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Incapacity or Operational Requirements?

 By Tessa Kassel; Vice Chairperson; General, Domestic & Professional Employers Organisation (GDPEO)

 

A dismissal may be determined to be fair if it relates to the employee’s conduct, incapacity, or the employer’s operational requirements.

 

However, what happens when the reason for the employee’s dismissal falls “between the cracks” in that it could relate to either the employee’s capacity to perform the job, or it may relate to the employer’s operational requirements? 

 

What is the appropriate route to follow?

 

What this article will attempt to show is that not only employers get the correct classification for a dismissal wrong; but CCMA Commissioners have on occasion too.

 

Employers may be faced with a situation where an employee becomes “unfit” to perform his or her duties.

 

There may be a certain minimum standard present that an employee must attain to render a proper service to the employer.

 

For example, a courier company driver must possess a valid driver’s license. What happens when an employee can no longer perform the duties assigned to him because he does not possess the necessary minimum requirements to perform his job?

 

What happens should our courier driver lose his driver’s license because of reckless and negligent driving?

 

Does one retrench this employee, or is this a case of incapacity? What is evident is that the employee can no longer perform his job because he does not have a certain qualification, skill or minimum legal standard required by law to perform his job.  

 

There are 2 judgments that illustrate the difficulty with this question.

 

Firstly, in the case of Armaments Corporation of South Africa (SOC) Ltd (ARMSCOR) v CCMA and Others (JR1961/13; JR1510/13, handed down in January 2016 it was held the Commissioner had failed to consider certain material facts and submissions placed before him and accordingly committed a material irregularity when he rejected ARMSCOR’s submissions that the employee had become incapacitated by operation of law, and therefore it had become necessary to terminate his services.

 

Mr Joubert (the employee) had had his contract with ARMSCOR terminated by operation of law after he failed to obtain the necessary security clearance in terms of section 37 of the Defence Act, a requirement to work at his level. Section 37(2) of the Defence Act, which would have been applicable to Joubert provides: 

 

‘A member or employees contemplated in subsection 1(a) may not be enrolled, appointed or promoted, receive a commission or be retained as a member or employee, unless such member or employee has been issued with the appropriate or provisional grade of security clearance by the Intelligence Division.’

 

On 18 December 2012, ARMSCOR addressed a letter of termination to Mr Joubert. After citing the provisions of section 37(2) of the Defence Act and ARMSCOR’s related policies, ARMSCOR informed Joubert that:

 

“You are hereby informed that you have been refused all grades of security clearance. Consequently your contract of employment is terminated with immediate effect.”

 

Joubert, after being dismissed referred a matter to the CCMA. The Commissioner was tasked to determine the real legal basis for the dismissal and whether it was substantively and procedurally unfair. ARMSCOR contended at the arbitration that, Joubert was dismissed fairly for the purposes of the LRA, and his dismissal was a dismissal for incapacity.  Joubert’s dismissal it was argued was fair in that it was dictated by section 37(2) of the Defence Act and ARMSCOR’s corresponding policies.

 

ARMSCOR referred the Commissioner to case law when it argued that incapacity can arise from any condition that prevents an employee from performing his work (my emphasis) and that an employer may legitimately dismiss an employee incapable of performing his obligations arising from the employment contract. Joubert’s employment was terminated because it had resulted from a legal provision.

 

Martin Brassey referred to incapacity when he said in Samancor Tubatse Ferrochrome v MEIBC & others [2010] 8 BLLR 824 (LAC)

 

“Incapacity may be permanent or temporary and may have either a partial or a complete impact on the employee’s ability to perform the job. The Code of Good Practice: Dismissal conceives of incapacity as ill-health or injury but it can take other forms. Imprisonment…, for instance incapacitates the employee from performing his obligations under the contract. The dismissal of an employee in pursuance of a closed shop is for incapacity; so is one that results from a legal prohibition on employment.”

 

A consideration of the above facts – which the Commissioner did not take into account – demonstrates that the Commissioner’s finding of substantive unfairness was not a reasonable decision.

 

The effect was that a failure to consider these factors caused an unreasonable outcome.

 

What transpired eventually was that the Judge (Whitcher) found the dismissal was substantively fair.

 

Effectively, the reason for the dismissal related to one of incapacity. However the dismissal was procedurally unfair in that Joubert was not afforded the opportunity to state his case at an incapacity investigation. His services were summarily terminated when the employer issued him with the letter referred to above.

 

What is evidenced by the abovementioned case is that although there may be a valid reason to terminate the services of an employee as a result of their incapacity, one must still follow a fair procedure as dictated by the LRA in Schedule 8. Due to their failure to institute any pre-dismissal procedure, ARMSCOR was order to pay eight (8) months compensation to Joubert!

 

However, Joubert had worked for ARMSCOR for 31 years. Had ARMSCOR followed the retrenchment route, it would have had to pay him for those years of service as a result.

 

An argument many employees may use at the CCMA is that the question may revolve around the fact that the employer in certain circumstances may utilise incapacity procedures to terminate an employees’ service in order to escape the liability associated with dismissals as a result of retrenchment.

 

The second case pertinent to this discussion is a recently handed down judgement.

 

First National Bank, A Division of First Rand Bank Ltd V CCMA and Others (as yet an unreported judgment, case no 1476/2016, delivered on 10 July 2017.)

 

In this case, an employee at the bank was appointed to the poition of Sales Consultant during 2011.

 

To perform the required tasks associated with the position, the employee needed to be an accredited Financial and Intermediary Services ("FAIS") representative as defined under the Financial Advisory and Intermediary Services Act, 2002 ("FAIS Act").

 

In order to operate at the required level as of a FAIS representative, the employee was required to comply with the prescribed "fit and proper requirements" for FAIS representatives. In order to be deemed “fit and proper” the employee would be expected to successfully pass the regulatory examinations set by the Registrar of the Financial Services Board ("FSB").

 

If the employee did not succeed in passing these exams he would not be be able to comply with the minimum standard under the FAIS Act.

 

This in turn would mean that FNB could not lawfully employ the employee to render financial advice as a Sales Consultant and he would in turn not be able to sell FNB's products.

 

The employee attempted the regulatory exams 15 times during 2004 and 2015.

 

The employer provided the necessary training, guidance and support necessary to enable the employee to pass the required exams.

 

Eventually, FNB was unable to accommodate the employee in an alternative position which it offered to him during December 2015. 

 

The employee was then invited to an incapacity enquiry.

 

The presiding officer made a finding that the employee lacked the necessary legal qualification to render a “fit and proper” service to advise clients on FNB products.  

 

FNB then terminated the employee’s service as a result of incapacity.

 

The employee referred a matter to the CCMA.

 

During the arbitration the Commissioner found that incapacity under the LRA only includes incapacity on the grounds of ill health or injury.

 

The Commissioner refused to accept that the employee had been dismissed as a result of a 'legal incapacity' to perform his duties.

 

Rather, the Commissioner found the  that dismissal was based on FNB's operational requirements.

 

The award was that FNB had not dismissed the employee substantively nor procedurally fairly.

 

FNB reviewed the decsion. FNB argued the Commissioner had made an two errors when he said: "a dismissal, resulting from a legally imposed requirement for the job and thus supervening impossibility to perform, cannot be construed as an issue of incapacity"; and, second, that "the dismissal ought to have been for operational requirements".

 

The Labour Court referred to the following: "it seems appropriate that the line between operational requirements and incapacity should be drawn where the employer determines or acknowledges the need to restructure its business and not where the employer cannot employ an employee because of a statutory provision prohibiting such employment".  

 

"In the event of incapacity, the focus is on the qualities of the employee. In the event of operational requirements, the focus is on the employer and its decisions relating to its business"

 

Essentially the Court found the reason for the dismissal related to the employees’ incapability rather than the employer’s need to restructure its business. Failure to meet the minimum legal requirements to render the service by the employee meant that it had become impossible as an operation of law.

 

As a result the Commissioner had made an error when he found the dismissal was based upon FNB's operational requirements as opposed to the employees’ incapacity.

 

Although this decision is one that employer’s may now embrace, it is however still evident that an employer must follow a fair procedure as determined by the LRA.

 

Employers must satisfy the requirement for fairness as determined by Schedule 8.

 

A Commissioner will ask at arbitration, is the employee’s incapacity the real reason for the dismissal?  

 

Commissioners will need to determine the substantive fairness of the dismissal.

 

The question will centre around the following: has the employer possibly disguised the real reason for the dismissal as one of incapacity rather than one due to operational requirements in order to escape certain legal obligations?

 

The employee in this case had been employed by FNB for 20 years. A significant retrenchment package would have been necessary to terminate his services had the real reason for the dismissal been due to a restructure at FNB.

 

Advice to employers: do not be tempted to cloak a dismissal in incapacity terms when it is clearly one of retrenchment or misconduct.

 

The true reason for the dismissal must relate to either the conductor capacity of an employee, or the result of a need to restructure a business because of financial, technical or similar needs; and a fair procedure must be instituted.

                                                                                                    

For more information please contact Tessa Kassel at This email address is being protected from spambots. You need JavaScript enabled to view it. or 011-615 1644 or visit www.gdpeo.co.za

 

 

 

 

 

 

 

 

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