Employer ordered to pay retirement benefit

© Sebastian Duda – Fotolia.com

Balaes had complained to the office of the Pension Funds Adjudicator that when his employment with Protea Technology (Pty) Ltd (third respondent) came to an end after almost a decade, he became entitled to a retirement benefit from Protea Technology Retirement Fund (first respondent), administered by NBC Fund Administration Services (Pty) Ltd (second respondent).

He submitted that following the termination of his service, he was advised that he had breached a clause in his contract relating to restraint of trade. He responded that he had only offered technical support and not advise on financial matters nor information relating to projects run by his employer.

Employed by competitor

R Beattie, group financial director of the third respondent and the principal officer of the first respondent, responding on behalf of both the first and third respondents, said on 30 September 2011 the complainant advised that he would be retiring on 1 November 2011 and his last day of work would be 31 October 2011.

He stated that he had been discussing this with his family for the last three months. He said this was not true as the complainant intended to commence employment with a competitor in breach of his restraint of trade agreement. He said the complainant had commenced employment with a competitor during his period of notice and whilst still in the third respondent's employ. The complainant had provided the competitor with information relating to pricing, customer information and prospects.

The first and third respondents further submitted that the third respondent instituted legal action against the complainant, two other ex-employees and the competitor company. The matter had been heard in the South Gauteng High Court and the Court had ruled in the third respondent's favour in both the breach of restraint as well as the unlawful competition. Costs had been awarded which still needed to be recovered against the complainant, two other employees and the competitor company.

Compensation for misconduct

Beattie submitted that the first respondent was entitled to withhold the complainant's retirement benefit in terms of section 37D of the Pension Funds Act as requested by the third respondent. Pension Funds Adjudicator Muvhango Lukhaimane said that in terms of the Pension Funds Act, a registered fund may deduct any amount due by a member to his employer on the date of his retirement as compensation in respect of any damage caused to the employer by reason of any theft, dishonesty, fraud or misconduct by the member.

However, the member must have admitted liability to the employer in writing and judgement must have been obtained against the member in a court of law. She said the restraint of trade agreement prohibited the complainant from competing or being concerned, associated, engaged or interested in any business similar to or competing with the business of the third respondent.

By accepting employment with another company whilst still serving his notice period, the third respondent had submitted that the complainant had breached the restraint of trade agreement and the terms and conditions of his employment and had, therefore, committed misconduct.

Regulated by different laws

Lukhaimane said a restraint of trade formed part of a contract of employment and was regulated by the Law of Contract. "The concepts of misconduct and breach of restraint of trade agreement are too far apart in law. They have different remedies and are regulated by different laws. The remedy in the case of misconduct is contained under Labour Law and the remedy in restraint of trade is through the Law of Contract. Therefore, a breach of restraint of trade agreement does not amount to misconduct but amounts to a breach of contract."

Lukhaimane said the complainant's conduct amounted to a breach of contract of employment and did not fall within the ambit of the Pension Funds Act as it did not amount to theft, dishonesty, fraud or misconduct. Further, the third respondent did not allude to any damages or loss that it suffered. No damages were awarded by the Court as the third respondent did not make a case of loss as a result of the complainant's breach of restraint of trade agreement. As a result, Lukhaimane said the first respondent could not withhold the complainant's retirement benefit.