Employment Law: Resignation with immediate effect and the legal consequences

Labournet’s Adri Louw advises on the legal consequences of the termination of a contract of employment “with immediate effect”.

A contract of service for an indefinite period can be terminated by one party giving notice of intention to terminate the contract to the other. Notice in this instance need not be provided for in the contract itself as it is an inherent feature of an indefinite contract, and if there is no agreed notice period, the notice must be reasonable, provided that it is not less than the minimum notice prescribed in section 37 of the BCEA. Fixed term contracts may also be terminated in this manner provided the contract has made provision for termination on notice. Termination on notice is not an inherent feature of fixed term contracts, and as such the contract needs to stipulate specifically whether this practice is permitted in the employment relationship.

The main question that arises from the above principles, is what happens when proper notice is not given in terms of these provisions?

The basic principles of a contract of employment are derived from the common law, with the minimum standards of the BCEA automatically incorporated into the contract. In Section 4 of the BCEA it states that basic conditions of employment constitute a term in a contract of employment, unless any other term of law is more favourable.

Terms and conditions which are expressly agreed upon need to be incorporated into the employment contract specifically. Should such a contract of employment end up before a court, the court should ensure that the wish of the parties be adhered to and not the wish of the court.

In terms of the above principles, if an employee fails to work the required period of notice, provided for either by contract or through the BCEA, that failure constitutes a breach of contract entitling the employer to hold the employee to the contract through an order of specific performance, or to cancel the contract and claim damages. No other mechanism has been provided to employers to address such a matter, as is the case for employees who could approach the Department of Labour to enforce their rights, or claim unfair dismissal in terms of the LRA. This omission can only be ascribed to the superior bargaining position of the employer, who arguably would not need additional protections in this regard.

In the case of an order for specific performance, the applicant seeks remedy in requesting the court to compel the defaulting party to adhere to the terms of the contract, which in essence would force them to serve the full term of their notice. In Thompson v Pullinger, the court stated that ‘the right of a plaintiff to the specific performance of a contract, where the defendant is in a position to do so, is beyond all doubt.’ The general rule remains that a plaintiff is entitled to enforce his contract. Each case should however be determined on its own facts.

‘Courts will exercise a discretion in determining whether or not decrees of specific performance should be made. They will not of course, be issued where it is impossible for the defendant to comply with them.’ The court in Nationwide Airlines (Pty) Ltd v Roedinger confirms that there are numerous situations where specific performance may be ordered based on various determining factors. These include:

•  The particular relationship between the employer and the employee;
• The nature of the employment contract;
• The nature of the service or work which is to be performed in terms of the contract; and
• The prejudice or hardship to be suffered by the innocent party should specific performance not be ordered, compared to the prejudice that will be suffered by the employee, should it be granted.

In exercising this discretion, Horn J found that the applicant, being a national airline, was entitled to enforce a three month notice period against the respondent, who had given the applicant written notice that he was terminating his services with only one month’s notice. Horn pointed out that the respondent entered into the contract freely, in a highly skilled position as a professional pilot, and contracting on equal terms with the applicant. He had agreed to the three month notice period stipulated in his contract and it could not be argued that the notice period had been forced on him.

In addition to this, the potential harm to the applicant related to its inability to replace the respondent with a sufficiently qualified pilot for two to three months, which would most likely result in the cancellation of flights for a very competitive route which was serviced by the respondent. The applicant’s potential loss was calculated at approximately R1 million per flight.

Under such circumstances, it was considered that this was a case where specific performance should be available to the applicant.

Converse to this finding, the case of Santos Professional Football Club (Pty) Ltd v Igesund illustrated a case where specific performance was not a possible remedy. The court referred to The Law of Contract where the position was set out as follows:

“Because such a contract calls for the performance of personal services of a continuing nature and because of the personal relationship involved, there would be a constant danger of disputes arising over whether the contract was being properly performed (that is, whether the defendant was in contempt), and the Court is not equipped to provide the constant supervision which would be necessary to prevent such disputes arising or to adjudicate upon them as they arose.”

This made reference to the highly specialised relationship a professional football coach would have with the players he is charged with coaching. Foxcroft J stated that he assumed that despite his professionalism, a coach performing his functions under a court order would, at the very least, do so with diminished enthusiasm and commitment. Based on the specific nature of the relationship and the service the respondent was required to render, an order of specific performance was not a viable solution to the breach of contract.

Claims for damages arising from a breach of contract through failure to serve notice are an entirely different matter with a different set of measures. The circumstances in which an employer would seek to recover damages from an employee for a breach of the employment contract must be extremely limited, although in principle an employer is entitled to recover any loss that it suffers consequent on such breach.

The main problem with the majority of such claims brought before the courts is that the applicant generally fails to establish proof of actual damages linked to the breach. Most applicants rely on the failure to serve notice itself and attempt to set out the value of the employee’s remuneration over the period not served as the basis for their claim. This, as was stated extensively over several cases, is simply not sufficient.

In Aaron’s Whale Rock Trust v Murray and Roberts Ltd and Another, Berman J held that:

“Where damages can be assessed with exact mathematical precision, a plaintiff is expected to adduce sufficient evidence to meet this requirement. Where, as is the case here, this cannot be done, the plaintiff must lead such evidence as is available to it (but of adequate sufficiency) so as to enable the Court to quantify his damages and to make an appropriate award in his favour. The Court must not be faced with an exercise in guesswork; what is required of a plaintiff is that he should put before the Court enough evidence from which it can, albeit with difficulty, compensate him by an award of money as a fair approximation of his mathematically unquantifiable loss.”

The same conclusion was reached in SA Music Rights Organisation Ltd v Mphatsoe and Labournet Payment Solutions (Pty) Ltd v Vosloo (supra).

 In the former case Van Niekerk explained that the failure to serve notice could not be quantified in terms of the employee’s salary for the period of absence, as the quantum could not be proven. The respondent may, for example, at the time of resignation have been teetering on the brink of redundancy, in which case the applicant would have benefitted from not needing to pay the respondent’s salary for the remaining period, as opposed to suffering damages.

The main principle is that the applicant would need to provide compelling proof of damages with an easily identifiable quantum in order for the court award such damages. Failure to do so will inevitably lead to dismissal of the application.

In conclusion, the employer’s sole recourse in respect of an employee’s failure to serve proper notice on termination is limited to a civil claim for breach of contract. The remedies available to the employer are an order for specific performance or a claim for damages. The onus would generally be on the employer to establish that specific performance is justified or that actual damages with a calculable quantum have been incurred.