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Automatic Termination of Employment

It is important to be aware of case law and recent judgments regarding the various facets of the law. In this research article, we will be exploring the long-debated subject of an employment relationship that may be terminated by the employer upon a specific event occurring or not occurring.

 

What is a Dismissal?

In terms of Section 186(1) of the LRA the definition of a dismissal is as follows:
(1) “Dismissal” means that

(a) an employer has terminated a contract of employment with or without notice;
(b) an employee reasonably expected the employer to renew a fixed term contract of employment on the same or similar terms but the employer offered to renew it on less favourable terms, or did not renew it;
(c) an employer refused to allow an employee to resume work after she

(i) took maternity leave in terms of any law, collective agreement or her contract
of employment; or
(ii) was absent from work for up to four weeks before the expected date, and
up to eight weeks after the actual date, of the birth of her child;

(d) an employer who dismissed a number of employees for the same or similar reasons has offered to re-employ one or more of them but has refused to re-employ another; or
(e) an employee terminated a contract of employment with or without notice because the employer made continued employment intolerable for the employee.
(f) an employee terminated a contract of employment with or without notice because the new employer, after a transfer in terms of section 197 or section 197A, provided the employee with conditions or circumstances at work that are substantially less favourable to the employee than those provided by the old employer.

 

In the premise a dismissal needs to comply with the above definition in order for a dismissal in terms of the law to take place. There have been various instances where people have claimed an unfair dismissal has occurred, but in essence no such dismissal occurred if one has regard to the laws as set out in South Africa.

 

Automatic Terminations:

Let us use the following scenario:
You are employed as a grade D security Guard doing work for a security company. You sign a contract with them and in the contract it clearly stipulates that you are employed until such time that the contract with the client (client being a big company who requires security guards) is terminated by the client.
You continue your work for 2 years and then receive a notice that your employment will be terminated.

What does the above mean?
It means that, once the big company terminates the contract with your employer your employment will end. This is an automatic dismissal clause.

 

Is it Legal?

In the matter of Enforce Security Group v Fikile & Others (DA24/15) [2017] ZALCD the company had employed employees similar to the scenario given above. In the contracts with the employees it was stipulated that the employment relationship between the parties would automatically terminate if Enforce Security Group’s contract was terminated with Boardwalk Inkwazi Shopping Centre. The employees received notice of the termination of the contract and the employer held meetings with the unions to discuss all relevant factors and the termination of the employment. Enforce had provided alternative employment options to the employees, but this was rejected by the representatives. The reason for the non-acceptance by the representatives was because the employees felt they were permanent employees and the Retrenchment process in terms of Section 189 of the LRA should have been followed instead. The employer proceeded to issue the termination notices and the employees subsequently referred the matter to the CCMA.

 

Proceedings at the CCMA

The Commissioner found that the termination of employment was justified by the fact that the contract with Inkwezi came to an end and therefore the Commissioner further found that the employees were not entitled to any compensation as the automatic termination was not unfair and did not lead to dismissal.

 

Review Proceedings

The matter was taken on Review at the Labour Court and the Labour Court reviewed and set aside the ruling of the Commissioner in that the Labour Court ruled that the employees were indeed dismissed. the employee was not satisfied and took the matter to the Labour Appeal Court.

 

Labour Apeal Court

The LAC delved deeper and stated that Section 186(1) of the LRA stipulates the meaning of dismissal and further expanded on what constitutes a dismissal. The main question according to me is that the LAC had to determine where the employees were dismissed and/or whether the automatic termination as stipulated in their contracts were lawful.
The LAC found that the employer had committed an act by terminating the contract of employment with the employees and that this does not constitute a dismissal, as the LRA makes provisions for the automatic termination of contracts.
It is important to note that the LAC clearly indicated that each matter should be determined on those set of facts relevant to or pertaining to each individual matter.

The court distinguished between 2 types of automatic termination:
1. When the employment is automatically terminated by the act of the client or the third party;
2. When the employment is automatically terminated by the employer:
a. A misconduct on the part of the employer may occur here and this is when each set of facts should be relied on individually.
b. The court used a previous judgment of South African Post Office v Mampeule (2010) 31 ILJ 2051 (LAC) wherein it stated that similar facts would constitute an unfair dismissal.

 

What does this mean for future Automatic Termination Clauses?

Each employer must be very careful in the wording of the automatic termination clauses and should be diligent when drafting such a clause. The employer may not insert such clause merely to circumvent the provisions of the LRA.
Each employee signing such an agreement must be aware of the risks that pertains to such an agreement and in the event that the employee’s employment automatically terminates, the employee must ensure that he may only refer an unfair dismissal dispute to the CCMA if the employer has indeed acted outside of the scope of the LRA.

 

Conclusion

In conclusion it is important to determine each matter on its own individual set of facts. This judgment has paved the way for attorneys to ensure that they are able to advise their clients accordingly.

About the Author

Chanté Mouton
Chanté Mouton
author

Chanté Mouton holds a BA Degree and an LLB Degree from the University of Johannesburg. She specializes in Labour Law and frequently attends to matters in the CCMA and Labour Court.

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