Terminating Employment –Divorce of a kind

labour-guideBy Judith Griessel, Griessel Consulting

No one wants to think about divorce when wedding bells are ringing and everyone is hopeful that the love will last forever. Unfortunately, this is too often not the case and painful separation and a legal dissolution of the marriage is the result. A well-drafted antenuptial- or similar contract can prevent many headaches (and unnecessary litigation) at a time when the relationship has become strained and adversarial. The same can be said of the employment contract in the South African context.

Just as divorce cannot happen overnight and “at will”, so too are there legal processes to be followed and time periods to observe when termination of employment is on the cards. There may be fighting and bad-mouthing, and disputes about money or timing………. Whether the reason for termination of employment is performance, restructuring, misconduct, retirement, resignation or something else, the potential for conflict is a certainty.

Managers, like most people, try to avoid or postpone conflict as long as possible – until inevitably there are exasperated calls from frustrated employers who have reached breaking point and need their staff issues resolved yesterday! Surrendering to pressure and making over-hasty decisions with the view that they will deal with any fall-out later, can however backfire badly.

In two recent Labour Appeal Court cases, unresolved poor performance issues with employees have resulted in termination of their employment by the respective employers and led to very different challenges by said employees.

  • In ARB Electrical Wholesalers (Pty) Ltd v Hibbert [2015] ZALAC (21 August 2015) the company’s pension fund provided for retirement at age 60, with the option of extending it to 65. There was no contractually agreed retirement age and Mr. Hibbert did not belong to the company’s pension fund. He had been allowed to work beyond 60, until his performance became unsatisfactory. He was given notice long in advance that he will be required to retire upon reaching age 64, even though he insisted that he would only retire at 65. When he was duly asked to leave at the given time, he challenged this on two grounds: automatically unfair dismissal based on age under the LRA; and unfair discrimination in terms of the Employment Equity Act. The employer’s argument was that, given the employee’s age and seniority in the company, they had considered retirement to be a more dignified exit for the employee than having to leave on the basis of poor performance. Although the court accepted the employer’s bona fides, this defence made it clear that the employee was in fact dismissed because of his age – and therefore that his claim should succeed, as he had not reached the applicable retirement age. The Court also confirmed that both of these separate claims can be brought simultaneously against the employer. Hypothetically, an employee could be awarded reinstatement for automatically unfair dismissal and also be awarded compensation for unfair discrimination in terms of the EE Act for violation of his right to equality and dignity.

So, what should the employer have done? Said judge Waglay at par 37: “In taking this route, the Appellant erred because our labour laws are very clear: the employer must deal with what is the real issue between it and its staff and not, no matter how honourable the intention may be, use another untrue reason to end the employment relationship”.

  • In Somi v Old Mutual Africa Holdings (Pty) Ltd [2015] ZALCJHB 279 (3 July 2015), the employer was also dissatisfied with the employee’s performance and had started a counselling process – including a number of attempts to reach a mutual separation agreement. An incapacity (“loss of confidence”) enquiry was eventually started but not completed and the employee was given notice of dismissal with immediate effect.

In this case, Ms Somi chose not to rely on her remedies in terms of the LRA, but instead instituted a civil claim against the employer for breach of contract in that they did not pay her contractual notice; and that she was entitled to a (full) incapacity hearing in terms of the company’s policy (which had been incorporated into her employment contract). She did not ask for damages, but claimed specific performance – i.e. for the court to order the employer to allow her to resume her employment.

As can be expected, the employer raised a number of defences, amongst which the argument that Ms Somi should have used her remedy in terms of the LRA for unfair dismissal. The court disagreed and confirmed that the Labour Court had the jurisdiction to determine a contractual claim in terms of section 77(3) of the BCEA. Also that “It is well-established in law that an employee whose contract of employment has been unlawfully terminated by the employer, has an election to either accept the breach of contract and sue for damages or enforce the contract.” Whether the court would grant specific performance, will depend on the circumstances of the case, the trust relationship between the parties; etc.

Ms Somi’s claim was successful and she could resume her employment, subject to her contract of employment. This left the employer back at square one in terms of starting the incapacity process again or finding another legitimate (lawful) reason for terminating her employment.

Returning then to the marriage/divorce analogy: the better prepared you are before committing to the relationship, the better off you’ll be in the event of a separation.

Lessons for employers from these two cases:

  • The employment relationship is governed by labour law as well as contractual / common law.  Complying with ‘fairness’ in terms of labour law, may mean nothing if the employee chooses to stand on his/her contractual rights to secure reinstatement or damages. Where the interests of both parties are considered in determining the fairness of a dismissal, the approach for determining a contractual claim is far more legalistic and precise.
  • Therefore – make sure that your employment contracts are properly drafted / vetted by a legal expert and that the various risks are adequately projected and addressed.
  • The practice to sweepingly incorporate whole policies into employment contracts as a matter of course is dangerous, as these would then become terms and conditions of employment and grant additional contractual rights to the employee. Integrating your employment contracts and policies without increasing your risk, can be achieved by careful drafting.

Lastly – when a problem or potential conflict situation is identified, deal with it sooner rather than later. Most issues require a process for it to be resolved one way or another and it is best to start this before the situation becomes desperate.

For more information, please contact Judith at judith@griesselconsulting.co.za

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