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Article 50/2022

In Rogers v Exactocraft (Pty) Ltd (2015) 36 ILJ 277 (LC), the labour court held that the period before retirement should not be taken into account when calculating an employee’s severance pay in accordance with s41(2) and s84 of the BCEA.  To what extent did the labour appeal court recently express a different viewpoint?

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Section 41(2) of the BCEA deals with severance pay. The section provides as follows:

‘An employer must pay an employee who is dismissed for reasons based on the employer’s operational requirements, or whose contract of employment terminates or is terminated in terms of section 38 of the Insolvency Act, 1936 (Act No. 24 of 1936) severance pay equal to at least one week’s remuneration for each completed year of continuous service with that employer, calculated in accordance with section 35.’

Section 35, which is referred to in s41(2), deals with the calculation of remuneration, and it, inter alia, specifies how an employee’s remuneration is to be calculated, what forms part of such remuneration for the purposes of the calculation, etc.

Section 84(1), in particular, provides:

‘For the purposes of determining the length of an employee’s employment with an employer for any provision of this Act, previous employment with the same employer must be taken into account if the break between the periods of employment is less than one year.’

The section, like s41(2) of the BCEA, is relatively clear and unambiguous. Section 41(2) has to be read in light of, and consistently with, s84(1) of the BCEA. The latter section qualifies and assists in the interpretation of the former (see inter alia, Insurance & Banking Staff Association on behalf of Aucamp v Old Mutual Life Assurance Co (2000) 21 ILJ 2515 (CCMA); [2000] 9 BALR 1030 (CCMA), at 1030).

In Barrier v Paramount Advanced Technologies (2021) 32 SALLR 70 (LAC); (2021) 42 ILJ 1177 (LAC), various scenarios were identified as follows:

Scenario 1: The duration of the break between previous employment and current employment of the employee with the same employer is less than one year

  • s41(2) is to be read with s84(1) of the BCEA, amounting to a legal fiction being created treating the previous employment period and the current employment period as continuous service when calculating severance pay
  • an application of s84(2) of the BCEA entails the following:
  • severance pay received by the employee in the previous period of employment is to be taken into account
  • other benefits received by the employee in the previous period of employment, e.g. pension/ provident fund, are not taken into account (see, further, Meyer v Iscor Pension Fund (2003) 24 ILJ 338 (SCA))

Scenario 2: The duration of the break between the previous employment and the current employment of an employee with the same employer is more than one year

  • an application of the principles contained in s41(2) read with s84(1) of the BCEA entails that no legal fiction is created regarding the previous employment and current employment as continuous service, when calculating severance pay
  • an application of the principles of s84(2) of the BCEA entails the following:
  • severance pay received by the employee in the previous period of employment is not to be taken into account when calculating severance pay
  • severance pay is calculated only with reference to the current employment
  • other benefits (e.g. pension/provident fund) received by the employee in the previous period of employment is not taken into account

Scenario 3: This entails no break whatsoever between the previous employment and current employment of the employee with the same employer (in the Barrier judgment, the labour appeal court made the factual finding that scenario 3 was applicable)

  • in terms of s41(2) of the BCEA, such employment will be regarded as continuous service
  • s84(1) of the BCEA is not applicable, seeing that actual, factual continuous service exists
  • an application of the principles contained in s84(2) of the BCEA entails the following:
  • severance pay is to be calculated with reference to the entire period
  • other benefits (e.g. pension/provident fund) received during the entire period are not to be taken into account when calculating severance pay
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