- Employers cannot discipline for conduct under a contract that has ended. Old charges become legally void.
- Rehiring creates a new employment relationship. Past contracts and policies do not automatically carry over.
- Banker reinstated with full backpay after court finds dismissal substantively unfair and sanction excessive.
An employer cannot fire an employee for misconduct committed under a contract that has already ended. That clear legal rule was confirmed by the Labour Court in Cape Town when it reinstated Ronaldo Giovanni Kleinsmith and ordered Absa Bank Limited to pay him backpay after relying on allegations nearly a decade old.
The judgment by Acting Judge W Jacobs offers a practical lesson in how disciplinary power works. It explains that discipline is tied to an active employment relationship. Once that relationship ends, the employer’s authority to punish under that contract ends too.
Old contract means old power
Kleinsmith first worked for the bank until his retrenchment in 2021. That retrenchment ended the contract and all rights flowing from it, including the right to discipline.
He was re-employed over a year later under a new agreement. Despite this, the bank charged him with two counts of misconduct from 2014 and dismissed him. The dispute went to the Commission for Conciliation, Mediation and Arbitration, where a commissioner upheld the dismissal.
On review, Acting Judge W Jacobs raised the jurisdictional issue himself, stressing that courts must first decide whether an employer has the power to discipline before considering the merits. He wrote, “the rights derived from contract by the employer, which contract was terminated in 2021, are not revived merely because another contract is concluded between the same parties 16 months later.”
The new contract, he noted, expressly replaced all previous agreements. “The new agreement explicitly supersedes all previous agreements and representations.”
That meant the earlier employment regime had no continuing force. As a result, the decade-old charges were declared ab initio void and could not lawfully be considered at all.
Sanction must match the real risk
The only remaining allegation concerned Kleinsmith’s failure to record an outside business interest on the bank’s internal compliance system. He had already disclosed the interest during a pre-employment risk assessment, and the business stopped working with the bank when he returned.
The commissioner inferred dishonesty and supported dismissal, but Judge Jacobs rejected that reasoning. “The inference drawn by the Commissioner is not based on evidence and is not reasonable.”
The bank had not shown any actual risk, prejudice, or harm, nor explained why the issue could not have been simply corrected. Judge Jacobs found that “in those circumstances, dismissal was excessive.”
The court also noted that the dishonesty finding was influenced by the now invalid historic charges. Once those fell away, the foundation for harsh discipline disappeared.
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