A Labour Court judge ruled on severance pay for retrenched employees in a case where three workers who had secured their new jobs themselves, were refused payment from their former employee.
Image: ChatGPT
The Labour Court has made it clear that retrenched employees who have secured alternative employment themselves are entitled to their severance pay.
Trade Union Solidarity turned to the Cape Town Labour Court on behalf of three of its members after the company for which they had worked refused to pay them their severance payments, as required by law.
The company, Tsebo Facilities Solutions, argued that in light of the trio having secured new jobs, there was no need to further pay them their severance pay.
A CCMA arbitrator earlier ruled against them and found that they had forfeited their severance pay under the Basic Conditions of Employment Act. This was based on the wrong conclusion that their now former employer had arranged their alternative employment with their new employer.
Solidarity subsequently successfully turned to the Labour Court to have this finding overturned.
Tsebo delivered a service to Sanlam in terms of a Service Level Agreement (“SLA”) with a staff complement of about 125 employees for about 20 years.
Tsebo lost the contract to another company, CBRE, and Sanlam issued a written notice of the termination of the SLA with Tsebo. Shortly afterwards, Tsebo issued section 189(3) notices to all affected employees, including the applicants, followed by a notice of termination of employment.
But by then, the three had already secured employment with CBRE, which was taking over from Tsebo.
The termination notice issued to the applicants referenced the section 189(3) notice and informed them that as they had found alternative employment, they were not entitled to severance pay in accordance with the Basic Conditions of Employment Act.
The trio referred the severance pay dispute to the CCMA, stating that they obtained alternative employment on their own accord and that they were therefore entitled to receive severance pay.
The commissioner referred to the forfeiture clause in the Act and found that it would apply where the employer offered the employee alternative employment or when the employee to whom alternative employment has been offered unreasonably refuses to accept the offer.
The commissioner further held that an employee who accepts a retrenching employer’s offer of alternative employment with another employer (an incoming service provider) is not entitled to severance pay.
In ruling against the trio earlier, the commissioner reasoned that as they continued uninterrupted duties with the incoming service provider, CBRE, they were not retrenched.
While the applicants argued that they had negotiated for their new jobs on their own, Tsebo maintained that the forfeiture clause finds application because of its involvement, influence, and engagement with CBRE, which led to the trio securing jobs there.
On review, the Labour Court remarked that this case turns on the single question of whether the applicants obtained employment with CBRE because of Tsebo’s efforts, or whether that employment came about independently of anything Tsebo did.
The court pointed out that the purpose of severance pay is to compensate an employee for the extinguishing of accrued service, a statutory entitlement earned through years of continuous employment with an employer.
The seamless transition to another company does not undo the severing of the employment relationship with Tsebo.
It emerged that two of the applicants, in any event, secured jobs with the new employer long before the retrenchment process started. CBRE was recruiting them independently and without Tsebo’s knowledge.
The court concluded that the trio are entitled to their severance payments.
zelda.venter@inl.co.za