Foreigners without Valid Work Permits: Incapacity or Retrenchment?
In Sibanda and Others v Roots Butchery (2025) 46 ILJ 2969 (CCMA), the Commission for Conciliation, Mediation and Arbitration (CCMA) upheld the dismissal of nine Zimbabwean general workers for incapacity due to lacking valid work permits, distinguishing this from retrenchment under operational requirements.
Employers facing similar issues with foreign nationals must grasp this nuanced ruling to avoid unfair dismissal claims and compliance risks under the Immigration Act and Labour Relations Act (LRA).
Case Background
Roots Butchery employed the applicants as general workers at its Letlhabile outlet, all being Zimbabwean asylum holders without valid work permits as required by Section 38(1) of the Immigration Act. A joint blitz operation by South African Police Services, Johannesburg Metropolitan Police Department, Home Affairs, and officials from the Department of Employment and Labour targeted the employer’s outlets, which led to everyone in the employer’s different branches – including managers – being taken to the police station to pay a fine of R150,000, or face imprisonment. There were also threats that the business owner could be incarcerated for up to one year for employing undocumented foreigners. All of the arrested employees paid a fine which resulted in criminal records. Although the employees had known since 2022 that asylum was not for an indefinite period, they failed to apply for work permits as required by the Immigration Act. The employer had attempted on multiple occasions, spanning more than a year, to get the employees to apply for work permits, to no avail. At this stage, the employer was forced to act and consulted the employees, giving them 30 days to provide proof that they had applied for the necessary permits.
Despite these consultations and ample prior awareness via radio and social media, the workers still failed to apply for work permits, citing long queues as the reason for being unable to make the applications, and still providing no proof of applications even a year post-dismissal. The employer convened individual incapacity hearings on charges of “illegal incapacity” based on the employees’ inability to legally render services, found them guilty based on their continued non-compliance after multiple meetings, and dismissed them effective June 2024 after a notice period. The workers referred an unfair dismissal dispute to the CCMA, arguing that they ought to have been retrenched with severance as opposed to being incapacitated, but the Commissioner ruled the dismissals substantively fair.
Key Concepts: Illegal and Operational Incapacity
The Commissioner clarified that “illegal incapacity” lacks formal statutory definition but describes an employee’s inability to perform duties due to legal barriers, such as the absence of valid work permits rendering continued employment unlawful. This falls under the broader incapacity umbrella in Item 10 of Schedule 8 to the LRA (Code of Good Practice: Dismissals), extending beyond ill-health or poor performance to external legal impediments. In this case, the workers’ asylum status and lack of work permits barred legal employment, exposing the employer to fines, imprisonment, and community backlash, including threats to burn premises if dismissals were not made.
Operational incapacity specifically arises when external factors such as missing permits, prevent job performance without implicating business viability. The commissioner drew on precedents such as First National Bank v CCMA (2017) 38 ILJ 2545 (LC), affirming incapacity’s wide scope and treating it as a fair basis for termination where employees were made aware of the requirement of valid work permits but failed to rectify this deficiency despite reasonable opportunities to do so. Employers benefit from this recognition, as it shields against claims of exploitation while enforcing compliance amid intensified enforcement post-2022.
Distinction from Operational Requirements
Operational requirements under Section 213 of the LRA trigger retrenchment when economic, technological, structural, or similar needs necessitate job losses, regardless of employee suitability. The CCMA explicitly differentiated this from operational incapacity: The former stems from business restructuring eliminating positions, while the latter is tied to the individual’s legal unfitness for the role due to extraneous obstacles such as permit absence. Here, Roots Butchery’s operations remained sound – no redundancies or downturns justified retrenchment – making incapacity the correct avenue, as confirmed by the absence of any LRA provision mandating retrenchment of unemployable workers.
This distinction carries profound implications. Retrenchment demands Section 189 consultations, fair and objective selection criteria, severance pay (at least one week’s pay per year served), and potential re-employment all of which prevents the potential reopening of roles to locals. Incapacity, conversely, follows Item 10 guidelines: Investigate causes, explore alternatives (e.g. permit applications), consult, and consider alternatives to dismissal, without severance obligations. The ruling aligns with Discovery Health v CCMA (2008) 29 ILJ 1480 (LC), prioritising fair labour practices for employers under Section 23 of the Constitution.
Appropriate Processes and Employer Guidance
For incapacity based on legal requirements such as the lack of valid work permits, it is important to initiate prompt investigations such as through Home Affairs checks or raids, as soon as you become aware of the situation. Then consult individually or collectively, offering employees reasonable time to comply (in the Roots Butchery case, 30 days atop prior notices sufficed given knowledge of the requirement since 2022). Document all efforts made to gain employees’ compliance, such as letters, meetings, and proof requests, and hold fair hearings with chairpersons assessing compliance (as the chairperson did), verifying awareness of the requirements and failure to act. Dismissal proves fair if employees show no genuine attempts, even post-notice, thereby balancing employee rights with employer liabilities.
Retrenchment is suitable when dismissals are due to business needs: Issue Section 189(3) letters detailing reasons, invite responses, consult on avoidance measures, apply fair criteria, and pay severance unless insolvency applies.
Misclassifying incapacity as retrenchment risks disputes, as employees may demand payouts without business justification, while true incapacity avoids this, protecting employers from retrenchment’s re-employment obligations.
HR practitioners should audit foreign worker documentation routinely (especially post-2022 reforms), train managers on incapacity protocols, and reference CCMA awards upholding similar dismissals.
Practical Implications for Employers
This CCMA decision reinforces that employers cannot retain illegal workers indefinitely, even those with long service records, amid enforcement blitzes turning “innocent” oversights into crimes. Verify permits at hiring and monitor expiries, communicating requirements and risks to employees clearly to avoid disputes and claims at a later stage. If disputes should arise, present full evidence of consultations held with employees and their continued inaction or non-compliance.
HR should integrate incapacity for individual legal barriers and retrenchment for business-driven losses into policies, thereby ensuring procedural and substantive fairness of dismissals. Proactive compliance protects employers from legal and financial repercussions while upholding fairness under the LRA.
