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24 Mar 2020

A dismissal dressed as a breach of contract is still a dismissal: a warning to employers

In terms of ordinary contract principles, if an employee commits an act of serious misconduct, this constitutes a breach of contract. This breach alone does not terminate the contract of employment. The employer can elect to either “accept” the breach or “reject” it. If the employer accepts the breach, it is this election of the employer to accept the breach that terminates the contract. This would, in common law terminology, constitute a dismissal. If the employer rejects the breach, the contract does not terminate and the employer would then typically seek to enforce the contract. An unaccepted repudiation does not terminate a contract of employment.

Section 186(1)(a) of the Labour Relations Act 1995 (“LRA”) provides a statutory definition of a dismissal. In terms of this section, a dismissal takes place if the employer hasterminated employment with or without notice”.

It is clear that this definition encompasses both the situation where an employer terminates employment by giving notice and where the employer dismisses an employee summarily ie, where the employer accepts the employee’s breach in the form of misconduct.

Recently, in South African Broadcasting Corporation (SOC) Limited v Commission for Conciliation Mediation and Arbitration and Others, Judge Van Niekerk re-emphasised the notion that the employee’s breach of contract (often referred to as a “repudiation”) and the acceptance thereof by an employer is in its very nature a dismissal. Judge Van Niekerk did not take lightly to having to explain a principle so trite in South African labour law.

Briefly, the employee in this matter, Ayanda Mkhize, alleged that she had been unfairly dismissed by the South African Broadcasting Corporation (“SABC”) and referred an unfair dismissal dispute to the Commission for Conciliation, Mediation and Arbitration (“CCMA”). The SABC disputed the CCMA's jurisdiction to hear the matter, submitting that if an employee commits misconduct, the employer may treat it as a case of misconduct or of breach of contract. The SABC, averring that it had treated the present case as one of breach of contract, argued that the employee did not have a claim for “dismissal” as defined in the LRA. If there was no dismissal, there could also not be an unfair dismissal. The employee’s remedy was confined to a contractual remedy, which the CCMA is not empowered to grant. It therefore lacked jurisdiction to consider the matter.

The commissioner hearing the matter decided that the CCMA had at least provisional jurisdiction in the sense that it was empowered to consider, and make a finding on, whether there had in fact been a dismissal. If the evidence established that there had been a dismissal, the CCMA would have jurisdiction to consider the fairness of the dismissal. But if the evidence revealed that the true nature of the dispute was one over which the CCMA did not have jurisdiction, the dispute would not be arbitrated but referred to an appropriate forum. The SABC, unhappy with this ruling, sought to review and set aside the ruling and substitute it with a ruling that the CCMA lacks jurisdiction to arbitrate the employee’s dispute. It also approached the Labour Court for a further order in terms of which it sought to stay the arbitration proceedings until the review application had been decided.

In considering this second application, Judge Van Niekerk held that the submissions made by the SABC were “profoundly” unsound. In this regard, he held as follows:

“The definition of ‘dismissal’ in s 186 of the LRA expressly includes circumstances where the employer ‘has terminated employment with or without notice.’ Whether the employer casts the termination in the contractual language of acceptance of the repudiation of a contract of employment and an election to cancel the contract, this is no more or no less than a termination of employment, with or without notice (i.e. a summary termination), which in turn, by definition, constitutes a dismissal for the purposes of s 186. This is a matter over which the CCMA exercises jurisdiction, at least where the reason for dismissal is misconduct, a reason that is not in dispute in the present instance (see s 191(5)). I find it disconcerting to have to record such a trite principle - to any labour lawyer, this is a statement of the manifestly obvious. Were the SABC’s point in limine to be upheld, it would be open to employers to avoid the statutory consequences of an unfair dismissal simply by casting a termination of employment in common law contractual terms. The inadequacies of the law of contract to protect employees against a termination of employment without a fair reason and without following a fair procedure is the raison d’etre of the statutory protection against unfair dismissal. This protection has its roots in the power imbalance inherent in the employment relationship and the remedial constitutional right to fair labour practices, a fact acknowledged many times over by this court, the LAC and the Constitutional Court.” 

It is therefore evident that employers should not view the acceptance of a breach of contract as a distinct and separate concept from a dismissal. The end result remains the same; there is a termination of the employment relationship between the employer and the employee. It then follows that the same rules of fairness apply, regardless of whether the employee’s conduct is described as a breach of contract or as misconduct. Employers are warned against using this argument to escape the remedies available to an employee at the CCMA by alleging that the CCMA does not have jurisdiction to arbitrate a breach of contract matter. As indicated by Judge Van Niekerk, the power imbalance in the employment relationship cannot be protected by depriving employees of the right to fair terminations of employment. A dismissal dressed as a breach of contract is still a dismissal as defined in the LRA.

Accordingly, the CCMA can have the necessary jurisdiction to arbitrate disputes involving the breach of a contract that leads to termination of employment.

Reviewed by Peter le Roux, an Executive Consultant in ENSafrica’s employment department

Claire Nolan
Candidate Attorney | Employment
+27 66 474 4747