Retrenchment is often considered one of the most challenging and unfortunate decisions for any organisation. It is a situation no employer or employee hopes to face, yet in the dynamic and often unpredictable business landscape, it can be an unavoidable consequence of maintaining a company’s health and sustainability. Employers must handle retrenchment with empathy, sensitivity, and transparent communication while providing support services, such as career counselling, job placement assistance, and any other reasonable assistance to potentially affected employees.
However, what happens when employees do not play their part, given that the consultation process or even any period of notice following the conclusion of the retrenchment process does not suspend an employee’s obligations regarding their contractual terms and conditions of employment? An employee who misconducts themselves during this period may still be fairly terminated by an employer and could see them lose out on a favourable retrenchment package offered or negotiated.
In Mabaso v Discovery Life (J1155/20) [2024] ZALCJHB 280 (handed down on the 2 August 2024) the employee was employed by the company since October 2009. The company initiated a retrenchment process, and the employee was among the potentially affected employees. The potentially affected employees were afforded an opportunity to accept voluntary separation packages (VSP). The employee did not initially sign the agreement, however on 20 April 2020, the employee signed the agreement. This is the same day he admitted that he committed a significant and elaborate fraud against the Company and that he had stolen GBP 500 000 from the Company.
When the company failed to make payment in terms of the VSP, the employee approached the Labour Court to make the agreement an order of the court. The company submitted that it entered into the agreement after it was induced to do so by a material misrepresentation and it subsequently elected to resile from the agreement, which was therefore rendered non-existent, invalid, and unenforceable. Where the court did not allude to the validity or enforceability of the contract it dismissed the employee’s application, finding that the agreement does not satisfy the criteria needed to make such an agreement an order of court.
In a similar incident, LabourNet successfully assisted a client in defending a case before the National Bargaining Council for the Road Freight and Logistics industry (NBCRFLI) where the Applicant, an employee, was terminated for carrying unauthorised passengers in a company vehicle without permission. At the time of the incident, the Applicant was an affected party in the retrenchment process and was serving notice after receiving notice of termination due to retrenchment at the conclusion of consultation. The Applicant contended that he was dismissed because the Employer did not want to pay severance pay due to him as a result of his retrenchment.
The Council found no evidence in support of a claim to avoid statutory payments and accepted that despite already having received notice of termination due to retrenchment, the employer had fairly terminated the employee’s employment due to misconduct and thus the applicant would not be entitled to further notice or severance pay.
Read the full case study here.
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