Is it always necessary to go through onerous disciplinary or incapacity procedures before terminating an employee’s service? The short answer is no. Unfair dismissal protection only applies when an employee is dismissed.
“Dismissal” is defined in the LRA as the termination of employment by an employer, either summarily (without notice) or with notice. Dismissal is therefore a unilateral act of the employer. This means that termination of the relationship for reasons other than a unilateral decision by the employer does not fall within the definition. Whereas a dismissal can be challenged as potentially unfair, termination of the relationship for reasons other than dismissal cannot. Further, whereas there are rules regulating the substantive and procedural requirements for a dismissal to be fair, similar rules don’t apply if the relationship ends for other reasons.
The kinds of situations where an employment relationship ends for reasons other than dismissal include death of the employee, resignation by the employee with proper notice to the employer, retirement upon reaching the agreed or normal retirement age, and termination by agreement. A well-known example of the latter is the acceptance by an employee of a voluntary severance offer by the employer in the context of retrenchment.
This raises the question whether it would be possible for employers to escape the requirements of the LRA by entering into termination agreements with employees who are incapacitated, underperform or misconduct themselves? Here the short answer is yes, this is possible, but employers have to proceed with caution. Failing to follow the guidelines below is likely to trigger claims of constructive dismissal, or give rise to other problems.
Firstly, any agreement to terminate employment must be entered into voluntarily by the employee. This does not mean that the employee must have a completely unfettered choice before the agreement will stand, only that the employee should have a choice between accepting the agreement and going through, e.g. a counseling process. Let’s assume that an underperforming employee faces the prospect of a formal poor performance process, or is already in a formal counseling process. The employer confronts the employee with a choice between accepting the offer a termination by agreement, or going through (or continuing with) a formal counseling procedure. Provided the employer’s complaint of underperformance is genuine, the employee still has a choice between the two options. The fact that it is a tough choice does not mean the decision to accept an agreed termination is not voluntary. The fact that one accepts onerous terms when receiving a loan from a bank does not mean that the decision to accept the loan is not voluntary: not accepting it remains an option.
Secondly, in the example above, the employer should have sufficient reason for believing that the problem is serious enough to justify a formal counseling process. There must be good grounds for believing so. We would advise that the option of an agreed termination would be safer to use in situations where the underperformance is serious enough for the employer to believe that satisfactory improvement is unlikely and that a counseling process followed by dismissal would be a waste of everybody’s time. The more serious the problem is, the easier it should be for the employer to satisfy the next requirement, namely, that accepting an agreed termination also provides the employee with a way out.
Thirdly, the choice should hold a benefit for the employee: this does not have to be a sum of money – although paying the employee in return for his or her agreement to leave (e.g. an additional month’s pay) is likely to be sufficient proof of the voluntary nature of the employee’s decision. Seeing that the employer saves time – and, therefore, money – if it were able to obtain an agreed exit it might just be worth putting some of the savings on the table as a sweetener. Instead of a monetary benefit, the employer could also point out – especially where the chances of improvement are low and the chances of dismissal high – that the employee has the chance of walking away with a better employment record than will be the case if he or she were dismissed.
Fourthly, the agreement should be in writing and should clearly state that the employee had been given a choice in the matter and that the employee had exercised that choice freely. Also record the benefit to the employee of accepting the offer of an agreed termination.
Finally, the employer should be consistent in its use of such offers.
Agreements to terminate employment can also be used in cases where an employee faces – or is already involved in – a counseling process for incapacity due to ill health. But what about cases of misconduct? Should the option of an agreed termination be considered? The key difference between incapacity (poor performance and ill health) situations and misconduct, is that misconduct involves reprehensible behaviour – a situation where the employee is at fault. We would advise against using agreements to terminate in such cases for the simple reason that they are precedent-setting and could result in employers having to provide an easy way out for all miscreants. For example, allowing a dishonest employee to take the easy way out through an agreed termination will simply encourage the very behaviour that the employer wants to avoid. The same holds true of allowing an employee to resign instead of facing a disciplinary hearing for serious misconduct: if this benefit is given to one employee, it could raise the expectation that it would be given to those who in future behave in a similar manner.
Barney Jordaan for www.labourwise.co.za