The LC reviewed and set aside a settlement agreement as the arbiter’s conduct was grossly irregular by failing to act within the confines of the law and exceeding his powers and authority.  There was no proof of any ‘dismissal’ and the amount agreed exceeded the limit imposed by s 194 of the LRA.  The authority of the person who signed for the employer was also disputed.

Lekwa Local Municipality v SALGBC (JR1069/14) [2016] ZALCJHB 359 (31 August 2016) per Mosime AJ.

Excerpts without footnotes

[25]     The Constitutional Court confirms finally also that ‘… [o]nce a settlement agreement has been made an order of court, it is an order like any other. It will be interpreted like all court orders’.  So should be settlement agreements made arbitration awards.

[26]     In casu, the terms of the settlement agreement made an award are that the applicant agrees that the third respondent was unfairly dismissed both substantively and procedurally, and admits full liability for the unfair treatment to the third respondent and also accepts to pay as prayed for.

[27]     The award records further that the agreed formula ‘is guided by the salary package of the applicant whilst she was employed by the respondent’. The compensation to the applicant by the respondent is an amount of R1 674 149.49 (one million six hundred and seventy four thousand, one hundred and forty nine rand and forty nine cents) in full and final settlement and the payment shall be made on or before 31 January 2014.  Both parties shall not disclose the details or contents of this agreement in any way to any other person and this agreement shall be confidential.

[28]     The award does meet the requirement that it relates directly to the issues arising out of the employment relationship between the parties and to the subject matter of the lis between them. Section 186(1)(e) of the Labour Relations Act does permit an employee who has resigned to refer a dispute concerning an alleged unfair dismissal to the CCMA or bargaining council.  It is not disputed that the third respondent was an employee of the applicant.

[29]     The award however, in my view, contains terms of the agreement that are objectionable and not capable both from the legal and practical point of view, of being included in an award, in that its terms do not accord with both the Constitution and the law, and are also, at odds with public policy. These are crucial factors that the commissioner ought to have taken into account when considering material available for his making a decision.

[30]     It is trite that commissioners are creatures of statute and that, sitting at processes constituted in terms of the LRA, are only possessed of powers confined in that statute.  The LRA provides as follows in section 194:

‘194 Limits on compensation

(1) The compensation awarded to an employee whose dismissal is found to be unfair either because the employer did not prove that the reason for dismissal was a fair reason relating to the employee’s conduct or capacity or the employer’s operational requirements or the employer did not follow a fair procedure, or both, must be just and equitable in all the circumstances, but may not be more than the equivalent of 12 months’ remuneration calculated at the employee’s rate of remuneration on the date of dismissal.’

[31]     The LRA is categorical, and so are Commissioner Guidelines that any amount of compensation awarded in terms of the Act ‘must be just and equitable taking into account all the relevant circumstances of the case, and may not exceed 12 months of the employee’s remuneration at the rate applicable at the time of the dismissal’. A Commissioner, therefore, cannot award any compensation outside the limits imposed by the statute.  The compensation awarded to the third respondent in this case, is objectionable on the basis that, despite the contention that its sum supposedly results from the calculation of the third respondent’s salary package whilst she was employed by the applicant, it far exceeds that limit of twelve months prescribed by the legislature.  The commissioner had no powers to permit that excess to pass.  In that regard, he disregarded his duties and acted irregularly by not ensuring that his award accords with the law.  There is no indication of the circumstances that the commissioner took into account in allowing a settlement agreement couched in such far-reaching terms to clothe itself in the legalities endowed in section 194.

[32]     What the commissioner clearly failed to do in this case before rendering an award, was to look at the remuneration package of the third respondent and ascertain whether or not the quantum he would sanction did not vault the limits set by s194 of the LRA. Had he done that, the commissioner would have immediately realised the obvious unreasonableness of awarding to an employee who had only been employed for less than 10 months, compensation that amounts to five years her annual package.  There was no plausible rationale, even in the papers before this court, justifying a public body (a municipality) ploughing from its fiscus, and appropriating R1 674 149.49 without the Council’s resolution, for the benefit of an employee that resigned voluntarily from employment, who worked only for the employer for only 10 months, and earned a little more than R300 000.00 per annum.  In effect, the commissioner’s award amounts to five times the maximum limit imposed by the legislature.  He exceeded his mandate.