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Worklaw subscribers receive a monthly newsletter containing commentary on the latest labour law cases and trends. We look at three new cases in this newsletter: the first deals with resignation as a director as opposed to resignation as an employee. The second deals with a reasonable expectation of a permanent job. The third case emerges in the form of a case study in this month`s article, which looks at petty theft and a recent case relating to whether the court will overturn a sanction of dismissal in such circumstances. This public newsletter is a free edited version of the Worklaw subscriber newsletter. LATEST CASES Resignation: clear and unequivocal
Is it possible to resign as a director but not as an employee? In other words, can an employee who is employed as a director resign from that position and automatically resume a previous position? Here are the facts of Amazwi Power Products (Pty) Ltd v Turnball (LAC decision; Case No: JA 14/07): The employee was employed in June 1979 as an internal accountant. In 1994 she was promoted to the position of accountant. On 1 November 2003 the company was bought by a new owner as a going concern. During the early part of 2004 the employee was appointed to the board of directors as its financial director.
On 10 January 2005 the employee wrote to the managing director tendering her resignation as a director, stating: “I will continue to give 100% on behalf of the company as an employee”. On 31 January 2005 the employee received a letter from the company’s managing director, acknowledging receipt of the letter of resignation as the financial director and confirming “your offer to continue as an employee”. He also informed the employee that the matter would be discussed by the board and thereafter they would consult with her.
She continued performing her duties until 18 February 2005 when she received a letter from the managing director, accepting her resignation of 10 January 2005 from the employ of the company and tendering to pay her until 31 March 2005. The employee objected, claiming that she had only resigned as the director and not as an employee.
The dispute was then heard by an arbitrator who found that the employee had been unfairly dismissed and awarded an amount of compensation equivalent to six months of her salary, prior to her appointment to the board. This decision was then taken on review to the Labour Court which dismissed the application to set aside the award but upheld a cross review and ordered the company to pay the sum of R 247 800,00, being the equivalent of six months salary, based on the employee’s salary as at the date of dismissal 18 February 2005. This award was larger than that of the arbitrator’s award.
On appeal in the Labour Appeal Court it was held that it is possible to resign from a directorship without resigning as an employee. When the departure from an organization is at the initiative of the employee by way of a voluntary resignation, which is accepted by the employer, the termination of the contract then takes place by mutual agreement between the parties. To be legally effective, a notice of intention to resign from employment and therefore to terminate the contract must be clear and unequivocal.
While this case seems to be saying that it is always possible to resign as a company director without resigning as an employee of that company, we want to sound a note of caution. Resignation by an employee is a unilateral act and if that employee wants to remain in employment but in a different capacity, that is a matter for negotiation. It could be that there is no alternative position. But the case is a good illustration of the need for good and clear communication.
A reasonable expectation of a permanent appointment
Section 186(1)(b) of the LRA defines "Dismissal" to include the situation where an employee reasonably expected the employer to renew a fixed term contract of employment on the same or similar terms but the employer offered to renew it on less favourable terms, or did not renew it. We raised this issue last year and referred to the case of Yebe and University of KwaZulu-Natal (2007) 28 ILJ 490 (CCMA) which we pointed out introduced a new development: not only is it possible to acquire a reasonable expectation of a renewal of a fixed-term contract, but more than that, an expectation of permanent employment.
There has now been another case along these lines - Gendenhuys and University of Pretoria (2008) 29 ILJ 1772 (CCMA) - which we bring to your attention because of the wide-spread reliance in many places of employment on fixed-term contracts. Like Yebe’s case, this is also a decision of the CCMA, so its standing must be seen in that context ie it is not a Labour Court or Labour Appeal Court decision. Another point to note is that this case was dealing only with a preliminary issue.
The employee was appointed as a part-time lecturer on a series of fixed-term contracts, the last of which expired on 30 November 2007. She then applied for a permanent position. She was unsuccessful but was offered a further fixed-term contract on improved terms. She declined the offer and referred the dispute to the CCMA. She argued that she had a reasonable expectation of permanent employment and the employer’s failure to appoint her in a permanent position constituted a dismissal in terms of s 186(1)(b) of the LRA.
The employer raised a preliminary point that the CCMA did not have the jurisdiction to hear the matter because a reasonable expectation of permanent employment fell outside the ambit of s186(1)(b) and the employee had been offered a further fixed-term contract on better terms. The judgment was just on this preliminary point and the CCMA found that it did have jurisdiction to hear the matter. The Commissioner went further and said there is no reason in logic or law why an expectation of permanent employment should not provide a ground for a claim of dismissal under s 186(1)(b) of the Act.
Bearing in mind that both these cases have been CCMA cases, this may not be the last word on the subject. The wording in s 186(1)(b) expressly uses the term ‘renewal on the same or similar terms’. It can be argued that this must mean a repetition of what previously existed, not a totally new form of contract. In other words, any expectation acquired regarding renewal, must relate to the previous fixed term period of the contract and not permanent employment. While we are supportive of those cases which regard the failure to renew a contract as a dismissal, we question the logic in stretching the dismissal to mean giving a permanent appointment to an employee on a fixed-term contract. The reality is that most permanent posts have to be advertised and there may be applicants better than the existing fixed-term contract-holder.
Bearing in mind that Gendenhuys and University of Pretoria has to date just dealt with preliminary issues, it will be interesting to watch how the CCMA in this case decides on the main issues.
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