Wednesday, October 22, 2008

An employer who dismisses an employee unfairly may ultimately be ordered to reinstate or re-employ the employee, or to pay the employee compensation. 
The Labour Relations Act (LRA) limits the amount of compensation that may be awarded, thus: 
·         For so-called ordinary dismissals, like those for misconduct or operational requirements, the maximum that may be awarded is 12 months’ remuneration; 
·         For automatically unfair dismissals, such as where an employer dismisses for a discriminatory reasons, the maximum that may be awarded is 24 months’ remuneration. 
The primary remedy is, however, reinstatement into the position the employee occupied prior to the dismissal.   
Given that there is often a substantial delay between the date of dismissal and the date when an unfair dismissal dispute is finalised, if an employee is retrospectively reinstated, the employer can be liable to pay a significant amount of back pay.  
In the majority judgement in Equity Aviation Services (Pty) Ltd v CCMA & Others, the Constitutional Court debated the interpretation of the LRA’s relevant provision.  
In recent years there have been conflicting decisions over the amount of back pay to which a reinstated employee is entitled in cases where the employee is reinstated retrospectively. 
On the one hand, it has been argued that in light of the limits on the amounts of compensation a court or tribunal can award, the courts may not order the retrospective reinstatement of an employee in excess of 12 months (in the case of ordinary dismissals) and 24 months (in the case of automatically unfair dismissals). 
Underlying this argument is the view that due to the lengthy delays in the judicial system, employers would be liable for back pay far in excess of what was envisioned by the LRA. Furthermore, so it is argued, there is no rational basis on which to distinguish between the limit on financial compensation where reinstatement is ordered and where it is not.  
On the other hand, it has been argued that when a court or tribunal orders retrospective reinstatement, it cannot be equated to an order of compensation. The aim of a reinstatement order is to ensure that the employee is put in a position where he or she is no worse off. As such, retrospective reinstatement should not be subject to the limitations imposed on the amount of compensation that can be awarded. 
The Constitutional Court has now had the opportunity to pronounce on this issue and, in Equity Aviation Services (Pty) Ltd v CCMA & Others, it was held that there is nothing in the LRA to support the contention that retrospective reinstatement should be limited to a maximum of 12 months’ remuneration or 24 months’ remuneration in the case of an automatically unfair dismissal. 
The Court said that the core value of the LRA is security of employment. If it is found that an employee has been unfairly dismissed, he/she has been unfairly deprived of wages due to the conduct of the employer. 
Reinstatement and compensation are distinct remedies and are dealt with in separate sections of the LRA. The sum of money paid to an employee subsequent to an order of reinstatement with retrospective effect is not compensation but, rather, an attempt to place the employee in the position in which he/she would have been but for the unfair dismissal.  
If there has been a lengthy delay, perhaps occasioned by the constraints of the judicial system, the prejudice caused to an employer if retrospective reinstatement is ordered can be assessed and dealt with by a court or tribunal while exercising its discretion to determine the extent of the retrospectivity order.   
Employers should accordingly be aware that regardless of the amount of time it takes to bring an unfair dismissal dispute to finality, there are no limits to the back pay that may have to be paid to an employee who is reinstated retrospectively.  
Brigitte Macdonald is a senior associate in the Employment Law Department at commercial law firm Bowman Gilfillan