Can you recover losses from a dismissed employee?

Until recently employers have been reluctant to pursue civil action against former employees for losses suffered as a result of negligence by those dismissed employees. Despite being entitled to do so, employers take a pragmatic view of cutting their losses and carrying on with their business, shying away from further litigation. As a result the employer is often left with the task of repairing the damage done by the employee and restoring their reputation.

The dismissed employee however benefits from this pragmatic view and if there are criminal proceedings instituted against the employee the attitude adopted by the employer is normally lax, often because criminal proceedings take time to be finalized without any guarantee as to whether the dismissed employee will be found guilty or not.

The Labour Court recently ruled on the situation when it confirmed an employer’s counterclaim for breach of contract against two former senior employees and ordered the employees to pay their erstwhile employer R8 million in damages for losses suffered as a result of their misconduct.

In the case, two employees were charged with and found guilty of misconduct by an independent chairperson of an internal disciplinary hearing and dismissed after the chairperson found that their misconduct caused R7.8 million losses to their employer. Both dismissed employees challenged their dismissals at the CCMA and the Director of the CCMA transferred their referrals to the Labour Court.

The employer then instituted a counterclaim for damages against the employees in terms of the Basic Conditions of Employment Act. The employer claimed damages against both dismissed employees on the basis that the fraud committed by them resulted in damages suffered as a result of the failure of the employees to honestly and faithfully serve the employer and their failure to exercise due and reasonable diligence as was required by their contracts of service.

In the evidence presented, it was clear that the employees had actively participated in fraud against the employer in return for bribes which resulted in a loss to the employer in the amount of R8 million.

The court further held that both dismissed employees not only had the express duty to maintain the highest level of ethics and transparency but, as senior employees, they had a fiduciary duty to ensure total honesty and integrity when goods and services were procured.

In the end the Labour Court accepted that the employer had established that both former employees caused the losses and that there was a causal link between the breach and the damages suffered by the employer. The employee’s dismissal was held to be fair and the dismissed employees were held liable for the amount of R8 million and criminal charges were also laid against both employees by the employer.

October 25, 2013
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