The South African department of Labour has expressed its intention to name and shame employers who practice fraudulent actitivies. This comes after an employee of Fleeceytex Knitting Company based in Alberton, Johannesburg, made an enquiry into the validity of an exemption granted to the company in terms of the Minimum Wage Act.
In a media release on 31 January, the DOL stated that: “The office of the Director General, Thobile Lamati received an e-mail on the 19th January 2019 from an employee at Fleeceytex Knitting Company based in Alberton, Johannesburg. The employee wanted to confirm the authenticity of an exemption notice displayed at the workplace. The employee indicated that the exemption notice displayed showed a rate of R16.00 per hour effective from the 17th January 2019 which the employees were subsequently paid on the 18th January 2019.”
After investigation the DOL opened a case of fraud with the SAPS.
The company admitted that the memo circulated to workers and their payroll department was incorrectly reflecting the amount granted in terms of the exemption. The memo and subsequent wages was indicating the exemption was for R16 per hour. The DOL granted an exemption for R18 per hour, R2 more.
The company further, after a meeting with the DOL on 22 January, said it is investigating the matter and will report to the DOL on the findings. The shortfall was corrected since it came to light.
The DOL however has reason to believe that this was a smoke-screen after the fact, and maintain its position of formal prosecution.
However, fraud is the intentional falsifying of information in order to cause financial loss to the defrauded party for personal gain. The DOL will have to prove beyond reasonable doubt that the employer did not make “an honest mistake” and intentionally lied to employees in order to benefit financially from the fraudulent information. The DOL could open itself up to a defamation suit if the case does not go their way.
Section 5 of the NMW Regulations provides that an exemption notice may be withdrawn if:
- The employer has provided false or incorrect information that has led to the granting in its application for an exemption; or
- The employer is not complying with the exemption notice; or
- The employer’s financial position has improved to the extent that the employer is able to pay the NMW
- There are other justifiable grounds for withdrawing the exemption notice.
The DOL did grant the exemption, which implies it believed the employer’s submission. The dispute is not about the application itself, but the implementation of the exemption after it was granted. If it was in fact a mere “typo” in the memo, it would not amount to fraud. The NMWA only allows for the withdrawal of exemptions and prosecution for non-compliance. If fraud must be proven, it would be up to the employees to lay a charge against the employer as they were defrauded.
The DOL said, “Considering the facts presented to us by the complainant and the employer, we have come to the conclusion that this is a case of fraud and addressing it. The Department of Labour is intent on naming and shaming employers who are engaging in fraudulent activities.”
It is however unclear what hourly rate the employer mentioned in the application for exemption. It is possible that it applied for R16 and thought to ignore the DOL’s instruction of R18. This remains to be proven.