When confronted with an alleged dismissal dispute to the CCMA in instances where the employee has signed a mutual separation or settlement agreement, many employers have successfully raised a point that the CCMA lacks jurisdiction to entertain the dispute.
There is a wealth of Labour Court authority which has held that a consensual termination of employment does not fall within the dismissal definition of the Labour Relations Act (“LRA”).
The Courts have held further that the CCMA is an administrative tribunal created by statute with limited powers specified in the LRA. The CCMA has no jurisdiction to enquire into matters not specified in the Act. It follows therefore that the CCMA is not empowered to consider matters of a contractual or delictual nature unless expressly provided for in the LRA. No provision in the LRA grants jurisdiction to the CCMA to enquire into the validity of contracts or set aside a contract on any grounds.
However, in the recent matter of Schroeder and another v Pharmacare Ltd t/a Aspen Pharmacare, the Labour Court found that a CCMA commissioner had wrongly concluded that the existence of the settlement agreement precluded him from arbitrating the alleged unfair dismissal dispute.
Schroeder and a colleague chose to sign “mutual termination agreements” in terms of which they agreed that their employment would terminate. Having done so, the two ex-employees referred unfair dismissal disputes to a bargaining council. The respective commissioners ruled that the council lacked jurisdiction to entertain the disputes because the ex-employees’ employment had terminated by mutual consent.
Schroeder and his colleague then referred the matter to the Labour Court seeking orders setting aside the settlement agreements.
The Labour Court, in dismissing the application, held that it had no jurisdiction to entertain the dispute as there was no provision in the LRA which confers jurisdiction on the Court to determine the validity of a settlement agreement.
As an aside, the Labour Court remarked that a settlement agreement is not a preliminary point which would oust the CCMA’s jurisdiction. In other words, the CCMA is not precluded from considering a settlement agreement when determining whether or not a dismissal exists.
In light of section 77(3) of the Basic Conditions of Employment Act, it would be interesting to see whether this position will be maintained by the Labour and Labour Appeal Courts going forward. Judges probably remain better qualified and experienced to deal with matters of this nature as opposed to CCMA commissioners.
The Schroeder decision supports the view that the CCMA is empowered to determine the validity of a settlement agreement in the course of an enquiry into the existence of a dismissal. However, in our view, the decision does not close the door on the point that the conclusion of a settlement agreement ousts the CCMA’s jurisdiction to determine the alleged unfair dismissal dispute.
In light of this decision, it remains to be seen whether CCMA commissioners will deal with this point as a preliminary point, special plea or point going to the merits of the matter. Alternatively, once it has been determined that the employee’s employment has been terminated by mutual consent, that there was no dismissal.