Brief Summary

Labour Law — Dismissal — Procedural and substantive fairness — Appeal against Labour Court's finding of procedural unfairness and substantive unfairness of dismissals — Appellant's restructuring process leading to retrenchments — Labour Court erred in adjudicating procedural fairness due to lack of jurisdiction under section 189A(18) of the LRA — Finding of procedural unfairness set aside — Substantive unfairness of dismissals of certain respondents upheld due to failure to apply fair and objective selection criteria.

Comprehensive Summary

Summary of Judgment

Introduction

The matter concerned an appeal in the Labour Appeal Court against orders of the Labour Court arising from dismissals for operational requirements (retrenchments) implemented by an employer during a restructuring process. The appeal was directed at the Labour Court’s findings on procedural fairness, aspects of substantive fairness, the refusal to admit further evidence after the employer had closed its case, and the attendant orders of reinstatement, compensation, and costs.

The appellant was Regenesys Management (Pty) Ltd t/a Regenesys (the employer). The respondents were nine individuals cited in the proceedings, with the dispute principally involving the first to eighth respondents’ challenges to the fairness of their dismissals. The appeal record reflects that certain preliminary condonation applications were unopposed and were granted, with the appeal being reinstated.

Procedurally, the dispute originated in a section 189A(13) application brought in the Labour Court (lodged by the ninth respondent), seeking relief premised on alleged non-compliance with a fair retrenchment procedure. On 8 October 2015, Gush J ordered that the section 189A(13) application be consolidated with the action in which substantive unfairness was alleged, and that the trial court determine both procedural and substantive fairness. At trial, the respondents closed their case without leading evidence. After the employer closed its case, it applied to adduce further evidence, which application was dismissed by Prinsloo J. Prinsloo J further held that the dismissals were procedurally unfair and that the dismissals of certain employees were substantively unfair, and granted reinstatement/compensation and costs against the employer. The present appeal (with leave of the Labour Appeal Court) challenged those conclusions and orders.

The general subject-matter of the dispute was the fairness of retrenchments implemented in the context of a restructuring, including whether the Labour Court was competent to adjudicate procedural fairness at trial in light of section 189A(18) of the Labour Relations Act 66 of 1995, and whether the selection/appointment process used by the employer yielded substantively fair outcomes for particular respondents.

Material Facts

On 17 June 2015 the employer notified staff, including the respondents, to attend a meeting at which it announced it was embarking on a restructuring process aimed at improving academic delivery, reducing dropout rates, improving financial performance, and achieving sustainability. At that meeting, staff were informed that retrenchments were contemplated due to the employer’s financial position, including that its salary bill comprised 43% of expenses. It was indicated that group meetings would follow.

On 18 June 2015 the affected departments (including the first to seventh respondents) attended meetings at which they were provided a proposed new structure and were simultaneously given section 189(3) letters inviting written proposals regarding the proposed restructuring. The first and second respondents made written representations. The first respondent and another employee requested the appointment of a CCMA facilitator, but none was appointed by the employer. The eighth respondent was told that her department (marketing) and certain other departments would not be affected by the retrenchments at that stage.

On 22 June 2015 the first to seventh respondents received a final amended organisational structure, a list of vacancies, and brief descriptions of those positions, and were invited to apply for available positions in the new structure by 13h00 on 23 June 2015. They were informed that selection would be based on knowledge, skills and behaviour; the employer’s pleaded case described the criteria as competence, including knowledge, skills, past performance and behaviour.

The first to seventh respondents applied for various positions in the new structure. On 24 June 2015 the first, second, third, fifth and seventh respondents were told their applications were unsuccessful and that they were retrenched, with July 2015 as their notice month (and most were not required to work during that month). The fourth respondent was offered the position of Marketing Database Coordinator but declined it and was retrenched on 29 June 2015. The sixth respondent, who had taken ill on 23 June 2015, was informed of her retrenchment upon her return on 29 June 2015 in a letter dated 24 June 2015.

After these events, on 5 August 2015 the employer’s CEO and another representative met with the eighth respondent and raised concerns that her performance and role were not commensurate with her salary, presenting her with a mutual separation agreement. She declined to accept a voluntary separation upon returning from sick leave on 11 August 2015. On 12 August 2015 she received a section 189(3) notice and she was retrenched at a follow-up meeting on 17 August 2015.

It was common cause in the appeal that only the first to eighth respondents challenged the fairness of their dismissals, and that the ninth respondent’s section 189A(13) application initiated the Labour Court proceedings and led to consolidation with the substantive unfairness dispute.

In relation to substantive unfairness (as ultimately upheld on appeal for particular respondents), the Labour Court had found, on the evidence before it, that the employer failed to apply fair and objective criteria and/or failed to take adequate steps to avoid retrenchment through suitable alternative placement in respect of the second, third, fifth and seventh respondents. The judgment recorded specific factual findings made by the Labour Court, including that a person appointed to a relevant position had been employed in 2015 and that the reasons advanced for preferring her included that she was “younger” and “more dynamic”, and that in other instances the employer relied on factors such as how an employee “came across” to students and colleagues. The Labour Court also found that in at least one instance other employees appointed to a position did not meet an asserted minimum qualification requirement, undermining the employer’s reliance on that requirement to exclude the seventh respondent.

Legal Issues

The first central legal issue was a jurisdictional question: whether, given section 189A(18) of the Labour Relations Act 66 of 1995, the Labour Court had jurisdiction to adjudicate (at trial, in proceedings referred under section 191(5)(b)(ii)) a dispute concerning the procedural fairness of dismissals for operational requirements, particularly after an earlier consolidation order purported to permit such adjudication alongside substantive fairness.

The second issue was whether the Labour Court erred in its conclusions on substantive fairness in relation to the retrenchments of identified respondents, including whether the employer applied fair and objective selection criteria and adequately considered alternatives to dismissal when filling roles in the new structure through a competitive application process. This was a mixed enquiry involving the application of legal standards to the established facts, and an evaluation of whether the employer’s conduct met the statutory threshold for substantive fairness.

The third issue was whether the Labour Court erred in refusing the employer’s late application to adduce further evidence after it had closed its case, which primarily concerned the appropriateness of reinstatement as relief. This involved the application of established principles governing the reception of additional evidence late in proceedings, and an evaluative assessment of materiality, explanation for lateness, prejudice, and finality.

A further issue arose as to costs, both in the Labour Court (which had awarded costs against the employer) and on appeal.

Court’s Reasoning

On jurisdiction and procedural fairness, the Labour Appeal Court located the enquiry within the statutory scheme of section 189A, emphasising that section 189A(13) provides a mechanism for early, corrective intervention when an employer does not comply with a fair procedure in large-scale retrenchments. The Court relied on the Constitutional Court’s explanation in Steenkamp and Others v Edcon Limited (2019) 40 ILJ 1731 (CC) that the primary purpose of section 189A(13) is to allow early corrective action to get the retrenchment process back on track.

Against that purpose, the Labour Appeal Court stressed that section 189A(18) expressly provides that the Labour Court may not adjudicate a dispute about the procedural fairness of a dismissal based on operational requirements in a dispute referred in terms of section 191(5)(b)(ii). The Court treated this as an explicit ouster of adjudicative competence on procedural fairness in the trial forum for such disputes. It followed that it was incompetent for the earlier consolidation order (made by Gush J) to direct the Labour Court to determine procedural fairness together with substantive fairness at trial. The Court drew support from authority recognising that orders made without jurisdiction are legally ineffective, including The Master of the High Court (Northern Gauteng High Court, Pretoria) v Motala NO and Others 2012 (3) SA 325 (SCA) and Department of Transport and Others v Tasima (Pty) Limited 2017 (2) SA 622 (CC). On this basis, the Labour Appeal Court held that Prinsloo J ought to have refused to conduct the trial in accordance with the consolidation order insofar as it purported to authorise determination of procedural fairness, and that the Labour Court’s finding of procedural unfairness therefore had to be set aside.

On substantive fairness, the Labour Appeal Court approached the matter on the footing that, notwithstanding the permissibility of a competitive process to seek to avoid retrenchment, the employer remains obliged to ensure that any ensuing dismissals meet the requirements of substantive fairness, including that retrenchment selection be determined by fair and objective selection criteria and that alternatives to retrenchment be properly explored. In addressing the employer’s reliance on South African Breweries (Pty) Limited v Louw [2018] 1 BLLR 26 (LAC), the Court held that the employer’s reliance was misplaced. It distinguished that decision on the basis that, in Louw, the employee did not apply for a post despite being invited to do so, and the LAC in that case made clear that a competitive process to avoid retrenchment is not inherently unfair. However, the present Court reasoned that this proposition does not remove the duty to ensure substantive fairness in the selection for retrenchment and the evaluation of alternatives.

Applying these principles to the matter as decided by the Labour Court, the Labour Appeal Court found no basis to interfere with the Labour Court’s conclusions that the dismissals of the second, third, fifth and seventh respondents were substantively unfair. It accepted that the Labour Court had carefully considered the material before it and had motivated its findings with reference to both facts and law, including findings that the criteria were not applied in a fair and objective manner and that suitable alternative positions were not properly used to avoid retrenchment for those respondents. The appeal against the substantive unfairness findings (as upheld and reflected in the substituted order) therefore failed.

On the attempt to adduce further evidence, the Labour Appeal Court endorsed the Labour Court’s approach. It noted that the application was made after the employer had closed its case and that the Labour Court considered the relevant factors drawn from Coetzee v Zeitz Mocaa Foundation Trust and Others (2018) 39 ILJ 2529 (LC) and Mkwanazi v Van der Merwe and Another 1970 (1) SA 609 (A), including the explanation for lateness, materiality, the risk that evidence may be shaped after the fact, prejudice, the stage of litigation, the possibility of alleviating prejudice by a costs order, the need for finality, and the appropriateness of granting the order sought. The Labour Appeal Court accepted the Labour Court’s conclusion that evidence had already been tendered on reinstatement and that the proposed new evidence was not relevant or material to the determination of competent and appropriate relief. Consequently, the Labour Appeal Court held that the Labour Court could not be faulted in dismissing the application.

On costs, the Labour Appeal Court adopted the position that, having regard to considerations of law and fairness, it would be inappropriate to award costs. This reasoning resulted in the setting aside of the Labour Court’s costs order and the making of no costs order on appeal.

Outcome and Relief

The appeal succeeded to the extent that the Labour Appeal Court set aside the Labour Court’s orders and substituted them with an order that did not include a finding on procedural unfairness, reflecting the Labour Court’s lack of jurisdiction to adjudicate procedural fairness in these circumstances due to section 189A(18).

In substitution, the Labour Appeal Court ordered that the dismissals of the second, third, fifth and seventh applicants were substantively unfair. It ordered the retrospective reinstatement of the second, fifth and seventh applicants into the same or similar positions held at dismissal, with effect from the date of dismissal and with no loss of benefits. It further ordered that severance payments received by those reinstated employees be repaid or set off against back pay.

The Labour Appeal Court ordered the employer to pay the third applicant compensation of R766 378,08, being equivalent to 12 months’ remuneration calculated at the remuneration rate applicable at dismissal, within 14 days.

The appeal against the Labour Court’s dismissal of the employer’s application to adduce further evidence was dismissed. There was no order as to costs in the substituted Labour Court order, and there was no order as to costs on appeal.

Cases Cited

Steenkamp and Others v Edcon Limited (2019) 40 ILJ 1731 (CC)

The Master of the High Court (Northern Gauteng High Court, Pretoria) v Motala NO and Others 2012 (3) SA 325 (SCA)

Department of Transport and Others v Tasima (Pty) Limited 2017 (2) SA 622 (CC)

South African Breweries (Pty) Limited v Louw [2018] 1 BLLR 26 (LAC)

Coetzee v Zeitz Mocaa Foundation Trust and Others (2018) 39 ILJ 2529 (LC)

Mkwanazi v Van der Merwe and Another 1970 (1) SA 609 (A)

Legislation Cited

Labour Relations Act 66 of 1995 (as amended), section 189(3)

Labour Relations Act 66 of 1995 (as amended), section 189A(13)

Labour Relations Act 66 of 1995 (as amended), section 189A(18)

Labour Relations Act 66 of 1995 (as amended), section 191(5)(b)(ii)

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The Labour Appeal Court held that section 189A(18) deprived the Labour Court of jurisdiction to adjudicate disputes about the procedural fairness of dismissals for operational requirements in matters referred for adjudication under section 191(5)(b)(ii). As a result, the Labour Court’s finding that the dismissals were procedurally unfair was set aside.

The Labour Appeal Court held further that the Labour Court’s findings that the dismissals of the second, third, fifth and seventh respondents were substantively unfair were not shown to be erroneous and remained in force, with the result that reinstatement and compensation relief (as ordered) was confirmed in substance through a substituted order.

The Labour Appeal Court held that the Labour Court did not err in refusing the employer’s late application to adduce further evidence after it had closed its case, given the considerations relevant to such applications and the lack of materiality of the proposed evidence.

The Labour Appeal Court held that fairness considerations justified no order as to costs, both in substitution for the Labour Court’s costs order and on appeal.

LEGAL PRINCIPLES

The judgment applied the principle that statutory limits on jurisdiction must be respected, and that where the Labour Relations Act expressly provides (in section 189A(18)) that the Labour Court may not adjudicate procedural fairness in a particular adjudicative forum, a prior case-management or consolidation order cannot confer competence to do so. An order purporting to authorise adjudication beyond jurisdiction is treated as legally ineffective for that purpose, and a later court should not proceed on its basis.

The judgment reaffirmed that while a competitive placement process during restructuring may be used as a mechanism to avoid retrenchments, it does not displace the employer’s obligation to ensure that any retrenchments that occur are substantively fair. Substantive fairness requires that selection for retrenchment be grounded in fair and objective criteria, and that alternatives to dismissal be properly canvassed and considered where suitable positions exist.

The judgment applied established principles governing late applications to adduce evidence after a party has closed its case. Relevant considerations include the explanation for the failure to lead the evidence timeously, materiality, potential tailoring of evidence, prejudice, the stage of proceedings, finality, and whether a costs order can cure prejudice. Where the proposed evidence is not relevant or material to the issues requiring determination, refusal to admit such evidence is justified.

Regenesys Management (PTY) Ltd t/a Regenesys v Nortje and Others (JA49/2020) [2022] ZALAC 96; (2022) 43 ILJ 2745 (LAC) (18 July 2022)