Brief Summary

Labour Law — Unfair dismissal — Review of arbitration award — Employee dismissed for alleged conflict of interest — Commissioner found dismissal substantively unfair and awarded retrospective reinstatement — Applicant contended that Commissioner erred in finding no conflict of interest and failing to establish reputational risk — Court held that the applicant did not prove on a balance of probabilities that the employee's actions constituted a breach of conduct warranting dismissal, thus upholding the Commissioner's award.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were a review application in the Labour Court seeking to set aside an arbitration award issued under the auspices of the Commission for Conciliation, Mediation and Arbitration (CCMA) (case number LP4876-15). The review was brought by De Beers Consolidated Mines Limited – Venetia Mines (the applicant employer) against the National Union of Mine Workers (first respondent), Ms Evodia Rathipa Landela (second respondent employee), the CCMA (third respondent), and the commissioner who issued the award (Commissioner Khutos Elias Mpai N.O, fourth respondent).

The procedural history was that Ms Landela was dismissed on 23 March 2015 following an internal disciplinary enquiry held on 23 January 2015. She referred an unfair dismissal dispute to the CCMA, where the matter was arbitrated on 20 September 2015 and 15 November 2015. The commissioner issued an award dated 26 November 2015 finding the dismissal substantively unfair and granting retrospective reinstatement. The employer then approached the Labour Court to review and set aside that award.

The general subject-matter of the dispute concerned whether the dismissal of a long-serving procurement employee for gross misconduct, framed as a breach of the employer’s code of business conduct and ethics relating to a conflict of interest (and the alleged failure to declare and avoid such conflict), was substantively fair; and, on review, whether the commissioner’s outcome was one that could reasonably be reached on the evidentiary material presented.

2. Material Facts

Ms Landela had been employed by the applicant since September 1996 and, at dismissal, occupied the position of Procurement Clerk, with responsibilities including contract management and procurement of outside service providers. The employer dismissed her for gross misconduct, alleging that she contravened the employer’s ethics/code by failing to declare and avoid a conflict of interest, and thereby failing to perform her duties conscientiously, honestly, and in the employer’s best interests.

The court treated the following facts as materially established on the record. The applicant procured services from Grace Security (described as “the contractor”) to install an alarm system at one of the applicant’s properties. The contractor subcontracted the work to Genesis Security (described as “the subcontractor”), and the applicant was purportedly not aware of the subcontracting arrangement. A sum of R20 000 was paid out in relation to the work, but the payment flow became contentious: the contractor remitted payment into Ms Landela’s bank account, rather than paying the subcontractor. The remittance was reflected as coming from a clearing house styled “Marine Loans”, and Ms Landela’s evidence was that she did not recognise the payment as originating from the contractor.

It was common cause that, once the contractor had paid Ms Landela, the subcontractor was not paid. It was also common cause that the subcontractor’s owner threatened to go to the media, purportedly on the basis that the applicant had not paid the contractor. The subcontractor lodged a complaint with the applicant’s head office, and the record reflected that the contractor’s contract was terminated, with an approximate loss of 27 jobs associated with that termination.

Ms Landela’s version (as recorded in the judgment) was that two employees of the subcontractor lived on her property as lodgers and paid rent. They requested assistance because they did not have bank accounts. In or about August 2014, she provided her bank account as a conduit to receive funds for them, without asking sufficient questions. After the R20 000 was deposited into her account, she increased her daily withdrawal limit, withdrew and handed R15 000 to an individual identified as “Sam,” and then provided her bank card and PIN to Sam to withdraw the remaining R5 000, which he did. She later declared an outside business interest to the employer’s Tender Board on 9 September 2014. The court also recorded evidence suggesting that the employer’s witness (Eman Nel) regarded the transaction as the impetus for that declaration.

The applicant’s case at arbitration was that Ms Landela placed herself in a conflict of interest in breach of the employer’s code of ethics, and that the employer could not “extricate” her from the ensuing dispute/controversy between contractor and subcontractor. Internally, the chairperson of the disciplinary enquiry (Andrew Fourie) considered that Ms Landela’s conduct involved dishonesty and fraud, linked to the fact that the subcontractor did not receive payment, and he treated dishonesty as a dismissible offence in terms of the employer’s code. However, the record (as summarised by the Labour Court) also indicated that Fourie struggled to align his conclusion with the specific charge as formulated, and that he likened the misconduct to dishonesty for sanction purposes notwithstanding uncertainties about whether the disciplinary code and ethics code expressly covered the charge as framed.

3. Legal Issues

The central legal questions were whether the commissioner’s award—finding Ms Landela’s dismissal substantively unfair and ordering retrospective reinstatement—was reviewable on the basis that it was not a decision a reasonable decision-maker could reach on the evidence and material placed before the commissioner; and, relatedly, whether the commissioner committed reviewable irregularities or material errors in concluding that the employer had not proved the alleged conflict of interest misconduct.

Within that overall inquiry, the dispute entailed a mixed evaluation of fact (what was proved about the transaction, knowledge, disclosure, and risk), the application of legal standards to those facts (the burden to prove fairness, and whether the proven facts satisfied the charge), and an element of value judgment inherent in assessing substantive fairness, including whether continued employment in a position of trust was viable.

Although the applicant advanced specific review criticisms—namely that the commissioner erred in finding no evidence of conflict of interest, misconceived the relevance of the contractor–subcontractor dispute to the employer, and incorrectly described Ms Landela as a “sacrificial lamb”—the Labour Court framed the decisive review inquiry in accordance with the reasonableness standard, asking whether the commissioner’s conclusion was rationally connected to the evidentiary material and reasons given, and whether the applicant had demonstrated errors producing an unreasonable outcome.

4. Court’s Reasoning

The Labour Court began by characterising the matter as a review of an arbitration award that went against the employer. It noted an internal inconsistency in the commissioner’s award (a reference stating the dismissal was substantively “fair”), which the court treated as an obvious error and read as meaning “unfair” in light of the award’s operative findings and remedy.

In addressing the review grounds, the court emphasised the review applicant’s obligation to stand or fall by its founding papers and, critically, to show where factual and legal errors occurred and how they produced an unreasonable result. The court restated that at arbitration the employer bore the onus, on a balance of probabilities, to prove substantive fairness in line with section 192(2) read with section 188 of the Labour Relations Act 66 of 1995, and with the relevant portions of the Code of Good Practice: Dismissal in Schedule 8. The commissioner’s task was to determine whether the employee was guilty of the charged misconduct and whether dismissal was an appropriate sanction in the circumstances.

A major feature of the court’s reasoning was its conclusion that the commissioner’s finding—namely, that the employer did not prove the charge as formulated—was driven by the employer’s own presentation of evidence. The court described the employer’s witnesses as giving poor and unhelpful testimony on the pivotal question whether Ms Landela broke the specific rule alleged. The commissioner’s acceptance that Ms Landela did not know the subcontractor’s relationship to the contractor (and thereby to the employer) was treated by the Labour Court as central to the failure of proof: if she did not know the payment’s provenance and nexus to the employer’s business, the commissioner could reasonably conclude that the employer had not established, on a balance of probabilities, a breach of the conflict-of-interest rule in the manner charged.

The court also considered the employer’s contention that Ms Landela’s conduct created reputational risk to the applicant. It held that the record did not establish, on the evidence presented, that Ms Landela was part of a syndicate or group to scam the subcontractor and contractor in a way that caused reputational damage to the applicant, and it questioned whether dismissal, on the employer’s version as proved, actually mitigated that risk. This analysis was tied to the court’s point that it remained the employer’s responsibility to prove its case, rather than expecting the commissioner to fill evidentiary gaps.

At the same time, the Labour Court expressed a distinctly critical view of Ms Landela’s conduct and the plausibility of her explanation. It rejected the commissioner’s characterisation of her as a “sacrificial lamb,” stating that she was “so far from it,” and describing the transaction as “dodgy,” including that she allegedly transacted with individuals whose surnames she did not know, provided her bank card and PIN, and did not take steps to mitigate the subcontractor’s risk once the issue emerged. The court considered the conduct concerning given her procurement role and long service, observing that her length of service aggravated rather than mitigated because she should have understood proper business processes.

However, the court treated these evaluative concerns as distinct from the review test and evidentiary burden at arbitration. It emphasised that, notwithstanding its own misgivings about the transaction, the employer remained in the “invidious position” of having to prove, on the evidence led, that what Ms Landela did met the charge and justified dismissal in a position of trust; and it found that the employer did not do so. The court noted that the chairperson of the disciplinary enquiry struggled to explain why Ms Landela was dishonest and fraudulent and did not decide the matter coherently on the charge as alleged, which aligned with the commissioner’s difficulty in finding the charge proved.

The Labour Court ultimately applied the Sidumo reasonableness approach, expressly referencing the principle that the commissioner’s sense of fairness, not the employer’s, must prevail. It concluded that the commissioner’s outcome was rationally connected to the reasons given and the material before him, and therefore reasonable (expressly referencing the Edcon authority in relation to reasonableness), with the lone exception that the “sacrificial lamb” comment was inappropriate but not sufficient, by itself, to justify interference on review.

5. Outcome and Relief

The Labour Court dismissed the review application, thereby leaving the CCMA arbitration award intact, including the finding that the dismissal was substantively unfair and the award of retrospective reinstatement.

No order as to costs was made.

Cases Cited

Edcon Ltd v Pillemer NO and Others [2010] 1 BLLR 1 (SCA).

Sidumo and Another v Rustenburg Platinum Mines Ltd and Others [2007] 12 BLLR 1097 (CC).

Legislation Cited

Labour Relations Act 66 of 1995 (as amended), section 188.

Labour Relations Act 66 of 1995 (as amended), section 192(2).

Labour Relations Act 66 of 1995 (as amended), Schedule 8: Code of Good Practice: Dismissal (items 2, 3 and 4).

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The Labour Court held that the commissioner’s award finding Ms Landela’s dismissal substantively unfair and granting retrospective reinstatement was not shown to be unreasonable on the record. The court found that, despite the court’s own serious misgivings about the employee’s conduct and its description of the transaction as suspicious, the employer failed at arbitration to prove on a balance of probabilities that Ms Landela was guilty of the specific conflict-of-interest misconduct charged, or that the evidentiary shortcomings could be cured on review.

The court further held that the commissioner’s “sacrificial lamb” characterisation was inappropriate in the court’s view, but it was not a sufficient basis, in the circumstances, to set aside an award that was otherwise rationally connected to the evidence and reasons, and therefore met the reasonableness standard applicable on review.

LEGAL PRINCIPLES

The judgment applied the principle that in unfair dismissal disputes the employer bears the onus of proving the fairness of the dismissal, as reflected in section 192(2) read with section 188 of the Labour Relations Act 66 of 1995 and the relevant guidance in Schedule 8. The court treated this as requiring the employer to establish, on a balance of probabilities, that the employee was guilty of the misconduct as charged and that dismissal was substantively fair in the circumstances.

The judgment applied the reasonableness standard for review of arbitration awards, holding that a reviewing court interferes only where the applicant demonstrates factual or legal error producing an unreasonable result, and that an award is sustainable where the commissioner’s conclusion is rationally connected to the reasons given and the material before the commissioner.

The judgment further applied the principle articulated in Sidumo and Another v Rustenburg Platinum Mines Ltd and Others [2007] 12 BLLR 1097 (CC) that, in the arbitration context, the commissioner’s sense of fairness is decisive rather than the employer’s preferred outcome, reinforcing a restrained approach to review where the commissioner’s decision falls within the band of reasonable outcomes on the presented evidence.

De Beers Consolidated Mines Limited - Venetia Mines v National Union of Mine Workers and Others (JR2545/15) [2018] ZALCJHB 194 (15 May 2018)