Public Newsletter
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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 dealing with "The Dismissal of Executive Employees", in light of the recent dispute between Old Mutual and its ex CEO Peter Moyo. We also discuss three new cases: The first case asks when is an employer liable for its employee's actions? The second case deals with when a settlement agreement can be set aside. The third case discusses how to prove the breakdown of the employment relationship.
This public newsletter is a free edited version of the subscriber newsletter.
RECENT CASES
When is an employer liable for its employee's actions?
A basic principle in employment law is that the employer is liable for the wrongs committed by its employees in the course and scope of their responsibilities. This is called 'vicarious liability'.
Sometimes the employee deviates from the 'course and scope' of his/her employment, as determined by the functions the employee was employed to perform. For example, a driver may deviate from a designated route and drive to a friend's house in the company vehicle to have lunch: is the employer then liable if the employee negligently causes a collision whilst off route?
For vicarious liability to apply, the test is 'whether the deviation was of such a degree that it can be said that in doing what he or she did, the employee was still exercising the functions to which he or she was appointed or was still carrying out some instruction of his or her employer'.. If the answer is yes, the employer will be liable no matter how badly, dishonestly or negligently those functions or instructions were being exercised by the employee.
There are also situations in which the employer can be found to be liable even when the employee is not exercising allocated functions or carrying out the employer's instructions. This happened in the recent case of Stallion Security (Pty) Limited v Van Staden (526/2018) [2019] ZASCA 127 (27 September 2019).
Stallion Security (Pty) Ltd (Stallion) provides security services to its customers. One of Stallion's employees, a site manager, murdered the financial manager of one of Stallion's customers, Bidvest. The cardinal issue in the appeal was whether Stallion was vicariously liable for the resultant loss of support suffered by the wife of Bidvest's murdered financial manager.
The facts were that the site manager, who was on sick leave at the time due to his unusual behaviour, accessed the office of the financial manager after hours, using the override key provided to him by Stallion, and demanded R50 000 from him. The financial manager did not have the safe keys with him and indicated that he could only provide R35 000 that he had in his personal bank account. The site manager coerced the financial manager to make an electronic transfer of that amount into his bank account. He then escorted the financial manager out of the building into his car, forcing him to drive to a mall, where he shot and killed him. The site manager then ran away. He was apprehended but escaped from custody. Later, subsequent information caused him to be presumed dead.
The High Court held that although the intentional wrongs of the employee were committed entirely for his own purposes, the financial manager's murder was nevertheless sufficiently linked to the site manager's employment with Stallion for it to be held vicariously liable for the loss suffered by the financial manager's wife. The Court essentially relied on the strong causal link between the site manager's employment and the murder, the risk of abuse created by his employment and the duties that Stallion owed to Bidvest through its site manager. The Court granted judgment against Stallion in favour of the financial manager's wife for R1 680 000 as a result of her loss of support.
On appeal, the SCA upheld the High Court judgment because, using an objective test, Stallion had created a risk of harm through the work systems it had in place (the site manager had access to the financial manager's work area through an override key), giving rise to a sufficiently close link between the harm caused by an employee and the business of the employer.
This case serves as a warning to employers that they may well be liable for the actions of their employees, even when employees commit misconduct and act contrary to instructions given to them. In assessing the employer's vicarious liability, the risk of harm created by the employer may constitute a relevant consideration in giving rise to a sufficiently close link between the harm caused by its employee and the business of the employer. Whether the employer had created the risk of the harm that materialised, must be determined objectively.
When can a settlement agreement be set aside?
AMCU referred an organisational rights dispute against Murray & Roberts (M&R) to the CCMA. On the day the dispute was scheduled for conciliation, M&R raised the point that for AMCU to become entitled to the organisational rights, it was legally required to become a member of the MEIBC, and in order to become a member it was required to show that it had at least 5000 members in the industry.
As a consequence of this information M&R and AMCU entered into a written settlement agreement, on a pre-printed, pro-forma CCMA settlement agreement form. AMCU agreed to withdraw the dispute and to submit its audited membership figures to the MEIBC in order for it to become a member of that bargaining council so as to secure organisational rights.
Later AMCU notified M&R in writing that it had complied with the terms of the settlement agreement and now wanted to exercise "section 12, 13, 14, 15 and 16 organisational rights" at M&R's projects in the Witbank/Ogies area. M&R did not respond so AMCU again referred an organisational rights dispute to the CCMA. In this referral form AMCU indicated that the result it required was for M&R to grant it organisational rights as it had members employed by M&R.
At the CCMA M&R raised a preliminary point that the matter was 'res judicata' (a Latin term meaning that a matter has been already been decided on its merits and so cannot be not subject to litigation again between the same parties). The CCMA issued a jurisdictional ruling in which the preliminary point was upheld, having taken into account the settlement agreement. It was ruled that in those circumstances the CCMA had no jurisdiction to determine the organisational rights dispute referred to it.
On review in the Labour Court AMCU asked to court to set aside the CCMA's jurisdictional ruling and the earlier conciliation proceedings, which culminated in the conclusion of the settlement agreement. AMCU sought to have the settlement agreement set aside mainly on the grounds of mistake.
The Labour Court upheld AMCU's argument that its representative at the first referral laboured under a mistake when concluding the settlement agreement and that the mistake was induced by what the Commissioner and M&R's representative had stated, but also found that even M&R's representative had been labouring under a mistake as to the state of the law at the time.
The Labour Court said that an agreement founded upon a common mistake, which mistake is impliedly treated as a condition which must exist in order to bring the agreement into operation, can be set aside formally if necessary, or treated as set aside and as invalid without any process or proceedings to do so. The Labour Court then went on to find that the erroneous interpretation of section 18 of the LRA influenced the conclusion of the settlement agreement, as both parties held the mistaken view that AMCU's eligibility for organisational rights must be preceded by compliance with the thresholds in various collective agreements, read with the constitution of the MEIBC.
The settlement agreement was thus held to have been concluded on the basis of a common mistake. The Labour Court found that AMCU would not have agreed to settle the dispute if it had known what the true legal position was and that, similarly, M&R would not have adopted the stance it took if it had been aware of the correct legal position. For those reasons the Labour Court set aside the settlement agreement and the jurisdictional ruling following the second CCMA referral.
On appeal the LAC in Murray and Roberts (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (JA40/2018) [2019] ZALAC 58 (20 August 2019) upheld the LC's decision. The LAC confirmed that the settlement was based on a wrong assumption of the law; and that AMCU would not have entered into the settlement agreement if it knew what the true legal position was. AMCU had therefore made out a case that the settlement agreement was void because of the parties' common mistake.
The learning from this case is that a party who wishes to set aside a contract or settlement agreement on the basis of a common mistake, must be able to prove that:
- it was based on a common assumption;
- that assumption was incorrect; and
- the subject-matter of the assumption was vital to the transaction - in other words, had both parties been aware of the true position, the transaction would not have been entered into.
Courts have in recent times questioned the approach adopted in the well known Edcon 2009 SCA judgment that, to prove the fairness of a dismissal, an employer must lead evidence to show that the employment relationship has broken down. For example the LAC in Autozone v Dispute Resolution Centre of Motor Industry and Others (JA52/2015) [2019] said this may not be necessary if this is apparent from the nature of the offence. Impala Platinum Ltd v Jansen and others (2017) 26 LAC also found that where an employee is found guilty of gross misconduct, it is not necessary to lead evidence about a breakdown in the trust relationship. This issue has again arisen in a recent LAC decision.
In this case an employee was employed as a senior process operator at a mining refinery which produced platinum group metals (PGM). These metals are of a very high value and susceptible to theft. The employer has a well-known rule that any PGM found at or around the refinery must be reported immediately to security or management and must not be moved, touched or picked up.
Steenkamp, the employee's superior, was working with the employee in a cab of a tanker, and discovered hidden under the "foot-pedal" a crudely sealed black bag. Steenkamp showed the bag to the employee who told Steenkamp not to report the bag to the security but to throw it away. Steenkamp ignored this and promptly reported both the bag and the statement made to him by the employee to security.
An investigation established that the bag contained just over 3.25 kg of PGM worth over R450 000.00. It was never clarified how the bag got to be where it was found, who was responsible for placing it there and for what purpose.
Some six months later, the employee was charged for gross misconduct. The misconduct was the statement he had made to his supervisor that he should throw away the bag. In the six months preceding the disciplinary hearing, both the employee and Steenkamp took their annual leave and, when not on leave, they worked together. A hearing could not take place for about two of the six months, but in the time that both men were not on leave, they continued to work together without problems.
At the hearing and subsequently at the CCMA arbitration, it was found that the employee had uttered the words ascribed to him by Steenkamp. At the hearing he was found guilty of gross misconduct for violating an essential and fundamental rule at the workplace by asking Steenkamp to discard the bag, and was dismissed.
The employee was reinstated by the CCMA arbitrator who found that the dismissal was too harsh a penalty and was substantively unfair. The arbitrator was not satisfied that the relationship between the employer and employee had broken down to the extent that dismissal was the only appropriate sanction. The arbitrator financially penalised the employee by only awarding two months' back-pay and the reinstatement was not backdated to the date of his dismissal.
The employer reviewed the CCMA's award. The Labour Court set aside the award and substituted it with an order that the dismissal was substantively fair but procedurally unfair, and ordered the employer to pay the employee five months' salary as compensation.
On appeal by the employee to the LAC in Khambule v National Union of Mine Workers and Others (JA89/17) [2019] ZALAC 61 (24 July 2019), the court was satisfied, after considering the evidence, that the CCMA award should be interfered with. The commissioner had found the employee had committed the misconduct complained of and had decided that a severe financial penalty was more appropriate than the employee's dismissal. On the facts of the case the LAC found that the award could not be said to be unreasonable and as such, the LC erred in interfering with it. The LAC granted the employee's appeal.
In coming to its conclusions, the LAC confirmed the following principles:
- An employer is not obliged to lead evidence to prove that the trust relationship has broken down, if the facts speak for themselves;
- But if the employer specifically seeks dismissal on the basis of a breakdown in the trust relationship, then it must lead evidence to prove the breakdown;
- Even if evidence is led of a breakdown in the relationship, it is the commissioner who must determine whether dismissal in the circumstances of the matter before him is the appropriate sanction.
by Prof Alan Rycroft
The very public spat between Old Mutual and its fired CEO, Peter Moyo, has had serious implications for both Moyo and Old Mutual. The 174-year-old insurer has apparently wiped R6.8 billion off its market cap since May when it cited a material breakdown in confidence and trust for its termination of Moyo's contract.Moyo was suspended for an alleged conflict of interest. The Company fired him three weeks later, a decision Moyo successfully challenged in the High Court in Johannesburg. Old Mutual has prevented Moyo from returning to work on grounds it is appealing the ruling to temporarily reinstate him. Moyo was issued with another notice of termination in August.
In this article Prof Rycroft discusses the legal principles involved in dismissing executives and the overlap between company law and labour law.
Read more (note - only available to Worklaw subscribers)
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Bruce Robertson
October 2019
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