Due to an increasing backlog at the CCMA and packed Court rolls, parties in a working relationship is encouraged to resolve their own labour disputes and to not make use of formal dispute resolution mechanism. This can be done by entering into a voluntary written settlement.
Such a settlement agreement usually determines that the matter is settled in full between the parties and that the employee cannot approach the CCMA with unfair dismissal or unfair labour practice claim. However, this does not oust the jurisdiction of the CCMA from hearing the matter and dealing with the merits thereof. This means that a settlement agreement that is a full and final settlement and entered into willingly by an employee is not immune to review and further investigation. It should be noted that the presence of such an agreement would be a factor to be considered with the onus resting on the employee to prove the unfair conduct.
When determining the validity of a settlement agreement, regard must be had to the fact that the employee is often in a weak bargaining position and should not be lightly assumed to have waived his or constitutional rights.
In Gbenga-Oluwatoye v Reckitt Benckiser South Africa (Pty) Limited and Another (2016) 37 ILJ 2723 (CC), the Constitutional Court (“the CC”) considered the validity of a mutual separation agreement and re-affirmed that such agreements are lawful, even if they waive an employee’s right to seek judicial redress through the Commission for Conciliation, Mediation and Arbitration (“the CCMA”) and the Courts.
The employee in this matter concluded a contract of employment with Reckitt Benckiser on 16 June 2013. He started his employment as Reckitt’s regional human resources director on 22 July 2013. An investigation for misrepresenting his qualifications and employment history began in February 2014. This resulted in his suspension. The quarrel was that during his employment negotiations with Reckitt Benckiser the employee untruthfully identified Unilever as his then-current employer, whereas in truth it was Standard Chartered Bank. Reckitt found this misrepresentation material since it was on this basis that it paid the applicant a sign-on bonus of US$40 000. Soon after the investigation, on 3 March 2014, the applicant was dismissed for misrepresentation.
The employee then requested a ‘softer exit’ and Reckitt Benckiser agreed. A mutual separation agreement was entered into by the parties to determine their future relationship (separation agreement). In the agreement, the employee acknowledged and accepted that the termination of his employment was without duress or undue influence and that he had voluntarily and unconditionally waived his right to approach the CCMA and any other Court for relief. The employee argued that he was coerced into signing the separation agreement and took further issue with the clause of the agreement that waived his right to approach the Commission for Conciliation, Mediation and Arbitration (CCMA) or any other court for relief.
Initially, the employee applied directly to the Constitutional Court, but the CC dismissed his application, holding that the matter was not in the public interest.
He then approached the Labour Court (“the LC”). The Labour Court dismissed the employee’s urgent application and the court noted that the employee’s case was not based on the provisions of the Labour Relations Act but rather on the common law of contract. It concluded that there was no procedural unfairness even though the employee had contended that his contract of employment expressly or by implication entitled him to a pre-dismissal hearing. The Court concluded that the claim of undue duress in signing the separation agreement was not supported by the facts. And there was no economic duress because the situation was created by the employee’s own misrepresentation. The Court examined the validity of the clause of the separation agreement that excluded recourse to the CCMA or the Labour Court. It found that the clause was “nothing but the expression of the full and final settlement”.
The employee then took the matter on appeal to the Labour Appeal Court (“the LAC”) but also dismissed the employee’s appeal. The Court endorsed the Labour Court’s findings regarding the separation agreement. It was thus unnecessary to pronounce on the contractual right to a pre-dismissal hearing under the employment contract – the separation agreement superseded that employment contract. The Labour Appeal Court further rejected the argument that the separation agreement violated public policy in limiting the employee’s right to access to the court. Barkhuizen v Napier 2007 (5) SA 323 (CC) set out the test to determine whether terms of a contract were contrary to public policy (contra bonos mores). Having regard to the parties’ relative positions, including their bargaining power and their level of knowledge of the contract, there was no inequity here. The employee was employed in a senior management position. He had ample previous experience at senior level. There was no indication that he did not understand that the separation agreement limited judicial redress. The clause was meant to bring the relationship between the parties to finality. It was not unlawful.
The employee then appealed further to the CC. The issue before the CC was whether the full and final settlement limited his constitutional right to seek judicial redress in the CCMA and the Courts. The CC found that there was no violation of his constitutional right of access to Courts because, as a senior manager the employee had a full understanding of the consequences of the agreed waiver and allowed him equal bargaining power. In applying the seminal case of Barkhuizen v Napier 2007 (5) SA 323 (CC), the CC held that there was nothing to indicate that the employee had unequal bargaining power when taking into account his position and his level of knowledge and understanding of the contract. The CC further held that when determining the lawfulness of the waiver, constitutional rights may be limited to the extent that such limitation is reasonable. Full and final settlement clauses, which provide for the finality of a dispute are commonplace and lawful and not contrary to public policy. The CC concluded that the intentions of the parties were clear since the employee agreed to part ways with his employer on final terms. The CC held that the agreement itself was unambiguous and that a valid compromise took precedence over any other contractual entitlement that the employee could have had.
The Court dismissed the application for leave to appeal with costs.
In summary, ensure that when you enter into a full and final settlement agreement with an employee that the content of the agreement is explained in detail. If needed, use the help of an interpreter to ensure that the employee understands what he/she is signing. And lastly, ensure that you have a witness confirming the agreement and who can testify when needed that the parties had a clear intention to part ways on the terms as agreed.
ABOUT THE AUTHOR
Hendrik van Niekerk obtained his LLB degree from the University of Pretoria in 2008 and was admitted as an attorney in 2010. Mr. van Niekerk joined SEESA Pretoria on 1 April 2010 as a legal advisor and was promoted to a senior legal advisor in 2012.