Lorentzen v Sanachem (Pty) Ltd (DA17/99) [1999] ZALAC 30 (1 January 1999)

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[1999] ZALAC 30
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Lorentzen v Sanachem (Pty) Ltd (DA17/99) [1999] ZALAC 30; [2000] 7 BLLR 763 (LAC); (2000) 21 ILJ 1075 (LAC) (1 January 1999)

ZONDO AJP
I agree
IN THE LABOUR APPEAL
COURT OF SOUTH AFRICA
Held
at Durban
CASE
NO.:DA 17/99
In the matter between:
KYLE
LORENTZEN
Appellant
and
SANACHEM (PTY)
LTD
Respondent
CONRADIE
JA
[1] The respondent is a
subsidiary of Sentrachem Ltd, a large manufacturer of chemicals.
Sentrachem also has a United Sates subsidiary
called Hampshire
Chemical Corporation (‘Hampshire’). The appellant was an employee
of Hampshire before joining the respondent
in Durban as regional
manager: marketing. I say ‘joining’ advisedly because there was
considerable dispute in the court
a quo
on whether the
appellant was indeed an employee of the respondent. On the last day
of the trial it was conceded that he was. The
concession was
correctly made. He was an employee in terms of the definition of that
term in the Labour Relations Act 66 of 1995(‘the
Act’) in that
certain remuneration was paid by the respondent in South Africa on
his behalf.
[2] In December 1997
Sentrachem was taken over by Dow Chemicals, an American conglomerate.
Dow Chemicals had its own marketing structure.
With the take-over,
the appellant’s post thus became redundant. The appellant was not
told of this in the nicest way. There was
no consultation on the
redundancy of his position. He was told not to come back from his
vacation in the USA or, if he did, to do
so merely to pack his
belongings. The court
a quo
found that there had not, in this
respect, been compliance with the consultation provisions of s 189 of
the Act. There had been no
attempt to reach consensus on appropriate
measures to avoid the appellant’s dismissal. There is no
cross-appeal against the finding
which is clearly correct. On this
point the only issue is whether the court
a quo
erred in
declining to grant the appellant compensation. It was accepted by Mr
Winchester, who appeared for the appellant, that in
terms of
Johnson
& Johnson (Pty) Ltd v Chemical Workers’ Industrial Union
(1999) 20 ILJ 89 (LAC) the learned judge
a quo
was required to
exercise a judicial discretion as to whether or not to award
compensation. The only other point on appeal is whether
the appellant
is entitled to severance pay.
[3] Although employed by
the respondent, the appellant retained significant links with
Hampshire. The latter by arrangement with the
respondent and for the
two years that he was to spend in South Africa continued to pay his
salary in the United States; he also remained
on Hampshire’s
pension fund. Hampshire gave the appellant more than that. It gave
the appellant an undertaking that if he should
at any time be
dismissed by the respondent, Hampshire would pay his repatriation
expenses and employ him for at least three months
and would also
employ him for three months if at the end of his contract term he was
not given ‘suitable ongoing employment’
with Sanachem. This was a
significant benefit for the appellant. Since, according to him, most
employment in the United States is
‘at will’, he would have been
unlikely to find security of tenure if he returned to that country
after the expiry of his South
African contract, even if he took up,
as it was envisaged he might do, a marketing position with Sanachem
USA Inc, a US subsidiary
of Sentrachem.
[4] Despite the brusque
announcement, by a senior manager of Dow Chemicals, that the
appellant’s position had become redundant,
Dow Chemicals was not
insensitive to the appellant’s predicament. The appellant was
offered a position with Dow AgroServices in
Indianapolis. He visited
the plant there, but did not like the job since it took him back to
his old tasks at Hampshire of financial
management and he wished to
make a career for himself in marketing. Although the salary was
slightly more than his remuneration from
Hampshire, it was not
sufficient to make up for the loss of his South African benefits. For
that reason (and although the additional
benefits would in any event
have terminated with his South African contract on 31 March 1999) he
declined the job offer.
[5] The respondent was
also not unsympathetic. Dr Job, the respondent’s managing director,
assured the appellant that it would honour
its contract with him and
find him a post for the remainder of his contract period which would
have been eleven months. Another Sentrachem
subsidiary, UPC, was
investigating the feasibility of creating a special post for the
appellant, but by the time its managing director
telephoned the
appellant to discuss the matter, he was told by the appellant that he
had accepted the job which Hampshire had undertaken
to hold available
for him. It would have been better if these initiatives had been
taken earlier, but the fact remains that the appellant
did have the
word of the managing director of the respondent’s holding company
that its contract with him would be honoured.
[6] The appellant
flourished with Hampshire. He remained with it until 30 April 1999
(which is about the time his South African contract
would have
expired.) Compared to the $54 600 which Hampshire had been paying
the appellant before his departure for Durban he earned
$ 65 000 p.a.
from 1 May 1998 which rose to $ 78 660 p.a. from 8 March 1999. He
left Hampshire of his own accord to take up a more
lucrative position
elsewhere.
[7] The learned judge
a
quo
did not uphold the respondent’s argument that the appellant
had merely been redeployed to Hampshire, but he did remark that, seen
from the group’s perspective, there had not been a dismissal and
that the appellant had, despite the different legal entities
involved,
‘made good within the family or group.’ Although this
consideration was not one which could alter the fact of the
dismissal,
it was one which, having regard to the tenor of the
judgment, undoubtedly, and properly in my view, influenced the
learned judge
in the exercise of his discretion. The fact is that,
apart from the procedural shortcoming of not having first discussing
the elimination
of his job with the appellant, the respondent did not
do all that badly. An alternative job was promised to the appellant
in South
Africa, one was offered in Indianapolis and eventually one
was accepted in Hampshire. The appellant tried to make out that he
alone
was responsible for the establishment of the so-called safety
net with Hampshire, but I think it is clear that it came about as a
result of the inter company connections and that the respondent
played its part in bringing it about.
[8] The choice before the
learned judge was a stark one. He could either award the appellant
R571 432.00 as a
solatium
in terms of the formula laid down in
s 194 of the Act, or he could give him nothing. The appellant's case
is that he is entitled
to almost R 600 000 for the wrong done to him
in not asking him how he thought his temporary job might be saved for
another year.
He says it is fair that the omission to do that should
cost the respondent nearly a year’s salary. He lays emphasis on the
anxiety
which was caused by the prospect of the loss of his job. The
learned judge also mentions this aspect. A procedural retrenchment
also
produces a good deal of anxiety. I do not believe that the
manner in which the appellant was treated contributed greatly to it.
[9] The all or nothing
choice facing the learned judge
a quo
has once again thrown
into sharp relief the dismal state of affairs to which s 194(2), as
interpreted in
Johnson & Johnson
(supra) has given rise. I
do not wish to be understood as saying that Froneman DJP who gave the
judgment for the court could have
found a better solution to what has
turned out to be a section with major unintended consequences. An
award has nothing to do with
the magnitude of an employer’s
industrial relations transgression. It is a factor of the employee’s
wage level and the case load
at the CCMA or the labour court. It has
little of a true
solatium
about it. If the tribunal is busy
the solace is large; if it is not, it is small.
[10] The section gives
rise to absurd consequences. Take the case of a thief whose dismissal
was procedurally unfair. Let us say that
he defrauded his employer of
massive amounts and the managing director, in a rage, dismissed him
without a hearing. If he was a highly
paid employee his compensation
up to the last day of the arbitration hearing could be substantial.
An arbitrator would not find it
fair to award him large compensation.
If, however, he gives him nothing, which is the only alternative, the
result is that the more
outrageous a culprit’s conduct is, the more
readily his unfair dismissal is likely to be overlooked. What happens
is that the miscreant,
by his conduct, in practice disentitles
himself to a fair procedure. The worse the employee behaves, the
worse his employer is permitted
to behave. The Act in this way
encourages unfair employment practices in the case of offenders whose
conduct leading up to their
dismissal was morally objectionable.
[11] In terms of
Johnson
& Johnson
(supra) an employer might escape liability by
offering substantial redress. It could do this by offering to
reinstate a culprit in
his previous position without loss of
benefits, immediately suspending him and holding a disciplinary
enquiry. If it does this soon
enough, a commissioner might well be
persuaded to award the culprit no compensation. But what remedy has
an employer like the respondent
which has neglected to consult on the
abolition of a job? It is supposed to consult
before
abolishing the job. After abolishing it, it is too late to discuss
anything. So, too, it is with all the other pre-retrenchment
discussions.
Such an employer can only wait for an award against him
as high as the labour court’s case load is long.
[12] Landman J held in the
court
a quo
that the appellant was not entitled to a severance
payment because he had been unreasonable in refusing to accept an
offer of alternative
employment with Dow AgroSciences in
Indianapolis. I agree with the conclusion of the learned judge and do
not wish to add anything
to his reasons.
The appeal is dismissed
with costs.
__________________
CONRADIE JA
I
agree
______________
_____________
WILLIS JA