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Employers should carefully consider what, and how much, they want to say in their disciplinary codes and in their termination clauses when drafting their contracts of employment. They may unwittingly bind themselves to overly formalistic and onerous approaches when this is not necessary.

The pitfalls of 

the contractual 

disciplinary code 

 


-  2014  -
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THE PITFALLS OF THE CONTRACTUAL DISCIPLINARY CODE
A comprehensive, prescriptive disciplinary code and procedure may not be the safety
net it is believed to be by employers, but could actually expose the employer to
greater legal liability.
Introduction
Incorporating a disciplinary code into an employee’s contract of employment can have far-reaching
and unintended consequences for the employer, especially if it grants employees entitlements over
and above the general fairness requirements in terms of labour law. The Labour Court has pointed
out some of these issues in the course of reviewing unfair dismissal awards.
“You cannot simply bypass a Disciplinary Code and Procedure that you yourself have drafted when
it suits you”
In Solidarity obo SW Parkinson v Damelin (Pty) Ltd and Others [2014] ZALC (JR2792/12), the Labour
Court had to determine whether the dismissal of the employee was fair. In the judgement delivered
on 2 December 2014, the court found that the findings of arbitrator were not, in the circumstances,
reasonable and ordered re-employment of the employee almost two years after his dismissal.
In delivering judgement, the court referred to a number of important issues that highlight common
mistakes made by employers and practitioners due to a lack of understanding or appreciation for
the legal intricacies embedded in employment relations management.
The facts of the case:
The employee was a General Manager and did not reach the expected sales targets of the
employer. He was alerted to this in a letter from management a few months before his
dismissal, but no formal disciplinary steps were taken prior to the proceedings which
resulted in his dismissal for misconduct.
In terms of the Applicant’s contract of employment the following is stated:
15. Disciplinary Code and Grievance Policy
a. The Employee is subject to the Employer’s Disciplinary Code, Codes of Conduct and Code
of Ethics…
b. The Employee undertakes to familiarize himself with the content of the relevant codes.
c. Should it be necessary to discipline the Employee in respect of misconduct, discipline will
be applied according to the Employer’s relevant codes’.
The Disciplinary Code provided for recommended penalties to be imposed for various
offences. Under the heading “failure to meet sales target” the corrective action was outlined
as counselling, written warning, final written warning and then dismissal yet the employee
was dismissed without this process having been followed.
The court’s main concern was the employer’s non-adherence to its own disciplinary code
and procedure. It took note of the employer’s argument that it was not required to slavishly
follow its disciplinary procedures and that disciplinary process for senior employees could
be less rigorous than that for more junior employees – however the court emphasised that
the Disciplinary Code and Procedure had been incorporated into the employment contract
and criticised the employee’s ‘laissez faire’ attitude in respect of its adherence to and
compliance with such disciplinary code:
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“In the event that the First Respondent determines that there are circumstances which arise
which require a process that deviates from such Disciplinary Code and Procedure it must
have compelling and good reasons to do so. At the very least it should advise the employee
that whilst the Disciplinary Code makes provision for certain steps and procedures, the First
Respondent believes that there are compelling circumstances and reasons why, in the
particular instance, the First Respondent does not intend to follow the Disciplinary Code and
Procedure and allow the employee an opportunity to comment and advance reasons why he
does not believe that there should be a deviance from such Disciplinary Code and Procedure.
Mr Nel who appeared on behalf of the First Respondent at the hearing before me was at
pains to refer to judgments where the need to follow disciplinary processes to the letter in
respect of senior employees was less rigorous than in respect of other employees. I do not
understand that to mean that you can simply bypass a Disciplinary Code and Procedure that
you yourself have drafted when it suits you. This makes nonsense of a Disciplinary Code and
Procedure which employees are required to follow and gives carte blanche to the employer
to act at its will.”
Dismissal constituting breach of contract
The consequences of incorporating codes and policies into an employee’s contract of employment
further do not only relate to fairness principles as was the focus in this judgement. The employment
contract is a hybrid between labour law and contractual / common law. This means that the
contents can be enforced in terms of labour law; or in terms of contractual / common law; or both.
The route that is followed (e.g. unfair dismissal or unlawful breach of contract), leads to vastly
different outcomes. It is possible to win a case at the CCMA based on fairness, but still having to pay
damages to a disgruntled employee in terms of a civil suit for breach of contract or unlawful
termination.
Some employers have clauses in their standard employment contracts stating that they will only
terminate the employee’s employment where a fair reason exists to do so and after following a fair
procedure. Even if it is just meant as a restatement of the statutory right, it could have severe
‘unintended consequences’. This was illustrated in Ngubeni v National Youth Development Agency
(J2322/13) [2013] ZALCJHB where Ngubeni challenged the termination of his employment. In short,
the wording of the termination clause in his employment contract gave him specific additional
procedural rights to a formal disciplinary hearing and permitted termination only after he had been
found guilty during such a process. These rights had a wider application than the provisions in the
LRA which merely requires the rules of natural justice to be complied with and not necessarily a full
formal hearing prior to dismissal. (Procedural fairness in terms of the LRA merely requires an
investigation into any alleged misconduct by the employer, an opportunity by the employee to
respond after a reasonable period with the assistance of a representative, a decision by the
employer, and notification of that decision.)
The employer however dismissed Ngubeni prior to completion of the promised formal disciplinary
process. He elected not to follow his remedies in terms of the LRA but instead sued for breach of
contract in terms of s77(3) of the BCEA and asked the Labour Court to restore the employment
relationship - at least until the employer had fully complied with their obligations in terms of this
clause. He could also have chosen not to ask for specific performance, but to claim damages, which
would (subject to his obligation to mitigate his damages) not have been limited to the statutory
amounts of compensation permissible for unfair dismissal under the LRA.
Conclusion
These cases illustrate the dangers for employers who insist on having disciplinary processes that are
overly formalistic, and worse incorporating these into the employees’ contracts of employment.
Employers should carefully consider what, and how much, they want to say in their disciplinary
codes and in their termination clauses when drafting their contracts of employment. They may
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unwittingly bind themselves to overly formalistic and onerous approaches when this is not
necessary.
In short, an employer has to ensure that its employment contracts and policies have been drafted
with the necessary legal expertise to protect against claims that may go beyond fairness / equity
principles.
©
Judith Griessel
________________________________________________________________________________
www.griesselconsulting.co.za
2014