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Fraud in the workplace

19 March 2014

Employers have always been reluctant to pursue a civil claim against former employees for losses incurred as a result of their negligence or misconduct.

In the recent judgment of Rand Water v Stoop (2013), the Labour Appeal Court (LAC) held that the Labour Court has the jurisdiction to entertain a claim for damages in terms of s77(3) of the Basic Conditions of Employment Act  75 of 1997 (BCEA) where such damages are linked to the employment contract.

Two employees of Rand Water, Johan Stoop and Johannes Buckle, were charged and dismissed after they had been found guilty of misconduct in an internal disciplinary hearing.

An investigation by a forensic accounting firm confirmed that their fraudulent behaviour caused their employer losses of around R7.8 million.

They had conspired with a supplier, SWR Projects, and signed off invoices for services that were never rendered and for goods that were substantially overcharged.

Following his dismissal, Stoop proceeded to refer an unfair dismissal dispute to the CCMA and requested that the matter be referred to the Labour Court. In turn, Rand Water instituted action against Stoop for the recovery of the money he had fraudulently acquired.

Buckle joined in the counterclaim and he, in turn, counterclaimed for compensation for unfair dismissal under the Labour Relations Act.

Stoop and Buckle raised the point that the Labour Court lacked jurisdiction to entertain the dispute and contended that the fraud amounted to a civil claim, which should have been instituted for damages.

The Labour Court agreed that it lacked jurisdiction regarding Rand Water’s counterclaim. On appeal, however, the LAC found that the claims and counterclaims all arose directly from the same facts that resulted in the dismissal of the two employees.

It was found that the fraud was committed by employees abusing the positions they held and that Rand Water’s counterclaim was based on the employment contracts between the parties.

The employees argued that even if the claims were based on the employment contract, Rand Water should pursue its claims in the civil courts as the Labour Court should only deal with disputes involving unfair dismissals and unfair labour practice.

It was found that both the Labour Court and the LAC have on many occasions held that if an issue in dispute relates to, is linked to or connected with an employment contract then the Labour Court has jurisdiction to entertain such a dispute.

The BCEA expressly confers power on the Labour Court to grant compensation or damages for breaches of contract.

Claims are not limited to a specific category and as such all categories of damages are included.

The employees’ further argument that the counterclaims had been instituted after the termination of the employment contracts was also rejected. The LAC held that termination of a contract does not prevent a party from claiming damages for a breach of contract.
Accordingly, an employee may successfully be sued in the Labour Court for damages incurred by an employer in civil claims.

The team

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