Employees, particularly those in senior positions, often contest dismissals on the grounds of breach of contract, seeking specific performance or damages. These dismissals are typically referred to as “unlawful” rather than “unfair.” The recent case of Passenger Rail Agency of South Africa and Others v Ngoye and Others highlights the risks associated with this approach, especially concerning the likelihood of obtaining a favourable contractual remedy.

Despite the protections against unfair dismissal provided by the Labour Relations Act, 1995 (LRA) and the specialized framework for resolving employment disputes, many senior employees choose to challenge their dismissals based on contract breaches. They often seek remedies such as specific performance or damages, labelling these dismissals as “unlawful” rather than “unfair.”

Unfairness vs. Unlawfulness

There has long been a debate about whether employees should pursue contractual remedies outside of the LRA framework or are required to use the LRA’s recourse mechanisms. This debate was settled by the Constitutional Court in the case of Baloyi v Public Protector, which confirmed that the LRA does not extinguish contractual remedies in cases of employment contract breaches or unlawful terminations. Consequently, employees can choose between pursuing a claim under the LRA or filing a breach of contract claim under section 77(3) of the Basic Conditions of Employment Act, 1997 (BCEA).

While this legal precedent allows employees to “forum shop,” there are concerns about the potential disadvantages of this approach. The Labour Appeal Court (LAC) in Passenger Rail Agency of South Africa and Others v Ngoye and Others (JA 78/21) [2024] ZALAC (26 March 2024) expressed these concerns, emphasizing the risks involved in pursuing an “unlawful dismissal” claim, particularly regarding the potential for obtaining a successful contractual remedy.

Case Background

PRASA terminated the Respondents’ employment contracts, citing that they had exceeded the standard five-year fixed-term contract period extended to all executives. The Respondents filed an urgent application in the Labour Court under section 77(3) of the BCEA, seeking to have their dismissals declared unlawful, reinstatement, and back pay.

The Respondents argued that PRASA was not justified in cancelling their contracts. The first and second Respondents contended that their written contracts were permanent, not fixed-term, and included a non-variation clause. The third Respondent, who did not have a written contract, argued that he had been employed for less than 12 months at the time of termination.

In the Labour Court, PRASA did not contest the facts or allegations made by the Respondents and relied solely on technical defences. PRASA claimed that the Labour Court lacked jurisdiction since the Respondents pleaded unlawfulness rather than breach of contract and failed to specify any contractual clauses PRASA had breached. The Labour Court rejected PRASA’s defence, declared the termination of the Respondents’ contracts unlawful, and granted the requested relief, including costs.

LAC Findings

On appeal, the LAC confirmed the Labour Court’s jurisdiction to adjudicate the dispute, referencing Baloyi. Although the LAC expressed concerns that the Baloyi ruling might weaken the LRA’s dispute resolution framework, the Court followed the Constitutional Court’s precedent.

Regarding the claim’s validity, the LAC held that the absence of a specific breached clause did not invalidate the Respondents’ claim. The LAC found that PRASA had unlawfully terminated the contracts, accepting the Respondents’ uncontested facts as true.

The main issue before the LAC was the appropriate remedy. The Court noted that if a dispute is brought under the LRA, only the remedies provided in the LRA are available. Conversely, by pursuing a breach of contract claim and obtaining a declaration of unlawful termination, the Respondents could only seek contractual remedies. As the Respondents failed to prove any damages, they were not entitled to any compensation, leaving specific performance (reinstatement) as the only possible remedy.

However, unlike unfair dismissal claims under the LRA, where reinstatement is the primary remedy, specific performance in breach of contract cases is not automatic. The court must exercise judicial discretion, considering the contract’s nature and the consequences of granting such relief. Historically, South African courts have been reluctant to order specific performance in employment contracts, which are personal agreements rather than commercial ones.

In this case, the LAC considered several factors, including the seniority of the Respondents, the potential for workplace conflict, PRASA’s lack of need for the Respondents’ services, and the financial prejudice claimed by the employees. Ultimately, the LAC ruled that the Labour Court had erred in granting specific performance without properly exercising its discretion. The appeal was upheld, and the Respondents’ application was dismissed.

Key Takeaways

Employers may continue to face claims of unlawful dismissal, particularly from senior employees. It is crucial to understand that this alternative legal avenue exists and that the Labour Court has jurisdiction to adjudicate such claims. However, the risks for employers may be lower compared to claims brought under the LRA.

From an employee’s perspective, while pursuing an unlawful dismissal claim is an option, litigants should be mindful of the challenges in securing a successful contractual remedy and carefully consider their legal strategy.