COMPENSATION: What factors do the CCMA and Labour Court consider when ordering the payment of compensation?
LABOUR LAW in a NUTSHELL May 2021
Section 193 (4) of the LRA gives a Commissioner the power to determine an unfair labour practice “…on terms that the arbitrator deems reasonable, which may include ordering reinstatement, re-employment or compensation.”
Reinstatement vs Compensation
Compensation is a payment to offset financial loss resulting from a wrongful act. An unfair dismissal is an example of a wrongful act. The primary remedy for an unfair dismissal which was both substantively fair and procedurally unfair is reinstatement. The usual remedy for an unfair dismissal which was substantively fair but procedurally unfair is compensation with no reinstatement. The CCMA or the Labour Court can order reinstatement with or without compensation
Compensation vs Damages
Compensation in the case of reinstatement usually means back-pay. It may be full back-pay for the time between the date of dismissal and the date of the order. Or it may be partial back-pay for some of the time if the employee was partly at fault. The back-pay is the direct financial loss or damage which the employee suffered from the unfair dismissal. This actual or direct loss is one type of damage – called special damages.
Special Damages vs General Damages
Special damages refers to compensation for actual financial losses incurred as a direct result of the unfair dismissal. This is the remuneration the employee was not paid since dismissal. It’s easily quantified as months x remuneration. The maximum for an unfair labour practice is capped at 12 months. The maximum for an automatically unfair dismissal (such as dismissal for discrimination) is capped at 24 months.
General damages refers to compensation for the indirect pain, suffering, and loss of amenity or dignity which the employee experienced because of the unfair dismissal. “Suffering” can include physical and/or psychological pain. We normally associate this type of damages with personal injury claims from injuries caused in road accidents. But the same principles can apply in labour law. The amount is not easily calculated.
General Damages for Procedural Unfairness
The damage is not based on an employee’s actual (financial) losses. It’s compensation or redress (‘solatium’) for the loss of a right. In a dismissal case – the right to a fair procedure before dismissal.
Section 194(1) of the LRA gives the Labour Court (or CCMA commissioner) a discretion to determine the amount of compensation for the loss of the right.
The key factors in the determination of compensation for procedural unfairness are –
- the extent of the deviation from a fair procedure.
- the employee’s conduct.
- the employee’s length of service; and
- the anxiety and hurt caused to the employee because the employer did not follow a fair procedure.
The LAC  has interpreted “just and equitable in the circumstances” by considering the following factors to assess the amount of general damages –
- the nature and seriousness of the injury.
- the circumstances in which the infringement took place,
- the behaviour of the defendant [employer] (especially whether the motive was honourable or malicious),
- the extent of the plaintiff’s [employee’s] humiliation or distress,
- the abuse of a relationship between the parties, and
- the attitude of the defendant [employer] after the injury had taken place.
TIP: Employers and employees should be aware that claims for compensation are not limited to back-pay and direct loss of earnings. “Compensation” can include claims for mental suffering and injury to personal dignity. Even if the dismissal is substantively fair, an employer can be punished by a compensation order for failing to follow a fair procedure.
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Source: Worklaw Case Review 2021