Should the employee be re-employed typically the contributions from the date of dismissal to the date of re-employment would not need to be paid to the fund. The case is generally different in the case of reinstatement where arrear contributions will need to be made to the fund.

The facts in the recent decision of the Supreme Court of Appeal in South African Municipal Workers’ Union National Provident Fund (Pty) Ltd v Dihlabeng Local Municipality and others [2023] 7 BLLR 626 (SCA), are interesting as the court had to consider a claim by the provident fund for arrear contributions from the employer for the period between the employee’s dismissal and their return to employment in terms of a settlement agreement. There was a dispute on whether the agreement provided for re-employment or reinstatement. The facts of the case are briefly as follows:

• On 6 April 2009, various employees of the Municipality engaged in an unprotected strike resulting in 75 employees being dismissed on 31 July 2009.
• The employees were members of the South African Municipal Workers’ Union National Provident Fund (Pty) Ltd (Fund).
• The employees challenged their dismissals in the High Court. However, the Municipality and employees concluded a settlement agreement on 8 October 2009, in terms of which the employees would return to the workplace and were also afforded the opportunity to elect a new medical aid fund and a new pension fund. In around 2013, the Fund sought to claim payment of arrear pension fund contributions from the Municipality from the date of dismissal up until 2013. The basis of the claim was that the employees were reinstated and not re-employed.

We know that re-instatement amounts to the resumption of employment on the same terms and conditions that prevailed at the time of dismissal. In such circumstances, there would be no conclusion of a new employment contract. Employment would rather be regarded as ‘suspended’ during the period of absence from the workplace. Whereas, re-employment, entails the conclusion of new terms and conditions of employment, with benefits from past employment not extending to the new employment relationship. Re-employment therefore implies a break in continuous employment.

With this definition in mind, based on an interpretation of the settlement agreement and rules of the Fund the court concluded that the employees were re-employed. The effect thereof being that the Fund was not entitled to claim any arrear contributions for the period between the dismissal and the re-employment.

An award for reinstatement has serious consequences for an employer. This applies equally to a deed of settlement which simply provides for reinstatement without more. So, employers should be alive to the full effects of an award for reinstatement or an open-ended agreement for reinstatement to avoid any surprises for arrear contributions arising soon after the ink is dry.