BUSINESS LAW & TAX Severance pay in the spotlight

Jacques van Wyk & Michiel Heyns

Werksmans Attorneys

Section 41(4)of the Basic Conditionsof Employment Act

75 of1997 (the BCEA) relievesan employerof theduty topay severance payin circumstances wherethe employee whois dismissedforoperational requirements “ unreasonablyrefuses toacceptthe employer’s offerof alternative employmentwith that employer orany other employer”

TheLabour Court(LC) recently revisited the application of section41(4) in the case ofServest Landscaping Turf Maintenance (Pty) Ltd v SACCAWY oboThisani & Others (2022)C464/2019 and re-affirmedthe principle that the requirements of section 41(4) are satisfied if retrenchees areoffered suitable alternative employment with a new employer as a result ofthe effortsof the retrenching employer.

In thecase ofIrvin &

Johnson Ltdv Commission for Conciliation,Mediation & Arbitration &others (2006)

27 ILJ 935 (LAC), the Labour Appeal Courtheld that “the purposeof severancepayin our law is not necessarily to tide the employeeover while he is lookingfor another job. If that was the purpose, an employee who immediately walks intoanother and sometimes evenbetter pay-

The LAC set out four instances when severance pay is payable pursuant to section 41:

● If the employee unreasonably refuses an offer of alternative employment, then no severance pay is payable;

● If the employee reasonably refuses such alternative employment in which event he or she is entitled to payment of severance pay;

● If the employee accepts the alternative employmentin which event heor she also forfeits theright toseverance pay; and ing job afterhis dismissal wouldnot beentitled toseverance pay because he would have noneed forit.” The LAC held that section 41(4) of the BCEA ultimately rewards an employer for offering or securing alternative employment for an employee.

● If anoffer ofalternative employment is made to the employee, but theoffer is not made by his or her employer or through the efforts of his or her employer then he/she would be entitledto severancepay, evenif theemployee turns it down.

Application

In the Servestcase, the Commission forConciliation Mediation andArbitration (CCMA), found that Servest hadfailedto provethatthe individual employees had obtained alternativeemployment with Bidvest through Servest’s efforts.

Instead, theCCMA found that, at best, Servest played a part in facilitating the employment of the 22 employees with Bidvest but didnot securesuchemployment for the employees.

The CCMAconcluded that it was notat the instance of Servest that the retrenched employees foundalternative employment with Bidvest.

Servest subsequently referred the award for review

Legal Scoop

to the Labour Court.

In considering,among others, Irvin& Johnsonand Fidelity SupercareCleaning (as outlinedabove), theLC foundthat thearbitratorhad made an errorof law which ledher to “disregard orminimise the significance of material evidence”

The evidence presented, which had been left uncontested, indicated that the relevant branch manager of Servest initiated meetings with Bidvest, that Servest kept a “close eye” on Bidvest’ s recruitment ofits staffand made its own premises, facilities and resources available toensure thatno-onewould beleftunemployed orlosea day’s work.

The LC found that the CCMAhad madean errorof law infinding thatanything less thana bindingundertaking obtainedby Servestfrom Bidvest was sufficient to show that Servest secured alternative employment for the 22 employees.

The LC set aside the finding of the CCMA with a finding thatall ofthe employees who were employedby Bidvest through Servest’s efforts, were not entitled to severance pay assection 41(4) of the BCEA applied.

Anemployee willnotbe entitledto severancepayif the employeeis employedby another employer and the retrenching employercan demonstrate that it secured the alternative employment through its efforts.

At aminimum, a retrenching employer must beableto demonstratethatit played an instrumental role in securing alternative employmentfor anemployeewith anotheremployer ifitseeks torely onsection 41(4)of the BCEA.