This case illustrates the limitations placed on employers when dealing with employees who are seeking new opportunities. It also confirms that an award of compensation must factor in patrimonial and non-patrimonial loss suffered by the employee.

Facts

Mahabeer was employed as safety, health, risk and quality manager at Lucchini South Africa (Pty) Ltd (Lucchini) with effect from January 2021. Within six months of his employment, he was suspended and charged with several allegations of misconduct, including breaching his employment contract by taking steps to secure alternative employment with Scaw Metal/Cast Products (Cast Products), a direct competitor, during the course of his employment; ransoming the value of Lucchini’s intellectual property during mutual separation discussions; dishonesty for failing to disclose his employment negotiations with Cast Products during retrenchment consultations; refusing to provide his laptop password to Lucchini; and misusing a relocation allowance.

Mahabeer was summarily dismissed following the conclusion of a disciplinary hearing.

Aggrieved by his dismissal, Mahabeer referred an unfair dismissal dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA). The commissioner found that his dismissal was substantively unfair and awarded him maximum compensation equivalent to 12 months’ salary. Lucchini reviewed this award in the Labour Court.

On review, the Labour Court upheld the substantive unfairness of Mahabeer’s dismissal, but reduced the award of compensation to six months.

In arriving at its finding, the Labour Court examined each of the allegations of misconduct and concluded that the CCMA commissioner had correctly found that the charges were “trumped up”, without merit and appeared motivated by Lucchini’s desire to force Mahabeer out after he indicated his intention to resign and join a competitor. None of the charges constituted a basis for Mahabeer’s dismissal. In particular:

• An employee has a constitutional right to seek alternative employment, even with a competitor, and may not be punished merely for trying to improve their career prospects. Clauses in employment contracts that attempt to prevent employees from seeking alternative employment are unenforceable as they are contrary to public policy. Similarly, for the same reasons, the Labour Court rejected Lucchini’s claim that Mahabeer had acted dishonestly by not disclosing his employment discussions with Cast Products during retrenchment consultations.
• Regarding the provision of the laptop password, the Labour Court accepted that Mahabeer had created the password himself, that the HR manager did not hold authority over him, and Lucchini still had access to the device through its IT provider. This meant that refusing to provide the password did not amount to insubordination.

Although the Labour Court agreed that Mahabeer’s dismissal was substantively unfair, it took issue with the CCMA’s decision to award maximum compensation on the basis that any compensation awarded must be “just and equitable”, taking into account not only financial loss, but also factors like emotional distress, humiliation and the seriousness of the employer’s conduct. The CCMA had incorrectly recorded that Mahabeer was unemployed at the time of the arbitration, when in fact he had secured new employment within three months of his dismissal. While financial loss is not the only relevant consideration, the Labour Court held that this error influenced the quantum awarded. It therefore reduced the compensation to six months. 

Key takeaways

This case confirms that an employee may seek alternative employment (while employed) without the fear of being dismissed. Even negotiations with a competitor do not constitute prima facie misconduct. Clauses in employment contracts seeking to prevent an employee for seeking alternative employment, are contract to public policy and unenforceable.

Employers may not attempt to punish employees for pursuing better opportunities. If they do, a dismissal will almost certainly be found to be unfair. Where an employer elects to pursue disciplinary action, the disciplinary charges must be legitimate, and supported by the evidence.