When are employees guilty 'by association'? The principle of derivative misconduct

Due to the large work force and/or closely associated employees it becomes difficult to identify and discipline the culprits. To make matters worse, those involved generally conceal one another's identities either out of intimidation or to derive further secret profits.

Derivative misconduct - case law

What is an employer to do? The answer lies in collective disciplinary action on the basis of 'derivative misconduct'. The Labour Appeal Court in Chauke & Others v Lee Service Centre t/a Leeson Motors 1998 19 ILJ 1441 (LAC) defined derivative or residual misconduct as, "the situation where employees possess information that would enable the employer to identify wrongdoers, and that those employees who fail to come forward when asked to do so, violate the trust upon which the employment relationship is founded".

Briefly the facts of the case were that the employer operated a panel-beater shop and his clients' vehicles had become the subject of malicious acts of sabotage due to underlying and on-going labour issues with his employees. Management continuously engaged with its employees after each incident of damage, but none of the employees ever came forward as to who was causing the damage.

Eventually management issued a final ultimatum which was headed "Sabotage Ultimatum". The letter detailed the following main points:

• "Sabotage to vehicles is detrimental to the interest of the business and is detrimental to your own interest."
  
• "Management has tried everything in its power to identify the culprits, but to no avail."
  
• "You are now advised that any further sabotage to any vehicle where the culprit cannot be identified will result in your instant dismissal."
  
• "This ultimatum is a final ultimatum in all earnest."

After a further incident of sabotage took place, the employees were provided with an opportunity to submit the names of the culprits to the employer, however no names were forthcoming. The employer accordingly took disciplinary action against the entire group of employees and they were all dismissed.

The group of employees alleged that their dismissals were unfair and the matter was finally adjudicated in the Labour Appeal Court (LAC). The LAC set out the substantive and procedural requirements in order to succeed with a dismissal based on derivative misconduct.

Substantive fairness

The court held that, where a company suffers from major stock losses / acts of sabotage, perpetrated by a collective group of employees, that such misconduct will be recognised as a substantive ground for disciplining and possibly even dismissing that group of employees.

An employer, in proving substantive fairness, needs to show that the employees were warned and knew of the relevant rule and that, if the sabotage/theft continued unabated, that they would be held collectively responsible.

The rationale for collective disciplinary action is based on the principle that the employees have all associated themselves with an act of misconduct and accordingly all act with a 'common purpose'. It has been held that derivative misconduct has as its core, the employee's silence when called upon to disclose theft/damage from within a collective unit and that this justified an inference that the employee/s participated in or supported the particular misconduct which was not disclosed to the employer.

The courts have adopted the approach that if the employees have an innocent explanation that they should tender such an explanation and that their failure to do so weighs in the balance against them. As for the burden of proof, the courts have held that the burden is on the employee to rebut the facts and allegations of sabotage/theft and that their failure to do so elevates the employer's prima facie case to one of conclusive evidence.¹

Procedural fairness

The second leg required to prove that a dismissal is fair is that of procedural fairness. The general rule is that the employer must afford an employee an opportunity to be heard (the audi alteram partem rule) which usually comes in the form a disciplinary hearing, and this process must precede any disciplinary action taken against the employee/s for such action and/or dismissal to be procedurally fair.

It has been held that a dismissal for derivative misconduct will be procedurally fair provided that the employer has observed the audi alteram partem principle, namely that the employer gives the employee/s an opportunity to state their respective cases and in so doing ensures that the employees are made aware of the charges against them.

The LAC has held that to satisfy the requirements for procedural fairness in cases of derivative misconduct, an additional requirement would need to be satisfied, namely the issuing out of an ultimatum.

The ultimatum should include an invitation to employees to come forward and disclose to the employer any information pertaining to the collective misconduct and those involved. The LAC has held that the failure to assist an employer in bringing the guilty employees to book violates the duty of trust and confidence and may in itself justify dismissal.

Circumstances in which liability may arise

Accordingly, an employee can only be held liable for acts of misconduct committed by members of a group to which he/she is a member in three circumstances:

1. If the employee is one of the persons in the group who actually committed the acts of misconduct;
   
2. If the employee did not actually commit the misconduct, but associated himself with the acts of misconduct or associated himself with the common goal of the group concerned (common purpose); or
   
3. The employee's guilt is based on the fact that the employee did not co-operate with the employer in that the employee failed to identify those employee/s who were guilty of the "primary misconduct" in circumstances where he/she was able to do so.
   

It is imperative to note that when employees are charged with derivative misconduct, they should each be charged with their own individual act of misconduct, be it either failing to disclose, taking part, or being an accomplice to the theft or damage.

A failure to charge the employee/s in this manner may have an impact on the substantive fairness of their dismissals.

¹Employment Matters July 2013