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Worklaw subscribers receive a monthly newsletter containing commentary on the latest labour law cases and trends. This newsletter contains an article on “Revisiting protected strikes when violence occurs”. We look at three new cases: the first deals with a case of dismissal for refusing to follow an illegal instruction. The second deals with a challenge to the amount of back pay an employer was ordered to pay. The third deals with a case where an employee published a letter of criticism about the employer.

This public newsletter is a free edited version of the Worklaw subscriber newsletter.


Dismissal for refusing an illegal instruction

The applicant was employed for 22 years by the company and was managing director at the time of her dismissal. The chairman and CEO of the company instructed her to summarily terminate the services of two employees. Knowing that to do so was in breach of both the LRA and the Companies Act, she refused. She was dismissed.

The applicant in Harding v Petzetakis Africa (Pty) Ltd (JS 1024/2009) [2011] ZALCJHB 81 (14 September 2011) argued that her dismissal was automatically unfair because the employer acted contrary to s 5 (2) (c) (iv) of the LRA. That section read with section 187 (1) deems a dismissal to be automatically unfair if an employer acts contrary to that section because it dismisses the employee because of that employee’s "...past, present or anticipated... failure or refusal to do something that an employer may not lawfully permit or require an employee to do;..."

The company admitted that it summarily dismissed the applicant, but denied that it did so for an impermissible reason or that it retrenched her. However, at the time the applicant’s services were terminated the employer provided no reason for the termination. The termination letter of that date merely stated, "We regret to inform you that your employment at Petzetakis Africa is hereby terminated with immediate effect." The letter also contained an offer of a severance package of 10 months’ of the applicant's total cost to company remuneration on the basis that she accepted this in settlement of all her claims against the company arising out of her employment or termination thereof.

The employer later listed alternative justifications for the applicant's dismissal. Principally, it claimed it had lost confidence in her in view of the company's loss-making situation by mid-2009, which demonstrated her ineffectiveness and/or negligence in failing to curb the losses. Secondly, it said she failed in her duties as the company's managing director in a number of respects namely: loss of market share; increased inventory levels; cost under-recoveries; losses on bad debts; competition commission penalties; inability to increase margins; negative cash flows; loss of major customers, and insufficient attention had been paid to improving the firm’s BEE status, all of which she failed to improve. It was only when the pre-trial minute was concluded that it stated expressly that it terminated her services for "poor performance and/or misconduct".

The court was satisfied that the applicant was asked to dismiss two employees without any kind of hearing and that, had she done so, she would have breached the provisions of the LRA and the Constitution governing an employee’s right to fair labour practices. In this sense she was expected to do something unlawful and, whatever legitimate reasons might have been relied upon instead, it was this impermissible reason which was the principle cause of her dismissal. The court found that it was an automatically unfair dismissal.

The court did say that the unlawful character of what the applicant was expected to do was civil not criminal, and this diminished the seriousness of the employer’s infringement of section 187.  Nevertheless the court ordered compensation equivalent to 13 months’ remuneration (amounting to R 1,813,500-00); three months’ notice pay (amounting to R 418,500-00); the pro-rata balance of her bonus for the three month notice period, (amounting to R 46,500-00); and twelve days’ leave pay (amounting to R 55,800-00) - in total over R2,3 million. The employer also had to pay the applicant’s costs, including the cost of two counsel.

This was a very expensive outcome for an employer that believed it could operate outside of our labour law. The lesson is that the labour court will act punitively against employers that try to avoid the procedural and substantive requirements of dismissal law.

Challenging an order for back-pay

The employer complied with that part of an arbitration award that required it to reinstate a dismissed employee. The employer did not seek to review the entire arbitration award but only that part of the award that reinstated the employee retrospectively including the back pay awarded to the employee. These were the circumstances in Johannesburg City Parks (Pty) Ltd v SALGBC & others LC JR 2767/09 Judgment 6 December 2011.

The time line is important here: the employee was dismissed on 27 November 2007; the arbitration finally commenced on the 15 July 2009 and was finalised on 19 August 2009. There were a series of postponements, often because the parties were negotiating, once because there was no arbitrator available, and once to allow the employee to consult with his family.

In essence, the issue in this matter revolved around whether the arbitrator in ordering retrospective reinstatement including payment of the back pay for the period of 21 months, exercised his powers properly and in a fair manner. The court said that the order was fair.

The factors the court took into account were that none of the applications for the postponement of the arbitration were opposed by either party – there seemed to have been consensus on each occasion. Further, the court found that the common understanding between the parties was that if the arbitrator was to find that the dismissal of the employee was procedurally and substantively unfair, the remedy available was retrospective reinstatement with full back pay. The conclusion reached by the arbitrator was thus in line with what the parties envisaged in their pre-arbitration minutes.

One puzzling aspect of this case is the confusion between the terms compensation and back pay. It has been decided in two important cases that back-pay resulting from reinstatement is not compensation, and is not limited to the maximum periods of compensation in section 194 of the LRA.(Equity Aviation Services (Pty) Ltd v CCMA & others [2008] 12 BLLR 1129 (CC); Republican Press (Pty) Ltd and CEPPWAWU & Gumede & others (SCA 27 September 2007). As we have pointed out before, this means that a very important factor in settlement negotiations is to take into account that back-pay may not be capped by s.194.

The lesson of this case is simple: postponing arbitration proceedings or delaying the process in other ways has the effect that an arbitrator can order back pay to the date of dismissal. If the delays are caused by the dismissed employee, it is important for the employer to register a protest so that there is some basis to argue that back-pay should not be for the full period.

Publishing criticism about your employer

You wake up one morning and see a letter from one of your employees while reading the newspaper. As you are a municipality, you read on with concern:

“The Ikwezi (morning star) municipality, which is supposed to be the hope for the community of Jansenville and Klipplaat, has not lived up to its name and is in a chaotic situation. The financial situation has reached a catastrophic state. The 2004-05 budget is about R8.7million, of which 56 % is for salaries and allowances, and only 44 % is for service delivery. The district municipality has intervened financially on numerous occasions. The provincial government contracted administrative and financial mentors, and bought new computers but, this did not improve the financial situation or administration. The municipality’s debt is about R1,9 million, but large numbers of indigent house owners have huge credits in their accounts. Newly appointed managers are working separately from those perceived as coming from the old order, which makes it difficult for the council to take informed decisions on crucial matters. Officials are barred from writing official letters without sanction of the municipal manager. This means that if the municipal manager is out of the office for a couple of days, municipal business must come to a standstill. We urge the MEC for local government to send an investigation team to Ikwezi and, if our allegations are found to be true, that corrective measures be taken.”

This letter to the editor of the Eastern Province Herald was published under the employee’s name and designation as “shop steward”.  He had 23 years of service and a clean disciplinary record.  As a result of this publication, the employee was charged and found guilty of conducting himself ‘in an unseemly and or gross manner’, ‘tarnishing the good name and reputation of the employer and officials’.  The employee was found guilty of contravening the Standard of Conduct which requires of employees that they “perform their tasks and job responsibilities diligently, carefully and to the best of their ability” and “refrain from any rude, insolent, provocative, intimidatory or aggressive behaviour to a fellow employee or a member of the public”.

In Ikwezi Municipality v SALGBC & others (LC Case no: P233/10 Judgment: 8 December 2011) the council arbitrator dealing with the above facts, held the dismissal was procedurally fair but substantively unfair and that the sanction of dismissal was inappropriate. The arbitrator found that there was no evidence that the relationship of trust had been irretrievably damaged, and that reinstatement was an appropriate remedy.

On review at the Labour Court the role of an arbitrator was described as: (a) to determine whether dismissal is an appropriate sanction in the context; (b) to apply his mind to all relevant and material facts and circumstances; (c) to balance the parties’ interests.  The court said that the arbitrator did what he was required to do and did not defer to the employer on sanction, but exercised his own sense of fairness and made a value judgment on the facts before him. The court went on to say that any interference with the sanction determined by the arbitrator would directly violate principles and precepts following from Sidumo.

For many employers this may be a difficult case. But the lesson to be drawn is that evidence that a continued employment relationship has become intolerable is vital. Employers should note that the court took the view that the letter was nothing more than the kind of criticism that appears in the media daily. The motive was not seen as malicious, as it invited the employer to put its version and, if necessary, to prompt corrective measures. The fact that the letter did not mention any managers by name and the fact there was no evidence that the shopsteward had acted dishonestly, were further reasons why reinstatement was appropriate. Perhaps the message to employers faced with criticism is to be more robust and deal with it objectively rather than with disciplinary measures.

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Bruce Robertson
February 2012
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