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Don Nyamande & Anor v Zuva Petroleum SC 43/2015

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Introduction

The full bench of the Supreme Court of Zimbabwe (SC) comprising of five (5) appellate judges delivered a unanimous ruling on 17th July 2015 which has important implications for employment law in Zimbabwe. The ruling deals with the contentious question of whether an employer can, for no reason or fault on the employee’s part, terminate the employee’s contract of employment by giving the employee an obligatory notice in terms of the contract of employment, or in terms of the Labour Act (Chapter 28:01) where the contract provides a less favourable notice period. The Judgment is also key in that it has interpreted the correct position of the law by material departure from numerous rulings in the Labour Court and Labour arbitral tribunals which upheld the illegality of an employer’s conduct in terminating a contract of employment on notice as being an unfair dismissal.

The Facts

The appellants, Don Nyamande and Kingstone Donga, were employed by BP Shell as Supply and Logistics Manager, and Finance manager, respectively. BP Shell sold its services as a going concern to Zuva Petroleum, the respondent in the matter. A transfer of undertaking was thus concluded in terms of section 16 of the Zimbabwean Labour Act (Chapter 28:01)(hereinafter referred to as “the Act”). The appellants were consequently transferred to Zuva Petroleum on the same terms and conditions of service that they enjoyed under BP Shell.

On 21st November 2011 Zuva Petroleum offered all its employees, who included the appellants, terms of a voluntary retrenchment package. The terms were rejected by the employees, the appellants included. On 15th December 2011 the respondent then served each of the employees with a compulsory notice of its intention to retrench them. The appellants and the respondent could not agree on the terms of retrenchment and thus referred their dispute to the Retrenchment Board (“the Board”) whose mandate is to fix a retrenchment package which is payable to employees should the employer insist on carrying out a compulsory retrenchment exercise. On 16th May 2012, the Board directed the parties to carry out further negotiations regarding a fair retrenchment package for another twenty-one (21) days. Two days into the twenty-one day period, the respondent wrote letters to the appellants, advising them of the termination of their contracts of employment on notice in terms of their contracts of employment. The termination was with effect from 1st June 2012. The respondent subsequently paid the appellants cash in lieu of their serving notice and thus terminated the employment relationship.

Aggrieved by this, the appellants approached a labour officer contending that they had been unfairly dismissed. The Labour officer failed to resolve the matter and referred it for compulsory arbitration. The appointed arbitrator concluded that the termination of the contracts was unlawful because appellants had not been dismissed in terms of an employment code of conduct.

The respondent appealed to the Labour Court. A full bench of the Labour Court allowed the appeal and concluded that in the Court’s view section 12B of the Act which dealt with dismissals of an employee, did not alter the employer’s right under the common law to terminate an employment contract on notice. Aggrieved by the decision of the Labour Court, the appellants appealed to the Supreme Court. Their contention was that the Labour Court had misdirected itself on a question of law in upholding termination of their contracts of employment on notice, and failing to find such termination to be an unfair dismissal. In their view, in enshrining the concept of unfair dismissal in section 12B, the Act was outlawing any termination of employment for no reason (no-fault termination).

The Law

Two sections of the Act were under scrutiny, to wit, section 12(4) of the Act which prescribes the applicable notice period in relation to the length of a contract of employment, to be given by either party on termination of employment; and sections 12B (2)(a) and (b) of the Act, which provide that an employee will be unfairly dismissed if an employer fails to show that the employee was dismissed in terms of an employment code, or in the absence of the employment code, in terms of the model code of conduct made in terms of the Act. The Court observed that the real dispute centred on whether or not the above sections had abolished the employer’s common law right to terminate an employment contract on notice, or whether that right still subsists under Zimbabwean labour laws.

The Ruling

The Supreme Court dismissed the appeal. It held:-

1. That the employer’s common law right to terminate a contract of employment on notice can only be limited, abolished or regulated by an Act of Parliament of a statutory instrument that is clearly intra vires an Act of Parliament

2. That Section 12B of the Act does not abolish the employer’s common law right to terminate employment on notice in terms of an employment contract;

3. That the time-honoured golden rule of statutory interpretation is that one gives the words of a statute their primary meaning. The rule also demands that the common law be not altered by a statute unless the statute explicitly states so. In the present case, if one employed the golden rule, there were no words in s12B of the Act that either expressly, or by necessary implication, abolished the employer’s common law right to terminate an employment relationship by way of notice. Further, section 12B whose main heading made it clear that it was dealing with dismissal and procedures to be followed there-under following misconduct proceedings, did not expressly state that termination of employment on notice was to be regarded as unfair dismissal as contended by the appellants;

4. That in the past, the Supreme Court had, for instance, held that where the relationship between the employer and the employee had deteriorated to untenable levels through no fault of either party, the relationship could be terminated on notice;

5. That it was also instructive to note that even section 8 of the Act which outlines in detail, conduct by an employer which is outlawed as being unfair labour practices, did not include termination of an employment contract on notice;

6. That section 12(4) which deals with notice periods to be given by either party on termination of the employment contract did not actually create for the employer the right to terminate employment on notice. That right was derived from the common law. Section 12(4) of the Act only regulated the exercise of that right.

7. That section 12(4) explicitly stated that the right to terminate on notice should apply to both the employer and the employee, and no explanation had been advanced on why it should apply to the employee alone, and not the employer as well.

8. That in the ultimate there are many forms of termination of employment which include termination on notice, termination by way of dismissal, and termination by way of retrenchment, among others. Termination of employment by way of retrenchment or on notice is NOT a dismissal. The proposition that dismissal means all forms of termination of employment was, therefore, erroneous.

Effect of Court Ruling

The effect of the ruling was immediately felt with close to 25 000 permanent employees having their contracts of employment terminated on notice in the following 45 days with no retrenchment package being paid. Reactions from the parent Trade Union body were strongest. It argued that the ruling had effectively turned every employee in the country into a “temporary employee”. It also posited that the implication on the economy would be felt far and wide, from banks that advance loans to employees on the understanding that their jobs are secure, to departmental stores that advance merchandise on credit on the same understanding. Other employment bodies also argued that the effect of the Court ruling was that the employer would simply ignore the strict retrenchment procedures set out in the Act by terminating contracts of employment on notice and limiting terminal payments to the corresponding notice period. The dramatic conclusion reached by many employees was that almost the entire Labour Act has become redundant in light of the ruling. On the other hand, many employers lauded the ruling and remarked that it had brought natural justice between the parties in the labour market.

Government Intervention

The Government of Zimbabwe, through the Ministry of Public Service, Labour and Social Welfare, swiftly intervened to stem the wave of terminations by introducing a Labour Amendment Bill. Parliament was urgently recalled from its recess. The Bill was introduced on 18th August 2015 and barely two days later, the Bill had sailed through the lower and upper houses of Parliament despite an adverse legal report on some of the provisions of the Bill by the Parliamentary Legal Committee. On 26th August 2015 the Bill was gazetted into law as the Labour Amendment Act 5, 2015 (“the Amendment Act”) and immediately came into effect.

The most important amendments introduced by the Amendment Act were:-

(a) a new section 12(4a) was inserted which outlawed the employer’s common law right to terminate a contract of employment on notice unless the termination is in terms of a registered employment code of conduct, or is by mutual consent of the parties, or if the contract is a fixed term contract, or if the termination is in pursuance of a retrenchment exercise;

(b) the old retrenchment provisions in the Act were repealed and replaced by a new section 12C which sets out a mandatory minimum retrenchment package to be paid by an employer as being not less than 1 month’s pay for each 2 years of service by the employee (and proportionate payments for lesser periods of service);

(c) a “transitional” provision was inserted, which backdates payment of the mandatory minimum retrenchment package to all permanent employees whose contracts of employment were terminated on notice following the Supreme Court ruling of 17th July 2015.

The new law has not found much favour with either the employees or the employers. On one hand, the employees are of the view that the mandatory minimum retrenchment package of 1 month’s salary for every 2 years of service is too little compensation as the employers will now only feel compelled to pay that minimum retrenchment package and nothing more. In the past, a retrenchment package would likely incorporate payments for medical aid and relocation allowances, among others. The employers, on the other hand, have mounted a Class action under the Employers Confederation of Zimbabwe (EMCOZ) to challenge the “transitional provision” and other amendments to the Labour Act which they state have the unintended effect of making the amendments to the Act difficult, or absurd, to implement.

Conclusion

The Court ruling is indeed a landmark decision in many respects. It elicited strong reactions from both employers and employees, as well as the Government, even though the Court has, in the past, come to similar conclusions on related matters. This can be explained by the fact that the 17th July 2015 ruling was highly publicised in the media, and also that in its past judgements, the Supreme Court’s position was not as emphatic and clear-cut as the Court pronounced in the Zuva case. Lastly, and more importantly, the ruling has also led to a change of the employment law landscape in Zimbabwe with the enactment of the Labour Amendment Act 5, 2005.

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This communication is provided for general information only and does not constitute legal or other professional advice. If you would like legal or other professional advice, please contact us.

About the Author

Ronald Mutasa is a Lead Associate in the Employment Law Practise Group at Manokore Attorneys. He is a graduate of the University of Zimbabwe and has 5 years’ post-qualification corporate, commercial and employment litigation experience gained from working in 3 Chambers Global Listed firms in Zimbabwe.

Author: Ronald Mutasa