Resigning with immediate effect in the face of a disciplinary sanction to be imposed – a classic case of dodging the bullet, or not!

• South Africa

• Employment law

14-10-2020

One of the oldest tricks in the book is for employees who are notified that they are to attend a disciplinary hearing is to resign with immediate effect. Employees hope that by doing so, they can avoid the consequences of being dismissed for misconduct and thus extricate themselves from a blemished disciplinary record that may scupper their prospects of future employment elsewhere.

By the same token, it may be that an employer wishes to proceed with disciplinary action even in circumstances where an employee resigns with immediate effect. The law has been in a state of flux on this issue.

What about a variation of the just-mentioned theme? What if an employee resigned after a disciplinary hearing was held and finding of guilt delivered, but before a sanction of dismissal was imposed? This is the precise issue which the Labour Court had to consider in the recent case of Mthimkhulu v Standard Bank of South Africa delivered on 18 September 2020 (“Mthimkhulu”).

In this case, the employee was of the view that because he resigned first, the employer could not dismiss him as it had no jurisdiction over him. Once the employee resigned, the employer nevertheless sought to hold the employee to his 30 days’ notice period and ultimately announced his dismissal. This set of circumstances precipitated the launching of an urgent application by the employee to set aside his alleged unlawful dismissal.

Q: will a tactical resignation to avoid a sanction being imposed have any legal effect and be of any assistance to the employee?

No. According to the Labour Court in Mthimhkhulu, an employer may still dismiss the employee. The Labour Court there recounted the principles of contract law, which stipulate that an “employee who is contractually obliged to serve a notice period, repudiates a contract when he or she does not serve the notice period”. In those circumstances, the employer as an aggrieved party has an election: it may decide whether it will accept the repudiation and sue for damages or it may decide to reject the repudiation and seek specific performance, i.e. to hold the employee to his or her notice period.

In this case, the employer, as we know, elected to keep the contact alive and hold the employee to his notice period. The employee’s dismissal was, in the circumstances of this case, found to have been valid and it was determined that “the resignation [with immediate effect] before the announcement of a sanction of dismissal has no legal effect” because of the election made by the employer.

Q: what about the legal principles laid down in 2019 Labour Court decision of Naidoo and another v Standard Bank of SA Ltd and another (“Naidoo”)?

In Naidoo, two employees resigned without serving their notice period (in other words, with immediate effect) once they received notices to attend a disciplinary hearing. The employer sought nevertheless to hold the employees to their notice period and proceed with their disciplinary hearings, regardless of whether they attended. The employees sought an urgent interdict to restrain the employer from proceeding with their disciplinary hearings.

The Labour Court in Naidoo held that although there was a breach of contract by the employees, for the employer to continue with their disciplinary proceedings it ought to have approached the court for an order of specific performance, but it had not done so.

The Labour Court in Mthimhkhulu referred to the Naidoo decision and departed from it. The Labour Court in this more recent judgment held that where an employee resigns in breach of his or her employment contract, the employer need not approach a court for an order of specific performance to keep the employment contract alive. It is the election by an employer to reject the repudiation of the employment contract that keeps it alive, not an order of specific performance.

Q: what have we learnt from the Mthimhkhulu decision?

Among the things that this case has taught us, is that the Labour Court has placed emphasis on the election which employers may make where an employee resigns with immediate effect in breach of his or her notice period. In response to the breach of contract by the employee, an employer may either accept the repudiation or it may reject it and hold the employee to his or her notice period, thus precluding the employee from avoiding a sanction being imposed upon him or her. Importantly, the employer need not rush off to court for an order of specific performance.

Co-authored by: Kyle-Terry Lamb (Trainee Associate) and Kathleen Butler (Candidate Attorney).