In labour disputes involving allegations of unfair dismissal or unfair labour practices, one of the key forms of redress available to an aggrieved employee is compensation. Where reinstatement is not feasible or appropriate, compensation may provide financial relief for the loss suffered. However, the discretion to award compensation is not unlimited. The Labour Relations Act 66 of 1995, supported by precedent from the Labour Courts, imposes clear requirements of fairness, reasonableness, and justification on such awards.
An employee may seek compensation in circumstances where reinstatement is either not requested or not viable. This often arises in cases where the employment relationship has deteriorated to the extent that a return to the workplace would be untenable, typically due to a breakdown in trust or hostility between the parties. Even where an employee initially seeks reinstatement, a commissioner may determine that compensation is the more appropriate remedy if reinstatement would be impractical or contrary to the interests of justice.
Importantly, compensation is not punitive; it is intended to place the employee in the position they would have been in had the unfair labour practice or dismissal not occurred, within reasonable limits.
The recent case of Malas (Pty) Ltd v Stapelburg N.O. (JR559/23) [2025] ZALCJHB 145 (1 April 2025) is a compelling example of what happens when a commissioner’s discretion in awarding compensation exceeds the bounds of fairness and logic.
In this matter, the third respondent, Mr Hoosen, sought compensation equivalent to three months’ salary after his dismissal. The commissioner, exercising his discretion, increased the compensation to four months, amounting to R98,000.00. However, in a surprising move, the actual amount awarded was R122,500.00, which equated to five months’ salary.
The employer challenged the award through a review application to the Labour Court, arguing that the commissioner had not provided a clear or reasonable justification for exceeding both the employee’s own request and the rationale provided in the award itself. The Labour Court agreed with the employer and found that the commissioner’s reasoning failed to meet the threshold of a reasonable decision as defined by precedent.
The Court emphasised that although commissioners have a degree of latitude when determining appropriate remedies, their discretion must be exercised judiciously and supported by a logical connection between the facts of the case and the relief granted. As such, the Court substituted the award and ordered that Mr Hoosen be compensated in the reduced amount of R73,500.00, subject to statutory deductions.
The case reinforces that the Labour Appeal Court has long held that arbitrators’ discretion to award compensation is a value judgment, not an unfettered power. It must be exercised fairly and consistently and is always subject to review under the Labour Relations Act if the outcome is not justifiable on the evidence.
In practical terms, this means:
- A commissioner may award more compensation than requested, but must explain why.
- Compensation must be “just and equitable” within the context of the specific case.
- Arbitrators must avoid awards that appear arbitrary or disconnected from the relief sought or the actual loss suffered.
- Employers have the right to challenge compensation awards that lack sufficient motivation or legal grounding.
For employers, the lesson is twofold: First, remain vigilant when a commissioner awards compensation in excess of what was requested or justified. Second, know that you are not without recourse. If the award lacks proper reasoning or seems excessive, a review may be appropriate. It is essential to understand that compensation is not guaranteed at any amount simply because unfairness is established. Relief must still align with principles of reasonableness and fairness, and even self-imposed expectations may not be met if not substantiated.
Article By Faheqa Adam
Dispute Resolution Official at Consolidated Employers Organisation (CEOSA)