Could KPMG still discipline the VBS auditors even though they’ve resigned?

On Saturday (14 April), KPMG South Africa announced that two partners, Sipho Malaba and Dumi Tshuma, have tendered their resignations with immediate effect after being faced with disciplinary charges brought against them.

“Both cases are conduct charges, connected to VBS bank and include, but are not limited to, failure by the partners to comply with the firm’s policies and procedures regarding the disclosure of relevant financial interests,” KPMG said.

While KPMG has announced that it will now audit all of its staff going forward, Malaba and Tshuma’s departure raises the question of whether or not you are actually allowed to quit in an attempt to avoid being fired under South African labour law.

According to Johan Botes of Baker McKenzie, the most important thing to note is that notice periods are inherent in every South African employment contract.

“The Basic Conditions of Employment Act (BCEA) prescribes a minimum notice period,” he said. “Thus, even where there is no written employment contract between parties, the employee may terminate the employment contract by providing the notice prescribed in the BCEA.”

Botes added that if a longer notice period is included in a contract, this becomes the new requirement.

Alternatively, if the employee agrees to work for a fixed period, the contract will typically provide that the employee may not give notice (resign) prior to the expiry of the fixed term.

Disciplinary hearings

Botes said that this notice period becomes very relevant when the employer brings disciplinary action against the employee, and the employee seeks to avoid being dismissed.

At an official unemployment rate of 27%, finding a job in South Africa is already difficult without adding the black mark of having been dismissed from your previous employment.

This means that if an employer simply wants the employee to leave, they may allow them to serve out the period without instituting disciplinary action.

“However, employers feeling strongly that the reason for termination should reflect ‘dismissal’ rather than ‘resignation’ would typically continue with the disciplinary hearing during the notice period, even where the employee plays truant or refuses to participate,” Botes said.

“Thus, provided the employer could wrap up the hearing before the end of the notice period, it could dismiss the employee even where the employee had resigned.”

In KPMG’s case, the group said it accepted the resignations, which were with immediate effect, indicating that there is no intent to pursue disciplinary action during any given notice period.

What if you just stop going to work?

If the employee fails to serve notice, the employee would be in breach of the employment contract, said Botes.

“As many often forget, the employment contract – though clothed with notions of equity and fairness and infused with the common law and supplemented with statutory rights – is still a contract,” he said.

“If one party to the contract breaches it, the other may exercise its right on how to deal with such a repudiation.

“It can either accept the breach and sue for damages or approach a court for an order of specific performance (asking the court to order the other party to do what it agreed to do in the contract).

“However, considering that specific performance would mean that a court forces an employee to continue working for an employer, our courts are reluctant to order specific performance against an employee where the employee breached the contract,” he said.

Forced to work?

While forcing employees to work against their will sounds a lot like slave labour, Botes notes that there have been cases where the court had ordered an employee to do just that.

This includes cases where an airline could not readily replace a pilot who otherwise would have to serve a three-month notice period, or where a football coach did not want to stay bound to a fixed-term contract so they could take up a position with another club.

In both instances, the court agreed that it could make an exception to the general apprehension to force an employee to continue an employment relationship.

But in a 2017 case, the court went one step further, Botes said.

“It (the court) held that the employee terminated the employment relationship when she resigned, notwithstanding the fact that she did not serve the requisite notice period,” he said.

“The court concluded that once the employee resigns, even without notice, her status changes from being an employee to an erstwhile employee.

“In this case, the court interdicted the employer from proceeding with the hearing and dismissing the employee. An employee could thus assail an adverse finding in a hearing and exit an employment relationship as having resigned rather than being dismissed.”

While Botes said that it was conceivable that an employer may approach the court to stop an employee’s resignation and obtain an order holding the employee to the contractual notice period, he argued that it was difficult to see any South African court upholding this request.

“The upshot of the law as it stands is that we are likely to see more employees opting to resign rather than stay and face the music when confronted with allegations of misconduct,” he said.

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Could KPMG still discipline the VBS auditors even though they’ve resigned?