South African Mutual Life Assurance Society v Insurance and Banking Staff Association and Others (CA10/2000) [2001] ZALAC 25 (29 June 2001)

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[2001] ZALAC 25
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South African Mutual Life Assurance Society v Insurance and Banking Staff Association and Others (CA10/2000) [2001] ZALAC 25; [2001] 9 BLLR 1045 (LAC) (29 June 2001)

IN THE LABOUR APPEAL COURT OF SOUTH AFRICA
HELD AT
CAPE TOWN.
CASE NO.
C312/98
APPEAL CASE
NO. 10/2000
In the matter
between:
THE
SOUTH AFRICAN MUTUAL LIFE
ASSURANCE
SOCIETY
Appellant
and
INSURANCE
AND BANKING STAFF ASSOCIATION 1
st
Respondent
HEATHER
PAULSEN
2nd Respondent
NICHOLAS
DAMANE
3rd Respondent
PENNY
CLARKE
4
th
Respondent
CHANTAL
STANDER
5
th
Respondent
JUDGMENT DELIVERED ON 29 JUNE 2001
DAVIS AJ.A
INTRODUCTION.
[1] Second to fifth respondents (‘the individual respondents’)
were employed by appellant as recruitment consultants in its
employment services department (‘the department’). They were
retrenched with effect from 30 May 1998 after being advised on
13
March 1998 that their services were no longer required. They brought
an action in the Labour Court which found that their dismissals
were
not effected for a fair reason and ordered appellant to pay
compensation equal to twelve months’ remuneration together with
costs.
BACKGROUND
.
[2] The
primary function of the department was to ascertain appellant’s
staff recruitment needs, to effect the necessary advertising
and to
select and recommend suitable candidates to fill vacancies. As from
the beginning of 1998 concerns had been expressed by
members of
appellant
as to the quality of service rendered by the employment
services department.. The concerns expressed related primarily to the
fact
that the department did not add value to the selection process
of new staff, that its role was confined to receiving and forwarding
resumés of potential clients without providing any input or
screening and that it was unable to determine the needs or to assess
the requirements of the particular ‘client department’.
Accordingly, several of the other divisions of appellant had resorted
to the employment of outside agencies to meet their recruitment
needs.
[3] In a letter of 24 February 1998 Ms Bridget Griffiths, the manager
of the department, wrote to a senior member of the department,
Mr
Ben Botha, in
inter alia,
the following terms:
“I also need to reiterate the seriousness of the issue in that
should employment services not fundamentally change the service
that
it provides and the way that it operates the viability of the whole
unit is at stake and this could mean the closure of the
department.”
[4] According to the testimony of Ms Griffiths and of her
predecessor, Mr Paul Alexander, training and skills development of
existing
staff in the department would not have achieved the desired
result. A total departmental redesign was required in order to ensure
that appellant’s recruitment objectives could be fulfilled. Ms
Griffiths testified that to this end a business case study had
been
drawn up, that numerous meetings had been held with the individual
respondents at which issues pertaining to the restructuring
of the
department had been canvassed. The competencies of staff required in
the proposed department had been carefully defined and
a panel
consisting of three well qualified human resources practitioners had
been constituted to conduct interviews and assess each
employee in
terms of their competencies for the new positions in the restructured
department.
[5] In
essence the evidence given by Ms Griffiths and Mr Alexander showed
that a series of meetings had been held throughout February
and March
1998 with a view to the implementation of the proposed restructuring
of the department. On 10 April 1998 a deadline had
been set for
reapplying for ‘new jobs’ in the restructured department.
Interviews had been held on 11, 12 March and 13 March
with members
of the department. The individual respondents declined to apply for
positions. They were then informed that their services
were no
longer required and, accordingly, that they must remove their
personal effects. Their access to the work premises was then
barred.
[6] It was clear that the individual respondents were reluctant to
engage in an application process for new posts within the
restructured
department. They insisted that the parties should
continue to consult and attempt to reach a consensus. On 6 March
1998 Ms Griffiths
telefaxed Mr Botha extending the deadline for a
contribution to the selection process to 16h00 on the same day. On
Wednesday 11
March she advised the third respondent that, if he did
not apply for a position in the restructured department, he would
forfeit
the opportunity of redeployment and that he would then have
to resign. When, on 13 March 1998 the individual respondents had
not
replied, Ms Griffiths advised them that they had therefore
automatically opted for retrenchment, and that they would receive a
severance
package. They were then handed retrenchment letters and
were informed that they were not required to return to work on Monday
16
March 1998. On the same day, 13 March their access cards were
confiscated. The individual respondents subsequently challenged
the
fairness of their dismissal in the Court
a quo
.
[7] In his
judgment
Jajbhay AJ
held that the ‘old’ and ‘new’
structures as set out in the restructuring process document were
essentially the same and accordingly
no new jobs had been created.
Rather jobs had been renamed within the same department.
Jajbhay
AJ
found that, of the eight incumbents who applied for positions
in the ‘new structure’, all were reappointed. Accordingly he
concluded:
“on a proper consideration between “old” and the
“new” jobs it appeared that they were doing essentially the same
work
after the restructuring as they had been prior to 13 February
1998”.
[8] For this
reason
Jajbhay AJ
held that appellant “had attempted to
disguise a classic retrenchment exercise as a reorganisation or
restructuring based on the
non delivery of services in the
department”. The business strategy adopted by the appellant in
order to achieve the desired effect
did not accord with a commercial
rationale. As the learned judge said “It is correct that the
dismissal of individual applicants
was not actuated by malice, or
some hidden motive, on the part of respondents management. However
the fundamental job content did
not change, it was the manner in
which the individuals began performing that was now different. Here
the ultimate decision arrived
at by the Respondent is neither
commercially, nor operationally justifiable on rational grounds based
on fairness”.
APPELLANT’S CASE.
[9] On appeal, the essence of appellant’s case was that, in terms
of
s 188(1)
, of the
Labour Relations Act 66 of 1995
as amended (‘the
Act’) it had proved that the reason for the dismissal was a fair
reason based on the employer’s operational
requirements. Mr
Oosthuizen, who appeared on behalf of appellant, placed considerable
emphasis on the test for evaluating the fairness
of a dismissal based
on operational requirements as laid down by
Froneman DJP
in
Sactwu and Others v Discreto (A Division of Trump and Springbok
Holdings
)
(1998) 12 BLLR 1228
(LAC) at 1230 G where he said:-
“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 scrutinizing
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, genuinely 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 have 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
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.”
[10] On the basis of this
dictum
Mr Oosthuizen submitted that
it was not the role of courts to ‘second guess’ appellant’s
decision to engage in a restructuring
exercise. He contended that the
evidence revealed a widespread degree of serious dissatisfaction
among other divisions of the appellant
concerning the services
rendered by the department. For this reason a restructuring exercise
was mandated if a department was to
survive in any form whatsoever.
The decisions taken by appellant were all designed to ensure that an
operationally more effective
department would emerge which would be
commercially viable. For this reason the court
a quo
had
erred in that it had sought to interfere with appellant’s decision
to restructure on commercially justifiable grounds, such
interference
being predicated on an adverse approach taken by the court
a quo
to the particular restructuring programme which had been chosen by
appellant. According to Mr Oosthuizen, appellant had considered
other
alternatives including the upgrading of skill levels of existing
staff. However, appellant had finally chosen the particular
strategy
which was the subject of this particular dispute.
EVALUATION
.
[11] Mr Bozalek, who appeared on behalf of the respondents,
submitted that a key document justifying the restructuring process
for the employment services division observed “For some time now
employment services has received negative feedback regarding the
service that it provides”. To this, the report stated: “This
feedback is directly attributed to the inadequate skill development
and qualification of several of Recruitment Consultants and the
capability of recruitment consultants to deliver what is expected.”
A further factor noted in the document was the provision of
inadequate administration support.”
[12] Accordingly Mr Bozalek submitted that the very documentation
upon which appellant had relied to justify the restructuring of
the
department indicated that much of the problem with the department lay
in the ‘inadequate skill level and qualifications of
several of the
recruitment consultants’. During the consultation period second to
fifth respondents had taken the approach that,
with improved training
and skills development, many of the difficulties which the department
had encountered could be resolved.
Accordingly Mr Bozalek submitted
that the decision to restructure the department represented a guise
under which appellant sought
to address problems of perceived non
performance or incapacity of the individual respondents which on its
own documentation was caused
by a skill shortage.
[13] Mr Bozalek further submitted that, when the new structure was
analysed, the various tasks which previously had to be performed
by
the incumbents were similar to the new posts which comprised the old
structure. Posts had merely been renamed rather than been
restructured. Of the eight existing incumbents who applied for new
posts all were accepted with one being appointed to the position
for
which he was not qualified in terms of the new published job
competencies. Under cross examination Ms Griffiths was asked whether
the restructuring exercise amounted to no more than a different way
of interacting with clients, ‘a different way of service delivery
She replied: “The delivery still is recruitment selection yes, how
it is delivered to the client is different”.
[14] When the restructuring of the department is examined within this
factual context it appears that it represented a means of
dismissal
of the individual respondents based upon incapacity and poor work
performance. Mr Paul West, appellant’s human resources
manager,
conceded as much in answer to the question:
“So was your problem actually with the performance of individuals
and not with employment services as a whole? He replied: “[T]he
problem with Employment Services as a whole, obviously there were
some individuals who were meeting the high level standards of what
the businesses were asking for and others not. And we had to find a
fair way of determining who those were without just saying well,
its
so and so, because some people were in the more difficult environment
than others. And by doing a selection battery we could
say let’s
see if we could shift people around and just say for example move
someone out of an IT area into a clerical area or a
new management
area or
vice versa,
to see who was most suitable. And then
as some folk didn’t have any of the competency required then
obviously then we would have
to look at whether the job – whether
they could stay in the job that they had”.
[15] Under cross-examination Ms Griffiths was unable to point to any
substantial differences between the posts which had existed
in the
old department and those which were established in the new
department. Furthermore, when asked as to how the incumbents
of the
old department were expected to perform successfully in their new
posts, Ms Griffiths was constrained to answer that they
were assessed
according to the required level of competence for the new jobs and
that they had received further training, the very
point on which
second to fifth respondent had sought to negotiate. This candid
assessment of the problem had been articulated in
the business case
study in which it was stated that the ‘negative feedback’ about
the performance of the department was ‘directly
attributed to the
inadequate skill level and qualifications of several of the
Recruitment Consultants to deliver what was expected’.
[16] Ms Griffiths’ evasiveness as a witness can probably be partly
explained by her inability (and indeed that of the other witnesses
who testified on behalf of appellant) to provide any clear evidence
which could indicate a substantive difference between the old
and new
structure. When the evidence is evaluated holistically, a clear
picture emerges of appellant being dissatisfied with the
performance
of certain members within the department, and choosing not to
initiate proper disciplinary enquiries in relation to performance
and
incapacity. Rather appellant sought to restructure the department as
a means of dismissing those employees with whom it was dissatisfied,
namely the individual respondents.
[17] In the circumstances, appellant was not able to discharge the
onus of establishing that second to fifth respondent were retrenched
because their jobs had become redundant pursuant to a process of
restructuring the department. It was also not able to show that
the
individual respondents would not have been able to perform to the
acceptable level of competence in the restructured department.
Even
applying the test advocated by Mr Oosthuizen as set out by
Froneman
DJP
in the
Clothing and Textile Workers Union, supra,
the
evidence presented to the court fails to provide a rational
justification for the decision to dismiss in terms of the appellant’s
operational requirements. The ultimate decision to change the
department was predicated upon appellant’s manifest dissatisfaction
with the performance of certain personnel in the department rather
than on the grounds of operational requirements, namely requirements
based on the economic technological, structural or similar needs of
the employer.
(s 213
of the Act).
[18] On the
basis of the finding to which I have come, it is unnecessary to deal
with the further issue as to whether the retrenchments
were
procedurally unfair. The appeal is dismissed with costs.
___________
DAVIS AJA
I agree
___________
ZONDO J P
I agree
______________
DU PLESSIS AJA