Although the Labour Relations Act, 1995 ("LRA") provides protection and remedies to employees who allege that they have been unfairly dismissed, some employees, especially white-collar employees, may seek to invoke another potential remedy. They may challenge their dismissals on the basis that the employer breached the contract of employment and therefore acted "unlawfully," and seek to claim specific performance (in effect reinstatement) or damages.
This then sparks a common debate: can employees challenge their dismissals or disciplinary action initiated by employers on the basis of breach of contract or unlawfulness, instead of disputing the fairness of their dismissals and thus utilising the LRA's recourse and remedies?
In the recent Labour Appeal Court ("LAC") case of Passenger Rail Agency of SA v Onica Martha Ngoye and others, the employer summarily terminated various employees' contracts of employment because the employees' contracts had "exceeded the normal five year fixed term contract extended to all executives." The employees argued that the termination of their contracts of employment constituted a breach of contract because their employment contracts were not for a fixed term but were rather for an indefinite period. The employees lodged an urgent application seeking a declarator that the termination of their contracts be declared unlawful and set aside. The relief sought by the employees was to be retrospectively reinstated with immediate effect.
In its judgment, the LAC embarked on a detailed discussion of several decisions of the Supreme Court of Appeal and the Constitutional Court dealing with the question of whether employees could exercise contractual rights. It points out that there have been diverging views on the issue but finds that it is bound by the decision of the Constitutional Court in Baloyi v Public Protector where it was found that when more than one cause of action flows from the termination of a contract of employment, namely (i) an unfair dismissal claim invoking a statutory right not to be unfairly dismissed, or (ii) invoking a contractual right not to be dismissed, a litigant may choose which cause of action to pursue.
Perhaps of more importance are the LAC's comments on the remedies available to employees if they bring a claim based on a breach of contract – the LAC warns litigants to take heed of the requirements that must be met for contractual remedies under common law such as specific performance and damages.
If an employee is successful in proving that their dismissal was unfair, the "default remedy" is reinstatement unless the limited circumstances mentioned in section 193(2) of the LRA are present. In terms of contractual principles, however, the remedy of "specific performance" (where the employee is usually seeking reinstatement) does not apply automatically. A court has discretion as to whether such a remedy should be granted depending on the circumstances of the case. In the current matter, the LAC held that the Labour Court did not exercise its discretion to determine whether it was appropriate in these circumstances to grant specific performance. Some of the factors that should be considered include the type of interaction required between senior managers and those who are authorised to control the affairs of the company; whether the granting of specific performance would cause workplace conflict; and, whether there is a need for the employees' services. These factors may be relevant for employers and the courts going forward.
An employee who argues that their dismissal was unfair may be granted the remedy of the payment of compensation without any detailed assessment of the loss the employee has suffered. In a contractual claim, the employee will have to prove the actual loss and the extent of this loss. Similarly, if an employee wishes to claim damages (which was not one of the types of relief sought in this matter), they would have to prove the damages that they have suffered, which can often be difficult. The importance of the differences between unfair dismissal remedies and contractual remedies is highlighted by the decision of the Court in this matter.
Comments
From this judgment, it is apparent that employees can choose whether they wish to pursue an unfair dismissal or allege that their dismissal was unlawful or a breach of contract. Given the challenges described by the LAC in obtaining contractual remedies, it may well be less risky for employers if employees pursue the contractual route and employees fail to satisfy the requirements for contractual remedies. However, employers should be ready to defend whichever course of action their former employees pursue.
Reviewed by Peter le Roux, an Executive Consultant in ENS' Employment practice.
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