Category: 2020 Case Law Review

This article is based on Chapter 1 of the latest book “A PRACTICAL STEP-BY-STEP GUIDE TO RETRENCHMENT LAW IN ZIMBABWE” which is available in hard copy.

One potential question that may arise in the retrenchment procedure is whether disputes related to retrenchment can be resolved through collective job action. While retrenchment may result in difficulties, an examination of the Act reveals that such disputes cannot give rise to collective job action, such as a strike. This is because the retrenchment provisions outline a structured dispute resolution mechanism that allows any aggrieved party to seek redress.

Statutory Instrument 191 of 2024 establishes the Retrenchment Board, a statutory body responsible for handling retrenchment disputes. The provisions clearly define the rights of both employees and employers, reinforcing that retrenchment disputes fall under disputes of rights.

In Zimbabwe, disputes of rights do not justify collective job action. Any employee who engages in a strike over a retrenchment dispute, or any employer who enforces a lockout in response, commits an unfair labour practice. Furthermore, under Act 11 of 2023, unlawful collective job action now carries severe penalties, potentially leading to criminal sanctions for both employers and employees.

For the sake of completeness, it is important for one to acknowledge the exceptions outlined in Section 104(4) of the Act, which legally permit employees to engage in collective job action even in cases where a dispute of right is anticipated. For instance, if an employer seeks to retrench the entire workers’ committee or union representatives without valid justification, the law recognizes the employees’ right to initiate collective job action in response. However, while this provision exists, employees must refrain from misusing it for personal or self-serving purposes. Section 12C provides complete remedies for anyone aggrieved with a retrenchment exercise. Care and due diligence must thus be taken by those contemplating a collective job action over a retrenchment dispute.

This article is based on Chapter 7 of the latest book “A PRACTICAL STEP-BY-STEP GUIDE TO RETRENCHMENT LAW, IN ZIMBABWE” which is available in hard copy.

From the foregoing, a common predicament employers face arises when an employee falls ill or is accused of breaching workplace rules, leading employers to resort to retrenchment in such circumstances. It is expected that whenever an employee is ill, the procedure outlined under section 14 of the Act should be followed to terminate the contract of employment. Similarly, when a breach of workplace rules is alleged, compliance with section 12B of the Act is mandatory.

We submit that resorting to retrenchment for reasons other than those specified under section 2 of the Labour Act is procedurally unfair and subject to challenge. For instance, a sick employee’s contract can only be terminated after the exhaustion of the initial 90 days of sick leave on full pay, upon a doctor’s recommendation, or after an additional 90 days on half pay. Retrenching such an employee is not only inhumane but also deprives them of other rights provided under the Act.

Likewise, retrenching an employee accused of breaching workplace rules undermines the rights outlined in section 12B (2) of the Act. Employers are therefore urged to utilize retrenchment only in the appropriate circumstances as stipulated in the Act.

Employees have a constitutional right to equal benefit and protection of the law, retrenchment laws included. This means that all the rights accruing to employees in terms of the Labour Act must be respected without derogation. This further means that retrenching employees in inappropriate circumstances prevents them from enjoying some of the rights accruing to them in terms of the Act, to the extent that a retrenchment process may be challenged if the reasons put forward by the employer are not legitimate.

Despite our submission above, situations may arise in the workplace where an employee who is ill or has a pending disciplinary hearing opts to be retrenched. In such cases, it is advisable for the employer to engage in a mutual separation arrangement under section 12(4a) of the Act. This approach allows the employer to avoid using the retrenchment procedure in circumstances where it may be inappropriate.

This article is based on Chapter 7 of the latest book “A PRACTICAL STEP-BY-STEP GUIDE TO RETRENCHMENT LAW, IN ZIMBABWE” which is available in hard copy.

The procedure outlined in the Labour Amendment Act 11 of 2023, which requires employees to approach the Retrenchment Board when they do not receive their retrenchment package, is, with respect, cumbersome, time-consuming, and costly. It is recommended that the legislature consider streamlining this process by allowing affected employees to approach the Labour Court directly for the enforcement of retrenchment packages without the need to go back to the retrenchment board.

Under this proposed approach, employees should be permitted to present a retrenchment certificate and/or a retrenchment agreement before the Labour Court to seek enforcement of the outstanding payment. This would eliminate the need for the current multi-step process, which requires the employee to return to the Retrenchment Board, present evidence of non-compliance, and wait for the issuance of a non-compliance certificate—only after which the employee can approach the Labour Court.

This process is unnecessarily repetitive, particularly considering that parties already receive a retrenchment certificate during the retrenchment process, confirming the retrenchment’s validity. This certificate, along with any evidence of non-payment, should be sufficient for the Labour Court to issue an order compelling the employer to fulfil the retrenchment package obligations.
Simplifying the procedure in this way would expedite the resolution of disputes, reduce legal costs, and provide retrenched employees with quicker access to their entitled packages.

This article is based on Chapter 3 of the latest book “A PRACTICAL STEP-BY-STEP GUIDE TO RETRENCHMENT LAW IN ZIMBABWE” which is available in hard copy.

There may be situations where an employer deems it necessary to withdraw a notice of intention to retrench. During retrenchment negotiations, the employer may come to realize that the minimum retrenchment package is financially unfeasible, perhaps due to adverse economic conditions.

Additionally, the employer might recognize that proceeding with the retrenchment could put the organization in a more detrimental financial position. This raises the question of whether such an employer can legally withdraw the notice of intention to retrench. Meanwhile, employees may be prepared to leave the organization and begin a new chapter in their lives. The issue becomes whether the employer has the legal right to retract the notice of intention to retrench and call for the resumption of duty by the employees.
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In Freda Rebecca Gold Mine Holdings Ltd v Nhliziyo & 180 Others, the Supreme Court dealt with a matter which resembles the above scenario. In this case, the employer engaged in a retrenchment exercise to cut down on operational costs. The retrenchment exercise was approved, and at that stage, the employer realised that retrenchment was going to be a costly exercise. The employer withdrew the retrenchment notification, and the employees initially agreed to return to work, worked for two days and thereafter demanded that they be paid their retrenchment packages since their employment had ended through retrenchment.

Those who refused to return to work were dismissed, leading to them challenging the process. The labour court ruled in favour of the employees, pointing out that when the ministerial approval was given, their contracts had been terminated. The retrenchment procedure that applied during this period was that the minister could either approve or refuse to approve a retrenchment.

The Supreme Court acknowledged that, under specific conditions, an employer may lawfully withdraw its intention to retrench and reinstate employees to the workplace.

This article is based on Chapter 3 of the latest book “A PRACTICAL STEP-BY-STEP GUIDE TO RETRENCHMENT LAW IN ZIMBABWE” which is available in hard copy.

One particular aspect of our retrenchment laws has drawn significant attention in our analysis of these provisions.

The retrenchment process, in cases where no retrenchment package has been agreed upon between the parties, requires additional procedural steps to ensure that both the affected employees and the retrenchment board are duly notified. This can be done without any negotiations with the employees. This means that an employee’s contract may be terminated without the employer being strictly bound to uphold the employee’s right to be heard or negotiate.

A potential criticism of this framework is its resemblance to the situation in 2015 following the Zuva Petroleum judgment, where employees could be dismissed with nothing more than three months’ notice. While the legislature has since removed the direct termination of permanent contracts on notice, the current retrenchment laws are not significantly different in their effect.
This is mainly because the statutory minimum retrenchment package—equivalent to one month’s salary for each year of service—does not offer adequate protection for employees with shorter service periods. An employee with less than a year of service may receive compensation amounting to less than a month’s salary upon termination, which, in our considered view, is not far removed from the challenges employees faced in the aftermath of the Zuva Petroleum ruling.

The situation is even worse for fixed-term contract employees, who can be terminated with notice and without being afforded a retrenchment package. It is important to note that even though the Act provides for the capping of fixed term contracts, where the renewal of fixed term contracts is limited for a certain period, this capping hasn’t been applied to certain sectors. At the time of authoring this book, for example, the mining industry does not have any limitation on how many times a fixed-term contract can be renewed. This means that an employee can be on a fixed-term contract for an exceptionally long period of time and may also lose his or her job through the termination of the contract on notice. The retrenchment provisions do not assist such an employee. This, in our view, is akin to the situation after the Zuva Petroleum judgment of 2015.

That said, we acknowledge the legislature’s efforts in introducing provisions that allow employees to challenge the adequacy of the retrenchment package by presenting evidence that the employer has the capacity to offer a higher payout. This aspect is discussed in further detail below from a procedural and substantive law perspective.

Introduction

We have stressed on several platforms that labour law is not static. It changes every day. Employers and employees must actively be on the lookout for the changes that happen in the law.

One of the glaring changes and challenges that came with Act 11 of 2023 was the absence of a definition of a minimum retrenchment package under section 12C of the Labour Act. This created a legal challenge. In the Contemporary Employment Law in Zimbabwe , we noted this legal challenge in the following terms:

“Section 12C (2) shows that the minimum retrenchment is payable in the absence of an agreed enhanced retrenchment package. Without ascribing a meaning to the minimum retrenchment package some of the provisions in section 12C become difficult to comprehend. For example, if an employer alleges that he or she cannot pay any part of the minimum retrenchment package it becomes mandatory for the same employer to still notify the retrenchment board and indicate that “the portion of the minimum retrenchment package that he or she can pay” is not “less than twenty-five per centum of the total package.” The reference in this section to 25% of the total minimum retrenchment packages means that the legislature envisaged that the “minimum retrenchment package” would be known beforehand. In the absence of the definition of a minimum retrenchment package in the Act, there is no objective way of calculating the 25% that should be strictly paid by an employer that cannot afford the minimum retrenchment package. This is a legal problem.”

Fortunately, it seems that this issue has now been resolved. In this article, we outline the contemporary minimum retrenchment package and discuss the legal implications of its definition.

Statutory Instrument 191 of 2024

Through a Supplement to the Zimbabwean Government Gazette dated the 6th of December 2024 a fresh statutory instrument was born. It designates the retrenchment board, defines the minimum retrenchment package and comes up with a set of forms that parties can make use of during retrenchment. Of particular interest in this article is the definition of the minimum retrenchment package.

The minimum retrenchment package

Section 5 of Statutory Instrument 191 of 2024provides that:

“Unless better terms are negotiated and agreed between the employer and the employee or employees concerned or their representatives, a minimum retrenchment package of one month’s salary or wages for every year of service as an employee or the equivalent, lesser proportion of (one month’s salary or wages for a lesser period of service) shall be paid as compensation for loss of employment”.

The minimum retrenchment package as defined in this statutory instrument is higher than what was provided under Act 5 of 2015 which designated the minimum package as “two weeks salary” for every year served by the employee. The minimum package is also applicable to employees who have been with an employer for less than one year and will be paid on a pro-rata basis.

Defining the minimum package as has been done provides legal certainty and gives parties in the employment relationship a starting point in negotiating their separations. It also gives the retrenchment board the capacity to consider and resolve retrenchment issues.

Legal implications of the well-defined minimum retrenchment package

Compared to the minimum retrenchment package outlined in Act 5 of 2015, the package introduced under Statutory Instrument 191 of 2024 is higher. It shifts from providing two weeks’ salary for each year of service to one month’s salary for every year of service.

The presence of a definition of a minimum retrenchment package does not make this the only package one can pay a retrenched employee. Employers and employees are still under an obligation to negotiate and if there is room allow employees to get an enhanced package.

The companies with pending retrenchment exercises are compelled to comply with this legal development. Those parties who were relying on the minimum retrenchment package of 2015 have changes to make.

Those retrenchment exercises that had not been finalised and were based on the 2015 minimum package would have to be revisited in due compliance with the law.

The definition of the minimum retrenchment package would also now affect those contemplating mutual separations under section 12(4a) of the Labour Act. Section 120(4b) provides as follows:
“Where an employee is given notice of termination of contract in terms of subsection (4a) and such employee is employed under the terms of a contract without limitation of time, the provisions of section 12C shall apply with regard to compensation for loss of employment.”

Section 12(4a) provides for the peremptory provisions that ought to be followed when ending a contract of employment including the use of mutual separation agreements for the termination of contracts of employment. Section 12(4b) of the Act provides for the compensation of employees who may be affected by the termination of the contract on notice under section 12(4a)including those under mutual separation conditions.

A mutual separation agreement remains an agreement between the parties. Parties contemplating mutual separation agreements now have to start their negotiations by taking into cognizance the minimum package payable. After the statutory instrument parties cannot agree on anything that is below the minimum package payable.

One would add that section 12(4b) of the Labour Act should not be used to imply that the minimum package is payable to an employee who would have resigned or who would have been dismissed. These circumstances of ending the employment relationship do not constitute a situation where “an employee is given notice of termination of contract” as outlined in Section 12(4a).

What is the salary or wage for retrenchment calculations?

A contentious yet essential issue we must address in this article is the definition of “salary or wage” for each year of service. This question is contentious because, to the best of our knowledge, it remains unresolved by the courts. It is further complicated by the structure of payslips in Zimbabwe, which typically distinguish between “basic salary,” “gross salary,” and “net salary.” The basic salary refers to the amount paid to an employee excluding allowances, the gross salary includes allowances, and the net salary is what remains after statutory and permissible deductions. Each of these components constitutes a form of salary.

In our considered view, the gross salary reflected on the employee’s final payslip should serve as the basis for calculating the minimum retrenchment package. We argue that the purpose of a retrenchment package is to fairly compensate an employee for the loss of their employment. Excluding the gross salary from this calculation fails to achieve full compensation for the purposes of retrenchment. While this is our respectful position, we acknowledge that the courts may decide differently in the future.

Conclusion

With the minimum retrenchment package now clearly defined, we believe that the ambiguities surrounding the implementation of Section 12C of the Labour Act have been effectively addressed. We applaud the authorities for heeding nationwide calls to at least make compulsory retrenchment available to parties contemplating utilising this method of ending the employment relationship. We are confident that employers and employees now have a solid foundation for retrenchment negotiations.

“There can be no doubt that the Labour Court fell into error in coming to this conclusion as it is settled law that damages in these circumstances must be properly proved by the party seeking the same”.

Introduction

In the Contemporary Employment Law in Zimbabwe, First Edition we indicated that the widely accepted test for determining if an employment relationship exists between the parties is the dominant impression test. This test looks at all the facts of the interaction between the parties to determine if indeed there was an employment relationship. Aspects such as the control of the employee by the employer, supervision, and control must be fully considered. The test also looks at whether the employee was part of an organization. In such a test, therefore, there is no single decisive factor that the court considers. The totality of the evidence presented by the parties is fully considered.

American Friends Service Committee v Irene Chauke SC 1/2012 deals with two important aspects of Zimbabwe’s employment law. First, it outlines the law that applies in a determination as to whether an employment relationship exists between the parties. Secondly, it also assesses and makes a decisive conclusion on the importance of evidence when it comes to the quantification of damages in lieu of reinstatement. These issues are discussed here.

1. Facts

The issue presented before the Supreme Court centred on whether or not a valid employer-employee relationship existed between the parties. The appellant had initially hired the respondent on fixed-term contracts up until September 2007. However, it was undisputed that the respondent continued to provide services to the appellant beyond this time frame. Her employment was extended on multiple occasions until its termination in June 2009. At the point of termination, she was earning a monthly salary of US$1,500 and was required to work five days per week and eight hours per day. Additionally, her role as office coordinator and programmer required her to report her activities to the regional office located in South Africa. The case at hand thus required a thorough examination of the employment relationship between the parties involved and to ascertain whether an employer-employee relationship existed between the parties.

1. The court’s findings and the law

The court found that on the facts, the respondent was an employee of the appellant. The fact that the respondent was earning a monthly salary of US$1,500 and was required to work five days per week and eight hours per day all pointed to the existence of an employment relationship.

In addition to the above, the court also found that the arbitrator based his decision regarding the quantification of damages solely on an unsupported statement from the respondent. The Labour Court had accepted this claim without opposition from the appellant. The Supreme Court emphasized that damages in such cases must be properly substantiated by the party making the damages claim.

Conclusion of the dispute

The court’s view was that there was a need for the quantum of damages to be properly proved. The matter was remitted to the Labour Court for determination of the damages after evidence had been adduced.

Own comment

This case highlights the dominant impression test of determining whether an employment relationship exists between the parties. The fact that the Respondent was employed on a fixed-term basis. That he was paid a salary of USD 1500 and reported to superiors in South Africa all pointed to the existence of an employment relationship contemplated by the Labour Act. Every court faced with a dispute regarding the existence of an employment relationship is compelled to look at the totality of the evidence presented by the parties. This resonates well with what the Supreme Court indicated in Masango & Others v Kenneth & Another SC 41–2015 where the court ruled that:

 “…. what the parties call each other in such a contractual relationship, or what they perceive their relationship to be is not decisive and may actually be irrelevant. The court looks at the totality of the evidence and all the circumstances to determine the true nature of the relationship.”

Equally so, the acceptance of damages by a court in the absence of evidence is not ideal. Several court judgements have emphasized the importance of leading evidence in order to support quantification proceedings. In Heywood Investments (Private) Limited T/A GDC Hauliers v Pharaoh Zakeyo SC32/2013 the Supreme Court ruled that:

“What the court is not empowered to do is to award damages in the absence of any evidence in support of such award”

We submit therefore that American Friends Service Committee v Irene Chauke SC 1/2012 is an important case for those who wish to contest the presence or the absence of an employment relationship. It is also a useful case for those seeking to thwart damages that were awarded in the absence of evidence.

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The Act now refers to two types of retrenchment packages,^[1] that is a minimum retrenchment package as well as an enhanced retrenchment package,^[2] which is negotiated and agreed upon between an employer and an employee. The definition of a minimum retrenchment package is missing from the Act 11 of 2023.

When the Labour Amendment Bill of 2021 was produced it marked that the minimum retrenchment package was pegged at 1 month’s salary for two years served.[3] This was similar to the provisions in Act 5 of 2015 which also provided for 1 month’s salary for every 2 years served. Strangely, the provision that provided for the definition of a minimum retrenchment package is no longer there in Act 11 of 2023. This creates a gap which results in interpretation problems for employers and employees.

A perusal of the whole section 12C shows a legislature that was making a distinction between a minimum retrenchment package and an agreed enhanced package. Section 12C (2) shows that the minimum retrenchment is payable in the absence of an agreed enhanced retrenchment package. Without ascribing a meaning to the minimum retrenchment package some of the provisions in section 12C become difficult to comprehend. For example, if an employer alleges that he or she cannot pay any part of the minimum retrenchment package it becomes mandatory for the same employer to still notify the retrenchment board and indicate that “the portion of the minimum retrenchment package that he or she can pay” is not  “less than twenty-five per centum of the total package.”[4] The reference in this section to 25% of the total minimum retrenchment packages means that the legislature envisaged that the “minimum retrenchment package” would be known beforehand. In the absence of the definition of a minimum retrenchment package in the Act, there is no objective way of calculating the 25% that should be strictly paid by an employer that cannot afford the minimum retrenchment package. This is a legal problem.

The legal challenges caused by the absence of the definition of a minimum retrenchment package in the Act call for two options. The first option is for the legislature to amend the Act once more and provide a definition of a minimum retrenchment package. The second option is for the Bill to be taken into consideration in understanding the definition of the minimum retrenchment package. This will be in line with the Interpretation Act (Chapter 1:01) which provides for the use of extrinsic material in the interpretation of enactments.[5] If such an approach is taken, one would realise that extrinsic information such as “any explanatory memorandum relating to the Bill containing the provision, or any other relevant document, that was laid before or furnished to members of Parliament by a Minister before the time when the provision was enacted;” can be used to interpret the legislative provision.[6]

If the second approach is taken and if this is indeed seen to be practical, the inescapable conclusion one might reach is that a minimum retrenchment package of 1 month’s salary for every year served was contemplated by the legislature when section 12 C of the Act was promulgated under Act 11 of 2023. The definition of the minimum retrenchment package was there in Bill. It was not different from what it was under Act 5 of 2015. This is the definition that the legislature must have had in mind when it enacted the whole of section 12C of the Act. The temptation to be escaped in the circumstances is where an employer plucks figures from the air and then ascribes them to the definition of a minimum retrenchment package. The legislature must not have contemplated such a haphazard approach.

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[1]               Section 12C (1) of the Act as amended.

[2]               Section 12C (1) of the Act as amended.

[3]               The Labour Amendment Bill provided: “minimum retrenchment package” means one months’ wages for every two years served (and the proportionate amount for every part of a year served). Unless better terms are negotiated and agreed between the employer and the employee or employees concerned or their representatives, a minimum retrenchment package shall be paid by the employer as compensation for retrenchment not later than the date on which the retrenchment takes effect”.

[4]               Section 12C(9) of the Act provides: “Where an employer alleges lack of capacity to pay any part of the minimum retrenchment package— (a) the employer shall within fourteen days of any employee being retrenched comply with subsection (5)(b) as if reference to minimum retrenchment package in that provision is a reference to the portion of the minimum retrenchment package that he or she is able to pay not being less than twenty-five per centum of the total package and subsections (6) and (7) shall apply to that portion accordingly”

[5]               Section 15B of the Interpretation Act (Chapter 1:01).

[6]               Section 15B(e) of the Interpretation Act (Chapter 1:01).