Good labour law should encourage economic growth. This means the regulation of the labour market should be sensitive to economic growth. The question is how the labour market is supposed to be regulated in order to guarantee economic growth?
By Cephas Mavhondo
In regulating the labour market some laws may bring more questions than answers. Such laws should be quickly amended or repealed to avoid confusion in the labour market. Such confusion is not healthy for the so much sought after foreign direct investment which stimulates economic growth.
In light of this view, the writer will try to unpack the current developments in Zimbabwe regarding termination of employment contracts in terms of Act 5/2015.
On July 17 2015, the Supreme Court of Zimbabwe delivered a judgment in Don Nyamande and Another v Zuva Petroleum (Private) Limited: SC43/15 to the effect that:
(a) The employer had a right to terminate a permanent employment contract on notice;
(b) That this right of the employer was there in terms of the common law of Zimbabwe;
(c) That the Labour Act never abolished that right; and
(d) The employee is equally entitled to terminate the same contract on notice.
Soon after the Zuva judgment, thousands of employees lost their jobs as employers took advantage of the legal effect of it.
For the employees, the Zuva judgment spelled doom. About a month after the judgment, the Parliament of Zimbabwe (House of Assembly and Senate) enacted the Labour Amendment Act No. 5 of 2015, which amended the Labour Act (Chapter 28:01) herein after called “the Act”. The amendment became law on August 26 2015. Act No. 5 of 2015, introduced a number of changes to the Act. With respect to termination of employment contracts on notice, the critical provisions are to the effect that:
(a) No employer shall terminate a contract of employment on notice unless, the termination is in terms of an employment code of conduct or the employer and employee mutually agreed in writing to the termination, or the employee was engaged on a fixed term contract or the termination is pursuant to retrenchment.
(b) Where an employee’s permanent contract is terminated on notice in terms of the Act as amended, that employee shall be entitled to a minimum retrenchment package of not less than one month’s salary for every two years of service or a pro rata (a proportion of that)
(c) Section 12 of the Act as amended by Act 5/2015 applies to every employee whose services were terminated on three (3) months’ notice on or after July 17 2015.
What followed after Act 5/2015 is what is currently giving players in the labour market relentless headaches. The amendment has one main shortcoming — it is not clear in various respects. This is proving costly to players in the market. The courts are continuously grappling with conflicting interpretations of some of the parts of the amendment. Resultantly, a number of questions arise and I will attempt to answer them in this article.
Does the employer still have the common law right to terminate a contract on notice?
Yes. However, the right is now heavily regulated by Section 12(4a) of the Act as amended. The employer can only terminate on notice if the termination is in terms of a code of conduct; or the employer and employee have mutually agreed in writing; or when the worker is employed on a fixed term contract; or the termination is pursuant to retrenchment.
Does the employee still have the common law right to terminate the contract of employment on notice?
Yes and this right has not been affected by Act 5/15 as section 12(4a) of the Act as amended which regulates termination of employment on notice does not cover termination at the instance of the employee.
How can a contract of employment be terminated on notice in terms of a code of conduct?
In my view a contract of employment can only be terminated on notice in terms of a code of conduct if that code of conduct provides for termination of employment on notice. There is a contrary view that an employee whose contract has been terminated through disciplinary proceedings in terms of a code of conduct is entitled to a notice. This is, in my view, a clear misinterpretation of the Act as amended.
Does a clause in a contract of employment to the effect that it can be terminated on notice provide a basis that the employer and employee mutually agreed in writing to the termination of the contract?
No. The agreement to mutually terminate a contract on notice is only reached at the time or after either party has mooted the idea to terminate the contract.
Does an agreement to mutually terminate a contract need to be on a single written document?
No. What is only required is that the employer and the employee must have “mutually agreed in writing”. In my view, any written document (s) can provide proof that the parties ‘mutually agreed in writing’- that is there was a meeting of the minds in writing. For example where the employer writes a letter to the employee and the employee replies agreeing to have the contract terminated.
However, it is ideal to have a single document recording the agreement which both parties would have signed. See Ruturi v Heritage Clothing P/L 1994 (2) ZLR 374 (S)
Is it really necessary to terminate a fixed term contract on notice?
Not for the stated termination date, unless the parties had previously agreed in the contract that it shall be necessary to issue a notice in order to terminate a fixed term contract. Either party has no right to terminate a fixed term contract, unless the parties agreed otherwise. This is so because a fixed term contract terminates automatically by expiry of time.
This is the position of our common law. However, it may be courteous to give notice even if it is not required.
It seems as if Act 5/2015 has changed this common law position such that the employer now has a right to terminate a fixed term contract on notice.
It is important to note that the notice periods stated in section 12(4) of the Act do not create a right for either the employer or the employee to terminate a fixed term contract. The notices only apply when there is a right to terminate a fixed term contract for example where the parties have agreed that their contract shall be capable of being terminated on notice or where an enactment (for example Act 5/2015) provides such a right.
How does notice apply pursuant to retrenchment?
Amendment number 5/2015 repealed a provision in the old Section 12C of the Act which expressly provided that no employer shall retrench any employee without affording the worker the notice of termination to which the employee is entitled — See Garikai v Zimasco SC46/96. Despite the repeal, this position in my view has not changed as section 12(4a) of the Act as amended covers termination on notice pursuant to retrenchment. This means that upon retrenchment of an employee, the employer is still required to give the worker the applicable notice period. This notice period is normally given in the retrenchment package as cash in lieu of notice.
What are the terminal benefits that an employee is entitled to upon termination on notice?
These are: all unpaid salaries, if any, accrued leave days (paid as cash in lieu of leave), if any, applicable notice period (cash in lieu of notice), minimum retrenchment package (This does not apply to fixed term contracts), medical aid expenses (if applicable), any pension, if any and statutory or contractual gratuity, if any. See section 13 and section 12C(2) of the Act as amended. The agricultural sector has its own special terminal benefits.
Is Section 18 of Act 5/2015 a retrospective provision?
Yes. This position was accepted by the Labour Court in a recent judgment by Justice Mhuri in the matter of Faith Mupangani NO v National Handling Services (Private) Limited and seven others LC/H/495/17) in which the court ruled that Section 18 of amendment Act 5/15 as further amended by Finance Act 8/15 is clearly retrospective such that all the terminations done in terms of Section 12(4) of the Labour Act were rendered null or void as they do not comply with the new Section 12(4a) of the Act as amended. The court extended the retrospective effect of section 18 to cover the validity of termination of employment done in terms of section 12(4).
Resultantly, the court found that section 18 invalidated such terminations. The court went on to say such terminations are therefore unlawful and the remedy for such employees is reinstatement failing which payment of damages in lieu of re-instatement.
Are the employees whose permanent contracts were terminated on notice following Zuva judgment but before Act 5/15, entitled to the minimum retrenchment package?
A reading of the retrospective section 18 of Act 5/2015 seems to show that parliament wanted such employees to be paid the minimum retrenchment package.
However, strict interpretation of Act 5/2015 shows that such employees are not entitled to the minimum retrenchment package.
This is the approach taken in the case of Aleck Magwenzi NO v Chapman Golf Club LC/H/800/16 where Murasi J held that Section 12C(2) of the Act as amended does not apply to employees whose contracts were terminated in terms of Section 12(4) of the Act. In other words, the Labour Court in that judgment accepted that Section 18 of Act 5/2015 had a retrospective effect.
The court, however, was of the view that the retrospective effect was not extended to Section 12C(2) as to enable payment of compensation to employees whose contracts were terminated in terms of Section 12(4) of the Act.
Is Section 18 of Act 5/2015 constitutional in being retrospective?
The question was in a way answered in the judgment of ZimInd Publishers (Private) Limited v Minister of Labour HH170-17 when Justice Matanda-Moyo held that Section 18 of Act 5 /2015 is retrospective and that the retrospectivity is unconstitutional as it takes away vested rights of the employer. The court found that Section 18 was inconsistent with sections 3(2)(k) of the Constitution of Zimbabwe that provides for “due respect for vested rights”, section 56(1) and Section 86 of the Constitution.
Since the pronouncement of the constitutionality of Section 18 in the ZimInd case supra (above) is yet to be confirmed by the Constitutional Court in terms of Section 167 of the constitution, it is too early for employers to celebrate and for employees to be sad. The game is still on.
What is the way forward in terms of legislative developments?
Possibly because of all these problems in termination of employment contract in terms of Act 5/ 2015, the Labour Act is being amended again but this time in a more holistic way. It will make more sense to discuss the proposed amendments once the relevant Bill has been gazetted.
Conclusively, Act 5/15 has caused a lot of problems for both the employers and employees. Indeed, it has brought more questions than answers concerning termination of employment contract on notice. There are other problems brought about by this Act for instance empowering Labour officers to make draft rulings in conciliation matters, which rulings are supposed to be confirmed by the Labour Court.
The writer will not go into details about the issue of labour officers in this article. That issue is left for another day. As such Act 5/2015 has to be quickly amended or repealed to avoid more confusion in the labour market. This confusion is not good for the nation as it may drive away foreign direct investment.
Advocate Mavhondo is a partner with Mhishi Nkomo Legal Practice. These New Perspectives articles are co-ordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society. E-mail firstname.lastname@example.org and cell no +263 772 382 852.