them access to the pension fund as long as they provide a benefit of equal value. Although the proposed amendment will be an employment issue and no claim would lie against the trustees of a pension fund if fund membership was not offered, it would be an issue that trustees of funds excluding fixed-term employees may wish to raise with the employer.
Carlyle Field, Associate
Contact: 031 575 7208 and firstname.lastname@example.org