Can employees pursue a claim for a breach of contract when their employment is terminated rather than bringing  an unfair dismissal dispute before the CCMA or the appropriate Bargaining Council?  The Labour Appeal Court in PRASA v Ngoye and others considered this question.

It was picked up by the Court that it had become commonplace, mostly for white-collar employees, to challenge their dismissals or disciplinary action initiated by their employers on the basis of unlawfulness and/or breach of contract, rather than to dispute the fairness of the employer's action. 

The Court summarised the cases out of the Supreme Court of Appeal and the Constitutional Court on the issue, confirming that the Constitutional Court had determined an employee could institute a contractual claim to challenge a dispute stemming from their dismissal.  The Constitutional Court accepted that multiple causes of action could result from the termination of an employment contract, allowing a litigant to choose which cause of action to pursue. 

The consequence of the Constitutional Court’s decisions is that different courts have different jurisdictions and powers concerning virtually the same dispute.  The right to use different causes of action to contest disputes arising from dismissals allows for the establishment of two parallel regimes of employment law - one based on statute and one on common law.

The Court observed that the motive for litigants choosing to follow an alternate route to the one set out in the Labour Relations Act was seemingly to be awarded a quicker remedy than that which is available in terms of the Act.  However it appeared that litigants are not aware of the requirements that must be met to qualify for a contractual remedy such as specific performance or damages.  

The Labour Relations Act provides for statutory relief in the form of reinstatement, alternatively re-employment or alternatively compensation to a maximum of 12 months, - the primary remedy is reinstatement. 

In a contractual claim, the remedies are specific performance or damages.  Specific performance is always at the discretion of the court and does not automatically follow from a finding that there was a breach, and damages need to be pleaded and proven. 

The Court cited the warning of the Constitutional Court in Toyota SA Motors (Pty) Limited v Nzuza and others, that

". . . it appears to have become fashionable for dismissed employees to come to the Labour Court in terms of the BCEA and claim breach of contract seeking either specific performance or damages.  I do not know the reason that has given rise to this, but the risk associated with claims made in terms of the BCEA, as in this matter before this Court, is enormous.  Firstly, unlike in the LRA the claimant must prove an unlawful breach and not unfairness for the termination of the employment; next in terms of the LRA reinstatement is generally compulsory where a dismissal is found to be substantively unfair, specific performance consequent upon a breach is not, and generally it is a discretionary relief."

This warning was not considered by the employees.  They sought reinstatement following their claim that the termination of their contracts of employment were unlawful, and specifically did not seek damages as alternative relief.  It was an all or nothing approach. 

Their claim that the termination of their contracts of employment was unlawful was grounded on their denial that their employment contracts with PRASA were for a fixed term of five years.  They were able to prove this, but that then begged the question of what relief they were entitled to. 

The Court pointed out that if a claim is made in terms of contract, only contractual remedies are competent, which relate to specific performance or damages.  In the absence of proving the damages that they have suffered, they were not entitled to any.  In any event, the only relief the employees sought was specific performance.  

A party claiming specific performance is pursuing its claim on the basis that a contract exists and it is trying to enforce the obligations undertaken by the other party in terms of the agreement.  In claiming specific performance, the wronged party has elected not to treat the other party's failure to perform as a repudiatory action justifying cancellation but to hold the other party to its obligations under the contract.  To simplify it further, where one has a commercial contract or more particularly a transactional contract and one party resiles from the contract the other party can enforce the contract's continuation and the court seized with the matter must exercise its discretion whether to compel the parties to the contract to perform in terms thereof or to order the party in breach to pay damages. 

However in the circumstances where a contract is terminated for a breach albeit consequent on unlawful conduct by the breaching party, specific performance is not the relief that automatically follows: it is discretionary relief.  A court must look at the facts and circumstances of the breach and determine if it is appropriate to grant specific performance, that is, to compel the parties to continue the relationship in terms of their agreement even though one of the parties, on the face of it, no longer wants to continue with the contract.  

This is opposite to the relief a dismissed employee who seeks reinstatement in terms of the Labour Relations Act for unfair termination of their employment is entitled to.  For specific performance, the court will exercise a judicial discretion on whether it is appropriate to grant specific performance whereas in a claim of unfair dismissal, the Commissioner or the Labour Court will only refuse reinstatement if certain specific conditions set out as in section 194 of the Labour Relations Act are present.

The Court then considered whether it was appropriate to reinstate the employees, given their seniority in the workplace and concluded that it was not.  On this basis, while the employees had proven that the termination of their employment contracts had been unlawful, they were not entitled to any relief, and their claim was dismissed. 

Employees are able to choose on what to base their claim, but they need to be mindful of the requirements necessary to prove the relief sought, if they seek to bring a claim based on a breach of contract. 

Written by Ludwig Frahm-Arp, Partner – Labour Employment and Human Rights & Alice Letsoalo, Associate  - Labour Employment and Human Rights; Fasken