Novanam Ltd v Percival Rinquest (LCA 65/2012) [2014] NALCMD 35 (22 August 2014)
The respondent was employed by the appellant as a ‘skipper’ on its vessels between the periods 16 October 2002 to 15 December 2011 when his employment was terminated, allegedly for operational and economic reasons. On 13 March 2012, the respondent, in terms of ss 82(7) and 86 of the Labour Act, 2007, referred a dispute of unfair dismissal (retrenchment) to the Office of the Labour Commissioner for conciliation and arbitration.
Legal principles
‘[14] The procedures set out in s 34 are detailed. They provide that when an employer contemplates dismissing employees for operational reasons, it is required to consult with them or their representatives over a range of issues. During the course of such consultations, the employer must disclose relevant information to make the consultation effective. The purpose of such consultation is to enable affected employees to make representations as to whether retrenchment is necessary, whether it can be avoided or minimised, and, if retrenchment is unavoidable, the methods by which employees will be selected, and the severance pay they will receive. It follows, therefore, that if a joint consensus-seeking process, envisaged by s 34 of the Labour Act, 2007, is not achieved, the dismissal of an employee for operational reasons will be procedurally unfair.
[27] Section 35 of the Labour Act, 2007 in material terms provides as follows:
‘35 Severance pay
(1) Subject to subsection (2), an employer must pay severance pay to an employee who has completed 12 months of continuous service, if the employee-
(a) is dismissed;
(b) dies while employed; or
(c) resigns or retires on reaching the age of 65 years.
(2) …
(3) Severance pay in terms of subsection (1) must be in an amount equal to at least one week’s remuneration for each year of continuous service with the employer.
[28] In the case of Nicola Jane Whall v Brandadd Marketing (Pty) (J 1130/97) [1998] ZALC 127 (15 December 1998), the South African Labour Court held that:
‘It has been generally accepted, too, that the purpose of severance pay is to cushion the shock of retrenchment, and to serve as a gratuity for services rendered. In other words, severance pay is a form of “compensation” for employees who fall victim to economic forces and the loss of employment: Cele & others v Bester Homes (Pty) Ltd (1990) 11 ILJ 516 (IC); Jacobs v Pre-Built Products (Pty) Ltd (1988) 9 ILJ 1100 (IC); Lloyd v Brassey (1961) All ER 312; Wynes v Southrepps Hall Broiler Farm Ltd [1968] ITR 407 (IT). Apart from confirming employees’ right to severance pay and the minimum amount thereof, I do not understand the Act to have been intended to alter the principles underlying these cases.’
[29] In my view, s 35(1)&(3) of the Labour Act merely confirms that retrenched employees are entitled to severance pay equal to at least one week’s remuneration for each completed year of service. This provision does not preclude an employer from agreeing to pay more. Nor, in my view, does it preclude this Court from ordering an employer to pay more than the statutory minimum in appropriate circumstances. It follows, in my opinion, that an arbitrator retains a discretion to order the payment of severance pay higher than the statutory minimum in appropriate circumstances.
[30] In this matter, the appellant has failed to discharge the onus resting on it to prove that the retrenchment of the respondent was both substantively and procedurally fair. I am of the view that the dismissal of the respondent was effected in the most callous manner. In my opinion, the circumstances of this case justify an order for the payment of severance pay higher than the statutory minimum. The applicant should have been retained in employment until he was dismissed for misconduct, poor work performance, or incapacity to perform his work, or until he retired. This means that his employment would have continued well beyond October 2012. This justifies him being awarded three months’ compensation pay, in addition to that to which he was entitled in terms of the Labour Act, 2007.’
Heritage Private School v Mutizwa(HC-MD-LAB-APP-AAA-2021/00032) [2023] NALCMD 10 (20 February 2023)
The first respondent was employed by the appellant in 2007 as a music teacher, and was later promoted to the position of school principal. On 7 May 2020, the first respondent was summarily dismissed on grounds of poor performance. The arbitrator found inter alia that the dismissal was both substantively and procedurally unfair, and awarded the first respondent her monthly remuneration and severance pay for seven weeks, and compensation for loss of income for six months. The appellant appealed against the award, only to the extent of the compensation and severance pay.
Legal principles
‘[27] In this matter before me, it is no longer disputed that the dismissal was unfair. Therefore, the appellant’s contention that severance pay is not due, is misconceived.
[28] The first respondent was employed by the appellant from 2012 to 7 May 2020. The seven weeks awarded for severance pay is justified on the evidence that was placed before the arbitrator.
[29] In addition, as regards the appellant’s assertion that there was no evidence before the arbitrator to make an award in terms of s 35, this too, is misconceived.
[30] Considering the terms of Table 1 as set out in s 10(3) of the Labour Act, it can be accepted from the evidence before the arbitrator that the first respondent’s monthly remuneration of N$10,000 was set by month. Therefore, in order to calculate the weekly rate, one would have to divide the monthly rate of N$10 000 by 4.333, which gives the amount of N$2 307, 87. The multiplication of that amount by seven weeks is N$16 155,09. Effectively, all the evidence necessary to make an award in terms of s 35 of the Act was before the arbitrator, and was unchallenged for that matter. For this reason, the challenge against the arbitration award insofar as it relates to severance pay is also unmeritorious.’
John and Penny Group (Pty) Ltd V Gerhardus Gabriel & 5 others (LCA 37/2016) [2016] NALCMD 44 (18 November 2016)
The respondents were employed by the appellant on a fixed-term contract as crew members on board of the R/V !Anichab vessel. The appellant had won several tenders to operate the aforesaid vessel. The respondents were employed on a 3-year contract, terminating at the end of each tender period. The appellant had at one point paid out severance to the employees at the end of one such term. During the employment term of 2009 to 2012, the appellant did not pay severance, and encouraged the respondents to take up further employment on a new contract commencing in 2013 to 2016. On 31 January 2016, when the contract was terminated, the appellant did not pay severance on the basis that previous payments were made in error and that the respondents were not entitled to severance pay as they were not dismissed, but that their contract was terminated by effluxion of time.
The Arbitrator held that section 35 (i) of the Labour Act can be interpreted to mean that the respondents were entitled to severance pay because termination is synonymous with dismissal. The appellant appealed against that finding of the arbitrator.
From the record, the arbitrator was requested to determine a legal issue, whether the respondents were entitled to severance pay. The appellant submitted that the Act does not entitle fixed-term contract employees to severance pay as they were not dismissed but their contracts terminated by effluxion of time.
Legal principles
‘[16] I now return to the main ground of appeal, that the arbitrator erred in law in her finding that respondents, being fixed-term contract employees, were entitled to severance pay at the end of their contract. The arbitrator based her finding on the meaning of dismissal, which she held to be synonymous with termination. I think no one would disagree with the arbitrator that termination and dismissal can be used interchangeably, but in this case, the arbitrator missed the issue altogether.
[17] The issue is whether an employee whose contract of employment terminated by effluxion of time is entitled to severance pay as provided in section 35 of the Act…
[18] The Act used the word termination, and many sections under Chapter 3 of the Act. The word is used in generic terms to describe the coming to an end of the employment relationship, for whatever reasons. Section 33 of the Act deals with unfair dismissal, and in that regard, dismissal is used specifically to insinuate a particular action taken by the employer against the employee. In the matter of Ouwehand vs Hout Bay Fishing Industries, cited with approval by Justice Ueitele in Tow In Specialist CC vs Chistoph Urinavi (LCA 55 of 2014) [2016] NALCMD 3 (20 January 2016), the court held that:
‘the employer party to a contract of employment undertakes an action that leads to the termination of the contract. In other words, some initiatives undertaken by the employer must be established which has the consequences of terminating the contract, whether or not the employer has given notice of an intention to do so’.
[19] In Hailulu v The Council of the Municipality of Windhoek (HC-MD-LAB-APP-AAA-2022/00028) [2023] NALCMD 15 (4 April 2023), Justice Silungwe held the following, in the context of allegations made by the appellant that they were dismissed after the fixed-term employment contract ended:
‘Turning to the respondent’s decision not to retain the appellant for a further term at the expiry of the then subsisting one, it seems to me that an assertion that the decision amounts to dismissal is to do violence to the English language. The respondent had not only acted in conformity with section 27(3)(b)(i) of the Local Authority Act, but it had also exercised its discretion properly; and the appellant’s fixed statutory contract of service had come to an end by effluxion of time. What else, one is constrained to ask, was the respondent reasonably expected to do in all the circumstances of the case?’
[20] It is common cause that both appellant and respondents agreed that the respondents were not dismissed. Respondents argued that they were entitled to severance pay by virtue of the provisions of section 35, read together with section 37 of the Act. If it is established that the respondents were not dismissed, it follows that they were not ‘entitled’ to severance pay. The arbitrator’s interpretation of section 35 is clearly wrong in law, and cannot be sustained. The contract of employment terminated by virtue of effluxion of time, and not by any act at the behest or initiative of the employer. I accordingly agree with Ms Shilongo that the arbitrator misdirected herself in law and in her interpretation of section 35 of the Act. Accordingly, the arbitration award cannot stand, and is hereby set aside.
[21] The respondents alleged that there was an agreement between the appellant and themselves that appellant would pay severance pay at the end of the employment contract in 2016. This case was however not made out, and is not apparent from the arbitration record. The case that was made out is that the appellant acted inconsistently in paying severance pay. The inconsistent action of the appellant was explained by the Human Resources Manager when she testified that severance was paid out to employees in error, and the error was picked up and corrected. Accepting her evidence to be correct, as it was not disputed, it cannot be said that appellant acted inconsistently in paying severance pay in the past, and now is refusing to pay severance to employees. At the most, appellant acted wrongly. On that basis, the allegation that there was an agreement to pay severance cannot be entertained by the appeal cour,t as this issue of inconsistency was not properly canvassed at the arbitration hearing.’
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