Dismissal, the LRA, and the CCMA

Dismissing an employee incorrectly is the single most common and most expensive employment law mistake made by small business owners in South Africa. The CCMA received over 145 000 new cases in 2023. Employers who lose pay an average of R85 000 in compensation plus R50 000 or more in legal fees. Most cases arise because employers skip documented steps, not because they dismissed for the wrong reason.

South Africa has some of the most protective employee dismissal legislation in the world. You cannot decide an employee is not working out and ask them to leave. Every dismissal must satisfy two requirements: it must be for a fair reason (substantive fairness), and it must follow a fair process (procedural fairness). A dismissal that fails on either ground is unfair, regardless of how justified the underlying reason may have been.

The Two Requirements: Substantive and Procedural Fairness

Substantive fairness means the dismissal is for a valid reason — one of the three fair reasons recognised by the Labour Relations Act. Having a valid reason is not enough on its own.

Procedural fairness means the employer followed a fair process before dismissing. A dismissal can be for a perfectly valid reason and still be ruled procedurally unfair because the employer did not give the employee a proper opportunity to respond. Both requirements must be met.

The 2025 Code of Good Practice: Dismissal, which updated the framework for employers, emphasises three principles that apply to every dismissal: proportionality (dismissal should be a last resort, with lesser sanctions considered first), meaningful engagement (the employee must have a genuine opportunity to state their case, not just a nominal one), and flexibility (procedures may vary based on the size and resources of the employer, but the substance of fairness cannot be waived).

The Three Fair Reasons for Dismissal

Misconduct

The employee has done something wrong — theft, dishonesty, insubordination, harassment, serious breach of workplace policy, or similar. Misconduct dismissals require a disciplinary hearing before dismissal. The hearing need not be formal, but it must be substantive. The employee must be:

1. Notified of the allegation in advance, with enough detail to prepare a response
2. Given a reasonable opportunity to prepare their defence
3. Allowed to be accompanied by a colleague or union representative
4. Given an opportunity to respond to the allegation before any decision is made
5. Informed of the outcome and the reasons for it

Dismissing without a hearing — even for clear-cut misconduct like caught-on-camera theft — is procedurally unfair. The hearing itself may take 30 minutes for a simple matter, but it must happen.

One common misconception: there is no law requiring three written warnings before dismissal. The LRA requires progressive discipline — the sanction must match the severity of the misconduct. A single act of gross misconduct (theft, violence, fraud) can justify immediate dismissal after a fair hearing, with no prior warnings required. Minor misconduct requires a more graduated approach.

Consistency matters. If you dismiss one employee for misconduct but tolerated the same behaviour from others, the dismissal may be unfair even if the underlying reason is valid. Apply discipline consistently across the workforce.

Incapacity

The employee is unable to perform their job due to poor performance or ill health. The 2025 Code also explicitly recognises incompatibility — where an employee cannot function effectively within the role or team — as a form of incapacity.

Poor performance dismissal is the most procedurally demanding category for employers. It requires:

• Communicating the performance standard clearly and confirming the employee understands it
• Confirming the employee has the capacity, resources, and support to meet the standard
• Notifying the employee that their performance is not meeting the standard
• Giving a reasonable opportunity and time to improve, with support
• Monitoring performance and documenting the outcome
• Conducting a hearing if performance does not improve, before deciding on dismissal

You cannot dismiss someone for poor performance without genuinely giving them a fair chance to meet the standard. Rushed performance improvement processes, vague performance standards, or failing to offer support are the most common reasons poor performance dismissals fail at the CCMA.

Ill health incapacity requires a different approach. The employer must investigate the nature and extent of the incapacity, consider the impact on the business, explore alternatives to dismissal (different duties, reduced hours, temporary absence), and consult the employee before dismissing. A medical opinion is typically required.

Operational Requirements (Retrenchment)

The employer's business needs make it necessary to reduce the workforce due to economic, technological, structural, or similar reasons. Retrenchment has its own specific consultation and process requirements under section 189 of the LRA.

The process requires written notice to affected employees of the proposed retrenchment, a consultation period during which the employer must genuinely consider alternatives, disclosure of relevant information to allow meaningful consultation, and selection criteria that are fair and objective.

For employers with more than 50 employees facing large-scale retrenchment (typically 10 or more employees), section 189A applies with additional requirements including the option of a facilitator and the right to strike over retrenchments as a final resort.

Severance pay on retrenchment is currently one week's pay per completed year of service. The Labour Law Amendment Bill 2025 proposes doubling this to two weeks per year — this is not yet law but is a proposed change with significant financial implications for any business planning a retrenchment.

Automatically Unfair Dismissals

Beyond the three fair reasons, certain dismissals are automatically unfair regardless of the employer's stated reason. These include dismissals for union membership, pregnancy, or exercising any legal right under the LRA. Automatically unfair dismissals attract higher compensation awards — up to 24 months' remuneration rather than the standard 12 months cap.

Common automatically unfair dismissal triggers that catch employers:

• Dismissing an employee who has lodged a grievance or CCMA referral (retaliatory dismissal)
• Dismissing a pregnant employee or an employee returning from maternity leave
• Dismissing an employee for participating in a protected strike
• Dismissing an employee for refusing to work in conditions that constitute a serious risk to health and safety

If a court finds the stated reason for dismissal (such as poor performance or operational requirements) is a fabrication covering an automatically unfair reason, the employer faces the higher 24-month compensation cap and significant reputational exposure.

Constructive Dismissal

A resignation can constitute a dismissal if the employer made the working environment so intolerable that the employee had no reasonable choice but to resign. This is constructive dismissal and is treated as a dismissal in law — the employee can refer it to the CCMA within 30 days of the resignation.

Common constructive dismissal scenarios: removing an employee's responsibilities without justification, a sustained campaign of harassment or humiliation, unilaterally changing material terms of employment, or failing to address a grievance about serious misconduct by a manager.

Constructive dismissal is difficult to prove — the employee must show both that the conduct was intolerable and that resignation was the only reasonable option. But it is a real risk for employers who manage employees out informally rather than through proper process.

The CCMA Process

The Commission for Conciliation, Mediation and Arbitration is the dispute resolution body for most employment disputes. An employee who believes they were unfairly dismissed refers the dispute to the CCMA within 30 days of the date of dismissal. The process is free for employees and accessible without a lawyer.

Step 1: Conciliation

The matter is set down for a conciliation hearing, typically within 30 days of referral. A CCMA commissioner facilitates a settlement discussion between the parties. Legal representation is generally not permitted at conciliation — both parties present their own case. If settlement is reached, a settlement agreement is signed and the matter is closed. If not, a Certificate of Outcome is issued confirming the dispute is unresolved.

Step 2: Arbitration (or con-arb)

If conciliation fails, the matter proceeds to arbitration. In many cases, conciliation and arbitration happen on the same day (con-arb), which means the employer may move from a settlement discussion directly into a formal hearing in a single sitting. This catches unprepared employers badly.

At arbitration, evidence is led, witnesses are called and cross-examined, and the commissioner issues a written award within 14 days. The employer typically presents first.

What employers can do at arbitration:

An employer can be represented by any employee or director of the business, or by an office bearer of a registered employers' organisation. Lawyers are not automatically permitted in simple misconduct cases — the commissioner may exclude them if their presence would cause unfairness. In complex matters the commissioner has discretion to allow legal representation.

Step 3: Awards

If the dismissal is found unfair, the commissioner may award:

• Reinstatement — the employee is restored to their position with retrospective effect to the date of dismissal, including back pay for the entire period. This is the primary remedy and commissioners are required to order it unless the employee does not want it, continued employment is intolerable, or a dismissal is procedurally but not substantively unfair.
• Re-employment — the employee returns from the date of the award, not retrospectively.
• Compensation — up to 12 months' remuneration for an ordinary unfair dismissal. Up to 24 months for an automatically unfair dismissal. Compensation is not calculated on actual loss — it is what the commissioner determines to be just and equitable in the circumstances.

If an award is not paid, the employee can certify it and enforce it as a Labour Court order, instructing a sheriff to attach the employer's moveable goods.

When a CCMA Referral Arrives

Do not treat it as a formality. Employers lose cases because they respond too late, misplace records, or underestimate procedural defects.

When you receive a referral notice:

1. Create a case file immediately. Gather all records — emails, WhatsApp messages, disciplinary hearing notes, warning letters, performance reviews, CCTV footage if relevant.
2. Identify the dismissal category and reconstruct the timeline.
3. Assess whether the process was followed correctly. If it was not, consider whether settlement is commercially rational before arbitration.
4. Contact a labour attorney or registered labour consultant. Do not represent yourself at arbitration unless the matter is straightforward and your documentation is watertight.

Settlement at conciliation is not an admission of wrongdoing. If reinstatement risk is high or process was weak, settlement is often more commercially rational than arbitration.

Documentation: The Deciding Factor

Most CCMA cases are won or lost on documentation, not on the merits of the underlying reason for dismissal. A commissioner cannot assess what happened without a record of it. If the disciplinary hearing was not documented, it effectively did not happen.

Keep the following for every dismissal:

• Written notice of the disciplinary hearing with the allegation stated clearly
• A written record of the hearing itself — what was put to the employee, what they said, who was present
• The written outcome and reasons for the decision
• Any prior warnings, with proof of receipt
• Performance reviews, targets, and improvement plans for incapacity cases
• The employee's acknowledgement of workplace rules and policies

Retain all employment records for at least five years after termination.

Common Mistakes Worth Avoiding

Dismissing without a hearing. Even for obvious misconduct, a hearing must happen first. No hearing means automatic procedural unfairness.

Conflating poor performance with misconduct. They require different processes. Applying a misconduct process to a performance issue, or vice versa, undermines both the substantive and procedural fairness of the dismissal.

Assuming three warnings are required. They are not. Progressive discipline means matching the sanction to the severity. Gross misconduct can warrant immediate dismissal after a single fair hearing.

Inconsistent application of discipline. If you dismiss one employee for behaviour you have tolerated in others, the dismissal is likely unfair regardless of the substantive reason.

Ignoring constructive dismissal risk. Managing an employee out informally — removing responsibilities, creating a hostile environment, hoping they resign — creates constructive dismissal exposure that is treated the same as a formal dismissal.

Not settling when process was weak. If the process was flawed, the risk of a reinstatement order with retrospective back pay is real. Settlement at conciliation is almost always cheaper.

Dismissing an employee who has lodged a grievance. If the timing suggests retaliation, this is automatically unfair dismissal with a 24-month compensation cap.

Not getting advice before the dismissal. The cost of a labour consultation before dismissing is a fraction of the cost of an unsuccessful CCMA arbitration.

This article provides general information about dismissal law and the CCMA process in South Africa. Dismissal disputes are fact-specific and procedurally demanding. Consult a qualified labour attorney or registered labour consultant before dismissing any employee. Nothing in this article constitutes legal advice.

Professional advice recommended

This topic involves legal, tax, or regulatory complexity that varies by individual circumstances. The information here is general guidance only. Consult a qualified professional before making decisions specific to your situation.

This article provides general information about South African business law and regulation. It is not legal, tax, or financial advice. Laws and regulations change — verify current requirements with a qualified professional or directly with the relevant authority before making decisions.

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