New case law finds that employees could potentially avoid disciplinary action if they resign with immediate effect before their hearings.
- Introduction
In 2017, the Labour Court had to consider in Kalipi Mtati v KPMG Services (Pty) Ltd whether employers are able to discipline employees who have resigned with immediate effect. The Court held that employers are not. This created a potential “loophole” for employees to avoid disciplinary hearings by resigning with immediate effect. Shortly after this ruling however, another ruling, Coetzee v Zeit Mocca Foundation Trust and Others, contradicted this legal position. As a result, employees were warned not to resign with immediate effect as they could still be called to a disciplinary hearing (see our previous article “I want to avoid disciplinary action: should I resign with immediate effect?”).
Hot on the heels of the controversial finding in Coetzee, the Labour Court has once again changed its view. On 24 May 2019 the Court ruled in Naidoo and 1 other v Standard Bank SA and SBG Securities (Pty) Ltd that employers are no longer entitled discipline employees following an employee’s resignation with immediate effect. The reasons for the Labour Court’s decision and the implications thereof for both employers and employees will be discussed in this article.
- Rationale behind the Coetzee Decision
In the Coetzee ruling the Court found that employees cannot resign with immediate effect to avoid a disciplinary hearing. The Court reasoned that in an employee may only resign with immediate effect where the employer materially breached the contract or accepted the resignation. If either of these two requirements are not met, resignation with immediate effect will be invalid. Furthermore, the Court reasoned that because this resignation is invalid, the notice periods prescribed in the employee’s contract and/or the Basic Conditions of Employment Act 75 of 1997 (“BCEA”) must still be adhered to. The employee’s service would effectively end at the end of their notice period.
As a result of this decision, employers could still arrange disciplinary hearings for employees who tried to avoid disciplinary action by resigning with immediate effect as this resignation was effectively not recognised.
- Rationale behind the KPMG Services and Standard Bank Decisions
Contrary to the Coetzee ruling, the latest case law and, interestingly the previous position of the Court regarding this question, is completely different. Both matters involved employees accused of serious allegations of misconduct who were called to attend disciplinary hearings. In both cases, the employees resigned with immediate effect and were dismissed in their absence. Both employees argued however, that as a result of the fact that their employment contract was terminated from the moment when they resigned with immediate effect, their employers no longer had the power to make any decisions relating to their employment.
In the Standard Bank case, the employer specifically followed the argument in the Coetzee decision by stating that the employer was entitled to hold the employees to their notice periods. The Labour Court was subsequently approached to decide which party’s argument was correct.
In both the KPMG Services and Standard Bank decisions, the Labour Court found that resigning with immediate effect will result in the termination of the employment contract on date of resignation. It is possible to have an invalid resignation with immediate effect, but in these cases the Labour Court prescribed in both matters that the employer is obligated to seek special performance for contract breach. Employers are therefore not entitled to institute disciplinary proceedings against their previous employees, since these employees are no longer in their employ.
- Implication of New Legal Position
Our previous article on this matter (see “I want to avoid disciplinary action: should I resign with immediate effect?”) warned employees against resigning with immediate effect because the law indicated that an employer could still institute disciplinary action against them. Following the Standard Bank ruling, however, the answer to this question is very murky. Both decisions were made by Labour Courts and as a result, it is unclear whether a Judge will rely on the Coetzee or the Standard Bank ruling when faced with a similar situation.
Something worth considering, however, is whether it is in fact wise for employers to pursue disciplinary action against an employee who has already resigned with immediate effect. The result of this action could be that the employee could argue that the employer had no jurisdiction to hold this hearing, and there is now two Labour Court decisions to support this argument. Furthermore, the fact that the employer does have other common law remedies at their disposal also means that employers are not unprotected.
On the other hand, employees who decide to resign with immediate effect to avoid disciplinary action are cautioned that this is not always the best decision. There is still valid case law which can be used to force an employee to attend his disciplinary hearing as it is possible that a Commissioner or Judge might agree with the Coetzee ruling. Furthermore, in the event that this employee resigns with immediate effect, he or she will forfeit many statutory benefits potentially owed to them. These employees may also struggle to find new work, since they would not have a good reference from their previous employers – something which they can receive if they followed the correct procedures.
- Conclusion
In conclusion, the new position of the Labour Court has created much confusion. Employees who resign with immediate effect run the risk of being forced to attend the disciplinary hearing in the event that the Judge presiding over their matter relies on Coetzee. On the other hand, an employer runs the risk of only having common law defenses at their disposal to remedy a breach of the employment contract in the event that another Judges prefers the KPMG Services and Standard Bank judgments. Unfortunately, the answer to the question: to resign or not to resign with immediate effect is still frustratingly ambiguous. Our advise to both employers and employees is to clearly consider your circumstances and contact a professional to inform you of your rights before making any rash decisions which might prejudice you later.