For the first time in employment law jurisprudence, the South African Constitutional Court has considered the nature and scope of the duty of good faith within the context of the contract of employment. This occurred in its recent decision inNUMSA obo Nganezi & Others v Dunlop Mixing and Technical Services (Pty) Ltd & Others.

Factual background

During August 2012, Dunlop’s employees embarked on a protected strike. As is all too common with strikes in South Africa, violence emerged. Dunlop obtained an urgent interdict from the Labour Court to stop the violence, but the violence continued and escalated – to the point where a manager and a foreman’s homes were set alight, petrol bombs were thrown and death threats were written on billboards.

Dunlop attempted to identify the individuals who took part in the violence, and even sought the assistance of the union that called the strike, the National Union Metalworkers of South Africa (“NUMSA”). However, Dunlop experienced difficulty in doing so, and decided to dismiss all striking employees – some having been identified as having been the perpetrators of the violence, and others on the basis of “derivative misconduct”.

The dismissed employees referred an unfair dismissal dispute to the Commission for Conciliation, Mediation and Arbitration (“CCMA”). The arbitrator distinguished between three categories of employees. These were:

1. employees who were positively identified as committing acts of violence;
2. employees who were shown to be present when violence took place but did not participate in these acts of violence; and
3. those employees who were not positively identified as being present when violence had been committed.

The arbitrator found that the dismissal of the first two categories of employees had been fair but that the dismissal of the third category of employees had been substantively unfair. Dunlop challenged the reasonableness of that part of the of the arbitrator’s award that found that the dismissal of the third category of employees had been unfair. Its challenge was successful in both the Labour Court and the Labour Appeal Court. NUMSA was then granted leave to appeal to the Constitutional Court.

The Constitutional Court decision

Central to both the Labour Court and the majority decision in the Labour Appeal Court’s findings was the view that the third category of employees had been guilty of “derivative misconduct” and that this constituted a breach of the employees’ common law duty to act in good faith with regard to their employer. Both courts held that the arbitrator had acted unreasonably in finding that there was no evidence that the applicants were present during the episodes of violence, as inferential reasoning would suggest that they were. Particularly, the Labour Court held that their derivative misconduct was the failure to identify the perpetrators of the violence or exonerate themselves by explaining that they were not present at the scene of the violence and could, therefore, not identify the perpetrators.

In determining whether or not Dunlop had proven that the employees were guilty of derivative misconduct, the Constitutional Court interrogated the nature and scope of the duty of good faith.

The duty of good faith

The Constitutional Court drew a distinction between a fiduciary duty and the duty of good faith.

The court held that a fiduciary duty applies to those persons who have access to, or power in relation to, the affairs of a beneficiary, which duties must be exercised for the sole purpose of promoting the beneficiary’s interests. Because of the high level of trust and responsibility imposed on an individual with a fiduciary duty, this duty is unilateral.

On the other hand, the duty of good faith is a lesser duty than a fiduciary duty. The Constitutional Court held that the principles of Ubuntu ought to be infused into the employment contract, as the employment relationship is an unequal and hierarchical relationship, where the employer has unfair power over its subordinated employee. Furthermore, the right to fair labour practices in the Constitution envisages fair labour practices for employees and employers alike. On this basis, the Constitutional Court held that the duty of good faith is a reciprocal duty, which the employer and employee both owe to each other.

The reciprocal duty of good faith in strike situations

The Constitutional Court further stated that the fact that a protected strike turned violent does not mean that the right to strike is no longer implicated in the analysis. The right to strike is underpinned by the power play between employer and employees and employees only have the power to strike if there is solidarity amongst the employees. Imposing an obligation to report misconduct of other employees would undermine that solidarity, and therefore requires the employer to exercise its duty of good faith towards their employees. In the strike situation, an employee would only be under the obligation to report misconduct of their fellow employees if the employer has guaranteed their safety and protection, before, when, and after the disclosure.

The impact on derivative misconduct

Given this additional obligation that is imposed on them, employers are required to also prove that it guaranteed the employees’ safety and protection, before, when and after the employees disclose the identity of the perpetrators, before the employer can rely on derivative misconduct.

On this basis, the Constitutional Court upheld the decision of the arbitrator that the dismissal of the third category of employees had been unfair.

Conclusion

Three points of importance emerge from this decision. The first is the explicit acceptance that an employer owes a duty of good faith towards its employees. Secondly, in the context of strike violence at least, the duty of good faith owed by an employer requires that the employer can guarantee the safety of an employee who is being asked to disclose information. The impact of this finding on other facets of the employment relationship remain to be seen. Although this judgment was issued in the context of strike violence and derivative misconduct, the principles articulated in relation to the duty of good faith will undoubtedly be applied in other contexts within the employment relationship. Thirdly, it is important to have regard to the point made by the Constitutional Court that, in some instances, it may not be necessary for the employer to rely on the concept of derivative misconduct. It may be possible to infer, from the presence of the employee at the place that the violence took place and the conduct of the employee at that time, that the employee participated in or associated himself or herself with the violence.

Reviewed by Peter le Roux, an executive consultant in ENSafrica’s employment department.