The Labour Appeal Court has ruled against an employer's reliance on collective misconduct for shrinkage in an unfair dismissal case, reinforcing the importance of evidence and the burden of proof placed on the employer.

The concept of collective misconduct applies when employers address misconduct involving multiple employees. However, it may be difficult to prove collective misconduct because employers often fail to rely on appropriate evidence. This was the case in SACCAWU & Others v Cashbuild (Pty) Ltd.

Cashbuild dismissed 12 employees, who held various capacities, from their Klerksdorp branch. The dismissals resulted from stock shrinkage, which was detected during a stock-take in January 2016. Further stock shrinkage was revealed during stock-takes in February and March that year.

To address the issue, Cashbuild conducted a shrinkage workshop wherein the employees were interviewed and given a questionnaire to complete indicating the cause of stock losses. They were also encouraged to use an anonymous tip-off line to report future incidents that might contribute to shrinkage concerns. The employees were issued with final written warnings, valid for 12 months, for failing to control shrinkage collectively or individually. Despite these interventions, in June 2016 a further stock shrinkage was identified. Cashbuild conducted another shrinkage workshop. This time, the employees identified various deficiencies in Cashbuild’s approach towards monitoring or preventing shrinkage, including staff shortages; the absence of an end controller stationed at the exit of the store; the lack of adequate controls at the stock receiving section; control of keys to the receiving area; and the malfunction of the CCTV system. Despite these discrepancies, Cashbuild charged the employees with collective and/or team misconduct, which resulted in their dismissal.

The employees referred an unfair dismissal dispute to the CCMA. The commissioner found that the employees had contravened the employer's rules and failed to report what they saw to be irregularities. The employees tried to disown how their conduct contributed to the loss of stock and rather sought to implicate others in the questionnaires. Their refusal to take accountability was found to have exacerbated the problem. Their dismissals were therefore found to be both procedurally and substantively fair.

Still aggrieved, the employees referred the arbitration award to the Labour Court on review. However, the Labour Court upheld the award as reasonable.

The employees appealed the decision to the Labour Appeal Court (LAC). The LAC explored the four different approaches to collective misconduct: common purpose, team misconduct, derivative misconduct, and situations where individual culpability cannot be determined. 

Cashbuild had relied on team misconduct, alleging that the employees, as members of a team, had failed to adhere to its rule meant to prevent and halt shrinkage at the store. However, the LAC found that Cashbuild failed to present adequate evidence of the details of the systems and controls in place at its Klerksdorp store to prevent stock losses. For example, no evidence was presented on any attempt to ascertain how stock was being lost or the size of the store. Having considered the evidence available to this extent, the LAC found that the size of the store meant that employees in one section of the store would have been unaware of stock being lost in another section. 

If Cashbuild had taken care to secure evidence of its attempts to determine how the stock was being lost, the LAC might have reached a different finding. However, as a result of the inadequate evidence presented by Cashbuild, the LAC found that the dismissals of the employees were unfair. It ordered retrospective reinstatement with backpay.

This case highlights the importance of employers being cautious when they embark on disciplinary measures under the umbrella of collective misconduct. Employers must obtain and assess the evidence properly before electing which approach to take. Failure to consider the nature of the evidence adequately may result in the employer adopting the incorrect approach and presenting insufficient evidence, thus failing to prove the misconduct. This failure could lead to unfair dismissals and potential unnecessary legal action from employees.

Written by Dhevarsha Ramjettan, Partner & Dumisani Ndiweni, Senior Associate at Webber Wentzel