One of the most difficult and often unpleasant aspects of an employment relationship for both employees and employers is the termination or dismissal of an employee. Like most relationships we enjoy in life, an Employment relationship, no matter how great it may be in the beginning, sometimes runs its course and comes to an end.
Terminating an employment relationship can be a daunting task for an employer for various reasons. Chief amongst these are the eggshells that you’ll be walking on in the form of the South African Labour laws. Therefore, this task becomes even more daunting for small business entrepreneurs who often do not have HR departments to handle such matters.
The South African Labour law landscape is onerous at best, so much so that you can be penalised for not following due process, even if your reason for dismissal is fair. It’s not enough to catch an employee red-handed for misconduct. You must still follow due disciplinary process before you dismiss them.
In this article, we look at the circumstances under which an employment contract can be terminated. We then discuss the dos and don’ts when it comes to terminating an Employment Agreement for misconduct. We also discuss consequences of prematurely shouting, “You are fired!” as popularised by you know who, and how to avoid this.
Section 188 of the Labour Relations Act 66 of 1995 as amended (“LRA”) and Item 2 of the Code of Good Practice: Dismissal Schedule 8 come into play here. In terms of section 188 of the LRA and Item 2 of the Code, an employer can dismiss an employee for reasons related to:
Further to the above, the employer must ensure that the dismissal is effected in accordance with a fair procedure.
What this means is that an employer can terminate an employee’s contract if she conducts herself in a manner that is against the employer’s set standards of behaviour. Standards of behaviour which is acceptable to an employer are usually contained in an employer’s Handbook or various workplace Policies.
Simple examples of misconduct that may justify dismissal are theft of company property, dishonesty, excessive lateness, abscondment, insubordination or insolence. An employer may also lawfully dismiss an employee on the basis of his inability to perform his duties. This may be due to illness or the employee’s injury. This is what is referred to in the LRA as an employee’s “capacity”.
Lastly, an employer may lawfully terminate an employee or employees for reasons related to its operational requirements, also known as retrenchments. This is also referred to as a no fault dismissal. As an example, the outbreak of Covid-19 in 2020 saw widespread retrenchments as its impact ravaged businesses across the globe.
In all the above circumstances, as an employer, you are strictly required to comply with the dictates of South African Labour laws to ensure fairness for employees. This is because, section 185 of the LRA, affords, ‘every employee, a right not to be unfairly dismissed and subjected to unfair labour practices’.
In the case for dismissal for misconduct, the fairness component is divided into substantive and procedural fairness. Substantive fairness dictates that the reason for the dismissal or termination must be a lawful and reasonable one. Procedural fairness dictates that you must follow a fair procedure before dismissing an employee. Therefore, an employer may still be penalised for not following due process regardless of the existence of a lawful reason for a termination.
Therefore, it is crucial that a dismissal must meet both the substantive and procedural fairness requirements in order to avoid an unfavourable CCMA award or a court order against you.
As stated above, in this article we are focusing on dismissals for misconduct. Therefore, the starting point here is section 188 (2) of the LRA. This section requires anyone considering whether a dismissal is substantively and procedurally fair to take into account any relevant code of good practice. In case of dismissals, this would be the Code of Good Practice: Dismissal (“the Code”) in Schedule 8 of the LRA. It is important to remember that the code sets out the requirements for ensuring that a dismissal is both substantively and procedurally fair.
In order to pass muster of the substantive fairness requirement, you must consider:
The above requirements seem quite self-explanatory; however, it is important to break them down. Therefore, the most important factors to note from the above are the following:
Once you have complied with the substantive fairness requirement as explained above, you are required to take the relevant employee through a fair disciplinary process. In order for a dismissal to be procedurally fair in terms of Item 4 of the Code, an employer must:
If and when you hit the big time as an entrepreneur and you attract the attention of trade unions, you must inform the relevant union before disciplining an office bearer of that trade union.
In the event that you dismiss an employee, you should provide him with the reason for dismissal. You must also remind him of any rights to refer the matter to a Bargaining Council with jurisdiction or to the CCMA. Furthermore, you may remind them to refer a dispute in terms of any other dispute resolution procedures established in terms of a collective agreement.
In exceptional circumstances, if you cannot reasonably be expected to comply with these guidelines, the Code recognises that you may dispense with pre-dismissal procedures.
The process above is what most entrepreneurs fall victim to because it can be quite complicated. It is therefore crucial for you to contact an experienced labour lawyer or consultant if you do not know what to do. As mentioned numerous times in this article, an employee’s wrongful conduct is not an automatic justification to show him the door. You must ensure that you follow due process before dismissing an employee for misconduct.
The primary remedy for an unfair dismissal is of course reinstatement, with or without back-pay, where this is reasonably practical. The second remedy is re-employment and the third, compensation. However, there are limitations as to the amounts an employee may be awarded for unfair dismissal.
Compensation awarded to an employee whose dismissal is found to be either substantively or procedurally unfair or both, may not be more than 12 (twelve) months’ remuneration. It is crucial to note that such compensation will be calculated at the employee’s rate of remuneration on the date of dismissal.
Needless to say, the above situation is one that no entrepreneur would want to find themselves in, especially considering the current economic climate. Therefore, it is crucial that you ensure you have a good understanding of handling disciplinary issues and dismissals. Alternatively, if you do not have a good grasp of disciplinary processes, make sure you have a labour lawyer or consultant on your side.
Based on the above it is quite clear that dismissals for misconduct can be quite disruptive and downright difficult. The question therefore is, can an employer terminate an employee in any other less disruptive way? The short answer to this question is yes – you can negotiate a mutual separation with an employee and sign a Mutual Separation Agreement.
Legalese has assisted numerous employers with negotiating and drafting mutual separation agreements. This is by far one of the best ways to terminate an employment contract. By signing a mutual separation agreement, you are able to take control of the process and the Agreement is final and binding on both parties.
Some of the benefits of such an agreement for an employer are that a termination is negotiated without going through the often cumbersome disciplinary enquiry. This way, your business operations will not be disrupted, and your remaining workforce will not be left demoralised. You will get to maintain a positive company culture where employees are not dragged through disciplinary processes and lawyers are always in your corridors.
For the employee, this means that they avoid dismissal, and rather chose to sever ties with the company on “good terms”.
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