Solidarity and Another v Armaments Corporation of South Africa (Sco) Ltd and Others (JA40/17) [2018] ZALAC 39 (27 November 2018)

Principle:

Where an employee does not have the required qualifications or certification for a particular job, this may trigger impossibility of performance, and if this incapacity is of a permanent nature, it may warrant dismissal. However in employment law the question that still remains is whether it was fair in the circumstances for the employer to exercise that election.

Facts:

Armscor's conditions of employment provide that an appointment of an employee to its staff establishment is subject to "obtaining and maintaining" an applicable security clearance. Those "who fail to qualify for any grade of security clearance as a result of a negative vetting content will be dismissed or their contract of employment terminated." Significantly, s 37(2) of the Defence Act, 42 of 2002 provides that "A member or employee contemplated in subsection (1)(a) may not be enrolled, appointed or promoted, receive a commission or be retained as a member or employee, unless such member or employee has been issued with the appropriate or provisional grade of security clearance by the Intelligence Division.'

Mr Joubert was in the employ of Armscor for more than three decades, throughout which he obtained the required security clearance certificates appropriate to his position. On 23 October 2006 he was issued with a grade "Secret" security clearance certificate which expired on 11 September 2011. In accordance with Armscor's Security Practice Mr Joubert submitted an application to renew his security clearance certificate to Armscor's Personnel Evaluation Division on 26 September 2011. For the period 11 September 2011 to 26 November 2012 Mr Joubert held a security clearance certificate classified as "Confidential". Thereafter, for reasons never explained to him or to Armscor the vetting panel of the Intelligence Division of the SANDF refused to grant him all grades of security clearance, let alone at the highest level he previously enjoyed.

His employment was terminated by letter in which he was notified of his right to appeal. This was not successful and Mr Joubert referred an unfair dismissal dispute to the CCMA. The commissioner rejected Armscor's argument that it did not dismiss Mr Joubert and that the termination of his services came about by the operation of the law, viz s37(2) of the Defence Act. He further rejected its contention that it had no discretion in the matter but to terminate Mr Joubert's services. The commissioner was of the view that Armscor could have placed Mr Joubert on suspension or considered alternative sanctions short of dismissal. He found that Armscor opted to terminate Mr Joubert's services by merely issuing a notice to that effect without providing reasons for the termination of employment as envisaged in s188 of the LRA.

The commissioner reasoned that Armscor was required to decide a fair reason for the dismissal and to act in accordance with the procedures laid down in the LRA, which it had failed to do. The commissioner concluded that Mr Joubert's dismissal was both substantively and procedurally unfair. He reinstated him retrospectively on the same terms and conditions, with back-pay of R737 280.00 (nine months' remuneration).

Armscor lodged a review application with the Labour Court to challenge the finding that the dismissal was substantively unfair and the relief awarded by the commissioner. Armscor conceded the procedural unfairness of the dismissal and consequently it did not require any determination.

The LC held that Mr Joubert's dismissal was substantively fair because it resulted from a legal prohibition on further employment brought about by s37(2) of the Defence Act and Armscor's internal policies. The Court found the injunction (that employees who fail to qualify for any grade of security clearance as a result of a negative vetting outcome will be discharged from their services) to be patently fair and reasonable. The LC found the commissioner's reinstatement order to be incompetent and unsustainable, because in law a party cannot enforce a contract that is in contravention of a statutory provision, in this case s37(2) of the Defence Act.

On appeal the LAC viewed the facts of this case from a different perspective. The LAC noted that it needed to consider whether the loss by Mr Joubert of all levels of security clearance triggered impossibility of performance: put differently, whether the termination of Mr Joubert's services by Armscor was actuated by reasons of his incapacity. If the incapacity was permanent, this would therefore warrant dismissal.

But on the facts of this case the LAC found that Armscor terminated Mr Joubert's services with immediate effect for reasons that he had been refused all grades of security clearance, before he had been given the opportunity under the Defence Act to challenge the refusal to grant him the required security clearance. The termination letter was issued before the employer had finally established that it had become permanently and objectively impossible for the employee to be retained in its service. In other words, the incapacity had not yet been determined to be of a permanent nature that warranted the employee's dismissal. The LAC accordingly held that the dismissal was substantively unfair.

The LAC agreed with the LC that the commissioner committed a reviewable irregularity by reinstating Mr Joubert, and said under the circumstances of this case he should have been awarded compensation. As his termination was effected without providing a fair reason and following due process, the maximum compensation of 12 months' salary under s194(1) of the LRA was justified.

This judgment clearly recognises that where an employee does not have the required qualifications or certification for a particular job, this may trigger impossibility of performance, and if this incapacity is of a permanent nature, it may warrant dismissal. However in employment law the question that still remains is whether it was fair in the circumstances for the employer to exercise that election. An employer in such circumstances would be wise to follow the incapacity guidelines under the Dismissal Code of Good Practice.

Extract from the judgment:

Phatshoane ADJP:

[22]   This appeal lies, in the main, against the substantive fairness of Mr Joubert's dismissal. It remains to be considered whether the loss by Mr Joubert of all levels of security clearance triggered impossibility of performance. Put differently, whether the termination of Mr Joubert's services by Armscor was actuated by reasons of his incapacity.If the answer to the question is in the affirmative then it has to be established whether the incapacity was temporary or permanent, and therefore, warranting being visited with a sanction of dismissal.

[23]   The CCMA's awards are reviewed on the grounds of, inter alia, unreasonableness. The test is whether the decision reached by the commissioner is one that a reasonable decision-maker could not have reached.

[24]   In his work Workplace Law, Mr John Grogan posits, correctly in my view, that incapacity need not arise from illness or injury. Employees may be dismissed for incapacity arising from any condition that prevents them from performing their work. In other words, incapacity may give rise to a species of impossibility of performance.

[25]   The following remarks in National Union of Mineworkers and Another v Samancor Ltd (Tubatse Ferrochrome) and Others are pertinent to this case:

'While ordinary principles of contract permit a contracting party to terminate the contract if the other party becomes unable to perform, that is not the end of the matter in the case of employment. The question that still remains in such cases is whether it was fair in the circumstances for the employer to exercise that election. In making that assessment the fact that the employee is not at fault is clearly a consideration that might and should properly be brought to account.'

[26]   In terms of s37(1) (a) of the Defence Act the Minister of Defence may prescribe different grades of security clearance to be issued by the Intelligence Division for various categories of members, the employees of Department of Defence and employees of Armscor. In terms ofs37(2) those members or employees may not be enrolled, appointed or promoted, receive a commission or be retained as members or employees, unless they had been issued with the appropriate or provisional grade of security clearance by the Intelligence Division. Section 37(4) provides that the Intelligence Division must, on the instruction of the Secretary for Defence, determine whether any security clearance or a specific grade of security clearance should be issued to any member or employee concerned.

[27]   In the letter of termination of service, referred to earlier, Mr Joubert was informed that he had been refused all grades of security clearance by the Intelligence Division and consequently that his contract of employment was terminated with immediate effect. The argument by Armscor that the dismissal of Mr Joubert was actuated by incapacity is not new. As correctly found by the Court a quo, it was one of the issues the commissioner was enjoined to determine. As more fully appearing on the Pre-arbitration minutes amongst issues that had to be considered by the commissioner was whether: "(T)he true reason for dismissal falls within the definition of 'incapacity' as contemplated in the LRA. Further, whether the reason for dismissal had to be "classified as being due to incapacity."

[28]   There can be no question that s37 of the Defence Act makes it a prerequisite for an employee of Armscor to be issued with an appropriate grade of security clearance in order tobe retained in its employ. The policies relied upon by Armscor, in effecting termination in this case, have the same import. They also have their genesis in s37 of the Defence Act. The argument by Ms Engelbrecht, for Solidarity and Mr Joubert, that Armscor did not rely on s37(2) of the Defence Act, as a motivation for the termination of employment but on its employment policies, is therefore unmeritorious. It is axiomatic that Mr Joubert's termination of service was based on supervening impossibility of performance. This constituted a form of incapacity to fulfil the attendant contractual obligations. As correctly found by the Court a quo Mr Joubert's inability to perform his services, due to the legal impediment imposed by s37 of the Defence Act and Armscor's corresponding employment policies, falls squarely within the ambit of a dismissal based on capacity. However, this is not the end of the enquiry.

[29]   Section 39(1) of the Defence Act requires the Secretary for Defence to give written notice to every member or employee in respect of whom a determination, of whether any security clearance or a specific grade of security clearance should be issued, has been made by the intelligence Division as envisaged in s37(4). The Secretary is further required, in terms of s39(2), to furnish in writing to every member or employee, whose security clearance or particular grade of security clearance has been refused, downgraded or withdrawn, the grounds and reasons for such refusal, downgrading or withdrawal. Very importantly, in terms ofs39(3)no security clearance or specific grade of security clearance may be refused, downgraded or withdrawn without the member or employee "who will be affected thereby being afforded reasonable opportunity to present information regarding such matter." Section 39(4)(a) provides that the member or employee concerned may, within 14 days after receipt of the grounds and reasons from the Secretary of Defence referred to above, lodge a written objection against the refusal, downgrading or withdrawal, as the case may be, with the Secretary for Defence and further furnish the Secretary with such written representations, statements and documents as the member or employee deems necessary for a review by the Personnel Security Review Board ("the PSRB").

[30]   The argument by Armscor that s39 of the Defence Act did not apply to its employees because they were not "members or employees" as defined in the Defence Act is devoid of substance. The Secretary of Defence is charged with the responsibility of giving notice of security clearance or refusal thereof to "every member or employee" contemplated in s37(4). The "members or employees" contemplated in 37(4) includes the employees of Armscor.

[31]   The PSRB is established by the Minister of Defencein terms of s40 of the Defence Act. The board is obliged to review any objection against the refusal, downgrading or withdrawal of security clearance, as the case may be, referred to it in terms of section 39(4)(c). It is further imbued with the power to confirm the determination of security clearance made by the Intelligence Division or to set it aside and substitute it as contemplated in s41(2) of the Defence Act.

[32]   So far it is clear that the condition precedent introduced by s37(2), to the effect that an employee may not be retained in the services of Armscor unless he/she had been issued with the appropriate or provisional grade of security clearance, cannot be implemented independently of ss 39 and 41 of the Defence Act, particularly in circumstances where an employee has lodged an objection against the negative vetting outcome as in this case. What Armscor did, on the basis of its policies which are founded on s37(2), was to terminate Mr Joubert's services with immediate effect for reasons that he had been refused all grades of security clearance. This notwithstanding, Mr Joubert was advised of his right to "appeal" the decision within 30 days from the date of receipt of the notice of termination.

[33]   Clause 5.12.1 of Armscor Security Clearance Practice, A-Prac-2033, issue 3 Provides:

'Any person who regards himself /herself as having been wronged in the conditional issuing, downgrading or denial of a security clearance, has the rightto apply for revision of his/her security status by the PSRB. An application for such an appeal to the PSRB must be made personally and submitted via APED within 60 days after notification of the clearance decision to the requesting body.'

[34]   An employee's right to apply for revision of the decision in respect of the grade of security clearance by the Intelligence Division is repeated in Clause 5.15. of A-Prac-2033, issue 3, which provides in part:

'5.15.1.   In the event of a clearance refusal, the requesting body will be informed immediately whether a lower grade of clearance was issued or all grades of clearance refused. Reason(s) for the refusal will not be disclosedin order to maintain confidentiality regarding the person concerned or references consulted.

5.15.2.   Course of action then lies within the following options:

5.15.2.1.   The person concerned may, within 30 days of notification by his/her manager, exercise his/her right to request a revision of the clearance decision by personally lodging a written request, via APED to the PSRB, for revision...'

[35]   The argument by Armscor that Mr Joubert was disqualified from lodging an objection in terms of its Security Clearance Practice because he was denied all grades of security clearance cannotbe sustained for two reasons. First, Armscor itself extended an invitation to Mr Joubert to file an objection if he wished to do so. Second, Clause 5.12.2 of Armscor's Security Clearance Practice-A-Prac-2033 sets out only two categories of persons who are disqualified to lodge an objection. Thisincludes: persons who had been refused security clearance during the recruitment process and whose appointment had not yet been confirmed prior to the denial of a security clearance; and the independent contractors, who tender to work on defence projects. Mr Joubert did not fall into any of the two categories and was therefore entitled to lodge an objection.

[36]   Ms Engelbrecht argued that the aforesaid clause 5.12.1, to the extent that it provides that: "Any person who regards himself /herself as having been wronged in the conditional issuing, downgrading or denial of a security clearance, has the right to apply for revision of his/her security status by the PSR," treats the denial of security clearance in the first round, before review of the decision, as conditional. The net effect of this, she contended, is that the legal impediment had not been finally determined. In countering this submission, Armscor contended that reliance on para 5.12.1 of the policy cannot avail the appellants because it provides for an employee having the right to apply to the PSRB for revision of "the conditional issuing, downgrading or denial of security". The word "conditional", it was argued, relates only to "the conditional issuing of security clearance" and not "denial of security clearance". The denial of security clearance to Mr Joubert was not conditional, the argument continued.

[37]   As I see it, nothing turns on the argument that denial of all grades of security clearance by the Intelligence Division was conditional pending the review of the decision. What is crucial here is that there rested an obligation on the PSRB to review any objection referred to it in terms of section 39 (4)(c). The difficulty with this case is that PSRB never reviewed the decision of the Intelligence Division which refused Mr Joubert all grades of security clearance and, worse, the reason(s) for the refusal of all the grades of security clearance remains unexplained.

[38]   A fair procedure as set out in s39 read with s41 of the Defence Act and Clauses 5.12.1 and 5.15 of Armscor Security Clearance Practice A-Prac-2033 was designed to create a platform where the grounds and reasons for the refusal, downgrading or withdrawal of security clearance would be provided to an aggrieved employee so as to afford such an employee a reasonable opportunity to present information, make representations and/or statements to the PSRB regarding the decision to, inter alia, refuse the security clearance. The grounds or reasons for the refusal of a grade of security clearance are, in my view, fundamental to the establishment of the substantive basis of a dismissal contemplated in s37(2) of the Defence Act. In other words, substantive fairness of the decision to terminate under s 37(2) could not have been determined in the absence of reasons for the decision not to grant the security clearance.

[39]   The procedure laid down in s39 of the Defence Act must precede the final adjudication of the review of the decision refusing the security clearance by PSRB. In my view, if the final determination has not been made, then the substantive reason for the dismissal under section 37(2) has not been determined. In this case the termination letter was issued before Armscor had finally established that it had become permanently and objectively impossible for Mr Joubert to be retained in its service. It follows that, at the time of issuing the letter of termination, the incapacity had not yet been determined to be of a permanent nature that warranted Mr Joubert's dismissal.It was only once the review process had been completed, and resulted in the confirmation of the decision of the Intelligence Division, that it could be said that Mr Joubert's incapacity had become permanent.

[40]   It is common cause that two of Armscor's employees were allowed or retained in its service without the requisite security clearance certificates. In the final analysis, there could never have been any rationality to the decision by Armscor to terminate the employment of Mr Joubert prematurely and prior to the determination of the review. The conclusion is irresistible that the dismissal was substantively unfair.

[41]   While it is true that the dismissal came about as a result of the legal impediment brought about by s 37(2), the Court a quo erred in holding that such a dismissal was fair without assessing the impact of s39 on the substantive fairness thereof. In Head of Department of Education v Mofokeng and Others, this Court held that the reviewing court must consider whether, apart from the flawed reasons of or any irregularity by the arbitrator, the result could be reasonably reached in the light of the issues and the evidence. Mere errors of fact or law may not be adequate to vitiate the award. Although the commissioner did not devote his attention to what the correct categorisation of the dismissal could have been on the available material before him, his conclusion, although inelegantly put, that Armscor was required to prove a fair reason for the dismissal and to afford Mr Joubert a fair hearing is unassailable.

[42]   On the question of relief, as correctly found by the Court a quo, an award of reinstatement was not legally competent. This is so for the following reasons:

42.1.   First, Mr Joubert did not hold the relevant security clearance certificate and was therefore disqualified to hold the position of senior manager (technical) that he held at the time of his dismissal. In these circumstances reinstatement would not be reasonably practicable in terms of section 193(2)(c) of the LRA. In Maepe v Commission for Conciliation, Mediation & Arbitration and Another, this Court made this instructive illustration: If the evidence before an arbitrator or the Labour Court in an unfair dismissal dispute between A and B, where A who had been employed by B as a driver, established that his driver's licence was withdrawn after his dismissal with the result that he could no longer drive lawfully, it would definitely be "reasonably impracticable" within the meaning of that phrase in s193(2)(c) for the employer to reinstate him/her because in such a case the employer would not be able to require the employee to perform his duties without requiring the employee to commit a criminal offence. Mr Joubert's position is analogous.

42.2.   Second, what was a temporary supervening impossibility of performance has become permanent because the review of the decision to deny Mr Joubert all grades of security clearance came to naught.

[43]   The Court a quo cannot be faulted in concluding that the commissioner committed a reviewable irregularity by reinstating Mr Joubert into Armscor's employ. The remedy available to Mr Joubert, under these circumstances, is that of compensation. Regard being had to the egregious manner in respect of which his termination was effected, without providing a fair reason and following due process, the maximum compensation allowed in terms of s194(1) of the LRA is justified.

[44]   Armscor did not challenge a costs order that was made against it in respect of the aborted review that was instituted under Case No: JR 1510/13. There can be no reason to upset the order of the Court a quo in respect of those costs. Concerning the costs in respect of this appeal, Mr Myburg argued that this is not a case where a costs order was calledfor. Ms Engelbrecht urged that costs follow the result. Having had regard to the requirements of law and fairness, I am inclined to award costs. In the result, I make the following order.

Order

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

    1. "The dismissal of Mr Jacobus Martinus Joubert, the fourth respondent, was substantively and procedurally unfair;
    2. The Armaments Corporation of South Africa (SOC) Ltd (Armscor), the applicant, is ordered to pay Mr Jacobus Martinus Joubert, the fourth respondent, compensation equivalent to his 12 (twelve) months' salary;
    3. There is no order as to costs in respect of the review application filed under Case No: JR 1961/13;