September 7, 2017

Regulatory Requirements Relate to Capacity and Not Operational Requirements

A dismissal may be determined to be fair if it relates to the employee’s conduct, incapacity, or the employer’s operational requirements.

However, there are instances where the employee’s dismissal ostensibly falls in between being a capacity and operational requirement related issue and where the dividing line that separates capacity and operational requirements can, sometimes, be very thin and vague.

Employers may be faced with a situation where an employee becomes “unfit” to perform his or her duties for some or other reason.  There may be a certain minimum or legal standard/requirement present that an employee must attain or possess to render a proper service to the employer or to occupy a certain position with the employer.

By way of example, a company driver must possess a valid driver’s license to be able to serve in the capacity of a driver for that employer. What happens when an employee can no longer perform the duties assigned to him/her because he/she does not possess the necessary minimum requirements to perform the job?  What happens should the driver have his/her driver’s license revoked because of reckless and negligent driving?  Does one retrench this employee, or is this a case of incapacity?  What is evident is that the employee can no longer perform his/her job because he does not have a certain qualification, skill or minimum legal standard required by law to perform the job.

Martin Brassey referred to incapacity when he said in Samancor Tubatse Ferrochrome v MEIBC & others [2010] 8 BLLR 824 (LAC)

“Incapacity may be permanent or temporary and may have either a partial or a complete impact on the employee’s ability to perform the job. The Code of Good Practice: Dismissal conceives of incapacity as ill-health or injury but it can take other forms. Imprisonment, for instance incapacitates the employee from performing his obligations under the contract. The dismissal of an employee in pursuance of a closed shop is for incapacity; so is one that results from a legal prohibition on employment.”

In a recently handed down judgement First National Bank, A Division of First Rand Bank Ltd V CCMA and Others (as yet an unreported judgment, case no 1476/2016, delivered on 10 July 2017), an employee at the Bank was appointed to the position of Sales Consultant during 2011.

To perform the required tasks associated with the position, the employee needed to be an accredited Financial and Intermediary Services (“FAIS”) representative as defined under the Financial Advisory and Intermediary Services Act, 2002 (“FAIS Act”).  In order to operate at the required level as a FAIS representative, the employee was required to comply with the prescribed “fit and proper requirements” for FAIS representatives. In order to be deemed “fit and proper” the employee would be expected to successfully pass the regulatory examinations set by the Registrar of the Financial Services Board (“FSB”).  The employee attempted the regulatory exams on or around 15 times during the period 2004 to 2015.  Eventually, FNB was unable to accommodate the employee in an alternative position which it offered to him during December 2015. The employee was then invited to an incapacity hearing.   The presiding officer made a finding that the employee lacked the necessary legal qualification to render a “fit and proper” service to advise clients on FNB products.  FNB then terminated the employee’s service as a result of incapacity.

The employee referred a dispute to the CCMA.  During the arbitration the Commissioner took a narrow view and found that incapacity under the LRA only includes incapacity on the grounds of ill health or injury.  The Commissioner refused to accept that the employee had been dismissed as a result of a ‘legal incapacity’ to perform his duties.  Rather, the Commissioner found that the dismissal was based on FNB’s operational requirements.  The award was that FNB had not dismissed the employee substantively or procedurally fairly.

FNB reviewed the decision to the Labour Court. FNB argued that the Commissioner had made two errors when he said: “a dismissal, resulting from a legally imposed requirement for the job and thus supervening impossibility to perform, cannot be construed as an issue of incapacity“; and, second, that “the dismissal ought to have been for operational requirements”.

The Labour Court referred to the following: “it seems appropriate that the line between operational requirements and incapacity should be drawn where the employer determines or acknowledges the need to restructure its business and not where the employer cannot employ an employee because of a statutory provision prohibiting such employment”.  “In the event of incapacity, the focus is on the qualities of the employee. In the event of operational requirements, the focus is on the employer and its decisions relating to its business”.

The Court therefore found the reason for the dismissal related to the employee’s incapability rather than the employer’s need to restructure its business.   As a result the Commissioner was found to have erred when he found the dismissal to be based upon FNB’s operational requirements as opposed to the employees’ incapacity.

Given the remedies available to an employee who is successful in referring their dispute to the CCMA or Labour Court and the resultant and significant financial ramifications for employers who are deemed to have acted unfairly in executing a termination of an employee’s contract, this makes it highly necessary for organisational managers and leaders to be able to make a distinction between when the capacity of an employee and when operational requirements of an employer is at stake.   This is important given the different procedures to be followed for incapacity as opposed to operational requirements and given that payments due to employees also differ.

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