Substantively unfair dismissals: reinstatement is the primary remedy

The Constitutional Court has re-affirmed, in a judgment handed down on 19 October 2021 in the matter between Booi v Amathole District Municipality and Others (CCT 119/20) [2021] ZACC 36, that reinstatement is the primary remedy for a substantively unfair dismissal even in the face of allegations of an intolerable employment relationship. In this matter the crisp question before the Constitutional Court was whether a court or arbitrator is entitled, in terms of section 193(2)(b) of the Labour Relations Act (LRA), to consider whether a continued employment relationship would be intolerable when considering the remedy of reinstatement.

The section of the LRA in question reads as follows:

193.   Remedies for unfair dismissal and unfair labour practice.

1. If the Labour Court or an arbitrator appointed in terms of this Act finds that a dismissal is unfair, the Court or the arbitrator may—

a) order the employer to re-instate the employee from any date not earlier than the date of dismissal;

b) order the employer to re-employ the employee, either in the work in which the employee was employed before the dismissal or in other reasonably suitable work on any terms and from any date not earlier than the date of dismissal; or

c) order the employer to pay compensation to the employee.

2. The Labour Court or the arbitrator must require the employer to re-instate or re-employ the employee unless—

a) the employee does not wish to be re-instated or re-employed;

b) the circumstances surrounding the dismissal are such that a continued employment relationship would be intolerable;

c) it is not reasonably practicable for the employer to re-instate or re-employ the employee; or

d) the dismissal is unfair only because the employer did not follow a fair procedure.

3) If a dismissal is automatically unfair or, if a dismissal based on the employer’s operational requirements is found to be unfair, the Labour Court in addition may make any other order that it considers appropriate in the circumstances.

4) An arbitrator appointed in terms of this Act may determine any unfair labour practice dispute referred to the arbitrator, on terms that the arbitrator deems reasonable, which may include ordering reinstatement, re-employment or compensation.

The background facts, and string of litigation that ensued in this dispute, is as follows:

South African Local Government Bargaining Council

• The appellant was employed by the respondent as a senior manager of municipal health services until he was charged with misconduct and dismissed in December 2015 following a disciplinary hearing that found him guilty of the charges levelled against him. Aggrieved, the appellant disputed the substantive and procedural fairness of the dismissal at the South African Local Government Bargaining Council. The arbitrator seized with the matter exculpated the appellant of the charges and found that his dismissal was substantively unfair but procedurally fair. Applying section 193(2) of the LRA, the arbitrator granted an arbitration award reinstating the appellant retrospectively.
• The respondent argued that the appellant’s continued employment would be an operational risk because the relationship of trust between him and his direct supervisor had irretrievably broken down. The arbitrator concluded that this argument was premised on the appellant being found guilty of the misconduct for which he was disciplined. The arbitrator, however, found the appellant to be innocent and held that the respondent’s argument was insufficient to persuade him to deviate from the primary remedy of substantive unfairness of the dismissal. As such the arbitrator awarded retrospective reinstatement with back-pay.

Labour Court

• After the award was handed down, the respondent approached the Labour Court to review the award. The review was based on 3 primary grounds: firstly, the arbitrator misconstrued the essence of the charges for which the appellant was dismissed and accordingly misconceived the entire enquiry into substantive fairness; secondly, the arbitrator misapplied the law of evidence in respect of certain evidence; and thirdly, the arbitrator committed a reviewable irregularity by ordering reinstatement despite the fact that the trust relationship between the appellant and the respondent had, on the evidence, broken down. The appellant disputed these grounds of review and maintained that he was prepared to continue working with his direct supervisor.
• The Labour Court found that the arbitrator’s finding that the appellant was not guilty of the charges fell within the band of reasonable decisions however, on the third ground of review, held that the arbitrator’s decision not to deviate from the primary remedy of reinstatement is unsupported on the evidence.
• The Labour Court accordingly upheld the arbitrator’s decision that the dismissal was unfair but set aside the award of retrospective reinstatement, replacing it with one of compensation. The appellant demanded, and was paid, the compensation.

Labour Appeal Court

• The appellant then sought leave to appeal from the Labour Court to the Labour Appeal Court. Leave to appeal was denied by the Labour Court resulting in the appellant petitioning to the Labour Appeal Court directly. The Labour Appeal Court also dismissed the petition for leave to appeal on the basis that it lacked prospects of success.

Constitutional Court

• The appellant then approached the Constitutional Court to contest the Labour Court’s decision. The appellant took issue, amongst other things, with the Labour Court’s assessment of the employment relationship. In his view, the finding that the trust relationship had irretrievably broken down was inaccurate. The intolerability of the employment relationship was always dependent upon the allegations of misconduct being proven – which they were not. Thus, once the appellant was exonerated of the charges he was entitled to reinstatement as the primary remedy provided for by section 193 of the LRA.
• The respondent argued that the appellant’s conduct coupled with the troubled state of his relationship with his direct supervisor could not be seriously disputed. There was clearly no prospect of a viable employment relationship being established pursuant to a reinstatement order. The respondent persisted with the submission that where the arbitrator went wrong was in the assumption that a finding of not guilty in respect of the substantive misconduct charges meant that the remedy of reinstatement necessarily had to follow. According to the respondent, that assumption was a non sequitur (a conclusion that does not follow).
• The Constitutional Court held that it is plain from the jurisprudence that where a dismissal has been found to be substantively unfair, reinstatement is the primary remedy and therefore a court or arbitrator must order the employer to reinstate or re-employ the employee unless one or more of the circumstances specified in section 193(2)(a) – (d) exist, in which case compensation may be ordered depending on the nature of the dismissal. The language, context and purpose of section 193(2) dictates the bar of intolerability to be a high one. The term “intolerable” implied a level of unbearability, and requires more than the suggestion that the relationship is difficult, fraught or even sour.
• The Constitutional Court found that the Labour Court was not entitled to interfere with the arbitrator’s decision – it held that a court reviewing an arbitration award of reinstatement on the basis of the intolerability in section 193(2)(b) does not itself conduct the intolerability enquiry afresh. Instead, it assesses whether the enquiry conducted by the arbitrator led them to a decision which could not have been reached by a reasonable decision maker conducting that enquiry. The Labour Court fudged this enquiry by conducting it afresh. There was no basis for the Labour Court’s interference with the arbitrator’s exercise of his discretion to reinstate the appellant. It went on further to say that the enquiry into whether there has been a breakdown of the employment relationship is an objective one, and does not turn on the subjective and possibly irrational views of the employer. It concluded that it was therefore reasonable for the arbitrator to conclude that the respondent’s submission about the prospects of a continued relationship were not sufficient to reach the high bar of intolerability, and did not warrant departure from the primary remedy of reinstatement.
• The appeal succeeded, the Labour Court’s decision set aside and replaced with a reinstatement order together with back-pay.

Lessons to be learned

• The high threshold set by section 193(2) gives effect to the purpose of the reinstatement injunction, which is to protect substantively unfairly dismissed employees by restoring the employment contract and putting them in the position they would have been in but for the unfair dismissal. The courts will not readily, or easily, interfere with the arbitration award granting reinstatement.
• It goes without saying that misconduct should therefore be thoroughly investigated to ensure the evidence supports the charge. Only charge the employee with the misconduct which you can prove to ensure that, in the event of dismissal, the reason is fair in the circumstances.
• It is not enough for employers to merely say the trust relationship has irretrievably broken down and made the employment relationship intolerable. The conclusion of intolerability will not be easily reached by an arbitrator or even the courts. Employers who wish to rely on a complete breakdown of the trust relationship, rendering the employment relationship wholly intolerable, must provide weighty reasons, accompanied by tangible evidence, to prove such intolerability. The evidentiary burden is even higher in this regard in circumstances where the dismissed employee has been exonerated of all charges, as was the case in this matter.