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Published: Fri, 02 Feb 2018
Edcon Ltd Versus Pillemer
A recent judgment by the Supreme Court of Appeal in Edcon Ltd v Pillemer and Others has raised the question as to when dishonesty warrants a dismissal. The issue that arises in cases of dishonesty is whether a future employment relationship would be intolerable. It is trite law that for a dismissal to be fair it must have been motivated by a fair reason and affected in accordance with fair procedure. Thus, it is only where the misconduct is so gross that it makes any future employment intolerable that the sanction of dismissal would be appropriate. 
The purpose of this note is to thoroughly analyse the Edcon judgment in light of the above. Firstly, an overview of the facts shall be provided. Secondly, the commissioner’s findings shall be discussed, and finally, the Supreme Court of Appeal’s findings shall be discussed and final comments will be made.
Ms Reddy was employed by Edcon Limited (Edcon) as a quality controller. As a result of her position in the company, Reddy was entitled to the use of a company vehicle, courtesy of Edcon’s car scheme policy (the policy). In terms of the policy, it was mandatory that Reddy, report any accidents of her vehicle to Edcon, the South African Police Service (SAPS) and the relevant insurance company within 24 hours. She was further required not to effect any repairs to the company vehicle without first obtaining approval from the insurance company.
In June 2003, Reddy’s son, Andre, was involved in an accident whilst driving the company vehicle. Reddy was not in the vehicle at the time. Rather than complying with the company’s policy of reporting the accident to Edcon, the SAPS and the relevant insurance company, Reddy arranged for the vehicle to be repaired at her husband’s panel beating shop.
Six months later, Reddy took the vehicle to a Toyota dealer to have its performance inspected. On inspection the service personnel discovered that the vehicle had been involved in an accident and had not been properly repaired. Reddy had requested her manager, Clive Dwyer, to authorise payment of the repairs, but had not disclosed that the vehicle had been involved in an accident. After an enquiry with the dealership, Dwyer learnt the true reason for the repairs and became aware of Reddy’s failure to report the accident.
When questioned by Dwyer, Reddy initially denied the accident. She later admitted the occurrence of the accident but stated that she had been driving the vehicle at the time the accident occurred. Edcon’s security manager, Naidoo, was appointed to investigate the matter. Reddy continued with her dishonesty during questioning, stating that her son had been driving the vehicle when the accident had occurred and that she had been a passenger. It was only after Reddy’s son gave a separate statement confirming that he had been alone in the vehicle when the accident had occurred that she admitted the truth.
Edcon convened a disciplinary enquiry and Reddy was charged with ‘failure to be honest and act with integrity in that she committed an act, which has affected the trust relationship between the company and the employee in that on 8 June 2003 to 8 October 2003: She failed to report an accident of a company vehicle. . . which her son was driving on the day of the accident (8 June 2003) and this resulted in a breach of trust between herself and the company’  . Reddy pleaded guilty, stating that her reason for non-compliance of the company’s policy was that she was under the impression that her son was precluded from driving the vehicle. Her impression was incorrect. Reddy offered to pay all the necessary costs of repairing the vehicle. Despite her remorse and honesty at the enquiry, and the fact that she had 43 years of unblemished service, she was found guilty and dismissed.
The reason for the decision to dismiss had been motivated by the fact that Reddy behaved without integrity and honesty, which are values regarded highly by Edcon. Reddy’s unblemished record and character was not regarded as sufficiently mitigatory of her conduct.
Reddy unsuccessfully lodged an internal appeal against her dismissal on the following 5 grounds. ‘The first ground was that the penalty was too harsh. She submitted that although serious offences usually justify dismissal, in this instance the nature of the offence had not completely destroyed the trust relationship between her and the employer. The second ground was based on Edcon’s inconsistency of disciplinary penalties, in that it had not dismissed an employee guilty of a similar offence. The third, fourth and fifth grounds were based on the fact that she had dedicated most of her working life to the company, that she provided a loyal service and that she had accepted full responsibility for all the necessary and reasonable costs of repairing the company vehicle’  .
Reddy then referred the dispute to the Commission for Conciliation, Mediation and Arbitration (the CCMA) on the ground of inappropriateness of the sanction.
The commissioner’s findings
The commissioner, Pillemer, identified that the principal issue was whether the dismissal had been fair. Pillemer held that whilst Reddy’s failure to report the accident constituted misconduct, it was not sufficiently serious in itself to have justified dismissal. Therefore, Pillemar found that, instead of being an issue of dishonesty, the issue was whether Reddy’s lack of candour, subsequent to Edcon’s discovery that she had failed to report the accident, led to the trust relationship being destroyed, justifying dismissal.
The commissioner took into account email correspondence from Reddy’s managers, which indicated that, the trust relationship had not been destroyed by Reddy’s misconduct and lack of candour. She further held, that ‘a decision to dismiss a person with Reddy’s track record and 43 years unblemished service, the misconduct committed had to be extremely gross and evidence was necessary to show that the trust relationship had in fact been destroyed’  . The commissioner consequently found the dismissal to be substantively unfair and directed Edcon to reinstate Reddy.
The Labour Court and Labour Appeal Court’s findings
Edcon unsuccessfully applied to the Labour Court  to review the Commissioner’s award. Pillay J held that there was no reason to disagree with the commissioner as she had taken all the circumstances into account, including Reddy’s initial dishonesty and came to the conclusion that the employment relationship had not been destroyed.
Edcon was similarly unsuccessful on appeal to the Labour Appeal Court. The judges unanimously agreed that the appeal had to fail on the ground that Edcon who had initially charged Reddy with failure to report the accident sought to rely on a subsequent lack of candour. This suggested to the court that had Reddy initially pleaded guilty, she would not have been dismissed.
The Supreme Court of Appeal: Discussion and Comment
Eventually on appeal before the Supreme Court of Appeal (SCA), Edcon sought to have the commissioner’s award set aside, contending, that the commissioner’s award was defective on the grounds that it failed to appreciate the extent of Reddy’s dishonesty, it erroneously considered hearsay evidence and that Edcon had not adduced evidence of the irretrievable breakdown of the trust relationship. 
Bearing in mind the aforementioned dispute, the Mlambo JA found it significant to consider the standard of review applicable to CCMA awards, in other words, the attitude that commissioners should apply when determining the fairness of the employer’s decision to dismiss. Accordingly, the SCA considered the classic ‘reasonable decision maker’ test expounded by the Labour Appeal Court (LAC) in Carephone (Pty) Ltd v Marcus  and subsequently affirmed by the Constitutional Court in Sidumo v Rustenburg Platinum Mines Ltd  . The question raised by this test is whether ‘there is a rational objective basis justifying the connection made by the administrative decision maker between the material properly available to him and the conclusion he or she eventually arrived at?’  On applying the ‘reasonable decision maker test’ it must be noted and endorsed that ‘if the commissioner made a decision that a reasonable decision maker could not reach, he or she would have acted unreasonably which could then result in interference with the award’  .
Therefore, the focal point of the enquiry is the reasonableness of the award. In establishing reasonableness one focuses not only on the conclusion reached but also on the material before the commissioner when making the award.  Since Edcon focused its case on the breakdown of its trust relationship with Reddy, the salient issue in the appeal was whether the trust relationship between Edcon and Reddy had, in fact, been so destroyed. In conducting its enquiry, the SCA examined the commissioner’s reasons for her conclusion and the material that was available to her in making such findings. 
In support of its case, Edcon had simply called one witness, Naidoo, Edcon’s security manger who had originally been appointed to investigate Reddy’s misconduct, to testify in the arbitration. The SCA, correctly acknowledged, that Naidoo’s testimony had not only failed to highlight the alleged breakdown of the trust relationship between the parties, but that he could not, in actual fact, have done so. ‘This was the domain of those managers to whom Reddy reported.’  Unfortunately for Edcon, it had failed to call either of Reddy’s managers to testify at the arbitration. It must further be noted, that at some point in the course of the disciplinary proceedings, Val Barnes, one of Reddy’s managers, had requested that Reddy be kept on her team despite the incident.  Furthermore, Mlambo JA held that Edcon’s disciplinary policy was just a policy and did not constitute evidence of the consequences of misconduct based on it. 
In Mlambo JAs view, Edcon was required to establish the ‘nature and scope of Reddy’s duties, her position in the hierarchy of employees, the importance of trust in the position she held or in the performance of her work, or the adverse effects, either direct or indirect, of retaining her on the company’s operations’  . Edcon, however, had failed to do so.
Mlambo JA cited with approval the following dictim of the LAC in De Beers Consolidated Mines Ltd v CCMA & others 
The seriousness of dishonesty – that is, whether it can be stigmatized as gross or not – depends not only, or even mainly, on the act of dishonesty itself but on the way it impacts on the employer’s business. 
Further guidelines were expounded by the Constitutional Court in Sidumo v Rustenberg Platinum Mines Ltd  in establishing the appropriateness of a sanction. The court thus held that
In approaching the dismissal dispute impartially, a commissioner will take into account the totality of circumstances. He or she will necessarily take into account the importance of the rule that had been breached. The commissioner must of course consider the reason the employer imposed the sanction of dismissal. As he or she must take into account the basis of the employee’s challenge to the dismissal. There are other factors that will require consideration. For example, the harm caused by the employee’s conduct, whether additional training and instruction may result in the employee not repeating the misconduct, the effect of the dismissal on the employee and his or her long-service record. This is not an exhaustive list. 
An analysis of the award in addition revealed that Reddy’s 43 years of unblemished service to Edcon was an essential consideration in determining whether dismissal was the appropriate sanction in the circumstances. 
‘Previously, where an employee was found guilty of some act of dishonesty, the labour courts applied a strict narrow approach that dismissal was an appropriate sanction and had conferred far greater weight to the gravity of the misconduct rather than the personal and surrounding circumstances of the employee.’  This particular viewpoint can be found in the case of De Beers Consolidated Mines Ltd where the court accepted the dismissal of two employees (who had a length service of 13 and 18 years) for claiming and receiving pay for 9 hours overtime that they had not worked as fair. According to, Conradie JA, where a serious misconduct has been committed by an employee one may reasonably deduce that the trust relationship between him or her and the employer has been destroyed.  He further held that
long service is no more than material from which an inference can be drawn regarding the employee’s probable future reliability. Long service does not lessen the gravity of the misconduct or serve to avoid the appropriate sanction for it. A senior employee cannot, without fear of dismissal, steal more than a junior employee. The standards for everyone are the same. Long service is not as such mitigatory… Dismissal is, or should be, a sensible operational response to risk management in the particular enterprise. 
Conradie JA further held that the length of service of an employee is only applicable for determining whether the employee is likely to repeat his misdemeanor, which must be weighed against the risk factor to the employer, especially where the employee illustrated a lack of commitment to reform. 
A similar approach was adopted by the LAC in Toyota SA Motors (Pty) Ltd v Radebe  . Nicholson JA reaffirmed the view that ‘theft and fraud have always constituted good grounds for dismissal as they frequently constitute a fundamental breach of the employment contract’  . In this case the employee was involved in a collision. Rather than reporting the collision in accordance with company policy, he abandoned the vehicle with the keys and told his employer that the vehicle had been hijacked. He had a length service of 13 years. He was dismissed. Zondo APJ in the LAC accepted the dismissal as fair, stating that
Although a long period of service of any employee will usually be a mitigation factor where such employee is guilty of misconduct, the point must be made that there are certain acts of misconduct which are of such a serious nature that no length of service can save an employee who is guilty of them from dismissal. To my mind one such clear act of misconduct is gross dishonesty…I am not saying that there can be no sufficient mitigating factors in cases of dishonesty nor am I saying dismissal is always an appropriate sanction for misconduct involving dishonesty. In my judgment the moment dishonesty is accepted in a particular case as being of such a serious degree as to be described as gross, then dismissal inter alia, is an appropriate and fair sanction. 
Notwithstanding, his above criticism of whether length of service should be viewed as a mitigation factor in claims of gross dishonesty, Zondo AJP in De Beers Consolidated Mines Ltd found that ‘even in cases of dishonesty, the length of service of an employee may be taken into account as a mitigating factor in appropriate cases’  . His reasoning for this variation was that the misconduct in Toyota SA Motors was far more serious than in De Beers Consolidated Mines Ltd. 
The LAC in Rustenberg Platinum Mines Ltd v National Union of Mineworkers  also adopted a strict approach to dishonesty as a form of serious misconduct and attached little weight to the employee’s 15 years unblemished service.
One apparent implication drawn from the above judgments is that they qualify that in certain circumstances involving serious misconduct one does not have to lead evidence to show that there was a breakdown in the trust relationship between the employer and employee, it is suggested that this can be automatically inferred. According to De Beers Consolidated Ltd where a logical inference and assumption can be drawn from the nature of the offence, evidence need not be presented for one to reasonably conclude that the relationship of trust and honesty has broken down. Even though the Labour Relations Act states that dismissal is an appropriate first sanction in certain circumstances and even though dishonesty can be regarded as a gross misconduct, ‘it is not an invariable rule that offences involving dishonesty necessarily incur the supreme penalty of dismissal. The facts of every case must be assessed and the mitigating features taken into account’  ‘It is, in fact, the relevant factors and the circumstances of each case, objectively viewed that should inform the reasonableness or lack thereof’  .
Ultimately then, the SCA in Edcon concluded that, it is trite law that when considering the reasonableness of an award, one has to look not only at the conclusion the commissioner reached but also at whether such conclusion is rationally connected to his or reasons taking into account the material before him or her.  Thus, the SCA held that in the absence of evidence being led by Edcon in proving the breakdown in its trust relationship with Reddy, the commissioner’s findings that Edcon’s decision to dismiss Reddy was substantively unfair, is eminently reasonable and correct.
Therefore, in light of Edcon the above cases would be overruled.
To put the Edcon judgment in perspective, it must be emphasised that, employers who are confronted with dishonesty in their working environment cannot merely prove that the employee was dishonest, this is insufficient, the employer must lead evidence confirming that such dishonest conduct had led to an irretrievable breakdown in its trust relationship with its employee, for dismissal to be found substantively fair. In other words, the Edcon judgment creates a precedent that, in any future case in which an employee with a long service and unblemished record is dismissed for failure to be honest, the commissioner can only find the dismissal to be fair if conclusive proof is provided by the employer that the trust relationship between the parties are destroyed. Thus, although not expressly provided by Edcon, the test in the given situation is an objective one and not merely a subjective test.
This judgement emphasises the need for employers to be cautious when imposing a sanction of dismissal. However, one must not be misguided by the Edcon judgment. This judgment does not prohibit an employer from dismissing an employee on the basis of dishonesty; rather this judgment clarifies how one must conduct proceedings on a practical basis.
Ultimately, the Edcon judgment raised the standard of evidence required when justifying dismissal on the basis of dishonesty.
The outcome in Edcon is clearly significant as it emphasises the importance of leading evidence when proving the appropriateness of a dismissal based on dishonesty. It further provides that an employer who decides to dismiss an employee for dishonesty must take into account factors such as the gravity of the misconduct; the circumstances of the infringement; the nature of the job performed by the employee; and the employee’s circumstances (which include length of service, previous disciplinary record and personal circumstances)  . Edcon also reinforces the Constitutional Court’s findings in the Sidumo case and states that commissioner’s awards can only be set aside if the commissioner’s decision is one that a reasonable decision maker could not reach.
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