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Terminating an Employment Contract for misconduct



One of the most difficult and often unpleasant aspects of an employment relationship for both employees and employers is the termination or dismissal of an employee. Like most relationships we enjoy in life, an Employment relationship, no matter how great it may be in the beginning, sometimes runs its course and comes to an end.

Terminating an employment relationship can be a daunting task for an employer for various reasons. Chief amongst these are the eggshells that you’ll be walking on in the form of the South African Labour laws. Therefore, this task becomes even more daunting for small business entrepreneurs who often do not have HR departments to handle such matters.

The South African Labour law landscape is onerous at best, so much so that you can be penalised for not following due process, even if your reason for dismissal is fair. It’s not enough to catch an employee red-handed for misconduct. You must still follow due disciplinary process before you dismiss them.

In this article, we look at the circumstances under which an employment contract can be terminated. We then discuss the dos and don’ts when it comes to terminating an Employment Agreement for misconduct. We also discuss consequences of prematurely shouting, “You are fired!” as popularised by you know who, and how to avoid this.

The Legislative Landscape

Section 188 of the Labour Relations Act 66 of 1995 as amended (“LRA”) and Item 2 of the Code of Good Practice: Dismissal Schedule 8 come into play here. In terms of section 188 of the LRA and Item 2 of the Code, an employer can dismiss an employee for reasons related to:

  • the employee’s conduct; or
  • the employee’s capacity; or
  • the employer’s operational requirements.

Further to the above, the employer must ensure that the dismissal is effected in accordance with a fair procedure.

What this means is that an employer can terminate an employee’s contract if she conducts herself in a manner that is against the employer’s set standards of behaviour. Standards of behaviour which is acceptable to an employer are usually contained in an employer’s Handbook or various workplace Policies.

Simple examples of misconduct that may justify dismissal are theft of company property, dishonesty, excessive lateness, abscondment, insubordination or insolence. An employer may also lawfully dismiss an employee on the basis of his inability to perform his duties. This may be due to illness or the employee’s injury. This is what is referred to in the LRA as an employee’s “capacity”.

Lastly, an employer may lawfully terminate an employee or employees for reasons related to its operational requirements, also known as retrenchments. This is also referred to as a no fault dismissal. As an example, the outbreak of Covid-19 in 2020 saw widespread retrenchments as its impact ravaged businesses across the globe. 

In all the above circumstances, as an employer, you are strictly required to comply with the dictates of South African Labour laws to ensure fairness for employees. This is because, section 185 of the LRA, affords, ‘every employee, a right not to be unfairly dismissed and subjected to unfair labour practices’.

In the case for dismissal for misconduct, the fairness component is divided into substantive and procedural fairness. Substantive fairness dictates that the reason for the dismissal or termination must be a lawful and reasonable one. Procedural fairness dictates that you must follow a fair procedure before dismissing an employee. Therefore, an employer may still be penalised for not following due process regardless of the existence of a lawful reason for a termination.

Therefore, it is crucial that a dismissal must meet both the substantive and procedural fairness requirements in order to avoid an unfavourable CCMA award or a court order against you.  

Dismissal for conduct or misconduct

As stated above, in this article we are focusing on dismissals for misconduct. Therefore, the starting point here is section 188 (2) of the LRA. This section requires anyone considering whether a dismissal is substantively and procedurally fair to take into account any relevant code of good practice. In case of dismissals, this would be the Code of Good Practice: Dismissal (“the Code”) in Schedule 8 of the LRA. It is important to remember that the code sets out the requirements for ensuring that a dismissal is both substantively and procedurally fair.

Substantive Fairness

In order to pass muster of the substantive fairness requirement, you must consider:

  • whether the employee contravened a rule or standard regulating conduct in, or which is of relevance to the workplace; and
  • if the employee contravened a rule or standard, whether:-
    • the rule was a valid or reasonable rule or standard;
    • the employee was aware, or could reasonably be expected to have been aware, of the rule or standard;
    • the rule or standard has been consistently applied; and
    • dismissal was an appropriate sanction for the contravention of the rule or standard.

The above requirements seem quite self-explanatory; however, it is important to break them down. Therefore, the most important factors to note from the above are the following:

  • the rule contravened by the employee must be relevant to the workplace or it must be one that regulates conduct in the workplace. Take note here that an employee may be disciplined for his conduct outside of the workplace and outside of working hours. However, you must prove that the contravention is relevant to the workplace.
  • Once you’ve proven that the employee has contravened a rule that is relevant or that regulates workplace conduct, you must ensure that:
    • The rule or standard was valid or reasonable. Generally, a rule will be valid or reasonable if it is lawful and can be justified with reference to the needs and circumstances of the business.
    • The employee must be aware of the rule or should be reasonably expected to be aware of it. Generally, rules of conduct are contained in HR Handbooks or other workplace policies. However, some rules are so well established that an employer need not specifically communicate them. Rules against theft or assaulting a fellow employee are good examples of well-established rules.
    • It is also crucial that, as an employer, you consistently apply the same sanction to misconduct of the same or similar nature. The Labour Court and the CCMA have in numerous cases reinstated employees where the employer was found to have applied discipline inconsistently. 
    • Lastly, it is critical that you do not crush the proverbial nut with a sledgehammer. The sanction of dismissal must be proportionate to the misconduct for which an employee is found guilty. A sanction of dismissal must take into account various factors, including the employee’s disciplinary record and the seriousness of the misconduct.  

Procedural fairness

Once you have complied with the substantive fairness requirement as explained above, you are required to take the relevant employee through a fair disciplinary process. In order for a dismissal to be procedurally fair in terms of Item 4 of the Code, an employer must:

  • conduct an investigation to determine whether there are grounds for dismissal. This may generally entail an analysis of your HR Handbook and/or Disciplinary Code to verify if the rule contravened warrants a dismissal;
  • notify the employee of the allegations using a form and language that the employee can reasonably understand. You do this by issuing a Notice of a Disciplinary Enquiry ;
  • allow employees the opportunity to state a case in response to the allegations. Depending on the circumstances, this may be a written representation or in person in a disciplinary hearing;
  • allow an employee a reasonable time to prepare the response and to the assistance of a trade union representative (if applicable) or fellow employee; and
  • to communicate the decision taken after the enquiry and furnish the employee with written notification of that decision.

If and when you hit the big time as an entrepreneur and you attract the attention of trade unions, you must inform the relevant union before disciplining an office bearer of that trade union. 

In the event that you dismiss an employee, you should provide him with the reason for dismissal. You must also remind him of any rights to refer the matter to a Bargaining Council with jurisdiction or to the CCMA. Furthermore, you may remind them to refer a dispute in terms of any other dispute resolution procedures established in terms of a collective agreement.

In exceptional circumstances, if you cannot reasonably be expected to comply with these guidelines, the Code recognises that you may dispense with pre-dismissal procedures.

The process above is what most entrepreneurs fall victim to because it can be quite complicated. It is therefore crucial for you to contact an experienced labour lawyer or consultant if you do not know what to do. As mentioned numerous times in this article, an employee’s wrongful conduct is not an automatic justification to show him the door. You must ensure that you follow due process before dismissing an employee for misconduct. 

Consequences of unfairly dismissing an employee

The primary remedy for an unfair dismissal is of course reinstatement, with or without back-pay, where this is reasonably practical. The second remedy is re-employment and the third, compensation. However, there are limitations as to the amounts an employee may be awarded for unfair dismissal.

Compensation awarded to an employee whose dismissal is found to be either substantively or procedurally unfair or both, may not be more than 12 (twelve)  months’ remuneration. It is crucial to note that such compensation will be calculated at the employee’s rate of remuneration on the date of dismissal.

Needless to say, the above situation is one that no entrepreneur would want to find themselves in, especially considering the current economic climate. Therefore, it is crucial that you ensure you have a good understanding of handling disciplinary issues and dismissals. Alternatively, if you do not have a good grasp of disciplinary processes, make sure you have a labour lawyer or consultant on your side. 

What is the alternative to a dismissal?

Based on the above it is quite clear that dismissals for misconduct can be quite disruptive and downright difficult. The question therefore is, can an employer terminate an employee in any other less disruptive way? The short answer to this question is yes – you can negotiate a mutual separation with an employee and sign a Mutual Separation Agreement.

Legalese has assisted numerous employers with negotiating and drafting mutual separation agreements. This is by far one of the best ways to terminate an employment contract. By signing a mutual separation agreement, you are able to take control of the process and the Agreement is final and binding on both parties.  

Benefits of a Mutual Separation Agreement

Some of the benefits of such an agreement for an employer are that a termination is negotiated without going through the often cumbersome disciplinary enquiry. This way, your business operations will not be disrupted, and your remaining workforce will not be left demoralised. You will get to maintain a positive company culture where employees are not dragged through disciplinary processes and lawyers are always in your corridors.

For the employee, this means that they avoid dismissal, and rather chose to sever ties with the company on “good terms”.


For the simple reason that dismissals are never a good experience for both employer and employee, it is critical that you handle them correctly. This will give you peace of mind, whilst simultaneously saving you crucial time and money. 

However, if you can avoid a disciplinary enquiry all together, that would be the best way to handle any dismissal for misconduct. You must, however, be cautious as to the timing and the strategy around initiating any negotiations for a mutual separation. The danger here is that if the negotiations fall through and you subsequently dismiss the employee, she may allege that you had already made up your mind to get rid of her.

In light of the above, if you are not exactly sure how to go about proposing a mutual separation, it is therefore crucial that you procure the services of a labour lawyer or labour consultant to assist you. It is always wise to have someone who has the technical know-how to deal with such matters. That way you avoid the pitfalls that befall most small to medium entrepreneurs.

Sudden Mutsengi – 09 April 2021

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