‘We Parted Ways’: Court Rules Mutual Separation Agreement Trumps Unfair Dismissal Claim

A mutual separation agreement, freely entered into, is bindingeven if the employee later claims it was really a dismissal.

That was the finding of the Labour Appeal Court in Johannesburg, which overturned a ruling that WBHO Construction unfairly dismissed grader operator Maswangwandile Mdayi.

The Background

Mdayi began working for WBHO in April 2018 as a final level grader operator.

In November 2020, the company’s operator training manager, Peter Gray, approached him about relocating to Postmasburg in the Northern Cape due to operational needs.

Mdayi declined, citing a desire not to be away from his family.

The Agreement

In December 2020, the parties signed a document titled “Mutual Separation Agreement” .

Under its terms, Mdayi received a severance package of more than R181,000.

The Dispute

Despite accepting the payment, Mdayi later referred an unfair dismissal dispute to the Bargaining Council for the Civil Engineering Industry.

He argued that the agreement was effectively a retrenchment disguised as a mutual separation, and that proper consultation procedures had not been followed.

An arbitrator agreed in May 2021, finding that WBHO had failed to comply with Section 189 of the Labour Relations Act, which governs retrenchment procedures. The arbitrator ruled the dismissal both procedurally and substantively unfair and ordered reinstatement.

WBHO challenged the award in the Labour Court, but the court dismissed the review in July 2024, holding that the agreement could not be used to circumvent retrenchment procedures.

The Appeal

The Labour Appeal Court saw it differently.

Acting Judge Tebogo Djaje found that the central issue was the validity of the agreement itself.

The court concluded that Mdayi had voluntarily accepted the separation package and that there was no evidence of coercion.

“Once a valid mutual separation agreement exists, it means that no dismissal took place,” the judge held. Therefore, the bargaining council lacked jurisdiction to determine an unfair dismissal dispute.

The court also emphasised that there is nothing preventing employers and employees from entering into mutual separation agreementseven where operational requirements are being discussed.

The Outcome

The appeal was upheld, and the earlier Labour Court ruling was set aside.

The Bottom Line

Mdayi signed the agreement. He took the money. Then he claimed he was fired.

The court’s message: you can’t have it both ways. A deal is a dealespecially when you walk away with R181,000 in your pocket.

{Source: IOL}

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