A contractual disciplinary code : simplebooklet.com

1 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:

2 “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

A contractual disciplinary code

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