Solidarity and JM Joubert v Armaments Corporation of South Africa (SCO) Ltd and Others

Mr JM Joubert was employed by Armscor for over 31 years. He held various security clearance certificates throughout his employment, most recently a "Secret" grade clearance that expired in September 2011. He applied for renewal in September 2011 and temporarily held a "Confidential" clearance until November 2012. The Intelligence Division of the SANDF then refused to grant him any grade of security clearance without providing reasons. On 18 December 2012, Armscor terminated his employment with immediate effect, citing its policies (A-Prac-2021 and A-Prac-2033) which required employees to obtain and maintain applicable security clearance. The termination letter advised Joubert of his right to request a review by the Personnel Security Review Board (PSRB). Joubert requested reasons for the refusal and lodged a review application on 7 January 2013, but no reasons were ever provided and the review remained pending. Joubert referred an unfair dismissal dispute to the CCMA. The commissioner found the dismissal both substantively and procedurally unfair and reinstated Joubert with nine months' back pay. Armscor reviewed this decision to the Labour Court, which found the dismissal substantively fair (based on incapacity arising from legal prohibition under s37(2) of the Defence Act) but procedurally unfair, and awarded eight months' compensation instead of reinstatement. Solidarity and Joubert appealed.

• Whether the dismissal of an employee who has been refused security clearance constitutes dismissal for incapacity based on supervening impossibility of performance
• Whether a dismissal effected pursuant to s37(2) of the Defence Act, 42 of 2002, before completion of the review process contemplated in s39 and s41 of the Act, can be substantively fair
• Whether the procedural protections in s39 of the Defence Act (provision of reasons, opportunity to present information, and review by the PSRB) must be completed before termination can be considered substantively fair
• Whether reinstatement is legally competent where an employee lacks the requisite security clearance
• What constitutes appropriate relief where a dismissal is both substantively and procedurally unfair but reinstatement is impracticable
• The correct application of the review test for CCMA arbitration awards

The appeal was upheld with costs. The Labour Court order was set aside and substituted with: (1) A finding that the dismissal was both substantively and procedurally unfair; (2) An order that Armscor pay Joubert compensation equivalent to 12 months' salary; (3) No order as to costs in respect of review application Case No: JR 1961/13; (4) Armscor ordered to pay costs of Solidarity and Joubert in respect of review application Case No: JR 1510/13.

Where an employee's dismissal is based on refusal of security clearance under s37(2) of the Defence Act, 42 of 2002, the dismissal constitutes incapacity arising from supervening impossibility of performance. However, such a dismissal can only be substantively fair if effected after completion of the procedural protections afforded by s39 and s41 of the Defence Act, which require provision of reasons for refusal, an opportunity for the employee to present information and make representations, and a review by the Personnel Security Review Board. The substantive basis for dismissal under s37(2) cannot be finally determined in the absence of reasons for the security clearance refusal and before completion of the review process. Until the review process is completed, the incapacity remains temporary rather than permanent, and does not warrant dismissal. Reinstatement is not reasonably practicable under s193(2)(c) of the LRA where an employee lacks the requisite security clearance that is a legal prerequisite for employment.

The Court made several notable observations: (1) It noted that two of Armscor's employees were allowed or retained in service without requisite security clearance certificates, suggesting inconsistent application of the policy. (2) The Court observed that incapacity need not arise only from illness or injury, but may arise from any condition preventing performance of work, including legal prohibitions. (3) The Court noted that the fact an employee is not at fault for incapacity is a consideration that should properly be brought to account when assessing fairness. (4) The Court rejected Armscor's argument that "denial of security clearance" was not "conditional" under clause 5.12.1 of its policy, stating that nothing turned on this argument - what mattered was the PSRB's obligation to review the decision. (5) The Court commented that given the egregious manner of termination and Joubert's 31 years of service, maximum compensation was not only justified but required by considerations of law and fairness. (6) The Court noted approvingly that while a commissioner's reasons may be inelegantly expressed, if the conclusion is correct, mere errors of fact or law may not vitiate an award.

This judgment is significant for establishing important principles regarding dismissals based on security clearance refusals in South African labour law: (1) It clarifies that loss of security clearance constitutes incapacity based on supervening impossibility of performance, not misconduct. (2) It establishes that where statutory procedural protections exist (such as those in s39 of the Defence Act), these must be exhausted before a dismissal can be considered substantively fair, even where there is a legal prohibition on continued employment. (3) It confirms that substantive fairness cannot be determined in the absence of reasons for refusal of security clearance - the grounds are fundamental to establishing the basis for dismissal. (4) It demonstrates the interplay between statutory provisions (Defence Act) and common law employment principles, showing that employer policies founded on statute cannot be applied in isolation from the procedural protections in the enabling legislation. (5) It provides guidance on when reinstatement is impracticable due to legal impediments, and confirms that maximum compensation may be appropriate where dismissals are effected in an egregious manner. (6) The case illustrates that timing matters in dismissal for incapacity - a temporary impossibility of performance should not be treated as permanent until all review processes are exhausted.