Whether a member of the board of an organisation can be an employee of such organisation as well was at the heart of a legal dispute the Supreme Court yesterday delivered judgement on.
While the Supreme Court was asked to determine whether John Frederick Swart who is a shareholder and director of Tube-O-Flex could also be classified as an employee as he was a “sales director” at the company earning commission on sales he effected, it went further and involved the minister of labour in the matter.
According to the Supreme Court judges the reason was that it is a matter of public importance and involved the interpretation of the Labour Act.
The matter was to be heard as an appeal on a judgement of the Labour Court wherein it declared itself not justifiable to interfere with a decision of the labour commissioner as the matter was “a question of law”. It concerned the issue of whether Swart can be determined an employee of Tube-O-Flex or not in terms of the Labour Act.
In the matter before the labour commissioner he denied to rule on the matter citing lack of jurisdiction as in his view Swart, the applicant, was not an employee of the company (respondent). On appeal the Labour Court did not decide whether the arbitrator was right or wrong and merely concluded that it lacks jurisdiction to determine the correctness of the arbitrator’s conclusion.
Swart then appealed against that decision to the Supreme Court. He claimed in finding that he was not an employee of the respondent and therefore not subject to the jurisdiction of the labour commissioner in terms of the Labour Act, the arbitrator was wrong as a matter of law and that the Labour Court misdirected itself in holding that it lacked jurisdiction.
In his statement of claim to the labour commissioner, Swart said he was employed by Tube-O-Flex as a sales director since 2007. He relied on a resolution of Tube-O-Flex dated June 2012 setting out a formula for the payment of a commission to him. However, he claimed that on June 1, 2012 the majority shareholder in the company “unilaterally” changed the formula to his detriment and since he did not consent, it was unlawful and contrary to the Labour Act.
During a hearing at the labour commissioner, the company raised an objection and claimed the labour commissioner lacked jurisdiction as Swart was not an employee. They asserted Swart was a shareholder only and a member of its board of directors and had agreed with the board of directors to render services as sales director for a commission. They claimed he was not bound to any specific times of employment and not subordinate to the managing director unlike other employees. After hearing arguments on the objection raised the arbitrator upheld the objection and declined jurisdiction, in effect holding that Swart was not an employee of Tube-O-Flex.
He based his ruling on a finding that there was a business contract between Swart and Tube-O-Flex, but no contract of employment.
On appeal the Labour Court sustained the objection raised by the company and declined jurisdiction.
In the Supreme Court appeal Swart argued that the arbitrator “fell into an error of law” and the Labour Court should have interfered with its decision.
Chief Justice Peter Shivute who wrote the judgment in concurrence with Deputy Chief Justice and Judge President Petrus Damaseb and Acting Judge of Appeal Fred Chomba said they agree with the Labour Court and the arbitrator that Swart does not fit the profile of someone who is deserving of the protection of the Labour Act and he stated he does not find any pressing public policy reason or concern that necessitates extending the protection afforded by the Act to a person in the circumstances of Swart.
The chief justice subsequently dismissed the appeal but made no order as to costs.