A common mistake when terminating fixed-term contracts

I recently came across an extract of a letter which was meant to terminate an employee’s contract.  This letter was of interest to me because, in my view, it contains common labour law mistakes that professionals make in the process of terminating contracts of a fixed-term nature.

For purposes of convenience, the letter is attached below:

I have deliberately inserted paragraph numbers to this letter to simplify the process referencing as I will be referring to these paragraphs throughout this article.

It is important to point out that this letter was meant to terminate a fixed-term employment contract that was due to expire on the 31st of December 2020.

AD PAR 1

Paragraph 1 indicates the intention of the employer to terminate the fixed-term contract on notice (see paragraph 4 as well). The fixed-term contract was effectively terminated on the 15th of January 2020 as can been seen from this paragraph.

Looking at this Paragraph in isolation, one can conclude that the intention was to terminate the contract in terms of section 12C of the Act as amended. In my view, if the employer had just stated that it was terminating the contract on notice there wouldn’t have been anything amiss about this termination.

Paragraph 2 of the letter raises important legal questions about whether the employer wanted to terminate the employees’ contract on notice (s12C of the Act) or dismiss the employee (s12B of the Act). The two processes are different, and each has its own legal connotations. I will explain.

Don Nyamande (2) Kingstone Donga v Zuva Petroleum (Private) Limited [i] shows that there are fundamental differences between termination on notice and termination as a result of a “dismissal”. The two methods have different procedures, for instance, a dismissal envisages the use of a code of conduct. A code of conduct is only utilised when an employee has committed some form of an offence[ii]. Termination on notice can be applied in no-fault situations. This distinction is critical in casu and should be kept at the back of one’s mind in the process of analysing paragraph 2 and 3.

AD PAR 2 & 3

Paragraph 2 and 3 of the letter tend to paint a totally different picture of what is apparent in paragraph 1. The two paragraphs indicate that the termination emanated from an allegation that this employee stole diesel from the company.

Paragraph 3 further indicates that the employee did not show any remorse after the alleged offence. It also threatened to hand over the employee to the police in view of the alleged offence.

It is my respective view that the two paragraphs were not proper at law and should not have been part of this letter considering that the employer wanted to terminate on notice. If the employee committed the offence why then was, he not arraigned before a disciplinary hearing? Was he granted an opportunity to be heard before an impartial tribunal before the termination was effected? The letter does not indicate that this was the case and if this is anything to go by then termination of the employee’s contract was irregular.

It is my sincere understanding that if an employee is alleged to have committed an offence, terminating on notice is not the correct procedure. The basic rules of natural justice require that an employee be given an opportunity to be heard if an offence is alleged to have been committed.  Such an opportunity can only be granted within the confines of a code of conduct. Summarily terminating the contract will be irregular in these instances.

The correct procedure would have been to charge the employee, go through the hearing process and allow him to state his side of the story. Only when, on a balance of probabilities, it is confirmed that he stole the diesel could his contract be severed. This process can be done even when the employee is on a fixed-term contract. The whole process only becomes fair when an impartial tribunal hears the matter and issue an appropriate penalty.

CONCLUSION

In conclusion, I am bothered by the fact that the employee in question was alleged to have committed an offence, but no disciplinary action was undertaken. The employer chose to pay the employee notice and the minimum retrenchment package without allowing the employee to respond to the allegations. I submit that termination by notice can only be utilised in no-fault situations where no party is to blame for the breakdown of the employer-employee relations.

In the circumstances and having considered the authorities, I am tempted to conclude that the termination of the said employee’s contract was null and void for want of compliance with the employer’s code of conduct.


[i] Don Nyamande (2) Kingstone Donga v Zuva Petroleum (Private) Limited (SC 43/15).

[ii] See section 101(3) of the Labour ACT (Chapter 28.01).

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