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Resigning rather than facing the music
19 August 2019  | Gerhard Smit
It frequently happens that resignation is used as a means to escape inevitable disciplinary action for serious misconduct instituted by an employer. The CEO of Steinhoff, for instance, resigned with immediate effect on Tuesday, 5 December 2017, which had a disastrous effect on the share price and credibility of that company. What is the legal position and what can, or should an employer do in circumstances where an employee resigns rather than face disciplinary action?

The employment relationship is based on the Law of Contract in that a Contract of Employment governs the details of the relationship as is prescribed by labour legislation. In the case of Sihlali vs SABC Limited, (2010) 31 ICJ 1477 (LC), the trite position in law was reiterated that resignation is a “unilateral” act.  It is however so that almost all Contracts of Employment require the employee to give notice of termination of employment. The Basic Conditions of Employment Act prescribes the minimum notice period which must be given depending on the duration of employment.  Resignation in terms of the statutory or contractual notice period will result in the contract only terminating on the last day of the applicable notice period. The status of an employee during this period does not change and therefore an employer has the full right to proceed with a disciplinary hearing after notice of resignation but before the expiry of the notice period.

In the matter of Mtati vs KPMG Services (Pty) Limited (2017) 38 ILJ 1362 (LC), the employer was investigating allegations of serious misconduct against an employee. The employee then decided to resign by giving the prescribed notice, but the employer, in turn, indicated its intention to continue with disciplinary action notwithstanding the resignation of the employee. The employee then resigned again but this time with immediate effect. At the disciplinary hearing, the point was raised that the chairperson did not have jurisdiction to continue with the disciplinary proceedings as the employee has resigned. The chairperson ruled that the hearing would continue, and the employee then walked out of the disciplinary proceedings which continued in her absence. She was found guilty of the allegations against her and dismissed. However, at the Labour Court the Judge held that:

“In my view, the second letter of resignation of the Applicant changed the status of the employee from that of being an employee in the ordinary sense of the word, to that of being the erstwhile employee of the Respondent. This means that the termination of the Employment Contract with immediate effect took away the right of the First Respondent to proceed with the disciplinary hearing against her”. The disciplinary hearing was consequently declared null and void and set aside.

This aspect also served before the Labour Court in the matter of Coetzee vs The Zeitz MOCCA Foundation Trust and Others (2018) 39 ILJ 2529 (LC), where the focus was specifically placed on the contractual relationship between employer and employee. The Judge held as follows:

  1. An employee is entitled to resign with immediate effect only in the case of a preceding material breach of contract by the employer or where the employer accepts the resignation with immediate effect.
  2. Statutorily and contractually the employee in this instance was bound to give at least four weeks’ notice of his resignation.
  3. During an employee’s notice period, there is no legal impediment to the prosecution of disciplinary proceedings and if warranted, the subsequent dismissal of an employee for misconduct.
So, in effect, the only instance where an employee could rely on immediate resignation as a change of his employment status was where the employer would accept the resignation with immediate effect (as was the instance with the Steinhoff CEO whose immediate resignation was accepted by the Board).

By accepting whether expressly or tacitly a resignation with immediate effect from the employee, the Court found that the employer has waived his right to proceed with disciplinary proceedings against the employee.

However, this is not the final position. In the latest case, in the matter Tristyn Naidoo and Sedayshum Naidu vs Standard Bank SA Limited and SBG Securities (Pty) Limited, case number: J1117/190, the employees sought to challenge the employer’s jurisdiction to continue with their disciplinary hearing relating to charges of gross misconduct and dishonesty after they have resigned with immediate effect. The employer in this instance responded on receipt of the resignations with immediate effect by stating that they did not accept the resignations and sought to hold the employees to their notice periods. The Court held that, where an employee resigns without giving notice, the employee is in breach of the Employment Contract and because this is a contractual breach of contract, the employer must, therefore, hold the employee to the contract by seeking an Order for specific performance. In other words, approach the Court for an Order to enforce the notice terms of the Employment Contract. The Court then in this matter went on to state that there is no legal basis for an employer to proceed with a disciplinary hearing against an employee who resigned with immediate effect, without first approaching the Court for an Order for specific performance.  In short, it was therefore held that the resignation with immediate effect brings about an end to the status of the employee in that the employment relationship, even though it is in breach of the termination clause, is terminated unilaterally with immediate effect, and the employer, therefore, has no power or jurisdiction to discipline the employee after they have resigned with immediate effect.

From the latest case law, it seems that an employee can escape a disciplinary outcome by resigning with immediate effect.

An employer’s options are:

  1. Make it clear that you do not accept immediate resignation. Approach the Court and ask for an Order of specific performance. However, in practice, I foresee that this would rarely happen.
  2. It is important to remember that in cases of serious misconduct and allegations involving a criminal element such as assault, theft or fraud, that employers have the right to report such conduct to the relevant authorities, notwithstanding the immediate resignation of an employee.
Tags: Employment
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