Enforce Security Group v Mwelase and Others (DA24/15) [2017] ZALAC 9 (25 January 2017)

Principle:

The definition of dismissal requires that there must be an act by the employer that terminates the contract. Where the end of the fixed term is defined by the completion of a specified event, such as the cancellation of a service contract, this is the proximate cause for the automatic termination of the employees' contracts of employment and does not constitute a dismissal.

Facts:

The appellant is a private security services provider and provided security officers to its various clients contracted to it, including Boardwalk Inkwazi Shopping Centre (Boardwalk), Richards Bay. In terms of the contracts of employment with the employees the period of employment commenced on a specified date. Clause 3.2 of the contracts provides that:

'The period of the employment would endure until the termination of the contract which currently exists between BOARD WALK or its successors (hereinafter referred to as the CLIENT) and the COMPANY.

3.2.1 The Employee agrees that he/she fully understands that the Company's contract with the Client might be terminated by the Client at any time and for any cause or might terminate through [e]ffluxion of time and that in consequence hereof the nature of the Employee's employment with the company and its duration is totally dependent upon the duration of the Company's contract with the Client/s and that the Employee's contract of employment shall automatically terminate. Such termination shall not be construed as a retrenchment but a completion of contract...'


On 30 September 2011, Boardwalk gave notice of termination of its contract with appellant with effect from 31 October 2011. As a result of the termination notice the appellant held meetings on 3& 4 October 2011 with the shop stewards from NASUWU and SATAWU which were the trade unions representing the employees at appellant's workplace. The appellant offered the affected employees alternative employment in Durban. The offer was rejected by the employees' representatives.

All the employees were then handed letters notifying them of the cancellation of the contract by Boardwalk Inkwazi Shopping Centre, offering them alternative employment in Durban, and that their respective contracts of employment would terminate on 31 October 2011 if they did not take up the offer of alternative employment.

Dissatisfied with their 'dismissal', the employees referred an unfair dismissal dispute to the CCMA. The commissioner concluded that the client's termination of the agreement with Enforce led to the automatic termination of the employees' employment contracts and therefore the employees were not entitled to any form of compensation. The application was consequently dismissed.

On review, the LC in Mwelase and Others v Enforce Security Group and Others (D358/12) [2015] ZALCD 46 (31 July 2015) rejected the employer's submissions that the employees were effectively on fixed term contracts, with the end of the fixed term being defined not by a particular date but by the occurrence of a particular event, namely the termination of the Boardwalk contract. The LC held that any contractual provision that infringes on the rights conferred by the LRA or Constitution is not valid, and even though an employee might be deemed to have waived his or her rights, such waiver is not valid or enforceable. The LC found that there was an obligation on Enforce to have embarked on a retrenchment exercise and that it refused to do so. Regarding alternative offers of employment, the LC held that Durban and Richards Bay are places too far apart to commute daily.

Enforce appealed against the LC's decision, and the LAC set it aside. The LAC stressed that dismissal only occurs when an employer's own act terminates the contract. Where employees have agreed that there will be automatic termination if a third party withdraws from the contract, there is no dismissal. The reasoning behind this was that the definition of dismissal requires that there must be an act by the employer that terminates the contract. Where the end of the fixed term is defined by the completion of a specified event, such as the cancellation of a service contract, this is the proximate cause for the automatic termination of the employees' contracts of employment and does not constitute a dismissal. The LAC accordingly found that Enforce was not obliged to retrench the employees.

Extract from the judgment:

Tlaletsi DJP

[12]   Ms Naidoo, for the appellant, contended that the termination of the employees' contracts of employment does not constitute a dismissal as defined in s186 (1) (a) of the LRA as the proximate cause of the termination of employment is not an act by the employer, but by Boardwalk and that in the circumstances, the automatic termination provision in the contracts does not offend against s5 of the LRA. In the circumstances, counsel submitted, the court a quo erred in finding that the termination of the contracts constituted a dismissal.

[13]   Ms Allen, for the employees, defended the judgment of the court a quo particularly the finding that the automatic termination clauses in the employees' respective contracts of employment were invalid and as a result they have been dismissed.

[14]   It must be recalled that the case that the employees pursued in the CCMA was that they were in fact permanent employees and not employed subject to a fixed term contract and as such were entitled to a retrenchment process upon termination of the contract between their employer and Boardwalk. This perhaps explains why the commissioner spent some time to investigate the nature of their employment arrangement with the appellant. Having found that they were employed in what he termed "indefinite (period) contracts", he proceeded to find that there had not been a dismissal. It is therefore not surprising that the commissioner did not consider the validity of such contracts with regard to s5 of the LRA and the decisions referred to in the judgment of the court a quo. It does not appear to be an issue he was called upon to consider by the employees. Be that as it may, it is clear from the judgment of the court a quo that the issue whether or not the employees were in permanent employment relationship with the appellant was no longer pursued by the employees in the Labour Court. One need therefore not say anything further about it and let it enjoy its eternal sleep.

[15]   There are therefore in my view, four issues that require determination on appeal. Firstly is the test on review; secondly, whether there was a dismissal; thirdly, the effect of the termination clause vis-a-vis s5 of the LRA (the lawfulness of the automatic termination clause), and fourthly, the relief awarded by the court a quo. I will deal with these issues in the order I have referred to them.

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[18]   It is clear from the wording of s186 (1) above that there are specifically defined instances that bring about the termination of employment which would be regarded as dismissal. This means therefore that an employment contract can be terminated in a number of ways which do not constitute a dismissal as defined in s 186(1) of the LRA. One such instance would be a fixed -term employment contract entered into for a specific period or upon the happening of a particular event. An event that comes to mind would include a conclusion of a project or the cancellation or expiry of a contract between an employer and a third party. Once the event agreed to between an employer and its employee takes place or materializes, there would ordinarily be no dismissal. It has been the position in common law that the expiry of the fixed term-contract of employment does not constitute termination of the contract by any of the parties. It constituted an automatic termination of the contract by operation of law and not a dismissal...

[20]   There is no express or implied intention by the legislature in enacting s 186(1) to amend or change the common law in this regard...

[21]   The definition of dismissal requires that there must be an act by the employer that terminates the contract. This is made clear by the legislature's employment of the words "an employer has terminated a contract of employment with or without notice". 'That encompasses the ordinary situation of the employer giving notice under the contract of employment and a summary dismissal'. In National Union of Leather Workers v Barnard NO and Another this Court had the following to say about 186(1) (a):

"The key issue in the interpretation of the phrase 'an employer has terminated the contract with or without notice 'is whether the employer has engaged in an act which brings the contract of employment to an end in a manner recognised as valid by the law".

In SA Post Office v Mampeule this Court remarked:

"...The subsection defines 'dismissal 'as follows: ...an employer has terminated 'a contract of employment with or without notice...' I am in agreement with the court a quo that 'dismissal 'means any act by an employer which results, directly or indirectly, in the termination of an employment contract..."

[22]   The evaluation of the evidence by the court a quo turned primarily on whether the automatic termination clause contained in the employees' contracts of employment offends against s5 of the LRA. An evaluation of the nature of the contracts of employment and the meaning and implication of its terms were not considered. The court a quo seems to have moved from the premise that since the commissioner found that the nature of the employment contracts were "indefinite contracts" of employment 'and that such a finding has not been assailed on review' it should stand. A finding that the employment contracts were "indefinite contracts" is an erroneous finding by the commissioner. Such a finding constitutes an error of law and cannot stand despite it not being challenged. As pointed out already, the test is whether the finding is a correct one and not strictly whether it falls within a bend of reasonable decisions.

[23]   The factual matrix in this case supports the view that the employees' contracts of employment were fixed-term contracts where the end of the fixed term was defined by the completion of a specified task or project, that is, the termination of the Boardwalk contract. The continued existence of these contracts depended on the continued existence of the contract between the appellant and Boardwalk. The employees were employed specifically for the contract between the appellant and Boardwalk. The termination of that contract is a legitimate event that would by agreement, give rise to automatic termination of the employment contracts. It is Boardwalk that cancelled the contract and not the appellant. There was no direct or indirect act by the appellant to cancel the contracts. There is no evidence to suggest that cancellation by Boardwalk was a device to rid the appellant of the employees. Neither is there evidence to suggest that it was a clandestine move by the appellant to dismiss the individual employees. On the facts of this case the cancellation of the service contract by Boardwalk is the proximate cause for the termination of the employees' contracts of employment.

[24]   The fact that the appellant had an option to retrench the employees or could have considered other options instead of relying on the automatic termination clause cannot be used to negate the clear terms agreed to by the parties. Put differently, one cannot simply use the considerations of the fairness or otherwise of a dismissal to determine whether an employee has been dismissed.