Where an employee is found to be unfairly dismissed, the court or an arbitrator may order that the employer reinstate, re-employ or order that the employer pay compensation to the employee. This article seeks to address the difference between an order to reinstate with backpay and to pay compensation to the employee.

Even though the LRA does not define the term “reinstatement”, the court in the case of Equity Aviation  Services  (Pty) Ltd v CCMA and others (2008) 29 ILJ 2507 (CC) defined reinstatement as placing the employee back into the same job or position he or she was in before the dismissal, on the same terms and conditions. The purpose of an order of reinstatement is to place the employee in the position he or she would have been but for the dismissal. An order of reinstatement may be fully retrospective or partially retrospective. Where an order is made in the former, it means that the reinstatement order is effective from the day of the dismissal, whereas if the order is made in the latter, it means reinstatement is effective from any day after the dismissal.

Whether or not reinstatement is ordered with effect from the date of dismissal or any date from the dismissal does not entitle the employee to remuneration from the date of the dismissal to the date of the order to reinstate. It is important to note that the LRA differentiates between backpay and compensation despite both being a form of reimbursing the employee for loss of income for the duration of the period he was dismissed.

Compensation is one of the statutory remedies available to an employee who is not granted a remedy of reinstatement or re-employment in terms of section 193 of the LRA. This section provides for reinstatement (with or without backpay), re-employment or compensation and uses the word “or” between the different types of remedies, which indicates that the court or arbitrator cannot order both compensation and reinstatement with backpay.

In the most recent case of Cel Concrete Products (Pty) Ltd v Brummer NO and Others C1134/2018 (LC), the court dealt with a dispute where three employees were dismissed for misconduct related to alleged assault during a protected strike which dispute was referred and arbitrated by the CCMA. The arbitrating commissioner found that the dismissal of 2 employees was both substantively and procedurally fair, but found that the dismissal of the other employee Ngcuka was both substantively and procedurally unfair. The arbitrator issued an arbitration award ordering retrospective reinstatement of Ngcuka to the date of his dismissal, being 7 March 2018 and in addition ordered that the employer (hereinafter “Applicant”) pays Ngcuka compensation for that period.

The Applicant thereafter applied for a rescission of the award on the following grounds, (a) the strike in which the employees allegedly committed misconduct had commenced on 11 September 2017 and was still in progress when the arbitrator issued the award on 29 August 2018, (b) the Applicant had not tendered his services at the time the award was issued or anytime prior thereto (c) employees were dismissed for misconduct on 7 March 2018 and (d) the amount awarded to Ngcuka was equivalent to an award of backpay to the date of the dismissal. The Applicant added that as Ngcuka had not tendered his services, he was consequently not entitled to any remuneration flowing from his retrospective reinstatement.

On review, the court noted that on the arbitration award, the arbitrator had clearly stated that the monetary portion of the award was for backpay. The Applicant on review contended that the awarding of the monetary relief by the arbitration amounted to gross irregularity on the part of the arbitrator in that it is not permissible to award both reinstatement and compensation as these are alternative remedies and mutually exclusive. In advancing its argument, the Applicant relied on the case of Equity Aviation  Services  (Pty) Ltd v CCMA and others (2008) 29 ILJ 2507 (CC), where the court drew a distinction between the term “backpay and compensation”. The court held that even though the employer must pay a reinstated employee a sum of money if the reinstatement order is made retrospective, that sum of money is not compensation as contemplated by section 193 (1)(c) of the LRA. In addition, the court clarified that even though backpay is a form of compensation for loss of income for the period of unemployment after the dismissal, same is generally different from compensation. The court held further that the LRA deals with reinstatement and compensation in different sections and regards these as alternative remedies which are mutually exclusive, meaning that an employee who is awarded full retrospective reinstatement cannot be awarded compensation in addition to backpay. It is on this basis that the Labour Court ruled that the arbitrator made an error in law when she held that she awarded compensation and not backpay in favour of Ngcuka.

The court noted that the circumstances of the Cel Concrete case were unusual in that the dismissal took place while the strike was still in progress and that the strike was still ongoing at the time of the award. The court held that the arbitrator failed to appreciate that Ngcuka had not tendered his services since the commencement of the strike and was not doing so at the time of his dismissal. On this basis, the court held that in instances where the employee decided to withhold his services due to strike, such employee would not be entitled to remuneration during the time when the strike was underway. The court, however, stressed out that the circumstances of this case are distinguishable from a normal situation where the employee would be continuing with work if it was not for the unfair dismissal.

The importance of the Cel Concrete case is that the court clarified that backpay could not be ordered in favour of an employee where an employee has decided not to tender his/her services during the period of his dismissal and the date of the order. Additionally, we learn from this case that compensation and retrospective reinstatement with backpay are different remedies in terms of the LRA and that these cannot be awarded in one order.

Article by: Sizamkele Jilaji
Dispute Resolution Official – Cape Town