Company under fire for withholding ex-worker’s pension

Published May 21, 2024


The conduct of transport company, FedEx South Africa came under the spotlight with the Deputy Pension Funds Adjudicator in a case involving the withholding of payment of an employee’s withdrawal benefit.

Fedex Express South Africa Retirement Fund was found to have not afforded the member an opportunity to make representations as to why the benefit should not be withheld from him.

Legal counsel for the employee, Naheem Essop said Fedex Express South Africa Retirement Fund had acted in breach of its fiduciary duties when it failed to comply with basic procedural requirements before exercising its discretion to withhold payment.

According to submissions made to the adjudicator, the employer lodged criminal charges against the employee and others as a result of it suffering financial loss of approximately R4 million. Two cases of fraud were opened.

“The complainant had been employed by Fedex Express South Africa (Pty) Ltd from 3 April 2007 10 October 2022. On 28 October 2022, the fund took a decision to withhold the withdrawal benefit of about R358 317.53 at the instance of the employer. The complainant submitted that he was arrested as a result of allegations levelled against him by the employer. He stated the case against him has been finalised and that he was, therefore, entitled to his withdrawal benefit. The fund’s administrator submitted a response on behalf of the fund, the employer and itself. It stated that the complainant was a member until his resignation following internal investigations into allegations of fraud against him and other employees,” details of the determination read.

Further submissions read that the fund’s administrator stated that the employee’s employment duties included clearing consignment that came into the country from abroad.

“It stated that for at least a year he misrepresented information pertaining to imported goods and deviated from the correct method of framing a shipment by using incorrect tariff codes and customs values. It stated that this conduct resulted in the underpayment of duties and VAT to the South African Revenue Service (“Customs”) and the incorrect commodity codes being declared to Customs.

“The fund’s administrator stated that as a result of the fraudulent conduct, the employer declared incorrect revenue to Customs from its operations, which resulted in loss of revenue to the authorities, and the employer was subsequently fined and penalised for its disclosures.”

Essop said in matters concerning the withholding of benefits, funds are required to act in a manner whereby its impartiality cannot be doubted. This is because the fund owes a fiduciary duty towards both the member and the employer.

“It is, therefore, of concern that the fund’s administrator submits a response on behalf of both the fund and the employer. The immediate perception created is that the fund’s impartiality has been compromised.

Such perception is exacerbated when the fund decides to withhold in the absence of evidence submitted to it in support of the strength of the employer’s case against its member,” said Essop.

In its decision, the adjudicator said: “It is clear that the fund deprived itself of considering the employee’s response by not allowing him an opportunity to make representations to it before the decision to withhold was taken.

The conduct of the board is a dereliction of its statutory and fiduciary duties to direct, control and oversee the operations of a fund in accordance with the applicable laws and the rules of the fund and to act with due care, diligence and good faith.”

Attempts to obtain comment from FedEx were unsuccessful.

Cape Times