International Newsletter

High Court of South Africa Decision Provides Hints on Relationship Between Terminating an Employment Contract and Dismissing an Employee

May 26, 2020
South Africa

A recent case decided by the High Court of South Africa dealt with the curious interplay of an employee’s rights as they arise from both a written contract of employment and labor legislation. Although the judgment may at first seem confusing, a careful analysis sheds light on how these parallel sources of rights and obligations operate in conjunction.

After a public and convoluted legal battle, in the matter of Old Mutual Limited and Others v. Moyo and Another (2020), on January 15, 2020, a three-panel bench of the High Court in Johannesburg delivered a finding that Moyo, the former chief executive of one of South Africa’s oldest insurance providers, Old Mutual, had been lawfully dismissed and thus was not entitled to any relief, whether damages for breach of contract or reinstatement to his position.

The decision of the High Court revolved around Moyo’s contention that, despite a provision in his contract of employment that Old Mutual was entitled to terminate his employment merely by notifying him of such termination with six months’ notice, Old Mutual was contractually obliged to hold an internal disciplinary enquiry or a pre-dismissal arbitration before doing so. The High Court correctly held that the contractual entitlement to dismiss Moyo with six months’ notice was unconditional, and although the agreement did in fact provide for circumstances in which an internal disciplinary enquiry or a pre-dismissal arbitration was required, it was not required in this case. As such, Old Mutual had not breached any of the provisions of the contract of employment when it notified Moyo of the termination of his employment; therefore, the termination was contractually lawful.

However, the judgment says nothing about whether the termination of Moyo’s employment was a fair dismissal. This aspect of the employment relationship, which exists in parallel to contractual concerns, cannot be ignored, as regardless of the content of an employment agreement, an employee always remains entitled to the protections set out in the Labour Relations Act, 66 of 1995 (LRA), which provides that an employee may not be unfairly dismissed. In order to avoid a claim of unfair dismissal, an employer must demonstrate that it had a fair reason to dismiss the employee and that it followed a fair procedure, allowing the employee an opportunity to respond to the proposal that he or she be dismissed, before making a decision.

In Moyo’s case, because he elected to pursue his claim in the High Court by challenging the lawfulness of the dismissal (which involves an analysis of the rights of the parties in terms of the contract) and not looking at it as an unfair dismissal in the Labour Courts (which would have involved an analysis of whether Old Mutual had a fair reason to dismiss him and whether it followed a fair procedure to do so), the judgment focused on whether Old Mutual had an unconditional contractual right to discharge Moyo with appropriate notice and whether that was correctly decided.

It is critical that employers not assume from the manner in which Old Mutual terminated Moyo’s employment that it is acceptable merely to provide an employee with notice of dismissal without ensuring that the dismissal is also fair in terms of the LRA. Should an employer act in this way, although the termination of employment may be contractually lawful, it would almost inevitably, and indefensibly, be an unfair dismissal. Because the employee always has the choice as to the forum in which he or she wishes to pursue a claim, employers may want to ensure that any termination of employment be both a lawful termination and a fair dismissal.

Written by Bradley Workman-Davies of Werksmans Attorneys and Roger James of Ogletree Deakins

© 2020 Werksmans Attorneys and Ogletree, Deakins, Nash, Smoak & Stewart, P.C.