In NUMSA and Others v SCAW South Africa (Pty) Ltd (1416/2024) [2026] ZASCA 126 (29 September 2026) the Supreme Court of Appeal (SCA) was asked to determine whether an employer may rely on section 41(4) of the Basic Conditions of Employment Act 75 of 1997 (BCEA) to withhold severance pay where a contractual provision identifies amounts payable upon retrenchment.
At a glance
- Section 41(2) of the Basic Conditions of Employment Act 75 of 1997 (BCEA) provides that an employee who is dismissed based on an employer’s operational requirements will be entitled to severance pay.
- Section 41(4) of the BCEA provides that an employee who unreasonably refuses to accept the employer’s offer of alternative employment shall forfeit severance pay.
- Where an employment contract identifies amounts payable upon retrenchment but does not expressly impose an obligation to pay severance upon retrenchment, the obligation to pay continues to arise from section 41(2) of the BCEA, making section 41(4) available as a defence.
Judgment
The SCA confirmed that the High Court enjoys concurrent jurisdiction in terms of section 77(3) of the BCEA to determine disputes concerning contracts of employment, e.g. breach of contract or enforcement of contractual rights.
The High Court had found that section 41(6) of the BCEA mandated referral of the dispute to the Metal and Engineering Industries Bargaining Council, and that since no such referral had been made, the claims fell to be dismissed. The SCA disagreed with this analysis.
The SCA harboured doubt that section 41(6) of the BCEA imposes a mandatory obligation to refer such disputes to arbitration, noting that it states that an employee “may” refer such a dispute, and, second, that the jurisdictional scheme in sections 73A and 77 of the BCEA points strongly to an election by an employee rather than an obligation.
More fundamentally, the SCA held that since the High Court had jurisdiction to adjudicate the appellants’ contractual claims, it necessarily also had jurisdiction to decide a defence based on an exception to the imposed obligation, being the section 41(4) defence raised by the employer. The SCA therefore found that the High Court erred in holding that it could not adjudicate the defence raised by the employer and that the dispute could only be resolved by invoking section 41(6) of the BCEA.
In turning to the gravamen of the dispute between the parties, which was the issue of severance, the SCA considered section 41(4) of the BCEA and case law, which confirmed that the purpose of section 41(4) of the BCEA was to discourage employees from unreasonably rejecting offers of alternative employment arranged by their employers simply because they might prefer cash in their pockets in the form of severance pay. Furthermore, the SCA confirmed that the BCEA sought to promote employment and to give employers an incentive to take steps to try to get alternative employment for their employees facing dismissals for operational requirements, instead of simply giving them money in the form of severance pay.
The SCA held that the letters of employment did not impose an obligation upon the employer to pay the severance amount, but that that obligation arose from the general obligation set out in section 41(2) of the BCEA.
Accordingly, section 41(4) applied to the present dispute.
The SCA agreed that the High Court could not have determined the merits on the papers before it. Whether an employee’s refusal of an offer of alternative employment is reasonable is necessarily fact-based and requires applying an objective standard, and motion proceedings in the present case were not best suited to resolve such disputes.
NUMSA had not denied that its rejection of the offer was unreasonable. Instead, it contended that section 41 does not apply to a contract claim, and it did not advance any alternative based on a denial of unreasonableness. As a result, no factual basis existed upon which the reasonableness question could be resolved.
The SCA held that the proper order was one of absolution of the instance and upheld the High Court’s costs order against NUMSA.
Key takeaways
Where an employment contract identifies amounts payable upon retrenchment but does not expressly impose an obligation to pay severance upon dismissal for operational reasons, the obligation to pay continues to arise from section 41(2) of the BCEA, making section 41(4) available as a defence.
Employees who unreasonably refuse to accept their employer’s offer of alternative employment shall forfeit severance pay in terms of section 41(4) of the BCEA.
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.
[View Source]
