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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 the approach arbitrators should adopt in deciding on the fairness of the employer’s disciplinary sanction.  We also look at three new cases from the SCA (Supreme Court of Appeal): the first deals with whether an employee can by-pass the CCMA & Labour Courts and directly access the civil courts. The second deals with whether an employer acts unfairly in proceeding with a disciplinary hearing in the absence of the employee. The third deals with whether back-pay to which a worker becomes entitled when an order for reinstatement is made, is limited to a maximum of 12 months` remuneration in terms of s 194 of the LRA.

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


Access to the civil courts for labour disputes

For lawyers, a lot turns on words. If an employee says the employer acted unfairly, there is one consequence (the matter must be processed through the CCMA and Labour Court). But if the employee says the employer acted unlawfully, there will be another consequence (the matter may be processed through the civil courts). To the lay-person this seems crazy because it seems to be just a play on words.  But there has been a consistent approach in the Supreme Court of Appeal (SCA) to allow what are labour disputes to be heard in a court other than the designated labour court.

The matter arose in the case of Boxer Superstores Mthatha and another v Mbenya (SCA Judgment:31 May 2007). The dispute arose on 7 December 2004, when the employer terminated the employment of the employee.  Seven months later – well outside the time limits for challenging an unfair dismissal under the LRA – the employee applied to the high court for (a) an order that the disciplinary hearing preceding her dismissal ‘be set aside’ and its outcome be declared ‘unlawful’ and set aside; (b) a declarator that her dismissal was ‘unlawful’ and of ‘no force’; (c) re-instatement to her former position ‘with all salaries and benefits to which she was entitled up to the date of her purported dismissal’ (alternatively an equivalent position ‘with all the benefits as if nothing has happened to her’); (d) back-pay; (e) costs.

The employer challenged the jurisdiction of the high court, arguing that it was a labour dispute that should be processed in terms of the LRA.

In her court papers, the employee asserted that her dismissal was substantively unfair (there being no grounds for it), as well as procedurally unfair (in that at the disciplinary hearing, where she appeared with a shop steward representing her, she was not asked to plead guilty or not guilty, and was put on her defence, and cross-examined, without any evidence being led against her).  For these reasons, she claimed, her dismissal was ‘unlawful’.  She submitted that ‘everyone is equal before the law and has the right to the equal protection of the law’, and noting that ‘everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before court’. She claimed that the high court had jurisdiction to hear the matter.

The employer argued that its former employee was complaining about the unfairness of her dismissal, and that the labour courts have exclusive jurisdiction under the LRA to adjudicate on unfair labour practices, while the ordinary courts have jurisdiction to rule on the lawfulness of breaches of contract.

The SCA ruled that an employee may approach the High Court to declare a dismissal unlawful on the basis that the pre-dismissal hearing was unfair. The SCA had previously ruled that dismissed employees could approach the High Court to claim damages arising from unlawful dismissals, or from unlawful breaches of the employer’s own disciplinary code under a contract of employment. In this case, the SCA has now held that the employee can approach the High Court even when she does not claim damages, but seeks only an order in relation to the pre-dismissal hearing.

However, the SCA warned that if an employee referred the dispute to the ordinary courts as opposed to the labour courts, this could limit the relief that the High Court might grant. The specific powers given to the labour courts under the LRA may not be available to other courts. This means that the employee may well not ultimately be entitled to the relief she seeks – at  best she may be entitled to have the hearing set aside, and the matter remitted to the employer – and not get reinstatement or back-pay, which are remedies special to the labour courts and their unfair labour practice jurisdiction.

Our view is that the unlawful / unfair distinction is an unfortunate basis on which to decide which court has jurisdiction. The LRA was enacted to deal with employment disputes and our view is that civil courts should be reluctant to hear such matters.

The right to a fair pre-dismissal hearing

We can take it for granted that procedural fairness requires a hearing prior to dismissal. But what does an employer do if an employee tries to stall the disciplinary hearing? Does there come a point when the employer is entitled to proceed without the employee being present? This issue arose in the case of Old Mutual Life Assurance CO SA LTD v Gumbi (SCA Judgment date: 17 May 2007).

The employee was charged with misconduct after he threatened his superior with assault. He did not attend a disciplinary enquiry arranged for 31 March on the basis that he was ill. He submitted a medical certificate before the hearing which continued in his absence and at the conclusion of which he was dismissed. However, after making representations, the employer reinstated him with a view to recharging him. The second enquiry was on 29 April. He and his representative attended the enquiry but it became clear from the outset that his representative wanted to prevent the hearing from being held. When the objections raised failed to have the hearing stopped, his representative asked for an adjournment which they were given. But the employee failed to return and a medical certificate was produced on his behalf. Suspecting that the employee was malingering, the chairman proceeded with the hearing in his and the representative’s absence. The representative had made it clear that neither he nor the employee would return. The employee was again dismissed at the conclusion of the second enquiry.

In challenging his dismissal the employee complained that he was denied a hearing before he was dismissed. The SCA held that the employee and his representative were to blame for his absence from the hearing as the medical certificate did not allege that he suffered from a serious illness which incapacitated him from attending the hearing.

This case is authority for the proposition that while an employee has a right to a fair pre-dismissal hearing, where the employee seeks to evade and avoid the hearing giving false or weak reasons, the employer does not commit a procedural irregularity if it continues with the hearing in the absence of the employee.

Compensation, back-pay and reasonableness

Section 194 of the LRA sets limits for compensation awarded to an employee whose dismissal is found to be unfair. It limits compensation to not more than 12 months' remuneration, provided that if the dismissal is found to be  ‘automatically unfair’ in terms of section 187 of the LRA, the maximum is 24 months. Similarly, the compensation awarded to an employee in respect of an unfair labour practice must be just and equitable in all the circumstances, but not more than the equivalent of 12 months remuneration.

There has always been a debate as to whether s 194, with these limits to compensation, restricts the amount of back-pay when an employee is reinstated. This has now been clarified in the recent judgment of Republican Press (Pty) Ltd and CEPPWAWU & Gumede & others (SCA 27 September 2007).

The company retrenched about 150 workers with effect from 6 September 1999. 40 workers and their union contested the fairness of their dismissals in the Labour Court after conciliation failed. The matter came to trial some six years after the workers were retrenched. There was no dispute that the company’s operational requirements justified the retrenchments and the issues in dispute related to whether the retrenched workers were selected in accordance with criteria that were fair and objective (as required by s 189(7)(b) of the LRA) and if not, what relief should be granted. The Labour Court held that the workers were not selected for dismissal in accordance with fair and objective criteria. The Court ordered that 28 workers be reinstated with backpay (subject to certain deductions) from 7 September 1999, that seven of the workers be paid compensation in an amount equivalent to 12 months’ pay, and that compensation in the same amount be paid to the estates of five workers who had died.

The employer appealed this decision to the SCA because the amount that would be paid to the workers would exceed the limits set out in s 194. The SCA held that back-pay to which a worker ordinarily becomes entitled when an order for reinstatement is made, is not to be equated with compensation. An order of reinstatement restores the former contract and any amount that was payable to the worker under that contract necessarily becomes due to the worker on that ground alone. This means that the limits on compensation contained in s 194 do not apply to back-pay.

The SCA also held that a court (or an arbitrator) that makes such an order may also order that part of that remuneration shall not be recoverable.  While the Act requires an order for reinstatement or re-employment generally to be made, a court or an arbitrator may decline to make such an order where it is ‘not reasonably practicable’ for the employer to take the worker back into employment. Whether that will be so will naturally depend on the particular circumstances, but in many cases the impracticability of resuming the relationship of employment will increase with the passage of time.

The remedies provided for in the LRA are premised on the belief that they would be applied soon after the dismissals had occurred, and that is a material fact to be borne in mind in assessing whether any alleged impracticality of implementing such an order is reasonable or not. Where there has been, for example, the passage of years from the time the workers were dismissed, this may be sufficient to find that it was not reasonably practicable to reinstate or re-employ the workers.

What is the significance of this case?  First, there are enormous cost implications. In the past, back-pay and compensation were regarded as one and the same thing. Now they may be treated separately. It could for example be possible that a court may award re-instatement with backpay and compensation. Employers will have to argue that the back-pay is sufficient ‘compensation’ for the unfair dismissal. Second, we believe that it will now mean employees will seek retrospective reinstatement of more than 12 months in cases when they would actually have preferred compensation to re-instatement. If re-instatement is granted, they will then attempt to negotiate more than 12 months compensation as a settlement.


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Bruce Robertson
November 2007
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