Transcript Document

Automatic termination clauses - a
focus on recent desertion and labour
broking cases.
Tamara Cohen
UKZN
Automatic termination
• s 186(1)(a) - dismissal means that ‘employer
terminated contract of employment with or
without notice’.
• overt act of employer.
• scenarios exist where employment contracts
terminate by operation of law and dismissal
provisions of LRA do not apply.
Automatic termination clauses in labour broking
contracts
• s 198 - labour broker is employer.
• employee has no contractual/employment
relationship with client of labour broker.
• contractual provisions in employment contract
provides for automatic termination when employer’s
service contract with client expires or client no
longer requires employee’s services.
• relied upon by employer to circumvent dismissal
provisions of LRA.
Sindane v Prestige Cleaning Services LC (2009)
• employee terminated due to client ‘scaling’
down contract with employer brokers.
• employment contract provided for automatic
termination.
• court satisfied that termination of
employment contract triggered by third party.
• as act of employer not ‘proximate cause’ of
termination, not ‘dismissal’.
SA Post Office Ltd v Mampeule LC (2009)
• employee appointed CEO and executive director of
employer.
• articles of association stipulated that appointment as
director ‘inherent requirement’ of job and, if ceases
to hold office, contract terminates automatically.
• employee advised of automatic termination after
removal as director, following allegations of
misconduct.
The court held:
• act by employer that directly/ indirectly results in
termination of contract of employment constitutes
‘dismissal’.
• employer ‘terminated’ contract by removing him as
director and termination constituted dismissal.
• Automatic termination provisions contrary to public
policy as statutory rights conferred on employees for
benefit of all employees and are incapable of
consensual validation.
Post Office Ltd v Mampuele LAC (2010)
• upheld finding of court a quo that Mampuele ‘dismissed’.
• s 5 (2) - ‘no person may prevent an employee from exercising
any right conferred by this Act.’
• s 5(4) ‘a provision in any contract… that directly or indirectly
contradicts or limits … this section, is invalid, unless the
contractual provision is permitted by this Act.’
• onus on employer to establish that automatic termination
clause prevailed over provisions of LRA.
• can’t contract out of LRA - in public interest and not only
interest of individual concerned.
Nape v INTCS Corporate Solutions LC (2010)
• employee of labour broker guilty of sending offensive email
using client’s computer .
• client refused to allow employee to return to premises.
• terms of contract of employment enabled broker to dismiss
employee ‘on grounds proven by the client to be reasonable
and/or substantively and procedurally fair’.
• Employee retrenched and claimed unfair dismissal.
Court held :
• relationship between broker and client lawful but not all
terms of contract lawful.
• contractual provision contrary to public policy.
Court held:
• Broker’s clients ‘not at liberty to structure their contractual
relationships in a way that would effectively treat employees
as commodities to be passed on and traded at the whim and
fancies of the client’.
• s 198 does not permit broker and client to limit rights of
employees.
• court not bound by contractual limitations created by parties.
• employee no right of recourse against client but brokers not
powerless when forced by clients to treat employees unfairly.
• brokers may approach competent court to order client to
refrain from such conduct.
Mahlamu v CCMA & others LC (2011)
• Employee employed by brokers as security guard at Gautrain
stations - contract ‘automatically terminated’ when no longer
required by client.
Court held:
• key consideration whether provisions permitted by LRA (s 5)
and whether permissible to contract out of right not to be
unfairly dismissed.
• test to determine legitimacy of waiver of statutory rights is
whether subject of right is intended to be sole beneficiary. If
others have interest in the right/right serves public interest
then cannot be waived.
• termination constituted dismissal.
Summary:
• fixed and maximum-duration contract lawful.
• terminated by occurrence of specified event.
• need to identify ‘proximate cause’ of
termination.
• contractual provision that has ‘effect’ of
limiting legislative protection invalid.
• Automatic termination clauses in broker’s
contracts unenforceable.
Automatic termination due to impossibility of
performance
• common law principle that contract terminates automatically
when permanently impossible to perform, due to no fault on
part of either party.
• supervening impossibility of performance - performance
prevented by superior force that could not reasonably have
been guarded against.
• impossibility must be absolute and not attributable to fault of
either party.
• impossibility of performance results in automatic termination
of employment contract and not ‘dismissal’.
Chillibush v Johnston & others LC (2010)
• court considered whether employee’s removal from
board of directors led to automatic termination.
• not permissible for employer to contractually
negotiate terms of dismissal.
• automatic termination provision in contract of
employment (or articles of association) contravenes
5(2)(b) and 5(4) of LRA.
• board’s resolution of removing employee from post,
although lawful, constituted dismissal.
NUM and another v CCMA LC (2009)
• employee convicted of culpable homicide and sentenced to 5
years’ imprisonment (reduced to 10 months).
• employer argued that imprisonment made it impossible to
perform contractual obligations, employee repudiated
contract by his actions and terminated contract by operation
of law.
• Commissioner held that if impossibility is temporary, contract
is suspended for period of incapacity but if permanent or
lengthy period contract terminated automatically.
• court held, on the facts, that employer’s decision constituted
dismissal as no evidence of permanency.
Samancor Tubatse Ferrochrome v MEIBC LAC (2010)
• employee in police custody on suspicion of armed robbery.
• after 150 days in prison employee advised (by letter) of
dismissal for ‘operational incapacity due to inability to tender
services’.
• dismissal confirmed in post-dismissal hearing after release.
Court held:
• dismissal for ‘incapacity’ not to be confined to incapacity due
to ill-health or poor performance.
• dismissal for ‘operational incapacity’ appropriate in light of
commercial need to fill position and uncertain period of
imprisonment.
Desertion in the private sector
• desertion occurs when employee absconds from workplace,
with no intention of returning.
• constitutes breach of fundamental term of employment
contract and employee regarded as having repudiated
contract.
• at common law an employer faced with employee’s
repudiation has election of accepting repudiation or holding
employee to terms of contract.
• question whether deserting employee terminates contract or
employer terminates relationship by acting upon desertion.
SABC v CCMA LC (2001)
• court considered whether employee’s failure to
return to work by specified date constituted
termination as opposed to dismissal.
• court held that resignation clearly distinguishable
from repudiation.
• act of desertion does not terminate contract but act
of employer who elects to exercise right to
terminate.
• must comply with requirements of LRA.
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Court held:
futile to hold hearing for deserting employee that
has indicated unequivocal intention not to return to
work or whose whereabouts unknown.
where employee’s absence unexplained needs to be
treated as misconduct.
question of fact and depends upon length of absence
and operational requirements of employer.
whether to hold disciplinary enquiry dependent on
relevant circumstances and practicalities.
Jammin Retail (Pty) Ltd v Mokwane LC (2010)
• contractual provision that employment contract
automatically terminates if employee absent without
authorisation for more than five consecutive days.
Court held:
• statutory ‘deemed dismissal’ provisions in public
sector do not apply to private sector employees.
• private sector employers to give deserting employees
hearing before dismissal.
• employer knew employee’s address yet made no
attempt to contact her - dismissal unfair.
SATAWU obo Langa v Zebediela Bricks LC (2011)
• employees dismissed following illegal work stoppage and
subsequently reinstated.
• failed to report for work - despite High Court interdict and
repeated requests by employer to do so.
Court held:
• majority of employees had no intention of returning to work
and had deserted.
• desertion ‘automatically terminates’ contract of employment
and employees not ‘dismissed’ and not entitled to hearing
prior to termination.
Automatic termination in public sector
• statutory provision for automatic termination if absent
without authorisation for specified period.
• s 17(5)(a) of the Public Service Act and s 14 of Employment of
Educators Act.
• termination by operation of law and not a result of employer’s
decision.
• not dismissal and employee not entitled to hearing.
• may be re-instated by employer on ‘good cause’ shown but
decision not to reinstate not dismissal, as contract remains
terminated by law.
De Villiers v HOD: Education, Western Cape (2009)
• question whether decision not to reinstate reviewable
administrative action.
• court considered source, nature and subject matter of power
exercised, whether involves exercise of public duty, and how
closely it relates to public policy matters that are not
administrative or to implementation of legislation that is.
• employer’s actions involved ‘straight-forward exercise of
statutory power’ once employment contract terminated.
• court held that, in light of inequality of parties and lack of
alternative recourse for employee, employer’s conduct
constituted reviewable administrative action.
Review on ground of legality
• s 158(1)(h) - Labour Court may review any conduct
by State in its capacity as employer on any grounds
permissible in law.
• public officials must be accountable and not make
arbitrary or irrational decisions.
• employer determining whether ‘good cause’ for
reinstatement to bear in mind principles relating to
fair dismissal for misconduct.
• employer must approve reinstatement unless
satisfied that employment relationship intolerable.
Grootboom v NPA LC (2010)
• duty on employee to provide employer with
satisfactory explanation for absence without
authorisation.
• employer does not have unfettered discretion in
determining whether or not to reinstate employee
and must be influenced by fairness and justice.
Mahlangu v Min of Sport and Recreation LC (2010)
• must consider whether absence wilful and whether
employment relationship broken down.
Conclusion
• employment relationship regulated by both
legislation and common law of contract.
• common law must be compatible with both
legislative and public policy.
• purposive interpretation of LRA - to protect
vulnerable employees.
• automatic termination clauses contrary to both
legislative and public policy and incapable of
consensual validation.