Mutual separation agreements – who has jurisdiction?

This article was written by Samantha Copeman, a candidate attorney at Norton Rose Fulbright South Africa

A mutual separation agreement is an agreement between an employer and employee to terminate the employment relationship.

In Cook4Life CC v Commission for Conciliation, Mediation and Arbitration & others (2013) 34 ILJ 2018 (LC), the Labour Court considered whether the Commission for Conciliation, Mediation and Arbitration (CCMA) has jurisdiction to determine the validity of mutual separation agreements.

In this case, the Labour Court said:

“Section 191 [of the Labour Relations Act (LRA)] contemplates that the CCMA must make a ruling when the existence of a dismissal is placed in issue, by determining whether or not an employee referring an unfair dismissal claim was dismissed within the meaning accorded to that term by section 186 (1) of the [LRA].  That being so, I fail to appreciate why, in matters such as the present, when it is contended that an agreement is voidable on account of it having been induced by duress, the CCMA is not empowered to make that determination in the exercise of its jurisdiction to determine the existence or otherwise of a dismissal.  To require an applicant in those circumstances to refer a contractual dispute to this court as a precondition to arbitration on an unfair dismissal claim would defeat the statutory purpose of informal and expeditious dispute resolution, and would import a requirement that finds no reflection in the [LRA].”

In other words, where an employee alleges that the mutual separation agreement that he/she has entered into is invalid (due to duress or misrepresentation), the CCMA should determine whether the mutual separation agreement is valid.  If it determines that the mutual separation agreement is invalid, the agreement should be set aside and the CCMA should proceed to determine whether there was an unfair dismissal.  The CCMA’s jurisdiction is not automatically ousted by virtue of the parties having concluded a mutual separation agreement.

The Labour Court in Schroeder and another v Pharmacare Ltd t/a Aspen Pharmacare upheld this view.  The applicants and their employer had terminated the employment relationship by concluding mutual separation agreements.  Subsequently, the applicants referred an unfair dismissal dispute to the bargaining council.  The arbitrator held that there had been no dismissal in terms of section 186 of the LRA, because their employment had come to an end by mutual agreement.  The arbitrator concluded that since there was no dismissal, the bargaining council lacked jurisdiction to consider the dispute.  The applicants then approached the Labour Court, seeking an order setting aside the agreements.

The Labour Court referred to Cook4Life and concluded that it lacked jurisdiction to entertain the dispute.  To do so would amount to a review of the arbitrator’s award that he lacked jurisdiction and the applicants had not approached the Labour Court on that basis.

In summary:

• The CCMA
  • can determine the validity of mutual separation agreements; and
  • does not lack jurisdiction simply on the basis that a mutual separation agreement exists.
• The Labour Court can review CCMA decisions relating to;
  • their jurisdiction; and
  • the validity of the mutual separation agreements.