The South African Constitution guarantees employees the right to fair labour practices. The Labour Relations Act, 66 of 1995 (LRA) gives effect to this right in that it provides a right against unfair dismissal. Employee seeking to challenge the fairness of their dismissal may resort to the free statutory dispute resolution service provided by the employment tribunal.

Seen against this backdrop, may an employer and employee agree to compromise claims to the extent that the employee is barred from exercising his right to have the fairness of his dismissal determined by the employment tribunal? This and other interesting questions surfaced in the recent case ofMuyiwa Gbenga-Oluwatoye and Reckitt-Benckiser (Pty) Ltd. The Labour Appeal Court (LAC) delivered its judgment on this issue on 3 February 2016.

Background

The employee was employed by the employer as its regional human resources director. A short while later his new employer took issue with the him when it discovered that he misrepresented facts that induced them into appointing him and also paying him a bonus he claimed that he would have lost upon leaving his current employer. When confronted with this he agreed that he erred and that the relationship of trust was damaged as a result of his actions. 

The employer conducted a disciplinary process and advised the employee of its decision to terminate his services. The employee requested that the employer considers allowing him a 'softer exit" and proceeded to negotiate terms of such an exit with the employer. The negotiations included various discussions and re-drafting of the eventual settlement agreement. Salient terms included a 'full and final settlement " clause wherein he agreed not to file a claim at the employment tribunal. 

But wait, there's more

A week after signing the agreement the employee launched an urgent application in the Labour Court. He stated that he had been coerced into concluding the agreement. In addition, he claimed that the agreement was invalid as it was against public policy to allow for the conclusion of an agreement that limited  his right to approach a court for relief. 

The Labour Court dismissed his application. It held that The court held that there was no basis for his contention that the agreement had been signed under duress. The employee then applied to the Constitutional Court for leave to appeal. The Constitutional Court dismissed his application.

Undeterred he sought and obtained leave to appeal the Labour Court judgment at the LAC. This court held that that the employee settled his claims with his erstwhile employer. It confirmed that he had waived his right to approach the employment tribunal or any other court.

Against public policy?

But what about the employee's argument that a court should not allow an employee to waive statutory rights where this will deprive the employee of legal redress? The LAC held that it was not against public policy to do so. It is in the public interest for parties to agree to settle their disputes even where this has the effect that a party compromises his rights. Had the employee be in a different position the court may have been more sympathetic. But under circumstances where he, as a senior employee, agreed to a limitation of rights in the absence of duress or any other grounds to set aside the agreement, he should be held to the agreement he concluded. The LAC dismissed the appeal with costs.

Things might have been different for him had he not been a very senior employee, as his bargaining position then may have been such that he did not understand the implications of the contractual limitation that he had agreed to. But he had a history of prior work experience at a senior level and must have known of the implications. The appeal was accordingly dismissed.

Points to Ponder

Termination of employment by mutual consent is an effective vehicle to secure the exit of senior employees. It is often in the interest of both the executive employee and the employer to agree on such terms that will see the employee terminating service consensually. Employers using agreements to terminate employment by consent should ensure that the agreement accurately reflect the discussions and that the employee does not conclude the agreement under duress. However, our courts are loathe to interfere with the ability of parties to contract on such terms that are agreeable to them. Our courts understand that negotiations involve compromise and are willing to accept that an employee may compromise rights, even statutory rights, in doing so. Duress and public policy, whilst valid defenses, require strong supporting facts before a court will set aside an otherwise valid agreement.