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The Scourge of Covid-19 On Unfair Dismissal and Actuarial Calculations

The Covid-19 pandemic necessitated a cessation of economic activities in South Africa on 26 March 2020 across most sectors. It is inarguable that this has made dismissals an inescapable concern as employers find themselves in a precarious situation to preserve profits and decrease operational costs.

The pandemic, however, is not a licence for employers to circumvent the rules for fair dismissals in terms of the guidelines in Schedule 8 of the Codes of Good Practice. In instances where an employee alleges unfair dismissal, the employer has the onus of proof in terms of Section 188 of the Labour Relations Act 66 of 1995 (LRA) that the dismissal is substantively and procedurally fair. This ensures that the principle of audi alteram partem is preserved. Members of the public may approach their respective Bargaining Councils and the CCMA as entities of first instance in the adjudication of unfair dismissal matters in terms of Section 191 of the LRA.

The above entities can take numerous remedial actions including but not limited to re-employment, reinstatement, interdicts, and reversal of demotion depending on the circumstances of each case. The article focuses on compensation as a form of remedial action.

The 1956 LRA placed no caps on unfair dismissal solatium. The Industrial Court had an unfettered discretion in terms of the said amount. Unlike its predecessor, Section 194 of the LRA read with the Basic Conditions of Employment Act 75 of 1997 states that:

  • If the dismissal of an employee is procedurally and/or substantively unfair, an employee may be awarded up to 12 months’ compensation and,
  • If the dismissal was automatically unfair, an employee may be awarded up to 24 months’ compensation.

It is possible albeit in limited circumstances to base a claim for unfair dismissal on the common law and thereby circumvent the caps on compensation provided in terms of the LRA.

The aim of compensation is fairness for the employee and employer, which gives credence to commercial reality. The law is responsible for the formulation of the purpose and framework within which actuarial calculations are performed. Actuarial reports must explain in detail with resort to math formulae, interest rates, and rates of inflation; however, the assumptions, conclusions, and presumptions of the actuary do not expropriate the functions of the court. The courts exercise judicial discretion to assist in resolving conflict by ensuring fair mathematics is used in assessing damages.

The use of actuarial calculations is not compulsory, however, a plaintiff who chooses not to use an actuary may find difficulty in proving the value of any benefits, to which they are entitled to in conjunction with the compensation. The court may mero motu with the consent of both parties’ requests such expert assistance for complex calculations.

In determining the quantum, actuaries require, but not are limited, to need the following:

  • Claimant’s data surrounding wrongful dismissal such as proof of earnings (including benefits) before dismissal.
  • Claimant’s current earnings (including benefits), if employed at a later stage after the wrongful dismissal event.
  • Industrial psychologist’s report.
  • Claimant’s demographic details such as date of birth and gender.
  • Any available ruling/finding in the Industrial Court, CCMA or Bargaining Council on the matter.

In addition to the above, the actuary will determine the appropriate demographic and financial assumptions to apply. In our next article, we will give an example of a wrongful dismissal calculation with the aim of helping attorneys to understand how actuaries compute their quantum.

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