Authored by Katia Lopes | 17 April 2024 | South African Labour Law

Are you entitled to severance pay and a thirteenth cheque if your employer passes on and you’ve been with that employer for a number of years? South African employees commonly recognize the death of a single employer as a termination of the contract of employment and expect to be entitled to termination of employment benefits. This aspect is dealt with in the case of Meyers and Estate Late Gordon (2022) ILJ 1720 (CCMA).

On the death of her employer, Meyers, the applicant, brought her claim to the Commission for Conciliation Mediation and Arbitration House (CCMA) regarding her belief in entitlement to severance pay and a thirteenth cheque on dismissal of employment, relying on the provisions set out in s41 of the Basic Conditions of Employment Act 75 of 1997 (BCEA).[1] The respondent, Dr Gordon, was represented by his son, Gordon, in his representative capacity as executor of the estate.[2] Meyers was employed by Dr Gordon as an assistant receptionist for his practice for ten years, earning a salary of R15 500 per month,[3] therefore below the minimum threshold as set out in the BCEA. The respondent noted in his evidence that the contract of employment between Meyers and Dr Gordon had not ended based on termination nor retrenchment, but rather due to the passing of the employer.[4] The respondent further noted that a thirteenth cheque is not a guaranteed right in an employment contract[5] and that the applicant was therefore not entitled to payment thereof.

The legal issue in this case was whether Meyers was entitled to a severance package and a thirteenth cheque upon the death of her employer.[6] Furthermore, whether the death of an employer ending a contract of employment would entitle an employee to the provisions set out in s41 of the BCEA.

Section 41 of the BCEA sets out requirements regarding severance pay. S41(2) states:

“an employer must pay an employee who is dismissed for reasons based on the employer’s operational requirements. severance pay equal to at least one week’s remuneration for each completed year of continuous service with that employer…”.[7]

Hence, an employment relationship must be terminated by operational requirements for an employee to be entitled to severance pay.[8] The death of an employer terminates a contract of employment by operation of law due to the impossibility for one to continue working.[9] An executor of an estate cannot perform any functions other than those performed by the doctor before his death which includes the rights and duties surrounding the payment of rental for leased properties or collecting debts due to the estate.[10] Finally, regarding a thirteenth cheque, the BCEA is silent on this aspect, however, thirteenth cheques are regarded as bonuses and employees are not entitled to thirteenth cheques,[11] unless their contract of employment or collective agreement provide for a mandatory bonus.

Severance pay is essentially the sum of money paid to an employee due to the early termination of an employment contract[12] as confirmed by Judge Rabkin-Naiker in Brandt v Quoin Rock Wines.[13] However, the issue in this case was the ‘termination’ aspect surrounding the terms as to when severance pay is applicable. Commissioner Ceda noted that a death of an employer makes it impossible for an employee to continue with employment duties and therefore terminates one’s contract of employment by consequence. However, it was further noted that a termination of this kind constitutes a ‘no-fault dismissal’.[14] A ‘no-fault dismissal’ occurs when an employee no longer is employed by no fault of their own.[15] However, this form of dismissal is commonly known as a retrenchment and is composed of operational requirements. Commissioner Ceda pointed out that there was no evidence to suggest this was a dismissal based on operational requirements[16] and hence, that that termination did not amount to a commonly known ‘no-fault dismissal’. Therefore, Meyers could not qualify to receive severance pay.

It is noted that the death of an employer cannot be considered as a dismissal entitling an employee to relief due to the impossibility to sue. By the passing of an employer, one cannot sue the deceased employer nor request reinstatement nor re-employment.[17] The definition of a ‘contract of employment’ is very specific. It notes that the contract is between an employee and an employer on the basis of the employment relationship.[18] Gordon, acting in his representative capacity of the estate of the late Dr Gordon and holding the dominium thereof, was not the employer and therefore did not hold the contract of employment with Meyers.[19] Gordon could not perform any other functions that the deceased would’ve, including obligations of Dr Gordon as employer in terms of the contract of employment.[20] Commissioner Ceda confirmed this by stating that “rights and obligations do not transfer from the estate to someone else”.[21]

But where specified in collective agreements, thirteenth cheques are considered bonuses and by no means are bonuses considered guaranteed entitlements; the latter confirmed by Commissioner Ceda.[22]

Meyers was not entitled to a severance package[23]  on the death of her employer. The contract of employment between Meyers and Dr Gordon was ‘terminated by operation of law by reason of death of the late Dr Gordon”.[24]

Although fairly basic and straight-forward, this case does contribute significantly to the legal position regarding severance packages and thirteenth cheques upon the death of an employer in South Africa. The Constitution,[25]  the Labour Relations Act 66 of 1995 and the BCEA are silent on the issue of the death of an employer. This case is therefore a welcome guide as it not only reaffirms the powers of an executor, but it also clarifies the rights of an employee in a situation where an employer becomes deceased.

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[1] Meyers and Estate Late Gordon (2022) 43 ILJ 1720 (CCMA) para 8.

[2] Ibid para 2.

[3] Meyers supra note 1 para 5.

[4] Ibid para 9.

[5] Meyers supra note 1 para 11.

[6] Ibid para 4.

[7] Basic Conditions of Employment Act 75 of 1997 s41(2).

[8] Meyers supra note 1 para 19.

[9] Ibid para 18.

[10] Meyers supra note 1 para 15.

[11] Jodi-leigh Erasmus ‘Bonus: Are all employees entitled to a bonus or 13^th cheque’ available at https://ceosa.org.za/bonus-are-all-employees-entitled-to-a-bonus-or-13th-cheque/ , accessed on 9^th March 2024.

[12] Will Kenton ‘What is severance pay?’ available at https://www.investopedia.com/terms/s/severancepay.asp , accessed on 7^th March 2024.

[13] Brandt v Quoin Rock Wines (2023) 44 ILJ 309 (LC) para 49.

[14] Meyers supra note 1 para 13.

[15] Conlon Law ‘3 Forms of Dismissal in SA Labour Law’ available at https://conlonlaw.co.za/resources/forms-of-dismissal/ , accessed on 9^th March 2024.

[16] Meyers supra note 1 para 19.

[17] Labour Relations Act 66 of 1995 s193.

[18] Quest ‘Contract of Employment’ available at https://www.questcover.com/resource-centre/hr-guides/contractual-obligation/contract-of-employment/ , accessed 9^th March 2024.

[19] Meyers supra note 1 para 14.

[20] Ibid para 15.

[21] Meyers supra note 1 para 16.

[22] Ibid para 21.

[23] Meyers supra note 1 para 23.

[24] Ibid para 21.

[25] Constitution of the Republic of South Africa, 1996 s23.