After the Edcon case: How to determine a fair sanction?

Nicola SmitProfessor of Law, University of Johannesburg

Co-director, CICLASS@UJ

Introduction

Background Onus of proof in dismissal disputes The final decision regarding the fairness of a dismissal When could dismissal be an appropriate sanction and

fair? How to approach the decision whether or not to impose

dismissal as sanction

Background 1• Every employee has a right not to be unfairly dismissed (s 185

LRA)

• If not automatically unfair, an employer may establish that a dismissal was effected for a fair reason after following a fair procedure (s 192 LRA)

• The Code of Good Practice: Unfair Dismissal (schedule 8 to the LRA) notes that whether or not a reason for dismissal is a fair reason is determined by the facts of each case and the appropriateness of dismissal as a penalty (see item 7(b)(iv)).

Background 2• Edcon Ltd v Pillemer NO & others (SCA)

• Reddy was the beneficial user of a company vehicle, a Toyota Corolla, courtesy of Edcon’s car scheme policy. – In June 2003, Reddy’s son was involved in an accident.

• Reddy was obliged, amongst other things, to report the accident to Edcon, the South African Police Service and the relevant insurance company within 24 hours and not carry out repairs on the motor vehicle without the approval of the insurance company.– Reddy did not comply with these rules.

Background 3

• Edcon charged Reddy with “failure to be honest and act with integrity in that you committed an act, which has affected the trust relationship between the company and the employee in that on 8 June 2003 to 8 October 2003, you failed to report an accident of a company vehicle ...”.

• She was found guilty and dismissed.

• Pillemer made an award in which she concluded that Reddy’s dismissal was substantively unfair and ordered Edcon to reinstate her but without arrear salary.

Background 4

• The crucial issue was whether the employee’s subsequent “lack of candour” had breached the trust relationship, as the presiding officers of the disciplinary and appeal hearing had found.

• The commissioner did not regard the sanction of dismissal fair because of the circumstances of the matter, the employee's length of service, her previous unblemished record and the fact that the employee was only two years away from retirement.

Background 5

• Edcon approach LC to set aside award (ito s 145 LRA) but fail, then a further appeal to the LAC also failed.

• The SCA reviewed the history of the various tests applied by the courts in applications to review, incl – Sidumo v Rustenburg Platinum Mines Ltd & others (CC)– Charge = “Negligence – Failure to follow established procedures in

terms of the Protection Services Department search procedure which caused prejudice or possible prejudice to the Company in terms of production loss and Failure to follow established procedures in terms of the Protection Services Department search procedures.”

Background final

• According to the Edcon case the test for review applications have changed from:

“a rational connection between the material properly before the arbitrator and the decision reached” to

“is the award one that a reasonable decision-maker could arrive at considering the material placed before him/her?”

Onus of proof in dismissal disputes 1

• In a dismissal dispute each party bear the burden of proof in relation to separate issues (i.e. the employee regarding the fact of dismissal and the employer regarding the fairness of the dismissal) (s 192 LRA).

• If misconduct was proven the employer still has to prove that the dismissal was substantively fair as it was, inter alia, the appropriate sanction for the conduct in question.

Onus of proof 2• The employer must adduce evidence:

–  “that is sufficient to persuade a court, at the end … that the claim or the defence, as the case may be, should succeed”

• The employer has to look beyond the fact of misconduct, it must consider the effect of such misconduct on the employment relationship.– the chairperson of a disciplinary inquiry can no longer “deal with the issue of

sanction on a cursory basis”

• What Edcon has emphasised is that if there should be a dismissal dispute the employer must lead evidence regarding the appropriateness of the dismissal as sanction

Onus of proof 3 • The employer has a persuasive burden – it must place

enough material and facts before the decision maker to persuade such person that the sanction of dismissal was fair

• See Schmidt & Rademeyer (Law of Evidence 2009) “The court’s judgment as to whether something is reasonable … is

strictly speaking, also not capable of resolution by invoking a burden of proof. It would not be correct to say that one of the parties has to prove that a regulation is reasonable …. That is a matter for the court to decide in the light of the facts set before it. But, of course, the facts influencing the court’s decision could be placed in issue, and in that respect the burden of proof could become operative.”

Onus of proof 4• This is also evident from the Sidumo judgment:

– “[u]ltimately, the commissioner’s sense of fairness is what must prevail and not the employer’s view.”

• Be that as it may, the facts influencing the commissioner’s decision could be placed in issue and in that respect the burden of proof become operative

• Fairness is a double-edged sword– “The concept of fairness, in this regard, applies to both the employer and

the employee. It involves the balancing of competing and sometimes conflicting interests of the employer, on the one hand, and the employee on the other. The weight to be attached to those respective interests depends largely on the overall circumstances of each case.” Branford v Metrorail Services (2003 LAC)

Onus of proof 5• Fairness (continued)

– “Fairness comprehends that regard must be had not only to the position and interests of the worker, but also those of the employer, in order to make a balanced and equitable assessment. In judging fairness, a court applies a moral or value judgment to established facts and circumstances.” NUMSA v Vetsak Co-operative Ltd (1996 (AD))

– “Where the rights in the section are guaranteed to workers or employers or trade unions or employers’ organizations as the case may be, the Constitution says so explicitly. If the rights in s 23(1) were to be guaranteed to workers only, the Constitution should have said so. … In addition, s 23(1) must apply either to all employers or none.” Nehawu v UCT (2003 CC)

Onus of proof 6• Where there are factual disputes a court must make

findings on: – “(a) the credibility of the various factual witnesses; (b) their

reliability; and (c) the probabilities.”

• See Sil Farming CC t/a Wigwam v CCMA (2005 LC), in relation to a factual finding on the merits:–  “A commissioner arrives at a decision which no reasonable

decision maker could reach if the decision is unsupported by any evidence, or by evidence that is insufficient to reasonably justify a decision arrived at or where the decision maker ignores uncontradicted evidence.”

Onus of proof final• See also Senama v CCMA & others (2008 LC)

– “A reasonable decision is reached when a commissioner, in performing his/her functions as an arbitrator, applies the correct rules of evidence , and if there is to be a deviation it must not be of such a nature that it materially denies any party a fair hearing. It is also required of the commissioner to weigh all the relevant factors and circumstances of the case before him or her to ensure that his decision is reasonable …”

• Myburgh submits that:– “In summary, a commissioner's finding on the facts will be unreasonable if it

is: (i) unsupported by any evidence; (ii) based on speculation by the commissioner; (iii) entirely disconnected from the evidence; (iv) supported by evidence that is insufficient reasonably to justify the decision; or (v) made in ignorance of evidence that was not contradicted.”

Who decides? 1• The SCA has confirmed that employers may set reasonable

standards of conduct in the workplace and may enforce such standards ( Rustenburg Platinum Mines (Rustenburg Section) v CCMA (2006 (SCA)).

• However, dismissal as a sanction must be substantively fair – and the final decision maker is the commissioner– “There is nothing in the constitutional and statutory scheme that suggests that,

in determining the fairness of a dismissal, a commissioner must approach the matter from the perspective of the employer. All the indications are to the contrary. A plain reading of all the relevant provisions compels the conclusion that the commissioner is to determine the dismissal dispute as an impartial adjudicator.” (Sidumo (2007 (CC)) par 61)

Who decides? 2

• The Sidumo-test is a stringent test:– “The commissioner must decide and the decision will be final

and binding as long as it cannot be said that such a decision or award is one that a reasonable decision maker could not have made in the circumstances of the case. It will not be often.” Fidelity Cash Management Service v CCMA (2008 LAC)

• Having regard of this the LAC has stated that:– “clearly, commissioners of the CCMA have a weighty

responsibility to act fairly” Phalaborwa Mining v Cheetham (2008 LAC)

Who decides? final• Sidumo requires that:

– a commissioner must, when impartially considering the fairness of a dismissal dispute, take into account the totality of circumstances

– “is not given the power to consider afresh what he or she would do, but simply to decide whether what the employer did was fair”

– “Insofar as this [the stringent nature of the Sidumo test] may be interpreted as a licence for commissioners not to apply the substantive law on dismissal, a word of caution. Notwithstanding the fact that commissioners certainly have a discretion when it comes to the determination of sanction, they are obliged to consider and follow the jurisprudence of the labour courts, and commit a reviewable irregularity if they do not do so. … In short, the Sidumo test does not render legal precedent superfluous.”

When could/would a dismissal be appropriate and fair? 1

• Whether or not a dismissal is for a fair reason is determined by the facts of the case, and the appropriateness of dismissal as a penalty– the purpose of discipline is viewed as a means for employees to

know and understand what standards are required of them

• “dismissal should be reserved for cases of serious misconduct or repeated offences”– “serious” misconduct will be conduct which is of such gravity that

it makes a continued employment relationship intolerable

Appropriate and fair sanction? 2

• The Code then proceeds by stating that when deciding whether or not to impose dismissal as penalty, in addition to the gravity of the misconduct, the employer should consider certain factors. These include:

– the employee’s circumstances;• this include length of service, previous disciplinary record

and personal circumstances – the nature of the job; and– the circumstances of the infringement itself

Appropriate and fair sanction? 3• In the Sidumo case the CC proceeded to list the following

factors that a commissioner must consider when deciding on the fairness of a dismissal :

– the importance of the rule that was breached;

– the reason the employer imposed the sanction of dismissal;

– the basis of the employee’s challenge to the dismissal;

– the harm caused by the employee’s conduct;

– whether additional training and instruction may result in the employee not repeating the misconduct;

– the effect of dismissal on the employee; and

– the long-service record of the employee.

Appropriate and fair sanction? 4• Serious misconduct of such gravity to make a continued

employment relationship intolerable

• Fijen (1996 AD) the relationship between EM and Em is ‘in essence one of trust and confidence’– ‘to be just and faithful to the company, that is to say, to conduct … in its

service with diligence, integrity and single-mindedness”

• A breach of trust (i.e. conduct of the employee that destroy the faith and goodwill of the employer towards the employee) will normally be considered a “material breach of an essential term” that may justify dismissal

TEST?

• Test is now: Was the ‘misconduct’ of such gravity to make a continued employment relationship intolerable?

• This may be indicated by showing that the ‘misconduct’ has resulted in the trust relationship being breached

Appropriate and fair sanction? 5

• Anglo American Farms t/a Boschendal Restaurant v Komjwayo (1992 LAC) the court stated that the employment relationship can only be healthy if the employer can be confident that it can trust the employee not to steal from it.

• Importantly, the court formulated the correct test to apply as follows: –  “whether or not respondent’s actions had the effect of rendering

the continuation of the relationship of employer and employee intolerable.”

Appropriate and fair sanction? 6• The court continued that if that confidence is destroyed or

substantially diminished due to a theft – “the continuation of their relationship can be expected to become

intolerable, at least for the employer. Thenceforth he will, as it were, have to be continually looking over his shoulder to see whether this employee is being honest”.

• In De Beers Consolidated Mines v CCMA (2000 LAC) it was stated that:– “Of course, a commissioner is not bound to agree with an employer’s

assessment of the damage done to the relationship of trust between it and a delinquent employee, but in the case of a fraud, and particularly a serious fraud, only unusual circumstances would warrant a conclusion that it could be mended”.

Appropriate and fair sanction? 7• In Toyota South Africa Motors v Radebe (2000 LAC)

• the court accepted theft and fraud have “always constituted grounds for dismissal of employees” because of the breach in the trust relationship” however there “is no invariable rule that offences including dishonesty should incur the supreme penalty of dismissal”

• In Edcon (SCA) –• the only issue was whether the material before the commissioner was

sufficient to prove that the trust relationship between the employee and the company had been destroyed.

• the company’s only witness could not and did not testify on the effects of the employee’s conduct on the trust relationship.

• the employer couldn’t simply equate serious misconduct with a finding that a continued relationship would be intolerable.

Appropriate and fair? final• Recent approach of courts - Westonaria Local Municipality v

SALGBC (2010 LC)• Employer bears the onus to show that the employee was guilty of the

offence, and that the dismissal was fair, and that the trust relationship between it and the employee has broken down due to the employee’s conduct

– Mutual Construction Co Tvl v Ntombela (2010 LAC)• Where an employee has committed a serious fraud one might reasonably

conclude that the relationship of trust between him and the employer has been destroyed.

• Totality of circumstances must be taken into consideration – where employee was placed in a position of trust and responsibility, this role constituted a crucial and fundamental ‘operational requirement’ in the employer’s business.