In the recent case of Matskoleng and Another v Synergy World Logistics (Pty) Ltd, the Labour Appeal Court (LAC) confirmed the enforceability of mutual separation agreements during retrenchment processes.
Mr Matskoleng faced potential dismissal due to the employer's operational requirements. Instead of proceeding to a formal retrenchment process under section 189 of the Labour Relations Act (LRA), the parties negotiated and signed a mutual separation agreement, in terms of which the employee received agreed payouts and left voluntarily.
The employee later challenged this at the CCMA, claiming an unfair dismissal. The arbitrator upheld his claim, applying the so-called reasonableness test which asks: did the commissioner reached a reasonable conclusion on the facts before the CCMA.
The LAC overturned both decisions and confirmed that: "There is nothing preventing parties from entering into a mutual separation agreement at any time when operational requirements are discussed. The dispute in this case concerned the validity of the agreement between the parties. The question was whether the court a quo's reasonableness test should have been applied. The validity of an agreement is a legal matter that does not require a reasonableness test …, but rather a correctness test. Therefore, the arbitrator lacked the necessary jurisdiction, and the court a quo should have reviewed the award and set it aside."
In reaching this conclusion, the LAC ruled there was no dismissal—only a valid, binding agreement. The CCMA and Labour Court erred by finding that the procedures as set out in section 189 of the LRA should have been followed, ignoring the parties' contractual autonomy.
This judgment reinforces that mutual separation agreements are binding on the parties thereto. Employers should document these clearly to avoid disputes, while employees must weigh options carefully during consultations and before putting pen to paper.