The Basic Conditions of Employment Act 75 of 1997 (BCEA) needs amending to change the basis on which employees claim severance benefits.   Only fault, in the sense of gross or serious misconduct, should deprive an employee of the right to notice pay and severance benefits, irrespective of an employer’s right to terminate employment fairly.   A right to severance pay cannot depend on the employer’s reason for termination.

At present the right only accrues if the employer provides operational requirements as the reason – see section 41 of the BCEA.   But if the Labour Appeal Court (LAC) treats a reason related to gross misconduct as being part of risk management and based on operational requirements will employees not try to claim a right to severance pay in terms of section 41 of the BCEA?

Clearly it was never intended that an employee could claim severance pay in such circumstances but the law needs to be amended to clarify the situation.   The simple solution is not to make the right dependent on the employer’s reason for termination.   Forfeiture of the right must depend on the employee’s fault; if it is gross or serious (“cause recognised by law”) the employee should forfeit not only the right to any notice pay but also any right to any severance benefit.

In other words it is submitted that employees should only forfeit rights to notice and severance benefits if they materially breach their contracts.   This would include gross or serious misconduct because section 37(6)(b) of the BCEA reads:

“Nothing in this section (Notice of termination of employment) affects the right – (a) … (b) of an employer … to terminate a contract of employment without notice for any cause recognised by law”.

Ever since the early 1990s and again recently the LAC has treated termination related to misconduct as being part of risk management and based on the operational needs of employers.

The LAC has always understood the overlapping nature of the problem.   In Anglo American Farms t/a Boschendal Restaurant v Komjwayo (1992) 13 ILJ 573 (LAC) at 590 per Thring J, the following passage from an arbitration award of Martin Brassey SC was quoted with approval:

“Conventional wisdom has it that there are three grounds of dismissal: dismissal for misconduct, for incompetence/incapacity (which I shall, for simplicity, call dismissal for incapacity) and for operational requirements.   The categories cover the field: in the first two, there is work for the employee to do, but he cannot be trusted to do it properly; in the third, he can do the work, but there is none for him to do.   That they overlap is undeniable.

Dismissal for theft, for example, is normally seen as dismissal for misconduct; but it can also be regarded as dismissal for incapacity, because the employee is revealed as someone who lacks one of the qualities – trustworthiness – necessary for the job; and, with effort, it can even be described as dismissal for operational reasons, because an employer obviously cannot run a business with untrustworthy employees.   The overlap illustrates that (absenting any improper motive, like victimization or union bashing) we are ultimately asking a single question: did the dismissal make commercial sense in the circumstances?”

Presently employees whose contracts have been fairly terminated for reasons related to conduct or capacity, or both, do not have any legal right to claim any severance benefits because of the wording of section 41 of the BCEA.

The BCEA is also not giving proper effect to the 1982 ILO Convention 158 on termination of employment  which makes it clear that fault is only relevant when deciding whether employees forfeit notice and severance benefits.   The Convention of 1982 obliges employers to provide employees with reasonable notice (or payment instead thereof) and some form of severance benefit, unless the reason for such termination is related to gross or serious misconduct.

South Africa has not fully adopted the ILO Convention.   In terms of the common law and the BCEA employers are only allowed to terminate summarily (without any notice) if they can prove a material breach of contract, which is really the same as saying gross or serious misconduct.   But unlike the ILO Convention section 41 of the BCEA only obliges employers to pay severance benefits (severance pay) if the reason for termination is based solely on operational requirements.

In other words we have the unacceptable situation where employers are allowed to terminate when there is ‘no-fault’, such as illness, injury or poor performance, but those employees do not have any right to claim any severance benefit!

See the earlier blog posts for further arguments in favour of amending the BCEA:

LAC: ‘Dismissal’ of employee – operational requirements & risk management

Employment termination: ‘no-fault’ when considering valid and fair reason?

These are some extracts from the recent Labour Appeal Court judgment – Miyambo v CCMA (PPC Ltd) [2010] JOL 25840 (LAC) per Patel JA (McCall & Hendricks AJJA concurring) – para [13]:

It is appropriate to pause and reflect on the role that trust plays in the employment relationship.   Business risk is predominantly based on the trustworthiness of company employees.   The accumulation of individual breaches of trust has significant economic repercussions.   A successful business enterprise operates on the basis of trust”.

“In De Beers Consolidated Mines Ltd v CCMA & others [2000] 9 BLLR 995 (LAC) at paragraph [22], the court, per Conradie JA, held the following regarding risk management:

Dismissal is not an expression of moral outrage; much less is it an act of vengeance.   It is, or should be, a sensible operational response to risk management in the particular enterprise.   That is why supermarket shelf packers who steal small items are routinely dismissed.   Their dismissal has little to do with society’s moral opprobrium of a minor theft; it has everything to do with the operational requirements of the employer’s enterprise’.”