Employment law update – Re-employment on different terms and conditions

April 1st, 2015

By Talita Laubscher and Monique Jefferson

In Kukard v GKD Delkor (Pty) Ltd [2015] 1 BLLR 63 (LAC), Mr Kukard was initially employed on an indefinite basis as a technical sales representative by GKD Delkor (Pty) Limited (Delkor) and then resigned and joined one of Delkor’s competitors. Kukard was bound by a restraint of trade agreement and thus Delkor threatened to take action to enforce the restraint. Delkor, Kukard and the new employer entered into negotiations and eventually concluded a settlement agreement in terms of which Delkor agreed to re-employ Kukard on the same conditions with the same benefits. However, when he reported for duty he was presented with a fixed term contract for a different position. He was also not provided with his company laptop and other company resources that he had used prior to his resignation. He refused to sign the agreement and was issued with a letter stating that the offer of employment was withdrawn. He also alleged that he was instructed to leave the premises and return his company cellphone. Kukard contended that Delkor was in breach of the settlement agreement and in addition he referred an unfair dismissal claim to the Commission for Conciliation, Mediation and Arbitration (CCMA). The CCMA found that the dismissal was unfair and ordered seven months’ remuneration as compensation.

On review, the Labour Court found that an employment relationship had come into existence between Delkor and Kukard but that the withdrawal of the offer of employment did not in itself constitute a dismissal as the offer was never accepted by Kukard. Thus, the Labour Court concluded that the CCMA did not have jurisdiction as Kukard had failed to prove that he was dismissed by Delkor. Delkor alleged that the proximate cause of the termination was that Kukard had refused to finalise the terms and conditions of his employment.

The Labour Appeal Court (LAC) held that an employment relationship had, in fact, come into being between Delkor and Kukard as a result of the settlement agreement and the fact that Kukard reported for duty to tender his services. It found further that Delkor had refused to comply with the provisions of the settlement agreement. Delkor alleged that it was necessary to change Kukard’s job description because there had been a restructuring but the evidence did not support this. Delkor also denied instructing Kukard to leave the premises but the LAC found that the most probable version was that Delkor had done so especially because Kukard was instructed to return his company cellphone.

The LAC concluded that the decision of the arbitrator was one that a reasonable decision maker could make as Kukard was an employee by virtue of the fact that he had been re-employed in terms of the settlement agreement and had reported for duty. Thus, any dismissal had to be substantively and procedurally fair.

As regards compensation, the arbitrator had a wide discretion to award compensation provided that it was just and equitable. When exercising this discretion, the arbitrator must determine the nature of the unfair dismissal and the scope of the wrongful act on the part of the employer. Compensation can only be interfered with if the arbitrator exercises discretion on a wrong principle, or with bias or without reason or if the arbitrator adopts a wrong approach. The LAC found that the order of compensation was reasonable as regard had been had to Kukard’s length of service prior to his resignation, the way in which he had been treated when he reported for duty, and the fact that he had been unable to secure alternative employment as he was bound by restraint of trade undertakings. It was noted that where an unconditional offer of reinstatement is made to an unfairly dismissed employee, the employee’s unreasonable rejection of such offer may mean that the employee is not entitled to compensation. This was, however, not the case here. When Kukard reported for duty, Delkor did not reinstate him as per the settlement agreement but instead tried to renegotiate the terms of his employment. The offer of employment was accordingly not a genuine reasonable unconditional offer to re-employ on the same terms and conditions and the refusal to accept the offer of employment on the new terms and conditions was not unreasonable. The appeal was accordingly upheld.

Team misconduct

In True Blue Foods (Pty) Ltd t/a Kentucky Fried Chicken (KFC) v CCMA and Others (LC) (unreported case no D441/11, 28-11-2014) (Shai AJ), Kentucky Fried Chicken (KFC) found that it was suffering severe stock losses and it accordingly improved its security measures by changing locks and employing more security guards to conduct patrols and searches. There were also CCTV cameras. KFC communicated to the employees that it was introducing a system of zero tolerance as regards stock losses and theft. It informed the employees that it was part of their duties to avoid stock losses and report acts of misappropriation and that if such significant stock losses continued, disciplinary action would be taken. Given the extremely large number of losses, (for example, 518 cans of juice went missing during one shift), KFC was of the view that it would not have been possible for theft to be carried out without all the team members being aware. Significant stock losses nevertheless continued and a disciplinary process was instituted. All the employees who had worked during the shifts when the stock losses occurred were subjected to a disciplinary inquiry and were found guilty on the basis of ‘team misconduct’ and were dismissed. After their dismissal there were no further stock losses.

The employees referred the matter to the CCMA as they alleged that KFC had not proved that they were involved in the stock losses or that they knew about it or were responsible for it. The CCMA found the dismissals unfair and ordered six months’ remuneration as compensation to each of the employees.

On review, the Labour Court, per Shai AJ, considered the concept of team misconduct and found that in team misconduct a group of employees are dismissed because the collective conduct of the group is indivisible. It is not necessary to prove individual culpability, derivative misconduct or common purpose but rather that each of the individuals has culpably failed to ensure that the group complies with a rule. Where stock losses are so significant that it could not have escaped the knowledge of all the employees, then a dismissal is justifiable.

Shai AJ concluded that in cases of team misconduct what suffices is for the employee to be a member of a team that has failed to ensure that the team meets its obligations. In this case there were significant losses, the stock loss had continued notwithstanding the measures that KFC had taken to try and curb the stock losses and the employees had been warned of the consequences should the stock losses continue. It was found that the arbitrator’s finding was unreasonable as he had erroneously found that individual culpability had to be proven in the case of team misconduct. Thus, the review succeeded and the arbitration award was substituted with an order that the dismissals were substantively fair.

Talita Laubscher BIur LLB (UFS) LLM (Emory University USA) is an attorney at Bowman Gilfillan in Johannesburg.

Monique Jefferson BA (Wits) LLB (Rhodes) is an attorney at Bowman Gilfillan in Johannesburg.

This article was first published in De Rebus in 2015 (April) DR 51.