On 17 July 2015, the Supreme Court handed down judgment in the case of Nyamande and Anor v Zuva Petroleum (Pvt) Ltd SC 43/15 (“the Zuva case”) which dealt with the issue of termination on notice without cause. In summary it held that the common law position was, and had always been that an employer could, on reasonable notice, terminate an employee’s contract with no reason being given.
Restatement of the legal position by the Supreme Court resulted in many employers taking the opportunity to terminate employees’ contracts on notice. This extreme reaction was prompted by the dire economic environment prevailing in Zimbabwe and the then existing retrenchment procedures which made it a lengthy and costly process for employers to reduce their workforce. The number of employees whose contracts were terminated after the Zuva case has been put at tens of thousands, with the City of Harare being alleged to have terminated contracts of more than 3 000 employees, the National Railways of Zimbabwe of over 1 500 employees, and the private banking sector of over 2 000 employees. Reports in the month following the Zuva case suggest that over 20 000 employees’ contracts were terminated over a three week period (http://www.reuters.com/article/us-zimbabwe-employment-idUSKCN0QL0ID2015 0816), although others suggest that the figure could be more than double that.
Facing pressure from unemployed workers, the Government scrambled to introduce amendments to the Labour Act [Chapter 28:01] (“the Act”). In an unusually quick period of time, the Labour Amendment Act No. 5 of 2015 was promulgated and came into force in 14 August 2015. The major changes introduced included:
- A prohibition on termination on notice except in specific circumstances
- The introduction of a minimum retrenchment package
- The application of a retrospective compensation package payable to employees whose contracts were terminated on notice
- Amendments to the conciliation and arbitration process at Labour Office level.
As a result of the rushing through of the Labour Amendment Act, a number of issues have since arisen in respect of the Constitutionality of some of the changes, as well as the lack of clarity on how certain sections of the Act apply in practice.
PROBLEMS FACED WITH THE AMENDED ACT
The most serious issue arising out of the amendment of the Labour Act is that of the retrospective application of the amended Section 12 as provided for in Section 18 of the Labour Amendment Act. This meant that employers – who had been acting lawfully at the time – would have to pay compensation to employees terminated on notice. The financial impact on already struggling companies was significant, and as such, many employers have chosen not to pay and rather deal with the issue at court.
The High Court has since held, in the case of Zimind Publishers (Pvt) Ltd. v Minister, Public Service, Labour & Social Welfare & Another  ZWHHC 170 that:
“Creating legislation with retrospective effect is the hallmark of tyranny as such laws place citizens at the mercy of government…
I am of the view that taking away vested rights is contrary to the Constitution. It is also not in conformity with the principle of the rule of law to prescribe a law ex post fact.
Accordingly it is declared that;
Section 18 of the Labour Act No. 5 of 2015 in inconsistent with sections 3 (2) (k), 56 (1) and s 86 of the Constitution of Zimbabwe and is therefore invalid”.
In addition to the retrospective provision, the amendment of Section 93(5) of the Labour Act has resulted in Labour Officers being given additional powers to make rulings against parties who no longer have a right of appeal against the same. The Labour Officer, having made a ruling, has to expend additional costs and time applying to the Labour Court for the confirmation of the ruling before it takes effect. In addition, the wording of the amended section means that a party against whom a decision has not been made, is not joined to the Labour Court proceedings even though they clearly have an interest in the outcome. The amendments contravene the following sections of the Constitution: Section 56(1) (right to equality before the law); Section 69(1) (right to a fair hearing) and Section 69(3) (access to the courts). Several matters have already been referred to the Constitutional Court on the issues raised above.
The drafting of the sections dealing with termination on notice (Section 12(4a)) and retrenchment (Section 12C) also leaves much to be desired. The Act appears to still allow for termination on notice where the contract is a fixed term contract, but the provision relating to compensation for termination on notice only speaks to permanent contracts (Section 12(4b) of the Act). In addition, it appears to provide that termination on notice can be provided for in Codes of Conduct, although not in contracts of employment and does not make provision for resignation.
Section 12C effectively does away with the powers of the Retrenchment Board, whose power – where the minimum compensation package is offered – is limited to merely stamping a notification from the employer.
To address the problems created, a new amendment Act is being prepared, colloquially known as the Zero Draft Labour Bill. The Zero Draft Labour Bill seeks to address the issues relating to Section 12 and termination on notice by limiting termination on notice to retrenchment, resignation, mutual agreement and failure to return from sick leave. It also very clearly sets out the methods of termination, other than giving notice. It also seeks to repeal the subsection dealing with compensation.
The Zero Draft Labour Bill seeks to reinstate the powers of the Retrenchment Board, but retain the minimum package – speaking, however, to employers who are “incapacitated” from paying more, which will likely lead to numerous differences of opinion and a number of disputes.
The Zero Draft Labour Bill would restore the dispute resolution provisions under the “old” Act, restraining Labour Officers to conciliating matters and having Arbitrators make rulings which can be appealed to the Labour Court. It also more clearly sets out the conciliation and arbitration procedures which will benefit employers and employees alike.
In summary, the Zero Draft Labour Bill is a definite improvement on the status quo, and if it is circulated amongst interested parties, can only be improved upon, leading to a more fair and efficient labour law and process in Zimbabwe.
Corporate and Commercial Department