Parting ways with a senior executive is one of the most sensitive decisions a board can take. The commercial stakes are high, the executive usually has a strong negotiating position, and a dispute can play out publicly. South African labour law has long treated executives in much the same way as other employees: they can claim unfair dismissal at the CCMA, seek reinstatement, and in some cases also sue for breach of contract.
That may be about to change. Draft amendments to the Labour Relations Act 66 of 1995 (LRA), published for comment on 26 February 2026, propose limiting the remedies available to high earners, capping compensation and preventing employees from running parallel unfair dismissal and contractual claims on the same facts. The proposals have not yet become law, but boards and HR executives should understand both the current position and where it may be heading.
The current position
An executive who is an employee enjoys the same protection against unfair dismissal as any other employee. A dismissal must be for a fair reason (misconduct, incapacity, including poor performance or incompatibility, or operational requirements) and follow a fair procedure.
If the dismissal is found to be unfair, the remedies under sections 193 and 194 of the LRA are:
- reinstatement or re-employment, which is the primary remedy for a substantively unfair dismissal, unless the employee does not want it, the relationship has broken down to the point that continued employment is intolerable, or reinstatement is not reasonably practicable;
- compensation of up to 12 months’ remuneration for an ordinary unfair dismissal; or
- up to 24 months’ remuneration for an automatically unfair dismissal, such as one linked to a protected disclosure or discrimination.
Because compensation is measured in months of remuneration, a 12-month award for a senior executive can run to many millions of rand. In addition, executives often have contractual claims, for notice pay, bonuses, long-term incentives or a fixed-term contract cut short, which can be pursued in the Labour Court or the High Court.
What the proposed amendments would change
The Labour Relations Amendment Bill published in February 2026 contains several proposals that directly affect senior employees:
- A high-earner threshold. Employees earning above a threshold, initially proposed at R1.8 million a year and adjusted annually, would generally be limited to compensation. Reinstatement would remain available only for automatically unfair dismissals.
- A compensation cap. The 12-month maximum would remain, but would also be capped by reference to the high-earner threshold. The cap would not apply to automatically unfair dismissals or to unfair labour practices linked to protected disclosures.
- No duplicate claims. A proposed new section 196 would prevent an employee from pursuing both an unfair dismissal claim and an unlawfulness or contractual claim arising from the same facts.
- A codified right to respond. Employees would have to be given an adequate and reasonable opportunity to respond to the reason for dismissal, which reflects the more flexible approach to procedure in the new Code of Good Practice: Dismissal.
Public comment closed on 28 March 2026. The proposals may change before they are passed, and the final threshold and drafting will matter. Until then, the current law applies.
Practical considerations for boards and employers
Get the reason right
Executive exits often involve a mix of concerns: performance, strategic disagreement, loss of trust or a restructuring. The reason you rely on determines the process you must follow. A performance case requires evidence of the standard and the shortfall. Incompatibility requires evidence of the breakdown and an attempt to address it. An operational requirements dismissal requires genuine consultation under section 189. Labelling a performance or relationship problem as a “restructuring” is a common and costly mistake.
Consider pre-dismissal arbitration
Section 188A of the LRA allows an employer, with the employee’s consent, to refer allegations of misconduct or incapacity to an arbitrator instead of holding an internal enquiry. The arbitrator’s award is final and binding, subject only to review. For senior employees, this can avoid a lengthy internal process followed by a CCMA hearing on the same issues.
Review the executive’s contract now
Many executive disputes turn on contract terms that were drafted when relationships were good. Check the notice period, any garden leave clause, how bonuses and incentive awards are treated on termination, good leaver and bad leaver definitions, restraint and confidentiality obligations, and the dispute resolution clause. Restraints need to be clear and limited to protecting legitimate interests. In a 2026 Labour Court case, a restraint that barred former employees from establishing any new business, without limiting it to competing businesses, was found too vague to enforce.
Negotiated exits
Most executive departures end in a mutual separation agreement. A well-drafted agreement should record a full and final settlement of all claims, deal with incentives, restraints and confidentiality, address public statements and regulatory notifications, and be structured with the tax treatment of the payment in mind. Pressure to sign, or a threat of dismissal without a proper basis, can expose the employer to a claim that the agreement was not voluntary.
Governance and disclosure
For listed and regulated entities, an executive exit may trigger disclosure obligations, regulator notifications or approvals. These should be built into the timeline from the outset.
A checklist for executive exits
- Identify the real reason for the exit and the process it requires.
- Review the employment contract, incentive scheme rules and any shareholder arrangements.
- Gather and preserve the evidence before raising concerns formally.
- Consider whether section 188A pre-dismissal arbitration is appropriate.
- Decide whether to offer a without prejudice separation discussion, and prepare a realistic settlement range.
- Plan communications to staff, clients, regulators and the market.
- Document board decisions and the reasons for them.
- Monitor the progress of the LRA amendments, which may change the risk profile of future disputes.
How O’Reilly Law can help
We advise boards and employers on executive performance, incompatibility and misconduct processes, pre-dismissal arbitration, separation negotiations and settlement agreements, incentive and restraint issues, and executive disputes in the CCMA, Labour Court and High Court. We work discreetly and with an eye on the commercial and reputational stakes.
Contact us for confidential advice on an executive exit.
Related reading: Retention bonuses and clawback clauses · Phantom shares and cash-settled incentive schemes
This article is general information and not legal or tax advice. Correct as at November 2026.