SASLAW 15th Annual Conference
Anton Myburgh SC
Section 188B: Big Bucks little protection?
Outline
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Text and operation of s188B
Explanatory memorandum
SASLAW’s comments
2010 Bill
Right not to be unfairly dismissed
Problem of categorisation and inflexibility
Problem of costs associated with dismissal
Threshold and bargaining power
Exclusion of s187(1)(g)
Contractual claims
Problems and puzzles
The text of s188B
‘(1) This section applies to employees who earn, as at the date of dismissal,
more than an amount determined by the Minister in accordance with
subsection (4).
(2) Despite section 188(1) the dismissal of an employee to whom this
section applies is, if it is not automatically unfair as contemplated in
section 187(1)(a) to (f) or (h), deemed to be for a fair reason and to
have been effected in accordance with a fair procedure as
contemplated in section 188 if the employer gives the employee the
notice referred to in subsection (3) or pays the employee in lieu of that
notice on or before the date of dismissal.
(3) The notice referred to in subsection (2) is three months or any longer
period specified in the employee’s contract of employment and must be
given in writing.
The text of s188B (cont)
(4) The Minister must from time to time in consultation with NEDLAC and
by notice in the Gazette make a determination of the amount referred
to in subsection (1). In making that determination the Minister must
take into account the extent to which employees, by reason of their
earnings level, level of skill or position, have sufficient bargaining power
to ensure that adequate provision may be made in their contracts of
employment for protection against unfair dismissal.
(5) This section will apply to contracts of employment concluded before the
commencement date of this section with effect from two years after the
commencement date of this section.’
The operation of s188B
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Only applies to employees above threshold
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Only applies to dismissals (not ULPs)
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Bargaining power assumption
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Does not limit employer’s right to dismiss
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Employee can challenge summary dismissal
The operation of s188B (cont)
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No claim for ordinary unfair dismissal if 3
months’ notice given
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Employee retains right to claim automatically
unfair dismissal
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But not section 187(1)(g) – section 197
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Transitional provisions – immediate; 2 year
suspension
Explanatory memorandum: problem 1
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‘At the heart of the change is the disproportionate cost,
complexity, and impact on an employer’s operations of
procedures to terminate the employment of high earning
employees … where the reason for doing so may not fall clearly
and neatly within the fair reasons for dismissal specified in s188.
These reasons [examples having been given] do not comfortably
fall within the reasons for dismissal specified in s188, but are
widely recognised as legitimate reasons to replace senior
executives.
The uncertainty created by the application of s188 in these
situations leads to significant inflexibility and inefficiency at the
tops levels of a business or state enterprise.’
Explanatory memorandum: problem 2
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‘At the same time, the cost of asserting discipline and
performance standards at senior levels is notoriously
difficult to manage, and conflict at this senior
executive level that results from efforts to terminate
employment
imposes
significant
constraints,
measured in cost and efficiency, on both public and
private sector employers.’
SASLAW comments
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‘Although a few members consider the section to be
pragmatic, the predominant view is that the
explanation given in the Explanatory Memorandum
for this amendment does not justify depriving the
employees of their right not to be unfairly dismissed.
On the face of it, the section appears vulnerable to
constitutional challenge as there are other means of
addressing the concerns expressed in the Explanatory
Memorandum.’
2010 Bill (s187A)
• ‘An employee earning in excess of an amount
determined by the Minister by notice in the
Gazette, may not refer labour disputes in
respect of the provisions of section 185, 186
[whole of], 188, 189, 189A and 197 to the
CCMA.’
• No entry mechanism to Labour Court
2010 Explanatory Memorandum
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‘The amendment seeks to exclude employees
earning more than the prescribed threshold from
referring their labour disputes to the CCMA. This will
ensure that vulnerable employees are not prejudiced
because of the delays caused by the volume of
complaints from employees who can afford to
approach the courts.’
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Regulatory Impact Assessment
2010 versus 2012
• 2010 proposal had no quid pro quo
• 2010 proposal also excluded ULPs
• Motivation very different
Right not to be unfairly dismissed: s185
• Essential to the constitutional right
• One of the most important manifestations of it
• Consistent with the main object of labour law
s188B versus s185
• Right is only as good as the remedy
• s188B deprives employees of a remedy in
respect of ordinary unfair dismissals
• If employees do not have sufficient
bargaining power to protect themselves,
then the legislature has traded the right not
to be unfairly dismissed for 3 months’ notice
SA Post Office v Mampeule (LAC)
• ‘A heavier onus rests on a party which contends that
it is permissible to contract out of the right not to be
unfairly dismissed in terms of the Act. … parties to an
employment contract cannot contract out of the
protection against unfair dismissal afforded to an
employee whether through the device of “automatic
termination” provisions or otherwise because the Act
has been promulgated not only to cater for an
individual’s interest but the public’s interest.’
Problem of categorisation and inflexibility
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Problem certainly exists
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It has arisen as a consequence of:
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limitation on permissible grounds of dismissal
defining them narrowly
maintaining rigged distinctions between
them
There are at least 4 ways to address the problem
1. Expand the meaning of incapacity and operational
requirements
2. Adopt a flexible
performance
informal
approach
to
poor
3. Loosen the strict divide between permissible grounds
of dismissal
4. Adopt the reasonable employer test in relation to
senior executives
1. Expand meaning of incapacity and operational
requirements
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Samancor v MEIBC (LAC) – operational incapacity
and incompatibility are a species of incapacity
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‘Incompatibility relates, essentially, to the subjective
relationship of an employer and other co-workers
within an employment environment regarding an
employee’s inability or failure to maintain
harmonious relationships with his peers.’
1. Expand meaning of incapacity and operational
requirements (cont)
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Brassey:
‘The definition of operational requirements should be
interpreted broadly enough to encompass all dismissals
originating in causes on the side of the employer. So read, it
would encompass dismissals for incompatibility … or as a
result of the breakdown in trust and confidence in the
employee. To interpret it otherwise would mean that the Act
made no provision for cases of this sort …. This conclusion …
is contrary to the intention of the drafters, who were
obviously seeking a comprehensive codification of unfair
dismissal law.’
2. Adopt a flexible approach to poor performance
• Item 9(a) of the Code of Good Practice:
failed to meet a ‘performance standard’
• Interpreted as meaning a measure of
performance, i.e. a standard by which
performance is measured
• Limits to formal performance appraisals
• Examples – soft people issues
2. Adopt a flexible approach to poor performance
(cont)
• Eskom v Mokoena (LAC):
‘The attitude adopted by the respondent was that he
required the individual complaints against him to be proven
as a fact before he would respond thereto. This was
tantamount to a refusal to come to grips with and respond
to the fact that there was a widespread perception of him
as an incompetent manager. … His very refusal to take steps
to address that perception pointed to his unsuitability to
hold the position of manager.’
2. Adopt a flexible approach to poor performance
(cont)
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Eskom v Mokoena (LAC):
‘Sight should not be lost of the fact that the present case is to be distinguished
from the case of a dismissal for misconduct. In the latter case the misconduct
itself must be established by the employer. In the present case what the
appellant was required to establish was the respondent’s alleged incapacity. It
was not necessary for that purpose that the alleged conduct on the part of the
respondent which formed the subject of the complaints made against him to
be established as if that conduct constituted misconduct justifying the
respondent’s dismissal. It was the widespread dissatisfaction of the staff in the
respondent’s division and in the power station, of which the complaints were
evidence, and their perception of the respondent as being incapable that was
the problem. It was that problem that had to be conveyed to the respondent
and on which the appellant was required to give him a hearing.’
2. Adopt a flexible approach to poor performance
(cont)
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On this approach:
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Senior managers must address allegations / perceptions
of poor performance.
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They do not have to be established in the manner
applicable in a misconduct case.
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The employer does not need to establish a formal
performance standard and that the employee failed to
measure up to it.
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This is a different and much less onerous approach than
that required by the Code of Good Practice.
3. Loosen the divide between the 3 permissible
grounds of dismissal
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Goldfields Logistics v Smith (LAC):
‘In my view, there would be instances where a legitimate
operational requirement exists, which would justify a
dismissal based on operational requirements and also a
fair reason on the basis of which an employer may
discipline the employee for misconduct which would lead
to a dismissal. Such a scenario should give an employer a
choice of procedure to follow.’
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Example – poor time-keeping
4. Adopt the reasonable employer test
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JDG Trading v Brunsdon (LAC):
‘I would think that where an employer on reasonable grounds
comes to the conclusion that a senior management employee is
unsuited to the position which he holds, the scope for having
such a conclusion overturned in a court of law is small. It is in
the highest degree desirable that an employer should, in the
interests of efficiency, be entitled to chose with as much
freedom as is compatible with the honest exercise of a
discretion, who it wants at or near the helm of its enterprise.
Qualities like leadership, resolve, business acumen, judgment
and effective administration are not readily provable in a court.
A deficiency in such qualities is not readily provable either.’
4. Adopt the reasonable employer test (cont)
• This is precisely the problem identified in
the explanatory memorandum
4. Adopt the reasonable employer test (cont)
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The solution was stated in JDG Trading v Brunsdon (LAC):
‘In the realm of dismissal for incapability, it is important
that the employer’s business should not have to suffer, to
the detriment of all concerned, through the ineptitude or
inefficiency of a particular employee. However, it is also
important that the employee whose work is causing
dissatisfaction should be treated fairly. The question for
the tribunal is whether the employer has satisfied them
that he genuinely believed on reasonable grounds that
the employee was incapable.’
4. Adopt the reasonable employer test (cont)
• In relation only to senior managers
• Limit to poor performance / incapability
• Precedent exists for a different test for
substantive fairness – s189A(19)
Problem of costs associated with internal
proceedings
• Problem certainly exists
• But it is the product of inflexible law
• And the use of criminal justice model of
procedural fairness
• Example – SA Custodial Services
Problem of costs associated with internal
proceedings (cont)
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National Bioinformatics Network Trust v Jacobson (LC):
‘The applicant chose to ignore the informal workplace
procedures prescribed by the Code of Good Practice and to
conduct a disciplinary enquiry, at great expense to the taxpayer
no doubt, in a form that would make any criminal court proud. I
have previously had occasion to comment on the profitable
cottage industry that has developed from the application of
unnecessarily complex workplace disciplinary procedures, and
how inimical the actions of some practitioners, consultants, socalled trade unions and employer organizations and the various
other carpetbaggers who populate this industry are in relation
to the objectives underlying the LRA.’
Threshold and bargaining power
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Grogan:
‘To take into account the employee’s salary as an indication of
bargaining power renders the inquiry entirely circular, because
the end point of the inquiry is to determine the salary. In any
event, a threshold set by earnings must inevitably be arbitrary –
why should an employee earning, say, R19 999 a month be able
to be unfairly dismissed, but not an employee earning R20 000?
Level of skills is also hardly a reliable indicator of an employee’s
pre-appointment negotiating power, because many jobs
requiring high levels of skills are not particularly well paid, and
some positions in the public sector, open to “deployees” of the
ruling party, require no skills at all. This leaves “position”, which
is probably the most sensible consideration to take into account
when determining which employees should be deprived of …
free services … if they happen to get the chop.’
Threshold and bargaining power (cont)
• Assumption: sufficient bargaining power to
ensure that ‘adequate provision is made in
their contracts of employment for
protection against unfair dismissal’.
• Private dispute resolution – why would
employer agree?
• Increased exit package – market forces?
Threshold and bargaining power (cont)
• If employees don’t have sufficient
bargaining power, then s188B equates to
the forfeiture of the right not to be unfairly
dismissed in return for 3 months’ notice
• Seems questionable whether this will pass
constitutional scrutiny, particularly given
the motivation for the amendment
The exclusion of s187(1)(g)
• Why exclude this?
• The implications?
The contractual claims
• Grogan:
‘Apart from claims for automatically unfair dismissal,
opulent employees will be confined to challenging their
dismissals under the common law. Unless they have
negotiated contractual provisions that bind the employer
to dismiss them fairly … these employees will find little
assistance from the courts under that head, at least while
judgments like SA Maritime Safety Authority v McKenzie
… remain binding. [It] knocked on the head the argument
that requirements of fairness can be implied into or
viewed as tacit terms of contracts of employment.’
Problems and puzzles
• If the true reason for an employee’s dismissal (on 3 months’
notice) is the employer’s operational requirements, will the
employee be entitled to severance pay?
• What about the employee who through his dismissal (on 3
months’ notice) loses out on massive deferred compensation
which would be due in a year’s time?
• Could an employer in the throes of a protracted disciplinary
enquiry up the employee’s salary to the threshold and then
give him 3 months’ notice?
• Can an employer ward off a claim for constructive dismissal by
paying the employee in lieu of 3 months’ notice on the day of
his resignation?
Conclusion
Big bucks little protection?
Citations – in order of reference
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SA Post Office v Mampeule [2010] 10 BLLR 1052
(LAC)
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Samancor Tubatse Ferrochrome v MEIBC & others
[2010] 8 BLLR 824 (LAC)
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Brassey Commentary on the Labour Relations Act
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Eskom v Mokoena [1997] 8 BLLR 965 (LAC)
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Goldfields Logistics (Pty) Ltd v Smith (unreported
LAC judgment, case no. JA42/08 dated
24/08/2010)
Citations – in order of reference (cont)
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JDG Trading (Pty) Ltd t/a Price ‘n Pride v
Brunsdon [2000] 1 BLLR 1 (LAC)
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Trustees for the time being of the National
Bioinformatics Network Trust v Jacobson &
others (2009) 30 ILJ 2513 (LC)
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Grogan ‘What’s in store – the coming
amendments (2012) 28 (4) Employment Law
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SA Maritime Safety Authority v McKenzie [2010]
5 BLLR 488 (SCA)