Chief Court Reporter
Employers terminating a permanent employee’s contract can only do so under one of four circumstances set out in the Labour Amendment Act, the High Court has ruled, rejecting an argument put forward by NetOne that the common law right to terminate a contract on notice still existed provided a compensation package is offered.
The ground-breaking ruling comes after two NetOne employees, brand manager Loveness Govera and head of IT infrastructure Tauya Mugwagwa, sued the mobile phone service provider after the company served them with letters of termination of their contracts of employment on notice in July this year.
Their successful High Court action challenged the lawfulness of the termination of their contracts by seeking an order confirming the validity of their permanent employment positions and declaring the employer’s notices to be invalid for want of compliance with the law.
An employer’s absolute common law right to terminate an employment contract on notice was taken away in 2015 and became a conditional statutory right exercisable in one of four specific circumstances prescribed under Section 12(4a) introduced into the Labour Act by the Labour Amendment Act of 2015.
The two argued that any termination on notice outside the four listed circumstances was invalid and attacked the employer for not showing that the purported termination complied with one of the four possibilities.
But the company argued that it exercised its common law right with the Amendment Act simply stating a person whose contract was terminated after 17 July 2015 was entitled to a minimum compensation package.
It said the right to terminate a contract of employment on notice was a common law right, with Section 12(4) just regulating that right and that in terms of Section 12(4b), termination of a permanent contract of employment on notice was available where the employer paid the minimum compensation package set out in Section 12C.
The company also submitted Govera and Mugwagwa were offered a package hence there was no basis for interfering with the manner in which the company exercised its common law right.
In deciding the matter Justice Dube felt the that the issues raised by application required to be resolved by way of a decelerator which will pronounce the law and guide the employer on how to proceed.
In her decision she zeroed in on the stipulations of the 2015 amendment to the Act dealing with termination of employment contracts on notice.
She said NetOne could not seek to rely on the fact that it is prepared to pay compensation to terminate a contract of employment on notice, since compensation is not one of the four criteria listed under Section 12(4a) allowing termination on notice.
By failing to comply with the requirements of Section 12(4a) of the Labour Act, NetOne failed to comply with the due process of the law, said Justice Dube.
“Accordingly . . . it is hereby declared that the respondent’s letters terminating the applicants ‘contracts of employment on notice, dated 9 July 2020 be and are hereby declared null and void.”
In this case, the judge found that the employer offered Govera and Mugwagwa a package, but without first complying with the requirements of Section 12(4a) and the two did not even know the basis of the termination, as this was not revealed.
“The notice of termination should contain the factual and legal basis for the termination to enable the employee to be able to challenge the termination,” she said noting that the two did not know whether the notices were issued in pursuance of retrenchment, in terms of a code or with their supposed agreement.
Justice Dube said if the employees were not advised of the factual and legal basis for termination of their contracts on notice, any offer of assessment of compensation was invalid.
She noted that payment of compensation on its own does not become a basis for terminating a contract of employment on notice, saying all Section 12(4b) of the Act did was ensure there was compensation where an employee was given notice of termination of contract in terms of one of the four listed reasons in the earlier Section (4a).