LABOUR LAW in a Nutshell May 2025
DAMAGES FOR INCOMPETENCE: Can an employer claim damages in the Labour Court for employee incompetence?
Yes. The dismissed CEO of the NHLS (Mogale) discovered this harsh reality much to her regret and considerable cost…R22306619.20 to be precise! A similar fate befell the CFO (Mr Zulu), her fellow applicant, who was also dismissed with her for the same offence.
The NHLS (National Health Laboratory Services) hired Mogale on a five year-contract to run the publicly funded institution efficiently. She claimed to have the competencies and experience to do the job before she was hired.
Not so in this damning Labour Court judgement…
[185] This case shows how important it is to have skilled, competent and qualified people employed in key positions and how devastating the consequences are if a CEO or CFO is not up for the task.
[186] In casu, it has been demonstrated that during their conduct relating to each of the three contractors, as discussed in detail supra, Mr Zulu and Ms Mogale failed to perform their duties effectively, efficiently and professionally, and instead displayed severe negligence and incompetence, resulting in damage to the NHLS. The issue of damages will be dealt with infra.
[187] The Applicants dismally failed to carry out explicit Board resolutions and they blatantly disregarded the limitations contained in the delegation of authority. They breached their undertakings to carry out the lawful, reasonable and fair instructions of their employer and they failed to exercise due diligence and care in the performance of their functions. Both failed to take reasonable steps to prevent loss and/or damage to the NHLS and to act with the necessary diligence care and skill as may be reasonably expected by the NHLS, having due regard to the functions of their roles and the nature of its business.
[188] The conduct of the Applicants undermined the whole framework and structure of tender law principles, emanating from section 217 of the Constitution. Ms Mogale’s version regarding Blue Future is astonishing – the Board resolution was very clear on what was approved and Ms Mogale’s understanding and interpretation thereof shows a concerning lack of her ability to read and understand a clear Board resolution. Her conduct with respect to Afrirent and DV8 shows an inability to understand policies and delegations, alternatively, her conduct shows that she lacks the capacity to hold the position of CEO.
And…
[190] Ms Mogale as the CEO and Mr Zulu as the CFO, both presented that they were duly qualified, experienced and competent to perform their functions and they contractually agreed that they would perform their functions with the necessary diligence, care and skill as may reasonably be expected by the employer having due regard to the nature of the functions. The only thing they managed to do effectively and diligently, was to collect their salaries.
“Astonishing” indeed – as the Judge described her dismal performance as leader of this critically important state institution!
What did she do…so badly that was so astonishing?
The Board approved tender contracts for three companies to provide services to the NHLS – Blue Future for (R93219702.26), Afrirent for R79691269.22 and DV8 for R63500000.00.
But the total payments made by the NHLS with Mogale’s blessing (without the Board’s approval) to Blue Future was R126394634.23, to Afrirent R155455340.51 and to DV8 R230909307.41.
The total overspend was a staggering R236 million!
As the Judge further commented –
“It is clear that Ms Mogale spectacularly failed to curb costs, the very reason why she was head-hunted.”
Mogale along with Zulu, was predictably found guilty of gross misconduct and dismissed. Undaunted by their lavish excesses, they complained to the CCMA that they’d been unfairly dismissed. They blamed others, including their subordinates, for the problem saying they relied on their advice that the overspends were justified.
NHLS would have none of this. They applied for the dispute to be referred to the Labour Court in terms of LRA s191 (6) for determination. And they filed a counterclaim for damages based on breach contract against Mogale and Zulu for payment of the full excess of R236millon. They relied on s34 of the BCEA as the legal basis. It allows an employer to claim damages from an employee who caused it.
The two disputes were consolidated for determination by the Labour Court.
The Labour Court certainly would have none of this appalling display of incompetence…as the extracts from the judgement quoted earlier clearly express.
The court emphatically dismissed the claims for unfair dismissal. It instead upheld the NHLS’s counterclaim for damages. And it applied its dual jurisdiction with the civil court to determine the validity of the NHLS’s claim and to calculate and amount of the losses caused by Mogale and Zulu’s incompetence.
In the end, the court ordered Mogale to pay more than R22m to NHLS in damages for her overspend on the Afrirent contract. And jointly with Zulu (since deceased), she was ordered to pay R342545.00 for the DV8 contract.
TIP: This is a very important judgement for several compelling reasons. Firstly, it shows that the court is fed up with incompetent executives and their extravagant disregard for good governance – especially those who run public institutions. Secondly, the Labour Court is willing to use its parallel jurisdiction with the High Court to punish employees who cause harm to their employers with harsh financial penalties. Thirdly, it sends a strong message to executives and senior managers that merit is the objective benchmark by which they will be held accountable for the proper performance of their duties.
PATRICK DEALE
Labour lawyer & mediator
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Source: Worklaw Newsletter 28 May 2025
Ref: Mogale and Another v National Health Laboratory Services (JS958/2019) [2024] ZALCJHB 362 (13 September 2024)
