Dec 5,2013 / News / Legal Brief

The mere conclusion of a settlement agreement is no absolute bar to the CCMA or courts making a determination as to whether the employee in question had agreed to waive his rights or in probing the circumstances leading up to the retrenchment. In this regard, the conclusion of a settlement agreement is not determinative of its lawfulness. What is key is the ability to show that the parties, in entering into the agreement, clearly intended waiving any further rights they had with clear knowledge of the law and the facts of the matter.

COURT’S DECISION

In the recent case of Hodges v Urban Task Force Investments CC and Others (JR840/12) [2013] ZALCHB 295 (7 November 2013), the court had to consider to the above issue.

Upon returning from leave the employee attended an operations meeting at which tasks ordinarily assigned to him were assigned to his colleagues. The following day he was called into a meeting where he was informed that he would be retrenched, effective that day. The applicant was presented with and signed a written agreement setting out the terms of his retrenchment. The agreement recorded that the dispute had been mutually settled, that it was in full and final settlement and that it could be made an order of court.

The applicant approached the CCMA alleging his dismissal was unfair. He contended that he entered into the agreement in order to receive what was statutorily due and owing to him (the settlement agreement did not provide for any benefits over and above those which the law provided he should receive when retrenched) and did not intend to settle the dispute about the fairness of his dismissal. The CCMA refused to consider the dispute because it determined that there was no dismissal (due to the settlement of the dispute) and that it therefore did not have jurisdiction to consider the matter.

The matter was referred to the Labour Court. The Labour Court disagreed with the CCMA, ruling that the CCMA was obliged to consider whether the applicant had in fact waived his rights in the agreement. The CCMA should have enquired into the circumstances leading to retrenchment. The commissioner did not do this. His mistake was made all the more egregious in light of the applicant’s contention that he merely signed the agreement in order to receive what was due and owing to him. The court found further that the mere signing of the agreement was not determinative of its lawfulness. A waiver of rights can only take place on full knowledge of the law and facts.

The court concluded that, because the employee did not waive the requirements which the employer must meet under the Labour Relations Act 66 of 1995, as amended, (“LRA”), the employee could challenge the substantive and procedural fairness of his dismissal. The court subsequently awarded the employee 12 months’ remuneration less the “settlement” amount paid to him in terms of the agreement.

IMPORTANCE OF THE CASE

The Labour Court will consider the substantive validity of settlement agreements concluded with retrenched employees and will take into account the circumstances leading up to the conclusion of the agreement as well as whether the parties intended to fully waive their rights.

An employer cannot require an employee to sign retrenchment agreements when the employer pays the employee nothing more than the employee would be entitled to in law in any event. It is unlikely that the employer will avoid liability in such circumstances.