At
the conclusion of arbitral proceedings, the arbitrator upheld the
respondent's claim for unlawful dismissal and ordered her
reinstatement, or, alternatively, payment of damages in lieu of
reinstatement. An appeal against the award to the Labour Court was
dismissed with costs. The present appeal is against that order.
FACTUAL
BACKGROUND
The
respondent was employed as Finance Director by the appellant on a
3-year contract, renewable subject to satisfactory performance,
commencing on 1 April 2013. Having successfully completed her period
of probation, she was confirmed as Finance Director by letter dated 2
August 2013. In a letter dated 12 February 2014, the Managing
Director of the appellant wrote to the respondent expressing his
displeasure at what he perceived to be incompetent performance of
duty on her part. In the letter, the Managing Director warned her
against such poor performance and indicated that the three months
that were to follow would be decisive of her continued tenure as
Finance Director.
On
18 July 2014, the Managing Director wrote to the respondent
terminating her contract of employment with effect from 31 August
2014. The letter stated as follows:
“Pursuant
to discussions held on 30th
June 2014, ref your performance and the restructuring that is
ongoing, you are hereby given 2 (two) months notice of the
termination of your contract of employment. The notice period will
run effectively from 1st
July to 31st
August 2014…,.”
On
28 July 2014, the respondent wrote to the Managing Director disputing
the lawfulness of the decision to terminate the contract of
employment and pointing out the failure on his part to follow due
process before such termination. The matter was subsequently referred
to a labour officer who, after issuing a certificate of no
settlement, referred the matter to arbitration on the issue whether
the termination of the contract was lawful, and, if not, what the
appropriate remedy was in the circumstances.
In
her Statement of Claim, the respondent submitted that the letter of
12 February 2014, which contained a warning over alleged poor
performance on her part, was authored without due regard to due
process. She further submitted that the basis for the termination of
the contract of employment was the alleged poor work performance and
restructuring of the company. In these circumstances, a disciplinary
hearing should have been held prior to the decision to terminate her
contract of employment. The failure to do so meant that the
termination was improper. She accordingly sought an order for her
reinstatement, and, in lieu thereof, damages.
In
its Statement of Defence, the appellant stated as follows. On or
about 30 June 2014, the respondent met with the appellant's
Managing Director during which meeting the parties discussed the
respondent's performance and the restructuring exercise that the
company had embarked on to reduce its operating costs. During that
meeting, the respondent and the appellant's Managing Director
“agreed that the respondent was going to leave the employ…, at
the end of the month on 31 July 2014 subject to a proper hand over
take over process having been concluded. It was also agreed that the
claimant would be paid cash in lieu of the notice. In other words,
the parties agreed to terminate their relationship.”
The
appellant further indicated, in its Statement of Defence, that it
intended to lead oral evidence from the Managing Director to show
that the termination was pursuant to an agreement between the
parties, and, in particular, pursuant to “her own agreement to end
her employment” with the appellant. It further averred that the
letter written by the Managing Director on 18 July 2014 was written
at the instance of the respondent to confirm the earlier discussion.
The
appellant denied that the respondent had been unlawfully dismissed,
adding that the circumstances clearly showed that the parties had
agreed “to end their relationship with the claimant leaving her
employ upon being given notice.”
The
appellant admitted that, initially, the respondent was given only two
months' notice as provided in her contract of employment. However,
in a letter dated 25 August 2014, the respondent was advised that she
was going to be paid cash in lieu of three months' notice due to
her.
In
his assessment of the facts, the arbitrator found that the appellant
had been inconsistent in its defence. It had claimed that the
termination was effected pursuant to an agreement, and, in the same
breath, was arguing that the termination was by notice. The
arbitrator remarked that “termination by notice is not the same as
termination by mutual consent. Where the employer terminates by
notice, the employer makes a unilateral act. It is not mutual
termination…,. In any event…, mutual termination…, ought to be
in writing.”
The
arbitrator found that the termination of employment in this case was
inextricably linked to performance and the restructuring of the
company. In these circumstances, the appellant should have either
instituted disciplinary proceeding or engaged the employee to agree
on a termination package. Consequently, the arbitrator found that the
termination was neither mutual nor lawful. He accordingly upheld the
claim for unlawful dismissal.
PROCEEDINGS
BEFORE THE LABOUR COURT
Dissatisfied,
the appellant appealed to the Labour Court. It argued, before that
court, that the arbitrator had erred in holding that it (i.e. the
appellant) could not, in the circumstances, terminate the
respondent's employment contract on notice and that the finding
that the contract was terminated on account of performance or
restructuring was a gross misdirection.
It
further submitted that since it was a term of the contract of
employment that the employment could be terminated on notice, the
appellant was within its rights to terminate the contract on notice.
There was no obligation to give reasons justifying such termination
on notice. There was therefore no need for the appellant to resort to
a Code of Conduct.
It
is worth noting that, before the Labour Court, the appellant did not
rely on the agreement allegedly reached between the parties to
mutually terminate the employment relationship.
The
Labour Court found that the notice of termination was predicated on
the respondent's alleged poor performance and that the arbitrator
had been alive to the law which provides for termination of
employment on notice. It accordingly found no merit in the appeal and
dismissed it with costs.
PROCEEDINGS
BEFORE THIS COURT
Unhappy,
once again, the appellant noted an appeal against the decision of the
Labour Court upholding the arbitral award. In seeking an order
setting aside the arbitral award, the appellant relies on three
grounds, namely:-
“1.
The court a quo grossly misdirected itself in holding that the
Respondent's contract had been terminated on notice on account of
poor performance or incompetence. The Court did not turn its mind to
the fact that the Notice to Terminate delivered by the Applicant to
the Respondent did not, at any point, state that such termination was
motivated or actuated by the respondent's poor performance or
incompetence.
2.
The Court a quo also erred at law in failing to hold that the
Respondent had been validly terminated on notice and therefore the
arbitral award before it was anomalous in this regard. At the
relevant time, a contract of employment could have been validly
terminated with one party giving the other notice of intention to
terminate the contract. Prior attempts at termination or disciplinary
measures are irrelevant considerations on adjudicating on the
validity of such termination.
3.
The Court a quo also fell into serious error when it conflated the
requirements of a dismissal and termination on notice. Termination on
notice is a distinct and legally legitimate manner of ending an
employment relationship quite distinct from dismissal for some
infraction or breach of contract.”
APPELLANT'S
SUBMISSIONS BEFORE THIS COURT
In
its submissions, the appellant argued that the issue for
determination is whether the appellant's right to terminate on
notice was properly exercised, bearing in mind that, at the relevant
time, the law allowed the termination of an employment contract on
notice.
The
court a quo had made constant reference to dismissal when the matter
before it related to termination on notice. The letter of 18 July
2014 clearly articulated that the contract was terminated on notice.
The law permitted the appellant to terminate the contract for any
reason, or no reason, with no obligation to communicate or justify
such a course.
The
finding by the court a quo, that the termination was premised on
allegations of incompetence, is a misconception. Whilst the letter of
termination recalls other issues discussed on 30 June 2014, the
termination that followed was not based on incompetence or poor
performance. The notice of termination was issued on the
understanding that the employment relationship had to end and the
finding that the respondent was dismissed for under-performance was a
clear misdirection.
Counsel
for the appellant, during submissions, accepted that the respondent's
contract of employment made no provision for termination on notice.
RESPONDENT'S
SUBMISSIONS ON APPEAL
In
her submissions, the respondent argues that the issue requiring
determination is whether termination on notice is available as an
option where the underlying basis for termination is disciplinable
conduct. In other words, the question is whether the general
provisions which regulate termination on notice can override the
specific provisions dealing with termination on account of
misconduct.
In
her view, the appellant adopted a wrong form of termination,
rendering such termination unlawful.
At
arbitration, the argument by the appellant was that the termination
was effected through mutual agreement, an argument that was
inconsistent with the argument adopted in the court a quo that the
termination was done unilaterally, on notice. The respondent argued
that the right to terminate on notice was never the appellant's
argument before the arbitrator. For that reason, the appellant should
have resorted to the disciplinary process before terminating the
employment contract.
Further,
the letter of termination written by the appellant makes it clear
that performance was the motivating factor in the decision to sever
its relationship with the respondent. The respondent argued, further,
that the general provisions of section 12(4) of the Labour Act cannot
be used in place of section 12B of the same Act.
Lastly,
she submitted that the belated submission by the appellant that it
relies on a termination on notice is an attempt to ride on the
judgment of this Court in Don Nyamande v Zuva Petroleum (Private) Ltd
SC43-15. The appellant must have wrongly believed that it was
entitled to terminate the contract of employment on notice despite
the fact that the underlying reason related to poor work performance.
ISSUE
FOR DETERMINATION BEFORE THIS COURT
The
simple issue before this Court is whether the court a quo correctly
dismissed the appeal against the award made by the arbitrator
upholding the claim for unlawful dismissal and reinstatement.
In
order to resolve this question, there is need to determine what the
appellant's case at arbitration was, and, thereafter its case
before the Labour Court, and, lastly, what its case is before this
Court.
In
its Statement of Defence, the appellant stated as follows:-
“During
the meeting of the 30th
June 2014 it was agreed by the Claimant and Mr. Smuts, representing
the Respondent, that the Claimant was going to leave the employ of
the Respondent at the end of the month on the 31st
July 2014 subject to a proper hand over take over process having been
concluded. It was also agreed that the Claimant would be paid cash in
lieu of the notice. In other words, the parties agreed to terminate
their relationship.”
The
appellant continued:-
“Pursuant
to the meeting, the Claimant approached Mr Smuts and requested that
she be given written confirmation of her termination, which
confirmation was given to her under cover of the letter dated 18th
July 2014. It must be stressed that the termination of the claimant's
contract was not premised on poor performance. The respondent has
indicated to this tribunal that it intends to lead oral evidence from
Mr. Smuts who represented it during the meetings with the Claimant.”
Although
in the Statement of Defence the appellant indicated that the
employment relationship was to terminate with effect from 31 July
2014; in the letter written on 18 July 2014, the appellant made it
clear that the notice period was in fact to run until 31 August 2014.
The letter did not refer to the agreement allegedly reached on 30
June 2014, to mutually terminate the employment relationship.
Instead, it refers to discussions regarding the respondent's
performance and the restructuring of the company.
It
is important to stress that, before the arbitrator, the appellant's
position was that the termination of employment was pursuant to an
agreement and that such termination was to be effective on 31 July
2014. It is clear from the Statement of Defence that the letter of 18
July 2014 was written at the instance of the respondent to confirm
this position. It seems to me, therefore, that before the arbitrator,
it was not the appellant's case that it had invoked the provisions
of section 12(4) of the Labour Act, which, at that time, stipulated
the length of the notice of termination to be given in cases where
either party may have wished to terminate the contract on notice to
the other.
The
earlier decision by the appellant, to call evidence to prove the
existence of an agreement, was abandoned notwithstanding the clear
position of the respondent in her replication before the arbitrator
that she had not verbally agreed to a termination of her employment.
She even challenged the appellant to show how such an agreement
would, in any event, have been lawful in view of the requirement that
the agreement should be in writing.
My
understanding of the position of the appellant, at the stage of
arbitration, is that the appellant was saying the claim for unlawful
dismissal should be dismissed on account of the fact that the parties
had agreed that her employment be terminated with effect from 31 July
2014, which date appears to have been altered to 31 August 2014. It
was for this reason that the appellant intimated its intention to
call Mr Smuts, its Managing Director, to prove the existence of such
agreement.
The
arbitrator, in his award, commented on what he perceived to be
uncertainty in the appellant's defence. I quote his remarks in this
regard:-
“The
Respondent seemed to clutch at straws on which defence to rely on. In
another angle, Respondent suggest (sic) that termination was by
notice. I believe, even if one were to argue along those lines,
termination by notice is not the same as termination by mutual
consent. Where the employer terminates by notice, the employer makes
a unilateral act. It is not a mutual termination. This line of
argument…, contradicts…, submissions that there was a mutual
agreement to terminate the employment relationship at the meeting of
30 June. In any event, the facts of this case are argued on the basis
of mutual termination, which ought to be in writing, or,
alternatively, Claimant would have tendered her resignation, which is
a unilateral act by the employee…,.”
Based
on that summation, the arbitrator was convinced that there had been
no agreement to terminate the agreement between the parties. In any
event, as already noted, the respondent had, in her replication,
denied the existence of such agreement. In the absence of such a
mutual termination, the arbitrator found that the decision by the
appellant, terminating the employment relationship on 18 July 2014,
was therefore improper and unlawful. The arbitrator also found, as a
consequence, that no mutual termination having been proved, the
reference in the letter to performance and restructuring meant that
the appellant had two options at that stage. These were either to
institute disciplinary proceedings or to agree on an exit package. In
the absence of either, the termination was therefore unlawful.
It
is clear that, before the Labour Court, the appellant completely
abandoned the argument that the termination of the contact of
employment had been mutually agreed. The appellant's argument
before that court was, in the main, that the arbitrator had erred in
failing to hold that, at law, the appellant had the right to
terminate the contract of employment on notice. Needless to say, the
court a quo upheld the arbitral award declaring the termination of
the employment contract to be unlawful.
Before
this Court, the appellant, again, changed tact. It argued that it
never relied on poor performance as a basis for termination of the
contract. It submitted that indeed the parties agreed at the meeting
of 30 June 2014 to terminate the employment. However, because the
respondent reneged on that agreement, the appellant had then decided
to invoke the provisions of section 12(4) of the Labour Act to
terminate the employment contract on notice.
Counsel
for the appellant stated that the letter of termination dated 18 July
2014 was not predicated on the agreement reached on 30 June 2014,
but, rather, was a unilateral decision by the appellant to terminate
the contract of employment in terms of its common law right to do so
by giving the notice periods reflected in section 12(4) of the Labour
Act.
I
have considerable difficulty with the submissions made by the
appellant before this Court. It was never its case before the
arbitrator that the respondent reneged on the mutual termination
discussed on 30 June 2014 and that it had, as a consequence, been
forced to invoke its common law right to terminate on notice.
Rather, its position before the arbitrator was that the parties had
agreed that the contract be terminated with effect from 31 July (or
August) 2014. It was its claim that the respondent requested that
this development be confirmed by letter, which was done by letter
dated 18 July 2014.
The
appellant expressed the desire to call evidence to prove the
existence of the agreement. This begs the question: why call evidence
to prove a decision made unilaterally to terminate the agreement on
notice in terms of section 12(4) of the Labour Act?
It
certainly was not its case before the arbitrator that the termination
effected on 18 July 2014 was a unilateral act on its part.
The
shift in the appellant's defence belies its belated attempt to rely
purely on its common law right, at that time, to terminate the
employment contract on notice. Clearly, therefore, once the
arbitrator found that the defence of mutual termination had not been
proved, he had no option but to find, as a corollary, that the
termination was, in the circumstances, unlawful.
DISPOSITION
In
all the circumstances, therefore, I am not persuaded that the
arbitrator misdirected himself in any way or that the Labour Court
erred in dismissing the appeal against the arbitral award.
In
the result, it is ordered as follows:-
“The
appeal be and is hereby dismissed with costs.”
