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Using Company Law to Effect a Termination for Purposes of Labour Law

This series of articles by Moksha Naidoo includes summaries, quotations and commentary on the very latest decisions handed down by the Labour and Labour Appeal Courts, with the intention of keeping you abreast with judgments in a manner that is uncomplicated, less time consuming and includes thoroughly researched commentary. These judgements are considered binding on statutory and private arbitrators.

by Moksha Naidoo

Moksha Naidoo is the author of Case Law Review. He was admitted as an attorney in 2003 and currently sits as an arbitrator on five bargaining councils and is a part-time commissioner at the CCMA. Moksha is also an internationally-accredited mediator. His contact details can be obtained off his website, http://www.caselawreview.co.za/

South African Post Office v Khutso Mampeule - JA29/09 (Patel JA)*
The case of South African Post Office v Khutso Mampeule JA29/09 (unreported) was handed down on June 2010 (Labour Appeal Court). It was an appeal against the Labour Court decision, whereby it dismissed a declarator application made by SAPO, seeking to declare the respondent’s termination not a dismissal as defined by the Labour Relations Act.

The respondent, Mampeule, entered into a five-year fixed term contract with SAPO, as its CEO, effective from the 20 June 2005. In terms of his appointment, he was simultaneously appointed as the Executive Director on SAPO’s Board of Directors. His contract further provided for the simultaneous and automatic termination of employment should he be removed from the position of Executive Director.

On 21 May 2007, the Minister of Communications, in her capacity of sole shareholder, removed Mampeule from his position of Executive Director. The next day, Mampeule received a letter informing him that as a result of him ceasing to hold the office of Executive Director, his employment had automatically terminated.

The Labour Court ruled that the automatic termination clause went against the provisions of Chapter 8 of the Labour Relations Act and also the constitutional right to fair labour practice. The Court further found that these rights have its roots in public policy and was not subject to consensual waiver. In terms of a purposive interpretation of the word dismissal, the Court was of the view that a dismissal would be shown by any act of the employer that directly or indirectly results in the termination of the employee.

The Labour Appeal Court (LAC) examined section 220 of the Companies Act, 61 of 1973 (Companies Act), which provides for the shareholders’ right to remove a director. The LAC found that although the automatic termination clause codified company law, the question as to whether or not the provision was implemented in good faith must be examined.

With reference to the decision of NULAW v Barnard NO & Another [2001] 9 BLLR 1002 (LAC), the LAC pointed out that a termination of employment as a result of a resolution passed by shareholders for the voluntary wind up of their company, constitutes a dismissal. On the other hand, a termination of employment as a result of a compulsory winding-up, did not constitute a dismissal as the courts intervening act broke the chain of causation. SAPO argued that the above case was authority for the principle that the employee must establish an act which is the ‘sole or proximate’ cause of the dismissal. It further argued that in this case the sole or proximate cause for the termination was the automatic termination clause, provided for in the employment contract. Mampeule argued that the Barnard case supports the view that a termination as a result of the operation of law is a dismissal.

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