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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 which looks at 'Alternatives to retrenchment - the employer's obligation to consider employee representations' in the light of two recent judgments that deal with this. This newsletter also takes a look at four new cases: The first looks at the issue of consistency in discipline, considering factors which allow an employer to distinguish between two situations. The second case looks at the test for 'gross negligence' as opposed to 'ordinary' negligence'. The third and fourth cases are discussed in the article, both dealing with employer responses to representations made by employees during pre-retrenchment consultation.
This public newsletter is a free edited version of the subscriber newsletter.
From the time of childhood we learn that a large part of ordinary fairness is that people get treated the same. From this basic idea has come what is also known as the parity principle. This is translated into the Code of Good Practice: Dismissal in this form in item 3(6):
The employer should apply the penalty of dismissal consistently with the way in which it has been applied to the same and other employees in the past, and consistently as between two or more employees who participate in the misconduct under consideration.The Code obliges employers to be consistent with previous incidents as well as consistent between employees in the same incident. But it is not that easy. Cases are seldom exact replicas of a previous one. Also, in the same incident employees could play different and less blame-worthy roles. These difficulties are well illustrated in the recent case of Ntshona v Public Health and Social Development and Others (P377/2010)  ZALCPE 4 (27 January 2015).
The employee was employed as the Deputy Hospital Manager of the East London Hospital Complex (the ELHC) and Medical Superintendent of the Cecilia Makhiwane Hospital (CMH). After an interview on SAFM, in which she incorrectly reported that 400 of the deliveries at the ELHC were baby deaths, she was charged with misconduct (contravening a code by allowing herself to be interviewed). She was found guilty and dismissed. Aggrieved by her dismissal, she referred an unfair dismissal dispute to arbitration where the arbitrator upheld the dismissal. She then referred the matter to the Labour Court to review the arbitrator's decision.
On review the employee argued that the arbitrator had not taken into account the employer's inconsistency - another employee who had spoken to the media had not been dismissed. The Labour Court drew a distinction between the two cases: the employee claimed that 400 babies died at the two hospitals monthly when the figure was in the region of 20 babies a month. She was aware or should have been reasonably aware of the correct information but lied deliberately. When she was told about the inappropriateness of her conduct and that she had failed to follow the correct protocol, she was unrepentant and maintained that she was telling the truth. It took her two years to apologise through an affidavit which had been prepared by her attorneys. The other employee had complained in the media about the shortage of beds for patients. When he was told that plans had been made to provide the beds, he apologized promptly.
The Labour Court held that the parity principle (that employers should act with consistency) is a general principle of fairness and should not be applied rigidly. The court said what also counted was the reaction of an employee after it had been brought to his or her attention that he or she has committed misconduct. In this situation the one employee was remorseful and apologised but the applicant did not, and persisted with her lies. It can therefore not be said that the two employees were treated differently. The reality is that the gravity of the misconduct they committed was different.
What do we learn from this case?
In assessing whether an employer has acted consistently, the comparative gravity of the misconduct should always be taken into account, as well as whether there was remorse by the parties when confronted with the misconduct.
Apart from by teenagers, the word 'gross' is not used much in ordinary speech. But it is used in labour law to describe an extreme form of misconduct or negligence which distinguishes it from 'ordinary' misconduct or negligence. The outcome of a recent case hinged on whether the employer had been able to establish that the employees had gone beyond ordinary negligence to gross negligence, so deserving dismissal.
The case involved the actions of two employees who had recommended that the employer settle a legal court action by paying a huge settlement agreement. They were later charged with incurring the employer in 'fruitless and wasteful expenditure'.
In the case of Department of Co-Operative Governance, Human Settlements and Traditional Affairs, Limpopo Province and Another v Seopela N.O and Others (JR 226 / 2012)  ZALCJHB 22 (4 February 2015), Nyarhi Developers CC ('Nyarhi') was contracted by the Department to build 500 housing units and would then sell these housing units, once completed, to qualified persons. But, in the end, not one housing unit was completed under this contract. The reason was that as a result of the flood in Limpopo, the finance for this housing project was allocated to disaster relief and by agreement with Nyarhi, this agreement was terminated and replaced with a new contract for another project in which Nyarhi was contracted to construct flood relief housing units.
Nevertheless Nyarhi issued summons out of the High Court claiming a sum of R24 837 220. The matter was set down for trial but was postponed so as to enable the parties to explore possible settlement. The Department established a negotiating team to consider the claims by Nyarhi and assess the prospects of successfully defending these claims, or whether the exploration of a settlement would be more prudent. Departmental employees (the third and fourth respondents) were part of the appointed members of this negotiating team.
A 'final second legal opinion' on prospects of success in defending the claims was sought. The advocate said the claims were 'excipiable and bad in law'. He went further and said: 'It should be emphasized that I do not believe that the merits of the Department's case are weak. In my view, the close corporation's claims are going to be difficult to prove.' As to whether settlement would be prudent, the advocate said: 'Settlement of the matters can therefore not be promoted based on any weakness in the Department's case. This can only be promoted based on commercial considerations.' This was referring to the commercial reality of incurring legal costs in conducting the litigation, and his settlement recommendation was one simply aimed at avoiding the incurring of these further legal costs.
The negotiating team reported back to the Department and presented a formal recommendation, saying that Nyarhi's case and the Department's defense were 'highly contestable'. Their recommendation was that the Nyarhi claims had substance and merit. The recommendation assessed the quantum of risk at R30 million and proposed that the department settle at R15 million. As the team was specifically appointed for the purpose of making such a recommendation, this recommendation was accepted by all the functionaries in the Department. The settlement agreement was concluded in terms of which the actions by Nyarhi were settled on the basis of the payment of R15 million. This settlement payment was not disclosed in the Department's financial statements, and was discovered in an audit conducted by the auditor general and reflected as fruitless and wasteful expenditure not disclosed. This report in turn led a further investigation.
Three years later two employees, the third and fourth respondents, were notified to attend a disciplinary hearing on a charge of gross misconduct. The charge was specifically described as one of "gross negligence" in recommending the settlement of R15 million in the Nyarhi claims, and in doing so, they failed to exercise reasonable care, resulting in fruitless and wasteful expenditure. They were found guilty of the charge and dismissed.
In arbitration, the arbitrator accepted that the employees committed misconduct in the form of the negligent discharge of their duties as part of the negotiating team. But the arbitrator adopted the view that the dismissal of the employees was inappropriate and unfair. Reinstatement subject to a final written warning and no back pay was substituted as the penalty.
The employer took this award on review to the Labour Court. The Court was required to decide whether the conduct of the employees constituted gross negligence. The Court highlighted that in spite of a legal opinion saying Nyarhi had a weak case, the employees represented the opposite. This, the Labour Court found, constituted gross negligence and it held that the sanction of dismissal was fair.
The Court applied the following test to determine whether the misconduct constituted gross negligence:
To qualify as gross negligence the conduct in question must involve a departure from the standard of a reasonable person to such an extent that it may properly be categorised as extreme; it must demonstrate, where there is found to be conscious risk-taking, a complete obtuseness of mind or, where there is no conscious risk-taking, a total failure to take care.
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