Employment law: The Privy Council confirms that continuous employment is evidence-driven and courts must justify departures from statutory legal rate

Background

Mr Appadoo joined the SBM, a Government-owned listed company, in June 1980. He was employed under a series of fixed-term contracts and progressed to senior leadership. By 2012, he held the role of Divisional Leader Finance and was also an ex officio member of the SBM’s board of directors.

In September 2017, the SBM suspended him for gross misconduct. He was dismissed after appearing before a disciplinary committee to answer these charges.

Mr Appadoo challenged his dismissal before the Industrial Court, arguing that it unjustified and that he was entitled to a severance allowance which he quantified as MUR 88,194,796.90 [±USD1,901,223.17] calculated on the basis of 37 years’ continuous employment with the SBM.

The SBM disputed his computation on the premise that there was a break of more than 28 days in his employment with them such that his employment with the SBM terminated on 24 November 2012. Thereafter, a fresh employment contact of fixed duration commenced on 24 December 2012. Accordingly, the relevant period for the computation of the severance allowance due to him was the period 24 December 2012 – September 2017

The SBM relied on contemporaneous documentation in support of its standpoint, including, among other things, (i) a letter extending Mr Appadoo’s employment contract to 30 November 2012 (ii) a notification to the Bank of Mauritius stating that he was not an SBM employee anymore and, (iii) an “exit procedure checklist”.

As to Mr Appadoo, his argument was that he continued working at the SBM during the period 24 November 2012 to 24 December 2012.

The Law

Mr Appadoo’s employment contact was governed by the Employment Rights Act 2019 (ERA) which has now been replaced by the Workers’ Rights Act.

The ERA defines the phrase “continuous employment” as “the employment of a worker under an agreement or under more than one agreement where the interval between an agreement and the next agreement does not exceed 28 days.”

Of interest, section 46(11) of the ERA declares that:“The Court may, where it thinks fit and whether or not a claim to that effect has been made, order an employer to pay interest at a rate not exceeding 12 per cent per annum on the amount of severance allowance payable from the date of the termination of the agreement to the date of payment.”

• Industrial Court: break in continuity found

The Industrial Court found for the SBM and held that Mr Appadoo’s employment ended on 24 November 2012. It found that there was a break of more than 28 consecutive days before the next contract began on 24 December 2012. On that basis, the Industrial Court held that continuous employment for the full 37 years, as alleged by Mr Appadoo, had not been established.

It therefore followed that severance allowance had to be calculated on the basis of 4 years’ continuous employment as opposed to 37 years. The Industrial Court also ordered interest to be paid at the rate of 3% per annum from the date of its judgment instead of the legal rate of 4.5%.

• Supreme Court: continuity of 37 yrs upheld

Mr Appadoo challenged the finding of the Industrial Court. On appeal, the Supreme Court allowed Mr Appadoo’s appeal in part. It found that there was no evidential basis for a finding that there was a mutual agreement that Mr Appadoo’s employment contact with the SBM would expire on 24 November 2012.

The Supreme Court therefore found that Mr Appadoo reckoned 37 years of continuous employment with the SBM and therefore awarded severance allowance in the sum of MUR 88,194,796 [[±USD1,901,223.17]], as claimed by Mr Appadoo

On the issue of interests, the Supreme Court accepted that the Industrial Court had a discretion to award interest. However, it disallowed the application of 3% of interests by the Industrial Court because (i) the prevailing legal rate was 4.5% and, (ii) section 46(11) ERA contemplates interest running from the date of termination until payment. Accordingly, the Supreme Court ultimately set aside the award of interests made by the Industrial Court.

• Privy Council: Supreme Court decision partly affirmed

The SBM challenged the determination of the Supreme Court which was upheld by the Privy Council.

The Privy Council dismissed SBM’s appeal as it had failed to establish that Mr Appadoo’s employment contract with the SBM had been terminated by mutual agreement.

The Privy Council emphasised that this termination was a fact-sensitive inquiry such that without proof of agreement, it is not open for a court to infer termination and, and a resulting break in continuous service simply from internal paperwork.

The Privy Council went further and found that the contemporaneous documents relied on by the SBM, such as the “exit procedure checklist” and other internal records, did not demonstrate any communication with Mr Appadoo or any participation on his part in a termination decision, or any reference to mutual agreement.

It therefore followed that in the absence of evidence capable of supporting termination by mutual agreement on 24 November 2012, the Supreme Court was correct in reversing the standpoint of the Industrial Court on the question of continuous employment. Accordingly, Mr Appadoo’s severance allowance had to be calculated on the basis of 37 years’ service.

On the question of interests, the Privy Council confirmed that there were two potential bases for an award. First, the statutory discretion under section 46(11) of the WRA. Secondly, a court’s inherent jurisdiction to award interest on compensatory damages. While the Board accepted that the Industrial Court could award interests from the date of its judgment, the Privy Council did not find any justification for the Industrial Court to depart from the legal rate of 4.5% and apply the lower rate of 3% without explanations.