TM labour case: The Zuva ghost

On 17th July 2015, the Supreme Court of Zimbabwe delivered a judgment in Don Nyamande and Another v Zuva Petroleum (Private) Limited: SC 43/15 to the effect that in terms of our common law, the employer had a right to terminate a permanent employment contract on notice.

Cephas Mavhondo,lawyer

The court stated that the Labour Act, never abolished that right; and that the employee is equally entitled to terminate the same contract on notice.

Soon after the Zuva judgment, thousands of employees lost their employment in Zimbabwe as employers took advantage of the legal effect of Zuva judgement. For the employees, the Zuva judgment spelled doom.

About a month after the Zuva judgment, the Parliament of Zimbabwe 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 26th August 2015.

Act No. 5 of 2015, introduced a number of changes to the Act. With respect to termination of employment contracts on notice, the following three critical changes.

Firstly, the Act now provides that 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.

Secondly, the Act now provides that 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 (1) month’s salary for every 2 years of service or depending on the circumstances of the case, a pro rata (a proportion of that).

Thirdly, the Act as amended by Act 5/2015 now applies to every employee whose services were terminated on three (3) months’ notice on or after the 17th July 2015. It is this third change that this article is going to focus on.

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 have answered some of them in my previous articles. In the midst of the stir of conflicting court decisions, the Constitutional Court on 28 March 2018 delivered a very important judgment in the case of Greatermans Stores (1979) P/L t/a TM Stores and Another v The Minister of Public Service and AG CCZ 2/18. The implications of this judgments are many. I will address some of the implications herein by answering two burning questions.

Firstly, 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 shows that the Parliament wanted such employees to be paid the minimum retrenchment package.

However, the Labour Court in one case held that such employees are not entitled to the minimum retrenchment package. This is the approach taken in the case of Aleck Magwenzi N.O. v Chapman Golf Club LC/H/800/16 where the court held that Section 12 C(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 12 C (2) as to enable payment of compensation to employees whose contracts were terminated in terms of Section 12 (4) of the Act.

In my view and with all due respect, the Labour Court erred in not extending the effect of the retrospective provision to enable payment of compensation (minimum retrenchment package) to employees whose contracts were terminated in terms of section 12 (4) as alluded to above. The Constitutional Court in the TM case sealed the position on this issue when it held that section 18 of Act 5/2015 was retrospective to the extent that all employees whose contracts were terminated after Zuva Judgment were entitled to the compensation of 1 month’s salary for every 2 years served. This judgment has thus settled the debate on retrospectivity of section 18 of Act 5/ 2015. This judgment has also therefore indirectly overruled the Labour Court judgment in Aleck Magwenzi case.

In a different Labour Court case of Faith Mupangani N.O v National Handling Services P/L and 7 Others LC/H/495/17, the Labour Court held section 18 of Act 5 /2015 is retrospective hence termination of employment contract done in terms of section 12 (4) of Labour Act after Zuva judgment and before Act 5 of 2015 was null and void as it was would not have been done in terms of the new section 12 (4a) of the Act as amended. The court then went on to state that in such circumstances the primary remedy for the employee is reinstatement failing which payment of damages in lieu of reinstatement. With all due respect, the court erred in holding that the retrospective effect of section 18 of Act 5/ 2015 covers the validity of the termination on notice or nullifies the termination. This interpretation amounts to an absurdity- how can the Act entitles such an employee to the minimum retrenchment package as alluded to in the TM Constitutional judgment on the one hand and nullify the termination of employment on notice for the same employee on the other hand? In my view, the retrospective section only applies to the employees whose contracts were terminated on notice on or after 17th July 2015 and not to the validity of the termination on notice done on or after 17th July 2015. As such, this section only entitles such employees to the minimum retrenchment package and not to any other remedy.

It is however critical to note that it is not every employee whose contract was terminated on notice who is entitled to the minimum retrenchment package. It is only those employees who were employed on permanent basis and whose claims for minimum retrenchment package have not prescribed in terms of section 94 of the Act which provides that unfair labour practices claims prescribe within two years, who are entitled to the minimum retrenchment package.

Secondly, is section 18 of Act 5/2015 constitutional in being retrospective? This question was first answered in the judgement of ZimInd Publishers (Private) Limited v Minister of Labour HH170-17 when the court held that Section 18 of Act 5 /2015 is retrospective and such retrospectivity is unconstitutional as it takes away vested rights of the employer. The High 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.
Clearly, this judgment of the High Court was indirectly overruled by the Constitutional Court when it delivered the TM judgment. The Constitutional Court in the TM case held that retrospective application of the Labour Act as amended is not unconstitutional in anyway.

Since the pronouncement of the constitutionality of section 18 in ZimInd case supra (above) has not yet been confirmed by the Constitutional Court in terms of section 167 of the Constitution, it is now certain that the Constitutional Court will not confirm that judgment.

In conclusion the retrospective effect of section 18 of Act 5 of 2015 is constitutional. Accordingly, the employees whose permanent contracts were terminated on notice after Zuva judgement but before or after Act 5 of 2015 are entitled to the minimum retrenchment package. Act 5 of 2015 did not nullify the termination on notice done after Zuva judgment. However, the employees in question can only succeed in their claims for minimum retrenchment package if their claims have not prescribed in terms of section 94 of the Act.

Mavhondo is a lawyer and partner with Mhishi Nkomo Legal. These New Perspectives articles are coordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society (ZES) Cell _263 772 382 852 and email kadenge.zes@gmail.com.

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