Procedural fairness
Substantive fairness
Appropriate remedy
Comment


The Commission for Conciliation, Mediation and Arbitration (CCMA) has published new guidelines on misconduct arbitrations, which became effective on January 1 2012 (for further details please see "New guidelines for misconduct arbitrations"). The guidelines aim to promote consistent decision making by CCMA commissioners during arbitrations relating to dismissals for misconduct, in order to give effect to the constitutional right to lawful, reasonable and procedurally fair administrative action, as set out in Section 33(1) of the Constitution.

This update examines the sections of the guidelines that advise arbitrators in misconduct proceedings on how to:

  • approach and assess the concepts of procedural and substantive fairness; and
  • determine an appropriate remedy (once it has been determined that the dismissal in question was unfair).

Procedural fairness

Procedural fairness is a flexible concept, and the determination of procedural fairness will ultimately depend on the particular standard against which it is measured. The guidelines deal with the various possible standards and approaches that may apply in different cases.

Code of Good Practice requirements
If there is no prescribed disciplinary procedure in a workplace, arbitrators must approach procedural fairness in line with the requirements of the Code of Good Practice: Dismissal, and in particular Item 4 of the code, which sets out the general principles of a fair procedure.

The code envisages a flexible approach to misconduct investigations and enquiries and does not prescribe a formal procedure akin to a criminal hearing. It is this inherently informal and flexible basis upon which procedural fairness should be assessed. Departures from the relevant requirements of the code should be justified and are permissible only in exceptional circumstances (eg, in order to protect lives and property or if the employee refuses to state his or her case in response).

The arbitrator should summarise and assess the relevant facts of the matter in relation to the following requirements set out in Item 4 of the code:

  • The employer must notify the employee of the allegations of misconduct using a form and a language that the employee can reasonably understand. Such notification may be oral or written. The fairness of the notice should be determined by testing whether it is clear and comprehensible enough to enable the employee to state a case in response. For example, it would be unfair to state the misconduct charges in vague and generic terms which do not sufficiently inform the employee of the basis on which to prepare his or her defence.
  • The employee should be allowed a reasonable time to prepare a response to the allegations. Determining what constitutes 'reasonable time' depends on the particular circumstances, such as the complexity of the allegations and the nature of the factual issues involved. The guidelines provide that, in most cases, it would be unreasonable to give an employee less than a day to prepare his or her defence.
  • The employee should be allowed the assistance of a trade union representative or fellow employee in preparing a response and in stating a case in any enquiry. However, a trade union representative may assist an employee only if the particular trade union has been granted the necessary organisational rights in the workplace. The code does not recognise an automatic right to legal representation.
  • The employee should be given the opportunity to state a case in response, either orally or in writing. As previously stated, this does not necessarily entail a formal hearing. The determining factor throughout is whether the employee was given a proper opportunity to state his or her case in response. The person who hears the case is irrelevant in this regard and the employer may use an external third party to conduct the hearing.
  • After the enquiry, the employer should communicate the decision taken and preferably furnish the employee with written notification of the decision. An employer should also remind a dismissed employee of the right to refer an unfair dismissal dispute to either the CCMA or a bargaining council with jurisdiction, or to any applicable dispute resolution procedure in a collective agreement.

If the arbitrator, after testing the actual procedure followed against these procedural requirements of the code, finds that the actual procedure was in any way defective, he or she should determine whether the particular defect was material. The severity of the defect becomes relevant when determining the compensation to be awarded for procedural unfairness.

Requirements in terms of workplace disciplinary procedures
If there is a prescribed disciplinary procedure in a workplace, arbitrators must have regard to it. However, there are circumstances in which the code may still be applied.

Workplace disciplinary procedures fall into one of three possible categories. These categories differ in respect of their legal status, which should direct the arbitrator's approach in assessing procedural fairness.

If disciplinary procedures are contained in a collective agreement, the code may be invoked only in relation to issues which are not addressed in that collective agreement. All other aspects of the disciplinary process must be tested against the collectively agreed procedure – and not the code – when assessing procedural fairness. The guidelines provide that an arbitrator should make a finding of procedural unfairness only if the actual procedure followed resulted in unfairness. This presumably means that the mere deviation from an established procedure should not in itself constitute procedural fairness; rather, the test is whether that deviation resulted in any unfairness.

Contractually binding procedures and those unilaterally imposed by the employer are lower in status than – and must be tested against – the code, which must be given precedence in the event of a conflict, unless the employer can justify a departure from the code. However, a contractually binding procedure must be given precedence over the code if it imposes a greater burden on the employer. The procedure which is more favourable to the employee must be followed.

Although a departure from a contractually binding procedure would generally constitute procedural unfairness, the guidelines state that not every instance of procedural unfairness should lead to an order of compensation. The materiality of the breach and the prejudice to the employee will be relevant factors in determining compensation.

Disciplinary procedures which are unilaterally imposed by the employer are not legally binding on the employee and should therefore not be strictly interpreted and applied. It follows that a departure from these procedures, or an adjustment of an employer's disciplinary policy for the purpose of addressing unforeseen circumstances, should not automatically result in a finding of procedural unfairness, unless there is resulting material prejudice to the employee.

Where a workplace procedure provides for the right to representation, an employer's decision on whether to allow an employee representation should be evaluated in terms of such procedure. Although legal representation is not automatic, the guidelines state that legal representation should be afforded if the particular procedure permits it.

Disciplinary action against trade union representatives
In the interest of maintaining amicable and ongoing industrial relations between employers and trade unions, an employer must inform and consult with the relevant trade union before taking disciplinary action against an employee who is a representative, office-bearer or official of that trade union. If there is no agreed consultation procedure, a procedure should be adopted which both the employees and the trade union find fair and objective. An employer may depart from this procedure for good reason, but only if this does not prejudice the trade union and the trade union representative. This requirement imposes an additional procedural burden on the employer, but applies only to trade union representatives, office-bearers and officials of a trade union that is legally recognised in the particular workplace. Unrecognised trade unions do not enjoy this right.

Substantive fairness

The guidelines describe in detail the following factual enquiries that flow from the provisions of Item 7 of the code:

  • Is there a rule?
  • Was the employee aware of the rule?
  • Did the employee contravene the rule?
  • Is the rule or standard valid or reasonable?
  • Was the dismissal an appropriate sanction?

Is there a rule?
At the outset, it is necessary to prove whether there was an existing rule or standard in the workplace which the employee in question allegedly contravened. Should the existence of a rule be disputed, the arbitrator may decide that dispute based on:

  • the evidence presented;
  • the credibility of the opposing witnesses; or
  • the balance of probabilities.

The arbitrator may also determine this issue by means of judicial notice – that is, to accept something which is clearly well known or indisputable as a proven fact. For example, a rule at the workplace forbidding theft or assault is clearly something which the arbitrator may automatically accept as proven by means of judicial notice, without having to require the employer to prove it.

The guidelines provide that the existence of a rule or standard may be proved:

  • by the content of a disciplinary code, collective agreement, contract or policy;
  • by way of testimony (given by one or more witnesses);
  • by way of inference from a contract, item of legislation or established practice in the particular sector or establishment;
  • when accepted as a basic or universal rule of conduct applicable in all workplaces, such as the duties inherent to an employment contract regarding performance, good order and trust; or
  • in terms of any special rules that may apply to the particular industry or sector or the specific nature of the employer's operations.

The nature of the sector or workplace is a relevant consideration. For example, a stricter standard of compliance is required in a workplace which poses a high risk to safety or security, such as a mine or an airline.

If a rule is not specifically contained in a disciplinary code, but is not specifically excluded as grounds for discipline, the guidelines nevertheless permit an arbitrator to rely on such rule or standard, provided that:

  • it is either proved by the employer or conceded by the employee that the employee knew or should reasonably have known that the rule or standard applied; or
  • the arbitrator can infer that the rule or standard applied from the disciplinary code, contract, legislation or an established practice in the sector or particular establishment.

The source of a particular rule is also a relevant aspect to consider at further stages of the enquiry, such as when determining whether the employee was aware of the rule. The enquiry into the alleged misconduct will not proceed if the existence of the rule itself cannot be proven at this first stage.

Was the employee aware of the rule?
Item 3(1) of the code requires that:

"[a]n employer's rules must create certainty and consistency in the application of discipline. This requires that the standards of conduct are clear and made available to employees in a manner that is easily understood." (emphasis added)

Should the employee dispute his or her knowledge of the particular rule, the employer will in turn have to refute this in order to prove that the employee was aware of the existing rule.

If there is no disciplinary code in the particular workplace, it must be determined whether the employee could reasonably have been expected to know of the rule or standard. The guidelines stipulate that this question may be addressed either in terms of the evidence presented or based on the expertise of the arbitrator. Item 3(1) of the code also determines that "[s]ome rules or standards may be so well established and known that it is not necessary to communicate them". This means that an employee is expected to be aware of the basic and self-evident rules of the workplace.

Did the employee contravene the rule?
An employee may or may not concede to having contravened the rule or standard. If the employee does not concede to the contravention, this question must then be determined in terms of the evidence respectively presented by both parties. The contravention of an existing rule is a purely factual enquiry and the evidence presented by the opposing parties must thus relate to the facts of the particular matter.

After evidence has been presented in this regard, the arbitrator must summarise and analyse it, then determine the question based on the credibility of the witnesses or the balance of probabilities of two competing versions.

This factual enquiry may involve an additional range of factual determinations, such as whether the employee can justify the contravention despite the fact that the employer may have proved the contravention or the employee may have conceded to contravening the rule.

Is the rule or standard valid or reasonable?
In accordance with the code, it is not the arbitrator's role to second-guess the rules and standards set by the employer in the workplace. The determination of the rules themselves is the employer's prerogative and the intention is not that the arbitrator should interfere with this. Instead, in inquiring into the fairness of the dismissal, the arbitrator should simply determine whether the particular rule is valid and reasonable.

The determination of validity entails considering whether the rule or standard is unlawful or contrary to public policy. For example, it would be unlawful (and thus invalid) to instruct an employee to do work that is clearly outside the agreed scope of his or her duties. The implication is that the contravention of an invalid or unlawful rule is justifiable, such as when an employee refuses to comply with an unlawful instruction.

An arbitrator is also required to decide whether a particular rule is reasonable. Unfortunately, this is a somewhat subjective determination and should thus be tempered by an acceptance of the employer's prerogative to determine rules for the workplace. The test for reasonableness must be distinguished from the test for fairness – the latter test only becomes applicable later in the analysis, in order to determine the fairness of dismissal as a sanction.

The guidelines do not elaborate on how reasonableness should be determined, except to state that it may involve a comparison with sectoral norms. An employer would thus have to justify a departure from the generally accepted standard of conduct that is expected from employees in its sector.

Was the dismissal an appropriate sanction?
The question is whether, in the circumstances, it was fair for the employer to impose the sanction of dismissal with reference to either a particular instance of misconduct or the cumulative effect of various instances of misconduct.

In light of all the relevant circumstances, at this stage the arbitrator must make a value judgment about the fairness of the employer's decision to impose the sanction of dismissal. The guidelines require that the following be kept in mind when making this value judgment:

  • the interests of both the employer and employee, for the purposes of making a balanced and equitable assessment;
  • the employer's rules and standards, which must be considered with regard to the reasoning behind them;
  • norms in the sector;
  • the code;
  • the guidelines; and
  • the expertise of the arbitrator.

These multiple considerations at this stage can be illustrated as follows:

Appropriate remedy

Arbitrators must determine an appropriate remedy within the scope of Section 193 of the Labour Relations Act (66/1995) and are obliged, in terms of the guidelines, to provide reasons for the chosen remedy in an arbitration award. Section 193 provides for remedies directing the employer to:

  • reinstate the employee from a date not earlier than the date of dismissal;
  • re-employ the employee; or
  • pay compensation to the employee.

Reinstatement
Reinstatement means that the employer is ordered to allow the employee to return retrospectively to work, as if the dismissal had never occurred.

The effect of retrospectivity is that the employer will be liable for any back pay due to the employee from the date of reinstatement. If made fully retrospective, the remedy of reinstatement restores the circumstances as they were before the dismissal. The employee must be placed back in the same position and the contractual relationship continues as it did previously.

Re-employment
By contrast, re-employment lacks the retrospective element of reinstatement and means that the employee will return to work at a future date referred to in the arbitration award. The intervening period of dismissal is therefore accepted by the arbitrator and the employee is not entitled to back pay for that period.

The guidelines state that re-employment is generally an appropriate remedy where an employee was dismissed on grounds of incapacity or operational requirements. However, the guidelines specify that re-employment may be appropriate for cases of dismissal for misconduct where:

  • the dismissal constituted a failure by the employer to re-employ the employee for alleged misconduct (rather than dismiss for misconduct);
  • the factual evidence indicates that the employee should be employed on different terms and conditions to those that were in place when he or she was dismissed; and
  • circumstances prevent the employer from reinstating the employee in his or her previous position, in which case the employer should be ordered to re-employ the employee in other reasonably suitable work. 'Reasonably suitable work' should be determined with reference to, among other things, the skills and experience required and the remuneration, benefits and status of the new position when compared to the old position.

An arbitrator is required to stipulate the specific terms and conditions of re-employment in the arbitration award, and is therefore given broad discretion to craft this remedy. The order must specify the extent to which the terms and conditions have changed (or remain unchanged) and the benefits to which the employee is entitled for the period between dismissal and re-employment (if any).

Orders of reinstatement or re-employment
Certain aspects concerning such orders must be specifically dealt with in the arbitration award. Namely, the date on which the employee must report for work and the effective date of the reinstatement of re-employment should be recorded. Reinstatement or re-employment may be made effective from either the date of dismissal (ie, a fully retrospective order) or any date subsequent to the dismissal.

The guidelines provide that an order which is not fully retrospective would be appropriate if the employee unduly delayed the commencement or continuation of the dispute resolution proceedings. Accordingly, the employee should not be allowed to profit, at the employer's expense, from his or her own delay.

The guidelines allow arbitrators to make an award of reinstatement or re-employment effective from a date more than 12 months before the date of the relevant arbitration award.

If an order of reinstatement or re-employment is not fully retrospective, any remuneration and benefits for the period between the dismissal and the date of reinstatement or re-employment are forfeited by the employee. Accordingly, it is important that the arbitrator have due regard to the above considerations when deciding whether it is appropriate to make such an order.

The guidelines further provide that an order of reinstatement or re-employment may be subject to a lesser sanction, such as a warning. In these circumstances, the arbitrator must consider any applicable disciplinary code and specify the effective period of the sanction. Such an order may arise where the arbitrator finds that the employee committed misconduct, but that such misconduct should not have resulted in his or her dismissal.

Back pay
Even if an arbitrator finds a dismissal to be procedurally unfair, an order of compensation may not be made in addition to an order of reinstatement or re-employment.

However, an order for reinstatement or re-employment may include an order that the employer pay an applicable amount of back pay to the employee, relating to the period between the dismissal and the date on which the employee returns to work. Such payment must be distinguished from an order for compensation.

The specific amount of back pay should be stipulated in the award, in order to avoid uncertainty and further disputes. Arbitrators should therefore avoid referring to back pay merely in terms of a certain number of months' remuneration.

Reinstatement and re-employment as inappropriate remedies
If an arbitrator finds that a dismissal was substantively unfair, he or she must direct the employer either to reinstate or re-employ the employee, unless one of the following circumstances apply:

  • The employee does not wish to be reinstated or re-employed. An employee may elect not to seek reinstatement or re-employment and must be given an opportunity during the arbitration hearing to state whether these remedies are being sought. An arbitrator should not interrogate an employee on his or her decision not to seek these remedies, apart from ensuring that the employee is making an informed decision – that is, with full knowledge of his or her rights under the Labour Relations Act.
  • A continued employment relationship would be intolerable. In this regard, an employer must demonstrate, by way of evidence and on a balance of probabilities, that there are no reasonable prospects of a good working relationship being restored between the parties, due to the circumstances surrounding the dismissal or what has subsequently taken place between the parties. This evidence may include the employee's negative conduct before or after the dismissal. The employee's return may also result in significant workplace disruption for the employer, thereby rendering a continued employment relationship intolerable.
  • It is not reasonably practicable for the employer to reinstate or re-employ the employee. This relates to practical reasons which do not necessarily pertain to the employment relationship itself. For example, an employee may have been employed as a certified crane operator before dismissal, but if the company has in the interim sold all its cranes, the employment of a crane operator becomes impracticable.

The onus is on the employer to illustrate that reinstating or re-employing the employee would impose a disproportionate financial burden on the employer. The arbitrator should consider whether it would be fair to order re-employment in other reasonably suitable work where re-employment in the employee's previous position may have become impracticable.

Compensation
If it has been demonstrated that reinstatement and re-employment are not appropriate remedies, the arbitrator must direct the employer to compensate the employee.

The maximum amount of compensation which may be awarded to an employee (in an ordinary misconduct matter) is 12 months of the employee's remuneration as of the dismissal date. The arbitrator must determine a just and equitable amount with reference to all circumstances relevant to both the employer and the employee, based on the evidence presented by both parties. If the parties do not present sufficient evidence in this regard, the arbitrator should request them to do so.

An arbitrator must determine the amount of compensation with regard to the extent of the employee's financial loss and the nature of the dismissal. Although compensation is not intended as a means of punishing the employer, the guidelines provide that a compensation award may be used as an expression of the arbitrator's displeasure at a "seriously unfair dismissal". The primary aim of compensation is to place the employee in the same financial position as if he or she had not been dismissed.

The guidelines stipulate numerous considerations that are relevant to determining the amount of compensation in cases of substantively unfair dismissals (which parties must substantiate with evidence), including the following:

  • the employee's remuneration and benefits at the time of dismissal;
  • alternative employment and other steps taken by the employee to mitigate his or her loss;
  • actual financial loss suffered by the employee;
  • the employee's financial position;
  • prospects of future employment, with regard to age, experience and qualifications; and
  • whether the employee unreasonably refused an offer of reinstatement.

Compensation for a dismissal which was only procedurally unfair (ie, was not also substantively unfair) is not based on the employee's actual financial loss and, therefore, alternative employment and mitigation of loss is irrelevant. In this regard, arbitrators must consider:

  • the severity of the procedural unfairness and whether this justifies a compensation order;
  • the employer's conduct before and in the course of dismissing the employee;
  • the extent of anxiety or hurt which the employee experienced as a result of the unfairness, which may involve considering the employee's length of service;
  • compensation as a means to make up for the loss of the right to a fair pre-dismissal procedure; and
  • the amount of compensation which would be just and equitable in the circumstances.

If a dismissal is found to be procedurally unfair (irrespective of the finding on substantive fairness), the arbitrator may also charge the employer an arbitration fee. This is not often done in practice.

Costs awards
Section 138(10) of the Labour Relations Act grants an arbitrator discretion to include a costs order in the arbitration award, should this be required by law and fairness in the circumstances.

If a genuine dispute exists, regardless of the strength of its merits, an arbitrator should generally not award costs. Conversely, if a party or its representative has processed the dispute in a frivolous or vexatious manner or has acted dishonestly, reprehensibly or unreasonably, a costs order may be justified.

A costs order may relate to the cost of legal representation, but may also include an award for the actual costs incurred by an unrepresented party (eg, transport costs to and from the CCMA). Arbitrators may not order parties to pay the costs incurred by the CCMA in respect of the arbitration.

Amounts payable under Section 74 of the Basic Conditions of Employment Act
If the employer owes the employee an amount of money in terms of the Basic Conditions of Employment Act (75/1997) at the time that the arbitration award is determined – such as unpaid salary, overtime or leave pay – and such amount has not been owing to the employee for longer than a year before the dismissal, the arbitrator may determine these claims insofar as they were stated in the 7.11 (conciliation) or 7.13 (arbitration) referral forms. However, if the employee has instituted other legal proceedings or obtained a compliance order to recover the amount owing, the arbitrator would not have jurisdiction to determine the claim.

Comment

An arbitrator's powers to determine an appropriate remedy are limited, first by the specific remedies available in terms of Section 193 of the Labour Relations Act, and second by the principles contained in the guidelines that are relevant to determining which available remedy is appropriate in a particular matter. This necessitates a thorough consideration of all relevant facts surrounding the dismissal, in order to determine whether the factual circumstances call for a reinstatement, re-employment or a compensation order. Litigants are advised to be aware of the detailed guidelines in this regard, given that an arbitrator is required to apply his or her mind to that end and justify his or her reasoning.

Arbitrators are obliged to take the guidelines into account and, accordingly, parties are advised to be mindful of the guidelines in relation to the manner in which an arbitrator assesses fairness and determines an appropriate remedy subsequent to an arbitration hearing. By assessing the conduct of the arbitrator with reference to the guidelines, a party may be able to prove more easily that the arbitrator exceeded his or her powers, committed misconduct in relation to his or her duties or committed a gross irregularity in the conduct of the proceedings. In terms of Section 145 of the Labour Relations Act, such grounds might constitute a defect in the arbitration proceedings, rendering the arbitration award reviewable.

For further information on this topic please contact Alex Ferreira or Louietta Du Toit at ENSafrica by telephone (+27 11 269 7600), fax (+27 11 269 7899) or email ([email protected] or [email protected]).