In accordance with the provisions of the FAIS Act, employees to whom the FAIS Act applies, are required to meet new statutory requirements in order to legally perform their employment functions. The implementation of these new statutory requirements left employers uncertain as to how to deal with the situation where employees fail to meet the new statutory requirements.
In accordance with the provisions of the FAIS Act a person may not act as a “representative” of an Authorised Financial Services Provider, such as a Bank, unless that person satisfies the “fit and proper” requirements of the FAIS Act. In order to comply with the “fit and proper” requirements employees are inter alia required to pass the relevant first and/or second level regulatory examinations set by the Registrar of Financial Services Providers. Failure by employees to pass the regulatory examinations accordingly raises the question of whether or not an employer could terminate the employment of an employee for reasons relating to incapacity emanating from the employee’s failure to comply with the legal requirement introduced by the FAIS Act.
Unions and others commentators have suggested that in circumstances such as these a retrenchment in accordance with section 189 of the Labour Relations (“the LRA”) would be the correct approach, rather than terminating the employment of those employees for incapacity. This would of course have financial implications for employers where the employment of a number of employees would be terminated for that reason as retrenchment packages would have to be paid. The contrary view was that the failure to pass the compulsory exams did not constitute a retrenchment as it did not fall within the definition of “operational requirements” as defined in the LRA and in any event, the employee was responsible for the termination of employment.
In the recent reportable case of First National Bank, a division of First Rand Bank Limited (“FNB”) v Sasbo obo Woni and others (10 July 2017) the Labour Court per F Coetzee AJ addressed this significant question and confirmed that the LRA recognises forms of incapacity other than ill health and injury and that a narrow interpretation should not be adopted. Numerous cases waited in line for the outcome of the Judgment dealing with this issue.
the employee, by virtue of the nature of his role at FNB was a “representative” in terms of the FAIS Act and was accordingly required to pass the statutory prescribed Regulatory Examination 1 (“RE1”). The employee attempted and failed the RE1 on numerous occasions. As a result of his failure to pass the RE1 he was required to attend an incapacity hearing and was thereafter dismissed by FNB for incapacity. The employee thereafter referred an unfair dismissal dispute to the CCMA alleging that he should have been dealt with as a retrenched employee.
On 22 June 2016 the CCMA found the dismissal of the employee to be substantively unfair and ordered retrospective reinstatement. The Commissioner found that where an employee fails to attain a standard imposed by law an employer should retrench the employee in accordance with section 189 of the LRA as opposed to dismissing the employee for incapacity. The Commissioner accordingly held that incapacity is limited to grounds of ill health or injury, thereby placing a narrow interpretation on the definition of “incapacity”.
FNB challenged the CCMA award and hence launched review proceedings at the Labour Court where it contended that the Commissioner had embarked upon the wrong enquiry. The Labour Court agreed with FNB and found that the employee’s dismissal related to incapacity and that it was fair.
This seminal Judgment affirms that incapacity encompasses more than ill health or injury and that it also extends to the inability or failure of an employee to meet a standard or qualification required by law, such as the regulatory examinations required by the FAIS Act. This Judgment impacts upon the banking, financial, insurance, security, transport, professional institutions and other industries.
Rod Harper and Tanya Mulligan of Cowan-Harper Attorneys represented FNB in this case.