Your Federal Quarterly Tax Payments are due April 15th Get Help Now >>

Resignation of Contracts - DOC by pxg20930


Resignation of Contracts document sample

More Info
									                                  The law on resignation or dismissal
                                                       Johanette Rheeder

This year has had its fair share of disputes regarding arguments between employers and employees as to
whether the employment relationship came to an end due to a resignation or a dismissal. Employees resign,
change their minds, want to withdraw resignations and the employer wants to move on. Had the employee
resigned, then the CCMA will not have jurisdiction, so whenever there is doubt, the employer will claim
resignation                  to                 stay               out                 of               the                CCMA.

With new technology, comes the resignation via SMS as well. In 2008 the Labour Court held that a binding and
valid employment contract can come into existence if the prospective employee communicates his or her
acceptance of the employer’s offer of employment to the employer by means of a SMS text message. In this
year, the Labour Court had to consider whether an employee can terminate his employment by sending a SMS
text                                                                                                                      message.

In Mafika v SA Broadcasting Corporation Ltd (2010) 19 LC 7.1.1 and [2010] 5 BLLR 542 (LC), the employee
was employed as legal advisor on a three year fixed-term contract. About half way through his contract period
he was suspended pending disciplinary action. The applicant immediately sent an SMS to the respondent’s
CEO stating that he had “quit with immediate effect”. Thereafter, the applicant had second thoughts. Some
weeks later he informed the CEO via email that his contract had not been terminated and that he was prepared
to defend himself at a disciplinary hearing. The CEO was away but by that time, the CEO had already written a
letter, which had not yet been sent to the employee stating that the resignation had been accepted. This letter
reached him one day after he send the email. The employee claimed that the SMS did not constitute a valid
resignation because it was not in writing and he withdrew it before the employer accepted his resignation. The
employer contended that the applicant had resigned, alternatively, that he had repudiated the contract by failing
to                 render             service              after              sending                  the            message.

The court had a look at various authorities on the subject and confirmed that a resignation is a unilateral
termination of a contract of employment by the employee. The Courts (in the past) have held that the employee
must show a clear and unambiguous intention not to go on with the contract of employment, by words or
conduct that would lead a reasonable person to believe that the employee harboured such an intention. Notice
of termination of employment given by an employee is a final unilateral act which once given cannot be
withdrawn without the employer’s consent. In other words, it is not necessary for the employer to accept any
resignation that is tendered by an employee or to concur in it, nor is the employer party entitled to refuse to
accept a resignation or decline to act on it. If a resignation is to be valid only once it is accepted by an
employer, the latter would in effect be entitled, by a simple stratagem of refusing to accept a tendered
resignation, to require an employee to remain in employment against his or her will. This cannot be said the
court   –     it     would   reduce     the      employment        relationship   to        a   form   of    indentured     labour.

This is not to say that a resignation need not be communicated to the employer party to be effective – indeed, it
must, at least in the absence of a contrary stipulation. A resignation is established by a subjective intention to
terminate the employment relationship, and words or conduct by the employee that objectively viewed clearly
and unambiguously show that intention. The Courts generally look for unambiguous, unequivocal words that
amount to a resignation. The employee has to “act in such a way as to lead a reasonable person to the
conclusion      that   he       did        not   intend    to     fulfil       his    part   of    the      contract.

In this case, the employee testified that he made the decision to terminate his employment in stressful
circumstances and in an angry response to his suspension, but did not claim that he was incapable of
appreciating what he was doing, or the consequences of his actions. On the contrary, his testimony was that
when he sent the SMS, he intended to resign but that some six weeks later he regretted the decision as he
considered his continued employment a means to the end of his restored reputation. The court found that
however, noble this motive may be, it cannot in law serve as a basis to resurrect the applicant’s contract of
employment some six weeks after its termination in circumstances where the demise of the contract was
brought about by his applicant’s voluntary and deliberate conduct. In the courts mind, the SMS sent by the
employee to the CEO constituted a clear statement of the applicant’s intention to terminate his employment.
There is nothing unclear or equivocal about the communication and its terms are not ambiguous.

The employer also argued that the personnel regulations requires the notice to be in writing, however the court
was not convinced that where there is a resignation in the form of a clear and unequivocal intention by an
employee not to continue with the employment contract, it is invalid only because it was not reduced to writing,
however a communication by SMS is a communication in writing in terms of section 12 of the Electronic
Communications and Transactions Act 25 of 2002 and Jafta v Ezemvelo KZN Wildlife [2008] 10 BLLR 954

This case looked at various arguments based on constitutional court rulings as well and confirmed the legal
principle to be that an employee who resigns, with clear intention can do so without consent of the employer
and is bound by that resignation unless the employer agrees to withdrawal of the resignation.

The next case dealing with resignation is that of Lottering & others v Stellenbosch Municipality (2010) 19 LC
6.6.1 and [2010] 12 BLLR 1306 (LC). The labour court extensively summarised the common law requirements
for       different         types          of      resignation,            cancellation      and         repudiation.

After an opposition coalition took control of the respondent municipality’s council, the newly reinstated
municipal manager withdrew the delegated powers of the applicant employees, who were all executive
directors. They resigned on the same day, and the municipal manager accepted their resignations. The
applicants appealed to the executive mayor against the municipal manager’s decision to accept their
resignations. The mayor upheld their appeal, and the applicants withdrew their resignations. The mayor
accepted and according to them their resignation was withdrawn. They reported for duty but were later
informed that the mayor’s decision was withdrawn and that their resignations were accepted and posts would
be advertised. The applicants launched an urgent application for an order directing the municipality to retain
them                                  in                                    their                             posts.

The main argument was that despite their letters of resignation, their contracts of employment did not terminate
because the notices were in breach of contract and in contravention of section 37 and 38 of the Basic
Conditions of Employment Act 75 of 1997 (“BCEA”); Alternatively, the contracts did not terminate because the
municipal manager’s decision to accept the applicants’ resignations was overturned on appeal to the executive
mayor; Alternatively, if the contracts were terminated, the executive mayor agreed to the withdrawal of their
The       Labour      court    confirmed     the    common        law    on     resignation     from      employment:

“Resignation is the term ordinarily used to refer to the termination of employment by the employee just as
dismissal is used to refer to termination by the employer. Like dismissal, resignation can take many forms. It
can take the form of the cancellation for breach, which has long been understood to include the acceptance of
repudiation.     If   the     contract   permits,   it   can    take    the   form     of   termination    on    notice.

A resignation in the form of a cancellation of the contract will mean, in the case of a fixed-term contract, that the
employee may terminate the contract before the expiry of the term; and, in the case of an indefinite contract,
that the employee may terminate without giving notice. A resignation in the form of a cancellation is unilateral in
the sense that one party can bring the contract to an end without the consent of the other. It however can only
be exercised if the other party has committed a material breach. In other words, if no material breach is found
to be committed then the party resiling from the contract is itself in breach. In other words, if the reason for the
cancellation is bad, the cancellation itself is bad.

In an indefinite contract, either party may terminate the contract on notice. A resignation in this context is simply
the termination by the employee on notice. There does not have to be a specific provision to that effect, it is an
inherent feature of an indefinite contract and if there is no agreed notice, the notice must be reasonable
(provided that it is not less than the minimum notice prescribed in section 37 of the BCEA). If the contract is for
a fixed term, the contract may only be terminated on notice if there is a specific provision permitting termination
on notice during the contractual period – it is not an inherent feature of this kind of contract and accordingly
requires specific stipulation.

The common-law rules relating to termination on notice by an employee can be summarised as follows:

          Notice of termination must be unequivocal (Putco Ltd v TV & Radio Guarantee Co (Pty) Ltd 1985 (4)
           SA 809 (SCA) at 830E).

          Once communicated, a notice of termination cannot be withdrawn unless agreed (Rustenburg Town
           Council v Minister of Labour 1942 TPD 220 and Du Toit v Sasko (Pty) Ltd (1999) 20 ILJ 1253 (LC)).

          Termination on notice is a unilateral act – it does not require acceptance by the employer (Wallis
           Labour and Employment Law paragraph 33 at 5–10).

          Subject to the waiver of the notice period and the possible summary termination of the contract by the
           employer during the period of notice, the contract does not terminate on the date the notice is given
           but when the notice period expires (SALSTAFF obo Bezuidenhout v Metrorail [2001] 9 BALR 926
           (AMSSA) at paragraph [6]).

          If the employee having given notice does not work the notice, the employer is not obliged to pay the
           employee on the principle of no work no pay.

          If notice is given late (or short), that notice is in breach of contract entitling the employer to either hold
           the employee to what is left of the contract or to cancel it summarily and sue for damages (SA Music
           Rights Organisation v Mphatsoe [2009] 7 BLLR 696 (LC) and Nationwide Airlines (Pty) Ltd v Roediger
           & another (2006) 27 ILJ 1469 (W) [also reported at [2006] JOL 17221 (W) – Ed]).
        If notice is given late (or short) and the employer elects to hold the employee to the contract, the
         contract terminates when the full period of notice expires. In other words if a month’s notice is required
         on or before the first day of the month, notice given on the second day of the month will mean that the
         contract ends at the end of next month. (Honono v Willowvale Bantu School Board & another 1961 (4)
         SA 408 (AD) at 414H–415A [also reported at [1961] 4 All SA 452 (A) – Ed]).”

Termination on notice not in compliance with contractual notice period

The court then looked at termination with notice which does not comply with the contractual notice period. Does
the fact that it is not in line with the contract (the notice period) mean that the whole resignation is defunct or
does it constitute repudiation instead of resignation? The court found that it follows that the act of termination is
a unilateral act permitted by the contract. Legally every employee has the right to resign, such resignation is not
a breach of contract. The fact that the notice period is not in compliance with the contract and accordingly a
breach does not mean that that breach should reach backwards and contaminate the act of termination
(resignation). The act of termination and the notice period are two distinct processes. In the courts’ view, the act
of resignation (the communication of the decision to terminate) is not a breach or a repudiation of the contract
but an exercise of a right conferred by the contract. It is a legal act and its consequences for the date of
termination are determined by the contract, not what might be stated in the notice.

That means in an indefinite contract, short notice to bring that contract to an end does not constitute repudiation
– it is a unilateral legal act permitted by the nature or the specific terms of the contract for bringing the contract
to an end at a future date – which date being determined by the contract. That is why an indefinite contract,
often referred to as “permanent employment” because it contemplates employment for long periods of time
sometimes from the whole of an employee’s working life, does not amount to servitude – as Mr Stelzner, for the
respondent, pointed out, it is always open to being terminated unilaterally. In a fixed-term contract, a notice to
bring the contract to an early end is a repudiation because it does not in itself constitute a contractually
permissible act of termination. Being a repudiation, the employer has an election to hold the employee to the
contract or to accept the repudiation and cancel the contract.

To sum up, there is a distinction between notification to terminate and the date of termination, which is
determined by the notice period stipulated in or inferred from the contract of employment. A deficient notice
does not negate the act of termination although it may constitute a breach with regard to the period of the
notice to be worked still by the employee before he/she can leave the employ, which may entitle an employer or
employee to either cancel the agreement summarily or hold the employer to the contract, which in its terminal
state. This amounts to no more than requiring the employee to work notice or paying the employee in lieu of
notice if the employer does not want the employee to work out the notice. If the employee leaves before the
notice period expires, then the employer can sue the employee for breach of contract in a civil court. The BCEA
precludes us from deducting money from the employee’s remuneration or accrued leave.

The application of sections 37 and 38 of the BCEA

The employees argued that it was also in breach of the BCEA: “It is now necessary to outline the application of
sections 37 and 38 of the BCEA to resignations. Section 37(1)(c) states that a contract cannot be terminated at
the instance of a party to the contract on notice less than four weeks if the employee has been employed for a
year or more. It is common cause that the applicants have been employed for more than a year. Section 38(2)
read with subsection (1) states that if an employee gives notice of termination and the employer waives any
part of the notice, the employer must pay the remuneration the employee would have received if the employee
worked the full notice. It follows that although section 37(1)(c) requires an employee to give a minimum period
of notice, section 38(2) permits an employer to waive any part of that notice provided that it pays the employee
an amount equal to what the employee would have earned for the unworked part of the notice. If notice is given
and not waived, the contract terminates on the expiry of the notice. If the employer waives any part of notice,
the contract terminates when the employee leaves work (i.e. at the commencement of the waived period). If an
employee having given notice to terminate, fails to work the notice, that failure constitutes a breach of contract
entitling the employer to hold the employee to the contract (i.e. work out the notice) or cancel the contract.
Nothing in section 37 or 38 affects the application of common-law principles to the failure to comply with the
contract until its expiry at the end of the notice period. If an employer fails to pay an employee who works the
full notice period, the employee can sue the employer for the remuneration earned for that work. Sections 37
and 38 do not affect the common-law principles in respect of the failure of an employer to pay an employee for
working out the notice period. The same would apply to an employee who tenders to work the full period but is
not permitted by the employer to do so. Accordingly, what sections 37 and 38 do, for the purpose of this case,
is to guarantee a minimum period of notice which may be waived by an employer. If waived, it must pay the
employee an amount equivalent to what the employee would have earned had she worked out her full notice.”

The employees tried to argue repudiation. “The thrust of their contractual argument is that a notice of
termination not in compliance with the terms of the contract, is not a lawful termination but a breach of contract.
Being a breach of contract, the employer is put to an election: either to hold the employee to the contract or to
cancel it on grounds of the breach. Since the respondent did not cancel on grounds of the breach, the
applicants’ contracts remained in force”.

The court confirmed a very important principle in this regard. It held that as a matter of authority and principle,
an employee has the right to unilaterally terminate the contract of employment on notice. “That means that
even if the employee does not give the proper notice, the unilateral termination of the contract is not a
breach or repudiation of the contract”. The notice of termination and the period thereof must be split. The
employee is in breach with regard to the period, not the termination part of the notice. “The failure to give
proper notice is a breach of contract in response to which the employer may elect to hold the employee
to the contract, which having been terminated amounts to no more than holding the employee to work
out the contractual period”. Alternatively, it may elect to cancel the contract on grounds of breach. In any
case, even if the employer did neither, the employer would not be obliged to pay the employee for that part of
the contractual notice period not worked. It, accordingly, follows that the applicants’ acts of terminating the
contracts of employment do not constitute a breach or a repudiation of the contract. They were doing no more
than giving effect to a right accorded to them by their contracts, namely, the power to bring the contracts
unilaterally to an end. It is quite clear that the notice given in their letters of termination is 6 days short of the 30
days’ notice required under clause 15.1. Although the applicants considered that their notice period [was] to
terminate on 30 November this does not mean that as a matter of law it “has no effect”. Once notice is given
the contract ends when the notice period contemplated in the contract expires. Acceptance is not necessary.

In Kgaile / Senforce Security Services (2010) 19 CCMA 7.1.9 and [2010] 12 BALR 1262 (CCMA) the employee
claimed that he was unfairly retrenched when he was removed from the premises of one of the respondent’s
clients and his salary was stopped. The employer claimed that the employee was employed on a fixed-term
contract, which had expired, therefore not dismissal but automatic termination of the contract.

The employee had signed a contract which set a specific date for termination. That date had arrived. In the
case of a fixed term contract, the duration of a contract of employment is pre-determined in advance by means
of agreement between the parties. The period is determined by a specific date being reached or a specific task
or project being completed. When the date arrives or the event occurs, the contract automatically expires in
accordance with the agreement between the parties. The LRA regards the failure to renew a fixed term contract
as a form of dismissal where there was a reasonable expectation for renewal on the same or similar terms (see
section 186(1)(b) of the LRA). A commissioner should therefore determine whether or not a dismissal occurred
despite normal principles of contract law. The Legislature has chosen to focus on the expectation of the
employee and the critical issue in determining whether or not a dismissal has occurred within the parameters of
the LRA, is whether or not a dissatisfied employee had a reasonable expectation of renewal. In essence, an
employee would only be entitled to relief should a commissioner find that a dismissal occurred within the
parameters of the LRA and such a dismissal would only occur if the employee had a reasonable expectation to
renewal of his/her contract.

The applicant never raised any issues relating to any possible expectation of renewal, except vaguely stating
that a certain Michael told him that they would attempt to place him elsewhere. He failed to explain who Michael
is, when this was said and under which circumstances it was mentioned. There was no corroboration of the
statement although he mentioned that they were two employees who were dismissed. He gave absolutely no
evidence suggesting that he had any reasonable expectation of renewal. The contract of employment clearly
spelled out the terms of employment. It was for a fixed period and contained a clause that no expectation of
renewal is created. The applicant conceded that he understood the contract and that he signed without any
undue                               force                              or                              influence

For more information contact Johanette on
In association with Gildenhuys, Lessing and Malatji

To top