Labour Relations Consultant provides Insight into Personal Liability
Personal liability of former employees for losses suffered as a result of mismanagement during their tenure
Author: Etienne Malan
Experienced legal professional. During his tenure as advocate of the High Court of South Africa he specialized in contractual and labour disputes where his daily functions were consulting with employers and employees involved in inter alia labour disputes, drafting Court/CCMA/Union processes and representing them at these forums.
Labour Relations Consultant Ettiene Malan provides us with some labour law insights:
Joyce Mogale and Another v National Health Laboratory Services
After an unsuccessful unfair dismissal claim, the Labour Court on 13 September 2024 ordered former National Health Laboratory Services CEO, Joyce Mogale, to pay R22m in damages. This comes five years after she was dismissed for contraventions of the Public Finance Management Act.
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Unfair Dismissal Claim
Mogale approached the Labour Court with a claim for unfair dismissal after being dismissed from the National Health Laboratory Service (NHLS) in 2019. The NHLS followed their internal disciplinary processes and charged her, in conjunction with former CFO, Sikhumbuzo Zulu, with irregularities and failure to fulfil their duties concerning three unapproved procurements totalling about R200-million during their tenure and was dismissed after conclusion of the hearing.
The Labour Court ruled that her dismissal was indeed fair, dismissed her claim and ordered her to pay her former employer more than R22-million in damages.
Had her claim succeeded as she hoped for, she would have been awarded monetary compensation by the Court for unfair dismissal. Instead the Court ruled them personally liable for the huge losses the NHLS sustained as a direct result of their mismanagement and a clear and opportunistic abuse of the court process.
Public Service Employees Accountability
This ruling should be welcomed, stressing that public service employees, and consequently all employees, must be held accountable for their actions. It confirmed earlier precedents for personal financial liability for mismanagement by former employees. It is also noteworthy that the NHLS, a public body, stood firm and acted consistently in defending the matter up to its finalisation.
Judge Prinsloo stated in his judgment:
“This case shows how important it is to have skilled, competent and qualified people employed in key positions and how devastating the consequences are if a CEO or CFO is not up for the task.”
“… it has been demonstrated that during their conduct relating to each of the three contractors… Mr Zulu and Ms Mogale failed to perform their duties effectively, efficiently and professionally, and instead displayed severe negligence and incompetence, resulting in damage to the NHLS.”
Usually when an employee is alleged to have committed misconduct, the employee is taken through a disciplinary process and thereafter dismissed if found guilty of such misconduct.
Most of the time employers are satisfied with this outcome. However, as illustrated above, the employer has the option to pursue the recovery of their losses through the Courts, especially where unjust personal benefits were fraudulently obtained by former employees.
In the matter of Passenger Rail Agency of South Africa v Mthimkhulu the Court upheld the employer’s claim for damages after an employee misrepresented academic qualifications and other relevant information in order to obtain employment or a raise. The damages the Court awarded represented the difference in salary between what he actually received and what he would have received if he had not misrepresented to PRASA.
Employee misconduct and the recovery of losses
The Need for Expert Guidance
These cases will certainly be an encouragement to many employers, particularly state-owned entities which appear to be the playing field for corruption. This is because it illustrates that, in addition to disciplining and probably dismissing their employees for misconduct (fraudulent or not), they can also approach the Courts to recover any losses suffered as a result of the misconduct.
They both dealt with losses suffered as result of mismanagement and fraudulent misrepresentation; but the approach adopted could also apply to other forms of misconduct such as theft or negligent conduct. While some employers may opt not to pursue litigation, other employers may use this option as a matter of principle to set an example to their employees.
It further serves as a stark warning to employees to act with utmost fidelity in the execution of their duties and any losses due to their misconduct may be recoverable from them personally after they have been dismissed.
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