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Former Edcon Employee Sues Retail Giant Over “Unlawful Termination” Of BEE Deal

JULIA MMOKE is heading to court to sue Edcon for  over R31 million in damages for what she says was an unlawful termination of a joint venture (JV) agreement she entered into with the global retail giant. In court papers filed in the South Gauteng High Court, Mmoke claims she was offered an opportunity to switch from being an employee to become a part store-owner in a black economic empowerment scheme which would earn Edcon BEE points, only to be dumped years later despite meeting the requirements of the JV agreement. She was required to resign her employment and give up her entitlement to all benefits including her pension that accrued to her up to the period of entering into the agreement. In an instant, she had lost her employee benefits. Edcon retail companies include Jet, Edgars, CNA, Legit

JULIA MMOKE remembers the sweet sound of the tills ringing during the festive season of 2006 like it was yesterday. It was shortly after signing an agreement with Edcon as part of the company’s BEE scheme, through which employees would be transformed into successful business men and women.

Called Fifty-Fifty, the scheme offered suitably qualified black managers opportunities to acquire a 50.1% ownership stake in new stores placed under their custodianship.

But Edcon’s BEE scheme was structured in such a way that it did not meet the legislative requirements and couldn’t earn the company the points for which it, and most organisations, entered into BEE deals. And when Edcon discovered the bad news, it would not review the way the scheme was structured but instead, chose to punish the BEE partners.

Long before the BEE deal went sour, Mmoke was one of Edcon’s star employees, a model employee who the retail giant had identified as capable of running a profitable store. And she had the performance track record to show for it. She had, since joining the Jet store in Mamelodi in 2003, pushed annual turnover from R20 million to R33 million by 2005. A year later she became an exemplar of the Edcon’s BEE Scheme and the Jet Mart store in Atteridgeville was identified as the store for the joint venture. Mmoke entered into a joint venture agreement with Edcon in November 2006. However, like many of these employee-turned-owner BEE schemes, she says the contract was unfair, one sided and almost entirely favoured Edcon without any input from her or other participants. “I had no prior independent legal advice before signing this agreement as I could not afford to pay attorneys,” Mmoke explains.

She was required to resign her employment and give up her entitlement to all benefits including her pension that accrued to her up to that period, as a condition for participating in the scheme. In an instant, she had lost her employee benefits.

In terms of the 50-50 project, store managing partners acquired a majority shareholding in the business over a period of three years.

Profits accrued to an accumulation account and at the end of the three-year period, the store manager would use her/his share of profits to finance his or her stake in the JV provided she complied with certain criteria set out in the agreement. In fact it is these shares which on termination of the contract, Edcon would claim in their defence that they were a settlement offer.

Mmoke didn’t mind the long and arduous hours working in the store. “The first two years were challenging…..But I worked tirelessly with a vision to be a part-owner of the Jet store,” she says.

After the three-year term, Mmoke kept asking Edcon when the shares would finally be transferred in her name. And suddenly she felt “something had changed”. After much persistence from her side Edcon finally told her they had to review the scheme to meet the requirements of the Department of Trade & Industry (DTI) and somewhere in the letter it said “we are looking forward to a bright future with you”. And so despite what she thought was a change of heart by Edcon, the letter gave her renewed hope that a future still existed for the relationship. “After years of hard work I thought my goal of becoming an entrepreneur was still intact,” she says.

The store had become so profitable that at one point they had to move to bigger premises.

Then in August 2012, the biggest bombshell of her life arrived by way of a letter from Edcon terminating the deal. “We confirm having communicated that the current 50/50 JV arrangement has not met the legislative requirement and the company has accordingly decided to terminate the JV agreement. We are currently reviewing other alternatives to ensure compliance with the laws in respect of Enterprise Development……We further confirm that the JV will terminate effectively on the 31st August 2012 and that the company will in good faith and without prejudice to any of its rights, extend an ex-gratia payment equal to your current monthly withdrawals for the month of September 2012. Accordingly, your last day the store is September 2012”.

And so having worked herself to the bone for nine years, her dream of becoming an entrepreneur was shattered and perhaps even worse, she was unemployed. Edcon didn’t offer to place her in any of their other stores. Mmoke suffered a tremendous deal in terms of her health. “I still suffer the scars but eventually I dusted myself up and started looking for work. I had to start at the bottom in the retail business. Explaining to prospective employers how I had been one of Edcon’s star employees, who had even received an opportunity to be a part-owner of one of their stores, and being let-go unceremoniously, was not easy. Nobody believed me”.

Mmoke is now headed to court claiming over R31million in compensation for an unlawful and wrongful termination of the contract, which Edcon deny. In its plea, the retail giant claims the contract ended in 2009. This is however disputed by Mmoke and her legal team who have a letter from Edcon dated 14 November 2011 in which among others, she’s congratulated for having “successfully met the requirements for the acquisition of the ownership as described in the Joint Venture Agreement. Yours is a story we are most proud of, we therefore congratulate you and thank you for your dedication and tireless commitment.” Mmoke’s team contends that she owned 50.1% share in the JV on 14 November 2011 when the letter was written. They say the letter of August 2012 terminating the agreement was unlawful. They argue that she was entitled to her ‘undivided 50.1% ownership in the JV including her rights to all assets and capital in the JV”.

Edcon’s counter claim is that it made an offer as a “full and final settlement, in writing to settle the dispute,” which Mmoke accepted. Mmoke refutes this claim and says the money she received from Edcon was the value of the shares to which she was entitled and was not a settlement offer in lieu of the unlawful termination of the JV agreement.

The case is scheduled to be heard in April 2019.

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