Employer found to be forcing member to sign away benefit under duress

Naheem Essop

The Office of the Pension Funds Adjudicator has blocked an attempt by an employer to be paid a retirement benefit after the member had signed an acknowledgement of debt - which was found to have been done under duress - for committing fraud in the workplace.

Naheem Essop, the Deputy Pension Funds Adjudicator, set aside the decision by the Fundsatwork Umbrella Provident Fund to withhold the benefit of the member to pay to the employer, FPG Foods (Pty) Ltd in the amount of R359 826.12.

In terms of the Pension Funds Act, an employer can claim a deduction from a member’s benefit if the member has acknowledged their liability to the employer in writing and that liability relates to theft, dishonesty, fraud or misconduct by the member perpetrated against the employer.

During her employment, the complainant was responsible for authorising payments to suppliers as part of her duties. The complainant committed fraud against the employer by inflating supplier invoices and then benefitting from the fraud by receiving bribes from the suppliers.

The employer conducted an investigation and uncovered the fraud. The complainant signed two acknowledgments of debt in favour of the employer in terms of which the employer would be authorised to claim a deduction from the complainant’s benefit held with the fund. The first acknowledgment of debt was signed on 4 May 2023 for the amount of R130 000 and the second acknowledgement was signed on 13 June 2023 for R359 826.12.

The dispute centred around the validity of the second acknowledgment of debt and the circumstances that gave rise to it, as occurred during a meeting on 13 June 2023 attended by the employer and its representative, and the complainant, and which meeting was recorded by the complainant.

The complainant alleged that during the meeting, the employer’s representative threatened her into signing away her entire provident fund. She submitted that she was forced to do so under duress. She alleged that the representative impersonated a police officer and said that he would handcuff her in front of everyone if she did not sign.

The complainant admitted to receiving kickbacks amounting to R70 000 from the employer’s vendors. She submitted that the R70 000 plus the balance of a loan amount of R60 000 equalled R130 000. She disputed that she received R359 826.12 and her liability in respect of that amount.

The employer stated that on 4 May 2023, it requested the complainant to sign an
acknowledgment of debt that would allow it to deduct R130 000 from her retirement savings benefit to recover its losses caused by fraud on the part of the complainant. Based on the fact that the extent of the fraud was significantly more than originally calculated, the employer engaged with the complainant to arrange an in-person meeting to decide how it would recover its losses. At the time of the meeting, the latest fund value was R335 290.25.

The employer denied that its representative engaged the complainant in a threatening manner and submitted that the complainant voluntarily indicated that that she wanted this matter to end and asked how she could stop the legal proceedings.

Accordingly, the employer alleged that an AOD was drafted and explained to the complainant on more than one occasion during the meeting. The employer submitted that the complainant acknowledged that she defrauded the employer to the extent of R335 390.25 and was prepared to instruct the fund to pay the retirement savings benefit in terms of section 37D.

Essop said having listened to the recording of the meeting, it was clear that there were three sides to the story and neither party had accurately described what happened during the meeting. For example, there was neither a hostage situation, as alleged by the complainant, nor were the exchanges during the meeting polite, as alleged by the employer.

“At the meeting on 13 June 2023, the complainant was threatened with criminal prosecution and it was indicated that the amount of R130 000 (presumably in relation to the first acknowledgment of debt) was not enough to make up for the loss suffered by the employer.

“She was told that she has none of the money left that she had stolen but the employer’s representative informed her that he had a solution for her. It appears that she was then given a document to sign after which the employer undertook to get rid of the evidence and that she would be able to walk out and never hear from the employer again.

“She was told that if she did not sign, then the employer would approach the SAPS. The offer was made to the complainant by the employer to buy immunity from prosecution with the proceeds of her withdrawal benefit,” said Essop.

He said the issue of whether the threat of criminal prosecution constitutes a form of duress has come before the courts. In Arend and Another v Astra Furnishers (Pty) Ltd [1974] AII SA 522 (C), the court held that “….a contract induced by the threat of criminal prosecution is unenforceable on the ground of duress and, in certain instances, also on the ground that it involves the compounding of a crime and the stifling of a prosecution”.

Essop said: “It is clear that the complainant did not sign the acknowledgment of debt out of her own free will. She was induced to do so under the threat of criminal prosecution wherein it was made clear to her that if she did not sign, she would be put into handcuffs and taken to the Commercial Crimes Unit. Further, that it if she did sign, the employer would make everything go away.”

Essop found that the complainant’s fraudulent conduct is an offence under the Prevention and Combating of Corrupt Activities Act, 2004 (“PRECCA”). From the employer’s submission, it only decided to report the matter to the SAPS after the complainant had a change of heart about the second acknowledgment of debt. The employer clearly considered itself to be in a position to decide whether or not to report the matter and such position was contrary to the provisions of section 34 of PRECCA which places a positive duty on the employer to report the matter to the DPCI, said Essop. Thus, he found that the deal struck at the meeting on 13 June 2023 was unlawful and consequently contra bonos mores. The Adjudicator cannot uphold an agreement that is unlawful.