Workers in South Africa use this ‘loophole’ when quitting their jobs


It has become common for some employers and employees to end their employment relationship through written agreements, which often provide inaccurate grounds for dismissal.

Usually, such dismissals are registered as dismissals, which allows the employee to claim from the Unemployment Insurance Fund (UIF), say experts from the law firm Webber Wentzel.

Section 16(1)(a) of the Unemployment Insurance Act (UIA) provides that an unemployed contributor is entitled to claim unemployment benefit if the reason for unemployment is:

  • Termination of the contributor’s employment contract by his employer or the end of a fixed-term contract;
  • The dismissal of the contributor, as defined by section 186 of the Labor Relations Act 66 of 1995;
  • Insolvency within the meaning of the Insolvency Act 24 of 1936.

“In the recent case of Swanepoel v KPMG Services, Swanepoel (the plaintiff) sought an order to compel KMPG (the defendant) to amend its UI-19 form, insurance claim form and accompanying documents to indicate that his employment was terminated by termination, when the settlement agreement between the parties unequivocally stated that the employment relationship was terminated on a mutual basis,” Webber Wentzel said.

Swanepoel was a senior manager at KPMG, who alleged he was not performing properly and offered him the option of resigning if he did not wish to be subject to disciplinary proceedings. Swanepoel was unwilling to resign, as he would lose the right to claim against the UIF or his personal insurance.

The parties eventually reached a settlement agreement and KPMG recorded the reason for Swanepoel’s dismissal as an “involuntary resignation”.

“As noted above, there are very specific instances where a UIF claim will be warranted, and ‘involuntary resignation’ is not one of them,” Webber Wenztel said.

“Since KPMG was not prepared to change the documentation, Mr. Swanepoel asked the Labor Court to order KPMG to change the UI-19 form to indicate that the reason for the termination was either a dismissal or a constructive dismissal.”

Judicial request

KPMG argued that the reason reflected in the UI-19 form and certificate of service was correct, as agreed to in the settlement, and denied having constructively terminated or terminated Swanepoel.

KPMG relied on the terms agreed to in the settlement, but was willing to concede and correct the error in Form UI-19 to indicate that the employment contract was terminated for the reasons stated in the settlement agreement and not for an “involuntary resignation”.

“In its analysis, the court referred to the case of Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13, where the Supreme Court of Appeals (SCA) set out an approach to the interpretation of written documents.

“The SCA has stated that ‘interpretation is the process of assigning meaning to the words used in a document,’ by reading it in its entirety and taking into account the ‘circumstances surrounding its creation. ”

Consideration should be given to the language used, in light of grammar and syntax rules, said Webbert Wentzel.

The court also said the process was objective and not subjective, and that sensible meaning was preferred to one that resulted in insensitive or non-commercial meaning or subverted the intended purpose of the document.

The SCA warned judges to avoid replacing what they considered reasonable, sensible and professional language with the words actually used.


“In light of the foregoing, the Labor Court upheld the context and purpose of the settlement agreement. She found the claim that the employment contract had been terminated due to dismissal to be untenable, given that the parties had mutually agreed to resign instead of following a disciplinary course. »

In addition to the legal issue raised by Swanepoel, the labor court noted its jurisdictional limits under UIA Section 66.

  • Article 66 of the LUI provides that, unless otherwise provided, the Labor Court has jurisdiction over all matters covered by the law, with the exception of an infringement of the law.
  • UIA Section 64 describes certain conduct as an offence, such as knowingly making a statement that is materially false and results in improper payment of UIF benefits under the law, or willfully making a false entry on the card registration of the contributor.

“The court held that the employment contract was terminated for mutual reasons, that the recording of “involuntary resignation” on the UI-19 form constituted a false registration within the meaning of section 64 and that it constituted a criminal offense within the meaning of UIA Section 64(2),” said Webber Wentzel.

“The court also held that the relief sought by Swanepoel, ordering KPMG to modify its UI-19 form (i.e., to modify it to reflect the dismissal as a retrenchment), would require KPMG to be dishonest about the reason for the dismissal, which amounts to an infringement of article 64 of the LUI.

Therefore, the court held that Mr. Swanepoel’s claim should be dismissed as ill-conceived and unjustified. The request was later denied.

“This case underscores the importance of being aware of all legal consequences for employers and employees when entering into settlement or separation agreements. Any false or distorted information could give rise to criminal liability,” said Webber Wentzel.

  • Commentary by Mpumelelo Nxumalo, Joani van Vuuren and Nasme Puley from the Employee Practice Group at Webber Wentzel.

Read: Warning against compulsory vaccination policies in South Africa


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