The Constitutional Court restricts the use of derivative misconduct

The concept of derivative misconduct has received a great deal of judicial attention over the last few years.

In many instances, charging employees for derivative misconduct is the last resort for employers who are the victims of collective misconduct and who are unable to identify the perpetrators of that violence. In such cases, employees who can identify those who committed the misconduct but fail to do so are dismissed for the breach of their duty of good faith to their employer. This has become known as ‘derivative misconduct’.

This is exactly what transpired at Dunlop Mixing & Technical Services (“Dunlop”) during 2012. NUMSA members commenced a strike at Dunlop which was immediately beset by violence. Notwithstanding an interdict from the Labour Court prohibiting the violence, it continued unabated. Dunlop repeatedly called for the intervention of NUMSA so that disciplinary action could be taken against those perpetrating the violence, to no avail. Ultimately, all of the striking employees were dismissed. Those who could not be identified as actively participating in the violence or associating therewith by Dunlop were dismissed for derivative misconduct.

At the subsequent CCMA arbitration proceedings, the arbitrator separated the dismissed employees into three categories, namely: –

  1. (a) those who were positively identified as having committed violence;
  2. (b) those who were identified as present when the violence took place but who did not physically participate; and
  3. (c) those that were not positively and individually identified as being present when violence was being committed.

In respect of the employees failing within categories (a) and (b), the CCMA held that their dismissals were fair and that was the end of the matter. In respect of the employees failing within category (c), however, the CCMA found that their dismissals were substantively unfair and reinstated them.

Review Application

Dunlop reviewed the award in respect of the reinstated employees. The Labour Court set the arbitrator’s finding aside and found that the dismissals were substantively fair. This was on the basis that the only reasonable and plausible inference from the evidence was that the employees falling within category (c) were present during the violence, notwithstanding that they could not be identified. Those employees thus had a duty to report the misconduct to Dunlop.

The Labour Court’s finding was subsequently upheld by the majority in the Labour Appeal Court. The matter then went on appeal to the Constitutional Court.

Constitutional Court

In a Judgment overruling the Labour Court and Labour Appeal Court, the Constitutional Court has definitively, and somewhat controversially, pronounced on what is required in order to sustain a dismissal for derivative misconduct.

Firstly, the Constitutional Court was sceptical regarding the need for ‘derivative misconduct’ at all for the following reasons: –

  • in terms of previous Judgments which established the concept, derivative misconduct was not required to dismiss the employees in question because those employees could be implicated in the primary misconduct either through direct participation or their association with that misconduct. The remarks in those Judgments in relation to derivative misconduct were therefore obiter dicta (not binding);
  • it is thus not necessary to use the concept of derivative misconduct where association or participation in the primary misconduct can be established by way of inference; and
  • derivative misconduct should not be used until all avenues of discipline for primary misconduct have been exhausted, because it would be wrong to rely on a charge of derivative misconduct as an “easier means to dismiss, rather than dismissal for actual individual participation” .

Secondly, the Court held that there is a difference between the duty of good faith held by ordinary employees and a fiduciary duty. Fiduciary duties may be implied by law for certain categories of employees (i.e. directors/prescribed officers) but are not implied in all employment relationships. Those employees holding fiduciary relationships have a fiduciary duty to disclose misconduct, but other employees do not.

Thirdly, in respect of the common law duty of good faith owed by all employees to their employer, it “does not as a matter of law imply the imposition of a unilateral fiduciary obligation on employees to disclose known information of misconduct of their co-employees to their employers”. In other words, ordinary employees who have no fiduciary duty are not obliged to disclose the misconduct of others to their employers.

Finally, contractual obligations of good faith must at the very least be reciprocal in nature, especially in the strike context. While employers may expect employees to report misconduct, there is no reciprocal duty on employers to give something in return, such as a guarantee of their safety.

Conclusion

While the Constitutional Court has not ruled out derivative misconduct as a form of misconduct altogether, it has nevertheless substantially limited its application in respect of employees who do not hold fiduciary relationships to their employers (i.e. directors/prescribed officers).

Clearly, the most controversial aspect of the Judgment is the finding that most employees do not owe a fiduciary duty to their employer and consequently do not owe a unilateral duty to disclose the misconduct of others.

In terms of the contractual duty of good faith applicable to all employees, it is reciprocal in nature and consequently, employees who are called to identify those committing misconduct must be offered something in return. In the context of a violent strike, the Judgment envisages that an employer should offer guarantees for the safety and protection of employees who come forward. It goes without saying that this may be difficult, if not impossible, for employers to guarantee.

Derivative misconduct may also only be used as a means of last resort and not where the employees could otherwise be implicated in the misconduct through inference either in the form of participation or association (including association after the fact).

The judgment is disappointing in that the Court appears to have overlooked the magnitude of the violence perpetrated during the strike. The Court also made no comments regarding the unacceptability of the violence in our industrial relations context or its role in the abuse of the right to strike.

The judgment means that employers will need to be more vigilant during strikes in order to monitor and identify perpetrators of misconduct. Where possible, cameras and recording equipment should be used to identify the perpetrators and detailed records of the strike should be kept.

Written by James Horn and Neil Coetzer of
Cowan-Harper-Madikizela Attorneys

A picture of James Horn of Cowan-Harper-Madikizela Attorneys
Neil Coetzer of Cowan-Harper-Madikizela Attorneys,