THE LABOUR COURT OF SOUTH AFRICA, GQEBERHA

Reportable
Case no: P135 /2021

In the matter between:

AMCU obo MEMBERS                                                           Appellant

and

ABERDARE CABLES (PTY) LTD				First Respondent

THE COMMISSION FOR CONCILIATION,
MEDIATION AND ARBITRATION				Second Respondent

NALEDI BISIWE N.O.						Third Respondent

Heard: 9 November 2023
Delivered:   20 December 2023 

This judgment was handed down electronically by consent of the parties’ representatives by circulation to them via email. The date for hand-down is deemed to be 20 December 2023.

JUDGMENT

PRINSLOO, J

Introduction

[1]	The Appellant (AMCU) acting on behalf of its members, approached the Second Respondent, the Commission for Conciliation, Mediation and Arbitration (CCMA) in terms of the provisions of section 10(2) of the Employment Equity Act (EEA) on a matter of unfair discrimination, with the contemplation of section 6(4), read with section 6(1) of the EEA. The discrimination was alleged to be on an arbitrary ground and the dispute stems from a differentiation in remuneration. 

[2]	An arbitration award was issued on 19 December 2021, wherein the Third Respondent (arbitrator) found that AMCU has failed to prove that the difference in terms and conditions of employment between its members and other employees performing the same or substantially the same work of equal value, amounted to unfair discrimination and the Appellant’s case was dismissed.

[3]	The Appellant filed a notice of appeal in terms of the provisions of section 10(8) of the EEA against the arbitration award. The Appellant also filed an application for condonation for the late filing of the record of proceedings in terms of Rule 9(5A)(d) and for the late filing of its written submission in terms of Rule 9(6). The application for condonation is not opposed. Having considered the application and the applicable legal principles, the late filing of the record and the Appellant’s submissions is condoned.

The Appellant’s case

[4]	AMCU, acting on behalf of 35 members (the employees), referred an unfair discrimination dispute to the CCMA. The parties concluded a pre-arbitration minute and per the agreement between the parties, the material facts set out herein are common cause.

[5]	The First Respondent (Respondent) is a private company, and it employs the employees. The Respondent falls within the registered scope of the Metal and Engineering Industries Bargaining Council (MEIBC), where collective bargaining takes place at a centralised level and results in the conclusion of collective agreements at central level. 

[6]	A collective agreement, which was implemented in the MEIBC and which bound and binds the Respondent inter alia implemented a uniform four level grading structure and stipulates minimum wages and hourly rates per applicable level or grade. The collective agreement provides for the following wage levels: level 1, 2, 3, 4 and 4B and a minimum wage is stipulated per level only and there are no increments or grades within a level which attract differing minimum wages. This means that all the employees employed on a specific level receive the same minimum wage and regardless of job description, a higher salary level attracts a higher minimum wage. All level 1 employees perform the same work or substantially the same or similar work of equal value. The same applies to employees at levels 2, 3, 4 and 4B. The nature, complexity, difficulty and as such the ‘value’ of work performed increase with each level and as such, the wage associated with each level increases as the levels increase.

[7]	It is common cause that in March 2013 the Respondent initiated a process in terms of section 189 and 189A of the Labour Relations Act (LRA), which resulted in a reduction of its workforce. During the latter part of 2013 the Respondent was confronted with a decline in business and on 5 December 2013 the Respondent and the National Union of Metal Workers of South Africa (NUMSA), the majority union at the time, attended a meeting regarding the circumstances being faced by the Respondent and three possible alternatives were proposed to address the concerns:
7.1	Applying to the MEIBC for a wage exemption to freeze wage increases until such time as the rates paid by the Respondent, aligned with the MEIBC rates;
7.2	Commencing with a further section 189 retrenchment process;
7.3	Engaging all new employees on the MEIBC rate of pay and rely on natural attrition to ensure that, over a period of time, all employees would be engaged on the same rates of pay. 

[8]	The Respondent and NUMSA agreed to option (iii) and it (the agreement) was implemented with effect from January 2014. As a result, all those employed on or after 1 January 2014 (new employees) earned the minimum wage rate, as stipulated in the collective agreement. The employees employed prior to 1 July 2014 (old employees) are remunerated on a higher rate (Aberdare rate) and the new employees are remunerated at a lower rate (MEIBC rate). After January 2014, all new employees were appointed on the prescribed MEIBC minimum wage, and the old employees retained their higher Aberdare rate salaries. 

The Appellant’s case

[9]	The Appellant referred a dispute to the CCMA and summarised the facts in dispute as follows: 
‘The company has got 2 rates for its employees which is MEIBC rates and Aberdare Cables rates and that has created a huge gap between employees doing the same job in the same grade and this gap was created by the employer deliberately.’

[10]	The Appellant’s case is that prior to 2014 the terms and conditions of employment, including remuneration rates, were bargained at company or plant level, through a bargaining process between the Respondent and union officials or staff representatives. In January 2014 when the agreement was implemented, NUMSA was the majority union at the Respondent, but none of the employees who are party to this dispute, were members of NUMSA. AMCU only started to recruit members at the Respondent in 2015. 

[11]	All the Respondent’s new employees, regardless of length of service, are employed in accordance with the aforesaid level and grading system and no employee, employed after 1 January 2014, earns more than the minimum wage prescribed in the collective agreement. The Respondent however implements different wage or remuneration rates to employees who were employed prior to 1 January 2014. 

[12]	The Respondent has applied and continues to apply the collective agreement stipulated wage increase percentage to all employees, irrespective of their date of employment and irrespective of whether they earn the Aberdare rate or the MEIBC rate. The result of this is that there is a consistent differential payment of wages between, for example level 1 employees who are remunerated on the higher Aberdare rate and level 1 employees who are remunerated on the lower MEIBC rate. The same applies to all the other salary levels.

[13]	The Respondent made no attempt to reduce the payment differential between employees earning the Aberdare rate and employees earning the MEIBC rate.

[14]	The Appellant identified two categories of comparator employees. The first category is the ‘equal work comparator employee’ and are those employees who perform the same, substantially the same or similar work of equal value, but receive higher remuneration. For example: level 1 employees remunerated on Aberdare rates are ‘equal work level 1 comparator employees’ in comparison to level 1 employees remunerated on the MEIBC rate. In this category the employees in comparison to the equal work comparator employees perform the same or similar work of equal value.

[15]	The second category is the ‘unequal work comparator employees’ and are those employees who perform work at a lower job grading or level and who perform work that is different and worthy of lower remuneration and of lesser value, yet they receive higher remuneration. For example: level 1 employees remunerated on Aberdare rates, as compared to levels 2, 3, 4 and 4B employees remunerated on the MEIBC rate, level 2 employees remunerated on Aberdare rates, as compared to levels 3, 4 and 4B employees remunerated on the MEIBC rate, and so forth in respect of each comparable level. 

[16]	There is a clear distinction between the employees who are employed on the Aberdare rate and those employed on the MEIBC rate. The employees, in comparison to the comparator employees, perform the same, or substantially the same or similar work of equal value.

[17]	In casu the parties filed a statement of case and a statement of response in terms of Rule 19 of the CCMA Rules. The Appellant’s case, as set out in the statement of case, is that the Respondent contravenes section 6 of the EEA in that, based on an arbitrary and prohibited ground, there exists a difference in the terms and conditions of employment of employees of the same employer, that being the Respondent, performing the same or substantially the same work or work of equal value. 

[18]	The Appellant’s case is premised on the provisions of section 6(4) of the EEA which provides that:
‘A difference in terms and conditions of employment between employees of the same employer performing the same or substantially the same work or work of equal value that is directly or indirectly based on any one or more of the grounds listed in section 6(1), is unfair discrimination. 

[19]	The Appellant’s pleaded case is that although the employees and the comparators perform the same or substantially the same work or work of equal value, there is a differentiation in remuneration. The case is pleaded as:
‘The arbitrary ground upon which the differentiation in remuneration is based is solely that the Respondent has elected to apply a higher rate of remuneration than the minimum wage provided for in the collective agreement but has, inter alia, irrationally and arbitrarily elected to do so only in respect to the comparator employees.’

[20]	The Appellant’s pleaded case is further that the arbitrary ground is the cause / reason for the difference in remuneration between the employees and the comparator employees, the arbitrary ground is prohibited in terms of the EEA and the arbitrary ground and resultant discrimination impairs and / or adversely affects the human dignity of the employees, it is based on attributes which have the potential to impair the fundamental human dignity of the employees, is based on attributes which have the potential to affect human beings and the employees in a comparably serious manner and the discrimination is for no reason and is purposeless. The arbitrary ground and resultant discrimination draw a clear distinction between the employees who are employed on the Aberdare rate and those who are employed on the MEIBC rate and there is no rational basis for the differentiation, which is patently unfair towards the employees.

[21]	The Respondent filed a statement of defence and stated that the first issue to be decided was whether or not the ‘arbitrary ground’ pleaded by the Appellant, qualifies as an arbitrary ground for purposes of section 6 of the EEA. The Respondent submitted that an arbitrary ground must first be established. 

[22]	The Respondent filed a special plea in terms of Rule 31 of the CCMA Rules, challenging the CCMA’s jurisdiction to adjudicate the matter and submitting that the Appellant failed to plead a recognised ground of discrimination. The Respondent’s case was that the Appellant’s pleaded case was that the arbitrary ground upon which the differentiation in remuneration is based is solely that the Respondent has elected to apply a higher rate of remuneration than the minimum wage, but the arbitrary ground was not identified or pleaded with any particularity. 

[23]	The Respondent submitted that the Appellant only pleaded the existence of differentiation but has not pleaded an identifiable ground of discrimination. Averments regarding arbitrariness or irrationality on the part of the Respondent do not amount to arbitrary grounds for purposes of section 6 of the EEA. The Appellant’s pleaded case failed to disclose an essential jurisdictional fact, namely the arbitrary ground of discrimination within the meaning of that concept for purposes of section 6 of the EEA.

[24]	The Appellant opposed the Rule 31 application and submitted that a statement of case in terms of Rule 19 of the CCMA Rules does not have the legal status of particulars of claim in high court or magistrate court proceedings and the purpose of such a statement is to provide a summary of the material facts and issues of law which arise in a particular referral. The legal issues would be supplemented in the arbitration proceedings by way of evidence and legal submissions. The Appellant submitted that the “confirmation / establishment / determination of the arbitrary grounds in such dispute …..can only be determined by the totality of the evidence to be led by the Appellants..”

[25]	The Appellant’s approach was incorrect. It is trite that an applicant alleging discrimination must set out explicitly and disclose in no uncertain terms what the ground for discrimination is. The ground of discrimination is to be disclosed and it is not an issue to be ‘confirmed’ or ‘established’ by evidence, as the evidence must support the disclosed ground of discrimination for an applicant to succeed with a claim for discrimination.

[26]	Be that as it may, on 10 February 2021 the Respondent’s special plea that the CCMA does not have jurisdiction to adjudicate the dispute, because the Appellant has not divulged the specific ground of discrimination, was dismissed. The presiding arbitrator held that the CCMA has been given the power to conciliate and arbitrate unfair discrimination disputes in terms of the EEA. Section 10 of the EEA sets out the requirements and it was undisputed that the Appellant had met the requirements, as set out in section 10, to meet the inherent jurisdictional requirements of the EEA. The presiding arbitrator further held that the burden was on the Appellant to provide the Respondent with the specific arbitrary ground it would rely upon. The arbitrator recorded that “at the hearing on 29 January, the Appellants had provided the specific arbitrary ground that they will be relying upon. Whether this is good in law, must be determined after consideration of all relevant factors.”

[27]	In the Respondent’s statement of defence it was disputed that the differentiation was effected on the basis of an arbitrary ground for purposes of section 6 of the EEA. The differentiation is fair on account of length of service or another relevant factor that is not unfairly discriminatory in terms of section 6(1) of the EEA, namely the need for the Respondent to align its wages with the industry norms and the wage levels applied by its competitors. The Respondent denies that the Applicant has pleaded an arbitrary ground within the meaning of that term for purposes of section 6 of the EEA. 

[28]	The parties subsequently signed a pre-arbitration minute, recording the specifics in respect of the Appellant’s pleaded arbitrary ground.

The evidence adduced

The Appellant’s case

[29]	Mr Njikelana testified that he is an operator, employed by the Respondent from October 2014. He is at level 3 of the MEIBC pay rate. He testified about how the differentiation in pay has affected his dignity, it is difficult for him to fulfill his family obligations. In cross-examination he could not dispute the Respondent’s financial position, which led to the decision to employ new employees from 2014 on the MEIBC rate and his view that the Respondent was making money, was premised on his observation that the Respondent spent money on new machinery. He conceded that there was a reduction in the shifts manufacturing paper products, because the demand was lower and the Respondent sold much less of the product than in the past.  The demand shifted to another product line, XLPE and Mr Njikelana did not dispute that the Respondent had to spend money to buy new equipment to supply the demand or to replace old machinery.\

[30]	Mr Njikelana did not dispute that the Respondent’s expenditure remained the same from 2013 until 2020 and that the total tonnage sold by the Respondent steadily declined for the same period or that retrenchment processes were followed in 2015, 2017 and 2020, which led to further job losses. He agreed that if the Respondent had not implemented the MEIBC wage levels, its wage bill would have been higher, each ton of product produced would have cost even more and if the Respondent was to pay all its employees 30% above the MEIBC rate, it would be difficult to compete with competitors that are paying MEIBC rates.

[31]	Mr Njikelana conceded that the fact that he was employed on the minimum wage rate in 2014 had nothing to do with him as a person, but it impacts him as a person. He also did not dispute that the decision taken by the Respondent in 2014 to employ new employees on the minimum MEIBC rate was a ‘sensible option’. Mr Njikelana testified that before he was appointed, he was informed by the Respondent that he would be appointed on a different, lower rate than the old employees, but he signed the contract because he “was happy to get the job.”

[32]	Mr Mbali testified that he was employed by the Respondent in February 2011 and he is a level 3 operator, employed on the old or Aberdare rate. He was not an applicant in the dispute before the CCMA but he testified that he feels ashamed because he is earning more than the new employees, who do the same work for less money.  

[33]	Mr Mbali testified that the Respondent was struggling prior to 2014, the employees had to work short time and when the variation of rates was introduced in 2014, the employees could see that the Respondent was struggling.  However, Mr Song, the Respondent’s CEO subsequently reported that the company was doing well and they could see that because there was new machinery. In cross-examination Mr Mbali did not dispute that the new machinery that was installed, was due to foreign investment and that it was financed, with the hope of making a financial recovery over time. He could not dispute that the tonnage of cabling sold by the Respondent declined from 2013 to 2020 and that the cost to produce each ton of cabling has gone up from 2009 to 2020.

[34]	In cross-examination he conceded that there was a sound business rationale in 2014 for taking the decision to employ new employees on the minimum MEIBC rate.

[35]	Mr Matinise, an acting strand operator on level 1, was employed by the Respondent in October 2016. He testified about how he felt about receiving less remuneration than the employees being remunerated on the Aberdare rate.
The Respondent’s case

[36]	The Respondent called Mr Potgieter, its group financial manager for manufacturing, as a witness. Mr Potgieter was employed by the Respondent in 2001. He testified that since 2010 there was a steady decline in demand for the product that the Respondent manufactures – there was a greater supply in the market than the demand, which resulted in pricing pressures. Mr Potgieter explained that if the demand was low, the manufacturer has an excess of supply and the demand versus supply results in pressures on pricing in the market.

[37]	Mr Potgieter referred to the Respondent’s audited financial statements and he explained that the Respondent had a R 30 billion revenue for the past nine years (2010 – 2019), with a profit after tax of R 27 million, which is an average profit of R 3 million per year, which is 0,1% profit, which is marginal. He explained that in good times the Respondent was making over R 500 million in terms of operating income for a year, but over the past nine years, it was down to an average of about R 3 million per year. The operating income percentage went down from 12% in 2008 to 3% in 2018, which indicated that the Respondent was not really profitable. 

[38]	Mr Potgieter testified that from a manufacturing point of view, the Respondent measures its output, production and sales in terms of tons, as that is a very important indicator in terms of volumes produced and sold and the Respondent’s tons sold per year shrunk from 45 000 in 2008 to 17 000 in 2020. The manufacturing costs increased steadily – the Respondent could manufacture 45 000 tons at R 10 000 per ton, at the time of the arbitration hearing, it manufactured 17 000 tons, costing R 30 000 per ton to make the product. 

[39]	Salaries and wages made up 55% of the Respondent’s total expenses.

[40]	Mr Potgieter testified that the Respondent was not cash flush but was rather in a borrowing situation. The Respondent invested in equipment for the future sustainability of the business, but that was funded from extensive borrowings. He explained that if all the employees who were employed on the MEIBC rate were employed on the higher Aberdare rate, the additional cost the Respondent would incur as a result would have wiped out the entire profit. The additional cost that would be spent on the higher salaries, would have amounted to R 55 million, when the total profit made over the same period, amounted to R 33 million, which situation would have taken the Respondent into a negative territory. 

[41]	In cross-examination Mr Potgieter conceded that for 2017, 2018 and 2019 the figures showed a profit, but he insisted that return on investment was very poor and he disputed that it was a good profit for the shareholders of the company. In 2016 the Respondent suffered a loss of R 113 million.

[42]	Mr Potgieter explained that the Respondent was not out of the woods yet as the trading conditions within South Africa have not improved dramatically and the Respondent has to position itself to remain sustainable within the economy and must reduce its costs.   

The arbitration award

[43]	The dispute was arbitrated and the issue to be decided was whether the differentiation in remuneration between the employees and their comparators who perform the same, substantially the same or work of equal value, constitutes unfair discrimination.

[44]	The arbitrator accepted that it was common cause that the employees are employed in various capacities, performing work as operators or similar functions. They were employed on different dates from 2014 and thereafter. They perform the same, substantially the same or work of equal value as the other operators employed by the Respondent, before 2014. The employees employed after 2014 are paid at different, lesser rates of pay, the so-called MEIBC rate, compared to the rate paid to the employees who were employed prior to 2014. 

[45]	The arbitrator identified the differentiation in remuneration as the crux of the dispute. The Appellant’s case was that the differentiation is not rational, discriminatory and is unfair. The Respondent’s case on the other hand was that the conduct complained of is not discrimination and even if it is, it is rational, justifiable and not unfair.  

[46]	In her analysis of the evidence, the arbitrator considered the provisions of section 11(2) of the EEA, which requires of a complainant, alleging unfair discrimination on an arbitrary ground, to prove that the conduct complained of is not rational, that it amounts to discrimination and is unfair.

[47]	She held that mere differentiation in pay between employees who do similar work or work of equal value does not mean that an act of discrimination is being perpetrated – it is only when such differentiation is linked to an unacceptable ground that it becomes discriminatory.

[48]	The arbitrator held that the Appellant identified being new employees as an arbitrary ground for differentiation. She found that the Respondent implemented the payment of MEIBC rates for future employees (2014 onwards) as a means to avoid dismissals for operational reasons and to save costs to maintain operations and save jobs. The remuneration strategy of adopting the MEIBC pay rates was introduced in consultation with the majority union, in an effort to introduce pay rates for future employees and protecting the pay of the Respondent’s existing employees. The decision by the Respondent was not unfair and did not discriminate against future employees as it was implemented for a rational and objective business motive. It did not discriminate against the fundamental dignity of the new employees, and it was rational and justified. 

[49]	The arbitrator concluded that the Appellant failed to discharge the onus to prove that the Respondent’s differentiation in wage rates between its new and old employees amounts to discrimination. The Appellant’s claim was dismissed.

[50]	The Appellant filed a notice of appeal in terms of the provisions of section 10(8) of the EEA against the arbitration award. 

General principles

[51]	Before I deal with the merits of this appeal, it is prudent to set out the general principles applicable to a claim for equal pay for equal work, where it is alleged to be unfair discrimination based on an arbitrary ground.

[52]	The EEA does not prohibit differentiation, it prohibits unfair discrimination. More specifically, section 6(1) of the EEA does not prohibit differentiation or arbitrariness, it prohibits unfair discrimination on an ‘arbitrary ground’.  ‘Arbitrary ground’ as provided for in section 6(1), read in conjunction with section 11(2), makes it clear that the irrationality of differentiation per se will not win a discrimination case based on an arbitrary ground. The conduct complained of must amount to unfair discrimination in that it must cause an injury to human dignity. Irrationality does not win a case, the irrationality of discrimination does.

[53]	Differentiation per se does not constitute discrimination. Differentiation on a specified ground of discrimination is presumed to constitute unfair discrimination, which presumption is rebuttable. Given that an arbitrary ground is synonymous with an unlisted/unspecified ground, the test for whether discrimination is established, is that set in Harksen v Lane NO and others (Harksen), namely, if there is differentiation based on an unspecified ground, then whether or not there is discrimination will depend upon whether, objectively, the ground is based on attributes or characteristics which have the potential to impair the fundamental dignity of persons as human beings or to affect them adversely in a comparably serious manner.

[54]	Section 6(4) of the EEA does not impose a blanket prohibition on wage differentiation. It prohibits such differentiation where it is directly or indirectly based on any one or more of the grounds listed in section 6(1).  An applicant pursuing a claim in terms of section 6(4) of the EEA must demonstrate more than mere differentiation. Such an applicant must not only clearly identify and plead an identifiable ground of discrimination that qualifies as an arbitrary ground, within the contemplation of section 6(1), but must also prove that the differentiation is based on such an arbitrary ground.

[55]	In Naidoo and others v Parliament of the Republic of SA, this Court considered the interpretation of the phrase any arbitrary ground and held that:
‘[36]	… Given that an arbitrary ground is synonymous with an unlisted/unspecified ground, the test for whether discrimination is established, is that set in Harksen, namely, if there is differentiation based on an unspecified ground, then whether or not there is discrimination will depend upon whether, objectively, the ground is based on attributes or characteristics which have the potential to impair the fundamental dignity of persons as human beings or to affect them adversely in a comparably serious manner.
[37]	Although the Constitutional Court did not provide a comprehensive description of what ‘attributes and characteristics’ would comprise, it held that:   
“What the specified grounds have in common is that they have been used (or misused) in the past (both in South Africa and elsewhere) to categorise, marginalise and often oppress persons who have had, or who have been associated with, these attributes or characteristics. These grounds have the potential, when manipulated, to demean persons in their inherent humanity and dignity. There is often a complex relationship between these grounds. In some cases they relate to immutable biological attributes or characteristics, in some to the associational life of humans, in some to the intellectual, expressive and religious dimensions of humanity and in some cases to a combination of one or more of these features.”
[38]	The test set out in Harksen v Lane NO and others will apply and, in order for the alleged grounds of arbitrary discrimination to qualify as such, they must, objectively, constitute grounds 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 to a listed ground. In short: the unequal treatment must be based on attributes and characteristics attaching to a person before it will fall within the meaning of ‘discrimination’.’

[56]	In Naidoo and others v Parliament of the Republic of South Africa the Labour Appeal Court (LAC) endorsed the narrow compass interpretation of the phrase ‘any other arbitrary ground’ in section 6(1) of the EEA. 

[57]	The LAC considered whether there was a cognisable case pleaded on the narrow compass interpretation and held that:
‘[29] 	The next step is to consider whether, upon the narrow compass construction of s 6(1), the appellants have pleaded a cognisable case. What exactly is averred by the appellants? Allusions are made to nepotism, differences in years of service and recruitment of the chamber support officers from the ranks of persons who were members of the SAPS at that moment of recruitment. The responsibility for this grievance is alleged to be the brainchild of their manager, Van der Spuy. A fair reading of these averments reveals that the critical allegation is that a group of persons have been given preferential treatment based on their affinity with Van der Spuy who is a fan of the SAPS: in a word, this is nepotism.
[30] 	Do these averments that the protection officers are the victims of nepotism meet the test in Harksen v Lane NO? in my view they do not.  Nepotism, in any case, cannot be countenanced, even more so in the case of parliament. However this court is required to determine this dispute in terms of the EEA and nepotism is not a necessary affront to human dignity, in neither the sense contemplated by s 9 of the Constitution, nor in s 6(1) of the EEA. To be neglected because of nepotism implies no characteristic of a person so victimised nor does it invoke any pejorative perspective of such person, whether inherent or adopted. Nepotism differs from, for example racism, where the bearer of authority or of power rejects X because of X’s race and prefers Y because of Y’s race. If what Van der Spuy has done is indeed to prefer his chums to the appellants, ie behaved nepotistically, that conduct, however wrongful, is not unfair discrimination within the purview of s 6(1).’

[58]	In short: it is not sufficient to simply allege differentiation or that the differentiation is arbitrary or that an employee’s dignity has been impaired. An applicant must allege a specific ground of discrimination, must prove that the pleaded ground of discrimination is the basis for differentiation and that it is unfair. There is a distinction to be drawn between differentiation and discrimination and differentiation per se does not constitute discrimination on an arbitrary ground, which must be clearly identified and pleaded.

The difficulty in the Appellant’s case

[59]	The Appellant’s pleaded case is that the arbitrary ground is that the Respondent elected to apply a higher rate of remuneration only in respect of the comparator employees. In pre-arbitration minute signed by the parties the following was specifically recorded in respect of the arbitrary ground:
‘The Appellants allege that the arbitrary ground upon which the differentiation in remuneration is based is solely that the Respondent has elected to apply a higher rate of remuneration than the minimum wage provided for in the CA but has, inter alia, irrationally and arbitrarily elected to do so only with respect to the comparator employees.
In amplification of the above, the Appellants allege that the Respondent has arbitrarily elected to apply the higher Aberdare rate to the employees employed before 1 July 2014 (that being the comparator employees) and the lower MEIBC rate to employees employed after such date.
The Respondent alleges that the arbitrary ground identified by the Appellants does not qualify as an arbitrary ground within the meaning to be ascribed to that concept for purposes of section 6 of the EEA.’ 

[60]	I already alluded to the fact that the Harksen test will apply in a case such as this one and the Appellant had to plead an identifiable ground of arbitrary discrimination.  Not every differentiation is discrimination and to qualify as such, the ground(s) for discrimination relied upon must, objectively, constitute a ground(s) 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 to a listed ground. The unequal treatment must be based on attributes and characteristics attaching to a person before it will fall within the meaning of ‘discrimination’, as contemplated in the EEA.

[61]	The difficulty in the Appellant’s case is that the arbitrary ground of discrimination is not identified or pleaded. It is not sufficient to simply allege differentiation or that the differentiation is arbitrary or that an employee’s dignity has been impaired. An applicant must allege a specific ground of discrimination, which the Appellant failed to do.

[62]	It is evident from the transcribed record that in the opening statement the Appellant’s case was set out in essence as: 
“The effect of this is that employees who were employed immediately prior to 1 January or 2 January perhaps, as the case may be, 2014, have enjoyed significantly higher rates of pay than those that were employed immediately thereafter. That is the point of differentiation, and that is what we say is the arbitrary ground….” It was submitted that the question to be decided was ‘whether that measure of differentiation if fair or unfair in terms of the Employment Equity Act, we submit relates to whether or not that infringes the dignity of the persons so affected.”

[63]	Added to the difficulty that the arbitrary ground for discrimination was not identified or pleaded, the witnesses called by the Appellant during the arbitration process, did not rescue the deficiencies in their pleaded case. The witnesses did not give evidence to prove that the basis for them being paid less than the comparator employees, who were employed prior to 2014, is because of discrimination by the Respondent, based on any specific arbitrary ground of discrimination. 

[64]	The Appellant’s witnesses testified about the fact that they have less spending power than the comparator employees, that they are unhappy about their level of earnings, and that they feel that their dignity has suffered as a result of their lower level of earnings. They further explained how they are adversely affected by the wage differentiation and how they feel prejudiced by that, but the reality is that an arbitrary ground for discrimination cannot be established by the existence of prejudice, or put differently, by the mere fact that an employee testifies that his or her dignity has suffered. The fact that an employee may profess to have suffered an insult to his or her dignity is not sufficient to establish discrimination, as outlawed by the EEA – more is indeed required.

[65]	In my view the Appellant’s has an incorrect understanding of the applicable principles and the Harksen test, which is best illustrated by the submissions made in argument before this Court. The Appellant submitted that the Harksen test requires that differentiation must be proved and “if the differentiation is not rational, the enquiry ends here and the conduct constitutes unfair discrimination.”  

[66]	Irrational differentiation does not automatically constitute unfair discrimination, just as rational differentiation might nevertheless amount to discrimination. As was held in Harksen: 
‘If it is not on a specified ground, then whether or not there is discrimination will depend upon 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.’

[67]	The Appellant’s case in the main is that there is differentiation, that the employees are adversely affected by the wage differentiation and their dignity has suffered because of it, therefore there is unfair discrimination on an arbitrary ground. 

[68]	It would be too radical to accept that once there is differentiation and prejudice or an impairment of some sort as a result thereof, it follows that an arbitrary ground of discrimination exists, without identifying what the arbitrary ground is. It would also be too simplistic to accept as a matter of fact, that a lower rate of earning equates to a lower level of dignity.

[69]	The case advanced on behalf of the Appellant in its heads of argument and in submissions before this Court, was not the Appellant’s pleaded case or the case presented before the arbitrator. Notably, the Appellant attempted to expand the scope of its pleaded grounds in its heads of argument by introducing an argument that the employees, as job applicants being unemployed or having low rates of earnings when they were employed by the Respondent, associated with a lack of bargaining power, were left vulnerable. The Appellant submitted that the Respondent’s reasons for selecting the employees to differentiate against, is because they were likely to have been unemployed at the time or have been employed at much lower rates and therefore would have agreed to the lower MEIBC rates. They did not have the power and ability to negotiate or bargain and their ultimate vulnerability meets the test of an analogous ground. This did not form any part of the Appellant’s pleaded case, nor the case presented at arbitration, and it can certainly not be introduced by way of heads of argument on appeal. If the grounds raised in the heads of arguments were the grounds for discrimination pleaded and presented at arbitration, the arbitration would in all probability have been conducted differently and the outcome might have been different, although all this is speculation in respect of a case that was not presented.

[70]	The difficulty in the Appellant’s pleaded and presented case, as alluded to supra, played a material and significant role in the outcome of the arbitration process, which the Appellant now seeks to appeal and, in my view, absent an identified arbitrary ground of discrimination, it is a difficulty that will remain.

The appeal

[71]	To succeed with its case, the Appellant had to prove all three the elements set out in section 11(2) of the EEA.

[72]	The Appellant’s case on appeal is that the arbitrator was wrong and erred in making the determination that the Respondent’s conduct was not unfairly discriminatory against the employees. The crux of the appeal, on the Appellant’s version, is firstly the arbitrator’s failure to identify the correct legal test, that being the entirety of the test per Harksen and secondly her failure to apply the correct legal test to the question of whether the Respondent’s conduct constitutes unfair discrimination on an arbitrary ground in terms of the EEA. 

[73]	In its submissions in the appeal, the Appellant stated that the arbitrator correctly finds that the CCMA is bound by the dicta in Harksen and that the crux of the appeal is that the arbitrator failed to apply the correct test. In my view the crux of the appeal is that the arbitrator failed to apply the correct test correctly. 

[74]	The Appellant submitted that the arbitrator should have found that the differentiation does not have a rational connection to a legitimate interest, and thus it constitutes unfair discrimination. In the alternative, if the differentiation is rational, it still amounts to discrimination as 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. The discrimination impairs the dignity of the employees and is thus unfair. The difficulty in the Appellant’s case leaps out once again – what is the arbitrary ground for discrimination?

[75]	I will deal with these issues in turn.

The applicable test

[76]	The Appellant correctly submitted that the applicable test is as per Harksen where it was held as follows:
(a)	Does the provision differentiate between people or categories of people? If so, does the differentiation bear a rational connection to a legitimate government purpose? If it does not then there is a violation of s 8(1). Even If it does bear a rational connection, it might nevertheless amount to discrimination.
(b)	Does the differentiation amount to unfair discrimination? This requires a two-stage analysis:
(i)  	Firstly, does the differentiation amount to “discrimination”? If it is on a specified ground, then discrimination will have been established. If it is not on a specified ground, then whether or not there is discrimination will depend upon 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.
(ii) 	If the differentiation amounts to “discrimination”, does it amount to “unfair discrimination”? If it has been 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 primarily on the impact of the discrimination on the complainant and others in his or her situation.
If, at the end of this stage of the enquiry, the differentiation is found not to be unfair, then there will be no violation of s 8(2).
(c)	If the discrimination is found to be unfair then a determination will have to be made as to whether the provision can be justified under the limitations clause (s 33 of the interim Constitution).’ 

[77]	Differentiation must be established in the first place. In casu differentiation is common cause. 

[78]	As differentiation is established, the second question is whether the differentiation bears a rational connection to a legitimate purpose, or put differently, whether the conduct complained of is rational.  Even if it is rational, it might still amount to discrimination.

[79]	In casu the arbitrator found that the differentiation is rational and the rationality is founded on the Respondent’s business motive to save operations and seniority and length of service is a justifiable reason for salary differentiation. 

[80]	The Appellant’s case is that the arbitrator misdirected herself and conflated the various steps within the Harksen test in determining whether or not unfair discrimination has occurred. She found that differentiation is not discrimination if it is rational, whereas rationality is merely the second step in determining whether the conduct constitutes unfair discrimination. Conduct that is rational may still be discriminatory. According to the Appellant, the arbitrator erred in finding that the differentiation was rational, and even if it was rational, she erred in not finding that the differentiation was unfair discrimination. 

[81]	In my view the Appellant is losing sight of the two-stage analysis. Even if the differentiation was not rational, is does not automatically amount to unfair discrimination. To determine whether the differentiation amounts to unfair discrimination, a two-stage analysis must be followed. The first stage is to determine whether the differentiation amounts to discrimination and if it does, the second stage is to determine whether the discrimination is unfair. 

[82]	The Appellant further submitted that the ground of ‘length of service’ is biased against a group of employees based on an analogous ground and / or is not applied proportionally. The differentiation is therefore not rational and fair and as such, unfair discrimination cannot be justified. The Appellant submitted that the arbitrator erred in not coming to this conclusion. 

[83]	The Appellant’s submissions in this regard fly in the face of Premier FMCG (Pty) Ltd t/a Blue Ribbon Bakery v FAWU obo Members and others where the Court found that the differential remuneration complained of based on service did not amount to unfair discrimination on an ‘arbitrary ground’ in the sense that term must be interpreted in section 6(1) of the EEA and held that:
‘[22]	It is difficult to see how length of service can be likened to an attribute akin to an immutable human characteristic, sexual or social identity, cultural or organisational association, or deeply held moral, political or religious conviction. Consonant with this principle, the EEA Regulations, which were applicable at the time and were “published to prescribe the criteria and methodology for assessing work of equal value contemplated in section 6(4) of the Act” specifically stated that length of service is a fair basis for differential remuneration of individuals performing work of equal value:

“7 Factors justifying differentiation in terms and conditions of employment
(1)	If employees perform work that is of equal value, a difference in terms and conditions of employment, including remuneration, is not unfair discrimination if the difference is fair and rational and is based on any one or a combination of the following grounds:
(a)	the individuals' respective seniority or length of service;…”

[84]	In Pioneer Foods (Pty) Ltd v Workers Against Regression (WAR) and others it was confirmed that nothing in the EEA precludes an employer from adopting and applying a rule in terms of which newly appointed employees start at a rate lower than existing long serving employees. This applies whether or not the newly appointed employee had previous substantial experience, whether with the employer concerned or some other employer. 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 is in any event neither irrational nor unfair.

[85]	The Appellant submitted that even if the arbitrator was correct that the differentiation was rational, she erred in ending the enquiry when it was incumbent upon her to go on to apply the two-stage analysis to determine whether the rational differentiation constituted unfair discrimination.

[86]	In my view there is no merit in the Appellant’s argument that arbitrator erred in finding that differentiation was rational. It was indeed rational as the Respondent’s decision to implement the minimum wages as per the collective agreement, while retaining its existing employees (as prior to January 2014) at the rate they were paid, is logically connected to the objectives it sought to achieve. The Respondent faced (and at the time of the arbitration proceedings, was still facing) a difficult economic climate, with a reduction in production and an increase in cost and it had to find a way to remain operational. The Respondent’s decision to align its wage rates to the industry norm to secure the sustainability of the business, was rational.

[87]	It is evident from the transcribed record that the Appellant’s witnesses did not dispute the rationality of the decision to implement MEIBC rates with effect from January 2014.

[88]	Having found that the differentiation was rational, the next issue for consideration was whether the differentiation amounted to discrimination.

[89]	The Constitutional Court has interpreted ‘discrimination’ and concluded that the word ‘discrimination’ is used in a pejorative sense, and not in a merely neutral sense. In Prinsloo v Van der Linde and another  the Court considered the concepts of differentiation and discrimination, and it was held that:
‘The proscribed activity is not stated to be “unfair differentiation” but is stated to be “unfair discrimination”.  Given the history of this country we are of the view that “discrimination” has acquired a particular pejorative meaning relating to the unequal treatment of people based on attributes and characteristics attaching to them.’
(Own emphasis)

[90]	The Constitutional Court confirmed that the right to equality means the right to be treated as equals, which does not always mean the right to receive equal treatment.

[91]	The Appellant submitted that the arbitrator should have determined whether the differentiation amounts to unfair discrimination, by application of the two-stage approach. The first stage is to determine whether discrimination has taken place, and the second stage is whether such discrimination is unfair.  On the Appellant’s own version, the question at the first stage of the enquiry was 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. 

[92]	The Appellant’s case is that the arbitrator should have found, based on the uncontested evidence, that the ground not only impairs the fundamental human dignity of the employees but also has the potential to affect them adversely in a comparably serious manner. The arbitrator erred in finding that the rationality of the differentiation resulted in the differentiation not being discriminatory. Furthermore, the arbitrator should have found that the Appellants discharged the onus and had proven discrimination.

[93]	In my view there is no merit in this ground for appeal. 

[94]	Following the Harksen test, an applicant for relief arising from discrimination on an arbitrary ground, has to show that the differentiation is based on attributes and characteristics which impair the fundamental dignity of persons as human beings or affects them adversely in a comparably serious manner. An attribute or characteristic is an immutable human characteristic or a quality or attribute which belongs to a person and which is inherently part of someone and it should be this characteristic or quality that is the reason for the differential treatment.  

[95]	It is trite that in order to prove that the conduct complained of "amounts to discrimination" in terms of section 11(2)(b) of the EEA, the complainant must identify the listed or unlisted arbitrary ground of discrimination relied upon, establish that that ground is an "other arbitrary ground"; and prove that that ground is the reason for the disparate treatment complained of. As this Court observed in Ntai and others v SA Breweries Ltd :
‘Litigants who bring discrimination cases to the Labour Court and simply allege that there was 'discrimination" on some or other 'arbitrary' ground, without identifying such ground, would be well advised to take note that the mere ‘arbitrary' actions of an employer do not, as such, amount to 'discrimination' within the accepted legal definition of the concept.’

[96]	The Appellant cannot succeed as they cannot show that the ground(s) of arbitrary discrimination, as per the pleaded case, is analogous to the listed grounds. Firstly, the arbitrary ground had not been identified and secondly, no case had been made out that the alleged, but undisclosed ground of discrimination, has anything to do with attributes or characteristics which make the employees who they are, and that it impaired their human dignity in a comparable manner to a listed ground. 

[97]	The difficulty in the Appellant’s case leaps out once again – the Appellant’s inability to point to any attribute or characteristic that underpins the differentiation implemented by the Respondent. It is evident that a different remuneration rate was introduced and implemented with effect from 1 January 2014, but the employees’ date of commencement of employment is not an attribute akin to an immutable human characteristic and does not constitute an arbitrary ground for discrimination.

[98]	It is evident from the arbitration award that the arbitrator struggled with the analysis around the ground for discrimination and this is not surprising as it was not identified. The Appellant placed much emphasis on the differentiation in wages, which took effect from 1 January 2014 and how the new employees were prejudiced as a result. The arbitrator held that length of service is a justifiable ground for salary differentiation and ultimately found that the Appellant failed to discharge the onus to prove that the differentiation in wages amounts to discrimination.

[99]	The Appellant’s submissions in the heads of argument to the effect that the employees were inter alia marginalised and oppressed, vulnerable and previously disadvantaged due to their race and that those attributes were the basis for the Respondent to choose to remunerate them at a lower rate, are disconnected from the Appellant’s pleaded case as well as the evidence presented, and the case pursued at the CCMA. The Appellant cannot be permitted to introduce an entirely different case in its heads of argument on appeal.   

[100]	Having found that the Appellant failed to identify an arbitrary ground for discrimination, there can be no finding that the Appellant had proven discrimination. In the absence of a finding that discrimination exists, there is no need to consider the second stage of the enquiry, namely whether the discrimination was unfair. That is the end of the enquiry.

Conclusion

[101]	In Naidoo the LAC confirmed that: 
‘... s 6 of the EEA which is predicated, as already noted, on the basis that the prohibited grounds are all designed to protect the dignity of an affected person. That is the starting point of any enquiry regarding discrimination. This conclusion is reinforced by the words ‘any other arbitrary ground’. The insertion of the word ‘other’ supports the conclusion that the phrase ‘any other arbitrary ground’ was not meant to be a self-standing ground, but rather one that referred back to the specified grounds, so that a ground of a similar kind would fall within the scope of s 6.’

[102]	The Harksen test applies and for the Appellant to show that their pleaded ground of arbitrary discrimination qualifies as such, they must show that the ground(s) they rely on, constitute grounds based on attributes and characteristics which have the potential to impair their fundamental human dignity or to affect them adversely in a comparably serious manner to a listed ground.

[103]	The Appellant failed to allege that the reason for differentiation is some characteristic that impacts upon the employees’ human dignity. The Appellant’s case is: there is differentiation, it impacts on the employees’ dignity and therefore it is unfair discrimination. The difficulty remains that the Appellant has not identified the arbitrary ground of discrimination.

[104]	In short, arbitrary conduct is not, per se  a ground of discrimination; only conduct based on a ground of discrimination that is arbitrary is actionable; and to be actionable, the ground must be analogous to a listed ground.

[105]	The Respondent’s conduct in paying different wages for the same or similar work, however unfair it might be, is not unfair discrimination within the purview of section 6(1) of the EEA. More than mere differentiation or unfairness is required in terms of the provisions of the EEA. 

[106]	The arbitrator did not err when she made the findings, as fully dealt with supra, and the appeal has to fail. 

Costs

[107]	This Court has a wide discretion to make orders for costs according to the requirements of the law and fairness and this is a matter where the interests of justice and fairness will be best served by making no order as to costs.

[108]	In the premises I make the following order:

Order

1.	The late filing of the record and the Appellant’s submissions is condoned;
2.	The appeal is dismissed;
3.	There is no order as to costs. 

Connie Prinsloo
Judge of the Labour Court of South Africa

Appearances:
For the Appellant:			Mr M Futcher from Futcher & Poppesqou Attorneys
For the First Respondent:		Advocate F le Roux
Instructed by: 			Chris Baker & Associates Attorneys