A word of caution to South African companies with branches outside of South Africa: the Labour Appeal Court has confirmed in Monare v South African Tourism and Others [2016] (Monare) that the Commission for Conciliation, Mediation and Arbitration (CCMA) may have jurisdiction to hear employment disputes that arise abroad, where an employee works at a branch office located outside South Africa.

Prior to this case,South African courts had held that South African labour legislation does not have extra-territorial application and accordingly that if an employee who works outside South Africa raises an employment dispute, the CCMA and the Labour Court would not have jurisdiction to entertain the employee’s claim.

In Monare, the employee, who had worked at South African Tourism in its London office, had been dismissed for misconduct. After an unsuccessful internal appeal, he approached the CCMA to refer an unfair dismissal dispute.

As the issue of whether the CCMA had jurisdiction was not raised by the parties, the CCMA arbitrated the matter and ultimately found that his dismissal was substantively unfair and ordered South African Tourism to reinstate him. 

On review to the Labour Court, South African Tourism argued that the CCMA did not have jurisdiction to entertain the dispute. In considering this, the Labour Court referred to the principle set out by the Labour Appeal Court in Astral Operations Ltd v Parry (2008) (Astral), that a primary consideration in determining the territorial application of the Labour Relations Act (the LRA) is the locality of the undertaking carried out by the company in which the employee was employed. Accordingly,  if an employee’s work was carried on inside South Africa, the CCMA would then have jurisdiction and, if it was carried on outside, the CCMA would not have jurisdiction.

In applying this principle, the Labour Court reasoned that the LRA could not apply and the CCMA had no right to entertain the dispute as there was no connection with the South African office. The employee (albeit a South Africa citizen) had been recruited overseas; his employment contract had been concluded overseas; he performed his services overseas, committed the misconduct overseas and was dismissed overseas.

The Labour Appeal Court disagreed and stressed that the Labour Court had not considered that the Labour Appeal Court in Astral had stressed the importance of the fact that in order to find that the CCMA does not have jurisdiction in such disputes, there must be a “divorce” and/or “separateness” between the employer’s undertaking outside of South Africa where the employee was employed and the employer’s undertaking in South Africa. The Labour Appeal Court found that the London office was not divorced or separate from the South African office; in fact, it was linked to, related to and dependent on it. The fact that it was located in London did not make it a different undertaking to the South African office as both branches had the same purpose which was to promote tourism in South Africa.

Though there will of course be other indicators that will be assessed to determine which law and jurisdiction will apply in a dispute, South African companies must still be cautious of the fact that even if its employees are placed outside South Africa, the CCMA may well have jurisdiction to entertain disputes that arise at those locations if the operations of those outside offices are dependent on and/or linked to the South African office.

Written by Nonkululeko Mkhwanazi, associate, Employment and Benefits Practice, Bowmans