Lethabo Masoga and Lebohang Maeleso v Pick 'n Pay Retailers (Pty) Ltd and Others

The appellants were employed by Assist Bakery 115 CC (AB), a close corporation that operated under an empowerment scheme with Pick 'n Pay (PnP). PnP contracted with AB to produce baked products as part of a five-year empowerment initiative to develop self-standing bakeries operated by previously disadvantaged persons. The appellants worked as "pickers" delivering ingredients to AB's workplace at PnP's manufacturing facility in Isando. They were employed under written fixed-term contracts of 12 months from 1 March 2015 to 1 March 2016. On 17 November 2015, the appellants referred a dispute to the CCMA, initially citing a section 198A (labour broker) dispute but later characterizing it as a section 198B (fixed-term contract) dispute. Before the arbitration, AB offered the appellants permanent employment and accepted at the hearing that they were its permanent employees in terms of section 198B(5). The commissioner nevertheless applied section 200B of the LRA to find that both PnP and AB were co-employers, jointly and severally liable to provide the appellants parity with PnP's permanent employees. PnP and AB successfully reviewed and set aside the award in the Labour Court.

• Whether the commissioner correctly identified the dispute before him
• Whether section 200B of the LRA could be applied without being invoked by the parties
• Whether the commissioner's application of section 200B was reasonable in circumstances where there was no allegation or evidence that the empowerment scheme was a sham or subterfuge
• Whether the commissioner misconstrued the purpose and scope of section 200B
• Whether the parties were afforded procedural fairness in relation to findings made under section 200B
• Whether the award was reviewable on grounds of unreasonableness or gross irregularity

The appeal was dismissed. The Labour Court's order reviewing and setting aside the commissioner's award was upheld. No order was made as to costs of the appeal.

Section 200B of the LRA is not a general test for determining who is an employer; it is a deeming provision for purposes of extending liability where arrangements are intended to, or have the effect of, defeating the purposes of the LRA or other employment laws. The section defines "employer" for the specific purpose of fixing joint and several liability in cases of simulated arrangements or corporate structures used as subterfuges to disguise the identity of the true employer or avoid employment law obligations. Section 200B cannot be applied by a commissioner without proper evidential foundation showing that an arrangement is a sham or has the intent or effect of defeating labour law purposes. A commissioner must properly identify the true nature of the dispute before him and cannot expand beyond those parameters without affording parties procedural fairness and an opportunity to address new issues. Where a commissioner makes findings on matters that occurred to him after the hearing and on which parties had no opportunity to address him, this constitutes gross unfairness warranting review and setting aside of the award.

The Court observed that section 200B, based on law and equity, is intended to assist in determining who the true employer or owner is for purposes of liability in complex stratagems designed to avoid employment obligations. The Court noted that the difficulty grappled with in Buffalo Signs Co. Ltd v De Castro regarding liability of holding companies would have been easily resolved if section 200B was available at that time. The Court also commented that while section 200B is relatively wide and open-ended, it requires strict purposive interpretation given its far-reaching implications and serious reputational consequences for entities found to have contravened the law. The Court noted that the genuineness of empowerment schemes should be assessed holistically, considering all relevant agreements and the full context, rather than selectively examining isolated provisions. The Court observed that interaction between employees of different entities in genuine empowerment schemes is inevitable and not inherently sinister when viewed in proper context.

This case is significant in South African labour law for clarifying the proper interpretation and application of section 200B of the LRA. It establishes that: (1) Section 200B is not a general test for determining employer identity, but rather a deeming provision for extending liability in cases of simulated arrangements or shams intended to defeat labour law purposes; (2) Section 200B cannot be invoked by a commissioner mero motu without the parties having an opportunity to address its applicability, as this violates procedural fairness; (3) There must be a proper evidential basis showing that an arrangement is a subterfuge or has the intent/effect of defeating labour law purposes before section 200B can be triggered; (4) Commissioners must properly identify the true nature of disputes and cannot expand beyond the parameters of the dispute referred to them without affording parties an opportunity to address new issues; (5) The case reinforces the importance of procedural fairness in arbitration proceedings and the limits of commissioners' powers to apply legal provisions not invoked by parties. The judgment provides important guidance on the interpretation of section 200B in the context of legitimate business arrangements such as empowerment schemes.