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The Constitutional Court of South Africa has delivered a significant, albeit divided, judgment in Maleka v Boyce N.O. and Others, reaffirming the stringent requirements for establishing a constructive dismissal under section 186(1)(e) of the Labour Relations Act 66 of 1995 ("LRA"). The decision raises important questions, including whether an employer's unilateral change to an employee's reporting line renders continued employment objectively intolerable and the extent to which an employee must exhaust internal remedies before resigning.
Factual background
Mr Reynolds Maleka, a highly qualified professional holding a Bachelor of Commerce and an MBA degree with approximately 15 years of experience in Information Technology ("IT"), was employed by Tyco, an Irish multinational, as the IT Director. He was placed with ADT Security (Pty) Limited, a South African subsidiary, where he served as a member of the Executive Committee ("Exco"). In this role, Mr Maleka reported directly to Tyco's global Head of IT, Mr Paul Birmingham (a "solid reporting line"), and locally to ADT's Managing Director, Mr Stuart Clarkson (a "dotted reporting line").
In late 2016, negotiations were underway for Fidelity Security Group ("FSG") to acquire ADT from Tyco. At an Exco strategic planning meeting, Mr Clarkson announced that ADT had appointed Mr Allan Quinn as its new Financial Director. Mr Quinn would henceforth oversee the IT portfolio (which Mr Maleka headed) and Mr Maleka would report to Mr Quinn rather than directly to Mr Clarkson.
Mr Maleka had not been consulted about this change prior to the public announcement. He immediately raised his objections with Mr Clarkson, as he perceived the new arrangement as a demotion in that he would henceforth be reporting to Mr Quinn who he considered a peer at the same management level. Despite several attempts to engage Mr Clarkson on the matter, Mr Maleka was informed that the decision was final, although Mr Clarkson assured him that his title, status, salary and responsibilities would remain unchanged.
Mr Maleka then resigned, stating in his resignation letter that the change in his reporting line was unacceptable and amounted to a demotion from an executive role to a managerial one. He subsequently referred a dispute to the Commission for Conciliation, Mediation and Arbitration, claiming constructive dismissal. The Commissioner found against Mr Maleka, and his subsequent applications for review in the Labour Court and on appeal to the Labour Appeal Court were both dismissed. He sought leave to appeal to the Constitutional Court. However, because the application for leave to appeal had been lodged outside the prescribed time period he had to apply for condonation for the late application for leave to appeal. One of the factors that the Constitutional Court had to consider when deciding whether leave to appeal should be granted was the merits of the appeal: had there been a constructive dismissal and, if so, had the dismissal had been unfair?
The majority judgment
Seegobin AJ, writing for the majority, held that the question whether an employee has been constructively dismissed is a jurisdictional issue, and a court considering a review application must decide whether, objectively speaking, a dismissal as defined in the LRA had taken place, i.e. a "correctness test." However, if a dismissal is established, the fairness of that dismissal is to be assessed in accordance with the "reasonableness test" as formulated by the Constitutional Court in Sidumo v Rustenburg Platinum Mines Ltd i.e. was the arbitrator's decision one which a reasonable commissioner could not reach?
The majority reaffirmed the established three-part test for a constructive dismissal i.e. (i) that the employee must have terminated the contract; that the reason for termination must be that continued employment had become intolerable; and that it must have been the employer who made continued employment intolerable. The threshold for establishing "intolerability" is high. It requires conduct that is beyond what can be tolerated, insufferable, or simply too great to bear.
Applying these principles to the facts, the majority found that Mr Maleka failed to establish constructive dismissal as his case was predicated on an anticipated intolerability which had not yet arisen by the time he resigned. His title, position on Exco, salary, roles and responsibilities remained unchanged.
The majority further held that Mr Maleka's failure to exhaust ADT's internal grievance procedures weighed against him. The LRA is designed to encourage employees to first seek recourse through internal procedures before resorting to external dispute resolution mechanisms.
The majority concluded that Mr Maleka had no reasonable prospects of success on the merits and refused condonation with no order as to costs.
The dissenting judgment
Madlanga ADCJ, writing for the minority, reached a starkly different conclusion, finding that Mr Maleka was constructively dismissed and that the dismissal was unfair.
The dissent held that the intolerability arose immediately upon Mr Clarkson's announcement because requiring a director to report to another person at the same level was, on its own, intolerable.
Madlanga ADCJ observed that the announcement which was made publicly and without prior consultation was "an appalling insult" that displayed a total disregard for Mr Maleka's self-worth.
The minority found that Mr Clarkson's stated reasons for interposing Mr Quinn (i.e. that Mr Quinn had experience with FSG and SAP IT systems) was nonsensical as there was no suggestion that Mr Maleka was unable to perform as IT Director without supervision. The dissent concluded that the real, unstated reason, was that Mr Clarkson simply "trusted" Mr Quinn because he was white.
The dissent held that Mr Maleka did attempt to resolve the situation through repeated approaches to Mr Clarkson, and his view that pursuing the formal grievance procedure would have been futile as Mr Clarkson was the most senior ADT employee, was not unreasonable.
The dissent would have granted leave to appeal, upheld the appeal, awarded compensation equivalent to one year's remuneration and ordered ADT to pay costs in all courts.
Comment
This decision serves as a reminder of the high threshold that employees must meet to establish a constructive dismissal. The majority's insistence on an existing, rather than anticipated, state of intolerability, coupled with the expectation that employees must exhaust internal remedies, reaffirms a rigorous approach to section 186(1)(e) claims. Yet the dissent suggests that there remains considerable judicial disagreement about how the concept of intolerability should be applied, particularly where dignity and transformation imperatives are engaged. The case will no doubt feature prominently in future constructive dismissal disputes and provides important guidance for both employers and employees navigating unilateral changes to employment conditions.
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