The negotiation of a mutual separation agreement between the employer and the employee, results in a consensual termination of the employment relationship, which constitutes neither a dismissal nor a resignation.
The termination of employment by way of a mutual separation agreement has a number of benefits, including avoiding litigation challenging the fairness of a dismissal and the termination of the employment relationship on mutually acceptable terms.
In the recent decision of WBHO Construction (Pty) Ltd v Mdiya and Others, the Labour Appeal Court (“LAC”) upheld the enforceability of a mutual separation agreement, voluntarily concluded, to terminate the employment relationship.
The LAC upheld the appeal of WBHO Construction (Pty) Ltd (“WBHO”) and set aside an earlier decision of the Labour Court which found that WBHO had unfairly dismissed an employee, Maswangwandile Mdayi.
BACKGROUND AND LITIGATION HISTORY
Mr Mdayi began working for WBHO in April 2018 as a final level grader operator. In November 2020, the company’s operator training manager, Peter Gray, approached him about the possibility of relocating to Postmasburg in the Northern Cape due to operational needs.
Mr Mdayi declined the transfer, saying he did not want to be away from his family. The parties later signed a document titled “Mutual Separation Agreement” in December 2020, in terms of which Mr Mdayi was paid a severance package.
Mr Mdayi subsequently referred an unfair dismissal dispute to the Bargaining Council for the Civil Engineering Industry, arguing that the agreement was effectively a retrenchment disguised as a mutual separation and that proper consultation process in terms of section 189 of the Labour Relations Act, 1995 (“LRA”) had not been followed.
The arbitrator found that WBHO had failed to comply with Section 189 of the LRA and that Mr Mdayi’s dismissal was both procedurally and substantively unfair and ordered his reinstatement.
WBHO challenged the award in the Labour Court, but the court dismissed the review application. The Labour Court held that the mutual separation agreement could not be used to circumvent the section 189 process.
The appeal centred around the validity of the agreement between the parties. The LAC concluded that Mr Mdayi had voluntarily accepted the separation package and that there was no evidence that he had been coerced into signing the agreement. Further, nothing prevents parties from concluding a mutual separation agreement when operational requirements are discussed.
CONCLUSION
There are numerous advantages for an employer to opt to negotiate a mutual separation as an alternative method of termination of the employment relationship.
However, the successful negotiation of a mutual separation agreement requires careful planning as to when and how to broach this option, in order to avoid the employee claiming duress or lodging a claim of constructive dismissal.
The terms of the mutual separation must be unambiguous, and the agreement must be concluded freely and voluntarily in order to be upheld as binding and enforceable. In order to exclude the future referral of disputes, an unconditional waiver of rights and release, in the form of a comprehensive full and final settlement clause, is imperative.
Should you require any more information, please contact Melanie Hart at melanie@bv-inc.co.za.
Disclaimer: This article is provided for informational purposes only and is not intended to serve as legal advice. Readers should consult one of our legal professionals for advice tailored to their specific circumstances.