In the matter of Sekhute and Others v Ekurhuleni Housing Company SOC (J1862/17)  ZALCJHB 318, the employees challenged the lawfulness of the employer’s deduction from their remuneration of overpayments made to them in error.
The employees’ posts were regraded and they received commensurate increases in their remuneration. However, when paying the increases, the employer erroneously also added the increased contributions to the pension fund and medical aid scheme to the employees’ remuneration and paid this over to the employees. These amounts should have been deducted from their remuneration and paid over to the pension fund and medical aid on the employees’ behalf. This resulted in some of the employees enjoying an increase of almost 40% when they were only entitled to an increase of 18%. The employer informed the employees of the overpayments and requested that the employees complete a salary deduction form wherein they agreed to the deduction of the overpayments from their future remuneration over a period of time. The employees refused to agree to the deductions. When the employer proceeded to make the deductions the employees launched an urgent application to prevent the employer from making future deductions and reversing deductions already made. The employees alleged that the deductions were unlawful as they were contrary to clause 13.2 of the employer’s HR policy which states:
“No deduction, unless in the form of a legal instruction such as a collective agreement, court order or arbitration award, will be made from an employee’s salary without the authority of the employee...”
The Labour Court accepted that the employer had made a genuine overpayment in error. As a result, the employer could cease making the overpayment in future. The question which the court then had to determine was whether the employer was entitled to recover the overpayments by way of deduction from the employees’ remuneration, in the absence of employees’ consent to the deductions. The employer relied on s34(5) of the Basic Conditions of Employment Act, No 75 of 1997 (BCEA) as the basis for the deduction and the lawfulness thereof.
The Labour Court considered s34 of the BCEA and held that s34(1) identifies two classes of deductions that can be made by an employer from an employee’s remuneration. The first is a deduction which may be made in respect of an acknowledged debt and which would require the employee’s consent in writing. The second is a deduction which does not require the employee’s written consent. The deduction may, for example, be authorised by law or a court order. The court then considered s34(5) of the BCEA which states:
(5) An employer may not require or permit an employee to:
(a) repay any remuneration except for overpayments resulting from an error in calculating the employee’s remuneration…”
The Labour Court found that the repayment of overpaid remuneration is a unique category of money that is lawfully recoverable by an employer from an employee. It held that s34(5) was intended to permit a deduction for amounts due to an employer and the employees’ consent is not required. The legislature’s intention with this section was to specifically authorise deductions for overpayment of remuneration. Insofar as the employer’s policy was concerned and the employees’ allegation that the policy prohibited the deduction given that it was not made in terms of a “legal instruction”, the court found that s34(5) is a provision of a law. In the circumstances, the policy did not prohibit the deduction.
This judgment is of significant assistance to employers that have made overpayments to employees in error. In terms of s34(5) of the BCEA, the employer is permitted to deduct the overpayment from the employees’ remuneration, without the employees’ consent.