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Introduction
As will be seen from what is set out below, Standard Bank has been steadfast in enforcing its contractual rights over a number of years with some degree of success, in circumstances where an employee resigns with immediate effect to avoid disciplinary action being taken against him or her. For financial institutions in particular and other employers, this issue is of great importance and relevance. Their determination in this regard has paid dividends.
On 10 December 2020, the Labour Appeal Court (“LAC”) handed down judgment in the matter of The Standard of Bank of South Africa Limited v Nombulelo Cynthia Chiloane (JA85/18) (“Chiloane”) and finally put an end to the debate around whether an employer is prohibited from holding a disciplinary enquiry during an employee’s contractual notice period in circumstances where they resign in breach of their contractual notice period (i.e. with immediate effect).
Perhaps more fundamentally, Chiloane addresses and puts to an end the erroneous, but growing view that an employee has a right to resign in breach of their contractual notice period in the face of a disciplinary enquiry.
The erroneous view
The erroneous view was based on a misinterpretation of the unilateral nature of a resignation. In accordance with this view – because a resignation was a unilateral act that did not require acceptance by an employer in order to be valid – an employee was at liberty to end their employment whenever they wanted, regardless of the agreed contractual notice period and the employer’s protestations to the contrary.
In Naidoo and Another v Standard Bank of SA Limited and SBG Securities (Pty) Limited (2019) 40 ILJ 2589 (LC) (“Naidoo”) the Labour Court, despite recognising that an employee’s resignation in breach of their contractual notice period was unlawful, held that an employer was required to approach the court for an order of specific performance to hold the employee to their notice period and keep the employment contract alive in order to retain its right to discipline the employee.
It has never been a principle of contract law that where an innocent party elects to hold a breaching party to the contract between them, the innocent party is required to obtain an order for specific performance to keep the contract alive. Principles of fairness do not affect or change the principles of contract. The contract is kept alive by the innocent party’s election.
In Mthombisi Mthimkhulu v The Standard Bank of South Africa (J928/20) (“Mthimkhulu”), the Labour Court confirmed that an employee’s tactical resignation, in breach of their contractual notice period, would not be valid and would not take effect where an employer elected to hold the employee to their notice period. Accordingly, the Labour Court confirmed that there was no need for the employer to seek an order of specific performance to keep the employment contract alive and to retain its jurisdiction to discipline the employee.
The judgment in Chiloane
In Chiloane the LAC held that the “argument that where an employee gives notice of termination by way of resigning with immediate effect, such an employee cannot be compelled to continue working for the employer because resignation is a valid unilateral act that comes into effect on the date the employee dictates that it will come to an end, is misconceived.” The LAC went further to confirm that a resignation that is not in compliance with the required contractual notice does not validly terminate the contract of employment unilaterally. Accordingly, the employee’s resignation only takes effect when the contractual notice period runs its complete course or if there is no contract on expiry of the notice period provided for in terms of Section 31 of the Basic Conditions of Employment Act. The LAC concluded that the employer was entitled to proceed with the employee’s disciplinary enquiry during her notice period, as it elected to hold her thereto. The LAC found that the employee’s view that her resignation was with “immediate effect” was of no consequence as it did not comply with her contractual notice period.
Conclusion
An employer’s right to discipline its employees is fundamental to the employment relationship. Many employers in regulated industries are obliged, as a matter of good corporate practice, to ensure that employees who misconduct themselves face disciplinary action and if needs be, be reported to the appropriate regulator. Had the law developed based on the principles in Naidoo, the effect would have been that an employee who wanted to avoid disciplinary action and possible dismissal could just immediately leave. This had the potential to lead to a situation where serious allegations made against an employee could not be dealt with and to allow unscrupulous employees to act with impunity.
Quite simply put, the LAC in Chiloane, has confirmed the principles of the law of contract in cases involving a breach of contract. Where an employee owes his/her employer a period of notice, they cannot avoid that period by resigning with immediate effect, unless the employer agrees that they may do so. To suggest that the employer must apply to the Labour Court for an order of specific performance to enforce the notice period as found in Naidoo was wrong.
This is a welcome end for employers to a much debated topic.