It frequently occurs that employees who receive an alternative work opportunity resign without giving the prescribed notice period. Previously, CEO published an article in which we specifically addressed whether the employer was required to remunerate the employee for the notice period not worked.
This article explores whether the employer is permitted to deduct the value of the notice period not worked by the employee where they were required to do so from the employee's remuneration. In other words, under which circumstances may an employer deduct remuneration owed to the employee for work rendered due to their failure to work the statutory or agreed notice period?
It may happen that because the employee failed to work the notice period, employers are left with the cost of recruiting another individual to replace said employee, which involves not only recruitment costs but also training, amongst other things. In so doing, the employer incurs some form of damage as a result of the employee's action.
Consequently, employers incorporate a clause into their contracts that states, for example, that if an employee tenders an immediate resignation, the employer will be able to deduct from their remuneration the notice that the employee was meant to serve. However, clauses of this nature are very problematic.
The Basic Conditions of Employment Act, under Section 37, provides guidelines for termination. It states the following:-
- Notice of termination of employment
(1) Subject to Section 38, a contract of employment terminable at the instance of a party to the contract may be terminated only on notice of not less than—
(a) one week if the employee has been employed for six months or less;
(b) two weeks if the employee has been employed for more than six months but not more than one year;
(c) four weeks, if the employee—
(i) has been employed for one year or more; or
(ii) is a farm worker or domestic worker who has been employed for more than six months.
(2) (a) A collective agreement may not permit a notice period shorter than that required by subsection (1).
(b) Despite paragraph (a), a collective agreement may permit the notice period of four weeks required by subsection (1)(c)(i) to be reduced to not less than two weeks.
The section, however, does not provide remedies for when there is an immediate resignation from the employee. Thus, employers think they are protected by the clause in the contract, which states that they are entitled to deduct said notice.
The problem with deducting notice pay is that it contravenes Section 34 of the BCEA. Section 34 regulates unlawful deductions. It specifically states that an employer is not allowed to deduct from an employee's salary unless there is consent from the employee and the deduction is permitted by law through a collective agreement, arbitration award or court order. Furthermore, the above is subjected to a fair hearing about why the deduction should not be made.
Since notice pay is not a deduction permitted by law through an arbitration award or court order, and Section 37 nor the BCEA provides remedies for an employer in a situation of immediate resignation, the only remedy an employer has is to recuperate the monies through the Civil Courts.
In South African Music Rights Organisation Ltd v Mphatsoe (J 595/08) [2009] ZALC 34; [2009] 7 BLLR 696 (LC); (2009) 30 ILJ 2482 (LC) (23 March 2009), the Court had to decide whether the Company had a claim for damages when the employee did not serve out his notice period thus emanating in a breach of contract. The Court states the following: –
"The introduction of a contractual right to fair dealing in the employment relationship calls into question the assumption that the purpose of damages for breach of an employment contract is simply to protect the aggrieved party's interest in a denied period of notice, or the unexpired portion of a fixed term contract. Breaches of mutual obligations of trust and confidence are unlikely to be remedied by an approach to the assessment of damages for breach of an employment contract such as that for which SAMRO contends." Essentially, the claim for damages on the part of the employer accordingly failed.
In another case, NEWU v CCMA & others [2007] ZALAC 3 (13 March 2007), the Court remarked that an employer could sue for damages in law where an employee failed to serve the requisite notice. However, employers rarely do so when, in actuality, they have a claim under breach of contract and the BCEA.
It is important to note that both cases concluded that employers cannot simply deduct notice pay. The cases emphasise that employers have a remedy, but the remedy is not one of deducting notice pay. They essentially point out that employers can use our Civil Courts, which is what transpired in the case of SAMRO.
Thus, it is suggested that employers relook at the employment contract as a whole and align the notice pay deduction clause with Section 34 of the BCEA. Should the employer wish to deduct the notice period from the employee's final remuneration, the employer would need to gain the employee's consent. Employers must obtain this consent specifically from the employee upon immediate resignation. It should be noted that the deduction will further be limited to 25% of the remuneration due to the employee. On the other hand, if there is no consent, the employer cannot deduct the notice pay. The only recourse available would be to approach our Civil Courts with a justifiable reason why damages in terms of a breach of contract should be awarded.
It must lastly be noted that the CCMA no longer enjoys jurisdiction to hear disputes relating to employee deductions. Therefore, if an employee files a case at the CCMA regarding a deduction under Section 34(1), the employer should raise a point in limine at the start of the arbitration stating that the CCMA lacks jurisdiction to hear the dispute.
This position was confirmed in the Labour Court judgement of O'Reilly v CCMA and Others JR2395/19 (LC), where the Court had to determine whether the CCMA had jurisdiction to deal with disputes relating to Section 34 deductions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.