Nokeng Tsa Taemane Local Municipality v Louw NO and Others (JA7/16) [2018] ZALAC 37 (17 October 2018)

Principle:

A threat of civil and criminal proceedings in relation to financial misconduct cannot reasonably constitute a threat rendering continued employment intolerable.

Facts:

The employee, a manager of the income section in the finance department, was issued with a notice of suspension pending an investigation into allegations of financial misconduct by him. About six months later he was furnished with a charge sheet in respect of a disciplinary hearing. It was alleged that the employee had caused the municipality financial losses.

The employee's attorneys directed a letter to the municipality indicating that he was prepared to resign on payment of between two-three months' salary in settlement of the matter. The municipality's attorneys responded on the same day stating that the municipality was prepared to accept the employee's resignation without any financial settlement. This letter warned that the disciplinary enquiry would go ahead 'in full force', saying that criminal and civil action was being considered.

The employee's attorneys immediately replied that the threats contained in the letter left the employee with no alternative but to resign, because the trust relationship between the parties has irretrievably broken down and the threats amounted to the constructive dismissal. The employee failed to attend the disciplinary hearing scheduled for the next day, and filed an unfair dismissal claim with the bargaining council. The arbitrator found that the employee had failed to show on a balance of probabilities that the municipality had made the continuation of employment intolerable. The employee then filed an application in the Labour Court to review and set aside the arbitration award.

The Labour Court construed the threat in the letter as intended to coerce the employee into resigning without compensation. It said that the mere reporting of the applicant to the police and the institution of civil proceedings would have an "extremely deleterious impact on the applicant." The LC found that a reasonable man "guilty or not" would not want to face the "dangerous" prospects of criminal and civil proceedings and thus the employee had established that he was constructively dismissed. The LC set aside the arbitration award and ordered the municipality to pay three months' remuneration as compensation and the costs of the application.

On appeal, the LAC set aside the Labour Court's order. The LAC held that the threat of civil and criminal proceedings in relation to financial misconduct cannot reasonably constitute a threat rendering continued employment intolerable. Any employee who is accused of illegal activities or financial impropriety may expect that the employer has various options, be they disciplinary, civil and/or criminal.

This LAC judgment confirms that threats by an employer to take legal or disciplinary action against an employee would not ordinarily provide a basis for constructive dismissal.

Extract from the judgment:

Murphy AJA

[12]   The municipality argues on appeal that Louw was not dismissed but voluntarily resigned with the aim of avoiding the disciplinary hearing and that the commissioner was correct to dismiss the claim of constructive dismissal.

[13]   The test for determining whether an employee was constructively dismissed is well-established. The onus rests on the employee to prove that the resignation was not voluntary, constituted a constructive dismissal and was not intended to terminate the employment relationship. The enquiry is whether the employer without reasonable and proper cause conducted itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between the employer and employee. The court must look at the employer's conduct as a whole and determine whether its effect, judged reasonably and sensibly, is such that the employee cannot be expected to put up with it. The test does not require that the employee have no choice but to resign, but only that the employer should have made continued employment intolerable.

[14]   The question to be answered in this case, therefore, is whether paragraph 4 of the letter of 11 November 2008 constituted a threat which made continued employment intolerable.

[15]   The threat of civil and criminal proceedings in relation to financial misconduct cannot reasonably constitute a threat rendering continued employment intolerable. By posing the threat, the municipality aimed at avoiding what might have been a lengthy disciplinary hearing; but also quite legitimately signalled that it reserved its rights to pursue criminal or civil proceedings in the event of financial impropriety being established at the disciplinary hearing. The municipality was entitled to adopt this stance in that it potentially had a legal obligation to follow such a course. Its conduct was legitimate, appropriate and defensible and of an order that an employee might reasonably be expected to put up with it. Any employee who is accused of illegal activities or financial impropriety may ordinarily expect that the employer has various options, be they disciplinary, civil and/or criminal.

[16]   The standpoint of the Labour Court that the municipality acted unreasonably in posing such a threat is hence untenable. If Louw were innocent, he could have faced discipline and avoided criminal and civil proceedings. It is clear that Louw made an informed choice to resign in order to avoid discipline and any civil or criminal proceedings that could have followed upon his discipline. By resigning, he pre-empted the possibility of a proper investigation and determination of the misconduct by the municipality. Having made this choice, he was not entitled to seek relief by way of compensation. The appeal must accordingly succeed. However, the circumstances of this case do not justify awards of costs.

[17]   The following order is made:

17.1.   The appeal is upheld and the order of the Labour Court is set aside and substituted with the following:

"The application for review is dismissed"