BCEA s74(2) changes: When the proposed changes to section 74 of the Basic Conditions of Employment Act become law arbitrators and Labour Court judges will have the jurisdiction and power to determine claims for reasonable notice pay. At present they may only do so if the ‘claim is referred in compliance with section 191 of the Labour Relations Act, 1995’ and employees never do so. It is assumed that one of the reasons for not doing so is the fear that by claiming notice pay it may suggest that there was a fair reason to terminate their employment. This is understandable given the present reluctance to recognise that there are always two separate issues at stake in every termination.
It is suggested the arbitrators and Labour Court judges will have to adopt similar principles to those adopted by judges dealing with contested divorces. Whilst ‘fault’ is no longer a requirement for a divorce it is relevant when deciding who gets what after the divorce.
Jeremy Gauntlett SC wisely said the words ‘diffidence’ and ‘deference’ are different. The same can be said about the words ‘requirement’ and ‘relevance’. Proof of fault is not a requirement for a fair reason to terminate employment, although clearly any degree of fault could be relevant. Proper notice to terminate is a requirement for a lawful termination, unless the employer proves that the reason for termination was the employee’s serious or gross fault.
It is suggested that it is incorrect to try and place all terminations into one of three neat categories, as suggested by the Labour Relations Act, 1995. The correct approach is to accept that there can be an overlap between categories. A recent Labour Court judge adopted ‘ruthless German logic’ and held that whilst there appeared to be a very clear case of gross misconduct the employer should not have argued that the reason was based on operational requirements. Martin Brassey SC stated years ago that all that was required was a rational commercial reason and that in many instances there was an overlap. See also: Severance pay & operational requirements – amend the BCEA.
Assuming that the reason is alleged to be related to conduct or capacity it should only be valid and fair if employers prove the genuine loss of –
- trust as a result of the conduct of the employee (elements of wilfulness);
- confidence when the reason is related to the employee’s capacity (usually poor performance and absence of any intent).
Split every termination of employment into these two separate issues of lawfulness and fairness and it is possible to achieve the correct balance of ‘justice with fairness’ between the parties. The rights of the unemployed to enter the job market are also recognised by such an approach.
It is suggested that arbitrators and judges will in future be required to split each case into at least two separate enquiries:
- was the termination of employment fair (fault not required)?
- even if it was fair, did the employee deserve to forfeit the right to reasonable notice (serious/gross fault required) ?
In other words employers will always be required to pay reasonable notice unless they are able to prove not only fairness but also lawfulness. It is hoped that the proposed amendment will force employers to consider both these matters every time they terminate employment. If employers do so it is expected that the number of referrals to the CCMA will decline.
At present the right to severance pay is solely dependent on the employer’s reason for termination (based on operational requirements). It has been argued earlier that the BCEA needs to be further amended to treat the right to some form of severance benefit as a right just like notice. It should only be forfeited upon proof of serious/gross fault. See Severance pay & operational requirements – amend the BCEA.
Employment and common law
Either party may notify the other of the termination of employment without providing any reason or following any prior procedure. To be lawful the notice must be reasonable (usually corresponds with the payment period but could be longer). Apart from a few exceptions (such as impossibility of performance and death) a summary (without notice) cancellation will only be lawful if the aggrieved party proves that the other party materially breached the contract. It is regarded as a repudiation of the contract entitling the aggrieved party to cancel or rescind it without notice.
Recently acting justice Cheadle in the Labour Court (Lottering v Stellenbosch Municipality) discussed the common law relating to resignation and termination of employment and held that
“Termination on notice involves two discreet elements: the notification of termination (the act of resignation) and the giving of notice”. The act of termination is a unilateral act and even where it is in breach of contract “that breach does not mean that that breach should reach backwards and contaminate the act of termination”.
Fault only becomes relevant if the one party alleges that the summary termination was unlawful. Assume the employer cancelled the contract and the employee institutes legal action alleging wrongful termination. The onus will be on the employer to prove on a balance of probabilities that the employee repudiated or materially breached the contract entitling the employer to cancel it without notice.
Over the last few years a reciprocal duty of ‘trust and confidence’ in the employment relationship has been recognised. It has been held that there are repudiations in the narrow and wide sense.
“In every contract of employment there is an implied term that the employer will not, without reasonable and probable cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between the parties. This implied term may be breached without the intention to repudiate the contract. It is sufficient if the effect of the employer’s conduct as a whole, judged reasonably and sensibly, is such that the employee cannot be expected to put up with it”.
BCEA (Basic Conditions of Employment Act)
The BCEA provides a measure of job security and certainty to employees by providing minimum periods of notice (in weeks not months). But it also impliedly accepts the common law position that either party may terminate the contract summarily for a ‘cause recognised by law’ as sufficient. In other words a material breach is regarded as sufficient reason for a party to terminate without notice.
LRA (Labour Relations Act)
This is the only statute requiring employers to terminate fairly in addition to doing so lawfully. A fair procedure becomes essential in the sense that all employees have a right to be heard before the termination decision is taken. See also: LC: Discard ‘criminal justice’ model – welcome support from Steenkamp J.
The LRA does not require any fault before an employer can terminate the contract fairly. It simply provides that a fair reason must relate to conduct or capacity (of the employee) or be based on operational requirements (of the business).
In effect the LRA assumes that an employer had a fair reason if
- the employer terminated lawfully;
- there was a valid reason (because of the link to the employee or the business);
- as a consequence of the conduct or capacity (usually poor performance) the employer proves that the relationship has become intolerable or that the necessary requirement of trust and confidence has been breached;
- when the reason is based on operational requirements the employer acted in good faith and in the best interests of all stakeholders in the business.
Holistic or win-win’ approach
To appreciate the true nature of ‘fault’ it is important to apply not only the statutes but also the common law. This will achieve a just and equitable balance between the rights of employers and employees.
To sum up:
- employers are not required to prove any ‘fault’ when proving that termination was for a fair reason.
- employees only forfeit their right to notice if there was serious or gross fault (material breach of contract).
Looked at in another way the argument should become clearer:
#1 Fair reason based on proper operational requirements
- Employers allowed to terminate (common law and LRA).
- retain right to reasonable notice pay (common law and BCEA)
- acquire statutory right to severance pay (BCEA and presumably retain rights to other benefits).
#2 Fair reason related to serious/gross misconduct (fundamental breach under common law such as theft, unprovoked assault, gross insubordination).
- Employers allowed to terminate (common law and LRA).
- Employees forfeit right to notice pay (common law and BCEA).
- Employees do not acquire any right to any severance benefits (BCEA).
#3 Fair reason falling into a grey area (between the above extremes)
- Employers allowed to terminate if lawful, valid and fair (see earlier explanation).
- Employees retain right to notice pay (common law and BCEA, as not a termination for a “cause recognised by law” as sufficient).
- Employees should retain some ‘severance benefits’ (BCEA needs to be amended to ensure the right is not dependent on the employer’s reason for the termination).
Old zero-sum game relating to divorce changed in 1979
Generally speaking until 1979 in South Africa there was a ‘fault’ system. Judges could only grant a divorce order if there was proof of fault in the form of desertion or adultery and then the ‘guilty’ party forfeited all the benefits of the marriage.
As from 1979 South Africa adopted a ‘no-fault’ divorce law where only proof of irretrievable break-down of the marriage was required to obtain a divorce order. A residual ‘fault’ element remains but only in relation to child custody and property settlements.
In other words fault was no longer a requirement and only became relevant when considering the consequences of the divorce order.
In the same year (1979) the Wiehahn Commission reported to the government and the concept of an ‘unfair labour practice’ was introduced in South Africa by an amendment to the statute dealing with employment and industrial relations.
Ironically this resulted in a false interpretation of the law by the industrial court in that employers had to prove ‘fault’ on the part of employees before allowing employers to terminate employment. If ‘fault’ was proved the employee effectively forfeited all the benefits in the form of notice pay and severance benefits – an ‘all or nothing’ approach.
See also the earlier blog posts: