Absa Bank Limited v Naidu and Others (DA 14/12) [2014] ZALAC 60 (24 October 2014)

Principle:

Consistency on the part of an employer is an important but not decisive factor to take into account in the determination process of the fairness of a dismissal. The fact that another employee committed a similar transgression in the past and was not dismissed cannot, and should not, be taken to grant a licence to every other employee to commit serious misdemeanours, especially of a dishonest nature, towards their employer on the belief that they would not be dismissed. The parity principle was never intended to promote or encourage anarchy in the workplace. There are varying degrees of dishonesty and, each case will be treated on the basis of its own facts and circumstances.

Facts:

The employee, an executive investment broker at Absa, she was charged with two counts of misconduct. In terms of her job description she advised and recommended to a client the best investment portfolio. She would then assist clients in investing their funds in various portfolios. With the consent of a client, she could move or "switch" funds from one investment portfolio to another. A "switch form" was used to implement the transfer of funds. The particulars of the client, the type of the investment and an original signature of the client had to be reflected on the switch form which was then faxed to the central point known as the Absa's Investment Management Services (AIMS), where the final transaction switch was to take place.

One of the employee's clients, on Ms Naidu's financial advice, deposited with a capital investment of R100 000 in a Property Market Fund. Unfortunately, it happened that there was volatility in the market which went so bad that the investment dropped to about R60 000, thus causing him a loss of some R40 000. He lodged a complaint with the bank against the employee. In due course, however, the bank sent him a letter advising him that after its preliminary investigation of his complaint, it found no fault on the part of anyone of its staff.

The client was not satisfied with this response and referred his complaint to the Ombud for Financial Service Providers, in terms of section 27 of the Financial Advisory and Intermediary Services Act (the FAIS Act). Consequently, the bank relented and agreed to refund his R40 000 loss. Thereafter, the employee advised and duly obtained consent from the client to move his investment from the Property Market portfolio to the Money Market portfolio. The client signed the prescribed switch form and the switch was finalised.

Some time later the employee had reason to believe, which indeed turned out to be correct, that the Property Market (which the client had previously switched from) was set to rise rapidly. Accordingly, she advised and duly obtained consent from a number of her clients to move their investments from Money Market to Property Market in anticipation of that rapid rise. She had obtained signatures of those consenting clients. However, when she attempted to communicate with the client for the same purpose, she did not succeed to get through to him. He was reportedly out of the country. She then, without his knowledge and consent, proceeded to process the switch of his investment from Money Market to Property Market. As she did not have his signature, she used an old signed switch form from a previous transaction and attached it to the new investment transfer forms and transferred his funds from Money Market to Property Market without his knowledge and consent. She did this in violation of the bank's rules and the code of conduct under the FAIS Act. This was the crux of the misconduct charge preferred against her.

At the disciplinary enquiry the employee pleaded guilty to count one, as it pertained to the transaction involving the client. The employee had been in the bank's employ for some 20 years. She was dismissed. She lodged an internal appeal against the dismissal sanction, but was unsuccessful, on the basis that both transgressions were categorised as "very serious offences" in terms of the bank's disciplinary code, which prescribed a sanction of dismissal for any misconduct involving a misrepresentation or a false declaration of any kind. Over and above the dismissal sanction, the appellant reported the employee to the Financial Services Board which, in turn, found her misconduct to be sufficiently serious to have her debarred from practising as a Financial Advisor, a ban that would endure either for life or for a specific period. The employee was not satisfied with her dismissal which she considered unduly harsh, on the basis that there were other employees who had previously committed similar transgressions but were not dismissed. On the misconduct charge and conviction, the commissioner found that the sanction of dismissal was "too harsh" in the circumstances of the case. Accordingly, the commissioner declared that the dismissal of Ms Naidu was procedurally fair but substantively unfair; and he ordered that she be reinstated with effect from the date of her dismissal. The bank was not satisfied with the outcome of the arbitration process and escalated the matter on review before the Court a quo in terms of s 145 of the LRA.The Labour Court, acknowledging that dishonesty has a corroding effect to the trust which the employer is entitled to expect from its employees, nevertheless held that an employer who exhibits a propensity of condoning acts of misconduct performed under dishonest circumstances runs the risk of being ordered by courts to reinstate employees found guilty of acts of misconduct in line with the parity principle. In its judgment, the Labour Courtaccordinglydismissed the review application with costs.

The bank appealed to the LAC which took a different approach to the CCMA and LC, and upheld the appeal, and held the dismissal was fair.

Extract from the judgment:

Ndlovu JA

[34]   Ms Naidu complained that her dismissal was unfair because the same sanction was not imposed on Ms Pin Lai who, according to her, had committed a similar misconduct as hers, yet was not dismissed but only issued with a final written warning. Therefore, her plea raised the issue of alleged inconsistency on the part of the appellant in its treatment of employees in relation to discipline. In other words, the appellant did not follow the parity principle.

[35]   It is trite that the concept of parity, in the juristic sense, denotes a sense of fairness and equality before the law, which are fundamental pillars of administration of justice. In the Australian decision in Green v The Queen, it was said that "the parity principle is an aspect of the systemic objectives of consistency and equality before the law - the treatment of like cases alike, and different cases differently." Indeed, in Chemical Energy Paper Printing Wood & Allied Workers Union and Others v Metrofile (Pty) Limited, this Court also stated:

'[35]   Our law requires that employees who have committed similar misconduct should not be treated differentially. In National Union Metalworkers of SA v Haggie Rand Ltd (1991) 12 ILJ 1022 (LAC) Goldstein J had occasion to consider the fairness of an offer of re-employment with loss of allowances linked to length of service. The learned judge reasoned, in that case, at 1029G-H, that the offer of re-employment was unfair because its acceptance would have resulted in employees losing allowances that depended on length of service. This, the learned judge found, would mean that employees were being unequally punished.

[36]   This principle, also referred to as the 'parity principle', was aptly enunciated in National Union of Metalworkers of SA and Others v Henred Fruehauf Trailers (Pty) Ltd (1994) 15 ILJ 1257 (A) where the court stated at 1264A-D:

'Equity requires that the courts should have regard to the so-called "parity principle". This has been described as the basic tenet of fairness which requires that like cases should be treated alike (see Brassey "The Dismissal of Strikers" (1990) 12 ILJ 213 at 229-30). So it has been held by the English Court of Appeal that the word "equity" as used in the United Kingdom statute dealing with the fairness of dismissals, "comprehends the concept that the employees who behave in much the same way should have meted out to them much the same punishment" (Post Office v Feennell (1981) IRLR 221 at 223). The parity principle has been applied in numerous judgments in the Industrial Court and the LAC in which it has been held for example that an unjustified selective dismissal constitutes an unfair labour practice.'

[36]   However, it ought to be realised, in my view, that the parity principle may not just be applied willy-nilly without any measure of caution. In this regard, I am inclined to agree with Professor Grogan when he remarks as follows:

'[T]he parity principle should be applied with caution. It may well be that employees who thoroughly deserved to be dismissed profit from the fact that other employees happened not to have been dismissed for a similar offence in the past or because another employee involved in the same misconduct was not dismissed through some oversight by a disciplinary officer, or because different disciplinary officers had different views on the appropriate penalty.'

[37]   In SACCAWU and Others v Irvin and Johnson (Pty) Ltd, this Court (per Conradie JA) stated:

'In my view too great an emphasis is quite frequently sought to be placed on the principle of disciplinary consistency, also called the 'parity principle' ... There is really no separate principle involved. Consistency must be measured by the same standards ... Discipline must not be capricious. It really is the perception of bias inherent in selective discipline that makes it unfair. Where, however, one is faced with a large number of offending employees, the best one can hope for is reasonable consistency. Some inconsistency is the price to be paid for flexibility, which requires the exercise of a discretion in each individual case. If a chairperson conscientiously and honestly, but incorrectly, exercises his or her discretion in a particular case in a particular way, it would not mean that there was unfairness to the other employees. It would mean no more than his or her assessment of the gravity of the disciplinary offence was wrong. It cannot be fair that other employees profit from that kind of wrong decision. In a case of plurality of dismissals, a wrong decision can only be unfair if it is capricious, or induced by improper motives or, worse, by a discriminating management policy ... Even then I dare say that it might not be so unfair as to undo the outcome of other disciplinary enquiries. ... If, for example, one member of a group of employees who committed a serious offence against the employer is, for improper motives, not dismissed, it would not ... necessarily mean that the other miscreants should escape. Fairness is a value judgment.'

[38]   There was unchallenged evidence from Ms Andrews to the effect that an employee (one Mike Pillay) who committed "exactly" the same dishonest misconduct as Ms Naidu, was dismissed. In my view, therefore, there seems to be no justification, on the facts of this case, in holding that, just for the single instance of Ms Pin Lai, the appellant exhibited "the propensity of condoning acts of misconduct performed under dishonest circumstances" and that the appellant's tolerance of such acts of misconduct showed "thatit is prepared to live with it".

[39]   I agree with counsel for the appellant that the situation in relation to Ms Pin Lai was not comparable to that of Ms Naidu.

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[42]   Indeed, in accordance with the parity principle, the element of consistency on the part of an employer in its treatment of employees is an important factor to take into account in the determination process of the fairness of a dismissal. However, as I say, it is only a factor to take into account in that process. It is by no means decisive of the outcome on the determination of reasonableness and fairness of the decision to dismiss. In my view, the fact that another employee committed a similar transgression in the past and was not dismissed cannot, and should not, be taken to grant a licence to every other employee, willy-nilly, to commit serious misdemeanours, especially of a dishonest nature, towards their employer on the belief that they would not be dismissed. It is well accepted in civilised society that two wrongs can never make a right. The parity principle was never intended to promote or encourage anarchy in the workplace. As stated earlier, I reiterate, there are varying degrees of dishonesty and, therefore, each case will be treated on the basis of its own facts and circumstances.

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[51]   This Court, in De Beers Consolidated Mines Ltd v Commission for Conciliation, Mediation and Arbitration and Others,stated the following:

'Dismissal is not an expression of moral outrage; much less is it an act of vengeance. It is, or should be, a sensible operational response to risk management in the particular enterprise. That is why supermarket shelf packers who steal small items are routinely dismissed. Their dismissal has little to do with society's moral opprobrium of a minor theft; it has everything to do with the operational requirements of the employer's enterprise.'

[52]   In the present instance, one needs carefully to look at the context of what Ms Naidu actually did and consider whether the commissioner's award which held that her dismissal was substantively unfair and ordered her reinstatement, was a reasonable decision, under the review test referred to above. It is significant to note that the kind of misconduct she committed did not only harm the appellant, as the employer, but it went further and harmed Mr Khan, the appellant's client, who was essentially an innocent outsider. She was clearly aware that her misconduct involved dishonesty and that, in terms of the appellant's disciplinary code, summary dismissal was the appropriate sanction prescribed for such type of misconduct. Of course, it is accepted that not every misconduct offence involving dishonesty warrants a sanction of dismissal. There are varying degrees of dishonesty and, therefore, each case is to be determined on the basis of its own facts on whether a decision to dismiss an offending employee is a reasonable one. Generally, however, a sanction of dismissal is justifiable and, indeed, warranted where dishonesty involved is of a gross nature. In Toyota SA Motors (Pty) Ltd v Radebe and Others, this Court held as follows:

'Although a long period of service of an employee will usually be a mitigating factor where such employee is guilty of misconduct, the point must be made that there are certain acts of misconduct which are of such a serious nature that no length of service can save an employee who is guilty of them from dismissal. To my mind one such clear act of misconduct is gross dishonesty. It appears to me that the commissioner did not appreciate this fundamental point. I hold that the first respondent's length of service in the circumstances of this case was of no relevance and could not provide, and should not have provided, any mitigation for misconduct of such a serious nature as gross dishonesty. I am not saying that there can be no sufficient mitigating factors in cases of dishonesty nor am I saying dismissal is always an appropriate sanction for misconduct involving dishonesty. In my judgment the moment dishonesty is accepted in a particular case as being of such a serious degree as to be described as gross, then dismissal is an appropriate and fair sanction.'

[53]   In De Beers Consolidated Mines Ltd, above, the Court further pointed out that "[t]he seriousness of dishonesty - ie whether it can be stigmatised as gross or not - depends not only, or even mainly, on the act of dishonesty itself but on the way in which it impacts on the employer's business." In the present instance, considering the nature of the appellant's business, there can be no doubt, in my view, that Ms Naidu's dishonesty severely adversely impacted on the business.

[54]   It is common cause that Ms Naidu occupied the position of executive investment broker, which was a senior position within the appellant's establishment. This fact is confirmed by the fairly high salary that she earned at the time of her dismissal. In the performance of her duties, she interacted with various investment clients - both current and prospective - and she did so in her representative capacity of the appellant. Resulting from such interactions, some serious financial transactions involving large sums of money were concluded by her (on behalf of the appellant) with the clients concerned. As such, it was obvious that the appellant would have placed a high level of trust and confidence in her. Indeed, it is a requirement, in terms of the FAIS Act, that a person must have "personal character qualities of honesty and integrity"in orderto qualify for the kind of position which Ms Naidu held. In these circumstances, it followed that she owed a fiduciary responsibility vis-a-vis the appellant towards ensuring that, at all times, she acted and performed her duties in a manner that was in the best interests of both the appellant and its clients. It seems to me, accordingly, that any false declaration or fraudulent misrepresentation that she made to any client - as she did in relation to Mr Khan - constituted a breach of her fiduciary duty and a breakdown in her trust relationship with the appellant.

[55]   On the issue of breakdown in trust relationship, occasioned by an employee's dishonest misconduct, this Court (per Davis JA) in Shoprite Checkers (Pty) Ltd v CCMA and Others,stated the following:

'[T]his Court has consistently followed an approach, laid out early in the jurisprudence of the Labour Court in Standard Bank SA Limited v CCMA and Others [1998] 6 BLLR 622 (LC) at paragraphs 38-41 where Tip AJ said:

"It was one of the fundamentals of the employment relationship that the employer should be able to place trust in the employee... A breach of this trust in the form of conduct involving dishonesty is one that goes to the heart of the employment relationship and is destructive of it."'

[56]   I am satisfied that, on the basis of her dishonest and fraudulent misbehaviour in relation to Mr Khan's matter, Ms Naidu's trust relationship with the appellant was, indeed, irreparably broken down. In my view, any plea of remorse, genuine or otherwise, was, in the circumstances of this case, most unlikely to bring back that trust, which was the cornerstone of her employment relationship with the appellant.

[57]   Accordingly, the commissioner's award did not, in my view, constitute a decision which fell within the range of decisions which a reasonable decision-maker could have made, given the material presented to the commissioner. Hence, the award falls to be set aside and replaced with the order that the dismissal of Ms Naidu was both substantively and procedurally fair. In the circumstances, it is not necessary to deal with the misconduct charges involving the other four clients in respect of which Ms Naidu pleaded not guilty.

The order

[58]   In the result, the following order is made:

1. The appeal is upheld.
2. The order of the Court a quo is set aside and replaced with the following order:



1. 'The arbitration award reference number KNDB13424-08 issued by the second respondent is reviewed and set aside; and replaced with the order that the dismissal of the applicant was both substantively and procedurally fair.
2. There is no order as to costs.'



3. No costs order is made for prosecuting the appeal.