Labour Column: Right to terminate contracts on notice still legally applicable

Davies Ndumiso Sibanda
THE Labour Amendment Act did not extinguish the employers’ right to terminate employment contracts on notice but it merely set conditions and procedures for terminating employment contract on notice.

One such condition is that where the employer cannot afford to pay retrenchment packages and has evidence that he has no capacity to pay and having tendered the relevant accounts, the courts will have no option but to grant the employer’s application not to pay a retrenchment package.

This is one fact that was never explained to the workers and workers are beginning to meet challenges as they try to have employers pay retrenchment packages.

The challenge given has left many workers who had a hope of being paid something disillusioned and some have contracted stress related illnesses.

I am of the view that trade unions and labour officers have a duty to tell workers the truth about their chance of getting retrenchment packages related to termination on notice.

There are however cases that would not qualify to be exempted from paying anything and such cases are those where the employers’ financials and other related reasons show that the business has the capacity to pay.

Workers will however have to engage an expert who can use a toothpick to go through the employer’s story and demonstrate that the employer has the ability to pay. This could lead to brutal litigation which could be a disadvantage to the worker who might have no money to hire lawyers to tell his story.

What this means is that when workers can see signals showing that the business is not doing well but is still hanging in there, it is advisable to engage the employer and negotiate retrenchment packages and leave.

Even in cases where the employer offers the minimum wage, workers are better off taking it than to wait until the business sinks to a point of no return and hope to get something.

Those organisations that are doing very well and those that are profitable including those on a recovery path are unlikely to be allowed to terminate employment contracts on notice without paying the packages.

However, the packages paid will vary from case to case as guided by the financial health of the business and how well the representatives argue their case before the retrenchment board.

Chances are very high that the Minister’s decision on these retrenchment matters is likely to be challenged by the parties at the Labour Court and Supreme Court.

This is so because section 12C(3) of the Labour Act reads “Where an employer alleges financial incapacity and consequent inability to pay the minimum retrenchment package timeously or at all, the employer shall apply in writing to be exempted from paying the full minimum retrenchment package……”

This clearly shows that the courts will have no choice but to grant employers not to pay anything if they have no capacity to pay. There is no room for discretion. Once a finding of fact that the employer cannot manage to pay (at all) then the court has no choice but to excuse the employer from paying the retrenchment package.

Because the retrenchment board has a quasi-political character, there are chances that decisions might not be fully technical and legal thus parties might approach the Labour Court and the Supreme Court on a point of law which in my opinion would hinge on the phrase “at all” given in section 12C(3) of the Labour Act.

This form of litigation is likely to prove expensive for both employer and labour and could prove disastrous for the party that loses the case with costs.

In conclusion, the right to terminate on notice is still available for a number of cases, all the employer needs to do is look at the procedures applicable for each case and the worker has to handle the process whilst being very much alive to the possible consequences of the response as the whole process is a legal minefield which is still being unpacked by the courts and will take some time before we are all clear on the direction.

Davies Ndumiso Sibanda can be contacted on: email: or cell No: 0772 375 235

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