Dismissal, Administrative Action and the Supreme Court of Appeal

Some difficult cases arise from difficult facts. Over the years we’ve come across many of these: cases where facts are in dispute or where it is sometimes difficult to figure out just what is what and where the real issues lie. Automatically unfair dismissals are good examples: did the dismissal relate to an automatically unfair reason, or was the dismissal based on a valid and fair reason relating to, for instance, misconduct. The facts are decisive in answering this question.

When it comes to the decision of the Supreme Court of Appeal in Transnet Ltd & others v Chirwa (2006) 15 SAC 1.11.1 the facts are not that problematic. An employee was dismissed for incapacity: poor work performance on 22 November 2002. An incapacity hearing was held and was chaired by the employee’s supervisor. She was employed as a human resources executive manager of the employer’s pension fund business the hearing was held to give her an opportunity to respond to allegations of poor performance, incompetence and poor employee relations. In the letter the employee’s manager also indicated that her future would be decided at the enquiry.

But at the hearing the employee refused to participate — largely because she objected to her manager serving as chairperson of the hearing. Her argument was that he could not act as the complainant, witness and presiding officer all at the same time. The hearing went ahead anyway, and she was subsequently dismissed. The High Court set aside the dismissal and ordered that the employee be reinstated — and that its order would operate retrospectively for a period of 9 months (calculated as from the date of the High Court’s order which was 25 February 2004).

From a labour law point of view, of course, one would say that the employee could have made out a case that her dismissal for poor work performance was procedurally flawed and that she should receive compensation — if it was only a case of procedural unfairness as regards the conduct of the incapacity hearing. But this is not the way the employee framed her case: she had chosen to argue that her constitutional right to administrative justice had been infringed and that she had remedies in terms of the Promotion of Administrative Justice Act 3 of 2000 (PAJA).

Divided opinions

The Supreme Court of Appeal’s decision in this case was a split decision: The matter was heard before 5 judges, and three different judgments were handed down. The fact that this Court, the highest court we have (excepting, of course, the Constitutional Court for constitutional matters) is so divided on this issue again underscores the fact that the questions raised, while they may appear easy, are not at all easy to answer.

On the contrary: this decision of the Supreme Court of Appeal, with respect, does not provide us with the short-and-sweet answers we’ve been waiting and hoping for. Some judges take a longer, historical view of the development of our legal system and find that decisions dating from the early 1990s are still relevant. Others take the view that our current legal system, based on the Constitution of 1996, is different: that there has been a very fundamental change to the very foundations of our legal system. Yet another judge finds a solution to the question by examining the systems of remedies provided by the Labour Relations Act of 1995 (the LRA) and the remedies provided by PAJA.

Dismissal is not administrative action

Two judges (Mthiyane & Jafta JJA) of the Supreme Court of Appeal held that Ms Chirwa’s dismissal did not constitute administrative action for the purposes of PAJA. There could be no doubt that Transnet is a statutory body and that PAJA applies to Transnet, but PAJA did not change the nature of the employment relationship between Chirwa and Transnet to a public law relationship. The employment contract between Transnet and Chirwa remains an employment contract like any other and Transnet’s power to dismiss her was not based on legislation. The power to dismiss came from the employment contract itself and, when terminating her employment, Transnet was simply acting like any other employer.

Things had changed since the early 1990s, said these judges. Back then the Supreme Court of Appeal had held that there is a public law aspect to employment relationships, and that this public law (or administrative law) aspect entitled an employee of a public body to a hearing. Bear in mind that in the early 1990s public service employees were not covered by the LRA. These two judges of the Supreme Court of Appeal concluded that Ms Chirwa’s dismissal was not administrative action as defined in PAJA; nor had she shown that any of her rights in terms of section 33 of the Constitution had been violated.

In PSA obo Haschke v MEC for Agriculture & others (2004) 13 LC 1.16.3, for instance, the Labour Court succinctly said that labour law and administrative law different things. And the view that the employment relationship between a public body and its employees is in effect no different from the employment relationships between private employers and employees (outside the public sector) has also been repeatedly stated by the Labour Court. It was clear to the Labour Court in SAPU & another v National Commissioner, SAPS & another (2005) 15 LC 1.1.2 that the decisions from the early 1990s had to be re-considered in the light of the Constitution.

Also central to the Labour Court’s approach is focusing on the distinction between employment relationships (which, in the view of the Labour Court, is a private-law relationship between an employer and an employee) and other relationships that are of a public nature (for instance, the making of a decision by a public official) — where, undoubtedly, PAJA would apply. Not everything a public body does, said the Labour Court, constitutes administrative action.

“The mere fact that Transnet is an organ of State does not impart a public law character to its employment contract with the applicant. The power to dismiss is found, not in legislation, but in the employment contract between Transnet and the applicant. When it dismissed the applicant, Transnet did not act as a public authority but simply in its capacity as employer. The factual matrix in which Zenzile, Sibiya and Mangena [the decisions from the early 1990s] were decided has changed. Furthermore at the time, public sector employees were expressly excluded from the Labour Relations Act 28 of 1956 by virtue of which employees were entitled to be heard. At the time of her dismissal by Transnet the applicant, like public sector employees, enjoyed protection under the LRA, which is the statutory embodiment of the constitutional right to fair labour practices. Although section 23(2) of the Constitution imports into the employment contract a reciprocal duty to act fairly it does not deprive the employment contract of its legal effect …

For the above reasons it has not been shown that the dismissal of the applicant by Transnet was an administrative action as defined in PAJA or that any of her rights under section 33 of the Constitution were violated.”

Dismissal is administrative action

Not so, held two other judges of the Supreme Court of Appeal (Cameron JA and Mpati DP). By its very nature as a statutory body, everything Transnet does (including its relationships with its employees) has a public-law or administrative law aspect. When dismissing an employee, a public body such as Transnet, is exercising a public power — a power conferred on Transnet by legislation. Without the legislation, Transnet would not exist: all of its powers are derived, in the final analysis, from the legislation which establishes it.

This means that there is a considerable difference in the employment relationships between a public body and its employees. It is not a contract between two individuals or between a company and an employee — instead, it is a special form of employment. The statute injects an element of public service into the employment relationship and this means that employees enjoy the protection of the principles of natural justice (such as the audi alteram partem principle or the principle that no-one may be the judge in his own case).

These judges are in effect applying the principles of the Supreme Court of Appeal decisions handed down in 1990-1992. Neither the Constitution of 1996 nor PAJA supersede these two decisions — on the contrary, the principles laid down in these older decisions are effectively confirmed by the Constitution and PAJA.

When it comes to dismissal, the implication is that the public dimension of the employment relationship between a public body and an employee renders that dismissal subject to administrative law control. The employer’s decision to dismiss had an immediate and direct external legal effect (the language of PAJA — see section 1 under the definition of “administrative action”) and therefore PAJA applies.

The exclusion of PAJA dismissal remedies

There is one other judgment in this case, namely the judgment of Conradie JA. This judge takes a completely different approach. His approach is to focus on the difficulties of interpreting the provisions of PAJA and the LRA. The real enquiry, he held, is not whether Transnet’s decision to dismiss Ms Chirwa constituted administrative action (he accepts that it did). Any proper dismissal enquiry in the public sector necessarily has the attributes to administrative action — and administrative action falls under the scope of PAJA.

The essence of Conradie JA’s approach is that it is not so much about the nature of the decision to dismiss but about the remedies and procedures that are at the disposal of an employee who has been dismissed. Clearly, the LRA provides a comprehensive scheme of labour laws and dispute resolution procedures. The purpose behind the LRA, he finds, is to subject an unfair dismissal dispute to the procedures set out in the LRA. What the LRA in effect does, is to remove unfair dismissal disputes from the scope of PAJA (even though they may still be administrative acts in nature). The LRA removes public-sector dismissal disputes from administrative law rules. A dismissal (in this case, a dismissal for poor work performance) is, in its very essence, a matter that should be dealt with in terms of the LRA. The following passage gives some insight into the Judge’s reasoning:

“[31] The Bill of Rights creates to distinct sources of power. Natural justice is a cornerstone of both but they are nevertheless distinct. The one, in s 23 of the Constitution, feeds the procedure of the labour law, the other, in s 33, those of the administrative law. Administrative power over the subject has one source, and employer’s power over its employees another. The statutes enacted to give effect to each of the constitutional provisions, PARA and the LRA, differ fundamentally in the substantive remedies they provide. If an application for the review of administrative action succeeds, the applicant is usually entitled to no more than a setting aside of the impugned decision and its remittal to the decision-maker to apply his mind afresh. Except where unreasonableness is an issue the reviewing court does not concern itself with the substance of the applicant’s case and only in rare cases substitutes its decision for that of its decision-maker. The guiding principle is that the subject is entitled to a procedurally fair and lawful decision, not to a correct one. Under the LRA the procedure to have a dismissal overturned or adjusted involves a re-hearing with evidence by the parties and a substitution of a correct decision for an incorrect one. The scope of relief consequent upon such an order is extensive. It is quite unlike that afforded by an administrative law review.”

No answer as yet …

For those who had hoped that the Supreme Court of Appeal would firmly and unambiguously decide, one way or another, that a dismissal is (or is not) administrative action, this case, with its three judgments, will no doubt be a considerable disappointment. The answer to the easy-looking question is still to come. Perhaps the time has come for PAJA to be amended, so that we can get some certainty on this point. That would, no doubt, be the easiest and cleanest solution to this issue.

The other issue is that of remedy. As the passage quoted above shows, the issue of remedy is a real one. If a dismissal is found to be unfair in terms of the LRA, an employee may be entitled to reinstatement or compensation. If the dismissal is only procedurally unfair, the employee is only entitled to compensation — but, depending on the nature of the unfairness, this compensation can be significant. The remedy under administrative law is a relatively poor one — the only remedy here is that the decision is referred back to whoever made the decision for a new process and a new decision. In other words, the matter simply goes back to where it came from in the first place, and, if the employer then follows a correct procedure the second time around, the dismissal (even if it is seen as an administrative act) may not be subject to review. Perhaps employees may be better advise to take their chances with the CCMA or a bargaining council instead of taking the High Court route.