Fundamental Changes to Dismissal Laws

Schedule 8 of the Labour Relations Act 1995, entitled the Code of Good Practice: Dismissal (the Code), is a document most South African employers are particularly familiar with. It has been around for many years; the original version dates back to 1996 and was last amended in 2002. Such is the importance of the document, no employer should propose probationary periods, implement disciplinary measures or consider dismissal (for reasons relating to conduct or incapacity) and now operational requirements without referencing the Code.

Yesterday, and somewhat out of the blue, Minister of Employment & Labour, Nomakhosazana Math, released a new draft of the Code of Good Practice: Dismissal (the new Code). What follows is an initial analysis of the proposed changes to this important part of our employment laws.

1. Small Business

The draft Code suggests big wins for small businesses.  It recognises that there are situations in which compliance by small businesses (which are not defined in terms of an employee or turnover threshold) may not be “practical or feasible for their operation”.   

It also places an obligation on Commissioners, when determining the fairness of a dismissal, to account for the circumstances in which small businesses operate, noting that small businesses cannot be expected to engage in “time-consuming investigations or pre-dismissal procedures while at the same time keeping the business going”, nor do they have the luxury of experienced and skilled HR departments. 

2. Workplace Rules

The requirement for employers to implement workplace rules has not fundamentally changed, though the new Code adopts a plainer approach to explaining what’s required. Like the original document, the new Code notes that larger employers may need to adopt a different approach to the implementation of disciplinary rules and procedures compared with smaller employers.

The new Code omits reference to the need for the concept of “corrective or progressive discipline”, instead providing a simpler explanation, namely that the purpose of discipline is for “employees to know and understand what standards are required of them and to guide their behaviour.” The need for a “corrective” has been retained.

Interestingly, the new Code states that employers may depart from the rules and procedures if there is “justification” to do so whereas the existing Code allows for this in “exceptional circumstances”. It will be interesting to see how this change, if any, is applied by our Courts.

3. Serious Misconduct

The new Code has omitted the illustrations of “serious misconduct” (which used to include gross dishonesty, gross insubordination etc.) but retained the existing test for serious misconduct, namely that the “continuation of the employment relationship is intolerable”. 

In the existing Code dismissal was stated to be reserved for “serious misconduct or repeated offences”.   In a departure from that position, “repeated offences” (or more accurately, “graduated disciplinary measures”) now form part of the definition of serious misconduct. 

4. Pre-dismissal procedures

In the existing Code, fair procedures for dismissals were outlined in one main paragraph. The new Code expands on the explanation of the processes employers should follow to ensure a fair procedure, but does not impose additional procedural obligations except to add that the purpose of fair procedure is to ensure “genuine dialogue and an opportunity for reflection”.

5. Dismissal for Misconduct

For many years Commissioners have adopted a strict approach that employers, needing to provide the fairness of a dismissal for misconduct, must prove four critical factors or face a ruling of unfairness.   Those factors – assuming a rule or standard was contravened – are:

• the rule was a valid or reasonable rule or standard; 
• the employee was aware, or could reasonably be expected to have been aware, of the rule or standard; 
• the rule or standard has been consistently applied by the employer; and 
• dismissal with an appropriate sanction for the contravention of the rule or standard. 

The new Code adds two further factors to this list, being:

• “the importance of the rule or standard in the workplace”’ and
• “the actual or potential harm or damage caused by the employee’s contravention of the rule or standard.“

Requirements to consider a range of factors before the sanction of dismissal is applied have been altered slightly by the new Code, but the obligation for employers to act consistently remains. However, the new Code goes further to add that inconsistency does not render a dismissal unfair if the misconduct renders the continuation of the employment relationship intolerable.

6. Probation

The new Code elaborates further on the expectation of reasonable guidance given to employees during probation and states that such guidance must be appropriate to the nature and size of the employer and the job.

7. Dismissals for Poor Performance

The new Code has largely retained the existing obligations for employers who wish to consider dismissal due to poor work performance.  However, there are two particularly important additions, being:

“Depending on the circumstances, an employer may not be required to warn an employee that if their performance does not improve they might be dismissed. This may be the case for managers and senior employees whose knowledge and experience enables them to judge whether their performance is adequate and employees with a high degree of professional skill where a departure from that high standard would have severe consequences justifying dismissal.”

We feel that this important change will considerably relax the procedural obligations of employers when they are required to justify the fairness of dismissals of employees in their senior management or top management occupational levels.

The new Code adds a further factor to the guidelines to consider in cases of poor work performance assuming that the employee has failed to meet the required performance standard being:

• “the required performance standard must be reasonably achievable”.

8. Dismissals for “other forms of incapacity”

The processes and obligations for ill health or injury have not changed at all but interestingly, other forms of incapacity have been added to the new Code, including “imprisonment” and “incompatibility”. The latter is stated as a form of incapacity in which an employee is unable to “work in harmony with an employer’s business culture or with fellow employees”.  Incompatibility is a principle that has been endorsed by the Courts for some time, but its inclusion into the new Code suggests it’s a possible form of dismissal which will become more prominent in future years.

9. Dismissal due to industrial action

The new Code provides substantially more guidance to employers who intend to dismiss employees due to unlawful industrial action and provides guidance on factors relevant to assessing the seriousness of any contravention to the Labour Relations Act.

10. Dismissals due to operational requirements

The existing Code makes very little reference to dismissal due to operational requirements (redundancies), other than to note that it is a legitimate reason for dismissal, presumably because guidelines for redundancy are outlined in a separate code of good practice (the Code of Good Practice on Dismissal based on Operational Requirements from 1999).

The new Code seeks to bring these redundancy procedures into the same instrument as other forms of dismissal and includes both a comprehensive list of procedures and also an annexure suggested to be a draft section 189 notice.      

The listed procedures broadly reflect those outlined in the Code of Good Practice on Dismissal based on Operational Requirements and unsurprisingly, align with the requirements set out in section 189 of the Labour Relations Act 1995.

In this instance, small employers are not exonerated from their obligations to provide a section 189 notice, however, the period and number of consultation meetings may depend on the size of the employer.

The annexure of the sample section 189 notice is a welcome addition and we anticipate that including the redundancy procedures in the new Code instead of a separate document (which for many consultation programs went largely ignored) is likely to bring greater consensus to what is required for fair redundancy procedures.

Summary

In our view, the two big winners from the new Code, currently in draft form, are small businesses and plain English. Smaller employers are likely to warmly receive the relaxation of some of the procedural requirements, though we will need to look to the CCMA and Courts to interpret the extent of any leeway. The move towards simplifying the language of the new Code is also welcomed and ought to work toward a greater understanding of what is required of those in an employment relationship. Despite the changes for small employers, there are elements that may affect all employers and all employers should give regard and consideration to these changes.

The Minister has provided for 60 days for public comment on the new Code.  Workplace Strategies will continue to monitor these developments and advise clients once the new requirements become law, as there will be a clear need to update workplace policies and educate managers and other employees on these important developments.