On 3 February 2016, the Labour Appeal Court ("LAC") delivered a judgment in the matter of Oluwatoye v Reckitt Benckiser South Africa (Pty) Ltd & 1 Other in which it had to consider the validity of a separation agreement.  This case concerned an employee, Mr Oluwatoye ("the employee") and the termination of his employment with Reckitt Benckiser South Africa (Pty) Ltd ("RBS").

During February 2013, the employee left the employ of Unilever to take up employment with Standard Chartered Bank in Dubai as a senior human resources relationship manager for a period of five months after which, he concluded a contract of employment with RBS and was  employed as its regional human resources director.

During his pre-employment interview with RBS, the employee told the interview panel that he was at that particular time, employed by Unilever (this was consistent with what was contained in his CV). He made no mention of being employed by Standard Chartered Bank and led the interview panel to believe that he was employed by Unilever and that he would be leaving Unilever's employ in order to take up employment with RBS. As a consequence , RBS, when it offered the employee employment agreed to compensate him for his alleged loss of Unilever shares equivalent to USD 40 000.00 in having to allegedly terminate his employment contract with Unilever in order to take up employment with RBS.

RBS came to learn, sometime after the employee had commenced employment that at the time that he was interviewed and offered employment, he was not employed by Unilever and as such, he had lied about his loss of shares. A disciplinary investigation was convened and RBS terminated the employment relationship with immediate effect.

In a quest for a "softer exit" and in order to avoid a dismissal on his record, the employee requested RBS to consider a mutual separation agreement.  The parties negotiated a separation agreement and when the employee signed theagreement, he acknowledged that the agreement was in full and final settlement and that he was not forced nor coerced to enter into the agreement. Further to signing the separation agreement, the employee signed an acknowledgement of debt in favour of RBS in an amount of USD 40 000.00.

On 10 March 2014 (a week after he had signed the agreement), the employee approached the Labour Court ("LC") with an urgent application to declare the separation agreement invalid and to set it aside on the basis that he alleged that he was coerced into signing the agreement against his will and under duress. The employee further alleged that, amongst other things, the agreement was contrary to public policy and violated his constitutional right to seek judicial redress as it contained a clause that waived his right to approach the Commission for Conciliation Mediation and Arbitration or any other court for relief emanating from his employment with RBS.

The LC held that there were no facts to indicate that the separation agreement was concluded whilst the employee was under duress nor was there scope to conclude that the agreement was contrary to public policy. The LC therefore dismissed the employee's application and concluded that the agreement was valid.

Aggrieved by the LC's decision, the employee, on appeal, approached the LAC for relief. The LAC, in its considering whether to declare the agreement invalid, referred to the judgment of Arend and Another v Astra Furnishers (Pty) Ltd in which it held that in order for a contract to be set aside on the grounds of duress based on fear, the fear must be as follows:

  1. reasonable;
  2. caused by the threat of some considerate evil to the person concerned or his family;
  3. be the threat of an imminent or inevitable evil;
  4. the threat or intimidation must be unlawful or contrary to the rules and norms of society; and
  5. the moral pressure used must have caused damage.

The LAC, correctly so, held that the employee in this case had the burden of proving the existence of duress. The employee argued that the duress emanated from the threat of the immediate termination of his employment, his housing and benefits, his child's schooling and the extension of his work permit in South Africa. RBS denied the allegations stating that the separation agreement was signed freely and voluntarily without duress. The LAC, in applying the factors listed above, came to the conclusion that there was no duress and as such refused to declare the separation agreement invalid.  

It is worth mentioning the LAC's analysis of the leading case of Barkhuizen v Napier in so far as the employee alleged that his constitutional right to access to courts was violated. The LAC took into account the fact that the employee occupied a senior role and with his previous work experience, there could be no doubt that he certainly understood the contractual limitation on seeking judicial redress once he signed the agreement. The LAC held that the clause in question was not unique in nature and is rather common as it permits for parties to settle disputes in such a manner that brings finality. Accordingly the LC was yet again correct in concluding that the separation agreement was neither unlawful nor contrary to public policy.