In Part 3 of the three-part series dealing with the importance of rules in the workplace, I made mention of the 5 possible and legitimate ways of terminating the employment contract. To recap, these were:
  • Disciplinary dismissal
  • Retrenchment
  • Incapacity termination
  • Employment contract expired
  • Negotiated departure
In this article, I will unpack negotiated departure as a fair and legal way of terminating an employment contract.

The nature of the employment contract

What distinguishes the employment contract from other forms of civil contracts, is firstly that it is a subordinate contract, which means that the one contract party is in the service of the other contract party and therefore subordinate to the latter contract party. Typically, the employee is in the service of the employer and that attracts certain common law obligations resting on the employee, such as that the employee is obliged to always act in the best interest of the employer and never to compete with the employer. From a more philosophical point of view, an employment contract can more readily be compared with a marriage, where there is a contractual side to it, but this side is over-shadowed by the relationship side associated with it. Many married partners may at a given time not even know exactly where their marriage contract is or what precisely it entails. The reason being that this contract is only really of importance at the beginning of the marriage and again, when it so happens that the marriage comes to an end. In-between, the parties to the marriage function daily within a relationship, which becomes the focal point of their interaction and not the contractual aspect of their union. While the contractual side of the employment contract is undoubtedly of importance, especially from a legal perspective, the devising of practical behavioural disciplines to define and guide the day-to-day relationship between employer and employee, ultimately determines the happiness and cohesion which tend to keep the parties within the employment relationship.

When does negotiated departure become relevant?

When dealing with negotiated departure, the operative verb is “negotiate”, which implies that the eventual departure has to be premised on a meeting of minds regarding what the terms and conditions of the separation will be. The other 4 legitimate ways of terminating the employment relationship referred to above, are not premised on negotiation between employer and employee. It happens either by operation of law (expiry of the employment contract), by failure to perform adequately in terms of the contract (incapacity), as result of affordability to sustain employment (retrenchment) or is the result of some wilful non-conformance on the part of the employee (disciplinary termination). The question now arises: In what circumstances will the employer consider negotiated departure as a means of terminating an employment contract? The obvious answer is: When none of the other 4 scenarios apply or is considered expedient to facilitate a mutually acceptable termination of the employment contract. This is however easier said than done, hence we need to unpack it some more, focussing on the different manifestations of negotiated departures within employment context.

Incompatibility remedied by negotiated departure

The most complicated circumstance where negotiated departure is normally resorted to, is in case of the incompatibility of the employee with the organisation. Usually, where incompatibility is at stake, the employee should never have been employed in the position or within the organisation in the first place. Basically, the necessity to reconsider the continuation of employment due to incompatibility boils down to a recruitment and placement problem and admittedly, a great deal of criticism in this regard can be brought to the door of the employer, for not having screened the candidate properly before appointment and not having utilised, for instance, probation in case where it was difficult to predetermine the suitability of the candidate upfront. One example of a predictable incompatibility that springs to mind, is where a company buys or acquires another company and incorporates it into its fold, but then retains the former CEO or owner of the acquired company to head the incorporated entity. It is conceivable that the former executive and owner will find it difficult to manage the incorporated entity from a subordinate perspective, which, in all likelihood, could make this executive incompatible with the organisation at large. Notably, negotiated departure based on incompatibility also tends to be the more expensive termination for the employer, simply because there is normally not enough tangible proof of non-compliance on the part of the employee to capitalise or leverage on, as it is more of an ingrained attitudinal problem and on top of that, the employer finds itself on the backfoot for having employed a misfit in the first place. In the final analysis, securing agreement on the terms and conditions of a negotiated departure necessitated by incompatibility could require a bit of “horse-trading” between the parties and ultimately, the depth of the employer’s pocket, coupled with the fear of potentially losing face and reputation on the part of the employee, will determine the likelihood of a mutually acceptable settlement being reached.

The nuisance factor as incentive for resorting to negotiated departure

Sometimes the employer is confronted with a situation involving a troublesome employee where one of the other 4 legitimate ways of terminating the employment relationship may be applicable, but because the case may not be clear-cut and termination of employment not guaranteed, the employer just do not have the appetite to schlep through the applicable formal termination process. It thus appears advantageous to rather throw money at the problem and in doing so, facilitating a clean break with no comebacks.

Disposing with drawn-out litigation as an incentive for resorting to negotiated departure

It happens sometimes that the employer finds itself embroiled in a litigation with a troublesome employee, instituted by the employee, often being assisted by a trade union and/or legal counsel. At best of times, the ultimate outcome of the litigation is not predictable with certainty, no matter how secure the employer’s defence may be. Such a litigation usually draws heavily on resources, including key personnel and the prospect of disposing with the litigation, albeit on financial terms, while both parties are still unsure of the outcome, becomes very attractive.

Important considerations when venturing into a negotiated departure exercise

The following 3 considerations are of utmost importance when resorting to a negotiated departure: Consideration 1: Always ensure that you possess some form of leverage on the situation in order to curb excessive expectations on the part of the employee, at the same time giving the employee something to lose by not seriously striving towards a mutually acceptable agreement. A way within which to achieve this is to have a fall-back reality in the offing, such as either the potential ability to institute disciplinary proceedings against the employee, which could result in a dismissal, the potential ability to retrench the employee, or the potential ability to terminate the employment contract due to incapacity. The employee should, therefore, be made aware that if negotiations fail, the employer will fall back on the mentioned alternative process (the fall-back reality), which may be applicable in the specific case. Without this leverage, incentivising the employee’s leaving will not be that easy and it may just be that the employee will have the employer “over the barrel” – so to speak. The proposal which the employer must put forward as an incentive for settlement, must however at least be financially more advantageous than the prospect of the alternative process resulting in a termination. With such leverage in place, it will normally discourage outrageous opportunism from the employee’s side, making a mutually beneficial settlement more achievable. Consideration 2: Always conduct the negotiations aimed at a possible negotiated departure on a without prejudice (“of the record”) basis. This allows the parties the freedom to explore all possibilities of a mutually beneficial settlement, without the restricting or inhibiting aspect of commitment. Only once agreement has been achieved in the process, the parties will formally dispose with the without prejudice principle and go on record with the terms of their agreement. Consideration 3: Ensure that the agreement reached, and which is reduced to writing and duly signed by both parties is done in full and final settlement of all matters related to the employment contract and employment relationship, which existed between the parties, including the termination of the employment contract. This will ensure that there will be no room for any comeback or second thoughts on the agreement reached and by its very nature, the termination of the employment contract, so achieved, will rule out any recourse to the CCMA, labour courts or any other court, for that matter, rendering it without jurisdiction to entertain a dispute concerning the termination of the employment contract. Advisory hint: Depending on the size of the company and the depth of its organisational structure, it may be advisable to endeavour not to involve the employee’s direct management in the negotiations regarding a negotiated departure. The reason being that, in the eventuality (unlikely as it may seem) that the negotiations should fail and the alternative route not resulting in a termination, the employment relationship may have to continue. Understandably, it will create an untenable situation if it was the immediate line management who actively participated to oust the employee but failed to achieve it and now the parties are expected to carry on as usual with the employment relationship. Admittedly, this hint poses severe logistical challenges, such as who then should initiate and conduct the negotiations? It can, for instance, be the HR executive or the legal department, but this approach has the best prospect of success in cases where it is known beforehand that the employee concerned secretly wants out, for whatever reason (something the employer will not be adverse to), but the employee is not prepared to exit without some form of incentive. The suggestion of a negotiated departure may then be welcomed.

In closing:

The bottom line is that negotiated departure remains an A-typical form of terminating the employment contract and hence one should not easily and without the necessary caution venture into a negotiated departure exercise. Rather make pretty sure that you have the means to offer the employee something as incentive, which will be difficult and even foolish to turn down in the circumstances. Like with any organism, it is inevitable that certain undesirable elements will enter from time to time and the organism itself must have a mechanism to rid itself from such “impurities”. The workplace is no different. Consider carefully what will be the most effective way of disposing with undesirable elements and follow through with that, bearing in mind that, theoretically at least, negotiated departure could be an option. Assistance in this regard is available by simply contacting the JJK ER/IR Consultancy at jjk.erir@mweb.co.za. Author: J J (Koos) van der Merwe – Chartered HR Professional, registered with the SABPP

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