UNPACKING
CURRENT DEVELOPMENTS REGARDING TERMINATION OF EMPLOYMENT ON NOTICE
Prepared
by Cephas Mavhondo
Mhishi
Nkomo Legal Practice
Dated
05/09/17
Good labour law should encourage
economic growth. This means the regulation of the labour market should be
sensitive to economic growth. The question is how is the labour market is supposed
to be regulated in order to guarantee economic growth? In regulating the labour
market some laws may bring more questions than answers. Such laws should be
quickly amended or repealed to avoid confusion in the labour market. Such
confusion is not healthy for the so much sought after foreign direct investment
which stimulates economic growth. In light of this view, the writer will try to
unpack the current developments in Zimbabwe regarding termination of employment
contracts in terms of Act 5/2015.
On 17th July 2015, the
Supreme Court of Zimbabwe delivered a judgment in Don Nyamande and Another v Zuva Petroleum (Private) Limited: SC 43/15
to the effect that:
(a) The employer had a right to
terminate a permanent employment contract on notice;
(b) That this right of the employer
was there in terms of the common law of Zimbabwe;
(c) That the Labour Act never
abolished that right; and
(d) The employee is equally entitled
to terminate the same contract on notice.
Soon after the Zuva judgment,
thousands of employees lost their employment in Zimbabwe as employers took
advantage of the legal effect of Zuva judgment.
For the employees, the Zuva judgment spelled doom. About a month after
the Zuva judgment, the Parliament of Zimbabwe (House of Assembly and Senate)
enacted the Labour Amendment Act No. 5 of 2015,
which amended the Labour Act (Chapter 28:01) herein after called ‘the
Act’. The amendment became law on 26th
August 2015. Act No. 5 of 2015, introduced a number of changes to the Act. With respect to termination of employment
contracts on notice, the critical provisions are to the effect that:
(a) No employer shall terminate a
contract of employment on notice unless,
the termination is in terms of an employment code of conduct or the employer
and employee mutually agreed in writing to the termination, or the employee was
engaged on a fixed term contract or the termination is pursuant to
retrenchment.
(b) Where an employee’s permanent contract is terminated on
notice in terms of the Act as amended, that employee shall be entitled to a
minimum retrenchment package of not less than one (1) month’s salary for every 2 years of service or a pro rata (a proportion of that)
(c) Section 12 of the Act as amended
by Act 5/2015 applies to every employee whose services were terminated on three
(3) months’ notice on or after the 17th July 2015.
What followed after Act 5/2015 is
what is currently giving players in the labour market relentless headaches. The
amendment has one main shortcoming-it is not clear in various respects. This is
proving costly to players in the market. The courts are continuously grappling
with conflicting interpretations of some of the parts of the amendment. Resultantly, a number of questions arise and
I will attempt to answer them in this article.
Does
the employer still have the common law right to terminate a contract on notice?
Yes. However, the right is now
heavily regulated by section 12 (4a) of the Act as amended. The employer can only terminate on notice if the termination is in terms of a code
of conduct; or the employer and employee have mutually agreed in writing; or
when the employee is employed on a fixed term contract; or the termination is
pursuant to retrenchment.
Does
the employee still have the common law right to terminate the contract of
employment on notice?
Yes and this right has not been
affected by Act 5/15 as section 12 (4a) of the Act as amended which regulates
termination of employment on notice does not cover termination at the instance
of the employee.
How
can a contract of employment be terminated on notice in terms of a code of
conduct?
In my view a contract of
employment can only be terminated on notice in terms of a code of conduct if
that code of conduct provides for termination of employment on notice. There is
a contrary view that an employee whose contract has been terminated through
disciplinary proceedings in terms of a code of conduct is entitled to a notice.
This is, in my view, a clear misinterpretation of the Act as amended.
Does
a clause in a contract of employment to the effect that the contract can be terminated
on notice provide a basis that the employer and employee mutually agreed in
writing to the termination of the contract?
No. The agreement to mutually terminate a
contract on notice is only reached at
the time or after either party has mooted the idea to terminate the
contract.
Does
an agreement to mutually terminate a contract need to be on a single written
document?
No. What is only required is that
the employer and the employee must have ‘mutually agreed in writing’. In my
view, any written document (s) can provide proof that the parties ‘mutually
agreed in writing’- that is there was a meeting of the minds in writing. For example where the employer writes a
letter to the employee and the employee replies the letter agreeing to have the
contract terminated. However, it is
ideal to have a single document recording the agreement which both parties
would have signed. See Ruturi v Heritage
Clothing P/L 1994 (2) ZLR 374 (S)
Is
it really necessary to terminate a fixed term contract on notice?
Not for the stated termination
date, unless the parties had previously agreed in the contract that it shall be
necessary to issue a notice in order to terminate a fixed term contract. Either party has no right to terminate a fixed term
contract, unless the parties agreed otherwise. This is so because a fixed term contract
terminates automatically by expiry of time. This is the position of our common
law. However, it may be courteous to give notice even if it is not required.
It seems as if Act 5/2015 has
changed this common law position such that the employer now has a right to
terminate a fixed term contract on notice.
It is important
to note that the notice periods stated in section 12 (4) of the Act do not
create a right for either the employer or the employee to terminate a fixed
term contract. The notices only apply when there is a right to terminate a
fixed term contract for example where the parties have agreed that their
contract shall be capable of being terminated on notice or where an enactment
(for example Act 5/2015) provides such a
right.
How
does notice apply pursuant to retrenchment?
Amendment number 5/2015 repealed
a provision in the old section 12C of the Act which expressly provided that no
employer shall retrench any employee without affording the employee the notice
of termination to which the employee is entitled - See Garikai v ZIMASCO SC 46/96. Despite the repeal, this position in my
view has not changed as section 12 (4a) of the Act as amended covers
termination on notice pursuant to retrenchment. This means that upon
retrenchment of an employee, the employer is still required to give the
employee the applicable notice period.
This notice period is normally given in the retrenchment package as cash
in lieu of notice.
What
are the terminal benefits that an employee is entitled to upon
termination on notice?
These are: all unpaid salaries,
if any, accrued leave days (paid as
cash in lieu of leave), if any,
applicable notice period (cash in lieu
of notice), minimum retrenchment package (This does not apply to fixed term
contracts), medical aid expenses (if applicable), any pension, if any and
statutory or contractual gratuity, if any.
See section 13 and section 12 C (2) of the Act as amended. The agricultural
sector has its own special terminal benefits.
Is
section 18 of Act 5/2015 a retrospective provision?
Yes. This position was accepted by the Labour Court in a recent judgment by Justice Mhuri in the matter of Faith Mupangani N.O v National Handling
Services (Private) Limited and 7 Others LC/H/ 495/17) in which the court
ruled that Section 18 of amendment Act
5/15 as further amended by Finance Act 8/15 is clearly retrospective such that
all the terminations done in terms of Section 12 (4) of the Labour Act were
rendered null or void as they do not comply with the new Section 12 (4a) of the
Act as amended. The court extended the retrospective effect of section 18 to
cover the validity of termination of employment done in terms of section 12 (4).
Resultantly the court found that section 18 invalidated such terminations. The court went on to say such terminations
are therefore unlawful and the remedy for such employees is reinstatement
failing which payment of damages in lieu of reinstatement.
Are
the employees whose permanent contracts were terminated on notice following
Zuva judgment but before Act 5/15, entitled to the minimum retrenchment
package?
A reading of the retrospective
section 18 of Act 5/2015 seems to show that Parliament wanted such employees to
be paid the minimum retrenchment package.
However, strict interpretation of
Act 5/2015 shows that such employees are not entitled to the minimum
retrenchment package. This is the approach taken in the case of Aleck Magwenzi N.O. v Chapman Golf Club
LC/H/800/16 where Murasi J held
that Section 12 C(2) of the Act as amended does not apply to employees whose
contracts were terminated in terms of Section 12 (4) of the Act. In other
words, the Labour Court in that judgment accepted that Section 18 of Act 5/2015
had a retrospective effect. The court
however was of the view that the retrospective effect was not extended to
Section 12 C (2) as to enable payment of compensation to employees whose
contracts were terminated in terms of Section 12 (4) of the Act.
Is
section 18 of Act 5/2015 constitutional in being retrospective?
The question was in a way
answered in the judgment of ZimInd
Publishers (Private) Limited v Minister of Labour HH170-17 when Justice Matanda-Moyo held that Section
18 of Act 5 /2015 is retrospective and that the retrospectivity is
unconstitutional as it takes away vested
rights of the employer. The
court found that section 18 was inconsistent with sections 3(2) (k) of the
Constitution of Zimbabwe that provides for “due respect for vested rights”,
section 56 (1) and section 86 of the Constitution.
Since the pronouncement of the
constitutionality of section 18 in ZimInd case supra (above) is yet to be confirmed by the Constitutional Court in
terms of section 167 of the Constitution, it is too early for employers to
celebrate and for employees to be sad. The game is still on.
What
is the way forward in terms of legislative developments?
Possibly because of all these
problems in termination of employment contract in terms of Act 5/ 2015, the
Labour Act is being amended again but this time in a more holistic way. It will
make more sense to discuss the proposed amendments once the relevant Bill has
been gazetted.
Conclusively, Act 5/15 has caused
a lot of problems for both employers and employees. Indeed it has brought more
questions than answers concerning termination of employment contract on notice.
There are other problems brought about by this Act for instance empowering
Labour Officers to make draft rulings in conciliation matters, which rulings
are supposed to be confirmed by the Labour Court. The writer will not go into
details about the issue of Labour Officers in this article. That issue is left
for another day. As such Act 5/2015 has
to be quickly amended or repealed to avoid more confusion in the labour market.
This confusion is not good for the nation as it may drive away foreign direct
investment.
