Employers have the right to recover losses

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Employees can cost employers millions through negligence, gross dereliction of duty, mismanagement, fraud and corruption, dishonesty or theft.
While employers seldom lay criminal charges or initiate civil litigation because of time and cost factors, they could in fact both dismiss the employee and get some of that lost money back.
Employers can either approach the Labour Court with a claim for damages, or petition the employee’s pension or provident fund.

Going to the Labour Court
In the matter of Stoop and Buckle versus Rand Water the employer dismissed both employees, laid criminal charges against them and instituted a counter-claim for damages against them in terms of the Basic Conditions of Employment Act (BCEA).

When the Labour Court agreed with the employees that it did not have the necessary jurisdiction to hear the matter because the employer relied, inter alia, on a breach of contract, the employer took the jurisdictional ruling on appeal.

The Labour Appeal Court (LAC) not only held that it had jurisdiction in terms of Section 77(3) of the BCEA, but also that employers could turn to the Labour Court to claim damages against employees for a breach of contract:

[36] “ (…) The BCEA benefits both employers and employees. This is clear from a number or provisions. (…). The
BCEA was designed to promote the right to fair labour practice which is available to everyone, employees
and employers alike. If the employee can claim damages for breach, so too can the employer, to suggest
otherwise is to argue that this section is unconstitutional.” (My emphasis).

After the LAC had dealt with the jurisdictional point, the matter was referred back to the Labour Court for a trial on the merits.

The Labour Court found that the two employees were jointly and severally liable for the loss suffered by the employer, and that their respective dismissals were both procedurally and substantively fair.
The court accordingly granted the employer the relief sought:

“137.3 The counterclaim against both the first and second applicants is upheld with costs on an attorney
and own client scale.
137.4 The first and second applicants are held liable jointly and severally for the amount of R8 091
607.16.”

Petitioning the Pension/Provident Fund
In the matter of Moore Road Gas CC v B Gumbi the employer laid a criminal charge against the employee after he was dismissed.

Although the Pension Funds Act includes provisions designed to protect a retirement benefit, deductions can be made from the withdrawal benefit in circumstances where an employer is to be compensated for losses or damages suffered either after the employee has admitted in writing to being responsible or, alternatively after the employer had obtained a court order.
Moore Road Gas CC proved its claim to the Auto Workers’ Provident Fund by handing it a letter signed by the employee, Mr Gumbi, in which he admitted liability and received the funds. Thereafter, Mr Gumbi lodged a complaint with the Pension Funds Adjudicator stating that the provident fund had paid his money to his employer.

In her determination, the adjudicator, Muvhango Lukhaimane, said the rules of the Auto Workers’ Provident Fund provided for the fund to withhold a member’s benefit pending the outcome of a criminal charge against the member.

The adjudicator said that the following requirements must be met before a deduction from the provident fund could be permitted:

• An amount must be due by a member to his or his employer;
• The amount must be due at the date of retirement, or the date on which the member ceases to be a member of
the fund;
• The amount must be in respect of compensation payable for damage caused to the employer, or legal costs
recoverable from the member;
• The damage caused to the employer must be by reason of theft, dishonesty, fraud or misconduct by the
member; and
• The member must have furnished a written admission of liability to the employer in respect of the
compensation, or judgment must have been obtained against the member in a court.

These requirements are in line with the provisions of section 37D(b)(ii) of the Pension Funds Act which state that a deduction will be paid in instances where

• The damage was caused by the employee’s “theft, dishonesty, fraud or misconduct” while the employee was
still an employee and a member of the fund; and
• the employee has admitted liability in writing, failing which the employer would have to obtain a court
order against the employee for the amount.

The employer may not make a demand for a contractual debt against the provident or pension fund. A contractual date would, for example, be for payment of a vehicle, training or a study loan in respect of which the employee still owes a balance to the employer.