When travel benefits end

By Ephraim Lehutso and Ciara Pillay

The Legal Ruling on SARS’s Travel Allowance Policy

In a significant recent judgment, the Labour Court provided important clarity on the removal of an employment benefit in the case Public Servants Association of South Africa and 490 Others v The Commission for Conciliation, Mediation and Arbitration. The case revolved around the removal of a travel allowance policy by the South African Revenue Service (SARS), which impacted many employees.

Background: The Journey Begins

In 2006, the Public Servants Association of South Africa (PSA) and SARS reached a collective agreement that provided a monthly travel allowance for employees who traveled extensively for work, covering distances up to 500 km. This agreement was amended in 2008 to clarify that the travel allowance would be excluded from the total remuneration of eligible employees.

However, by 2014, SARS began experiencing difficulties with the travel allowance, prompting discussions with the trade union. In 2015, SARS officially terminated the 2006 agreement and introduced a new Travel Allowance Policy for employees who travelled for work. In 2018, SARS decided to completely withdraw the policy, leading to consultations with the employees and their union.

SARS’s Reasons for Hitting the Brakes on the Travel Allowance

SARS provided six key reasons for the removal of the travel allowance policy:

1. Many employees receiving the allowance were not traveling the required 500 km distance for business purposes, which was the basis of the benefit.
2. Paying the allowance to employees who weren’t traveling constituted wasteful expenditure, as per the Public Finance Management Act (PFMA).
3. The policy created unfair pay disparities between employees who travelled and those who didn’t, despite similar travel needs.
4. Delays in submitting income tax returns deprived SARS of tax revenue and increased its debt burden.
5. The removal of the policy would help ensure compliance with tax laws regarding travel allowances.
6. The policy’s termination would save SARS R33 million annually, as many employees were receiving allowances without significant business travel.

Detour: CCMA Proceedings

In March 2021, PSA filed a complaint with the CCMA, alleging that SARS’s removal of the travel allowance policy amounted to an unfair labour practice. However, the CCMA ruled in favour of SARS, finding that their actions were not unfair.

Unhappy with this outcome, PSA sought a review of the CCMA’s decision, calling on the Labour Court to set aside the arbitration award and rule in their favour.

The Road to Review: PSA’s Grounds of Review

PSA’s grounds for review were based on several arguments:

1. The Commissioner’s decision was unreasonable and not one that a reasonable decision-maker could have made.
2. The Commissioner erred in law by finding that the travel allowance fell away with the termination of the collective agreement, asserting that the allowance should have continued as part of the employment contracts.
3. The removal of the allowance constituted a unilateral change to the employment contracts, amounting to unfair labour practice.
4. The removal was unfair as a majority (60%) of employees were using the allowance, while only 40% were not.

Fork in the Road: The Court’s Ruling

PSA argued that the 2006 collective agreement had varied the employees’ contracts, and even after the agreement’s termination, the travel allowance should continue to exist within the employment contracts. However, the court rejected this argument, noting that if this were the case, it would render the relevant section of the Labour Relations Act redundant. The court found that it was illogical for terms of a collective agreement to remain in force once either party had chosen to end it.

The court further examined whether the removal of the travel allowance amounted to an unfair labour practice. It was established that SARS had clearly communicated its reasons for wishing to withdraw the travel allowance policy, providing employees with the opportunity to respond and suggest alternatives. Following consultations, SARS did not immediately remove the policy but instead opted for a gradual phase-out, reducing the allowance by 25% annually over four years.

Importantly, even after the removal of the allowance, employees were still entitled to claim for business travel expenses based on the Department of Transport’s tariff per kilometre travelled.

End of the Road: Conclusion

Whilst the facts of the dispute in the SARS matter are distinct from the facts of the Imperial Cargo Solutions v SATAWU and Others (JA63/2016) [2017] ZALAC 47; (2017) 38 ILJ 2479 (LAC); [2017] 12 BLLR 1189 (LAC) (1 August 2017), the Imperial dispute concerned the cancellation of a Collective Agreement which introduced additional tasks for employees and payment for such tasks, and the expectation of the continuation of such tasks and refusal by the employer to remunerate employees post the cancellation of the Collective Agreement, the introduction of the travel allowance benefit through the conclusion of the Collective Agreement in the SARS matter introduced a tool of trade benefit and not additional duties in that, in the absence of the travel allowance benefit (tool of trade), the employees would still be required to travel to execute their duties.

Of interest and to demonstrate that SARS did not act improperly, SARS did not only cancel the Collective Agreement, it replaced the tool of trade with a rather more accountable method of claiming the benefit, and the implementation of the new travel allowance policy was not the subject of the litigation nor was there any proceedings wherein the Applicants’ prayed for same to be placed in abeyance pending the determination of the unfair labour practice before the CCMA or the review proceedings before the court.

In terms of the new travel allowance policy, the applicants were required to claim the travel allowance per distance travelled instead of SARS paying travel allowance as lumpsum into the applicants’ accounts. It is upon this basis that the authors reasonably believe the court, correctly and aptly pronounced upon the dispute and that the Applicants’ claim was axiomatically a result of avariciousness.