Highest court finds that dismissed employees' compensation for procedural unfairness may be reduced

​The Constitutional Court has handed down a judgment confirming that it can reduce compensation awarded for procedurally unfair dismissals. The case also shines a light on the real costs of employers not following the correct processes – legal costs, punitive costs, and time with protracted litigation.

The Constitutional Court (CC)* has confirmed that it may reduce compensation awarded by the Labour Court by the Commission for Conciliation, Mediation and Arbitration (CCMA) or a Bargaining Council for procedurally unfair dismissals.

Facts

A senior medical practitioner was dismissed after he was found guilty of sexual harassment. The victim was a newly qualified medical practitioner. The sexual harassment included daring the victim to remove her clothing and swim naked and inappropriately pressing himself against the victim while demonstrating a medical procedure.

Unfair dismissal dispute

The employee referred an unfair dismissal dispute to the Public Health and Social Development Sectoral Bargaining Council (Council). The Council found the employee guilty of sexual harassment but ultimately concluded that the dismissal was substantively unfair because the employee had not been treated the same as another employee facing similar charges. The Council also concluded that the dismissal was procedurally unfair because the employee was not provided with an opportunity to defend himself as ‘relevant’ evidence was excluded during his disciplinary hearing. The evidence which was excluded was three photographs which had no impact on the result of the hearing. The Council did not reinstate the employee and instead awarded the employee compensation in the amount of ZAR924 679.92, equivalent to six months’ remuneration.

Labour Court

The employee sought to have the Council's arbitration award reviewed and set aside on the basis that his conduct did not constitute sexual harassment and it did not warrant dismissal. The employer brought a counter-review application in which it sought to have the arbitration award and the award for compensation set aside.

The Labour Court held that the dismissal was procedurally unfair but substantively fair. The Labour Court did not review the compensation awarded to the employee, which meant that the employer still had to pay the compensation awarded by the Council.

Labour Appeal Court

The employee then approached the Labour Appeal Court (LAC) for an order declaring that his dismissal was substantively unfair and that he be reinstated. The LAC found that the dismissal was procedurally unfair and substantively fair. The LAC did not, however, review the compensation awarded to the employee.

Constitutional Court (CC)

The employee then approached the CC for an order declaring that his dismissal was substantively and procedurally unfair and an order of reinstatement. The employer lodged a cross-appeal on the basis that the Labour Court failed to review the compensation awarded to the employee.

The CC found that the Labour Relations Act, 66 of 1995 (LRA) makes provision for various remedies for unfair dismissal. If a dismissal is found to be unfair, the arbitrator or Labour Court must exercise a discretion as provided in section 193(1) of the LRA. If the arbitrator or Labour Court award compensation under section 193(1)(c), the arbitrator must then carefully consider the issue of quantum of compensation. The CC emphasized that although every employee has the right not to be unfairly dismissed, the infringement of that right does not automatically confer a right to a remedy. The arbitrator or Labour Court may order the employer to pay compensation. The CC held that compensation "flows from the findings as to the quality and nature of a dismissal". The arbitrator or Labour Court must consider a range of factors to determine if compensation should be awarded and if so, the extent of the compensation. Compensation is the "stuff of legal discretion" and it must be just and equitable in the circumstances.

The CC stated that in general procedural unfairness in a dismissal is not insignificant and invites compensation, however, in assessing compensation, the nature and deviation from procedural requirements is important to consider.

In this matter, the CC found that the procedural irregularities were "of no major consequence" and that the nature and gravity of the misconduct and the attitude of the perpetrator weighed heavily on the determination of compensation. The employee was found guilty of sexual harassment and his conduct was previously described by the Labour Court and LAC as "deplorable" and "grossly unreasonable". Although compensation for unfair dismissal serves an important purpose, the appropriateness of compensation must be understood within the context of the dismissal.

Ultimately, the CC held that a compensation award of 6 months was far too generous for minor procedural mistakes. The employee's compensation was reduced to 2 months' remuneration.


* McGregor v Public Health and Social Development Sectoral Bargaining Council and Others [2021] ZACC 14 (17 June 2021)


Webber Wentzel > News > Highest court finds that dismissed employees' compensation for procedural unfairness may be reduced
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