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Foreign Employers with Offices in South Africa

Foreign Employers with Offices in South Africa

Dale  Holloway
2021/04/06
Foreign Employers with Offices in South Africa
Foreign Employers with Offices in South Africa subject to South African Labour Laws

Herewith an important summary for our clients who are based in a foreign country, but employ staff / teams who execute their duties / functions within the borders of South Africa (SA).

When a foreign embassy is situated in South Africa it is in fact, according to law, based on foreign soil. A South African working at a South Africa based foreign embassy would therefore be subject to the labour law of that foreign country. However, a branch of a foreign company based in or operating out of South Africa is not considered to be on foreign soil and is therefore subject to South African law. Our labour laws strongly protect South African employees, and anybody employed legally in South Africa.

Furthermore, our courts do not easily give up jurisdiction to foreign courts. Take note, in the case of August Lapple (SA) vs Jarrett & others (2003, 12 BLLR 1194) , the dismissed employee had been the managing director * of the South African subsidiary of said German company. He referred his dismissal to the Bargaining Council for the Motor Industry in South Africa.

However, the employer (in SA) disputed the council's jurisdiction as it claimed that it had been the company's head office in Germany that had dismissed the employee. The arbitrator ruled that the bargaining council did indeed have jurisdiction. The employer therefore referred the jurisdiction ruling on review to the Labour Court which found that:

  • Although the employee had been employed by the German parent
  • company, the employee had also been employed and was working for and
  • in support of the South African subsidiary,
  • The bargaining council did have jurisdiction to hear the matter,
  • The employer was to pay the employee's legal costs.

Even South Africans working outside South Africa can, in certain cases refer labour disputes to the South African dispute resolution system. For example, in the case of Kleinhans vs Parmalat SA (Pty) Ltd. (2000, 9 BLLR 879), the employee was retrenched after having worked in Mozambique. The Labour Court decided that:

  • An agreement by the parties as to where jurisdiction lies does not bind the Court,
  • South African law was “impliedly” incorporated into in the employment contract and this gave the South African courts jurisdiction,
  • The contract was concluded and cancelled in South Africa,
  • The employee's salary was paid in South Africa and was paid in Rands,
  • The termination letter was written by the employer who considered the Mozambican operation as its own,
  • The Court therefore did have jurisdiction to hear the case.

In the case of Parry vs Astral Operations Ltd. (2005, 10 BLLR 989), the employee was retrenched after having worked in the position of general manager of the employer's operations in Malawi. The Labour Court decided that:

  • Both parties were based in South Africa,
  • The parties had agreed that the employer's (South African) policies would apply,
  • The employer had not approved the contents of Malawian law,
  • Both parties had, when signing the contract, been under the impression that they were concluding it under South African law,
  • The Labour Court therefore had jurisdiction,
  • The employee was entitled to damages for breach of contract, balance of relocation costs, share options, accrued profit shares, salary, notice pay, severance pay and compensation equal to 12 months' remuneration. In addition, the employer had to pay part of the employee's legal costs.

In the light of these cases, employers should not assume all that they can hide behind foreign incorporation or foreign workplaces. In other words, they should not assume that they need not follow South African law merely because foreign elements exist in the working situation and or contracting thereof. Instead, employers should first obtain expert labour law advice from their trusted advisor/s before terminating contracts or taking any action of any nature as governed by labour law against employees regardless of where the employee works or where the employer is based.

If you have any labour law queries or requirements then please contact Crowe DNA for assistance. Our digital Employee Relations Guide (ERG) platform covers 36 countries across Africa enabling our team of experts to advise across borders.

*Summarized and referenced by Crowe DNA with associate legal experts & partners.# 011 / 2020/21 Dale Holloway Crowe DNA (Pty) Ltd Somerset West, South Africa