Background

Potgieter was dismissed on 24 October 2006. He then challenged his dismissal before a bargaining council. On 25 June 2008, an arbitration award was issued finding the dismissal procedurally and substantively unfair and granting him 12 months’ compensation.

Potgieter filed a review of the award in the Labour Court, challenging it on the basis that he sought retrospective reinstatement and not compensation. The review application was dismissed. This went on appeal and on 12 June 2014, the LAC found that at arbitration, Potgieter should have been retrospectively reinstated (reinstatement order). Samancor appealed the reinstatement order to the Constitutional Court (CC) and on 3 September 2014, the appeal was dismissed. Potgieter then effected the reinstatement order by reporting for duty and he was accepted back into Samancor’s employ on 23 July 2015. However, by 30 November 2015, the parties terminated the employment relationship by entering into a mutual separation agreement.

A second round of litigation between the parties then commenced. This is when a dispute arose regarding Potgieter’s entitlement to back pay under the reinstatement order. In particular, the parties were in dispute regarding whether Potgieter was entitled to back pay for the entire period from:

• the date of the award (June 2008) until the reinstatement order (June 2014) – a period of eight years; or
• Potgieter’s dismissal date (October 2006) until the date of the award was issued (June 2008) – a period of 20 months.

On 23 July 2018, Potgieter instituted a claim for the payment of his outstanding remuneration arising from the reinstatement order. In the Labour Court on 29 May 2020, the parties reached agreement regarding, among other things, the withdrawal of the proceedings and time periods within which the parties were to agree to a stated case regarding the effect of the reinstatement order. This agreement was made an order of court.

However, when the parties were unable to agree on a stated case, Samancor delivered an application on 10 July 2020 to consider whether the effect of the reinstatement order was that Potgieter was entitled to his full salary for the entire eight-year period, despite having engaged in alternative employment during this period. In a judgment on 16 February 2021, the Labour Court distinguished between: (i) Potgieter’s right to a judgment debt for the period between his dismissal and the issuing of the award; and (ii) a contractual claim for payment of Potgieter’s remuneration for the period between the date of the award and the reinstatement order. Importantly, the Labour Court found that the second (contractual) claim “… must still be determined and is subject to moderation and adjustment depending on the damages that [Potgieter] is able to prove, and any defences raised by [Samancor]”. The Labour Court then allowed Potgieter 90 days to institute such a claim.

On 2 August 2021, Potgieter instituted a claim for arrear remuneration for the period between the date of the award and the reinstatement order. It was in these proceedings that Samancor contended that Potgieter’s claim had prescribed. In its judgment, the Labour Court:

• confirmed that monies owing pursuant to a reinstatement order constitute a debt under the Prescription Act 68 of 1969 (Act) and accordingly, such a debt prescribed after three years;
• found that prescription began to run in respect of any claims pertaining to the reinstatement order either on the date of the LAC’s judgment (i.e. on 12 June 2014) or when the CC dismissed Samancor’s appeal (i.e. on 3 September 2014), and was completed three years after either of these dates;
• found that Potgieter’s claim of 23 July 2018 (which was withdrawn by agreement) and his claim of 2 August 2021 were both instituted more than three years after the debt became due and enforceable;
• rejected Potgieter’s contention that his claim emanated from the Labour Court’s judgment of 16 February 2021, which granted him leave to institute his claim for the arrear remuneration and held that this order by the Labour Court could not be construed as precluding Samancor from raising prescription as a defence; and
• found that Potgieter did not serve any “process” to interrupt prescription and as a result, the debt prescribed in either June 2017 or September 2017.

In the end, the Labour Court found that Samancor was not liable to Potgieter for any further remuneration.

The Labour Appeal Court

The LAC differed with the Labour Court.

Potgieter argued that a debt can only be claimed once a creditor has acquired the right to institute an action for the recovery of the debt., Based on this, Potgieter argued that his claim partly arose on the date of his actual reinstatement, being 23 July 2015. Potgieter also contended that the running of the period of prescription was interrupted on 20 July 2018, when he instituted an action for recovery of the debt, which claim was ultimately withdrawn by agreement. His alternative argument was that prescription only commenced after the Labour Court’s judgment of 16 February 2021, which clearly distinguished between his two separate claims and, therefore, it was only on this date that he came to a full awareness of his contractual claim. Samancor persisted that the claim prescribed three years after the reinstatement order, namely on 13 June 2017.

The LAC emphasised that it was important to determine was the date when the debt fell due. The court reiterated that a reinstatement order merely revives an employment contract, and it is only thereafter that reciprocal obligations arise. In other words, in order for a reinstatement order to take effect, an employee must tender their services, and an employer must accept the tender, place the employee back into their previous position and pay wages to the employee.

Therefore, the LAC held that it followed that any contractual claim arising from a reinstatement order can only accrue once an employee is actually accepted back into their previous position. This is because an employee who is granted retrospective reinstatement is not entitled to any of the contractual benefits of reinstatement, including back pay, without the contract being restored through actual reinstatement.

In other words, the reinstatement order did not entitle Potgieter to contractual claims – instead, it merely granted him the right to restore the contract through a tender and a reciprocal acceptance. The consequence of this, the LAC held, was that Potgieter’s claim for arrear remuneration only became due and payable once he was reinstated to his prior position on 23 July 2015 and therefore, the three-year period for him to have instituted his claim would have only lapsed on 24 July 2018.

The LAC then considered whether any of the steps Potgieter had taken to enforce his claim for arrear remuneration interrupted the running of prescription.

In coming to its conclusion on the interruption of prescription, the LAC considered the CC’s judgment in FAWU obo Gaoshubelwe v Pieman’s Pantry (Pty) Ltd (2018) 39 ILJ 1213 (CC). The LAC held that the Act does not require instituted proceedings to culminate in a judgment in the same proceedings. Rather, it is sufficient for a party to approach the recovery of a debt in a staggered fashion. Therefore, even though Potgieter’s claim that was initiated on 23 July 2018 was ultimately withdrawn, it still constituted “process” interrupting prescription under the Act. The LAC further found that these “aborted” proceedings were “intertwined” with the proceedings that led to the Labour Court’s judgment of 16 February 2021, which allowed Potgieter to pursue his contractual claim. Accordingly, it was held that Potgieter’s claim had not prescribed.

So, the LAC found that Potgieter had a valid claim against Samancor.

Key takeaways

An arbitration award issued against an employer granting an employee reinstatement does not automatically entitle the employee to any backpay other than what is provided in the award itself. A tender by the employee is required which must be accepted by the employer.

Employers must be aware back pay is than a live claim for three years from the date of actual reinstatement. In other words, once an employee has been accepted back into their prior position, the employee has three years to pursue a claim for payment of back pay falling which the claim prescribes.

Although not dealt with in this leg of the litigation between the parties, employers also ought to have regard to the CC’s judgment in Maroveke v Talane [2021] 9 BLLR 851 (CC), where it was held that the purpose of a back pay award, in the context of reinstatement, is to offset an employee’s financial loss suffered as a result of their unfair dismissal, and to restore the employee to the position that they would have been in, but for their unfair dismissal. As a result, the actual extent of an employee’s loss must be calculated in determining the back pay due to them. Where an employee has found alternative employment after their dismissal, this can serve to reduce the back pay amount owing to the employee after reinstatement.

Whilst not an issue in the Potgieter case, we point out, as an aside that it is always important to pay particular attention to the terms of the “full and final settlement” clause in separation agreements.