Backpay could mean “with interest”

Some years ago the Constitutional Court said in Equity Aviation Services (Pty) Ltd V CCMA and Others that: “Reinstatement is the primary statutory remedy in unfair dismissal disputes. It is aimed at placing an employee in the position he or she would have been but for the unfair dismissal.”

Retrospectively reinstating an employee means that the employer must pay backpay. The only question is whether this backpay must be paid with interest or not.

The Labour Court judgment in Victoria Sibongile Malapane and NTT Motor Investments (Pty) Ltd makes for interesting reading because it provides a legal context as to what it means when an arbitrator directs that such backpay must be paid with interest.

Following her dismissal the applicant turned to the Dispute Resolution Centre. The arbitrator retrospectively reinstated her and directed the employer to pay her salary with interest from the date of dismissal on 28 February 2017 until the date of her reinstatement on 28 March 2018.

The employer told her that she should not report for duty as he was taking the arbitration award on review.

After the review was dismissed on 21 March 2021, the applicant was reinstated on 1 April 2021 and on 1 May 2021 paid an amount of R200 200.00 – an amount equivalent to 13 months’ salary – as directed by the arbitrator.

In effect the applicant had to wait for her retrospective reinstatement for the entire period that the matter was on review before the Labour Court; that is, from the date on which she was to have been reinstated 28 March 2018 until 1 April 2021.

The first question before the court was whether the applicant was entitled to payment of the amount that had accumulated during the 36 months from the time when the employer instituted review proceedings until she was retrospectively reinstated in terms of the arbitration award.

The second question was whether this payment was interest-bearing. The Court found the answer in the LRA in section 143 (2), and the Constitutional Court decision in NUM v Hendor Mining Supplies which said that the employer was liable for paying interest in respect of the backpay.

In NTT Motor Investments (Pty) Ltd the court said that the period from 1 April 2018 until 31 March 2021 while the matter was on review was also subject to backpay with interest because the arbitrator had ordered that such interest must be paid until the employee was reinstated.

What this judgment shows is that backpay can become very much more expensive than anticipated!