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).

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Section 12(4a) (b) under Act 11 of 2023

Section 12(4a) (b) of the Act provides that an employer can terminate a contract of employment in the following circumstances:

“For the breach of an express or implied term of contract, upon such breach being verified after due inquiry under an applicable employment code or in any other manner agreed in advance by the employer and employee concerned.” (Own Emphasis).

This section is subject to controversy as some practitioners are of the view that it gives the employer the right to terminate a contract on notice. The assumption by these practitioners is that the words “in any other manner agreed in advance by the employer and employee concerned” applies to the parties generally agreeing to a method of termination not provided under the whole section 12(4a). The argument goes on to suggest that the provision allows an employer and an employee to choose to terminate a contract on notice.

In our respectful view, section 12(4a) (b) must be construed as a whole. We submit that the employer and employee may agree to a different method of inquiring into the alleged breach other than a method in the code of conduct. The word “inquiry” means “a request for information or a systematic investigation often of a matter of public interest or examination into facts or principles.”^[1] The wording of the provision thus suggests that upon an employee being accused of breaching workplace rules, there must be an inquiry to verify this breach. There are two ways of verifying the breach. An investigation can be done as per the specifics of a code of conduct. The parties may also agree in advance on how they will conduct this investigation or inquiry.

We submit that it is only after the investigation has been carried out and a subsequent hearing has been done that an employee can be deemed to have been fairly dismissed in terms of section 12(4a) (b) of the Labour Act. The same section cannot be used to propagate the view that the termination on notice was introduced in the Labour Act via the back door. Such an interpretation will fly in the face of section 12(4a) which has expressly excluded the termination of a contract on notice.

Besides the above, we also submit that jurists must interpret legislation to protect the legislature’s intention. There is no doubt that after the infamous Zuva Petroleum judgment, and the enactment of Act 5 of 2015, the intention has been to curtail the termination of a permanent contract on notice. By expressly proving for the strict ways a contract can be terminated the legislature intended to make it clear that termination of a permanent contract on notice must be removed from our law. If one is to peruse the parliamentary debates on this issue, the clear message that was sent out was that the common law rule of terminating a contract on notice must not be available in the Labour Act. This was the intention of the legislature, and this is how section 12(4a) of the Labour Act must be interpreted.

The interpretation that perpetuates the termination of permanent contracts on notice does not save and protect the legislative intention to preclude the termination on notice. The section must not be used to revive the ghost of 2015 which saw thousands of employees losing their jobs after the Zuva Petroleum judgement.

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[1]               https://www.merriam-webster.com/dictionary/inquiry <Accessed on 14 July 2023>.

“The quantification done by the arbitrator and upheld by the Labour Court in this matter is legally unsustainable. As the respondent did not prove that he was entitled to more than what the appellant had paid him, the Labour Court ought to have granted absolution from the instance.”

Introduction

The quantification of damages in lieu of reinstatement is a frequent source of labour law litigation. There is always the temptation to “pluck the figures from the air” an approach that the courts have frequently discouraged. Quantification of damages in lieu of reinstatement is not an easy task. Those who preside over such disputes must as much as possible fully utilise the evidence presented by the parties. Failure to consider such evidence results in a problematic outcome.

The Facts

This case was an appeal against the quantum of damages in lieu of reinstatement that was awarded to the Respondent, Kenny Broxham by an arbitrator. The Labour Court had agreed with the quantum.  Noteworthy, on 30 November 2009, the appellant company had given a month’s notice of termination of the employee’s contract, effective from 1 December 2009 to 31 December 2009. The respondent employee accepted alternative employment with effect from May 2010.

The Law

First, it was the Supreme Courts’ observation that the respondent was out of employment for four months. The damages awarded by the arbitrator and upheld by the Labour Court were for 9 months. There was no evidence supporting the 9 months. There was therefore no legal basis for the award because the amount granted in the arbitral award had no basis or explanation.

The Supreme Court utilised the law in Zupco v Daison wherein it was stated that:

“… in its judgment the Tribunal did not say why it chose the period of forty-eight months as opposed to any other period. As stated in Nyaguse v Mkwasine Estates (Pvt) Ltd 2000 (1) ZLR 571 (S) at 575D, ‘if the tribunal is forced to make an estimate, it must use the information to hand, and not simply pluck a figure from nowhere. In the circumstances, I am satisfied that the Tribunal’s decision can be categorised as wholly unreasonable. …”

Duly Holdings Limited v Clever Spanera 2005 (1) ZLR 407 (S); SC 140/04 was also utilised wherein the court remarked:

“He (the employee) will be compensated only for the period between his wrongful dismissal and the date when he could reasonably have been expected to find alternative employment.”

In essence, the Supreme Courts’ argument is straightforward, any process of quantifying damages must be supported by evidence. Failure to consider the evidence by the party’s results in an unreasonable award which is liable to be set aside by an appellate court. Even where a court is compelled to make an estimate, this estimate must be supported by the information presented by the parties.

Conclusion

The court allowed the appeal.

Own Comment

Repeatedly the Supreme Court has urged the lower courts to substantiate the quantum of damages with the evidence presented by the parties.[1] This is a universal rule when it comes to the quantification of damages in lieu of reinstatement. Plucking figures from the air results in an arbitrary decision which is not supported by the authorities on this subject.

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[1]              See also Redstar Wholesalers v Edmore Mabika SC 52/05 wherein the court said: “The Labour Court’s approach was wrong and its consequent ruling grossly unreasonable. The Court is not entitled to pluck a figure out of a hat because it is of the view that this figure „meets the justice of the case‟. Instead, the court is required to hear evidence as to how long it would reasonably take a person in the position of the dismissed employee to find alternative employment. The fact that the parties have led insufficient evidence to enable the court to arrive at an informed conclusion does not absolve the court from its duty to utilise its powers in terms of s 89 (2) of the Labour Act by calling evidence in order to resolve the issue.”