Review of Labour Act Amendment No.5 of 2015 (Part 1)
Amendments to the Zimbabwean Labour Act (Chapter 28:01) and their implications on the employment relationship: A review of some critical sections of the Labour Amendment Act No. 5 of 2015.
By Adv Caleb Mucheche
The Zimbabwean Labour Act was recently amended following what the Herald newspaper edition of 18 July 2015 described as a shock labour ruling. This was pursuant to the Supreme Court judgment in Don Nyamande and another vs Zuva Petroleum (Pvt) Ltd delivered on 17 July 2015 asserting an employer’s common law right to unilaterally terminate a contract of employment on notice. The new section 12 (4a) of the Labour Act makes for interesting reading. Its mandatory wording allows for termination on notice in four instances namely; where it is done in terms of either an employment code or the model code made under section 101(9) of the Labour Act; or the employer and employee mutually agree in writing to the termination of the contract; or the employee was engaged for a period of fixed duration or for the performance of some specific service; or pursuant to retrenchment, in accordance with section 12C. In all the aforesaid four scenarios, an employee whose contract of employment has been terminated is legally entitled to compensation for loss of employment as stipulated in terms of the new section 12C of the Labour Act. Among others, there is a raging debate mainly on the possible interpretation(s) to be ascribed to section 12(4a) of the Labour Act. This essay seeks to explore some of the likely interpretations and their impact on the employment relationship.
REINCARNATION/REBIRTH OF THE EMPLOYER’S COMMON LAW RIGHT TO TERMINATE A CONTRACT OF EMPLOYMENT ON NOTICE AS A STATUTORY RIGHT IN TERMS OF THE LABOUR ACT.
The demise of the employer’s common law right to terminate a contract on notice was short lived as same right was resurrected by parliament as a statutory right in terms of the new section 12(4a) of the Labour Act albeit with some modifications. Soon after the Supreme Court pronounced the employer’s common law right to terminate a contract of employment on notice and its consequent legion effect which led to mass arbitrary dismissal of employees, the legislature made a spirited effort to exorcise that common law ghost by way of an amendment to the Labour Act. The amendment now provides an employer with a statutory right to terminate a contract of employment on notice in terms of the model code (national code of conduct, Statutory Instrument 15 of 2006) , by mutual agreement with the employee and pursuant to an employment code of conduct. The employment code contemplated by section 12(4a) of the Labour Act is the one governed by section 101 of the Labour Act. It may therefore be a NEC Code or a code made for a particular undertaking.
The section 101 envisages either. What this therefore means is that the right to terminate a contract of employment on notice in terms of the common law has been abolished by the latest amendments to the Labour Act. Termination on notice is now regulated by statute and only permissible under the circumstances provided for in terms of section 12(4a) of the Labour Amendment Act No 5 of 2015. The parties to an employment contract have been given the room to contract either including it or to contract out of it. The difference with the pre amendment era is that under the old regime, the employer was only obliged to pay for the notice period where it required the employee to leave immediately while under the new regime, the employer has to pay a retrenchment package stated under section 12C (2) for any termination of employment as provided for in terms of section 12(4a) of the Labour Act. Thus it can be argued that the new labour legislation has eroded job security for employees and introduced flexible
termination of a contract of employment by the employer.
WHETHER EMPLOYMENT CODES OF CONDUCT OR THE MODEL CODE ENSHRINE AN EMPLOYER’S RIGHT TO TERMINATE A CONTRACT OF EMPLOYMENT ON NOTICE.
For one to know whether an employment code of conduct registered in terms of section 101 of the Labour Act as read with the Labour Relations(Employment Codes of Conduct) Regulations, SI 379 OF 1990 allow termination of employment on notice by the employer, it is important to closely look at the provisions of the applicable employment code of conduct. If the concerned employment code of conduct provides for termination on notice by the employer, then an employer can resort to termination on notice. On the other hand, if the employment code of conduct applicable to the concerned employer or industry does not provide for termination of employment on notice by the employer, this means that legally an employer cannot terminate a contract of employment on notice. The rationale for allowing termination of employment on notice by an employer if provided for in terms of an employment code of conduct is anchored on the fact that employment codes of conduct are bipartite statutory contracts negotiated and agreed upon between employers and employees to regulate their various conditions of employment including but not limited to misconduct proceedings, grievance handling procedures, termination of employment, hours of work and rates of remuneration.
Thus if employers and employees, in the exercise of their autonomy and acting through their representative organs either at the works council or employment council, agree on an employment code of conduct conferring an employer with a right to terminate an employee’s contract of employment on notice, then that legal provision is enforceable between the parties. If the applicable employment code of conduct between a given employer and employee provides
for compensation in the event of an employer terminating an employee’s contract on notice, the compensation stipulated within that employment code is what the employer should pay to the affected employees and not the minimum package provided for in terms of the new section 12C of the Act unless the employer successfully applies for an exemption from paying such a compensation package to the applicable authority.
Conversely, where the employment code of conduct simply gives an employer the right to terminate a contract of employment on notice without specifying the compensation package payable to the affected employee(s), by operation of law, the employer is automatically legally obliged to pay the employee(s) the compensation package provided for in terms of the new section 12C of the Act unless the employer has been granted an exemption from paying the minimum package by the applicable authority. In both scenarios given above, the employer should pay the affected employee(s) not less than the minimum package as compensation for loss of employment by means of termination on notice through an employment code unless granted an exemption by the applicable authority.
In its current form, the model code, SI 15 OF 2006, does not have any legal provision allowing termination of a contract of employment on notice as the lawful methods of termination of employment contained in section 5 of that legal instrument excludes termination on notice by an employer.
EXPOSURE OF EMPLOYEES UNDER THE TERMINATION ON NOTICE LEGAL REGIME
Labour law was created to aid the employee in his relationship against the employer. Its thrust is to curtail excesses by the employer which flow from the unequal bargaining power between the two parties. Among others, the employer’s right to terminate on notice has been left for the parties to agree on. The legislation inexplicably assumes that the two parties’ bargaining powers are the same. Nothing could be further from the truth. Labour can never be equal to capital in the sphere of bargaining power. Capital will always have the bigger say in the relationship should it go unregulated. As such, the amendment did not address the real cause which created the problem which the legislature sought to rectify by the amendment. In making the amended section 12 retrospective in its application, the legislature acknowledged that the employer was wielding too much power in the employment relationship which enabled it to insert clauses which allowed employers to terminate on notice. In order to address this problem, the legislature needed to arrest this power. What is important is not the retrenchment package created under 12C (2). Job security is the most important thing.
EXPOSURE OF EMPLOYERS UNDER THE STATUTORY TERMINATION ON NOTICE: POSSIBILITY OF PAYING AN EMPLOYEE FIRED FOR MISCONDUCT LIKE THEFT OR FRAUD
The wording of section 12(4a) of the Labour Act now leaves a lot to be desired as it may potentially be interpreted to mean that an employer who charges an employee for an act of misconduct like theft or fraud, proceeds to conduct a disciplinary hearing and finds the employee guilty and proceeds to dismiss such employee from employment, is legally obliged to compensate the errant employee. This becomes the case if one applies a literal rule of interpretation being the ordinary grammatical meaning of the words used in terms of section 12(4a) as read with section 12C of the new Labour Act. The literal rule is always the first port of call in statutory interpretation but it can be departed from if it leads to an absurdity. The new labour law seems to compel employers to pay employees dismissed for misconduct and/or thieving employees compensation in terms of section 12C post termination for misconduct. This line of interpretation may be rejected by courts of law and other labour tribunals as it may potentially lead to a glaring absurdity which was not contemplated by the legislature. Under the old labour law, an employer was not legally obliged to pay a dismissed employee any compensation apart from any applicable normal terminal benefits provided in terms of section 13 of the Labour Act. The only circumstance where an employer would be legally compelled to pay a dismissed employee some compensation is where an arbitrator or court of law would have made a finding that the concerned employee was unfairly dismissed and as an alternative to the remedy of reinstatement, the employer would be given the option of compensating that employee by paying damages in lieu of reinstatement.
PROBABLE DEMISE OF DAMAGES IN LIEU OF REINSTATEMENT AS COMPENSATION FOR UNFAIR DISMISSAL
Under the old law, an employee who was unfairly dismissed was entitled to damages in lieu of reinstatement as monetary compensation for premature job loss. In the case of an unfair dismissal of an employee who was employed on a fixed term contract of employment, damages for loss of employment were calculated by awarding the affected employee monetary compensation for the unexpired period of his contract of employment less any mitigation. On the other hand, in the case of an employee on an open ended contract of employment, damages in lieu of reinstatement payable to an unfairly dismissed employee were calculated in the form of monetary compensation constituted by salaries and benefits due to the concerned employee from the date of unfair dismissal to the date the employee secured alternative employment or was reasonably expected to get alternative employment less mitigation.
One may interpret the new section 12(4a) (a)of the Labour Act to mean that where an employee’s contract of employment is terminated by an employer through a disciplinary process either in terms of an employment code or the model code, the employer should pay the affected employee the minimum compensation stipulated in terms of section 12C of the Labour Act in full and final settlement or pay that compensation over and above the ordinarily previously payable damages in lieu of reinstatement. The first option means that the legal formula for the compensation for premature loss of employment via unfair dismissal or otherwise has now been settled by the legislature through the provision of a minimum package. The latter option which results in an unfairly dismissed employee getting both the traditional damages in lieu of reinstatement and the minimum compensation provided for in terms of the new section 12C of the Labour Act is likely to be frowned upon as double dipping. If the interpretation that section 12C now caters for damages in lieu of reinstatement, this literally means that the legislature has proverbially killed two birds with one stone by inserting a legal formula for compensation for both retrenchment and unfair dismissal.
UNLOCKING THE MINIMUM RETRENCHMENT PACKAGE IN TERMS OF THE NEW SECTION 12C OF THE LABOUR ACT
It is commendable that the Labour amendment Act has introduced certainty to retrenchment process by stipulating the minimum retrenchment package payable to employees in the event of a retrenchment proper or termination on notice. Previously, the retrenchment process was like murky waters for both employers and employees as there was no legal formula for calculating the retrenchment package. This state of affairs led to some employers and employees
getting stuck in an unfinished retrenchment process as parties haggled over the retrenchment package.
A employer who wishes to retrench any employee in Zimbabwe now knows the minimum cost in advance just like in the case of South Africa where the retrenchment package of two weeks for every year served is provided for in their Labour Relations Act. In the past it was hard if not impossible for employers to realistically budget for the retrenchment process. However from the perspective of employees, the minimum retrenchment package granted to the one whose contract is terminated either via a normal retrenchment or on notice is meagre compared to the retrenchment packages which used to be paid to employees before the minimum statutory retrenchment package was unveiled. For instance, under the minimum package, employers are no longer legally compelled to pay what they used to pay like relocation allowance, destabilization allowance, tools of trade, motor vehicles at book value and several other benefits which employees used to earn on retrenchment. Individual employers can however choose to pay their respective employees more than the minimum retrenchment package prescribed in the Act.
To be continued in Part 2……
For part 2…….
MINIMUM RETRENCHMENT PACKAGE LIKELY TO BE THE MAXIM
Paper presented at Great Zimbabwe University, Masvingo on 29 September 2015.presented at Great Zimbabwe University, Masvingo on 29 September 2015. © By Caleb Mucheche LLB(Hons) UZ, LLM Labour Law- Legal Practitioner/Labour Specialist/Arbitrator/Senior Partner @ Matsikidze and Mucheche Legal Practitioners, Commercial and Labour Law Chambers.