In a previous article, we reported on a Labour Court (LC) ruling that an employer may not use a mutual separation agreement to bypass the retrenchment procedure prescribed by the Labour Relations Act (LRA). The Labour Appeal Court (LAC) has since overturned that decision, reaffirming the long-standing principle that agreements entered into freely and voluntarily should be honoured.

The facts

In WBHO Construction (Pty) Ltd v Masenye and Others (2026), the LAC summarised the facts as follows: Mr Maswangwandile Mdayi (Mdayi) joined the company in April 2018 as a Final Level Grader Operator. In November 2020, Mr Peter Gray (Gray), the company’s Operator Training Manager, approached Mdayi to discuss operational needs and the possibility of transferring him to Postmasburg in the Northern Cape. Mdayi declined, citing family commitments.

At arbitration, Mdayi testified that Gray told him the company intended to retrench him, and that refusal would result in dismissal. Gray, however, testified that Mdayi requested retrenchment due to financial difficulties. On 3 December 2020, the parties signed a “Mutual Separation Agreement,” and Mdayi received severance pay of R181,541.75.