Unacceptable Stock Losses

Case Law Bulletin 

The dismissal of employees due to unacceptable stock losses (in accordance with the company’s policy on levels of stock found to be missing at stock count) was found to be substantively fair. 

Case summary

This matter was set down at the CCMA as a con-arb process but couldn’t be resolved during conciliation. It was then set down for arbitration, and since the applicant challenged the substantive fairness of the dismissal, the commissioner had to determine whether the dismissal of the applicants, who had been employed as shop assistants by the respondent, a clothing store chain, was substantively fair.

The applicants were dismissed after a stock count revealed that there had been unacceptable stock losses during the time that they were at work. The respondent stated that the company’s policy is very clear on this point, and that the employees were all aware of the policy and had signed documents detailing their understanding of this aspect of their employment.

The company’s stock loss policy states that all employees are jointly and severally liable for stock, money and assets. The policy allows for stock losses up to 1% per annum, but if the number of items missing is above this level, the employees will be subject to disciplinary action. 

This policy is in place due to the difficultly of proving that any one employee is responsible for the loss of items from the store. The applicants stated at various points during the hearing that they were aware of the company’s policy on stock losses, and had signed the documents agreeing to this policy.

The respondent called two witnesses – the HR manager and a stock control auditor. Both parties confirmed that during the time period of the employment of the applicants, the stock loss level climbed above the allowable 1% and, thus, the employees had been dismissed. Stock was counted with the employees present, and the loss was significantly higher than the employees had reported. They reported 81 items missing for the applicable time period when the stock audit found that, in fact, 506 items were missing, a massive discrepancy.

The applicants countered that there was no possible way they could have control over how much stock went missing due to rampant shoplifting, the cameras in the store not being in working order, and no security guard. They argued that in the years where a security guard was present in the store, stock losses had been very low. They stated that they often found empty boxes indicating theft had taken place, and that they had once even helped to prosecute a shoplifter. Their main argument was that the lack of security meant that they were unable to prevent the theft of items.

The arbitrator, obviously aware of the “he said, she said” conundrum, which could cause such a case to continue indefinitely, referred back to a previous case: Foschini Group v Maidi and others, which had set a precedent for a threshold of acceptable stock losses for times when it is difficult to prove that one particular employee is responsible.

The arbitrator observed that the company policy was in accordance with this rule, it was clearly laid out to employees in a separate document, they were aware of it and had all signed the document. Stock losses were proven to be unacceptably high, the company enforced its rule, and the employees were dismissed. In the circumstances, the dismissal was found to be substantively fair.

Rage Distributors v SACCAWU obo Menemene Anda and 6 others (ECEL3905-20/2020) [2023]

This article does not constitute legal advice. For an informed opinion and/or assistance with a labour-related matter, you are encouraged to arrange a formal consultation with the author.

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