CoA judgement on termination of contracts: bitter pill to swallow

SHARE   |   Monday, 22 August 2016   |   By Adam Phetlhe
CoA judgement on termination of contracts: bitter pill to swallow

The Court of Appeal (COA) recently delivered two separate and telling judgements in cases where contracts of employment were terminated. In these cases, the High Court had initially ruled in favour of employees subsequent to which employers lodged appeals with the COA. In one case, the employee was successful in that the COA confirmed and awarded him financial damages while in the other, employees were not lucky because they only got compensation in the form of notice pay.  The Patriot on Sunday reported on 8 August 2016 under the heading “Medic wins P1m for wrongful dismissal” that Dr Marape Marape had sued his erstwhile employer, Botswana Baylor Children’s Clinical Centre of Excellence for wrongful dismissal. At the core of the COA ruling in favour of Dr Marape was the clause in his contract which provided that his contract could be terminated on notice but on condition that there is a valid reason.  Because the court found that no such valid reason existed, it ruled that Dr Marape be compensated the remainder of his contract hence the P1m figure.

In the case of Chakalisa Ronald Phuthego and four others who were suing Barclays Bank Botswana for unlawful termination, the clause in their contract of employment which led them to lose their lawsuit is that “Barclays reserves the right to terminate the employment with immediate effect by giving written notice and paying your salary in lieu of the whole or any unexpired part of your notice period”. This without doubt, is a telling blow to the litigants in this case and to those who have signed contracts with similar clauses elsewhere. It begs the question whether those whose current contracts bear this clause and whether in law the employees with such contracts can approach employers and change to those similar to Dr Marape’s. Contracts are agreements between two parties and therefore it should pose no difficulty in either party calling for variation of such contracts. But armed with the COA judgement which virtually guarantees that employers’ financial losses for “wilfully and maliciously” terminating such a contract is a drop in the ocean, would employers be flexible enough to accommodate employees who wish to vary their contracts such that should the employer terminate them prematurely for whatever reason, they don’t lose out as is the case with Barclays Bank matter?

On April 8, 2016, the Ontario Court of Appeal released its decision in Howard v/s Benson Group. In this case, the appellant John Howard had a five-year contract with the Benson Group which was terminated twenty three months into it. Howard sought to be compensated for the remainder of his contract. There was a clause which provided that it could be terminated by providing Howard with notice. The Ontario Court of Appeal highlighted the following question as the main issue to be decided: Is an employee who is employed under a fixed-term contract that does not provide for early termination without cause, entitled to payment of the unexpired portion of the contract on early termination of the contract? The court answered in the affirmative where ultimately, Howard was awarded damages equivalent to three years of $180,000. 

It goes without saying that this clause “paying your salary in lieu of the whole or any unexpired part of your notice pay” somewhat makes employers “hold all the aces” in that your fixed-term contract could be terminated to your detriment at any time owing to the fact that firstly, a valid reason becomes inconsequential and secondly that the employer “pays your salary in lieu of the whole or any unexpired part of your notice period”. A universally accepted principle for termination of employment is that it must be procedurally and substantively fair. This principle still stands and is applied at the Industrial Court (which is a Court of law and equity) but it looks like litigants may from now on fear the High Court given the precedent by the COA - that is, even if there is no valid reason for termination or the reason for such was evidently and manifestly motivated by ill motive, the clause determines your fate compensation-wise.

From the COA judgements, it would appear that it was merely interpreting the two fixed-term contracts and in the process alerting us of their implications and ramifications. However, one would have expected the COA to have protected the weaker party to a contract (employees) on the basis that no solid grounds existed for termination, a cardinal principle in termination of employment. Most employees rely on their employers as their sole source of income, and a sudden disruption in that flow of income takes an enormous personal and financial toll. This doesn’t appear to have been at the back of the mind of the COA. Any type of contract is assumed and expected to be fair on either party such that none of the parties suffers no damage of whatever nature at its or termination-it must be drafted in the spirit of good faith. Something tells me that bank employees committed a genuine mistake which cost them dearly and this should have been considered. If these considerations were taken into account, the bank employees could have been awarded a better financial settlement.

When all is said and done, the esteemed justices have delivered judgement and bitter as it is to swallow, we have to nevertheless. Legislators have to as a matter of urgency, re-visit the Employment Act since the COA determined that there is no provision in this Act which obliges an employer to provide a valid reason before a permanent employee can be dismissed on notice.

Adam Phetlhe
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