Does an employee's immediate resignation automatically terminate the employment relationship or does the employer have a right to hold the employee to their notice period? Also, can an employer proceed with a disciplinary enquiry against the employee despite their immediate resignation? Unfortunately, the answer hasn't been clear-cut, and the South African Labour Court has given conflicting judgments on this issue, thereby exacerbating the problem.
In Mtati v KPMG Services (Pty) Ltd, the Labour Court ruled that if an employee resigns with immediate effect, the employment relationship ceases and the employment contract terminates. As a result, the employer essentially loses its right to proceed with a disciplinary enquiry against that employee. The court also ruled that the employer does not have authority to institute a disciplinary inquiry over the employee once they have tendered the resignation with immediate effect and the continuation with the disciplinary inquiry would be null and void. The same approach was taken by the Labour Court in Chiloane v Standard Bank of SA Ltd (although this was later overturned by the LAC), as well as in Naidoo and Another v Standard Bank SA Ltd and Another. In Naidoo the court ruled that an employer may not proceed with a disciplinary hearing without first getting a court order for specific performance to compel the employee to serve their notice period.
However, in Coetzee v Zeitz MOCCA Foundation Trust and Others, the court ruled that where the employer does not accept the employee's resignation with immediate effect, the employment relationship does not terminate with immediate effect but rather only at the end of the notice period. As such, the employer was entitled to continue with the disciplinary hearing despite the employee's intended resignation with immediate effect. In Mzotsho v Standard Bank of South Africa (Pty) Ltd, the court dealt with an instance where an employee resigned immediately upon being given a notice to attend a disciplinary hearing. The court ruled that the employer's contractual power to discipline remained.
Recently, in Mthimkhulu v Standard Bank of South Africa, the court ruled that an employee who is contractually obliged to serve a notice period, repudiates the contract when they do not serve the notice period. A breach (failure to give notice) by an employee does not end the contract. The contract will only end if the employer chooses to do so. In this case, since the employer had elected to keep the employment contract alive, it was entitled to proceed with a disciplinary hearing and issue a disciplinary sanction.
These conflicting judgments from the Labour Court have caused great uncertainty for both employees and employers regarding the effect of resignation with immediate effect on a pending disciplinary hearing. Because of this, all parties have needed the Labour Appeal Court (“LAC”) to provide clarity on this contentious issue.
The LAC has finally had the opportunity to address this issue in Standard Bank of South Africa Limited v Nombulelo Cynthia Chiloane, where it made clear that if an employee resigns with immediate effect in breach of their notice period, the employer is entitled to reject such repudiation and enforce the applicable notice period.
In this case, the Labour Court was called to declare null and void the dismissal of an employee, Ms Chiloane. Ms Chiloane had been charged with misconduct but before the disciplinary hearing took place, she resigned with immediate effect. Despite this, her employer, Standard Bank, enforced the applicable notice period and proceeded with the disciplinary hearing in her absence, where she was found guilty of the misconduct allegations made against her and was dismissed. The Labour Court granted Ms Chiloane's request for her dismissal to be declared null and void.
When the matter came before the LAC, it strongly disagreed with the Labour Court judgments that resignations with immediate effect terminate the employment relationship. The LAC instead held that the employment relationship is governed by either contract or statute or both. Where an employee and an employer do not agree to a notice period for the termination of the employment relationship, the Basic Conditions of Employment Act, 1997 (“BCEA”) still provides for a notice period. Therefore, unless the other party to the employment relationship waives the notice period, the notice period has to be complied with either in terms of the contract or the BCEA.
The LAC held that the view that where an employee resigns with immediate effect, such an employee cannot be compelled to continue working since resignation is a valid unilateral act, is misconceived. A notice period either in terms of the contract or statute (where the contract is silent on the issue), remains valid and binding unless waived by the innocent party. The LAC emphasised that resignation not in compliance with contractual or statutory notice requirements does not validly terminate the employment contract unilaterally but only resignation compliant with notice requirements serves to unilaterally terminate the contract. The LAC thus set aside the Labour Court's judgment in the Standard Bank case.
The LAC has now settled the issue. Resignations with immediate effect do not unilaterally terminate the employment relationship unless the employer agrees to it. Where an employer seeks to discipline an employee who has resigned with immediate effect, they may do so provided that such disciplinary proceedings are held and concluded within the employee's notice period.
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