Employment law update – Conditions in employment contracts providing for automatic termination of employment

June 1st, 2017

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

In Nogcantsi v Mnquma Local Municipality and Others [2017] 4 BLLR 358 (LAC), an employee was offered a position as a protection officer in terms of a three year fixed term contract subject to the outcome of a positive vetting process. In this regard, the employment contract contained a resolutive condition, which provided that the offer was subject to a vetting and screening process and that the employment contract would automatically terminate should the employer become aware of any negative information pertaining to the employee.

The municipality was subsequently informed that the employee had displayed dishonesty at his previous employer and it then terminated the employment contract. The employee alleged that he had been unfairly dismissed and referred an unfair dismissal dispute to the bargaining council seeking reinstatement. The arbitrator found that the employee had not been dismissed. The employee then took the matter on review to the Labour Court (LC) and argued that parties to an employment contract cannot contract out of the provisions of the Labour Relations Act 66 of 1995 (LRA) regarding dismissals. Van Niekerk J considered the case law and found that this case was distinguishable. He held that for an employment contract to provide that it is conditional on a positive vetting process and to provide for automatic termination should the outcome of the vetting process not be positive did not deprive an employee of the right to security of employment. Furthermore, the employee had agreed to the condition in the employment contract and understood the consequences of a negative outcome to the vetting process. The vetting process was also not in the hands of the employer and was material to his suitability for the position. As regards the employee’s argument that he was not given an opportunity to put his version across in respect of the negative information that was disclosed to the employer, Van Niekerk J commented that the employee had had the opportunity to put his version across by making a full disclosure at the time of his appointment. Van Niekerk J said that the circumstances of this case were similar to a situation where a pilot was required to produce proof of a pilot’s licence.  This arbitrator’s ruling was accordingly upheld by the LC.

The employee then appealed to the Labour Appeal Court (LAC) arguing that the arbitrator had erred by finding that the employment contract had terminated automatically as the termination provisions in the employment contract were invalid or void for vagueness. The employee further argued that he was denied the right to a hearing before the termination clause was invoked. The LAC held that this was not a matter which involved misconduct that entitled the employee to a hearing. Instead, it involved an employment contract that was subject to a condition. It was held that a contract of employment that is subject to a condition is not in conflict with the LRA and it is a commercial reality. Furthermore, the LAC did not agree with the employee that there should be a distinction between resolutive and suspensive conditions.

In the case of a resolutive condition, the employment contract comes to an end on fulfilment of the condition and the employment contract is treated as if it never came into existence. This was not found to be in conflict with the LRA. The appeal was accordingly dismissed with costs.

Protective promotions

In Ncane v R Lyster NO and Others [2017] 4 BLLR 350 (LAC), an employee applied for an advertised post with the rank of captain. The selection panel rated the employee with a score of 17, while the successful candidate obtained a rating of 18 from the selection panel. The employee referred an unfair labour practice dispute to the bargaining council. The arbitrator held that there had been no unfair labour practice. The employee then took the matter on review to the Labour Court (LC), which found that the employee should have received a score of 18 points as he was in possession of an LLB degree. The LC did not, however, rule that the employee should have been appointed to the position. Instead, the employee was awarded compensation equal to five months’ remuneration.  The employee argued that he should have been granted ‘protective promotion’ as the LC had found fault with the selection process that had been followed in that the employee had not received the correct amount of points.

The employer argued that the LC had erred by focusing exclusively on the points that were allocated to the candidates.

The LAC held that employers must follow a fair procedure when considering candidates for promotions by adhering to the law and applying objective criteria. However, the LAC acknowledged that promotion is not a mechanical process and that an element of discretion and subjectivity should be allowed when making the appointment. In circumstances where the employer has a rule that it appoints the candidate with the highest scorecard if the candidates are of the same race or gender, as was the case in these circumstances, then it must adhere to that rule. If the candidate disputes the scores and complains about not being promoted then the candidate is required to show that the process and outcome was unfair. The employer explained that experience was a significant factor that was taken into account in ranking the candidates. This experience was not merely based on the length of the service, but also on the relevance of the experience. The LAC held that interference with a promotion is only permissible if the decision is irrational, grossly unreasonable or mala fide. It was held that in this case it had not been unreasonable of the arbitrator not to interfere with the appointment decision. Thus, the appeal was dismissed.

This article was first published in De Rebus in 2017 (June) DR 55.