Fantastic on paper but a flop in the boardroom
The challenge
Many organisations pay top dollar for a senior employee, in the belief that he or she will take it to the next level, only to discover that the executive has oversold their wares. Getting rid of the executive can be a costly and protracted exercise. Currently, the Labour Relations Act, 1995 ("LRA") makes no distinction between senior and junior employees and, as a general rule, to safely dismiss for poor performance, an employer must first follow a formal performance-counselling process. This process can take months to finalise.
An international ad agency entrusted its Cape Town operations to an experienced executive who provided a detailed CV setting out his qualifications and experience. Within a couple of months, it was clear that the Cape Town business was in serious trouble. Its existing clients were leaving in droves and no new business was coming in. There was no meaningful way of performance counselling the executive, and the skills the employee needed could not be obtained from performance counselling. The Company needed to exit the executive out the organisation before it suffered further reputational damage and lost its Cape Town business to its competition.
The Solution
Practically, there were two ways of trying to balance the Company’s legal and business risks:
Settlement
Often the quickest and cleanest way of exiting the executive is when the executive waives his right to sue in exchange for a gratuity. However this option not only requires the buy-in of the executive, but is often costly and is not without legal risk.
The main risk is that if the employer approaches the executive and offers to pay him an amount to resign, and the executive refuses or settlement discussions break down, the executive could allege that any subsequent pre-dismissal process is a farce as the company had clearly indicated that it had made up its mind that it wanted him out.
Move Straight to a Hearing
Our courts have in the past, recognised that in the case of more senior employees, the performance process can be attenuated. The Labour Court in Boss Logistics v Phopi &Other (2010) 31 ILJ 1644 (LC), reiterated that the support which an employer has to provide in order to enable an employee to meet the required standard of performance, is dependent on the level of seniority of the employee as well as their qualifications and experience. On the evidence before it, the Court found that the employee was employed in a management position, and ought to have been able to determine for himself whether his performance was up to the mark. Accordingly, the Court set aside the CCMA’s finding that the company had to put into place performance management processes to assist the employee prior to dismissing him.
Furthermore, the Court was of the view that if an applicant for a position misrepresents his experience or qualifications and is appointed to a position on the basis of such misrepresentation, there is no duty on the employer to provide the employee with counselling, training or assistance.
In brief, there is case law which provides that higher standards of competence and performance are expected of senior or managerial employees than of ordinary workers, especially where the employee has warranted his knowledge and skills.
The Company did not want to enter into a costly settlement with the ad executive and on the basis of the Labour Court judgment above decided to take a robust approach and move straight to a performance hearing. The executive had warranted that he had the necessary skills and experience and should have determined for himself what was required to get the job done. In the end, and at the request of the executive, the parties ended up settling at the hearing. However, this was on a far cheaper basis than would have been the case if the executive did not have the hearing hanging over his head.
The future
One of the current proposed amendments to the LRA is that employees in highly-paid positions can be lawfully dismissed, subject only to the employer giving the employee three months’ notice (or if longer, the period specified in the employment contract). Although the threshold salary for triggering this provision is still to be determined by the Minister of Labour (in consultation with NEDLAC), it is thought that it will be in the region of R1million a year. This is generally viewed as a positive move for the private and public sector. However it is not yet law and there is concern that, as it is currently drafted, this provision may be open to constitutional challenge.
