South Africa: The Dangers Of Providing In Employment Contracts That A Dismissal Must Be For A Fair Reason And Follow A Fair Procedure. A Recent Lesson From The Labour Court

Last Updated: 2 December 2013
Article by Muzi Khoza

Most Read Contributor in South Africa, September 2018

Some employers qualify the termination provisions in their standard employment contracts, by stating that they will only terminate the employee's employment where a fair reason exists to do so and after following a fair procedure.  Sometimes this is done to give employees the comfort of seeing in black and white that they won't be dismissed without fair cause and fair process, and in other instances it is just intended as a restatement of the statutory right not to be unfairly dismissed.  However, an application heard recently in the Labour Court (in the matter of Ngubeni v National Youth Development Agency) illustrated the possible consequences for employers of doing this.

Factual background

Mr Ngubeni ("Ngubeni") was employed by the National Youth Development Agency ("the NYDA") as its chief executive officer on a fixed term contract that in the ordinary course would expire automatically on 31 October 2014.

During July 2013 the NYDA instituted disciplinary proceedings against Ngubeni in respect of various allegations of misconduct. When initiating the disciplinary proceedings the NYDA addressed a letter to Ngubeni on 27 July 2013 informing him of the allegations of misconduct and of his rights during the disciplinary process.  Amongst other things, Ngubeni was informed that he had the rights to a "bona fide" hearing, the right to be present at the hearing, the right to a timeous hearing, the right to adequate notice prior to the hearing and ample opportunity to consult a representative, the right of representation, the right to state a case, to call witnesses, to a reasoned finding, to cross-examine witnesses, to be treated as innocent until found guilty and to state mitigating factors.

The purpose of affording Ngubeni these rights was apparently aimed at ensuring that Ngubeni received a 'fair disciplinary procedure' for the purposes of clause 10.1 of his fixed term contract of employment.  Clause 10.1 of the contract of employment regulated the termination of the contract.  It read:

"10.1 Misconduct

The employment of the employee may be terminated at any time, either summarily or on notice by the Agency after a fair disciplinary procedure establishes that the employee is guilty of any misconduct or the Employee has committed a breach of material obligation under this agreement which is incompatible with a continued employment relationship, or if the Employee is found guilty of any act which would, at common law or in terms of any applicable statute, entitle the Agency to terminate the Employee's employment."

Ngubeni was subsequently called to a disciplinary hearing before an independent chairperson, a practising advocate, who was appointed by the NYDA to chair the hearing.  The hearing commenced in August 2013 and sat for four days in August and September 2013.  Once the NYDA had led its witnesses the NYDA closed its case.  Ngubeni did not immediately commence leading his evidence in his defence but rather made an application for the dismissal of the "charges" against him on the basis that his guilt had not been proved by the evidence of the NYDA.  The NYDA opposed Ngubeni's application and on 23 September 2013 the independent chairperson dismissed Ngubeni's application.  The enquiry was then postponed to 27 September 2013, and on that date, a bundle of documents that Ngubeni intended to use in his defence was given to the NYDA's representative.  The NYDA's representative took the view that the NYDA had been ambushed by the new documentation and the enquiry was then postponed at the NYDA's request.

Subsequent to this postponement, and in light of the delays that had been experienced in concluding the hearing, the Board of the NYDA, apparently confident that Ngubeni was in fact guilty of the allegations of misconduct made against him, took a decision to terminate his employment.  This decision was taken before Ngubeni could call any witnesses or himself testify in his defence and before the enquiry initiated by the NYDA had completed its work.

The case made by Ngubeni before the court

Aggrieved by the decision of the Board, Ngubeni brought an urgent application at the Labour Court, arguing that the NYDA breached his contract of employment when it decided unilaterally to terminate the contract in the face of the uncompleted disciplinary enquiry.  Ngubeni sought an order re-instating him to his position so that the enquiry could continue and the independent chairperson could make a decision regarding whether he was guilty and if so, whether the termination of his employment was warranted.

Significantly, Ngubeni did not rely on any rights or remedies in terms of the Labour Relations Act No. 66 of 1995 ("the LRA").  He rather brought the application in terms of s 77(3) of the Basic Conditions of Employment Act No. 75 of 1997, which confers concurrent jurisdiction on the Labour Court (with other civil courts) to determine any matter concerning a contract of employment.  He argued that his dismissal was (contractually) unlawful as he had been dismissed in breach of clause 10.1 of his contract of employment.

Ngubeni sought an order for the specific performance of his employment contract against the NYDA and he asked the Court to restore the employment relationship, at least until the NYDA had complied with clause 10.1 of his contract of employment.  He contended that clause 10.1 of his contract of employment expressly required the NYDA to afford him a fair disciplinary procedure in all circumstances before dismissing him for misconduct and he therefore sought to enforce that right.  The NYDA opposed the application.  However the Court would have none of the arguments advanced by the NYDA in defence of its Board's decision.

The court's reasoning and findings

The Court re-stated the long established rules for interpretation of legislation and other legal documents, including contracts.  Chief amongst these is the principle that the words of the statute or contract must be interpreted within the context in which they occur.

Reasoning that the manifest purpose of clause 10.1 was to stipulate the terms on which Ngubeni's contract could be terminated by the NYDA, the Court held that, on a proper reading of clause 10.1, Ngubeni could be dismissed only if, after a fair procedure it is established that he (1) was guilty of any misconduct or (2) had committed a breach of material obligation which would be incompatible with continued employment or (3) was found guilty of any act that would in law entitle the NYDA to terminate the contract.  The Court reasoned further that the purpose of fair procedure, on this reading, was to establish whether any of the three grounds for termination in fact existed.

The Court observed that the procedure up to the point of the Board's decision to dismiss Ngubeni had encompassed only the presentation of evidence by the NYDA, and that there was no record of any evidence given by Ngubeni or any of his witnesses, nor had Ngubeni been invited to address the Board and put his case or to make submissions as to why he should not be dismissed.   Whilst expressing its appreciation of the Board's frustration at the slow pace at which the enquiry had been running, the Court held that this did not entitle the Board to abandon the process, and then to assume the proverbial role of judge, jury and executioner.  That, the Court held, was manifestly an unfair disciplinary procedure.

The Court also held that, in any event, the letter written to the Ngubeni concerning the hearing had offered him a hearing on elaborate terms stated in that letter. Ngubeni had accepted those terms and the enquiry was commenced on that agreed basis.  In these circumstances, it was not open to the NYDA to unilaterally change the terms of the agreement or renege on the agreement.  The termination of Ngubeni's employment was thus found to have been unlawful and it was set aside and an order was granted reinstating him.

Lessons to be learnt

Ngubeni, like all employees, had a statutory right not to be dismissed, which includes a right to a fair procedure being followed.  This is a statutory right which, if breached, could be enforced through the unfair dismissal dispute resolution processes of the LRA, i.e. arbitration at the Commission for Conciliation, Meditation and Arbitration ("the CCMA") or a bargaining council with jurisdiction. 

However, if an employer creates a contractual right to procedurally fair dismissal, like the NYDA did with Ngubeni, more remedies will be created for the employee and his or her rights will then not be limited to the statutory rights contained in the LRA.  Instead, a distinct contractual right is created which gives the employee remedies in addition to those provided for in the LRA.  One of the remedies available to the innocent party to a contract that has been breached is to claim specific performance by the other party.  This is what Ngubeni did.  Alternatively, the innocent party may cancel the contract and claim damages for any foreseeable loss that he or she may have suffered as a result of the breach, which might be the remuneration that employee would have earned for the remainder of his/her employment, although this would be subject to his/her obligation to mitigate the damages.  The upshot is that the employee may be able to claim damages that would be far more than the statutory compensation that they would ordinarily have been awarded at the CCMA, and this would also not preclude the employee from pursuing the CCMA remedies in addition to those damages.

The case also illustrates the dangers for employers who set out to conduct disciplinary processes that are overly formalistically and as though they are conducting criminal trials.  The letter written by the NYDA to Ngubeni, which the Court considered also created a contractual arrangement between the parties is a good example of this.  All that the Code of Good Practice: Dismissals requires is that the employer should conduct an investigation to determine whether there are grounds for dismissal and afford the employee the opportunity to state his/her case before a decision is made.  It expressly provides that this does not need to be a formal enquiry.   The concept of procedural fairness in misconduct cases incorporated into the LRA is thus one that requires an investigation into any alleged misconduct by the employer, an opportunity by any employee against whom any allegation of misconduct is made to respond after a reasonable period with the assistance of a representative, a decision by the employer, and notice of that decision. 

The Labour Court has on various occasions recognised that there is no place for formal disciplinary procedures that incorporate all of the elements of a criminal trial, including the leading and cross-examination of witnesses, technical and complex "charge sheets", requests for further particulars by employees, the strict application of the rules of evidence, legal arguments, and the like.1  Commenting on the content of the letter sent by the NYDA to Ngubeni on 27 July the Court remarked that the NYDA offered Ngubeni "a procedure that would have made any criminal court proud".  The Court stated that instead of this letter outlining an elaborate procedure, the NYDA could have said, as envisaged by the Code of Good Practice: Dismissals, that Ngubeni would be afforded the opportunity to state a case in an informal manner in response to the allegations against him.  This would have been sufficient.

Employers should therefore carefully consider what they want to say about pre-termination process when drafting their contracts of employment.  Employers should also be careful, when conducting their disciplinary processes, that they do not unwittingly bind themselves to overly formalistic approaches akin to those used in criminal proceedings when this is not necessary.

BREAKING THE GLASS CEILING FOR WOMEN: 'GENDER MAINTSTREAMING' TO BECOME LAW?

South Africa already requires most employers (under the Employment Equity Act) to take affirmative action measures to advance the representation of women in the workplace.  Now additional similar statutory obligations look likely to be introduced to try and break the glass ceiling for women both in the workplace and in society in general.

Following its establishment in May 2009, the Department for Women, Children and People with Disabilities is seeking to give effect to one of its primary responsibilities, namely to mainstream women's empowerment and gender equality considerations, through the introduction of draft legislation in the form of the Women Empowerment and Gender Equality Bill (the "Bill").

The primary objects of the Bill are essentially to give effect to the value of non-sexism, to ensure that women participate equally in social, political and economic structures and to eliminate detrimental cultural, economic, religious, social, and traditional practices against women. 

Under the Bill, all entities (including but not limited to employers) would be required (within their ambit of responsibility) to empower women politically, social and economically by inter alia 'mainstreaming gender' in all strategies and budgets and enforcing gender equality legislation.  "Gender mainstreaming" is said to include preceding all organisational decisions and activities with a gender equality analysis, assessing the implications of any planned measures on the right to gender equality and implementing corrective measures to achieve substantive gender equality.

In addition, in terms of the Bill all entities are required to develop measures to achieve at least 50 per cent representation and meaningful participation of women in decision-making structures. 

The Bill states expressly that it is not unfair discrimination to implement special measures to eliminate discrimination against or to empower women who have been directly or indirectly disadvantaged, excluded or adversely affected or will potentially be so disadvantaged by discriminatory legislation, policy or practices in any sector of life.

The Bill also empowers the Minister of Women, Children and People with Disabilities with authority to monitor, review and oversee gender mainstreaming and to issue a directive to any entity she feels is not adequately complying with the Bill's provisions.  In this regard, an entity could be directed to submit a report to the Minister on progress made in eliminating discrimination against women and gender mainstreaming, the status of women representation and participation in decision-making structures, and its annual numerical goals towards increasing women empowerment.  The Bill also envisages that it would be a criminal offence to wilfully and unlawfully participate in or perpetuate a practice of male or female dominance over women which infringes or is likely to infringe the fundamental rights of women or have a substantial adverse effect on their well-being.

The Bill has been approved by Cabinet and has been published for public comment.  If enacted in its existing form or something similar thereto, employers will have to review their structures, decision-making processes and the like to ensure that they are 'gender mainstreaming'.

Footnote

1. See, for example, Avril Elizabeth Home for the Mentally Handicapped v CCMA & others [2006] JOL 17623 (LC)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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