No Gratuity For Permanent Employees

No Gratuity For Permanent Employees
By Dickson Jere and Chanda Chungu

An employee was charged by the Bank for carrying out foreign exchange transactions using her account for her and her mother at lower rates. The Bank found this conduct dishonest as it caused them to suffer loss and dismissed her, without paying her any benefits

The dispute went to the High Court in which the Judge ruled that the dismissal was fair and lawful as the conduct of the employee amounted to gross misconduct. However, the High Court held that the dismissed employee, was entitled to severance pay in the form of gratuity, despite being permanent and pensionable.

Unhappy with the Judgment, the Bank appealed to the Court of Appeal, arguing that a permanent and pensionable employees are not entitled to gratuity. The Bank also argued that if an employee is dismissed, they cannot benefit from their own misconduct by being awarded a gratuity.

A panel of three judges were constituted to determine the case. The critical issue was who should get gratuity in terms of the law.

The Court was adamant that a permanent employee does not qualify for gratuity as it is not a contract of fixed contract. The Court held that

“The sum of our analysis is that a permanent contract of employment is not equivalent to a contract of fixed duration.Therefore, the lower court’s assertion that a permanent contract is also a contract of fixed duration because it expires at retirement (if not terminated in other ways) is incorrect as there is no single retirement age.”

The Judges said that only employees on long-term (fixed-term) contracts are entitled to gratuity and not those who are employed on permanent and pensionable contracts.

The Court went ahead and held that

“Might we add that employees who have been dismissed for misconduct are excluded from severance pay because their actions have fundamentally breached the terms of the employment contract.”

According to the court,where an employee is dismissed, his/her misconduct disqualifies him from receiving the additional payment of gratuity. The Court clarified dismissed employees are only entitled to their accrued leave days, unpaid salaries and nothing else

The Judges emphasised that the law on gratuity only applies and extends to employees who have been terminated through no fault of their own .

Case citation – Stanbic Bank Zambia Plc v. Natasha Phiri – Appeal No. 274 of 2022 and Judgment rendered on 22nd August, 2024.

Interesting case. If you are a permanent employee or dismissed from employment, you are not entitled to any gratuity for your service