To compensate or to reinstate? An arbitrator’s discretion on remedy
Section 193(1) of the Labour Relations Act (“LRA”), confers upon the arbitrator the discretion to either order the employer to reinstate, re-employ or compensate an employee whose dismissal is found to be unfair. Integral to the exercise of the arbitrators discretion, in terms of this section, is the nature of the employment contract and whether it is still in effect when an employee’s dismissal is found to be unfair. The remedy of reinstatement is confined to the situation where, at the date of finding that the employee’s dismissal is unfair, the original employment contract is still extant. However, where the employee is employed on a fixed-term contract, the expiry of which precedes the unfair dismissal finding, then reinstatement or re-employment are not legally permissible remedies. In Toyota SA Motors (Pty) Ltd v Commission For Conciliation, Mediation And Arbitration and Others (LAC) [2023], the Union on behalf of the aggrieved employee took the decision of the arbitrator on review, seeking that the compensation award be replaced with an order for reinstatement with full retrospective effect.
In short, the employee was employed on a three-month fixed-term contract, as a crane driver. His contract was renewed several times up until date of dismissal in 2015. The employer issued the employee with a final written warning relating to a charge of negligence. Within three months of receiving the aforesaid warning, he was involved in yet another incident relating to negligence in that he allegedly failed to check that the clamping device between the tool and the moving bolster on the crane was removed prior to lifting the tool. Three days before the employee was placed on precautionary suspension, he signed a further fixed-term contract commencing 1 August 2015 and terminating on 31 October 2015. Following a disciplinary hearing, the employee was dismissed on 14 August 2015.
Upon dismissal, the employee referred an unfair dismissal dispute to the CCMA seeking reinstatement with backpay. The arbitrator found the dismissal to be substantively unfair, in that employer could not have expected him to check a clamp of which he had no knowledge of, and ordered the employer to compensate the employee. The arbitrator exercised her discretion, by taking into account that at the point of the employee’s dismissal, he was not a permanent employee but was on a fixed-term contract, which would terminate some two and a half months later. She further took into consideration, that on the date of which she found the employee’s dismissal to be substantively unfair, the employees fixed-term contract had already expired and that, in the present circumstances, she was legally precluded from ordering the employer to reinstate the employee.
On review, the Labour Court ordered that the compensation order of the arbitrator be set aside, and that the employer reinstate the employee with full retrospective effect. The Labour Court held that but for the disciplinary process, the employer would have offered the employee permanent employment. Significantly, the Labour Court’s reinstatement order sought to create a permanent contract of employment between the employer and employee when no such contract existed. The Labour Appeal Court (“LAC”) held this to be incorrect. It had been ignored that at the time of his dismissal the employee remained on a fixed-term contract which terminated two and a half months later. It held further, that since reinstatement involved the original contract of employment, which in this case was one of limited duration that had terminated by effluxion of time, it was legally impermissible for the Labour Court to create a new contract through ordering reinstatement. The LAC, therefore, set aside the Labour Court’s decision aside and confirmed the arbitrators award.
Importantly, this case highlights the discretion that arbitrators have in choosing whether to reinstate or compensate an employee, which must be judicially exercised, in the event that the dismissal is found to be substantively unfair. The remedy of reinstatement is confined to situations where, at the date of the ruling that dismissal was unfair, the initial employment contract still exists.
We trust that you found this article informative, please email info@hjw.co.za for assistance with dismissal disputes.
By Alexi Rosenzweig, candidate attorney, and Rowan Bauer, attorney, working in the employment law practice area at HJW Attorneys, a boutique law firm based in Fourways, Johannesburg.
This article is provided for informational purposes only and should not be substituted for legal advice on any specific matter. Any opinions expressed herein are subject to the law as at the time of writing and will change in accordance with any change in the law. We recommend that you contact HJW Attorneys at info@hjw.co.za directly for advice applicable to your specific matter.