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[2017] ZALAC 9
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Enforce Security Group v Fikile and Others (DA24/15) [2017] ZALAC 9; (2017) 38 ILJ 1041 (LAC); [2017] 8 BLLR 745 (LAC) (25 January 2017)
IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA, DURBAN
JUDGMENT
Reportable
Case no: DA24/15
ENFORCE SECURITY GROUP
Appellant
and
MWELASE FIKILE AND 46
OTHERS
First to 47 Respondents
COMMISSIONER G
GERTENBACH
48th Respondent
COMMISSION FOR
CONCILIATION, MEDIATION
AND
ARBITRATION
49th Respondent
Date heard: 25 August
2015
Delivered: 25
January 2017
Contract of
employment—Fixed-term contract- Service provider employer
placing employees with client in terms of a fixed-term
eventuality
contract—such contract to terminate at termination of contract
between the employer and the client.-the client
terminating the
contract with the service provider employer because the services
rendered no longer required.- Employer giving
notice to employees of
termination of their employment contracts because the eventuality to
terminate the fixed-term contract having
taken place-Such termination
not dismissal.
Termination of
employment- automatic termination clause – interpretation
thereof- whether the clause impermissible on the
facts of this case.
Factors to be considered to determine whether the contracting parties
have contracted out the protection against
unfair dismissal.
Coram:
Tlaletsi DJP; Ndlovu JA
et
Hlophe AJA
Judgment
Tlaletsi DJP
Introduction
[1]
The issue to be
determined in this appeal is whether the termination of the first to
the 47
th
respondents’ (the employees) contracts of employment with their
employer (the appellant) which contained automatic termination
clauses operative upon the termination of a contract for the
provision of services which existed between the appellant and its
client, having come into effect, constituted a dismissal.
The 49th respondent (the
commissioner) who arbitrated the dispute essentially found that the
employees had not been dismissed and
consequently dismissed the
employees’ claim of unfair dismissal referred to the Commission
for Conciliation Mediation and
Arbitration (the CCMA).
[2]
In
a review application brought by the employees, the Labour Court (per
Cele J) found that the termination of the employees’
employment
contracts constituted a dismissal in terms of the Labour Relations
Act
[1]
(LRA). The Labour Court
then ordered the appellant to pay severance pay and compensation for
what it found to be substantively
and procedurally unfair dismissal
of the employees by the appellant. The appeal lies against the
findings that the employees had
been dismissed, that such dismissal
was unfair, and the relief ordered by the Labour Court. The appellant
is in this Court with
leave of the Labour Court.
Factual Background
[3]
The background
facts underlying the dispute are common cause. The appellant is a
private security services provider and is registered
as such in terms
of the law regulating that sector. The appellant provides security
officers to its various clients contracted
to it. Boardwalk Inkwazi
Shopping Centre (Boardwalk), Richards Bay, is one of such clients
contracted to the appellant to provide
security personnel. To honour
the said contract the appellant employed the employees and placed
them at Boardwalk.
[4]
In terms of the
contracts of employment with the employees the period of employment
commenced on a specified date. Clause 3.2 of
the contracts provides
that:
‘
The period
of the employment would endure until the termination of the contract
which currently exists between BOARD WALK or its
successors
(hereinafter referred to as the CLIENT) and the COMPANY.
3.2.1 The Employee
agrees that he/she fully understands that the Company’s
contract with the Client might
be terminated by the Client at any
time and for any cause or might terminate through [e]ffluxion of time
and that in consequence
hereof the nature of
the Employee’s
employment with the company and its duration is totally dependent
upon the duration of the Company’s
contract with the Client/s
and that the Employee’s contract of employment shall
automatically terminate. Such termination
shall not be construed as a
retrenchment but a completion of contract…
’
[Emphasis provided].
Clause
23.3 provides that the employee specifically accepts that his/her
employment with the appellant is dependent upon the retention
by the
appellant of the client’s contract at whose premises the
employee will be assigned his/her duty
[2]
.
[5]
On 30 September
2011, Boardwalk gave notice of termination of its contract with
appellant with effect from 31 October 2011. As a
result of the
termination notice the appellant held meetings on 3 October 2011 with
the shop stewards from NASUWU and SATAWU which
are the trade unions
representing the employees at appellant’s workplace. The
appellant offered the affected employees alternative
employment in
Durban. The offer was out rightly rejected by the employees’
representatives. According to the minute of that
meeting the
employees held the view that a retrenchment process in terms of
section 189 of the LRA and subsequent payment of severance
pay would
be the only solution acceptable to them.
[6]
A further
meeting was held with the employees at Richards Bay on 4 October
2011. The employees were once again offered alternative
employment by the appellant in Durban. The offer was rejected by the
employees. At the same meeting all the employees were handed
letters
notifying them of the cancellation of the contract by Boardwalk
Inkwazi Shopping Centre, offering them alternative employment
in
Durban, and that their respective contracts of employment would
terminate on 31 October 2011 if they did not take up the offer
of
alternative employment. Pursuant to clause 3.2 above, the appellant
terminated the employees’ contracts of employment
with effect
from 31 October 2011.
Proceedings
in the CCMA
[7]
Dissatisfied
with their dismissal, the employees referred an unfair dismissal
dispute to the CCMA. The commissioner reasoned that:
the nature of
the contracts were neither ‘
fixed
term’
contracts as there was no definite commencement and termination
dates, nor were they
‘
temporary
employment’
contracts intended to assist with the completion of a special
project; they are ‘
indefinite
(period)’
contracts entered
into
where the period of employment cannot be determined with certainty.
That ‘such contracts can be cancelled by the employer
giving
the required or reasonable notice of termination when the employee’s
services are no longer required or on completion
of the project for
which the employee had been engaged or on fulfilment or coming into
being of a condition of employment
’.
[8]
The commissioner
concluded that the client’s termination of the agreement with
the appellant led to the automatic termination
of the employees’
employment contracts and therefore the employees were not entitled to
any form of compensation. The application
was consequently dismissed
with no award as to costs.
The Court
a quo
[9]
The grounds of
review on which the award was challenged as captured in the founding
affidavit are that the commissioner failed to
apply his mind to what
constituted the rights of employees engaged on indefinite contracts
of employment. The contention in this
regard was that the
commissioner erred in finding that the indefinite contracts of
employment can be cancelled by the appellant
by giving the required
or reasonable notice of termination and that he should have found
that the appellant had an obligation to
negotiate with the employees’
unions and follow s189 of the LRA. Lastly, that the award stand to be
reviewed and set aside
as no reasonable arbitrator would have come to
the conclusion that the employees’ dismissal was fair.
[10]
The
court
a
quo
referred to the decisions of the Labour Court and this Court
respectively in
South
African Post Office v Mampeule
[3]
and
South
African Post Office v Mampeule
[4]
(
SA
Post office
)
as well as
Mahlamu
v CCMA & others
[5]
.
The nub of the court
a
quo’s
reasoning is captured as follows at paragraph 11:
“
Therefore,
it follows from the authority in South African Post Office v Mampeule
that any contractual provision that infringes on
the rights conferred
by the LRA or Constitution is not valid, and even though the employee
might be deemed to have waived his or
her rights, such waiver is not
valid or enforceable. In this matter, it follows that by finding that
the cancellation of the contract
between Boardwalk and the
[appellant] led to the automatic termination of the employees
‘contracts of employment, the [commissioner]
committed a
material error of law by failing to apply his mind to the relevant
provisions of the LRA, namely, sections 5(2)(b),
5(4) and 185. The
[commissioner] found that the [employees] were employed on indefinite
contracts of employment. This finding is
not assailed in this review
application. He then came to the conclusion that the employees’
contracts were automatically
terminated and that the employees were
not entitled to compensation. In the premises, the award of the
[commissioner] stands to
be reviewed and set aside as a decision
which a reasonable decision maker could not have reached
.”
[11]
The court
a quo
found further that there was an obligation on
the appellant to have embarked on a retrenchment exercise and refused
to do so. Regarding
alternative offers of employment the court held
that Durban and Richards Bay are two places far apart to commute
daily. In conclusion
the court a quo ordered as hereunder:
‘
1
.
The arbitration award of the [commissioner] in this matter is
reviewed and set aside. The termination of the [employees’]
employment constituted a dismissal for the purposes of the LRA.
2. The dismissal of
each [employee] by the [appellant] was substantively and procedurally
unfair.
3. The [appellant] is
ordered to compensate each [employee] in an amount of money
equivalent to six months’ remuneration,
calculated at the
[employees] rate of remuneration on the date of dismissal.
4. Further, the
[appellant] is ordered to pay so much of severance pay as each
[employee] is entitled in terms of the contract of
employment or in
terms of the law.
5. The payment of
compensation and severance pay is to be made within 21 days from the
date of this order, but not later than August
2015.
6. In the event that
the parties are in dispute about any payment to be made under 1
and 2 hereinabove, that dispute is to
be referred to the [CCMA] which
is to appoint a commissioner, other than the [commissioner who
arbitrated this dispute]’to
hear such evidence and to issue an
award in relation thereto.
7.
No costs order is made.
’
The Appeal
[12]
Ms Naidoo, for the appellant, contended that the termination of the
employees’ contracts of employment does not constitute
a
dismissal as defined in s186 (1) (a) of the LRA as the proximate
cause of the termination of employment is not an act by the
employer,
but by Boardwalk and that in the circumstances, the automatic
termination provision in the contracts does not offend
against s5 of
the LRA. In the circumstances, counsel submitted, the court
a quo
erred in finding that the termination of the contracts constituted a
dismissal.
[13]
Ms Allen, for the employees, defended the judgment of the court
a
quo
particularly the finding that the automatic termination
clauses in the employees’ respective contracts of employment
were
invalid and as a result they have been dismissed.
[14]
It must be recalled that the case that the employees pursued in the
CCMA was that they were in fact permanent employees and
not employed
subject to a fixed term contract and as such were entitled to a
retrenchment process upon termination of the contract
between their
employer and Boardwalk. This perhaps explains why the commissioner
spent some time to investigate the nature of their
employment
arrangement with the appellant. Having found that they were employed
in what he termed “
indefinite (period) contracts
”,
he proceeded to find that there had not been a dismissal. It is
therefore not surprising that the commissioner did not
consider the
validity of such contracts with regard to s5 of the LRA and the
decisions referred to in the judgment of the court
a quo
. It
does not appear to be an issue he was called upon to consider by the
employees. Be that as it may, it is clear from the judgment
of the
court
a quo
that the issue whether or not the employees were
in permanent employment relationship with the appellant was no longer
pursued
by the employees in the Labour Court. One need
therefore not say anything further about it and let it enjoy its
eternal sleep.
[15]
There are therefore in my view, four issues that require
determination on appeal. Firstly is the test on review; secondly,
whether there was a dismissal; thirdly, the effect of the termination
clause vis-à-vis s5 of the LRA (the lawfulness of
the
automatic termination clause), and fourthly, the relief awarded by
the court
a quo
. I will deal with these issues in the order I
have referred to them.
The
Review test
[16]
The question whether there has been a dismissal goes to the
jurisdiction of the CCMA and the Labour Court to entertain the
parties’ dispute. A finding that there was no dismissal means
that the CCMA and subsequently the Labour Court did not have
jurisdiction to entertain the dispute. Such a finding as a
matter of fact, has to be a correct finding. It cannot be a finding
that falls within a band of reasonable findings since there can only
be one correct finding
[6]
. To
the extent that the court
a
quo f
ound
that the award stands to be reviewed and set aside as a decision
which no reasonable decision maker could have reached it misdirected
itself because it applied a wrong test to review the award of the
commissioner.
The
Dismissal issue
[17]
Dismissal of an employee for the purposes of the LRA is defined in s
186 which provides that:
‘
(1)
―Dismissal means that:
(a) an employer has
terminated employment with or without notice;
(b) an employee employed
in terms of a fixed term contract of employment reasonably expected
the employer-
(i) to renew a fixed term
contract of employment on the same or similar terms but the employer
offered to renew it on less favourable
terms, or did not renew it; or
(ii) to retain the
employee in employment on an indefinite basis but otherwise on
the same or similar terms as the fixed term
contract, but the
employer offered to retain the employee on less favourable terms, or
did not offer to retain the employee.
(c) an employer refused
to allow an employee to resume work after she -
(i) took maternity leave
in terms of any law, collective agreement or her contract of
employment;
(d) an employer who
dismissed a number of employees for the same or similar reasons has
offered to re-employ one or more of them
but has refused to re-employ
another; or
(e) an employee
terminated employment with or without notice because the employer
made continued employment intolerable for the
employee; or
(f) an employee
terminated employment with or without notice because the new
employer, after a transfer in terms of section 197
or section 197A,
provided the employee with conditions or circumstances at work that
are substantially less favourable to the employee
than those provided
by the old employer.’
[18]
It is clear from the wording of s186 (1) above that there are
specifically defined instances that bring about the termination
of
employment which would be regarded as dismissal. This means therefore
that an employment contract can be terminated in a number
of ways
which do not constitute a dismissal as defined in s 186(1) of the
LRA. One such instance would be a fixed –term employment
contract entered into for a specific period or upon the happening of
a particular event
[7]
. An event
that comes to mind would include a conclusion of a project or the
cancellation or expiry of a contract between an employer
and a third
party. Once the event agreed to between an employer and its employee
takes place or materializes, there would ordinarily
be no dismissal.
It has been the position in common law that the expiry of the fixed
term-contract of employment does not constitute
termination of the
contract by any of the parties. It constituted an automatic
termination of the contract by operation of law
and not a
dismissal.
[8]
In
Sindane
v Prestige Cleaning Services
[9]
Basson J correctly explains the position thus:
“
[16]
It is accepted that apart from a resignation by an employee (unless
constructive dismissal is claimed consequent to resignation),
an
employment contract can be terminated in a number of ways which do
not constitute a dismissal as defined in section 186(1) of
the LRA,
and more particularly, in terms of section 186(1)(a). These
circumstances include the following: (i) The death of the
employee;
(ii) The natural expiry of a fixed term employment contract entered
into for a specific period, or upon the happening
of a particular
event, e.g. the conclusion of a project or contract between an
employer and a third party. In the first instance,
if the fixed term
employment contract is, for example, entered into for a period of six
months with a contractual stipulation that
the contract will
automatically terminate on the expiry date, the fixed term employment
contract will naturally terminate on such
expiry date, and the
termination thereof will not (necessarily) (subject to what is stated
below in respect of the remedies provided
for by the LRA to an
employee who has signed such a contract) constitute a “dismissal”,
as the termination thereof
has not been occasioned by an act of the
employer. In other words, the proximate cause of the termination of
employment is not
an act by the employer. The same holds true for a
fixed term employment contract linked to the completion of a project
or building
contract. These fixed term employment contracts are
typical in circumstances where it is not possible to agree on a fixed
time
period of employment, i.e. a definitive start and end date, as
it is not certain on what exact date the project or building contract
will be completed, and hence, the termination date is stipulated to
be the completion date of the project or building contract.
Similarly
as in a fixed term employment contract with a stipulated time period,
when a fixed term employment contract linked to
the completion of a
project or building contract terminates, such termination will not
(necessarily) be construed to be a dismissal
as contemplated in
section 186(1)(a). Thus, the contract terminates automatically when
the termination date arrives, otherwise,
it is no longer a fixed term
contract (SA Rugby (Pty) Ltd v CCMA & Others (2006) 27 ILJ 1041
(LC) at 1044 par 6)3. It must,
however, be pointed out that the LRA
does provide a remedy to an employee who have entered into fixed term
employment contracts
as referred to in section 186(1) (b) of the LRA
in terms whereof an employee, who reasonably expected the employer to
renew a fixed
term contract of employment on the same or similar
terms, but the employer offered to renew it on less favourable terms,
or did
not renew it, can claim a dismissal occasioned thereby. In
such a case the “act” of the employer which is the
failure
or refusal to renew the fixed term employment contract on the
same or similar terms, or to renew it at all is the proximate cause
of the dismissal. Furthermore, an employee who has entered into a
fixed term employment contract is not without remedy in terms
of the
LRA or the common law, if the employer unfairly or unlawfully
terminates the employment contract of the employee for reasons
related to misconduct, incapacity or operational reasons, prior to
the natural expiry of the fixed term employment contract.”
[19]
In
Mahlamu
v CCMA
[10]
,
Van Niekerk J had the following to say in agreement with what is said
in the
Sindane
decision, perhaps on this aspect only:
“
[23]
This is not to say that there is a ‘dismissal’ for the
purposes of s 186(1) of the LRA in those cases where the
end of an
agreed fixed term is defined by the occurrence of a particular event.
This is what I understand the ratio of Sindane
(supra) to be - that
ordinarily, there is no dismissal when the agreed and anticipated
event materialises (to use the example in
Sindane, the completion of
a project or building project), subject to the employee’s right
in terms of s186 (1) (b) to contend
that a dismissal has occurred
where the employer fails or refuses to renew a fixed term contract
and an employee reasonably expected
the employer to renew the
contract. In other words, if parties to an employment contract agree
that the employee will be engaged
for a fixed term, the end of the
term being defined by the happening of a specified event, there is no
conversion of a right not
to be unfairly dismissed into a conditional
right. Without wishing to identify all of the events the occurrence
of which might
have the effect of unacceptably converting a
substantive right into a conditional one, it seems to me that these
might include,
for example, a defined act of misconduct or
incapacity, or, as in the present instance, a decision by a third
party that has the
consequence of a termination of employment.”
[20]
There is no express or implied intention by the legislature in
enacting s 186(1) to amend or change the common law in this
regard.
In
Fedlife
Assurance Ltd v Wolfaardt
[11]
the Supreme Court of Appeal held that:
“
[17]
The 1995 Act does not expressly abrogate an employee’s common
law entitlement to enforce contractual rights and nor do
I think that
it does so by necessary implication. On the contrary there are clear
indications in the 1995 Act that the legislature
had no intention of
doing so.
[18]
The clearest indication that it had no such intention is s 186(b)
which extends the meaning of
“dismissal” to include the
following circumstances:
“
(A)
n employee reasonably expected the employer to renew a fixed term
contract of employment on the same or similar terms but the
employer
offered to renew it on less favourable terms, or did not renew it.”
It
is significant that although the legislature dealt specifically with
fixed-term contracts in this definition it did not include
the
premature termination of such a contract notwithstanding that such a
termination would be manifestly unfair. The reason for
that is plain:
The common law right to enforce such a term remained intact and it
was thus not necessary to declare a premature
termination to be an
unfair dismissal. The very reference to fixed-term contracts makes it
clear that the legislature recognized
their continued enforceability
and any other construction would render the definition absurd. By
enacting s 186(b) the legislature
intended to bestow upon an employee
whose fixed-term contract has run its course a new remedy designed to
provide, in addition
to the full performance of the employer’s
contractual obligations, compensation (albeit of an arbitrary amount)
if the employer
refuses to agree to renew the contract where there
was a reasonable expectation that such would occur. That being so, it
would
be strange indeed, and bereft of any rationality, for the
legislature to deny to the employee whose fixed term contract of five
years has been unlawfully terminated within days of appointment the
benefit of either specific performance of the contract or damages
for
its premature termination and to confine the employee to the limited
and entirely arbitrary compensation yielded by the application
of the
formula in s 194 of the 1995 Act.”
[21]
The definition of dismissal requires that there must be an act by the
employer that terminates the contract. This is
made clear by
the legislature’s employment of the words “
an
employer has terminated a contract of employment with or without
notice
”.
‘That encompasses the ordinary situation of the employer giving
notice under the contract of employment and a summary
dismissal’.
[12]
In
National
Union of Leather Workers v Barnard NO and Another
[13]
this Court had the following to say about 186(1) (a):
“
The
key issue in the interpretation of the phrase ‘an employer has
terminated the contract with or without notice ‘is
whether the
employer has engaged in an act which brings the contract of
employment to an end in a manner recognised as valid by
the law”.
In
SA Post Office v
Mampeule
this Court remarked:
“…
The
subsection defines ‘dismissal ‘as follows:…an
employer has terminated ‘a contract of employment with
or
without notice…’ I am in agreement with the court a quo
that ‘dismissal ‘means any act by an employer
which
results, directly or indirectly, in the termination of an employment
contract…
”
[14]
[22]
The evaluation of the evidence by the court
a
quo
turned primarily on whether the automatic termination clause
contained in the employees’ contracts of employment offends
against s5 of the LRA
[15]
. An
evaluation of the nature of the contracts of employment and the
meaning and implication of its terms were not considered. The
court a
quo seems to have moved from the premise that since the commissioner
found that the nature of the employment contracts
were “indefinite
contracts” of employment ‘
and
that such a finding has not been assailed on review
’
it should stand. A finding that the employment contracts were
“indefinite contracts” is an erroneous finding
by the
commissioner. Such a finding constitutes an error of law and cannot
stand despite it not being challenged. As pointed out
already, the
test is whether the finding is a correct one and not strictly whether
it falls within a bend of reasonable decisions.
[23]
The factual matrix in this case supports the view that the employees’
contracts of employment were fixed-term contracts
where the end of
the fixed term was defined by the completion of a specified task or
project, that is, the termination of the Boardwalk
contract. The
continued existence of these contracts depended on the continued
existence of the contract between the appellant
and Boardwalk. The
employees were employed specifically for the contract between the
appellant and Boardwalk. The termination of
that contract is a
legitimate event that would by agreement, give rise to automatic
termination of the employment contracts. It
is Boardwalk that
cancelled the contract and not the appellant. There was no direct or
indirect act by the appellant to cancel
the contracts. There is no
evidence to suggest that cancellation by Boardwalk was a device to
rid the appellant of the employees.
Neither is there evidence to
suggest that it was a clandestine move by the appellant to dismiss
the individual employees. On the
facts of this case the cancellation
of the service contract by Boardwalk is the proximate cause for the
termination of the employees’
contracts of employment.
[24]
The fact that the appellant had an option to retrench the employees
or could have considered other options instead of relying
on the
automatic termination clause cannot be used to negate the clear terms
agreed to by the parties. Put differently, one cannot
simply use the
considerations of the fairness or otherwise of a dismissal to
determine whether an employee has been dismissed.
Lawfulness
of the automatic termination clause
[25]
The relevant provisions of s5 (2) (b) under the heading ‘Protection
of employees and persons seeking employment’
provides that:
“
(2)
Without limiting the general protection conferred by subsection (1),
no person may do, or threaten to do, any of the following-
(a)…
(b)
prevent an employee or a person seeking employment from exercising
any right conferred by this Act from participating in any
proceedings
in terms of this Act,..
”
Section
5(4) decrees that a provision in any contract, whether entered into
before or after the commencement of the LRA, that directly
or
indirectly contradicts or limits any provision of s4, or s5, is
invalid, unless the contractual provision is permitted by this
LRA.
[26]
In
Mahlamu
supra, Van Niekerk J correctly, in my view,
summarised the effect of the above provisions as follows:
“
[21]
These passages are clear authority for the fact that the parties to
an employment contract cannot contract out of the protection
against
unfair dismissal afforded to the employee whether through the device
of ‘automatic termination’ provisions
or otherwise.
[22] In
short: a contractual device that renders a termination of a contract
of employment to be something other than
a dismissal, with the result
that the employee is denied the right to challenge the fairness
thereof in terms of section 188 of
the LRA, is precisely the mischief
that section 5 of the Act prohibits. Secondly, a contractual term to
this effect does not fall
within the exclusion in section 5(4),
because contracting out of the right not to be unfairly dismissed is
not permitted by the
Act.”
[27]
It is logical that parties to a contract of employment cannot be
permitted to agree that what is proved to be a dismissal should
be
regarded as not being a dismissal. Further, it is impermissible for
parties to conclude a contract in terms whereof an employee
agrees
not to challenge the fairness or otherwise of his or her dismissal.
As to whether there has been a dismissal in a particular
case is a
value judgment which should be made on the facts of that particular
case.
[28]
There has been reference to and reliance in
SA Post Office v
Mampeule
by the parties and the Labour Court in its other recent
judgments which appears to have been differently understood.
Mampeule
was appointed Chief Executive Officer (CEO) of SA Post
Office (SAPO), a state owned entity on a five-year fixed term
contract.
He became an executive director of the Board of SAPO by
virtue of his appointment as the CEO. Article 8 of SAPO’s
articles
of association provided that if an executive director ceases
to hold office for any reason whatsoever, including removal by the
shareholder, his contract terminated automatically and simultaneously
with the cessation of office. Clause 9 of Mampeule’s
contract of employment stipulated that his employment could be
terminated on account of incapacity, as a result of poor work
performance
or ill health, misconduct or operational requirements,
and that such termination had to be done with due regard to fair
labour
practices and in conjunction with SAPO’s articles of
association. The Minister of Communications suspended Mampeule
pending
a forensic audit into his conduct. Subsequent thereto,
Mampeule was removed as a director by a resolution tabled by the
Minister
of Communications to that effect. The following day the
chairperson of the Board formally informed the Mampeule in writing
that
following his removal from the Board, his employment contract
had terminated automatically and simultaneously with his removal as
a
director.
[29]
SAPO approached the Labour Court seeking a declaratory order that the
termination of Mampeule’s employment, due to his
removal from
the Board of directors on 21 May 2007, did not constitute a
dismissal. In order to decide whether dismissal occurred,
the court
had to, firstly, determine the proximate cause that led to the
termination of the Mampeule’s contract of employment.
In its
view, the removal of the Mampeule as a director triggered,
proximately or effectively, the termination of his employment.
The
effective cause of termination of the employee’s contract of
employment was clearly the Minister’s removal of him
from the
Board. Had the Minister of Communications not removed Mampeule from
the Board, his employment would not have terminated.
[30]
Consequent to finding that the Minister of Communications was the
proximate cause of the termination of the contract, the court
found
that SAPO dismissed the employee. The court was also of the view that
any act by an employer which results, directly or indirectly,
in the
termination of an employee’s contract of employment constitutes
a dismissal within the meaning of section 186(1)(a)
of the LRA.
Although the court agreed with SAPO that the employee’s
employment contract permitted automatic termination,
it found that
the automatic termination clause was impermissible and cannot rightly
be invoked to stave off the clear and unambiguous
effect of the
Minister’s overt act. It concluded that the termination
of the employee’s contract of employment
pursuant to a
contractual term in his employment contract read together with the
Articles of Association are impermissible in their
truncation of the
provisions of Chapter 8 of the LRA, and possibly even, the
concomitant constitutional right to fair labour practices.
Provisions
of this sort, militate as they do against public policy by which
statutory rights conferred on employees are for the
benefit of all
employees and not just an individual, are incapable of consensual
validation between parties to a contract by way
of waiver of the
rights so conferred.
[31]
On appeal, this Court followed the same line of thought as the Labour
Court by enquiring into the proximate cause of the termination
of the
employment contract. The LAC enquired whether in the present matter,
it could be said that the shareholder's resolution
to remove the
employee was not the cause of the termination of the employment
contract. Alternatively, whether the automatic termination
provision
intervened and became the proximate cause of the termination of
employment; Or, should the question be asked as to what
led the
automatic termination provision to 'kick in' in order to determine
what the proximate cause was? Having set
these questions,
the LAC observed that in labour law jurisprudence, lawfulness could
not be equated with fairness. The LAC reiterated
that the right not
to be unfairly dismissed is one of the most important manifestations
of the constitutional right to fair labour
practice which forms the
foundation upon which the relevant sections of the LRA are founded.
This Court reiterated further that
parties to an employment contract
cannot contract out of the protection against unfair dismissal
afforded to an employee whether
through the device of automatic
termination provisions or otherwise because the LRA had been
promulgated not only to cater for
an individual’s interest but
the public’s interest. The LAC held that a heavier onus
rests on a party which contends
that, in a particular case, it is
permissible to contract out of the right not to be unfairly dismissed
in terms of the LRA.
[32]
This Court held, in conclusion, that in the absence of an explanation
by SAPO as to why the employee was suspended and why
it used the
automatic termination clause, the inference is overwhelming that
SAPO’s conduct was designed to avoid its obligation
under the
LRA. The Court was therefore satisfied that the court
a quo
came to a correct conclusion. The LAC however declined to consider
the constitutionality of the automatic termination clause.
[33]
There are several factors that distinguish the SAPO matter from the
matter under consideration. Firstly, the termination of
Mampeule’s
employment contract was due to an act by the employer. The Minister
who tabled the resolution for Mampeule’s
removal from the board
and the subsequent termination of his contract of employment was the
employer. The Minister’s act
of removal of Mampeule from the
board was the proximate cause of the termination of employment.
Secondly, the termination of Mampeule’s
contract was directly
related to allegations of misconduct. In his referral to the labour
court to challenge his dismissal he made
allegations that his
suspension was triggered by the protected disclosures he had made. In
response to the said allegation SAPO
was found by the LAC to have
made a bare denial of the allegations and did not “
pin
its colours to the mast
“as to why he was suspended. Through the actions of the
employer Mampeule was being denied the opportunity to contest the
fairness of the termination of his employment contract. Thirdly, the
termination of employment in the SAPO case was not linked
to the
expiry of a fixed -term contract.
[16]
Sindane v Prestige
Cleaning Services [supra]
[34]
The facts in this case are closer to the facts in the matter under
consideration. The court considered whether the applicant,
formerly
employed as a cleaner by the respondent in terms of a “fixed-term
eventuality contract of employment had been dismissed
within the
meaning of section 186(1) (a) of the LRA. The employee’s
contract of employment had been terminated as a result
of the client
downsizing its contract with the employer brokers, by cancelling a
contract in terms of which an extra cleaner had
been provided to
them. The contract stipulated that, upon termination of the broker’s
contract with the client to whom the
employee rendered services, the
employee’s employment contract with the employer broker would
automatically terminate.
[35]
The Respondent employer argued that there was no dismissal as his
contract of employment was terminated when the cleaning contract
with
the client Menlyn Piazza was reduced. In reaching its decision, the
Labour Court considered the finding of the Labour Court
in
SA Post
Office
which considered the automatic termination of an
employment contract as a result of an act of a third party. The court
then distinguished
the finding of the court in
SA Post Office
to that of the case at hand. It found that in
SA Post Office
,
the termination was based on the employer’s decision to remove
the employee from the Board of directors following allegations
of
misconduct. In such instances, the court held, because the employee
was suspended for alleged misconduct and the termination
was
misconduct related, fairness dictates and in light of the
audi
alteram partem
rule that he ought to have been given an
opportunity to dispute the fairness of his termination. The Labour
Court was satisfied
that the applicant had not been dismissed as the
termination of his employment contract was triggered by the
termination of the
employer’s contract with its client. The
court relied on the wording of section 186 of the LRA which defines
dismissal as
the termination of the contract of employment “by
the employer”. In finding that the contract terminated as a
result
of a specified event as opposed to an overt act on the part of
the employer, the Labour Court was satisfied that the termination
did
not fall within the ambit of section 186. This conclusion by the
Labour Court can, in my view, not be faulted.
Mahlamu
v Commission for Conciliation, Mediation and Arbitration and others
[36]
In this matter, the employer entered into an agreement with its
client, Bombela Joint Venture, to provide security escort services
at
various sites related to the Gautrain project. The employee was
employed as a security officer on these sites. During January
and
February 2009 Bombela advised the employer that the armed escort
services at the Park, Marlboro Portal and Benrose sites, would
end
with immediate effect. The employer notified the employee that, as a
result of the cancellation and in the absence of any alternative
positions, his services were no longer required. The employer relied
on clause 2.1 of the employee’s contract of employment
which
states
inter alia
, that the employment contract will commence
on 23 October 2008 and will automatically terminate in the event
where the client does
not require the services of the employee for
whatsoever reason.
[37]
At the arbitration the employer presented evidence that the employee
was offered alternative positions at a reduced remuneration
but were
rejected by the employee. The arbitrator upheld the employer’s
contention that there was no dismissal for the purposes
of s 192 of
the LRA and dismissed the employee’s claim. In
considering the matter on review, the Labour Court had regard
to the
Sindane
and
SA Post office decisions
. It concluded that
the facts of the case at hand were materially similar to those in
SA
Post Office
because in both instances, a third party triggered
the automatic termination provisions.
[38]
The Labour Court held that since the automatic termination provisions
in the contract fall within the section 5(2) (b) injunction,
the
remaining question is whether it is permissible to contract out of
the right not to be unfairly dismissed. In answering this
question,
the court relied on its interpretation of the
SA Post Office
and the UK Court of Appeal dictum in
Igbo v Johnson Mathery
Chemicals
Ltd
1986 IRLR 215
(CA). It noted that the parties
to an employment contract cannot contract out of the protection
against unfair dismissal
afforded to the employee whether through the
device of automatic termination provisions or otherwise. The court
held that a contractual
term to this effect does not fall within the
exclusion in section 5(4), because contracting out of the right not
to be unfairly
dismissed is not permitted by the LRA. The
Labour Court then concluded that the arbitrator committed a material
error of
law by finding that the employee’s contract terminated
automatically when the employer’s contract with its client was
cancelled.
[39]
At paragraph 19 above I have indicated that Van Niekerk J, in
agreeing with Basson J’s remarks in
Sindane
, accepted,
correctly, that there will not be a dismissal for the purposes of
s186(1) of the LRA in those cases where the end of
an agreed fixed
term is defined by the occurrence of a particular event. However, as
counsel for the appellant has submitted, the
learned Judge seems to
have moved from an erroneous interpretation of the
SA Post Office
when he held that:
“
[9]
In the present matter, the third respondent relies on the
cancellation of the service agreement by Bombela as the specified
event giving rise to the automatic termination of the applicant’s
contract. That being so, it seems to me that the facts
of this case
are not materially dissimilar to those in Mampuele -
in
both instances, the ‘automatic termination’ provisions
were triggered by a third party - in Mampuele’s case,
the
shareholder, in the present case, the client
.”
[Emphasis provided]
[40]
The interpretation of the
SA Post Office
matter in
Mahlamu
is indeed erroneous because this Court found that the termination of
the contract was an act of the employer (the sole shareholder)
and
not a third party, and that the overwhelming inference was that
SAPO’s conduct was designed to avoid its obligations
under the
LRA.
[41]
In my view, it does not necessarily follow that in all cases an
automatic termination clause based on an event contained in
a fixed
term contract of employment will be visited with invalidity. It would
be necessary to determine whether in the circumstances
of a
particular case the clause was intended to circumvent the fair
dismissal obligations imposed on the employer by the LRA and
the
Constitution.
[17]
Some of the
relevant considerations, in my view, would include the precise
wording of the automatic termination clause and the
context of the
entire agreement; the relationship between the fixed-term event and
the purpose of the contract with the client;
whether it is left to
the client to choose and pick who is to render the services under the
service agreement; whether the clause
is used to unfairly target a
particular employee by either the client or the employer; whether the
event is based on proper economic
and commercial considerations; the
list is not exhaustive. Each case must be decided on its
circumstances.
[42]
In this case clause 3.2 (i) provides that “
the
period of employment would endure until the termination of the
contract with Boardwalk
”.
This clause is in my view sufficient on its own to convey that it is
a fixed-term contract that will run until the contract
with the
client is terminated. The fact that clause 3.2 (ii) provides that
“
the employee
agrees that the contract of employment would terminate automatically
upon termination of the Boardwalk contract and
that such termination
would not constitute a retrenchment but a completion of the contract
”
does not in my view, render a termination of the contract of
employment upon termination of the contract with Boardwalk
to be
something else. It may merely serve to amplify the consequences of
the agreed terms. The clause itself does not constitute
termination
of the employment agreement. The affected employees are free to
challenge the termination if it does fall within
the exclusions in s
5(4) of the LRA. They may also challenge the termination of their
employment in terms of s 186(1) (b). In any
case once the employees
have established that there has been a dismissal in terms of s186 (1)
(b) the onus shifts to the appellant
to justify the fairness of the
dismissal. It does not follow that the inclusion in a contract of
employment of a clause similar
to the one in this case should
automatically render a termination of that contract based solely on
its legitimate terms, a dismissal.
That would in my view defeat the
whole purpose of concluding fixed-term contracts concluded for
legitimate reasons.
The
relief granted by the court
a quo
[43]
The award which was the subject of review only dealt with a
preliminary issue relating to the question whether the employees
have
been dismissed. It is in essence a jurisdictional issue. Having found
that there was no dismissal, the commissioner did not
have to deal
with the fairness or otherwise of the dismissal which was
non-existent. No evidence was presented by the parties on
the
fairness or otherwise of the dismissal. The award that the
commissioner could competently make was to find that the CCMA lacked
jurisdiction because on the facts of the case the employees failed to
establish the existence of a dismissal. It was not supposed
to
dismiss the employees claim since it lacked jurisdiction to entertain
it.
[44]
The court
a quo
, having found that there was a dismissal,
concluded that the said “dismissal” was substantively and
procedurally unfair.
This was a misdirection on its part since it was
enjoined to review a jurisdictional finding made by the commissioner
without having
not dealt with the merits of the dispute. At best the
matter should have been left to the parties to pursue the fairness of
their
“dismissal” at the appropriate forum. The order in
line with that made in the
Mahlamu
matter would have been
appropriate. For these reasons the order of the court
a quo
on
the relief granted should also be set aside as it was incompetently
granted.
[45]
For the reasons discussed above the appeal should succeed. I am of
the view that it will be in accordance with the requirements
of the
law and fairness that there be no order as to costs.
[46]
In the result, the following order is made:
1. The
appeal is upheld.
2. The order
of the Labour Court is set aside and substituted with the following;
“
The
application for review is dismissed.”
3.
There shall be no order as to costs both in the Labour Court and this
Court.
___________________
Tlaletsi DJP
Ndlovu
JA
et
Hlophe AJA concur in the judgment of Tlaletsi DJP
APPEARANCES
For the appellant:
LR Naidoo
Instructed by:
Millar & Reardon Attorneys, Durban
For the respondent:
K Allen
Instructed by:
Tomlinson Mnguni James Inc, Umhlanga Rocks
[1]
Act 66 of
1995.
[2]
The
appellant has only attached the three pages of the written agreement
it is relying on. The employees have attached a complete
written
agreement to their Replying affidavit.
[3]
[2010] BLLR
1052 (LAC).
[4]
[2009] 8
BLLR 792 (LC).
[5]
(2011) 4
BLLR 381
(LC).
[6]
SARPA v SA
Rugby (Pty) Ltd & others; SA Rugby (Pty) Ltd v SARPU [2008] 9
BLLR845 (LAC) at paragraph [41].
[7]
In SA
Transport and Allied Workers Union on behalf of Dube and Others v
Fidelity Supercare Cleaning Services Group (Pty) (2015)
36 ILJ 1923
(LC), the Labour Court held: “[29] A view has already been
posited, approved and upheld in the labour courts
holding
effectively that a current contract of employment can terminate by
operation of its terms (de jure), as a natural consequence
of the
termination of another contract, to which the current contract
intensively relies for its own subsistence. This is possible
in all
instances where there is a contractual arrangement in terms of which
a person, the employee, agrees that his or her services
have been
procured for and will be provided to a client, a third party, by a
temporary employment service (“the employer”).
When in
such circumstances, there is a clause in the current contract to the
effect that when a certain “event” occurs,
such as the
client terminating the SLA contract with the employer, the current
contract will also terminate. There can be no
question, save where
there is an attack on the lawfulness or validity of the contract
itself, that when such an event comes to
pass, the current contract
will also validly and/or lawfully terminate.
[30]
To the extent that this termination is triggered by the “occurrence
of an event” and is not based on an employer’s
own
decision, there is no dismissal and the employee is not entitled to
a hearing nor, as it would be the case with the public
sector
employees, is the termination subject to judicial review (Nkopo v
Public Health and Welfare Bargaining Council and Others
and MEC,
Public Works, Northern Province v CCMA and Others). The conundrum
arises when a school of events occur and it is incumbent
to decide
which of those are capable of terminating a contract of employment
validly without it being said that there was a dismissal”
[footnotes omitted.]
[8]
Air Traffic
and Navigation Services Company v Esterhuizen [2014] JOL (SCA) at
para 17.
[9]
(2010) 31
ILJ 733 (LC) at para16.
[10]
[2011] 4
BLLR 381
(LC) at para 23.
[11]
(2001) 22
ILJ 2407 (SCA) at para 17-18. See also Buthelezi v Municipal
Demarcation Board (2001) 25 ILJ 2317 (LAC) at para 12.
[12]
Steenkamp
and Others v Edcon Ltd
2016 (3) SA 251
(CC) at para 107.
[13]
(2001) 22
ILJ 2290 (LAC) at para 22 – 23. National Union of
Metalworkers of SA and Others v SA Five Engineering (Pty)
Ltd AND
Others (2007) 28 ILJ 1290 (LC) at para 41- 422.
[14]
Supra at
para 12.
[15]
The
provisions of s 5 of the LRA are referred to in para 22 of the
Judgment.
[16]
For a full
discussion of the distinguishing features see Sindane (supra) at
para [17].
[17]
Constitution
of the Republic of South Africa Act 1996.