Dishonesty – the subtle destroyer of the trust relationship

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Dishonesty – the subtle destroyer of the trust relationship

The employment relationship, underpinned by the employment contract, is often equated with a marriage relationship, which has the marriage contract as its foundation.

While the contractual side of these two “unions” is of significant importance, it only becomes relevant at the commencement of the contract and again at the termination of the contract, for whatever reason. This is unlike commercial contracts where the contractual obligations are managed and enforced almost on a daily basis.

By and large, when the above-mentioned equation between the employment relationship and a marriage is envisaged, it is the on-going relationship part which typifies the day-to-day interaction between the parties and not the contractual part.

In between commencement and termination of these contracts, there may however be sporadic “stressors” that may act as “reminders” for the parties that there is a contractual aspect having a bearing on their relationship but invoking these contractual entitlements (such as escape clauses) would only happen when the chips are really down, such as in case of infidelity in a marriage and dishonesty within the employment contract.

These “stressors” at least have the potential to destroy the trust relationship.

Honesty within employment context

In the High Court case: Carter v Value Truck Rental (Pty) Ltd, Grogan AJ made the following remarks in relation to honesty in the workplace:

It is trite that, both in common law and under the equitable dispensation created by the LRA, the employment relationship is regarded as one of the highest good faith”.

“The success of any enterprise depends on the absolute integrity and honesty of its employees, and any form of dishonesty or deception potentially may have more serious and far-reaching consequences at executive level”.

In an article written by Graig Bosch titled “The implied term of trust and confidence in South African labour law”, the following statement is made:

The courts have also repeatedly stated that it is an implied term of the contract of employment that the employee will act with good faith towards his employer and that he will serve his employer honestly and faithfully”.

The importance of honesty and trust within the employment relationship has also been abundantly emphasised in our labour courts and particularly in the Labour Appeal Court (LAC). To quote but a few of these pronouncements:

  • Standard Bank Ltd v CCMA & others (LAC): “It was one of the fundamentals of the employment relationship that the employer should be able to place trust in the employee (…) A breach of this trust in the form of conduct involving dishonesty is one that goes to the heart of the employment relationship and is destructive of it”.
  • Kalik v Truworths (Gateway) & others (LC): “An employment relationship broken down as a result of an act of dishonesty can never be restored by whatever amount of mitigation (…) an employer cannot be expected to keep dishonest workers in his/her employ”.
  • G4S Secure Solutions (SA) (Pty) Ltd v Commissioner Anthony Ruggiero N.O., CCMA & another (LAC): “The employment relationship, by its nature, obliges an employee to act honestly, in good faith and to protect the interests of the employer. The high premium placed on honesty in the workplace has led our courts repeatedly to find that the presence of dishonesty makes the restoration of trust, which is at the core of the employment relationship, unlikely”.


How then should the occurrence of acts of dishonesty be treated in the workplace?

One point that clearly emerged from my research on the topic of dishonesty in the workplace is that one simply cannot have a one dimensional, “one size fits all” approach to dishonesty.

While dishonesty is certainly a potential destroyer of the trust relationship inferred by the employment contract, our jurisprudence on dishonest behaviour has recognised different “shades” or categories of dishonest behaviour, depending on severity.

Decision making, where alleged dishonesty is at stake, therefore requires the decision maker to apply his/her mind with circumspect.

Socrates is quoted to have said: “Four things belong to a judge: (1) hear courteously, (2) answer wisely, (3) consider soberly and (4) decide impartially”.

When endorsing the somewhat lenient approach to dishonesty adopted by the Commissioner in the Edcon-case (Edcon Limited v Pillemer & others (LAC)), judge Pillay remarked as follows: “The CCMA is not a rubber stamp, as I have said elsewhere before, for decisions of the employer. Justice is not justice unless it is tempered with mercy”.

In Bifawu and Mfundo Nhlapo v Mutual and Federal Insurance Company Limited (LAC) judge Willis said the following in regard to dishonesty in the workplace: “Although acts of dishonesty by an employee will normally justify dismissal, this is not an invariable rule”.

This latter remark of judge Willis sums up the gist of the approach employers should adopt to dishonest behaviour in the workplace. Dishonesty remains a very serious offence which, in most cases, could justifiably result in summary dismissal. However, each case should be considered on its merits and only once all relevant factors were duly assessed, should a determination be made whether dismissal would be an appropriate sanction in the circumstances.

I do appreciate that the notion of leniency in respect of acts of dishonesty may rebel against the general feeling amongst employers in this regard, especially those employers who are of the opinion that there simply are no “small, medium and large” categories of dishonesty and that dishonesty in any form destroys the trust relationship.

The inescapable reality however is that our courts have drawn a distinction and have set a precedent in differentiating between acts of dishonesty on the basis of severity and more particularly, its impact on the business of the employer.

In Branford v Metrorail Services (Durban) and others (LAC) the judge remarked that: “It is not an invariable rule that offences involving dishonesty necessarily incur the penalty of dismissal”.

This implies that it is imperative that any adjudicator dealing with an allegation of dishonesty, has to discern whether the alleged conduct is indeed an act of dishonesty. Once this is done, there needs to be objective evidence that the act of dishonesty impacted negatively on the employer’s business and that it caused irreparable harm to the trust relationship.

In this regard judge Willis referred to international jurisprudence (a Canadian case) where the following distinction was drawn in so far as dishonesty is concerned: “Dishonesty is normally used to describe an act where there has been some intent to deceive or cheat. To use it to describe acts which are merely reckless, disobedient or foolish is not in accordance with popular usage or the dictionary meaning”.

A common view expressed by our courts is that where the dishonesty can objectively be regarded as gross dishonesty, dismissal will be an appropriate sanction. The more senior the position of the perpetrator of dishonesty, the less leniency needs to be applied.

The latter approach was followed in the case: Dell v Seton South Africa (Pty)Ltd (LAC) where the managing director of Dell SA gave himself an increase, unilaterally created a second bonus scheme from which he benefitted and misrepresented his income when challenged. He was dismissed and his dismissal was upheld in the CCMA, Labour Court and Labour Appeal Court, at which point he seemingly “got the message” that he will not get away with being dishonest.

In the case: Autozone v Dispute Resolution Centre of Motor Industry & others (LAC) the judge made the following pronouncement: “(…) where the offence in question reveals a stratagem of dishonesty or deceit, it can be accepted that the employer probably will lose trust in the employee, who by reason of the misconduct alone will have demonstrated a degree of untrustworthiness rendering him unreliable and the continuation of the relationship intolerable or unfeasible”.

The judge in the case: Timothy v Nampark Corrugated Containers (Pty)Ltd (LAC) remarked as follows in respect of serious dishonesty: “(…) where there is nothing more than an aggressive denial and a perpetuation of dishonesty it is extremely difficult to justify a progressive sanction, particularly in a case where the dishonesty is as serious as this dispute”.

There obviously are many other examples of cases of dishonesty at various organisation levels where a clear intent to deceive for personal gain, premeditation of dishonest behaviour, repetition and lack of remorse made summary dismissal the appropriate sanction.

The brevity restriction which I place on these blogs however prevents me from elaborating further upon the obvious. Rather, I will devote the latter part of this blog to instances where a more holistic and discerning approach to dishonesty in the workplace was followed by our courts.

Ludwig Willem Ehrke v Standard Bank of South Africa, Commissioner F J Van Der Merwe N.O., CCMA (LC)

At the time of the matter in question, Ehrke was employed as home mobile consultant at the Home Loan Division of the respondent.

A series of unusual and unexpected circumstances led to Ehrke panicking and in the process resorting to what was later coined a “white lie”.

In short, Ehrke was in the process of opening an account for a client and some complications with the process caused the payment of the client’s credit card to run into arrears, which naturally upset the client. To add insult to injury, the client was at some stage told by another employee that her application was declined.

Ehrke then arranged to meet with the agitated client at a particular day and time to resolve the issue, but Murfy’s law stepped in, and his manager insisted that he attend a business function on the same date and time.

This is where Ehrke hatched the plan to conjure up a meeting with a client who was about to imminently leave for the USA, making it impossible for him to attend the function, as the meeting time clashed with that of the function.

This still was not the end of Ehrke’s woes, as the client then shifted their meeting to another date and time. With a performance appraisal looming as well, there was no way in which Ehrke could undo the delicate arrangement he succeeded to conclude with his manager to excuse him from attending the function, so he arranged to meet another client on the function date and time for the opening of an account.

Things came to a point when Ehrke was requested to bring the necessary documentation pertaining to the emergency meeting he ostensibly had with the “client” on the function date to his performance appraisal meeting. He still persisted for a while with the “white lie” but then decided to come clean and spill the beans.

He was subjected to a disciplinary enquiry and ultimately dismissed for dishonesty (misrepresenting the facts). In addition, he was registered on the bank’s REDDS-list, where employees dismissed for dishonesty are “blacklisted” within the financial industry and disbarred as representatives in terms of the FAIS Act.

He disputed the substantive fairness of his dismissal on the basis that he derived no undue benefit from the “white lie” and that its sole purpose was to provide proper customer service.

The challenge to his dismissal in the CCMA did not succeed and he took his dismissal on review to the Labour Court.

The court took cognisance of the principles laid down in the Sidumo-case in the Constitutional Court which includes the importance of the rule breached, the basis of the employee’s challenge to the dismissal, the harm caused by the breach of the rule and the prospect of rather resorting to a disciplinary measure short of dismissal.

The Labour Court accepted that the “white lie” told by Ehrke was solely occasioned by baseless fear and panic on his part. Considering the disastrous effect the dismissal of Ehrke would have on his career in the banking industry, it was the court’s view that his dismissal was just not justifiable in the circumstances.

This view was further reinforced by the fact that no evidence was adduced to show that Ehrke’s conduct destroyed the trust relationship between the parties, hence the arbitration award justifying Ehrke’s dismissal on account of dishonesty, was set aside.

Edcon Ltd v Pillemer N.O. & others (SCA)

In similar vein, the court in the Edcon-case adopted the more compassionate approach to seemingly dishonest behaviour in the workplace, basing its judgement on the totality of facts and circumstances of the matter placed before the court.

In summary, the employee in question, Reddy, enjoyed the benefit of the use of a company vehicle. This vehicle was involved in a collision with another vehicle while Reddy’s son was the driver and Reddy was not a passenger at the time.

Being under the mistaken belief that her son was not allowed to drive the vehicle (although being in possession of a valid driving licence), Reddy decided not to report the accident but to rather have the damage fixed by her husband’s panel beating business at own cost.

Like in the case of Ehrke, Reddy however did not escape Murphy’s law in that 6 months later Reddy had to take the vehicle to a Toyota dealer, complaining about the vehicle’s performance. The dealer discovered that the vehicle was in an accident and that the current performance problems stem from repairs which were not properly done at the time.

Initially, Reddy did not disclose that the vehicle was in an accident and formally requested authorisation from her manager to have it repaired. During liaison with the service department, Reddy’s manager however found out of the collision.

When confronted, Reddy initially denied that the vehicle had been in an accident, but later conceded this fact, stating that she was driving the vehicle at the time.

After being suspended pending a full investigation Reddy admitted, upon questioning, that her son actually drove the vehicle at the time of the collision, but that she was a passenger. Eventually, Reddy came out clean and admitted the full truth.

Reddy was charged with dishonesty. She admitted guilt and was dismissed. She challenged the fairness of her dismissal via the internal appeal process on several grounds, including alleging inconsistency in the application of the rule concerned and the fact that she had an unblemished record over a career of 43 years and was 2 years from retirement. She however did not succeed with the appeal.

Reddy referred an alleged unfair dismissal dispute to the CCMA and at arbitration the Commissioner (Pillemer) found that (similar to the Ehrke-case) there were no evidence led to show that the trust relationship had been destroyed through her lack of candour on the part of Reddy.

Ultimately the Commissioner found that, given the evidence presented and taken into account the unblemished service record stretching over 43 years and Reddy being 2 years from retirement, the sanction of dismissal was too harsh in the circumstances.

Eventually, the matter landed before the SCA which totally concurred with Commissioner Pillemer’s findings and dismissed Edcon’s appeal.


In closing

I am mindful of the danger that my emphasis on the more lenient approach adopted, as illustrated in the last two cases, may create the impression that our courts have generally gone soft on dishonesty.

This is not the message I want to convey with this blog and such inference drawn from the content of this blog is incorrect.

The imbalance which was created by a carte blanche zero-tolerance approach to conduct related to dishonesty in the workplace however needs to be addressed and proper balance restored. Employers should move away from a one-size-fits-all, uncompromising and undiscerning zero-tolerance inclination towards conduct even vaguely smacking of dishonesty or untruthfulness on the part of the employee, since such approach is sure to be contra-productive and even could be considered draconius in its application.

When implementing this restoration, care should however be taken not to veer too much to the other side, effectively “dispensing with the child along with the bathwater”, so to speak.

An act of dishonesty showing intent to deceive, premeditation, repetition, the object of self-enrichment, and lack of remorse will undoubtedly still justify a zero-tolerance approach with summary dismissal as an appropriate sanction.

Just to emphasise the point I just made; I need to end off by at least referring to, arguably, the most quoted case in favour of a tough line approach to dishonesty:

Toyota SA Motors (Pty) Ltd v Radebe and others (LAC) where the court stated the following:

“Although a long period of service of an employee will usually be a mitigating factor where such employee is guilty of misconduct, the point must be made that there are certain acts of misconduct which are of such a serious nature that no length of service can save an employee who is guilty of them from dismissal.  To my mind one such clear act of misconduct is gross dishonesty”.

No one is perfect and immune to indiscretion, not the accused and certainly not the decision maker or adjudicator, but what is important is the intent  and the rationale behind the indiscretion.

J J (Koos) van der Merwe – Chartered HR Professional, registered with the SABPP

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