Ivan Israelstam

It is common practice for employees to accept a termination package offer from an employer and leave the organisation.

The reasons that such a package might be offered include the following:

• The employer believes that the employee and another person in the organisation are incompatible and that a mutually agreed separation would be best;
• The employee is suspected of misconduct but the employer cannot prove it;
• The employee has committed misconduct or has performed badly but the employer does not want the “hassle” and possible expense of a disciplinary hearing;
• The employer’s operational needs change;
• The employee is so incapacitated as to be unable to do his/her job anymore; or
• The boss wants to create a vacancy for a family member.

Where a separation package is accepted by the employee the parties might agree that the amount of the payment will be calculated in the same or similar way to that used for calculating a retrenchment package in terms of section 41 of the Basic Conditions of Employment Act (BCEA).
This means that the calculation might be based on the number of years of service of the employee at the company. However, this does not mean that the employee has been retrenched in terms of section 189 of the Labour Relations Act (LRA). In terms of that section, if the employer has operational requirements that might necessitate reductions in staff numbers and terminations, the employer is required to consult with the employees who may be affected or with their representatives.
Section 189 allows the employer to retrench employees if there is a good enough basis for this and if the consultation process has been conducted properly. In a section 189 retrenchment the employer does not have to get the agreement of the employees or employee representatives to carry out the retrenchment. Instead, it need only comply with the provisions of the LRA. On the other hand where there is a mutually agreed separation this, by definition, involves an agreement.
A section 189 retrenchment is concluded by a letter from the employer giving the employees notice of termination of employment. However, a termination by mutual consent is concluded by a legal agreement. Employers are warned that they should not get these two types of termination confused. A termination concluded by a genuine and legally binding contract is not classed as a dismissal in the LRA. Whereas a section 189 retrenchment is a type of dismissal and may, in certain cases, be viewed as an unfair dismissal.

In a case recently decided by the Labour appeal court [ABSA Investment Management Services (Pty) Ltd v Crowhurst 2006, [2 BLLR 107] Crowhurst’s employment had been terminated. She went to the labour court claiming unfair retrenchment. Absa lost the case and, on appeal, claimed that the employee’s employment had been terminated via mutual agreement. Crowhurst claimed that she had been led to believe that her position had become redundant and that she would need to be retrenched as there were no other positions available for her.
However, according to Crowhurst, she discovered that there were several vacancies that would have suited her qualifications. The employer’s version was that Crowhurst had been offered two alternatives to retrenchment. Confronted with these two conflicting versions, the court had to look closely at the document that had implemented the termination of Crowhurst’s employment. It stated that, due to the redundancy of her position, her employment was being terminated.
The letter made no reference to a mutually agreed termination or to the alternatives to retrenchment that the employer claimed had been offered to her. The court decided that Crowhurst had, in fact, been retrenched and that this dismissal had been unfair. The employer was therefore required to pay Crowhurst six months’ remuneration in compensation and also to pay her legal costs.
As the stakes are high when employment is terminated, employers are warned:

• To formulate their mutual termination documents to make it clear that the termination is not a dismissal.
• Record their retrenchment consultations so as to make sure that they are able to prove to the courts what really was and was not said.
• Avoid leaving termination strategies and processes to those not fully versed in labour law.

Our appreciation to Ivan and The Star newspaper for permission to publish this article. Ivan Israelstam can be contacted on 082-852-2973 or via email at: [email protected]