by Venolan Naidoo Senior Associate at BCHC and edited by Prof Darcy du Toit
Should an employer be liable to compensate an employee after it has attempted to remedy a wrong that was due to a mistake on the employer’s part?
From time to time, employers make mistakes (as opposed to deliberate acts) which infringe an employee’s rights under the Labour Relations Act of 1995 (the LRA) or other laws. But, if the employer is willing to remedy its mistake, will it remain liable to compensate the employee?
The question has arisen particularly in unfair dismissal disputes where employees refuse to accept the employer’s offer of remedial action but prefer to persist with their claims for compensation based on the employer’s mistake. The answers given by the courts in a number of leading cases are discussed below.
Johnson & Johnson (Pty) Ltd v Chemical Workers Industrial Union (CWIU).
The employer in this matter had dismissed 20 women workers due to operational requirements in terms of section 189 of the LRA. This was done after consultation with the workers’ union. However, the employer did not engage the union about selection criteria for the employees to be dismissed. Instead, only women were targeted because the employer assumed that they could not be offered alternative “male-type” jobs. The union then referred an unfair dismissal dispute on the basis there had been inadequate consultation.
However, four days after the decision to dismiss the employer realised its mistake and offered to re-employ the workers in alternative “male-type” jobs if they were willing and able to do them. The union did not respond and, although the offer was repeated at conciliation, there was again no response. Instead, the union referred the dispute to the Labour Court, which found that the dismissals had been procedurally unfair and ordered the employer to pay compensation.
On appeal, the Labour Appeal Court noted that the LRA does not require a mechanical “check-list” approach to determine whether section 189 had been complied with. The proper approach is to ascertain whether the purpose of the section – that is, a joint consensus-seeking process – has been achieved. Although the dismissals were procedurally unfair, the unfairness had lasted for only four days. To award compensation in such a case, the court held, “would be to reward the union and the employees for their unreasonable obstinacy, echoing their earlier refusal to discuss anything except the need to retrench”. The order of compensation was therefore set aside.
Mkhonto v B L Ford N.O & Others.
Again, the employee’s dismissal in this case was procedurally unfair. The employer then realised its mistake and offered the employee “unconditional reinstatement”. However, the employee refused the offer and referred an unfair dismissal dispute to the CCMA, where he obtained an order of compensation.
On review, this order was reversed. The Labour Court, noting that the employee was offered reinstatement (although she tried to deny it), found that her claim for compensation was insupportable. The employee then went on appeal. However, the LAC confirmed that her refusal to accept the offer of reinstatement was grossly unreasonable and upheld the judgment of the Labour Court. The court added:
“The appellant’s conduct in the litigation leaves much to be desired. Not only did she fail to proffer any reason for having refused the offer of reinstatement, but her evidence concerning the reinstatement offer, the only factual issue in the case, was patently false. I thus see no reason for interfering with the order of the court a quo that the appellant should pay the [employer’s] costs” (at para 12).
Kemp t/a Centralmed v Rawlins.
Once again, the employer had dismissed an employee for operational reasons without following procedure. The employee referred an unfair dismissal dispute to the CCMA. At conciliation, the employer offered to reinstate her or, alternatively, to pay a substantial amount in settlement. The employee rejected the offer, also when it was repeated a few days later, and instead referred an automatically unfair dismissal to the Labour Court. Again the employer repeated the offer of reinstatement, but to no avail.
The Labour Court found that her dismissal was both substantively and procedurally unfair and awarded her compensation equal to 12 months’ salary. The employer appealed. In its judgment, the Labour Appeal Court pointed out that, although every employee has the right not to be unfairly dismissed, the infringement of that right does not automatically entitle the employee to a remedy. On the question of compensation, the court explained the position as follows:
- The LRA aims at striking a balance between the interests of employers and employees.
- Once a finding is made that a dismissal is unfair, section 193(1) of the LRA states that an arbitrator or the Labour Court “may” order the employer to pay compensation.
- This confirms that the arbitrator or court must exercise a discretion whether or not to order compensation.
- This discretion must be exercised after considering all relevant factors (the court listed eight factors as important examples but emphasised that the list was not exhaustive). In contrast, section 194(1) of the LRA merely stipulates the maximum amount that may be ordered if compensation is awarded.
Applying this test, the Labour Appeal Court took into account all relevant factors, including the employer’s repeated offers of unconditional reinstatement and the employee’s rejection thereof. The rejection, it found, was based on the employee’s subjective belief that the employment relationship had broken down, but there was no evidence to support this belief. The court went on to hold that:
- The employer had treated the employee unfairly in the manner of her dismissal but had a right to seek to correct the unfairness.
- By refusing the employer’s offer of reinstatement, the employee undermined one of the primary objects of the LRA, namely the effective resolution of disputes.
- If an employee fails to accept a genuine and reasonable offer of reinstatement for no valid reason, the employer has a strong case in support of an order denying the employee compensation.
The Labour Appeal Court therefore reversed the Labour Court’s decision and awarded the employee no compensation notwithstanding her unfair dismissal.
It follows from what has been said that the employer’s offer must be “reasonable”; that is, it must offer substantial redress in relation to the wrong which the employee may have suffered. It must therefore not be arbitrary and should also not be conditional or “without prejudice”, unless conditionality can be objectively justified.
For example, an employee will be entitled to refuse an “ex gratia” payment in full and final settlement of an unfair dismissal claim if the court considers the offer to be inadequate.
The focus is on the reasonableness of the employee’s refusal of the employer’s offer. This means that the adequacy of the employer’s offer, given the unfairness of its conduct, will also come under scrutiny.
- If an employee challenges a dismissal, the employer should not dig in its heels and prepare to fight it out. Rather, it should look carefully at its own actions in light of the requirements of the LRA – especially at the reason for dismissal and the procedure that was followed.
- If it is reasonably possible that an arbitrator or court may find some substance in the employee’s complaint, it may be wise (if necessary after seeking legal advice) to offer to the employee to rectify the shortcoming as far as possible along the lines indicated in the cases discussed above.
- The employer’s offer should be unconditional and reasonable in all the circumstances.
- If the employee accepts reinstatement, the employer could at most be required to repeat the dismissal process in accordance with the LRA.
- If the employee does not accept a reasonable offer, he/she will most probably forfeit the right to compensation.
Further case law
Other cases where employees had unreasonably refused employers’ offers to “right a wrong” include:
- Burger v Alert Engine Parts (Pty) Ltd  1 BLLR 18 (LC) para 30
- Fletcher v Elna Sewing Machine Centres Pty Ltd  3 BLLR 280 (LC) at para 43
- La Vita v Boymans Clothiers (Pty) Ltd  10 BLLR 1179 (LC) at para 38
- Maloba v Minaco Stone Germiston (Pty) Ltd  10 BLLR 1191 (LC) at para 42
- Fourie v Iscor Ltd  11 BLLR 1269 (LC) para 10.7
- Scholtz v Sacred Heart College  3 BLLR 368 (LC) paras 19-20
- Technikon SA v Mojela & others  10 BLLR 1075 (LC) paras 22-24
Cases where it was found that employees had reasonably refused the employer’s offer include:
- Scribante v Avgold Ltd (Hartebeesfontein Division)  11 BLLR 1342 (LC)
- HM Liebowitz (Pty) Ltd t/a Auto Industrial Centre Group of Companies v Fernandes  4 BLLR 291 (LAC)