IN THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG JUDGMENT

Transcription

1 IN THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG JUDGMENT Not Reportable Case no: JR211/14 In the matter between:- CORNIE DE BRUYN Applicant and COMMISSIONER JOSEPH TSABADTI First Respondent COMMISSION FOR CONCILIATION MEDIATION AND ARBITRATION OUTSURANCE INSURANCE COMPANY LIMITED Second Respondent Third Respondent Heard: 2 March 2016 Delivered: 25 October 2016 Summary: Review of award grade level movement in insurance company - upward trajectory is not a promotion, nor is the downward movement a demotion. The lower and higher earnings consequent upon a level movement are akin to

2 2 commission earnings in the sales department.- decision of arbitrator not unreasonable. JUDGMENT CELE J Introduction [1] In terms of section 145(2) of the Labour Relations Act, 1 the Applicant seeks to be granted an order couched in the following terms: 1) Reviewing and setting aside 2) the arbitration award issued by the First Respondent under case number GATW 3067/13 on the 19th of December 2013 and received by the Applicant on the 23 rd of December 2013; 3) Ordering that the finding that the demotion of the Applicant from a level1 to level 2 was not an unfair labour practice be substituted with a finding that the demotion of the Applicant from a level 1 to level 2 was an unfair labour practice; 4) Alternatively, remitting the matter to the Second Respondent for a hearing de novo before a different Commissioner than the First Respondent; 5) In the event of any respondent opposing the application, ordering that the costs of this application be paid by such respondent [2] The third Respondent, in whose favour the assailed award was issued, opposed this application in its capacity as the current employer of the Applicant. Factual background 1 Act Number 66 of 1995, hereafter referred to as the Act.

3 3 [3] By and large, most of the facts in this matter are common cause. The Applicant commenced her employment with Third Respondent on 01 June 2000, initially as a buildings claim advisor, and thereafter in various positions until August 2003 when she was transferred to the contents area of the Third Respondent s investigation department. During 2006, she was moved to an Advanced Claims Assessor (level1) which position she held until her move to a level 2 assessor for the period January 2013 to June She soon regained her level 1 status immediately after her down grading. At time material to this matter, there were 26 Assessors in the contents investigation department where the Applicant was based. Her functions as an Assessor entail the assessment of claims from customers whose household contents were stolen or got lost for some or other reason. [4] The work performance of Assessors is measured according to the evaluation system known as the Performance Based System (PBS system). Depending on the outcome of his/her performance during a review period of six months, each Assessor is placed in one of three categories or levels. The levels 1 Assessors earn not only more than the other levels but are also allocated more complex and higher quantity claims. However, five-eighths of the salary was guaranteed and it is the three-eighths part which was fluctuating, depending on her performance. The operation of the PBS system entailed the work performance of each Assessor to be measured in terms of four key performance areas (KPA s) and weighted as follows. 1. Turnaround time (TAT) the length of time taken by the assessor to investigate the claims allocated to him/her 20% weighting. 2. Rejection ratio on numbers the ratio of the number of claims rejected by the assessor out of the total number of claims, investigated 25% weighting. 3. Rejection ratio on amounts - the ratio of the number Rand value of claims rejected by the assessor out of the total Rand value of claims investigated by the assessor- 40% weighting.

4 4 4. Authorized amount the Rand value of all claims investigated by the assessor 15% weighting. [5] Clause 4 of the Applicant s contract of employment expressly makes provision for the level movement of employees up and down a level depending on the performance of an employee during a six-months period. The relevant clauses in the contract of employment of the Applicant state that: 4.2 It is hereby acknowledged that the level of skills, competencies, abilities and/ or subsequent performance of Assessors employed by the EMPLOYER vary significantly and as such warrants fair differentiation in terms of the nature of the work allocated and remuneration levels of employees in this skill set. 4.3 Accordingly the EMPLOYER differentiates between the following three categories of Assessors: Assessor- Entry level Claims Assessor- Intermediate Claims Assessor- Advanced Claims 4.4 The EMPLOYEE S appointment in terms of the differentiated categories in 4.3 above will be reviewed on a six monthly basis after taking cognizance of the following: The EMPLOYEE S performance when compared to the performance of his/her peers; The EMPLOYEE S performance against pre-determined performance areas, in relation to the EMPLOYEE S core competencies and; A Managerial rating based on input from the EMPLOYEE S manager about the EMPLOYEE S overall performance and conduct over the period in which performance is being reviewed.

5 5 4.6 The EMPLOYEE, will accordingly hold such appointments for the consequent six months time period based upon the outcome of the aforegoing performance review and /or assessment; 4.7 The EMPLOYEE, accordingly hereby accepts any future amendments to the terms and conditions of employment arising out of the afore-stated performance review and/ or assessment process and the consequent appointment in any of the said categories as listed in clause 4.3, above. 4.9 Where there is any disagreement by the EMPLOYEE with the outcome of the performance review referred to above, the EMPLOYEE will be required to pursue this as a grievance in accordance with the EMPLOYEE S grievance procedure. [6] Individual measurements of work performance are used to determine the group s average measurement of work performance in respect of each KPA. The group average becomes the benchmark against which the performance of each individual Assessor is then measured and his/her performance scored. The better the individual s performance is relative to the average, the higher the score and vice versa. The Assessors are then ranked relative to one another. Those Assessors ranked in the top 35% of the group are assigned to Level 1, those Assessors ranked in the middle 40% of the group are assigned to level 2 and the lowest performing 25% of the group are assigned to level 3. The performance of every Assessor is measured and ranked in this fashion every month on a threemonth rolling average basis. At the end of every six- month review period, they are re-assigned to a particular level based on their ranking relative to one another. The performance based system (PBS) was incorporated in the Assessors employment contracts on 11 December 2006 but the level movement part of it was implemented on 1 January [7] The Applicant entered into a contract whereby she agreed to this system and she has admitted that the terms of the contract are lawful and binding on her, though she then contends that a contractual term which violates the Constitutional right to fair labour practices, is by definition contrary to public policy and therefore

6 6 unenforceable. The Applicant was the recipient of two fully paid overseas trips for best performer during the years preceding her demotion, based on the same system. [8] Consequent upon her demotion, the Applicant lodged a grievance with the Third Respondent. When the grievance could not be resolved, she referred an unfair labour practice for conciliation and thereafter for arbitration. The parties formulated their pre-arbitration minutes to guide the arbitrator. The First Respondent issued an award with the findings that the Applicant failed on a preponderance of probabilities to make a case that the Third Respondent perpetrated an unfair labour practice against her. He said that the Applicant was at all material and relevant times fully aware of the PBS system on the basis of which her performance would be assessed. The Chief findings of the Commissioner [9] In the main, the arbitrator found that the vital piece of evidence from the side of the Third Respondent remained unchallenged and uncontested during crossexamination in regard to the use of the PBS system. He rejected the contestation of the Applicant that she had no control over the KPAs used to measure her performance. He found that she was able to outperform her peers and she remained in the top 35% over a number of years. He upheld the version of the Third Respondent that the PBS System was not unfair and that the conduct of the Applicant was rather opportunistic in that when the system worked in her favour she accepted it only to reject it once she had a relapse in her work performance. He found it telling that the Applicant was not targeted and subjected to unfair treatment. He then found that the factors which the Applicant alleged that she had no control over affected all assessors equally and not the Applicant alone. Grounds for review

7 7 [10] The Applicant has adopted a process related review approach in this application. 2 Such an approach is no longer permissible. 3 When summarised, the grounds for review are that - 1. The arbitrator misconceived the Applicant s cause of action as a dispute relating to the fairness of the PBS system while the Applicant s true cause of action relates to the application of the system when measuring her performance during the review period. In support of this ground, the Applicant, inter alia, said that the arbitrator incorrectly made factual findings and/or assumptions without taking into consideration the basis of the Applicant s challenge to the demotion. An example of such an incorrect finding or assumption is his conclusion that Applicant s rewards over the years for excellent performance is a vital piece of evidence that tips the scale in the employer s favour, while the opposite is far more likely. The Applicant s contention is that her reward for excellent performance is an indication that her demotion was the result of factors beyond her control. 2. The arbitrator misconceived the onus that the Applicant bears in alleging that there has been an unfair labour practice in terms of section 186(2)(a) of the LRA. The Applicant alleges that where the employee produces sufficient evidence to cast doubt upon the fairness of the demotion, the burden of proof passes to the employer in order to rebut the employee s version. 3. The Applicant alleges that the arbitrator failed to realise that the Applicant s employment contract violated the constitutional right to fair labour practices and is contrary to public policy and thus unenforceable. 4. The assessment of performance evaluation by the Third Respondent does not match the fairness criteria of the applicable legislation. 2 See paragraph 4.1 of the heads of argument. 3 See the decision in Gold Fields Mining SA (Pty) Ltd (Kloof Gold Mine) v CCMA and Others (2014) 35 ILJ 943 (LAC) at paras 15 to 17.

8 8 [11] In opposing this application, the contentions by the Third Respondent, in dealing with each ground respectively, are essentially that 1. Although the First Respondent did not expressly refer to the implementation of the PBS system as the level movement system, he correctly understood the implications and the application of the level movement system as applied to the Applicant when she moved from a level 1 to a level 2. In his analysis of the evidence and argument, the First Respondent correctly reasons that the Applicant did indeed have control over the percentages of the KPAs. This evidenced that the First Respondent currently understood the implications of the level movement system despite referring to it as the PBS, which technically forms a wider interpretation but is, in any event, correct. 2. The arbitrator dealt with the onus of proof quite extensively in his award and properly concluded that the Applicant failed, as a matter of probability, to prove that the Third Respondent perpetrated an unfair labour practice. 3. This ground is of no substance as, throughout the Third Respondent s evidence, it was shown that there were substantive reasons why the Applicant moved down to a level 2 position. The Third Respondent duly followed a fair procedure in terms of coaching and assessing the Applicant s performances before moving her down to a level 2 position. The implementation of the level movement system was provided for in the Applicant s contract of employment and it accordingly adhered to substantive as well as procedural fairness. There are no grounds of unenforceability to be made in respect of the Applicant s employment contract. The Applicant willingly and voluntarily signed her employment contract and thus she is bound to the provisions of the PBS system. 4. It is evident from the Third Respondent s level movement procedure and the procedural steps that it followed, that they are in line with the Code of Good

9 9 Practice prescribed for poor performance matters, to the extent that same is, in any event, applicable. Evidence at arbitration [12] A pre-arbitration minute signed by both parties in this matter identified, for the arbitrator, those facts, which they agreed were common cause to them. This means that in relation to such facts, the arbitrator was not called upon to make any factual findings. The Applicant s contract of employment is lawful and binding on her notwithstanding the name of the employer as per the employment contract. 4 Paragraph 2.4 of the minute, inter alia, reads: In terms of clause 4.2 of the contract of employment the applicant acknowledges that the levels of skills, competencies, abilities and/or subsequent performance of Assessors varied significantly and she agreed that as such, a fair differentiation in terms of the nature of work allocated to the various Assessors and their respective remuneration levels was warranted. [13] The minute then provides in 2.4 et al that clause 4 continues thereafter to state the following: Accordingly the EMPLOYER differentiates between the following three categories of Assessors: Assessor Entry level Claims Assessor Intermediate Claims Assessor Advanced Claims 4.4 The EMPLOYEE`S appointment in terms of the differentiated categories in 4.3 above will be reviewed on a six monthly basis after taking cognizance of the following: 4 See paragraph 2.3 of the pre-arbitration minute.

10 The EMPLOYEE`S performance when compared to the performance of his/her peers; The EMPLOYEE`S performance against pre-determined performance areas, in relation to the EMPLOYEE`S core competencies and; A Managerial rating based on input from the EMPLOYEE`S overall performance and conduct over the period in which performance is being reviewed. 4.5 Accordingly, the EMPLOYER shall reconfirm, once the aforegoing review and/or assessment has been completed, the EMPLOYEE`S appointment to any one of the three categories as listed in 4.3 above and in accordance with the criteria in 4.4. This will occur every six months and shall be in the month of May for the performance period from November to April and in the month of November for the performance period from May to October. 4.6 The EMPLOYEE will accordingly hold such appointment for the consequent six months` time period based upon the outcome of the aforegoing performance review and/ or assessment; 4.7 The EMPLOYEE, accordingly, hereby accepts any further amendments to the terms and conditions of employment arising out of the aforestated performance review and/or assessment process and the consequent appointment in any of the said categories as listed in clause 4.3 above. 4.8 The amended term and conditions of employment, accordingly, include but are not necessarily limited to the nature of the work allocated to the EMPLOYEE, the applicable Target Salary, the possible categorization of the EMPLOYEE and /or Performance Bonus Structure. 4.9 Where there is any disagreement by the EMPLOYEE with the outcome of the performance review referred to above, the EMPLOYEE will be required to pursue this as a grievance in accordance with the EMPLOYER`S grievance procedure.

11 Notwithstanding the date of the contract of employment, the system described in clause 4 was not immediately implemented.it was implemented with effect from 1 January Upon implementation of the system in January 2012, the Applicant was allocated to a Level 1 (Assessor Advanced Claims) position, which position she occupied from January to June In terms of contract of employment, at the end of the first 6 month review period in 2012 the Applicant remained in a Level 1 (Assessor-Advanced Claims) position, which position she occupied from July to December In terms of the contract of employment, at the end of the second 6 month review period in 2012 the Applicant was demoted to a Level 2 position (Assessor- Intermediate Claims), which position she occupied from January 2013 up to June In terms of the contact of employment at the end of 6 month review period in 2013 the Applicant was promoted back up to a Level 1 position (Assessor-Advanced Claims), which position she still currently occupies. The Applicant`s salary before her demotion and after her demotion in January 2013 is as follows: before demotion: R After demotion: R The Applicant has suffered financial prejudice of R being R per month for the 6 month period that she was employed in a Level 2 Assessor position from January to June Clause 4 of the Applicant`s contract of employment provides for a performance based system of remuneration and reward which is known in the Respondent`s organisation as PBS or the PBS system. 2.9 The pre-determined performance areas referred to in clause of the contract of employment refer to the following key performance areas (KPAs)-

12 12 1. TAT (turnaround time the time between a claim being allocated and finalised); 2. Authorised Amount (the Rand amount of claims finalised, whether settled or rejected); 3. Settled Ratio on Numbers (the number of claims settled out of the total number of claims assessed); 4. Settled Ratio on amounts (the Rand value of claims settled out of the Rand value of the total number of claims assessed); 5. Synchronised TAT (the time between a claim being allocated to an Assessor and the electronic mobile assessment being synchronised with the operating system, SMMIT. [14] The understanding of the award must therefore take into account the ambit of the issues which the arbitrator was called upon to arbitrate. A ground for review which seeks to introduce the determination of issues that the arbitrator was never called upon to make findings on, because they were common cause, should therefore not be allowed to stand. The main issue in dispute was identified as whether the Applicant was demoted for weightings which she had no control over and whether the Third Respondent complied with the procedures set out in the document entitled: Level Movement Procedure: Investigations Department. The arbitrator was called upon to decide: Whether the demotion was procedurally and substantively fair; If found unfair, the remedy to be granted. [15] The Applicant was the only witness to testify in her case. She conceded that the Third Respondent was exposed to substantial risk of fraud and dishonesty when it comes to claims submitted by its customers, hence the introduction of the PBS system. She said that her work ethics over the years remained the same. Yet for purposes of a demotion or level movement down it had to be proved that the failure to meet the targets required in terms of clause 4 of the contract of employment

13 13 was due to some act on the part of the Applicant which is the proximate cause of her alleged substandard performance as opposed to a statistical evaluation. During her evaluation, she described her demotion thus: I am being penalised for settling claims and not having enough rejections. I am there to validate/investigate claims and give awesome service which I have done. I have always been a top performer, now for 6 months I did not have enough rejections, and I get demoted with a salary decrease. I cannot see how this is fair. The different levels of assessors can also not be compared with each other. It is all about experience and being able to deal with high profile and high quantum claims. [16] She averred that a failure to meet targets set by management was not conclusive proof of poor work performance as the targets might have been unattainable or arbitrarily set. She referred to various examples in relation to the rejection of claims based on numbers relying on the turnaround time, rejection on amounts not paid, the authorised amounts, that is, the total rand value of all claims dealt with in a month and the ratio on numbers dependent on claim sizes. She said that the rejection ratio on amounts was initially 32.5% but was increased to 40% because management wanted assessors to give more attention to bigger quantum claims. [17] She conceded that in terms of a monthly level allocation report for July 2012, there was a prediction that she would have to go down one level in her ranking. As required, she then had a meeting with her team manager, Mr Virgil Steenkamp in what is called a coaching session. On his computer, Mr Steenkamp had the Level Movement Implications Discussion document which he discussed with the Applicant. The Applicant says that Mr Steenkamp merely told her to work faster and to reject more claims. She felt that to penalise an employee for poor performance required at least that the employer should prove that the employee s performance was deficient. That could not be the case if the Applicant s failure to attain the standard required, was due to factors beyond her control, inter alia, because of the diversity of claims allocated to assessors, each with its own characteristics, the validity of the claims, which affected the rejection rate and the

14 14 subjection of the claims to the manager s evaluation and approval over which Applicant has no control. [18] The Applicant said that her rewards for excellent performance before her demotion were due to her good fortune, in that she was allocated claims that enhanced her performance and as a result outperformed her peers. The Applicant s contention was that her rewards for excellent performance were an indication that her demotion was the result of factors beyond her control. [19] Messrs Roshan Maharaj, the Head of claims and Virgil Maharaj were the only witnesses for the Third Respondent. Their evidence was essentially that the role of the assessing department of the Third Respondent was to identify invalid claims, be claims that fell outside of the terms and conditions of the insurance contract and/or claims that are dishonest or fraudulent. The management of risks was a necessary business part of any insurance company. According to analysis done 10% of the short-term insurance claims were fraudulent. That was to the exclusion of the invalid claims that did not need warranties. The Third Respondent was paying out R300 million per month for claims. The company had a 94% settlement ratio, meaning that 94% of the claims were settled. [20] In the process of dealing with and analysing claims, the Third Respondent utilises a claims allocation model written by its actuarial department and the investigations management team. Every time a claim is captured on the operating system, called the Summit, there are criteria which run through the model and every claim is then allocated a certain score, depending on risks associated with that claim. Certain scores cause the claim to flag. On the next morning, a team manager or a manager in the investigations will then draws a report from what is known as the SQL database and then matches the claim with assessors that are available to get new claims for that day. The higher quantum claims with higher value are allocated to a level 1 assessor. A progression allocation system is used to allocate lower valued claims to lower level assessors.

15 15 [21] In relation to salaries, evidence is that there had been an old system in terms of which salary was determined by an assessor performance output, resulting in a monthly fluctuating salary. There was a public outcry about the reputation of insurers. The allegation was that assessors were being paid to reject claims. The Third Respondent chose to move away from what had become an aggressive remuneration system. Initially, the top earners were made level 1, the middle group, being the largest became level 2 and all people at the bottom were placed on level 3. That was in There were no job reviews and performance started dropping. People at the top level figured out that nobody was chasing them and if they did nothing, they would still earn that level salary, with only their semi-annual bonus being affected. The level 2 and 3 people could not get to level 1 unless a level 1 assessor resigned or retired. They were unhappy about the status quo. That called for a review of the pay system to bring about a huge motivating factor. [22] According to Mr Maharaj, the PBS system produced phenomenal results by creating an incentive to earn extra money thus becoming a driver of performance, making people perform at their best. To that extent, it has attracted other corporate entities, such as Telkom and South African Revenue Services who wanted to adopt the system. What the Third Respondent did was to duplicate business models used in America and United Kingdom in the 1980s that have proven track records. It worked out to be a comparative remuneration policy in the chase for profit and it is the best way to get the best out of one s resources. It is about the fit for the game concept where people are paid not just for coming to work rather than working. Those employees who do not like the game have the option to move to other support departments where they can earn a static salary every month. [23] In practice, the assessors are investigators. As such, they are not office bound. They are accorded basic training and every now and then, they are called in for some advanced training and interview training. Training was provided on an ongoing basis on every Friday run by Mr Sieghard Iske, the Manager Contents Area. For their mobility, they are each supplied with tools of work such as a laptop, a 3G card, a cellular telephone, a dictaphone, a camera, a fuel card and a credit

16 16 card, if one has to stay over. They are expected to use their skills and to figure out what to do and how to do it, using the resources and tools made available to them. Their purpose is to save money by preventing invalid claims from being paid. The objective criterion to measure the assessors is the rejection ratio on amounts, that is, all the amounts saved divided by all the amounts they have handled. So of a million is 10%. It would be very irresponsible of the Third Respondent to use nominal amounts because then outliers can spray the whole system. [24] In respect of the reputational risk about the concept of being paid to reject claims, or staff being incentivised to reject more claims, Mr Maharaj said that there is a scientific model which determines the probability of something being wrong with the claim, based on statistical data. The company did not set targets to say how many claims were to be rejected. Instead, a determination was premised on whether an assessor was better or worse than the average of his or her peers. [25] There had to be a change in the weightings of the rejection ratio numbers and the rejection ratio amounts as the company found itself paying out more that it was bringing in. The rejection ratio numbers was quite high, which was regarded as good, hovering in the range 42% to 45%. But the rejection ratio in amounts was alarmingly low, in the range 17% to 18%. The implication of those ranges was that the assessors were rejecting smaller claims, which was a problem in the reputational and service point of view. Management together with the PBS Committee decided to correct the disparity by adjusting the weightings where 25% was then for the numbers and 40% for the amounts. An instant change was then noticed. The amounts came up to 20% to 25% and the numbers started hovering in the range of 37% and dropped further. While the drop in numbers was found disappointing the good news for the company was that it began to bring in money, as a return that the company wanted. An example of the success of the PBS system was demonstrated by considering whether it was fair to pay assessor A more for rejecting two claims for R 2000 each versus a rejection by assessor B of two claims for R2 million each. Assessor B was said to benefit the company more and therefore deserved to be paid more.

17 17 [26] When dealing with the complaint of the Applicant that she was penalised for settling claims and not having enough rejection, the response was that, assuming the pot of claims for that six months was of the nature that the fraud model was broken, the claims allocation model was broken, thus dishing out claims with a zero probability of rejection, than that would be the same for everybody. Everybody would have very low rejection ratio numbers and amounts. Yet that was not the case as some of her peers had 35% rejection ratio on amounts, having to stay at or come up to level 1, while she had 15% at the end of that six months period. So it was not the pot of claims that was tainted. Nor was there a problem with how the claims were handed out. The only variable was the Applicant s application of her skills. [27] On the allegation by the Applicant that she was there to validate and investigate claims and to give awesome service which she did, Mr Maharaj confirmed compliance by the Applicant but added that her turnaround time was average and not awesome. The fact that she received no complaints and serviced clients well was fantastic, giving her highest claims parameters but these attribute were more for client care staff and the claims call centre staff, which the Applicant was not employed for. Hers was to manage company risks better while exhibiting these awesome attributes. On the aspect of her saying it was unfair to be demoted with a salary decrease for not having enough rejections, he said that none of the applicable principles changed. The Applicant, who hitherto had been one of the top performers to the extent that she won two overseas incentives, changed how she applied her skills and attitude by a process of elimination. Over 68 claims, the probability that all were clean and nothing was wrong, only for her, was extremely improbable. [28] On the issue of experienced assessors who were able to deal with high profile and high quantum claims, the company decided not to peg people with experience but with tenure of existence so as to avoid mediocrity and complacency. Payment was based on the results produced and not for how long they had been with the company. That she did not want to work under stress and pressure every month

18 18 was left to her choice. It was conceded that assessors had to work faster and to reject more claims provided that was understood to be the short format or simplification of what the key performance areas were about. It is akin to saying save as much as you can as quickly as you can. [29] Mr Maharaj said that he had a discussion with the Applicant during the grievance procedures. She told him that there was not much more she could learn as she was great at her job and that she was doing exactly what she did previously. He suggested that her adopted stance might be the source of her anguish when her peers had then seen the light and were doing things differently, such as assessing better by going out to see all the pawnbrokers for instance, when jewellery was stolen. He said that she admitted to him that she did not do that. He compared her repetitiveness to insanity where one did the same thing repetitively expecting a different result. Being good at what she was doing was also given as an explanation why Applicant did not attend training which was suggested to her by Messrs Steenkamp and Iske. Mr Steenkamp testified to the same effect on this aspect as did Mr Maharaj. [30] In respect of procedural fairness, the company written procedure was that two managers had to attend the counselling session which could lead to an employee being demoted. Mr Steenkamp was the only manager who attended a session with the Applicant and he conceded that it was an oversight on his part not to arrange for Mr Iske to be present as a mediator and to ensure that Mr Steenkamp s approach in the presentation was objective enough. He said that the Applicant could never have been prejudiced by the absence of Mr Iske because the discussion he had with the Applicant was loaded on the computer to which Mr Iske had access. According to Mr Maharaj, one manager was sufficient for the compliance with the spirit of the procedure manual written by him. He said that the manual needed to be revised so as to require the attendance of only one manager. Evaluation

19 19 [31] As the application at hand is premised on the provisions of section145 of the Act, the question to ask is whether the decision reached by the arbitrator is one that a reasonable decision-maker could not reach. 5 In explaining the review test outlined in the Sidumo case, the Labour Appeal Court 6 had, inter alia, the following, of relevance here, to say: [18] In a review conducted under s145 (2) (a) (c) (ii) of the LRA, the review court is not required to take into account every factor individually, consider how the arbitrator treated and dealt with each of those factors and then determine whether a failure by the arbitrator to deal with one or some of the factors amounts to process-related irregularity sufficient to set aside the award. This piecemeal approach of dealing with the arbitrator s award is improper as the review court must necessarily consider the totality of the evidence and then decide whether the decision made by the arbitrator is one that a reasonable decision-maker could make. [19] To do it differently or to evaluate every factor individually and independently is to defeat the very requirement set out in section 138 of the LRA which requires the arbitrator to deal with the substantial merits of the dispute between the parties with the minimum of legal formalities and do so expeditiously and fairly. This is also confirmed in the decision of CUSA v Tao Ying Metal Industries. 7 [32] In resolving the unfair labour practice dispute of the Applicant in this case, the First Respondent, as an arbitrator, had to resolve the real dispute between both parties 5 Sidumo and Another v Rustenburg Platinum Mines Ltd and Others [2007] 12 BLLR 1097 (CC) at para 110 (Sidumo). 6 Gold Fields Mining SA (Pty) Ltd (Kloof Gold Mine) v Commission for Conciliation, Mediation & Arbitration & others (2014) 35 ILJ 943 (LAC) (2) SA 204 (CC) at paras 64 and 65 where the court held that: commissioners are required to deal with the substantial merits of the dispute with the minimum of legal formalities. This requires commissioners to deal with the substance of a dispute between the parties. They must cut through all the claims and counter-claims and reach for the real dispute between the parties. In order to perform this task effectively, arbitrators must be allowed a significant measure of latitude in the performance of their functions. Thus the LRA permits commissioners to conduct the arbitration in a manner that the commissioner considers appropriate. But in doing so, commissioners must be guided by at least three considerations. The first is that they must resolve the real dispute between the parties. Second, they must do so expeditiously. And, in resolving the labour dispute, they must act fairly to all the parties as the LRA enjoins them to do. An arbitrator must, as the LRA requires, deal with the substantial merits of the dispute. This can only be done by ascertaining the real dispute between the parties.

20 20 expeditiously and fairly as the Act enjoins him to do. At the heart of the first ground of review is the operation of the level movement system for purposes of a demotion with the PBS system. The Applicant contended that she had no control over the KPA s that led to her moving to level 2. For purposes of a level move down, the Applicant said that it had to be proved that the failure to meet the set targets in terms of clause 4 of the contract of employment was due to some act on her part as the proximate cause of her alleged substandard performance. [33] The arbitrator was confronted by the overwhelming and persuasive evidence of the Third Respondent that the PBS system produced phenomenal results by creating an incentive to earn extra money thus becoming a driver of performance, making people perform at their best. It even attracted other corporate entities, such as Telkom and South African Revenue Services who wanted to adopt the system. It was described as having worked out to be a comparative remuneration policy in the chase for profit and it is the best way to get the best out of one s resources. It is about the fit for the game concept where people are paid not just for coming to work rather than working. On the issue of the level movement system, the arbitrator had to accept that the probabilities favoured the evidence of the Third Respondent. Mr Steenkamp warned the Applicant in time about her unsatisfactory performance. She was even shown a Level Movement Implications Discussion document on Mr Maharaj s computer which had the objective of:- Discussing her poor performance; Identifying key performance areas that needed her improvement; Developing an action plan to improve key performance areas and Setting reasonable targets for a follow up discussion within 30 days. [34] According to the discussion document, what is known as the MIS level movement data had identified the possibility of Applicant s demotion due to her poor performance, with graphs to demonstrate the disparities in respect of six months savings ratios, the six months turnaround time, the rejection amount versus total

21 21 amounts and the rejected claims versus total claims. Yet the Applicant was insistent on having to follow the same old procedures in her investigations and refused to develop and apply new strategies. In respect of the claim that the Applicant was penalised for settling claims and not having enough rejection, there is more credence in the evidence of the Third Respondent that some of her peers had 35% rejection ratio on amounts, having to stay at or come up to level1, while she had 15% at the end of that six months period. Clearly therefore, it was not the pot of claims that was tainted. Neither was there a problem with how the claims were handed out. The only variable was the Applicant s application of her skills. [35] On the issue that the Applicant was to validate and investigate claims and to give awesome service, her turnaround time was average and not awesome. For about 68 claims handled at the time, the probability that all were clean and nothing was wrong only for her was indeed extremely improbable. It was within the discretion of the company not to peg people with experience but with tenure of existence so as to avoid mediocrity and complacency. In my view, there was absolutely nothing wrong with assessors having to work faster and to reject more claims provided that was understood to be the short format or simplification of what the key performance areas were about, akin to saying save as much as you can as quickly as you can. [36] The arbitrator was said to have misconceived the onus that the Applicant bore in alleging that there has been an unfair labour practice in terms of section 186(2)(a) of the Act. To the extent that the onus shifted to the Third Respondent, the evidence on record of Messrs Maharaj and Steenkamp was indeed overwhelming, both viva voce and through documents handed in, and its acceptance was inevitable. [37] The Applicant contended that the assessment of performance evaluation by the Third Respondent did not match the fairness criteria of the applicable legislation. It is important to bear in mind here that five-eighths of the salary of the Applicant as an assessor, was guaranteed and it is the three-eighths part which was

22 22 fluctuating, depending on her performance. The movement from a lower to a higher level was not advertised for. Nor did it depend on there being a vacant funded post. By moving from level 3 to level 2 and from level 2 to level1 the incumbent did not become a supervisor to the lower ranking incumbents. A downward move has no negative effect to the subsequent upward move. The level movement is flexible and depends on peer performance for the six months period only. [38] Strictly speaking, therefore, the upward trajectory is not a promotion, nor is therefore the downward movement a demotion. The lower and higher earnings consequent upon a level movement are akin to commission earnings in the sales department. Commission is used as an incentive for excellent performance in the sales department. The Third Respondent described the PBS system as producing phenomenal results by creating an incentive to earn extra money thus becoming a driver of performance, making people perform at their best. Moving down the levels is accordingly not a demotion as is envisaged by the Act. [39] It must consequently follow from the above that prescribed steps as precursors to a demotion in compliance with the Act 8, need not be strictly followed in the operation of the PBS system. The presence of one manager in the counselling sessions is sufficient provided there is a comprehensive report for discussion with the incumbent who should be given reasonable time to consider it and respond thereto, if so desired. In conclusion, I find that none of the grounds outlined for review has any merits. As regards costs, the predominant considerations are that there is an ongoing employment relationship and the application did not border on frivolity. [40] The following order shall therefore be issued: 1. The application is dismissed. 2. No costs order is made. 8 See also Gold Fields Mining SA (Pty) Ltd (Kloof Gold Mine) v CCMA and Others (2014) 35 ILJ 943 (LAC) at para 25.

23 23 H.S Cele Judge of the Labour Court of South Africa

24 24 APPEARANCES: FOR APPLICANT: Adv. P Kirstein Instructed by: Applicant FOR THIRD RESPONDENT: Adv. Snider Instructed by: Sarah Smith Attorneys