ABSTRACT
In First Merchant Bank v Eisenhower Mkaka& Others[i],the Supreme Court ruled that in terms of section 57(2) of the Employment Act there is no legal obligation for the employer to consult employees where he/she intends to retrench some due to the restructuring of the organization as part of its operational requirements. This was a landmark ruling as it reversed the earlier erroneous position of the Industrial Relations Court(IRC) which made it mandatory for an employer to undertake such a consultation. This article intends to briefly examine one salient point which the Supreme Court considered in its ruling in order to come up with the new legal position.
INTRODUCTION
According to the Employment Act (EA),in an employment contract the employer has the right to terminate the employment contract by notifying the employee that the contract has come to an end.[ii] The termination by the employer is commonly referred to as a ‘dismissal’, and this could be with or without notice.[iii] However, the dismissal which is governed by section 28(1), is subject to section 57 of the EA. This provision states that the termination of the contract should only be effected if there is a valid reason connected with the conduct[iv] or capacity[v] of theemployee or due to the operational requirements of the employer.[vi] If a dismissal does not comply with section 57, then it is deemed unfair[vii], and the employee is entitled to some compensation.[viii]According to section 57(2),it is mandatory for the employer to provide the employee with the opportunity to defend himself against the allegation where the dismissal is due to misconduct[ix] or incapacity.[x]In order to trigger an unfair dismissal claim, the employee simply has to establish the existence of the termination of the contract by the employer, and then the onus is on the employer to prove that the dismissal was fair.[xi]
DISMISSAL DUE TO OPERATIONAL REQUIREMENTS OF THE EMPLOYER
One of the grounds for the dismissal of an employee in terms of section 57(1) is the operational requirements of the employer.[xii]The EA does not provide any detail on what amounts to ‘operational requirement’, but case law suggests that one such ground is any form of dismissal of employees as a result of the restructuring or operational requirement of the organization which is commonly referred to as ‘retrenchment’.[xiii]The EA does not provide any procedural guidelines for a termination/dismissal due to operational requirement as is the case with misconduct and incapacity which is provided for in section 57(2). Thus in several cases the IRCtried to fill the lacuna by holding that in terms of section 57(2) of the EA, an employer was obliged to consult employees before a dismissal on this ground.[xiv]
In First Merchant Bank Ltd v Eisenhower Mkaka & Others[xv] the Respondents (Mkaka & others) were dismissed because the employer (appellant) was restructuring its business. The respondentsalleged unfair dismissal because they were not consulted as required by section 57(2) of the EA. They referred the matter to the IRC which upheld their argument, which resulted in the employer appealing to the High Court, which also agreed with the position of the IRC. The employers being dissatisfied, then appealed to the Supreme Court where thecourt held that in terms of section 57(2), it is not mandatory for the employer to consult employees where the dismissal is based on operational requirement of the organization, as is the case with incapacity and misconduct. The court clearly stated that, since such a process was omitted from section 57(2), the court could not assume that that was the intention of the legislature.However, the court still found that the dismissal was unfair on the basis that in the company’s terms and conditions of service, there was an undertaking that forany restructuring that the company shall carry out, employees shall be consulted. The court was of the view that the appellants were bound contractually by this provision and that they could not renege on that undertaking.
Sikwesehas criticised the Mkakadecision,arguing that it was as bad in law for failing to consider section 57(2) together with section 61(2) of the EA.[xvi] However, this criticism is rather flawed because it overlooks the fact that the requirement in section 61(2) is for the employer to act with justice and equity when dismissing the employee. In other words, the employer should have a valid justifiable reason when dismissing the employee on this ground. Section 61(2) does govern the giving of an employee the right to be heard before a dismissal which is within the domain of section 57(2). That is why in its ruling in the Mkaka case the Supreme Court clearly stated that the requirement for an employee to be heard in section 57(2) only applies to dismissals due to employee’s misconduct or incapacity and not for operational requirementsof the undertaking, and that the court cannot infer an intention into section 57(2) which the legislature never intended.
CONCLUSION
The Malawi Supreme Court decision inFirst Merchant Bank v Mkaka and Others is a landmark decision because it has reversed an erroneous interpretation of section 57(2) by the IRC which has been part of Malawi’s labour law jurisprudence for the past fourteen years.The legal position now in Malawi is that, in terms of section 57(2) of the EA, an employer who wants to restructure his/her business could dismiss (retrench) an employee without consulting them, provided the operational reason for the restructuring is genuine. Going forward, it is important for the IRC to correctly interpret provisions in the EA, which is a very important piece of legislation as it gives effect to the right to fair and safe labour practices in section 31 of the Republic Constitution.
Further Reading
STATUTES
Employment Act
Republic Constitution
BOOKS
Chilumpha,C Labour Law. Blantyre: Commercial Law Centre, 2004
Muhome, A Labour Law in Malawi,Blantyre: Focus Printers, 2018
SikweseR,Labour Law in Malawi 3rded, Lexis Nexis, 2019.
CASES
First Merchant Bank v Eisenhower Mkaka & Others[2014] MLR 105
Jawadu v Malawi Revenue Authority [2008] MLLR 397
Khoswe v National Bank of Malawi [2008] MLLR 201
Isabel Gadama& another v Opportunity Bank (IRC) unreported case no 02/2017 (6 October 2018) [Online] available at www.malawilii.org (accessed on 16 April 2022)
Jekapu v Supa Bake (IRC) unreported case no 194/2006 (29 May 2008) [online] available at www.malawilii.org (accessed on 27 October 2021)
Mwale v SDV AMI Malawi Ltd (IRC) unreported case no 191/2004 (27 December 2006) [online] available at www.malawilii.org (accessed on 16 April 2022)
Madinga v Petroleum Control Commission (IRC) unreported case no 176/2001 (23 June 2004) [online] availableat www.malawilii.org (accessed on 16 April 2022)
Masauli& Others v Malawi Savings Bank (HC) unreported case no 02/2017 (18 October 2018) [Online] available at www.malawilii.org (accessed on 16 April 2022)
Mwaungulu v Kawalazi Estate Ltd (IRC) unreported case no 71/2004 (22 April 2005) [Online] available at www.malawilii.org (accessed on 16 April 2022)
Chancy Nanthambwe v Bunda College of Agriculture (HC) unreported case no 4/2014 (6 January 2017) [online] available at www.malawilii.org (accessed on 16 April 2022)
Premium Tama Co Ltd v Frank Mambala (HC) unreported case no 103/2012 (8 July 2016) [online] available at www.malawilii.org (accessed on 16 April 2022)
Chancy Nanthambwe v Bunda College of Agriculture (HC) unreported case no 4/2014 (6 January 2017) [online] available at www.malawilii.org (accessed on 16 April 2022)
Mkandawire v World VisionInternational (IRC) unreported case no 254/2005 (25 April 2004) [online] available at www.malawilii.org (accessed on 16 April 2022)
Mwafulirwa v ManicaMalawi (IRC) unreported case no 34/2004 (30 April 2004) [online] available at www.malawilii.org (accessed on 16 April 2022)
Sheha v Malawi Revenue Authority (IRC) unreported case no 113/2002 (1 October 2002) [online] available at www.malawilii.org (accessed on 16 April 2022)
[i] [2014] MLR 105
[ii]Section 28 of the Employment Act ; Chilumpha,CLabour Law. Blantyre : Commercial Law Centre,2004, p3
[iii]Sections 28 and 59 of the Employment Act ; Muhome, A Labour Law in Malawi , Blantyre : Focus Printers ,
2018. P 68.
[iv] Jawadu v Malawi Revenue Authority [2008] MLLR 397 ; Khoswe v National Bank of Malawi [2008] MLLR
201 ; ; Isabel Gadama& another v Opportunity Bank (IRC) unreported case no 02/2017 (6 October 2018) [Online] available at www.malawilii.org (accessed on 16 April 2022)
[v] Jekapu v Supa Bake (IRC) unreported case no 194/2006 (29 May 2008) [online] available at
www.malawilii.org (accessed on 16 April 2022) ; Mwale v SDV AMI Malawi Ltd (IRC)unreported case no
191/2004 (27 December 2006) [online] available at www.malawilii.org (accessed on 16 April 2022).
[vi] Section 57 (1) Employment Act ; First Merchant Bank Ltd v Eisenhower Mkaka& Others[2014] MLR
105 (MSCA) ; Madinga v Petroleum Control Commission (IRC) unreported case no 176/2001 (23 June 2004)
[online] available at www.malawilii.org (accessed on 16 April 2022) ;
[vii] Sections 58 of the EA
[viii] Sections 63 of the EA
[ix] Masauli& Others v Malawi Savings Bank (HC) unreported case no 02/2017 (18 October 2018) [Online]
available at www.malawilii.org (accessed on 16 April 2022)
[x] Mwaungulu v Kawalazi Estate Ltd (IRC) unreported case no 71/2004 (22 April 2005) [Online] available at
www.malawilii.org (accessed on 16 April 2022)
[xi]Section 61(1) and (2) of the EA ; Chancy Nanthambwe v Bunda College of Agriculture (HC) unreported case
no 4/2014 (6 January 2017) [online] available at www.malawilii.org (accessed on 16 April 2022) ; Sikwese
R , Labour Law in Malawi 3rd ed , Lexis Nexis (2019) p84-88
[xii]Premium Tama Co Ltd v Frank Mambala (HC) unreported case no 103/2012 (8 July 2016) [online] available at
www.malawilii.org (accessed on 16 April 2022) ; Chilumpha,CLabour Law. Blantyre : Commercial
Law Centre,2004, p.3 .
[xiii] Chancy Nanthambwe v Bunda College of Agriculture (HC) unreported case no 4/2014 (6 January 2017)
[online] available at www.malawilii.org (accessed on 16 April 2022) ; Muhome, A Labour Law in Malawi, Blantyre : Focus Printers , 2018, p.68.
[xiv] Mkandawire v World VisionInternational (IRC) unreported case no 254/2005 (25 April 2004) [online] available at www.malawilii.org (accessed on 16 April 2022) ; Mwafulirwa v Manica Malawi (IRC) unreported case no 34/2004 (30 April 2004) [online] available at www.malawilii.org (accessed on 16 April 2022) ; Shehav Malawi Revenue Authority (IRC) unreported case no 113/2002 (1October 2002) [online] available at www.malawilii.org (accessed on 16 April 2022) ; Khawela& Others v Stanbic Bank (IRC) unreported case no 63/2004 (16 May 2005) [online] available at www.malawilii.org (accessed on 15 April 2022 ; Kamwambev Action Against Hunger (IRC)unreported case no 235/2006 (5 October 2006) [online] available at www.malawilii.org (accessed on 15 April 2022) ; Chimbwanya v Tea Research Foundation IRC) unreported case no 118/2008 (3 March 2008) [online] available at www.malawilii.org (accessed on 15 April 2022).
[xv] [2014] MLR 105 (MSCA)
[xvi] Sikwese R , Labour Law in Malawi 3rd ed , Lexis Nexis, 2019. p84-88