Mutual separation agreements (“MSA’s”) are not prohibited from use and are governed in accordance with the Common Law; notably, they are entrenched within the Law of Contract. Section 191(1) of the LRA empowers the CCMA to determine the existence of a dismissal and the fairness of the dismissal. Therefore, a valid MSA means there was no dismissal as provided in Section 186(1) of the LRA. The CCMA would accordingly, in the instance of a valid MSA, lack jurisdiction to arbitrate, and the matter must be referred to the Labour Court or High Court by the party that wishes to set aside a valid MSA.

Jurisdiction of the CCMA
In the matter of Cook4life CC v CCMA (2013) ZALC JHB 10, the Labour Court held that the CCMA has the discretion to determine the validity of the MSA, to determine the validity of an MSA, ordinary principles of Law of Contract would apply, which include the following:

  1. Capacity to contract.
  2. Offer and acceptance.
  3. Certainty.
  4. Possibility.
  5. Lawfulness.

In Kgwedi v Bidvest Protea Coin LTD (2019) 28 LC, it was held that agreements are binding unless the party wishing to escape the contract can show that the agreement was void ab initio, unlawful or contra bonos mores. This is done by proving one or more of the following elements:

  1. Coercion
  2. Undue influence
  3. Misrepresentation
  4. Fraud
  5. Mistake
  6. Lack of legal capacity
  7. Unconscionable

The principle of Caveat subscriptor also applies, which binds the signatories to the agreement irrespective of their intentions at the time of signing. For an MSA to be valid, both parties must have entered the agreement voluntarily. In a legal context, voluntary is defined as something ’done by design or intention’ and ’acting or done of one’s own free will, without valuable consideration or legal obligation.’

Duress and Coercion:
Duress and Coercion have the same effect on the voluntariness of an agreement. Duress refers to an instance where a party is threatened, either through fear or intimidation, into signing an agreement. Coercion, on the other hand, refers to an instance where a party, which may have a position of power over the victim and is able to use that position of power, uses such power to influence the victim into signing. Both, if proven, will have the effect of rendering the MSA void and unenforceable.

Where a party is looking to rely on the doctrine of duress to resile from a contract, the grounds for duress were set out by the CCMA in Vena and Others v Sanitech (2022) 2 BALR 209 CCMA, which sets out that to resile from an MSA on the grounds of duress the claimant must establish:

  1. Reasonable fear
  2. Threat to person or family
  3. Imminent or inevitable
  4. Unlawful or contra bonos mores
  5. Harm

Ensuring a valid MSA
Employers are to take care when relying on MSA’s to end employment contracts. To ensure that there are no unforeseen consequences that arise from mutual separation agreements, it is advisable to seek assistance from a Labour Law specialist in facilitating the process.

The employer should also ensure that the conduct in concluding the MSA is mutual and voluntary and that the employer’s conduct does not amount to “bullying the employee” into the settlement to avoid alternative disciplinary action.

Article by: Wesley Lazarus
Dispute Resolution Official – George