A common dilemma, with which employers in all areas of industry are faced, is the question of when dishonesty by an employee is sufficient to justify dismissal.

Light was recently cast upon this issue by the Supreme Court of Appeal in the matter of Edcon v Pillemer.

Ms Reddy, the employee, had allowed her son to drive her company car, a Toyota Corolla. The son was involved in an accident and, rather than reporting the accident to her employer in accordance with company policy, Reddy arranged for it to be repaired at her husband’s panel beating shop.

Six months later the car gave trouble and Reddy took it in for repairs. The Toyota specialists advised Ms Reddy that the collision damage had not been properly repaired. Reddy then asked her manager to have the cost of repairs covered by the company.

At the time, she failed to advise him that the car had been involved in an accident. Upon enquiry with Toyota, Reddy’s manager was informed of the true reason for the repairs and the company then became aware of Reddy’s failure to report the incident.

After initially denying the incident, Reddy admitted to knowing about the collision but claimed that she had been driving the car when the accident had occurred. She conceded that the car had been repaired at her husband’s shop.

Edcon’s security manager then requested a statement from Reddy who, on this occasion, said that her son had been driving the car when the collision had occurred but that she had been a passenger at the time – she had not.

It was only after her son confirmed to the security manager that he had been alone in the car when the accident had occurred that Reddy came clean.

Edcon subjected Reddy to a disciplinary hearing, at which she was accused of: “Failure to be honest and act with integrity in that you committed an act, which has affected the trust relationship between the company and the employee in that on 8 June 2003 to 8 October 2003: you failed to report an accident of a company vehicle…which your son was driving on the day of the accident (8 June 2003) and this resulted in a breach of trust between yourself and the company.”

At the hearing, Reddy admitted guilt, noting that her ignorance of company policy had motivated her deceit. She had been unaware that her son was, in fact, permitted to drive the car and had simply wanted to protect him. Reddy offered to pay the cost of all necessary repairs to the vehicle. In spite of her remorse and honesty at the hearing, and the fact that she had been working for Edcon without incident for 43 years, she was found guilty and dismissed.

Reddy instituted an internal appeal against the company’s decision, on the following grounds:

• The penalty imposed by the company was too harsh as the trust relationship between her and her employer had not been destroyed; and
• Edcon had been inconsistent in dismissing her for the offence in question as, when faced with a similar incident in the past, Edcon had not dismissed the employee concerned.

The chairperson found that Reddy’s dishonesty had inevitably impacted negatively upon the trust relationship and that dismissal was justified. Reddy then referred a dispute to the CCMA.

At the CCMA, the Commissioner identified the primary issue as whether the dismissal had been fair. She held that Reddy’s failure to report the collision, whilst constituting misconduct, was not sufficiently serious in itself to have justified dismissal. Rather than being a question of dishonesty, the question was whether Reddy’s lack of candour, following Edcon’s discovery that she had not reported the incident, had led to an irreparable breakdown in the trust relationship, warranting dismissal.

The Commissioner considered email correspondence indicating that the trust relationship had not, in fact, broken down beyond repair.

The Commissioner noted that, given Reddy’s clean disciplinary record over 43 years of employment with the company, her misconduct needed to have been extremely gross in order to justify dismissal. She was reinstated without back pay.

Edcon took the award on review to the Labour Court, where it was unsuccessful, and thereafter on appeal to the Labour Appeal Court, where it was similarly unsuccessful. Six years after Reddy’s dismissal, the matter found its way to the Supreme Court of Appeal (the SCA).

Edcon’s representatives sought to have the Commissioner’s findings set aside, on the following grounds:

• The Commissioner had failed to appreciate the extent of Reddy’s dishonesty;
• The Commissioner’s consideration of hearsay evidence had been irregular and rendered her award defective; and
• The Commissioner’s finding that Edcon had not adduced evidence of a breakdown in the trust relationship was erroneous.

The SCA considered the Constitutional Court’s findings in Sidumo v Rustenburg Platinum Minesand concluded:

In determining whether the Commissioner’s award was reasonable, the SCA noted that the thrust of Edcon’s case was its contention that the trust relationship between the company and Reddy had broken down beyond repair, following Reddy’s dishonesty. The primary issue was accordingly whether the trust relationship had, in fact, been so damaged. In conducting its analysis, the Court addressed the Commissioner’s findings and the material which had properly been available to her at the arbitration.

In support of its case, Edcon had called only one witness to testify during the arbitration proceedings – the security manager who had initially investigated Reddy’s misconduct. It was apparent to the Court that not only had the security manager failed to testify about the impact of Reddy’s misconduct on the trust relationship between the parties, but that he could not, in fact, have done so. This relationship existed primarily between Reddy and the managers to whom she had reported.

Regrettably for Edcon, it had failed to call either of her managers as witnesses. In fact, during the course of the disciplinary proceedings, one of Reddy’s managers had admitted that he would still have been able to work with Reddy.

Edcon should have demonstrated the nature and scope of Reddy’s duties, her position in the hierarchy of employees, the importance of trust in their employment relationship or the adverse effects of retaining her on the company’s operations. This, Edcon had failed to do.

The SCA concluded that the Commissioner’s findings had been eminently reasonable and that she could not be faulted for concluding that the trust relationship between the parties had not been irretrievably destroyed. The Court accordingly dismissed the appeal, with costs.

Whilst it might appear that the Supreme Court of Appeal has now disposed of the well established principle that an employee’s dishonesty, no matter how trivial, may justify dismissal, this is not in fact the case. Rather than disposing of the principles governing dishonesty, the Court has simply clarified the manner in which they are to be applied.

Three pertinent features of the Edcon matter illustrate the applicable principles:

• Edcon specifically contended at the disciplinary hearing, and during the subsequent Court proceedings, that dismissal was warranted on the basis that the trust relationship between the company and Reddy had been destroyed. It continued to proffer this as a justification for the sanction imposed on Reddy.
• Edcon failed to show that Reddy’s dishonesty had had a negative impact on the trust relationship. The company’s evidence had, in fact, demonstrated that the trust relationship had not actually broken down; and
• Reddy had been employed by the company for 43 years, during which time she had maintained an unblemished record.

Whitelaw notes that in light of this decision, employers should be careful not to impose the sanction of dismissal lightly. The judgment does not, however, constitute a bar to dismissing employees for dishonesty, even for a first offence.

“Importantly,” she emphasizes that, “the dishonesty must genuinely have led to a breakdown in the trust relationship between the parties and the employer must then adduce evidence of such breakdown.”

“In other words, the impact of the dishonesty on the employer’s business is critical, rather than the act of dishonesty itself. Where an employee has been in loyal service with an employer for an extended period of time, adducing evidence to show that the trust relationship has been damaged is now perhaps even more important than it was before.”