SACTWU and another v Discreto (JA95/97) [1998] ZALAC 9 (22 June 1998)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Labour Appeal Court
SAFLII
>>
Databases
>>
South Africa: Labour Appeal Court
>>
1998
>>
[1998] ZALAC 9
|

|

SACTWU and another v Discreto (JA95/97) [1998] ZALAC 9 (22 June 1998)

IN THE LABOUR APPEAL COURT OF
SOUTH AFRICA
HELD AT JOHANNESBURG
Case no. JA 95/97
In the matter between:
SOUTH AFRICAN CLOTHING AND
TEXTILE WORKERS UNION & OTHERS Appellants
and
DISCRETO, a division of
TRUMP AND SPRINGBOK HOLDINGS Respondent
JUDGMENT
FRONEMAN DJP.
[1] This is an appeal against a determination made in the industrial
court under the old Act ( the
Labour Relations Act, 28 of 1956
),
heard by this court by virtue of the transitional arrangements set
out in
section 22(5)
and
(6)
of
schedule 7
to
the new Act (the
Labour Relations Act, 66 of 1995
). The
appellants, a trade union and its affected members, seek to overturn
the decision of the industrial court, which was to the
effect that
the termination of the services of the trade union’s members by
the respondent was not procedurally or substantively
unfair.
[2] The
employees concerned worked at a factory of the respondent where the
primary product was denim jeans, although cotton clothing
was also
produced there. The production of denim jeans, however, was what
made the factory viable. Without it the factory would
have had to
close. Towards the end of 1995 the respondent decided to
discontinue denim production at the factory, with the inevitable
result of closure and the termination of employment of the people
who worked there.
[3] The manner in which this decision was taken and in which it was
conveyed to the trade union representative and the employees
at the
factory is nothing short of remarkable.
[4] On 22 November 1995 the respondent’s human resources manager,
Mr. Lingenfelder, travelled to Pietersburg to meet Mr Kutu,
a trade
union official, and shop stewards at the factory for wage
negotiations. Neither Lingenfelder nor anyone else was aware
and
prepared for the portentous news the respondent’s board had in
store for them all on that day. When Lingenfelder arrived
at
Pietersburg in the morning he received a message to telephone head
office as a matter of urgency. One of the directors, Mr.
Mark
Lubatsky, told him that the board had decided the previous evening
to cease production at the factory on 15 December 1995.

Lingenfelder duly conveyed this news to Kutu and the shop stewards,
saying that wage negotiations were of no value under the

circumstances. Both Kutu and Lingenfelder then addressed the
employees at the factory, informing them of the decision. Questions
were asked, but eventually Lingenfelder left and the meeting later
ended in some disarray.
[5] There is some
dispute about exactly what was said at this meeting on 22 November
1995. The material disputes relate to whether
Lingenfelder told
Kutu and the others that the respondent’s decision was not a final
one, but one only made
in principle
, and to the extent to
which information on the reason for the closure of the factory was
asked for by Kutu and provided by Lingenfelder.
The presiding
officer in the industrial court, in an unreasoned judgment, found
that the trade union representatives were told
that a decision
in
principle
only had been taken, and that no financial statements
were sought from the respondent by Kutu.
[6] The importance of a proper resolution of these two material
issues arise from the legal requirements for a fair retrenchment
process, flowing from the unfair labour practice definition in the
old Act. The requirements are,
inter alia
, that consultation
with employees and, where applicable, a trade union, is required
once the possible need for retrenchment is
identified and
before
a final decision is taken on retrenchment (
Atlantis Diesel
Engines (Pty) Ltd v National Union of Metal workers of South Africa
(1994) 15 ILJ 1247 (A) at 1252D-F
[1995] ZASCA 30
; ;
1995 (3) SA 22
(A) at 28E-I
), as well as that sufficient information be disclosed to the
affected employees or their union to enable the consultative
process
to take place fairly (
Atlantis Diesel case
at 1253D and J
(ILJ): 29E and J (SA) ).
[7] The need to consult before a final decision on retrenchment is
taken, is said to found its rationale in both pragmatism (the
need
to avoid retrenchment altogether or at least to minimise dismissals
and mitigate their consequences) and principle (to give
employees a
chance to be heard and to avoid or minimise industrial conflict) (at
1252I - 1253B (ILJ); 28J-29C (SA);
of the
Atlantis Diesel
case
). That case was decided prior to the constitutional
entrenchment of the right to fair labour practices in both the
Interim Constitution
and the Final Constitution. The former was in
operation at the time the present dispute arose. I would
respectfully suggest
that, in addition to the considerations
mentioned in the
Atlantis Diesel
case, the constitutionally
entrenched fundamental right to fair labour practices provides a
further basis for these requirements.
[8] Every person has the constitutional right to fair labour
practices (
s. 27(1) of the Interim Constitution
;
s. 23(1)
of the Final Constitution
). As far as retrenchment is
concerned, fairness to the employer is expressed by the recognition
of the employer’s ultimate
competence to make a final decision on
whether to retrench or not ( cf. the
Atlantis Diesel
case
at
1252H (ILJ); 28I (SA)
). For the employee fairness is
found in the requirement of consultation prior to a final decision
on retrenchment. This requirement
is essentially a formal or
procedural one, but, as is the case in most requirements of this
nature, it has a substantive purpose.
That purpose is to ensure
that the ultimate decision on retrenchment is properly and genuinely
justifiable by operational requirements
or, put another way, by a
commercial or business rationale. The function of a court in
scrutinising the consultation process
is not to second guess the
commercial or business efficacy of the employer’s ultimate
decision ( an issue on which it is, generally,
not qualified to
pronounce upon), but to pass judgment on whether the ultimate
decision arrived at was genuine and not merely a
sham (the kind of
issue which courts are called upon to do, in different settings,
every day). The manner in which the court adjudges
the latter issue
is to enquire whether the legal requirements for a proper
consultation process has been followed and, if so, whether
the
ultimate decision arrived at by the employer is operationally and
commercially justifiable on rational grounds, having regard
to what
emerged from the consultation process. It is important to note that
when determining the rationality of the employer’s
ultimate
decision on retrenchment, it is not the court’s function to decide
whether it was the best decision under the circumstances,
but only
whether it was a rational commercial or operational decision,
properly taking into account what emerged during the consultation
process.
[9] As already stated, one of the requirements of a proper
consultation process is that consultation must precede a final
decision
on retrenchment. The reason for this requirement should be
obvious: it is impossible to determine beforehand what might emerge
from the consultation process and to what extent these results might
influence a final decision (
Mohamedy’s v Commercial Catering
and Allied Workers Union of SA
(1992) 13 ILJ 1174 (LAC) at
1179F-H) and, conversely, once a decision is taken without
consultation, any representation after the
event will be met with
the natural reaction to justify the original decision (
Attorney
General, Eastern Cape v Blom and others
1988 (4) SA
645(A)
at 668D-E).
[10] For these reasons it is crucial to determine whether the
respondent’s decision to close the factory on 15 December 1995
was
a provisional one, subject to what might emerge from the
consultation process; or whether it was final in nature, in effect
a
fait accompli
presented to the trade union and the employees
at the factory. The appellants’ case was that it was the latter.
Lingenfelder
informed them, unequivocally and without qualification,
that the decision to close the factory had already been taken; he
refused
to consult with the union on that issue, or to divulge
information relating thereto; and consequently it was futile for the
union
to further participate in a charade of consultation which
would only deal with the details of how the employees will be
retrenched
and not with the decision on whether they should be
retrenched. The respondent’s case, in contrast, was that the
decision communicated
to the trade union and the employees on 22
November 1995 was indeed a provisional decision, one made only ‘in
principle’; that
the respondent sought consultation on the very
issue of whether the factory should be closed, but that appellants
refused to engage
in this consultation process. In the result the
respondent’s ultimate decision to close the factory and retrench
the workers
was not in conflict with the requirements of proper
consultation process, and it was, furthermore, justifiable on
commercial or
operational grounds.
[11] I have little hesitation in rejecting the respondent’s
version.
[12] At the outset there is the fundamental problem that only one
witness, Lingenfelder, was called to testify on behalf of the
respondent at the industrial court hearing. He was the respondent’s
human resources manager and, by his own admission, had no
direct or
personal knowledge of the board’s decision to close the factory (
he did not serve on the board ), nor of the reasons
for the decision
( he was not involved in the financial or commercial dealings of the
respondent). There was thus simply no admissible
evidence led in
the industrial court to substantiate the respondent’s case that it
had a commercial rationale for the retrenchments.
It did not get
past the first base. It is simply not good enough in this r egard
to rely on the hearsay evidence of the human
resources manager of
the respondent. As a minimum evidence should have been presented by
someone with personal knowledge of the
respondent’s financial
position and, more specifically, its relationship with its bankers;
as well as evidence of the board’s
decision to close, by someone
who attended the meeting where the decision was taken. Lingenfelder
was, in any event, as taken
aback as the trade union officials and
employees were, when he was told of the respondent’s decision by
telephone on the morning
of 22 November 1995.
[13] Even if it is permissible to rely on Lingenfelder’s evidence,
his assertion that he told Kutu and the employees on 22 November
1995 that the decision was only made ‘in principle’ simply does
not withstand scrutiny. On 23 November 1995 he wrote a letter
confirming the events of the previous day, stating that the
respondent “has
decided” (
my emphasis
)
to
discontinue production of denim jeans and that “(t)he
closure
of Discreto will be the first step
in this process”( my
emphasis again), for which he invited discussions on the “logistics
of this operation”. When the trade
union had the temerity, a few
days later, to request clarity on the extent of the decision to
close, protesting that such a decision
was made without notice and
asking for information on when the respondent started to look into
the possibility of closure, it invoked
the indignant reply from
Lingenfelder that he told Kutu and the workers on 22 November 1995
“exactly why and when the factory
will be
closing
(the underlining is Lingenfelder’s), and that the request amounted
to “delaying tactics”. It is difficult to be restrained
in
one’s comment on this reply. Firstly, it totally contradicts the
assertion of a decision to close only ‘in principle’.
Secondly,
given the unseemly haste in closing the factory and depriving
approximately 400 people of their livelihood the reference
to
delaying tactics is breathtaking in its arrogance. Thirdly, insofar
as it states that the full reasons for the closure was given
on 22
November 1995, it is, at the very least, misleading . It is clear
that the real reason for the sudden decision to close
Discreto was a
threat from the respondent’s bankers to withdraw its credit
facilities if steps were not taken to satisfy the
banker’s
requirements. It is common cause that Lingenfelder did not disclose
this on 22 November 1995. Perhaps Lingenfelder
was still not yet
aware of this when he wrote the letter on 28 November 1995.
[14] There was therefore no consultation with the union or employees
prior to the final decision to close the factory. Retrenchment
inevitably had to follow closure of the factory, on the respondent’s
own version. In view of this, and the failure to convey
the true
reason for the closure of the factory to the union and the employees
(viz the threatened withdrawal of credit facilities),
it is
unnecessary to go into any detail on whether Kutu in fact requested
sight of the respondent’s financial statements on 22
November 1995
or not. The failure to consult before the final decision to close
the factory and retrench the workers was taken,
was a flaw which
fatally tainted any subsequent attempt at consultation. Humpty
Dumpty could not be put together again.
[15] It follows, for the reasons emphasized in paragraphs 6 to 9
above, that the decision to retrench was unfair for want of
compliance
with the legal requirements of the consultation process.
For the same reasons it is impossible to argue that the retrenchment

was substantively fair.
[16] What remains is the question of what remedy should follow upon
this finding. The factory has been closed since December 1995,
so
reinstatement will probably only mean further discussions on a
retrenchment package, as well as retrospective pay to the employees
from the date of reinstatement, which would be the date of the
industrial court judgment, 8 September 1997, until now, a period
of
some nine months. The individual employees have already received a
retrenchment package. If not reinstated they should be awarded
compensation for the unfair labour practice to which they were
subjected. A practical (and flexible) yardstick to determine the
amount of compensation would be the employees’ salary for the
length of time a normal process of consultation would have taken.

Mr. Bruinders, for the appellants, suggested a period of six months
for this purpose, which appears to be reasonable.
[17] At the start of the industrial court hearing the respondent
took the point
in limine
that the dispute was not properly
referred to the conciliation board. The objection was dismissed,
but costs were not ordered
to follow the result. The objection was
based on a legal point and there is no equitable reason why the
respondent should not
have been ordered to pay the costs.
[18] The appeal succeeds with costs. The determination in the
industrial court is set aside and replaced with the following:
“1. The termination of the second and further applicants’
employment by the respondent is declared an unfair labour practice.
2. The respondent is ordered to pay compensation equal to six
months’ salary to each of those applicants whose affidavits are
contained in exhibit “B” to the proceedings.
3. Interest is payable on the said compensation at the legal rate
from date hereof.
4. The respondent is ordered to pay the applicants’ costs relating
to the dismissal of respondent’s point
in limine
.”
J FRONEMAN DJP.
I agree
J MYBURGH JP.
I agree
C NICHOLSON JA.
Date of hearing: 15 June 1998.
Date of Judgment: 22 June 1998.
Appearances
For Appellant: Adv. T. Bruinders instructed by Cheadle Thompson &
Hayson
For Respondent: Adv. M E D. Moyses instructed by Raymond Tucker.
This judgment is available on the internet on website:
http://www.law.wits.ac.za/labourcrt.