BCHC: Termination of employment without a hearing

Written by Nikita Reddy

Introduction

In Old Mutual Limited and others v Peter Moyo and another (A5041/19) [2020] ZAGPJHC 1 (14 January 2020), the High Court had to determine whether Old Mutual committed a breach of contract when it terminated Mr Moyo’s employment contract in terms of a notice provision instead of subjecting him to a disciplinary process. The High Court held that an employer is contractually entitled to terminate a contract of employment without following a fair process where the contract allows for it. Old Mutual had accordingly terminated Mr Moyo’s contract lawfully and his claim for breach of contract ultimately failed.

Overview of the law

The principle that an employer can lawfully terminate a contract of employment without conducting a hearing where the contract permits it is not novel. There is a long line of cases which establish the principle that there is no self-standing common law right to fairness in an employment contract. In South African Maritime Safety Authority v McKenzie 2010 (3) SA 601 (SCA), the Supreme Court of Appeal (SCA) considered a contract of employment which provided for termination on notice. The judgment was the final instalment of the trilogy of SCA decisions and which departed from the reasoning of the previous decisions in Old Mutual Life Assurance Co. SA Ltd v Gumbi 2007 (5) SA 552 (SCA) and Boxer Superstores Mthatha v Mbenya 2007 (5) SA 450 (SCA). In McKenzie, The SCA clarified that the constitutional right to fair labour practices and the right not to be unfairly dismissed under the LRA are not implied into contracts of employment. Those are statutory rights for which statutory remedies have been provided together with statutory mechanisms for resolving disputes in regard to those rights. The right to a pre-dismissal hearing arises contractually only if the contract provides for it either expressly or implicitly. The SCA ultimately held that no requirement for fairness had been incorporated into the employment contract in question. The employment contract had accordingly been lawfully terminated on notice.

In Transman (Pty) Ltd v Dick and another 2009 (4) SA 22 (SCA), the SCA similarly held that the employment contract was not subject to an implied term that the employee would be afforded a fair hearing before he was dismissed. In Gama v Transnet SOC Limited and Others (J3701/18)[2018] ZALCJHB (19 October 2018), the Labour Court held that termination of the then CEO’s employment contract on six months’ notice due a breakdown of trust and confidence was permitted under the contract. In both cases the Courts found that there was no contractual right to fairness and that it was accordingly lawful to terminate employment without affording the employee a hearing.

Practical implications

This does not mean that an employee is left without recourse when the employment contract is lawfully terminated under the provisions of the contract. The LRA specifically gives effect to the constitutional right to fair labour practices and the consequent right not to be unfairly dismissed.  While contractual remedies may be unavailable, an employee retains their rights under the LRA and may pursue a fairness claim in terms of its statutory dispute resolution system. A contract that is terminated lawfully may nevertheless give rise to unfairness under the LRA. Employers should accordingly exercise caution in invoking termination clauses without giving effect to the requirements of substantive and procedural fairness as they could face a claim under the LRA despite having terminated the contract lawfully.