Executive director: The lawfulness and fairness of a provision regarding the end of a directorship as ending employment was the focus in the recent LAC judgment. Can an employer, such as the SA Post Office Ltd, where the State is the sole shareholder, rely on an automatic termination provision in a contract of employment? For example if an executive director ceases to be a director of the company, for any reason whatsoever, does the contract of employment terminate automatically?
The LAC held that the “automatic termination” clause conflicted with an employee’s statutory right not to be unfairly dismissed. The employer failed to discharge the onus of proving that the “automatic termination” clause prevailed over the relevant provisions in the Labour Relations Act 66 of 1995. The LAC expressed reservations about the ability of employers and employees to contract out of the protection against termination of employment in any manner whatsoever.
SA Post Office Ltd v Mampuele (JA29/09) [2010] ZALAC 15; (2010) 31 ILJ 2051 (LAC); [2010] 10 BLLR 1052 (LAC) (4 June 2010) per RAS Patel JA [Tlaletsi JA and Hendricks AJA concurring]
The LAC disallowed the employer’s appeal and upheld the judgment of the Labour Court – SA Post Office Ltd v Mampeule [Ngalwana [V], 12.12.2008] reported in [2009] 8 BLLR 792 (LC); (2009) 30 ILJ 664.
In para [21] (b) the LAC observed:
“… it is accepted in labour law jurisprudence that lawfulness cannot be equated with fairness. Accordingly it is not a defence to an unfair dismissal claim that the employee’s dismissal was lawful (see NUMSA v Vetsak Co-operative Ltd & others (1996) 17 ILJ 455 (A); Fedlife Assurance Ltd v Wolfaardt [2001] 12 BLLR 1301 (SCA). Thus Mampeule, like any other employee, enjoyed the right not to be unfairly dismissed or more appropriately unfairly removed. This is more so since the Act was enacted to give effect to the right to fair labour practices guaranteed in section 23(1) of the Constitution of the Republic of South Africa, 1996. The right not to be unfairly dismissed is not only essential to the enjoyment of this constitutional imperative but is one of the most important manifestations thereof and further forms the foundation upon which the relevant sections of the Act are erected and is consonant with the spirit and the letter of the Act (see NEHAWU v University of Cape Town & others (2003) 24 ILJ 95 (CC) at paragraph [42]; Sidumo & another v Rustenburg Platinum Mines Ltd & others [2007] 12 BLLR 1097 (CC) at paragraphs [72] and [74])”.
In para [22] the LAC also referred to the protection afforded to employees by section 5(2)(b) and 5(4) of the LRA.
In para [23] it was further observed:
“The onus rested on SAPO to establish that the “automatic termination” clause prevails over the relevant provisions in the Act and clause 9.1 of the contract. A heavier onus rests on a party which contends that it is permissible to contract out of the right not to be unfairly dismissed in terms of the Act. I am in agreement with the submission made by Mampeule’s counsel, supported by authorities, that parties to an employment contract cannot contract out of the protection against unfair dismissal afforded to an employee whether through the device of “automatic termination” provisions or otherwise because the Act has been promulgated not only to cater for an individual’s interest but the public’s interest (see Brassey Commentary on the Labour Relations Act at A2-9 and A2-11; SA Eagle Insurance Co Ltd v Bavuma 1985 (3) SA 42 (A) at 49G–H; Bafana Finance Mabopane v Makwakwa & another 2006 (4) SA 581 (SCA) at paragraph [10] and Denel (Pty) Ltd v Gerber [2005] 9 BLLR 849 (LAC) at 24). The court a quo was thus correct when it held at paragraph [46] that:
‘Provisions of this sort, militating as they do against public policy by which statutory rights conferred on employees are for the benefit of all employees and not just an individual, are incapable of consensual validation between parties to a contract by way of waiver of the rights so conferred’.”