The Labour Court reviewed and set aside the award because the reason for the alleged mass dismissals was based on operational requirements and the CCMA lacked the jurisdiction to determine the dispute.  An automatic termination clause in a contract that prevents employees from exercising their LRA rights is unenforceable and will be treated as a ‘dismissal’.  After 10 years Unilever cancelled a contract with Pecton, which provided persons to work at Unilever and whose contracts provided that in such circumstances their employment would end automatically.  Such termination was regarded as unlawful and invalid in certain circumstances.  But given that the reason for dismissal could only be based on operational requirements any dispute had to be adjudicated by the Labour Court.

Pecton Outsourcing Solutions CC v Pillemer NO (D1256/13) [2015] ZALCD 66; [2015] JOL 34585 (LC) (12 November 2015) per B Whitcher J.

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[36]      I was referred to Twoline Trading 413 (Pty) Ltd t/a Skosana Contract Labour v Abram Mongatane and Others [ [2014] JOL 31668 (LC) at para 58] where Snyman AJ, (coincidentally also the attorney for the applicant in this matter) found that:

‘where a client of the temporary employment service unilaterally and even without reason terminates the service agreement with the temporary employment service and/or demands the removal of employee(s) of the temporary employment service from its site and/or excludes such employees from its site, this cannot in itself and on its own constitute a deemed act of dismissal by the temporary employment service of its employees.  It is what the temporary employment service itself does or does not do, about this, that could constitute an act of dismissal.’

[37]      Snyman, AJ further held:

‘…..  It is often the case that in the temporary employment service environment, the employment contract of the employees would provide that the employment of the employee of the temporary employment service would automatically terminate upon the termination of the service agreement between the client and the temporary employment service or where the employee is removed from the client’s site.  What this means is that the occurrence of a particular event brings about the automatic termination of the employment of the employee of the temporary employment service.  ….’

[38]      He concluded:

‘….  in the case where the whole service agreement between the client and the temporary employment service is terminated or is completed or otherwise comes to an end, then it is not an issue of individual employees being dealt with whilst the underlying service agreement still continues to exist.  In such a case, the exercise by a client of a contractual right to terminate the whole service agreement is an event that could legitimately constitute an event substantiating automatic termination of a fixed-term contract.  It is in my view exactly the same situation as the completion of a project or contract.  In such a case, the termination of the entire underlying service agreement between the client and the temporary employment service would automatically terminate the contract of employment of the employees of the temporary employment service along with it, provided the employment contracts of the employees make specific provision for this and properly define this.’

[39]      In its heads of argument, the applicant provided an example of the application of the reasoning in Twoline Trading:

“if the entire service contract between the employer and the customer is cancelled by the customer per se, this event would not constitute a dismissal but an automatic termination, but where the customer demands from the employer that a particular employee be removed from its site or the contract and this demand is then considered by the employer to be the termination event, this then would be a dismissal.”

[40]      The applicant further argued that a pertinent example of a circumstance of employer conduct forming the basis of a purported automatic termination (and thus dismissal) is where the employer removes an employee as a director and the automatic termination event is defined as the employee ceasing to be a director.  In such a case, it is clear action by the employer that gives rise to the event, in other words a direct nexus between the conduct of the employer itself and the occurrence of the event exists.  Examples of this can be found in the judgments of SA Post Office Ltd v Mampeule and Chillibush Communications (Pty) Ltd v Johnston NO and Others.”

[41]      The applicant therefore argues that the present matter is not one of the instances of where the termination event of the fixed term contract would constitute a dismissal.  The termination of the respondents’ contracts was not conduct relating to or directed at a particular employee (namely the respondents) or an act of the employer.  It flowed from the loss of a service agreement between the applicant as employer and its customer, Unilever, as a whole.

[42]      This line of reasoning does not persuade.  First, it strikes me as an artificial and arbitrary distinction between whether the security of employment of one or all employees is adversely affected by the will of a client.  In this case, the client’s will over the employees was just as unilaterally imposed as in Mahlamu even though its aim was less pointed.  Second, as mentioned above, whether a termination of an employment contract is an act initiated by the employer depends on a prior legal determination of whether the automatic termination clause should or should not be enforced.  This is perfectly in line with our legal regimen in which contracts of employment are enforced unless a statute or collective agreement provides otherwise.