Employment law update – Mutual termination agreements

May 1st, 2015

By Talita Laubscher and Monique Jefferson

The applicants in Schroeder and Another v Pharmacare Ltd t/a Aspen Pharmacare [2015] 2 BLLR 168 (LC) each signed a ‘mutual termination settlement agreement’ in terms of which they agreed, inter alia, that their employment with Aspen would terminate by mutual agreement on 16 February 2011. It is not apparent from the judgment why the applicants concluded these agreements or what process preceded the conclusion of these agreements. In any event, notwithstanding having concluded the agreements, both applicants subsequently referred an unfair dismissal claim against Aspen to the bargaining council. The presiding arbitrators held that the council lacked jurisdiction to entertain the disputes because of the existence of the agreements. The arbitrators accordingly held that the individual employees were not ‘dismissed’ but that their employment came to an end by mutual agreement.

The applicants did not challenge the jurisdictional rulings by way of a review to the Labour Court. Instead, on 30 January 2012, the applicants filed a statement of case in the Labour Court in accordance with r 6 of the Labour Court Rules in terms of which they sought an order to set aside the settlement agreements and for reinstatement with retrospective effect. Aspen raised two special pleas in defence: First, it argued that the applicants unduly delayed in challenging the validity of the separation agreements; and second, that the court lacked jurisdiction to determine the dispute.

This matter turned on whether the Labour Court has jurisdiction to set aside an agreement (on grounds such as duress or misrepresentation) entered into between an employer and employee in terms of which a termination is mutually agreed. Van Niekerk J held that it is well-established that the Labour Court’s jurisdiction must be established with reference to the applicants’ pleadings. In this case, there was no reference to any provision of the Labour Relations Act 66 of 1995 (LRA) that confers jurisdiction on the Labour Court to determine the validity of a settlement agreement. Van Niekerk J held that the court has jurisdiction to make a settlement agreement an order of the Labour Court (see s 158(1)(c)). In addition, the court may determine whether an agreement induced by duress or misrepresentation ought to be set aside in the context, for example, of an alleged unfair dismissal for a reason related to the employer’s operational requirements. However, in those circumstances, the court exercises jurisdiction by virtue of the fact that the reason for the dismissal (such as the operational requirements of the employer) falls within the court’s jurisdictional ambit. Nowhere in the LRA is the Labour Court empowered to consider the validity of a settlement agreement per se. With reference to the Basic Conditions of Employment Act 75 of 1997 (BCEA), the court held that it has jurisdiction in terms of s 77 in respect of matters arising from employment contracts. The applicants in this case did not argue that the dispute about the validity of the settlement agreements was a matter that arose from their employment contracts, and consequently the court held that it was not an issue that it was required to decide.

In the circumstances, the applicants’ claim was dismissed.

Referral of claims in terms of the Employment Equity Act 55 of 1998

In South African Transport and Allied Workers’ Union obo Members v South African Airways (Pty) Ltd and Others [2015] 2 BLLR 137 (LAC), the South African Transport and Allied Workers’ Union (SATAWU) referred an unfair discrimination dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA) on behalf of certain of its members. The dispute was not resolved and a certificate of non-resolution was issued on 14 November 2011. SATAWU referred the matter to arbitration, which was set down for 12 March 2012. The arbitrating commissioner ruled that the CCMA did not have jurisdiction to arbitrate the dispute since it related to alleged unfair discrimination and should, therefore, have been referred to the Labour Court. SATAWU filed its statement of case in the Labour Court on 12 June 2012, about seven months from the date of the certificate. SATAWU contended that the statement of case was only filed in June due to the internal processes that had to be followed at the union before a decision could be taken to institute proceedings in the Labour Court. It explained that the shop steward who was handling the matter referred it to the union’s local Kempton Park office on 30 April. From there it was referred to the provincial office which, in turn, had to refer it to the union’s head office. The attorneys were only instructed to act on 24 May 2012 and the first consultation with the attorneys took place on 25 May 2012. A subsequent consultation with the affected employees took place on 6 June 2012; a meeting on the matter took place with the SATAWU president on 11 June; and the statement of case was filed on 12 June 2012.

The applicants’ claim concerned alleged recruitment discrimination following the appointment of external candidates (two males and one female) allegedly in violation of the South African Airways (SAA) recruitment policy to the exclusion of the three internal female applicants.

SATAWU applied for condonation of the late filing of its statement of case. SAA opposed the condonation application. The matter came before the Labour Court on 12 December 2012 and the application for condonation was dismissed. The Labour Court held that the statement of claim had to be filed within 90 days of the date of the certificate of non-resolution, namely, by 12 February 2012. The statement of claim was, therefore, four months out of time. The court held that the explanation for the delay in filing the statement of case was weak, and so were the applicants’ prospect of success on the merits.

SATAWU appealed to the Labour Appeal Court (LAC). With reference to NEHAWU obo Mofokeng and Others v Charlotte Theron Children’s Home [2004] 10 BLLR 979 (LAC) the court (per Tlaletsi DJP) confirmed that the applicable time period to refer an unfair discrimination dispute to the Labour Court following the issuing of a certificate of non-resolution is 90 days. Considering the Labour Court’s reasoning on condonation, the LAC was of the view that although the delay was lengthy, it was adequately explained. As regards the merits of the unfair discrimination claim, the court stated that the claims were not well-articulated in the statement of claim, but in view of the fact that the onus of proof is on the employer to establish fairness, one should loath to shut the door for the employees in cases of this nature. The LAC furthermore observed that SATAWU had all along intended to have the dispute adjudicated, which was evident from the timely referral of the dispute to arbitration, albeit that this was the wrong forum. The court therefore held that condonation should have been granted and the appeal was successful.

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 (May) DR 52.

De Rebus