What could happen if your employer reduces your salary without permission?

In accordance with South African labour law, employees may resign from their jobs in circumstances when employers have rendered the employment relationship intolerable; this is not to say that resignation must be the only option or last resort available, but rather that alternatives to resignation are unreasonable. In such circumstances, through resignation, an employee exercises his or her right to cancel the employment agreement and to institute legal action.

Employees may proceed with a case of constructive dismissal to the Commission for Conciliation, Mediation and Arbitration (CCMA) or the relevant Bargaining Council.

Constructive dismissal cases are generally difficult to prove and employees must show that they acted reasonably in trying to first engage with their employer to remedy the issue over which they eventually resign.

The recent case of Westcor SA (PTY) LTD v Mey and Others (C189/2021) [2022] ZALCCT 61 (22 November 2022) is a prime example of circumstances under which an employee was in fact constructively dismissed, and where a resignation was quite reasonable in response to intolerable behaviour by the employer.

Ms Tanya Mey commenced employment with Westcor (Pty) Ltd, hereafter the ‘employer’, in 2018 as a jewellery product specialist. Following Covid-19 and the ensuing lockdowns, the employer on 30 June 2020 announced that from 1 July 2020 staff were required to work their full hours but would indefinitely only receive 75% of their salaries.

Ms Mey then immediately emailed the Managing Director informing him that she could not accept the salary cut. In ensuing meetings, Ms Mey offered to work 75% of her hours in return for 75% of her salary, so that she could spend her remaining time on a side-business of which her employer was aware but her employer did not agree to this arrangement.

Ms Mey informed her employer that as much as she wanted to support the company, she was unable to accept the 25% salary cut as her husband was unemployed and her family was falling into debt. The employer offered to assist Ms Mey through a loan to make up the 25% shortfall for July 2020. Ms Mey responded stating that she could not accept a loan, as it would entail incurring more debt. She stated that the employer could not lawfully reduce her salary unilaterally. Further, in the event of a retrenchment consultation, the employer would be required to disclose financial information to show salary cuts were necessary.

Ms Mey posed a number of pertinent questions exploring the employer’s decision to cut salaries, including whether directors’ salaries were also being reduced, whether salaries withheld from staff could be repaid at a later date, and whether the employer had considered or implemented alternative cost-cutting measures (such as negotiating with suppliers). Ms Mey also questioned whether there was in fact an objective need for salary cuts, pointing out that her sales had increased by 37% in the previous year, and that she had exceeded her target by 17%.

In her view, the employer had been profitable, and it probably had sufficient reserves to tide it over the lockdown. Ms Mey said it was unfair and unreasonable to put the burden of the pandemic on staff whereas the company had performed well in the previous year, and had passed on very little of this benefit to employees. She recorded that the employer had made it clear, in meetings with her, that it could not commit to a timeline: ‘This reduction could go on for months. There has also been no criteria given as to when the company will go back to paying full salaries. This leaves it open ended …’. Ms Mey wrote that she had been forced into a position which was prejudicial and unfair.

Ms Mey emailed the employer on Friday 24 July 2020, again explaining that she was unable to live on 75% of her salary, could not afford to take a loan, and, while she understood the Covid situation, the company was unfair to place the burden on staff whereas it had not shared the previous profitable year’s upside with them. At close of business on Monday 27 July 2020, Ms Mey submitted her letter of resignation and advised the employer that she would refer a constructive dismissal dispute to the CCMA.

The CCMA Commissioner found that the employer had acted unilaterally in breaching Ms Mey’s contract, further that Ms Mey had done everything reasonably possible to address her objection to the salary cut with the employer. The Commissioner awarded Ms Mey six months’ ordinary salary as compensation for unfair dismissal.

The employer subsequently took the matter to Labour Court to challenge the fairness of the award. The Labour Court found that the Commissioner’s award was in fact reasonable.

Employees should note that constructive dismissal cases are no easy feat to prove. However, as can be seen in the above matter, should an employee properly address issues in the workplace and the employer nonetheless remains unwilling to remedy legitimate issues which it has itself created, it is more likely that the employee will be able to make out a case for constructive dismissal, as the employment relationship has been rendered intolerable by the employer.

Employees should always seek legal advice before resigning and proceeding to argue a case of constructive dismissal. Should you require any further information or legal representation, contact Mouton Attorneys on 076 279 6680 or albert@moutonattorneys.co.za or visit https://moutonattorneys.co.za/.