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The automatic termination of employment

14/06/2017

Resolutive and suspensive conditions 


By: P.A.K le Roux

In CLL vol 25 no 4 we discussed the automatic termination of contracts of employment where employers have utilised the mechanism in the context of labour broking or contracting arrangements. However, in Nogcantsi v Mnquma Local Municipality & others (2017) 38 ILJ 595 (LAC) the Labour Appeal Court dealt with this issue in another important and often occurring context.

The appellant in this case, a Mr Nogcantsi, applied for the position of a close protection officer at the Mnquma Municipality. His application was successful but his contract contained a ‘resolutive condition’ to the effect that his appointment was subject to a vetting and screening process that was being conducted and that -

‘… should the revealed outcomes become negative, your contract will be automatically terminated.’

The vetting process resulted in the Municipality receiving a letter from the South African Police Service in which it was revealed that Nogcantsi had various criminal charges pending against him, including attempted murder and defeating the ends of justice, and that he had been dismissed from the Police Service. He had not disclosed this to the Municipality. The Municipality relied on the resolutive condition referred to above.

Nogcantsi referred a dispute to the relevant bargaining council and argued that he had been dismissed and that the dismissal was both procedurally and substantively unfair. The arbitrator found that Nogcantsi had not been dismissed – his contract had terminated automatically.

Nogcantsi then sought to review the award in the Labour Court. His legal representative relied on the decision of the Labour Appeal Court (LAC) in Post Office Ltd v Mampeule (2010) 31 ILJ 2051 (LAC) and the decision of the Labour Court in Mahlamu v CCMA & others (2011) 32 ILJ 1122 (LC) where automatic termination clauses were found to be invalid because they were in breach of section 5 of the Labour Relations Act, 66 of 1995 (LRA). In the Mampeule decision the clause provided for the automatic termination of a senior executive’s employment in the event that he was removed as a director of the company he served. In the Mahlamu decision the clause stated that the contract of a security officer would terminate automatically on the expiry of the contract between his employer and the client of his employer where he was providing his services; alternatively, if the client no longer required his services ‘for whatsoever reason.’ The Labour Court rejected this argument in the following terms –

‘[10] In my view the present instance is not one that falls into the category of the unacceptable. To provide, in the contract of employment of a security officer, that his appointment is conditional on a positive vetting and that the contract will terminate automatically should the vetting not be positive, does not serve to deprive an employee of the right to security of employment in the same sense as the examples cited above. In the present instance, the applicant agreed to the terms of the contract, and did not dispute that he understood that should he not be positively vetted, his employment contract would terminate. The vetting process was not in the hands or control of his employer — the letter listing the pending charges against the applicant and the fact of his dismissal was generated by the SAPS. The case is therefore not one like Mampeule, where the minister as shareholder took a decision to remove Mampeule as a director knowing full well that the clause in question providing for automatic termination would be triggered. The present instance is not unlike one where a clause in an employment contract provides that a person engaged as an airline pilot must produce proof of a pilot’s licence, or a chauffeur proof of an unqualified driver’s licence, failing which the contract will terminate. I am unaware of any decision to the effect that such provisions, where the condition is not met, deprive the employee of the right to security of employment.’

Nogcantsi then appealed to the LAC. In argument his legal representative referred to another important decision in support of his case, namely National Union of Leather Workers v Barnard NO & another (2001) 22 ILJ 2290 (LAC). In this matter the shareholders of a company had passed a special resolution in terms of section 349 of the now repealed Companies Act of 1973 to the effect that the Company would be wound up. In terms of section 38 of the Insolvency Act, 24 of 1936, this meant that the contracts of employment of the employees of the company were terminated automatically by the operation of law. When the employees claimed that they had been unfairly dismissed the employer raised the defence that there had been no dismissal. The Labour Court accepted this argument. On appeal, this finding was overturned. The LAC found that a dismissal takes place when an employer has engaged in an act which brings the contract of employment to an end in a manner recognized as valid by the law. The special resolution passed by the shareholders constituted such an act.

The LAC came to the conclusion that, the negative vetting was not an act of the employer, the Municipality, that caused the resolutive condition to take effect and the automatic termination to take place. This was the action of the South Africa Police Service. In addition -

‘[32] The act referred to in Barnard (and Mampeule) must also be understood as a ‘deliberate’ or ‘intentional’ act. The employer (or the third party) in performing the act that results in the termination, must, at least, have directed its will to causing a dismissal. The latter consequence must have been the object of its act.

[33] So, on the objective facts, in the light of the decision in Barnard and the dictum in Mampeule, there was no dismissal — since the automatic termination was not caused by any decision or act of the municipality or SAPS, which had as its objective the termination of the appellant’s employment contract. The appellant bore the onus to prove a dismissal on a balance of probabilities, and failed to discharge that burden.’

The LAC also found that the automatic termination provision did not contravene section 5 of the LRA. Nogcantsi’s lawyer appears to have drawn a distinction between a suspensive condition and resolutive condition. If a contract contains a suspensive condition the contract does not come into force until such time as the condition is fulfilled. If a contract contains a resolutive condition the contract comes into existence but will terminate automatically if the condition is fulfilled. It stated the following -

‘[38] In my view, that criticism of the court a quo is not valid. It does not matter whether the condition is suspensive or resolutive. What does matter is whether the condition prevents the employee from exercising any right conferred by the LRA, which is what s 5(2)(b), read with s 5(4) of the LRA, is set against. The enquiry should be whether the agreement entered into prevents the employee from exercising any of such rights, and not whether the condition is suspensive or resolutive.

[39] As in the case of a condition requiring a person appointed, say, to the position of a driver, to produce a valid driver’s licence, the vetting condition in this case did not prevent the appellant from exercising any right conferred on him by the LRA. Therefore, the court a quo did not err by likening the cases of a pilot and a chauffeur to that of the appellant.’

The examples referred to in these excerpts illustrate the importance of this decision.