General Food Industries Ltd v Food and Allied Workers Union (CA11/2002) [2004] ZALAC 4; [2004] 7 BLLR 667 (LAC); (2004) 25 ILJ 1260 (LAC) (11 May 2004)

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General Food Industries Ltd v Food and Allied Workers Union (CA11/2002) [2004] ZALAC 4; [2004] 7 BLLR 667 (LAC); (2004) 25 ILJ 1260 (LAC) (11 May 2004)

55
IN THE LABOUR
APPEAL COURT OF SOUTH AFRICA
HELD
AT JOHANNESBURG
CASE NO CA 11/2002
In the matter
between
GENERAL
FOOD INDUSTRIES LTD APPELLANT
and
FOOD
AND ALLIED WORKERS UNION RESPONDENT
JUDGMENT
NICHOLSON
JA
Introduction
[1] The appellant is
General Food Industries Ltd (“
the
company
”
or “
Genfood
”).
Some explanation is required at the outset to cover sales and mergers
of previous corporate entities involving Genfood. As I
understand the
position Genfood’s holding company, National Cereal Industries
Limited (“
NCI”
),
bought the shares in Premier Food Industries Ltd (“
PFI
”)
during August 1998 and merged Genfood with PFI to create a new
Genfood. Although NCI acquired the right to use the name “
Premier
”
it did not use it. Genfood’s name was later changed to Premier
Foods Limited. The appellant will be referred to as such or as
Genfood and the old Premier Food Industries Ltd, before the merger
with Genfood, as PFI. The respondent is the Food and Allied Workers
Union (“
the
union
”),
a registered trade union acting for and on behalf of 58 of its
members who were dismissed by the appellant on 15 February 2000.
[2] This appeal
concerns a dispute about the fairness or otherwise of the dismissal
by the company of 58 of its employees (all members
of the union) at
the appellant’s Salt River Mill in Cape Town. Dismissals were also
effected by the company at its Epping depot,
Blue Ribbon Bakeries in
Lakeside, and Blue Ribbon Bakeries in Cape Town. The union and the
company entered into an agreement in terms
of which the Salt River
Mill dismissals would be regarded as a test case which would enable
the parties in the remaining cases to
consider the judgment and
decide thereafter whether litigation in the remaining cases was
necessary.
[3] The
respondent referred the unfair dismissal dispute to the Labour Court
and sought the reinstatement of its dismissed members.
The appellant
defended the claim. The court found that the dismissals were
automatically unfair in terms of
section 187(1)(c)
of the
Labour
Relations Act 66 of 1995
, as amended (“
the
Act
”)
and also substantively and procedurally unfair. Arendse AJ made an
order for reinstatement on 8 August 2002 with retrospective
effect
from 15 February 2000 after a trial spanning the period 4 to 13 March
2002 with argument on 26 April 2002. Costs were ordered
against the
appellant with the exclusion of those relating to one amendment. With
the leave of the Court a quo, the appellant now
appeals to this Court
against the whole of that judgement and order. Before I can deal with
the appeal, it is necessary to set out
the history and background to
the matter.
History
and background
[4] Genfood has
wheat mills in centres throughout South Africa, including one at Salt
River, Cape Town as well as maize mills, depots,
distribution centres
and bakeries throughout the country. Genfood mills wheat at its Salt
River mill in Cape Town and operates 24
hours a day, six days a week
and is labour intensive. Essentially, a mill buys wheat and processes
it. The flour that is produced
is sold to bakeries within the group
(one third) and the remainder to others. The jobs performed by the
dismissed employees still
exist, but have been outsourced by the
company to a service provider, Staffgro (Pty) Ltd (“
Staffgro
”).
[5] Up until the
birth of the new South Africa in 1994, the wheat and milling industry
was very profitable and was regulated by the
Wheat Board under
permit. The Wheat Board was, however, abolished in 1994, and,
following deregulation, wheat and maize could be
sourced freely in
the open market. Farmers could demand international dollar prices for
their crops. Tariff and price protections
were abolished,
prohibitions on the import of wheat and flour fell away and the
industry felt the strictures of foreign competition
and threats from
smaller and medium-sized millers entering the fray.
[6] Ms Esselaar, its
director of organisational effectiveness, came from the PFI group,
having started there in 1987 and, after the
acquisition of PFI,
became the human resources manager in the company’s milling
division. Esselaar testified that the respondent
had been recognised
by Genfood prior to the acquisition in 1998, but only at plant level.
The relationship between the respondent
and PFI prior to 1998 was
regulated by a national collective agreement and a participative
agreement. These agreements provided for
various structures at
national, divisional and plant levels. At plant level, for example,
joint management teams (“
JMTs
”)
were formed with full union participation.
[7] In 1997 PFI was
in a poor financial state and investors in the company were unhappy.
As a result it appointed consultants called
Competitive Capabilities
Africa (“
CCA
”)
in an attempt to revitalise the organisation and to make it
competitive. CCA used the JMTs provided for in the participative
agreement. The process involved the election of task forces on which
both union and management were represented. These task forces
undertook an analysis and audit of the business to help create an
understanding of a world-class business. One such task force, the
national outsourcing task force, was established to look at
merchandise, canteens, etc on a group basis.
[8] In October 1997
the possibility of the sale of PFI’s food assets to Tiger Milling
was discussed and at a meeting between PFI
and the union on 6
November 1997 the union was told that a joint effort could stop the
merger. The proposal that was ventilated involved
restructuring PFI
as the company’s principal shareholders were dissatisfied.
Management proposed that a retrenchment of 2000 employees
be effected
on an urgent basis and other matters were addressed relating to the
terms and conditions of those remaining. An agreement
was reached
which included retrenchments and the union was thanked for the
positive spirit with which it had conducted the negotiations.
1211
employees were retrenched and Esselaar testified that consultations
in this regard took place at various levels. Her evidence
included
concessions that the rationale and number of retrenchments were dealt
with nationally and the timing and selection of retrenched
workers at
plant level. The process came to an end when PFI’s chief executive
officer, Mr Ian Heron, called a halt in mid-1998.
[9] During August
1998 the company bought the milling and baking businesses of PFI as
going concerns and merged the businesses of
PFI with those of the
company. The evidence of Nelissen reveals that this resulted in a
duplication of mills with concomitant inefficiencies
which resulted
in economic problems and questions about its viability in the food
business. Esselaar testified that the reasons for
the sale by PFI to
Genfood were that the objects of the rescue plan had not been
achieved, major shareholders were not satisfied
with the returns; and
Genfood was attracted to PFI’s brand-names and national presence.
[10] After
the sale the appellant moved to effect a reconstruction of its
operations to counter the depredations of market conditions
and what
it perceived as over inflated salaries. Reference will be made to
various minutes of meetings, which the parties agreed
correctly
reflected what transpired at the said gatherings. On 18 August 1998
the minutes of an Exco meeting referred to the rationalization
of the
Group and to redundancy declarations and the application of a uniform
policy in regard thereto. A week later a plan to fire
PFI staff and
then rehire them with Genfood was mooted but then rejected – in
favour of a plan to offer new terms to those that
came over and to
retrench those who did not accept. After the purchase of PFI the
total staff of Genfood was 9 889 employees and
the board contemplated
retrenching 1 000 before the end of the year.
[11] Esselaar
was at a meeting on 10 September 1998, shortly after the acquisition
in August 1998, when the company announced to the
union that
downsizing was inevitable, and that retrenchments would take place at
the workplace level. She testified that at the “old”
PFI
businesses, negotiations took place in accordance with the previous
(centralised) arrangement; and at the “old” Genfood businesses,
negotiations took place at plant level. It was common cause that
wages at PFI were higher than at previous Genfood businesses and
were
higher than any of the appellant’s competitors.
[12] While in PFI
less profitable units would have been subsidized by more profitable
ones, Genfood adopted a decentralized structure
and Nelissen
testified that each business unit was required to be viable in its
own right. Before Genfood had acquired shares in
PFI, the latter had
already closed mills at Butterworth, Port Elizabeth and East London
and was outsourcing its non-core functions
– examples of this being
Pretoria and the Durban mill. Limited outsourcing occurred at Thaba
Nchu and Kroonstad.
[13] The union
wanted centralized wage negotiations and was of the opinion that PFI
wages should prevail throughout the company. The
union was told that
if they continued pushing up wages, then the company would have to
look at outsourcing and further job cuts.
[14] Esselaar
maintained that outsourcing was widely used in the industry and the
union was aware of this as it represented its members
who worked in
the industry for the appellant’s competitors. Before the
acquisition in August 1998, retrenchments and outsourcing
had taken
place at PFI plants as well as at Genfood operations. To further
illustrate that PFI workplaces were not targeted – because
the
workers there earned comparatively higher wages, where there was
duplication of depots after the acquisition, the Genfood depots
were
closed, and the PFI ones kept open. Esselaar confirmed that 58% of
the union’s members lost their jobs at the Salt River Mill
due to
outsourcing. Retrenchments which took place at PFI plant level after
November 1997 took place following an agreement that
was reached
between PFI and the union.
[15] After Genfood
acquired the shares in PFI it commenced rationalizing operations and
retrenchment exercises took place at Vereeniging
and Isando. After
August 1998 problems emerged between the company and the union as the
collective bargaining arrangement between
PFI and the union was
highly centralised, whereas the appellant operated in terms of a
decentralised system of collective bargaining.
The need to outsource
and retrench was also imperative because the cost of raw materials
escalated by some 300%.
[16] At the meeting
of the 4
th
May 1999 the chairman of the board of the Exco meeting took note of
the forthcoming dates for wage increases and spoke of rectifying
the
gap between old PFI and Genfood salary scales. The minutes of a
meeting held on the 12
th
June reflect under the heading ‘rationalisation’ that staff had
been placed on the [lower] Genfood pay scales at Pietersburg
with
negative consequences and that the matter had been referred to the
CCMA. It was also noted that since the commencement of the
rationalization policy the complement of staff had been reduced by
1000. Mr Hansen, the appellant’s Human Resources Director, told
Exco on 10 July that a 6% increase had been budgeted for in respect
of the bakery division but that the appellant could face a strike
which - the meeting concluded - should be prevented at all costs.
[17] Centralised
wage negotiations commenced on 22 July 1999 between the appellant and
the union and were conducted in terms of the
recognition agreement
entered into between the union and PFI, although the appellant had
given notice in February 1999 of its intention
to cancel it. At the
first round of national wage negotiations Mr Sibongile Pohlongo was
present representing the Western Cape. He
was the chairman of the
shop steward committee at the Salt River mill. The appellant
explained to the union that it faced tremendous
problems, which its
competitors were tackling by way of rationalisation (which included
outsourcing). The appellant explained that
it was paying more than
its competitors and suggested a wage freeze in the wheat division, 4%
in the urban depots and a 20% reduction
in the rural depots. The
respondent started with a demand of a 14% wage increase but stated
that it would not accept below 11%. It
said that it certainly would
not accept any change in the wage structure downwards as it had no
guarantee that retrenchments and
outsourcing would come to an end.
The appellant was unwilling to give any undertakings on job security
in return for reduced wage
demands but modified its position to a 2%
increase for the urban wheat sector and urban depots and minus 10%
for rural depots.
[18] The appellant
explained its parlous state and the reasons for its losing market
share because “
our
labour cost is the second highest cost of the product; we are paying
at least 10 % higher wages than our major competitors; the
small
millers are paying about 25% of our wages only, this being a matter
that should be addressed by the union…”
So clearly the appellant was asking the union to moderate its demands
for increases.
[19] It is clear
that outsourcing and retrenchments were discussed as the minutes
record this “
motivating
the demand of 14% the union said that it had no guarantee that
retrenchments and outsourcing would come to an end; it would
not be
easy to motivate to the employees a 0% increase in light of the
aforesaid; at the end of the day the members will still be
retrenched.”
Clearly
the union knew that retrenchments would take place and wanted a
sweetener for the rest of the workers who were not laid off.
Later in
the minutes it is recorded that “
the
union also wanted to record that it is not happy with
rationalizations that are only taking place in the old Premier
operations;
it will voice its objection that Maizecor and the other
operations are not being affected by retrenchments…”
[20] Finally the
union made mention of the fact that, as “
70%
costs have been saved through outsourcing and retrenchments
”,
and other factors, including that it was “
against
the idea of being paid the same rate as companies that use cheap
labour
”,
it was reducing its demand to 11%. This was the clear position at the
meeting and no evidence was tendered on the side of the
respondent to
gainsay it. The inevitable conclusion to be drawn from this is that
at national level the union was being asked to
persuade its members
to lower their wages or face the retrenchments that had taken place
at other mills.
[21] That position
did not change at the next national wage negotiations on 10 August at
which Pohlongo was also present, where the
respondent made its
position clear that “
anything
relating to a wage freeze or minus will not be discussed.”
Appellant
again emphasized the high level of wages in comparison to other
companies and “
management
reminded [the union] that during the Premier days the union was
strong. High wages were demanded. The long-term impact
caused the
Company to be uncompetitive. The wage increase were (sic) always
above inflation rates. All this caused the business to
close and jobs
were lost. Management said that people must be mature about this and
allow other companies to catch up on wages. Continuation
of
un-competitiveness will lead to further job losses.”
Again
the importance of reducing or moderating the wage increases and the
possibility of retrenchment were clear. The dispute was
then referred
to the CCMA where an across the board settlement of 6% increase in
the relevant bargaining units was agreed on 14 October
1999.
[22] The Salt River
Mill was making a profit in 1999 but, nevertheless, the company was
looking at flexibility, including outsourcing
as utilized by its
competitors, given that flour can be stockpiled. Nelissen stated in
his evidence that the mill had limited warehousing
space and had
capacity for only three days storage. There were peaks and troughs
with extra demands at weekends and lag periods where
the fixed costs
of labour and other items persisted. Tiger Foods and Pioneer Foods
had utilized outsourcing to achieve flexibility
in this regard.
Although the mill was profitable, account had to be taken of a loan
to purchase PFI and the proportionate level of
interest repayment to
the mill. The profit margin was 5.9% and at least 10% was required to
remain viable.
[23] Nelissen
testified that he attempted on 19 August 1999 to approach the shop
stewards at the Salt River Mill to discuss these
issues, in
particular about the need for operational requirements to change.
Reference was made to a document, which evidenced the
view of the
Department of Trade and Industries that the South African milling
industry was inefficient and had a few years to improve.
The shop
stewards were told that alternatives were being explored including
outsourcing. He explained that the wages paid at Cape
Town were much
higher (by between 8 to 47%) than other mills, including those of the
opposition companies. He reminded them that
the Vereeniging mill had
been through the outsourcing exercise and the union had been
involved. After consultations between the parties
an agreement was
reached there between the company and the union. There were alarming
cost differentials between Salt River and other
mills belonging to
the appellant, the average cost per ton was R76,19 at Salt River
compared to R46.83, as the average for all the
other mills combined.
[24] The shop
stewards’ response, however, was that these sorts of discussions
should take place at national level in terms of the
recognition
agreement. The discussions were therefore unsuccessful. Hansen told
Exco on 24 August 1999 that, while the union was
not in favour of the
appellant’s policy of outsourcing, the company was going to
continue with the process because the appellant’s
competitors were
already implementing it.
[25] The minutes of
the Exco meeting of the 29
th
September reflect that 16 workplaces were to be the subject of
outsourcing and restructuring. As I have already mentioned, on 14
October a wage agreement had been concluded with a 6% increase across
the board, valid for a year from 1 July 1999.
[26] The 6%
across-the-board increase agreed on 14 October 1999 was a surprise to
Nelissen. Esselaar denied that the company had agreed
on a 6% wage
increase because it had already decided to outsource. She confirmed
that no decision had been taken to outsource and
that the company had
agreed to a 6% increase because of the overriding consideration to
strike sensitivity.
[27] The minutes of
the Exco meeting of the 28
th
October 1989 dealt with questions relating to human resources and the
meeting noted the progress of restructuring at various divisions.
Hansen emphasized that outsourcing was becoming increasingly
important and that Genfood should continue to keep control of the
venues,
where outsourcing was taking place. Esselaar prepared an
outsourcing update in November 2000, which summarized the broad
picture
during the period in question. It reflected that 36
workplaces had been the subject of outsourcing. As outsourcing had
occurred at
76% of the work venues she and Nelissen were hard pressed
to resist the suggestion that it had not occurred spontaneously but
was
the result of a deliberate policy of the appellant.
[28] By November
1999 no improvement had taken place at Salt River and the issue of
outsourcing there was deadlocked as the local
shop stewards took note
of these issues, but they maintained that it should be discussed at
national level. Nelissen told the court
a quo that the only way he
saw of moving forward was to force the workers to confront the issue,
which he had tabled at the previous
meetings.
[29] On 16 November
1999 Nelissen issued a retrenchment notice - designed to force the
hand of the shop stewards. At the first consultation
meeting on 24
November 1999, the company proposed the retrenchment of 74 employees
out of a total staff complement of 98 in the packing,
warehouse
maintenance and mill production departments. These jobs would be
outsourced. The company’s wage bill would be reduced
by R123 000
per month. Further consultations took place on 24 November, 8
December 1999 and on 25 January 2000. On the last-mentioned
date
alternative employment was discussed, in particular the issue of
outsourcing.
[30] Nelissen told
the meeting that he had already (in August 1999) identified some
service providers and he could arrange meetings
with them. He
testified that he had consulted with certain labour brokers and they
had supplied quotes for supplying the manpower
for the work. The
union had been informed of this fact. He also consulted service
contractors who provided a specialized service
and also managed the
work in question. Nelissen explained that the use of a labour broker
or service provider also resulted in reduced
costs as far as other
non-labour items were concerned including administrative costs, staff
loans, cleaning costs and damage caused.
[31] No formal
response was elicited from the shop stewards and the union organiser
contended that the meetings were unlawful. The
management expressed
disappointment that an opportunity of alternative employment of the
workers had been missed. Nelissen also said
“
what
we proposed is that when there’s a retrenchment programme that we
deal with it so that the retrenched employees could find
alternative
employment elsewhere in the company, and that might mean a relocation
to either a different town or a different site…”
Names were required of persons who were willing to take up employment
within the company even though no vacancies existed at that
time. The
respondent and the shop stewards committee wanted nothing to do with
that suggestion.
[32] On 28 January
2000, Nelissen addressed a letter to all union members, giving them
notice of the termination of their contracts
of employment with
effect from 15 February 2000. The last consultation was held on 2
February 2000, where the union’s alternative
proposals of a wage
freeze, a reduction in paternity and compassionate leave, etc were
discussed, but rejected by the company. The
union’s proposals only
related to a saving of R20 160,00. The company informed the union and
the shop stewards that, if it remained
at the same level of wages, it
would go out of business. The union stated that it would not accept
any reduction in wages and salaries.
[33] The company’s
proposal on outsourcing was described as unlawful and unprocedural
and was rejected by the union. The advantages
of outsourcing were
explained in evidence by Nelissen, who testified that the labour
broker or service provider would attend to the
flexibility issue and
provide workers at the peak periods required and not have to pay for
them at the times of troughs when no work
was required.
[34] Nelissen made
specific mention of finding jobs with the outsourcers. He said that
he would arrange meetings with them. The shop
stewards wanted to have
nothing to do with outsourcers. Nelissen denied that the company’s
decision to retrench was purely to increase
profits as it needed to
reduce operational costs in order that it could be more competitive.
The market was depressed, there was
an over-capacity, prices were
low, and the price of flour had come down.
[35] One alternative
that had been considered was to close the mill, and to import flour
directly from overseas. He furthermore denied
demanding that the
union’s members reduce their wages, or they would face dismissal.
Nelissen explained that lowering wages was
not an adequate solution
as there was a need for flexibility. The last mentioned consideration
convinced the company to contract
with Staffgro which would provide
its services from 16 February 2000.
[36] Nelissen found
the process of consultation frustrating given the union’s refusal
to properly consider the problems facing the
company, and evaluate
the solution of the company’s competitors i.e. outsourcing. He
agreed that the only way jobs could be saved
would be to change the
conditions of employment of the affected employees to suit the
company’s competitive needs. He denied that
he was trying to get
rid of the union and testified that outsourcing was employed by the
company throughout the group, only where
this would reduce the
operational costs.
[37] The company
advised the union in the course of the consultations that outsourcing
would reduce its wage bill by approximately
48% or R120 000 per
month. The evidence of Nelissen was, furthermore, that the union was
not invited to discuss the issue of outsourcing
at a national level,
as the company wanted to deal with these issues at plant level and
this was one of the factors, which compelled
the company to retrench
employees at the Salt River Mill.
[38] Staffgro was
willing to employ the affected employees at Staffgro rates but, as
will be discussed later in this judgment, the
proposal was not
attractive to the union or the affected employees. Nelissen conceded
that he had decided on the Staffgro proposal
at the meeting with the
shop stewards on 25 January 2000. As the letter of 28 January 2000
had effectively terminated their employment,
it was suggested to
Nelissen that the last consultation meeting of 2 February 2000 was
merely going through the motions, but he said
he was obliged to
respond to the union at this meeting. The company paid to the union’s
members a severance package of two weeks
for each completed year of
service.
[39] Mr Van Dyk, the
company secretary, testified that decisions on principle and policy
such as mergers, takeovers and such like
would be made at board and
executive level, and that operational decisions relating to
employment and restructuring would be dealt
with at plant and
regional level. The last mentioned matters would be referred by
company executive directors to the divisional director
who, in
consultation with the company’s human resources director, would
make the plant-level decisions. The human resources director
reported
to the national management meetings. Decisions as to methods of
implementation during retrenchment exercises were taken
at plant and
regional level. He testified that the plant management decided on
restructuring, and in particular whether or not to
outsource any of
the plant’s functions.
[40] Van Dyk also
testified that after the acquisition of PFI, the company engaged in a
process of rationalization aimed at avoiding
duplication of
operations, and in some instances this resulted in closures. Before
the acquisition, the company had used outsourcing
to cut down on
operational costs - after the acquisition outsourcing continued under
the control of the managing director of the
plant. Van Dyk confirmed
that wage negotiations had been delegated to plant and divisional
level despite this being contrary to the
national agreement. He
testified that the contract entered into between the Salt River Mill
and Staffgro involved the latter rendering
services to the value of
R261 000 during March 2000. The dismissal of the employees took
effect on the 15
th
February 2000.
Proceedings
in the Labour Court
[41] A dispute arose
between the parties on the fairness of that dismissal. The dispute
was referred to the CCMA for conciliation
but, when attempts at
conciliation failed, it was referred to the Labour Court for
adjudication. At the trial the appellant adduced
the evidence of
three witnesses, Mr Dominique Nelissen, the managing director of the
company for the Cape region (also responsible
for the Salt River
Mill), Mr Jan Stephanus van Dyk, the company secretary, and Ms Surita
Esselaar, its director of organisational
effectiveness. The union did
not call any witness. The respondent contended in that court that the
dismissal was automatically unfair
in that the appellant’s reason
for dismissing the employees was to compel them to agree to a demand
relating to a matter of interest.
Alternatively, the respondent
contended, the dismissal was unfair for lack of a fair reason to
dismiss and because the appellant
had the employees. The appellant
disputed the correctness of these contentions and submitted that the
dismissal was for operational
requirements, was based on a fair
reason to dismiss and had been preceded by a fair procedure before
the dismissal of the employees.
The finding of the Court a quo and
the order it made have been referred to above already and need not be
repeated.
The judgment
of the Court a quo
[42] Arendse AJ, who
heard the matter in the Court a quo, considered the argument of the
present appellant in the court a quo that
the employees were
dismissed after the company had decided that outsourcing was the
solution to its operational requirements, that
outsourcing met its
economic and structural needs and that no suitable alternatives to
outsourcing could be found. Accordingly, so
the argument ran, that
placed the dismissals firmly within the ambit of
section 189
of the
Act.
[43] The Court a quo
was satisfied that, on a balance of probabilities, these contentions
were not supported by the evidence. The
company, so Arendse AJ held,
was picking itself up by its own bootstraps by creating the
conditions that validate its decision to
outsource at a time when
those very conditions already existed before the wage deal was struck
on 14 October 1999. He asked why the
company concluded a wage deal on
14 October 1999, and then undermined the effect thereof by serving
notice of its intention to retrench
those very workers on 16 November
1999.
[44] The Court a quo
accepted that a company may outsource work to a third party that
might otherwise be performed by its employees
and that this promoted
the efficient operation of the business. Arendse AJ held that in this
matter, however, outsourcing constituted
a threat to trade unions
because it strikes at the core of job security and the survival of
jobs. He held that “
the
company used outsourcing as a device for undermining the status of
the wage agreement concluded on 14 October 1999, and, as a
device,
for undermining the status of the union as the exclusive recognised
collective bargaining agent of its members, the dismissed
employees
.”
Consequently, held the Court a quo, the company failed to demonstrate
the existence of any compelling logic or economics of operation
to
justify the use of
section 189
of the Act, other than the wage bill,
when it decided to outsource certain of its operations.
The
appeal
[45] Before us there
was argument directed at the legal implications of the union’s
failure to testify at all; the failure to put
a version to the
company’s witnesses (
Small
v Smith
1954 (3) SA 434
(SWA) at 438E–G;
President
of the Republic of South Africa v South African Rugby Football Union
2000 (1) SA 1
(CC)
at
paragraphs [58]–[65]); the selective use by the union of certain
documentary evidence without agreement or formal admission;
and the
union’s reliance on inference, in the absence of fact (
Lazarus
v Gorfinkel
1988 (4) SA 123
(C) at 135A–B).
[46] Mr Wallis, very
fairly in my view, submitted that the appellant’s witnesses were
not sufficiently unreliable or mendacious
that their testimony could
be dismissed out of hand. In the circumstances, in the absence of
evidence from the respondent, he conceded
that he was stuck with such
evidence, oral and documentary – and, given that it was peculiarly
within the knowledge of the appellant
– there was little that could
have been done about it. In my view, if the respondent wanted to
challenge the appellant’s version
of what transpired at certain
meetings and union officials or shopstewards were present at such
meetings, it should have adduced
their evidence. However, it was up
to the respondent to make the decision to call or not to call a
witness in this regard. In the
absence of such evidence, if there
were two versions the court would accept the evidence of the
appellant’s witnesses in so far
as such evidence emerged unscathed
from the rigours of cross examination.
[47] Mr
Wallis indicated that, as a result of the recent judgment of this
Court in
National
Union of Metalworkers of SA v Fry’s Metals
[2003] 2 BLLR 140
(LAC
),
he was unable to defend the finding of the Court a quo that the
dismissals were automatically unfair. In that case this Court held
that the argument that an employer cannot dismiss employees for
operational requirements in order to increase profits, but can only
do so to ensure its survival, is not supported by the provisions of
the Act.
The
issues as pleaded
[48] The
two questions that remained for decision in this appeal were whether
the individual respondents’ dismissals were for a
fair reason based
on the employer’s operational requirements and implemented after
following a fair procedure as contemplated in
section 188(1)
of the
Act.
In terms of
section 189
(as it read at the relevant time) when an employer contemplated
dismissing one or more employees for reasons based on the employer’s
operational requirements, the employer must consult any registered
trade union whose members are likely to be affected by the proposed
dismissals and try to reach consensus in terms of sub-section (2) on
“
(a)
appropriate measures
(i) to avoid the
dismissals;
(ii) to minimise
the number of dismissals;
(iii)
to change the timing of the dismissals; and
(iv) to mitigate
the adverse effects of the dismissals;
(b) the method
for selecting the employees to be dismissed; and
(c) the severance
pay for dismissed employees.”
In
terms of
section 189(3)
– (7)
“the
employer must disclose in writing to the other consulting party all
relevant information, including, but not limited to
the reasons for
the proposed dismissals;
(b) the
alternatives that the employer considered before proposing the
dismissals and the reasons for rejecting each of those alternatives;
the number of
employees likely to be affected and the job categories in which they
are employed;
(d)
the proposed method for selecting which employees to dismiss;
the time when,
or the period during which, the dismissals are likely to take
effect;
the severance
pay proposed;
any assistance
that the employer proposes to offer to the employees likely to be
dismissed; and
the possibility
of the future re employment of the employees who are
dismissed.”
Subsections 4 to 7
read thus:
“
(4) The
provisions of
section 16
apply, read with the changes required by the
context to the disclosure of information in terms of subsection (3).
(5) The employer
must allow the other consulting party an opportunity during
consultation to make representations about any matter
on which they
are consulting.
(6) The employer
must consider and respond to the representations made by the other
consulting party and, if the employer does not
agree with them, the
employer must state the reasons for disagreeing.
(7) The employer
must select the employees to be dismissed according to selection
criteria
(a)
that have been agreed to by the consulting parties; or
(b) if no
criteria have been agreed, criteria that are fair and objective.”
[49]
A central
enquiry into the question of substantive fairness is whether there
was a fair reason to dismiss the employees concerned.
The court a
quo found that the ostensible commercial rationale proffered by the
company did not provide a reasonable basis for the
dismissal of the
58 employees.
Substantive
fairness with regard to retrenchment means that a fair reason must
exist for the termination of the employment of an employee
on account
of operational reasons. The grounds why the respondent submitted that
there was no fair reason for dismissing the individual
respondents
were set out in paragraphs 28 – 30 of its statement of case. These
read as follows (the present appellant was the respondent
and the
present respondent the applicant):
“
28.
The wage levels which existed in 1999 were the product of a
collective bargaining process. In other words, they were at their
current levels because respondent had agreed to pay these wages.
Respondent, having made no previous attempt via the collective
bargaining
process to reduce wages, commenced a retrenchment process
claiming that the wage bargain which it itself had struck with the
applicant
would provide the justification of possible dismissals
there being, according to respondent, no other viable alternatives of
which
the respondent was aware.
29.
It is submitted that there were clearly alternatives to dismissal
but, if from the respondent’s perspective the only viable
alternatives which presented was one involving a reduced wage bill
while maintaining the same size labour force, then the respondent
was
not entitled, in the first instance, to employ retrenchment
procedures to attain this objective. The applicant submits that these
retrenchments were effected principally to cancel the impact of a
collective wage agreement on the company’s profit margins.
30.
Dismissals effected for these reasons and by this procedure were not
dismissals for a fair reason based on the employer’s operational
requirements as contemplated by
section 188
of the Act.”
This ground may be
summarized as the “
impropriety
”
of retrenchment to reduce the wage bill or increase profits.
[50] Apart from
these grounds the question of national consultation was the subject
of an amendment of the statement of case, which
reads as follows (the
present appellant was the respondent and the present respondent the
applicant):
“
32(a)
Respondent is a large corporation having under its control mills,
bakeries and depots throughout the Republic of South Africa.
In
or about August 1999 the respondent’s Executive Committee adopted
a policy of outsourcing certain functions at its mills, bakeries
and
depots.
In
accordance with this policy local management at the various
workplaces were inter alia required to investigate the cost
benefits,
which might be derived from outsourcing. Thereafter, and
in the event of the respondent concluding that overheads might be
substantially
reduced should outsourcing be implemented, respondent
in pursuance of this policy would thereupon notify staff at the
relevant
workplace of an intention to restructure by the outsourcing
of certain of its functions.
Between
August 1999 and 27 January 2000 several thousands of respondent’s
employees lost their jobs due either to outsourcing
or plant
closures.
Respondent’s
Executive Committee was at all material times aware that introducing
outsourcing as a national policy would, alternatively
might, lead to
retrenchments.
According
to the respondent the problem which it faced subsequent to the
purchase of PFI and which required a solution was a national
problem, namely that in respondent’s view the wage rates at the
ex-PFI workplaces, including its mills, were not competitive.
Respondent sought, on a national scale, to address this problem via
the implementation of an outsourcing policy.
It
is submitted that were a meaningful solution to the problem to be
found which might avoid retrenchments such solution would have
to be
addressed at all the ex-PFI workplaces including its mills.
Applicant
submits that the problems, which arose constituted a dispute of
interest to be resolved through power play. Should the
court however
find that on these facts the use of retrenchment procedures was
permissible then the applicant submits as follows.
Addressing
the problem in a manner which might avoid retrenchments required, so
it is submitted, retrenchment consultations with
the union at a
national level in terms of which respondent would have been obliged
to notify the union that unless its labour costs
were substantially
reduced, the problem would have to be addressed by restructuring,
including outsourcing with possible retrenchments
in consequence
thereof.
In
failing to consult at this stage, and insisting on consulting on a
plant-by-plant basis over several months, respondent placed
itself
in a position where it failed to consult at the earliest
opportunity.
In
further consequence of this, and by the time that consultations
commenced at the Salt River Mill, local wages had been fixed
and the
principal means by which retrenchments might have been avoided,
namely the alteration of substantive terms and conditions
of
employment affecting Salt River employees, could no longer be
addressed.”
This
ground can be summarized as the failure to consult on a national
level at an early enough stage.
[51] In terms of the
Act read with the Code of Good Practice on Dismissal Based on
Operational Requirements the retrenchment must
be based on:
(a) economic or
financial reasons, that is those reasons relating to the financial
management of the enterprise; or
(b) technological
reasons, that is those reasons that refer to the introduction of new
technology which affects work relationships
either by making existing
jobs redundant or by requiring employees to adapt to the new
technology or a consequential restructuring
of the workplace; or
(c) structural
reasons, that is those reasons that relate to the redundancy of posts
consequent to a restructuring of the employer’s
enterprise; or
(d) similar needs.
[52] In the Fry’s
Metal case (supra) at paragraphs [32] – [33] this Court dealt with
the argument that the appellant could not
dismiss for operational
requirements when this was done for the purpose of making more profit
as opposed to where it was resorted
to in order to ensure the
survival of the business or undertaking. Zondo JP considered the
article 'Bargaining, Business Restructuring
and the Operational
Requirements Dismissal' by Thompson which appears in (1999) 20 ILJ
755 which was the foundation for the submission
and held that such
argument has no statutory basis in our law. The Act recognizes an
employer's right to dismiss for a reason based
on its operational
requirements without making any distinction in the context of a
business the survival of which is under threat
and a business which
is making profit and wants to make more profit.
[53] An employer is
entitled to take the provisional decision to consider the possible
retrenchment of employees on his own, without
any input from the
employees or the union. But he is not allowed to make a final
decision before consulting with the trade unions
or employees
involved. In practice an employer will first sense the need to
retrench at managerial level and a decision in principle
will be
taken. However, the employer must consult once it contemplates the
dismissal of employees for operational requirements.
[54] The prior
consultations between the employer and the trade union enable the
employer to provide the union with information on
the reasons for
retrenchment, the effects thereof, to allow it an opportunity to
consult and, if possible, to reach agreement. Consultation
is a very
important process and necessitates that the consulting parties must
engage in a joint problem solving exercise in order
to try and reach
consensus. Bona fides is crucial and shadow boxing, subterfuges and
masquerades only impede what is a matter of
life and death for the
employees.
[55] The employer
must afford the other party the opportunity to make representations
on any relevant issue. Bona fide consultation
necessarily implies
that the employer must seriously consider and evaluate the
representations. If the employer does not agree with
them, he must
state his full reasons for rejecting them. After consultations have
been exhausted the employer must decide whether
to proceed with the
retrenchments or not. The loss of jobs through retrenchment has such
a deleterious impact on the life of workers
and their families that
it is imperative that - even though reasons to retrench employees may
exist, they will only be accepted as
valid if the employer can show
that all viable alternative steps have been considered and taken to
prevent the retrenchments or to
limit these to a minimum.
[56] The second
broad issue was that of procedural unfairness. The respondent pleaded
in its statement of case that the dismissals
were a fait accompli and
the appellant knew that, were it to claim that the only viable
alternatives to dismissal was agreement from
the workers to a 40%
decrease in their wages, then the result would be that the process
which would follow would amount to merely
going through the motions
without any real problem solving being possible. It was further
pleaded by the respondent that “
plans
were probably made in advance to ensure that the new service provider
would be ready to commence their activities by the preplanned
effective date of terminations”.
The respondent alleged that, given appellant’s attitude, no
meaningful consultation could occur on appropriate measures to avoid
the dismissals.
[57] The respondent
also pleaded that, given that the appellant intended to outsource, it
was at the very least obliged to engage
in meaningful consultations
regarding the possibility of securing alternative employment for its
ex-employees with the new service
provider on the best terms and
conditions of employment that might be obtainable in the
circumstances. The respondent alleged that
the appellant’s claim
that it was not able to influence the new service provider had the
consequence that no meaningful or good
faith consultations could take
place on appropriate measures to mitigate the adverse effects of the
dismissals.
[58] The respondent
also pleaded in the amendment that there was insufficient disclosure
of information, in particular the Staffgro
contract, as the appellant
had been informed in November 1999 that, in the event of Staffgro
being appointed as service provider,
it was prepared to agree to the
following:
“
7.2
Should you require us to take over existing employees, after
consultation and evaluation of those identified current employees,
applicants will be appointed on Staffgro (Pty) Ltd conditions of
employment. Should you require Staffgro (Pty) Ltd to take employees
over as a going concern as in terms of Section 197 of the LRA,
negotiations with interesting (sic) parties must first and foremost
be concluded prior to entering into such an arrangement.”
[59] The respondent
then pleaded that the appellant being the respondent, and, the
respondent being the applicant;
“
32(m)
Respondent was under a duty to disclose to the respondent in writing
the alternatives that it had considered before proposing
the
dismissal of respondent’s members and the reasons for rejecting
each of these alternatives.
(n)
The respondent in fact considered but rejected Staffgro’s offer to
take transfer of its employees in terms of section 197 of
the LRA,
the respondent, however, failed to disclose this in writing or at all
to the applicant.
(o)
The respondent was furthermore under an obligation to disclose in
writing any assistance that it proposed to offer to the employees
likely to be dismissed.
(p)
The respondent failed to disclose in writing that Staffgro, in hiring
staff for the Mill, was prepared to employ alternatively
employment;
grant preference to the respondent’s former employees.
(q) The
respondent in either event, in failing properly to communicate the
terms and conditions under which alternative with the new
service
provider might be secured, failed in its obligation to attempt to
reach consensus on the means by which the adverse effects
of the
dismissals might be avoided.
(r) Respondent in
fact exacerbated the adverse effects of the applicant’s members’
retrenchments by failing to pay to them such
notice pay as it was in
law obliged to pay.
(s)
Respondent in fact failed to disclose in writing any alternative
which it has considered, or had considered but rejected, which
might
altogether avoid retrenchments.
”
The notice pay issue
was resolved between the parties.
[60] The first
substantive issue really is whether a company is prevented from
effecting economic adjustments in an already profitable
region in
order to increase its national profits.
[61] The question of
outsourcing had been engaging the attention of the company and the
union for some years. Retrenchments had occurred
at a number of mills
prior to that in the Cape. That the shop stewards demanded that it be
dealt with at national level admits of
no dispute. The suggested
measures to decrease costs (in the region of R20 000) were directed
at the Salt River Mill itself and came
nowhere near satisfying the
amount that outsourcing would save.
[62] I am of the
judgment that a natural consequence of the Fry’s Metals judgment is
that, all things being equal, a company is
entitled to insist by
economic restructuring that a profitable center becomes even more
profitable. It is also clear from the evidence
that the appellant
required flexibility on the part of the employees’ terms and
conditions of employment in order to be competitive.
The respondent
did not offer such flexibility. In my view that need of the appellant
also provided a fair reason to dismiss the employees
when they were
not able or prepared to offer such flexibility to the appellant.
Accordingly, I am of the view that the dismissal
of the employees
concerned was substantively fair.
[63] If the
appellant was entitled to retrench to increase its profits, the next
question is that addressed by the second part of
the amended
statement of claim. This relates to procedural fairness and alleges
that the appellant was obliged to address the problem
of reducing its
costs in a manner which might avoid retrenchments and required
retrenchment consultations with the union at a national
level in
terms of which appellant would have been obliged to notify the union
that unless its labour costs were substantially reduced,
the problem
would have to be addressed by restructuring, including outsourcing
with possible retrenchments in consequence thereof.
The respondent
went on to contend that, by failing to consult at this stage, and
insisting on consulting on a plant-by-plant basis
over several
months, the appellant placed itself in a position where it failed to
consult at the earliest opportunity. By the time
that consultations
commenced at the Salt River Mill, local wages had been fixed and the
principal means by which retrenchments might
have been avoided,
namely the alteration of substantive terms and conditions of
employment affecting Salt River employees, could
no longer be
addressed.
[64] In my view,
within the context of answering the question whether or not the
dismissal of the employees for operational requirements
was fair or
not, the question whether the consultation should have been held at
national or local level misses the point. Such issues
are matters
for discussion among the consulting parties unless there is an
agreement between the parties which makes provision as
to the level
at which such issues should be discussed or dealt with. That is the
position in our law in regard to levels of collective
bargaining and,
in my view, that is also the position in regard to retrenchment
consultations. As to levels of collective bargaining,
sec 64(2) of
the Act makes it clear that a refusal to bargain is a dispute of
interest over which a strike or lock-out can be resorted
to and sec
64(2)(d)(ii) of the Act makes it clear that a dispute about
appropriate bargaining levels is a dispute about which power
can be
resorted to if the parties do not reach agreement.
[65] In
my view the correct question is whether, given the level at which the
consultation took place, there was a fair consultation
process which
preceded the dismissals. In other words, did the fact that the
consultation process took place at the level at which
it did render
the consultation process unfair? In this matter the respondent could
have ensured that, if its delegation at the consultation
process, was
unable to handle the issues raised at the consultation, such
delegation was appropriately increased to deal with such
issues. It
did not do so and no reason has been advanced why the respondent
could not in addition have included its high ranking
officials in
such delegations to make sure that it took part in the consultation
process in an effective manner. If the respondent
had sought to
include certain senior officials in its delegation but the appellant
had refused to continue with consultations unless
the respondent
altered the composition of its delegation and it was not shown that
there was any agreement between the parties precluding
the union from
composing its delegation in that fashion or if it was shown that the
issues were too complex for the plant level delegation,
this could
have been different. That, however, was not part of the respondent’s
case. The respondent’s case seems to have been
based on
effectively saying that it would have been more convenient to hold
the consultations at national level than at plant level.
In my view
that could never be sufficient for purposes of determining whether
the dismissal that followed such consultations was
fair.
[66] To
the extent that the respondent may have sought to argue that through
“
bumping
”, the
appellant may have avoided the retrenchment of the employees in this
matter, it is necessary to record that a fair reading
of the
pleadings and the issues before the Court a quo reveal that bumping
was not really canvassed in the evidence. For that reason
alone it
should not be part of the equation. Some of the evidence and I am
thinking especially of the testimony of Nelissen was to
the effect
that there were two reasons why bumping could not take place. Firstly
he stated that there were no vacancies – not that
it would be
relevant, given that one employee with more experience and service
supplants another with less - and secondly, the workers
showed no
interest in other positions.
[67] Mr Wallis
submitted that the evidence demonstrated that the appellant was
engaged in a process of restructuring and harmonizing
terms and
conditions of employment in an attempt to make its operations more
competitive and profitable and that these were national
matters
affecting members of the union throughout the country, not at the
Salt River mill only – or indeed at all, as it was common
cause
that it was operating profitably at all times. He submitted that no
reason existed to retrench at Salt River as there were
other
alternatives that could have been explored, which would have been
supportive of collective bargaining. It was, therefore, so
he
submitted, unfair to retrench long serving employees as the limited
financial advantages of such a move were outweighed as against
the
loss to the workers, and that the parties could have resolved the
appellant’s economic issues far more advantageously by a
proper
process of collective bargaining at national level.
[68] This last point
was developed to encapsulate the submission that as the retrenchments
were part of a national restructuring process
and that – because
wages and other conditions of employment were concluded after
national bargaining, the proper forum for consultations
about
retrenchments was also at national level.
[69] Mr Wallis then
summarized the evidence, which has been set out above relating to the
policy of the appellant to outsource and
submitted that the appellant
had done so whenever it was commercially advantageous to do so. To
characterize such a national process
as a local one was unfair, he
submitted.
[70] It seems to me
that the second point raised in the amendment was addressed at the
national negotiations. Clearly the appellant
told the respondent
that, unless its labour costs were substantially reduced, the problem
would have to be addressed by restructuring,
including outsourcing
with possible retrenchments in consequence thereof. The respondent
was unwilling to discuss a wage freeze or
a negative increase nor was
the question of retrenchment at all appetizing. The extracts from the
various meetings of national wage
negotiations, set out above, do
show that the topics were raised and dealt with at a national level.
[71] It is true, as
alleged in the amendment, that by the time that consultations
commenced at the Salt River Mill, local wages had
been fixed (by the
6% increase). Nonetheless, I am of the view that it was still open
to the shop stewards and others at the local
levels to discuss means
by which retrenchments might have been avoided, namely, the
alteration of substantive terms and conditions
of employment
affecting Salt River employees. At the first Salt River Mill meeting
to discuss the retrenchments, Pohlongo was present
as was Mr
Lookington Ndongeni, a union official. At that meeting the union
asked the appellant when it realized it had a problem
that required
addressing by way of retrenchments. The appellant responded by saying
that at every national wage negotiation the issue
had been raised in
the context of the wages paid by its competitors. The appellant
supplied the figures showing the reduction in
costs that would be
secured if service contractors or labour brokers were contracted.
[72] That the
remaining employees secured a 6% increase is not necessarily
contradictory as the appellant feared a strike, which the
appellant
thought would have had disastrous consequences for it. The employees
in the profitable areas deserved an increase and the
evidence
revealed that such barely kept pace with inflation. The respondent
was conscious that it, as a trade union, also benefited
from
achieving an increase for its members that remained in employment. It
also recognized, and I have cited some passages in the
minutes of the
meetings, if, in order to achieve flexibility, the appellant resorted
to outsourcing, a retrenchment would have to
follow.
[73] I am of the
judgment that possible retrenchments were discussed at a national
level to the extent that the respondent permitted
it and that the
question of moderating the wage demand was also raised by the
appellant, without apparent success.
[74] The present
respondent alleged that by failing to consult at this stage, and
insisting on consulting on a plant-by-plant basis
over several
months, the appellant placed itself in a position where it failed to
consult at the earliest opportunity. The respondent
maintained that
the only negative consequences of a failure to have national
consultations pleaded by the respondent were that by
the time that
consultations commenced at the Salt River Mill, local wages had been
fixed and that the alteration of substantive terms
and conditions of
employment affecting Salt River employees could no longer be
addressed. In my view it was always possible for the
union and its
members to agree to a change of their terms and conditions of
employment in order to avoid the retrenchment even if
that meant
foregoing the 6% increase after it had been agreed to. I accept that
this would not be easy but that is different from
saying that it
could not be done. However, at any rate the evidence reveals that the
wage rates were not the only problem but the
inflexibility of the
employees with regard to their terms and conditions of employment was
another.
[75] Nelissen
testified that the respondent as a national union was involved in all
the outsourcing and retrenchment exercises around
the country and did
not challenge them in principle. Nor did it raise a collective
bargaining issue on the matter. The outsourcing
topic had been around
for some considerable time and reference was made to it from a long
time previously.
[76] I do not
believe that the appellant was not entitled to engage in the
retrenchment exercise when it did. That it was entitled
to increase
its profits at an already profitable center is clear – but I do not
believe it was impermissible to retrench after
the 6% wage increase.
From the commencement of the national wage bargaining meetings it was
clear that the wages had to be reduced
or else substantial
retrenchments would follow. The respondent wanted neither and blocked
discussions on both topics, which were
raised at the various meetings
I have mentioned. The increase was agreed to by the appellant at a
time it faced a national strike.
[77] Part of the
national strategy to outsource had been implemented prior to the 6%
wage settlement and it was mentioned during the
wage negotiations.
The wage settlement did not waive any rights of the appellant to
continue retrenchments as part of the outsourcing
nor did it provide
a contradiction of that policy. The respondent opposed discussions on
outsourcing and no increase or minimal wage
increases, well knowing
that in order to be competitive the appellant had to continue on that
path. It cannot lie in the mouth of
the respondent to complain that
retrenchments and outsourcing were not discussed at a national level
when it blocked such a discussion.
[78] I am therefore
of the judgment that the dismissals were for a fair reason.
[79] Another issue
arising out of the procedural unfairness relates to whether the
decision was a fait accompli. This was, indeed,
the original ground
pleaded by the respondent. Arendse AJ questioned whether the company
was sufficiently flexible to consult with
the union with an open mind
about alternatives to outsourcing when the consultations commenced.
He found that the evidence of the
company was clear that, unless the
employees could show the company how approximately R120 000 per month
could be saved on the wage
bill at the Salt River Mill, other than by
outsourcing, they were going to be retrenched. The only alternative
left to the employees,
he held, was to change the substantive terms
and conditions of their employment. The company, the Court a quo
held, was, however,
aware of the fact that this could not be done at
plant level.
[80] The Court a quo
also held that the company also knew that a staff reduction was not
the solution because there was no over-capacity.
The Court a quo
said that this raised the issue of a bargaining-levels dispute.
Objectively, therefore, it held, the company was
aware that a
solution to their retrenchments was objectively unattainable. The
company preferred the outsourcing method and therefore
by inference,
the Court a quo held, that the company had closed its mind to any
other method in dealing with high wages, flexibility
etc.
[81] There was much
debate in evidence and in argument as to whether outsourcing was a
policy of the appellant or was merely a method
used where appellant
saw advantage in it. In my view it does not matter a great deal even
if outsourcing was the appellant’s policy.
If it was the
appellant’s policy, that does not on its own assist the respondent.
The real question is whether if outsourcing was
the appellant’s
policy, the appellant was nevertheless prepared to properly and
genuinely consider other possible solutions including
those that the
respondent could propose or that it did propose and to change its
mind about implementing outsourcing if another option
with more merit
than outsourcing emerged from the consultation process. In any event,
the effects of outsourcing i.e. the savings,
were put to the
respondent during consultation and it was asked whether it had other
suggestions that would result in a similar reduction
in costs and the
suggestions by the shop stewards resulted in a saving of
approximately R20 000 which came nowhere near the target.
[82] There was a
long history of outsourcing and the respondent was abundantly aware
of it. It is necessary to decide if it was a
fait accompli. The fact
that it was the only answer staring everyone in the face and had been
implemented by competitors and other
branches of the appellant did
not make it a fait accompli. It was inevitably very difficult for the
respondent or the shop stewards
to match the saving that outsourcing
could produce. I am of the view that it was not a fait accompli.
[83] The Court a quo
was satisfied that the appellant had failed to enter the consultation
process with an open mind. Indeed, Arendse
AJ held that Nelissen
adopted an a priori approach that excluded any or all alternatives
other than outsourcing. While I accept that
the appellant approached
the consultation process with a very strong view that outsourcing was
the way to go, I do not accept that
the appellant was not open to a
consideration of other possible solutions to the problem if they were
suggested and appeared to be
viable. In my view the appellant was
open to other viable options that could be suggested. At any rate it
would have been helpful
if some suggestions had been made by the
respondent either at the meetings or even subsequently at the trial
which, if implemented,
would have effected the same savings. The
matters suggested at the meetings by the union have been mentioned
but they were not a
serious contender, given the limited savings they
involved. I would add that the respondent also proposed that assets
be sold but
I understand from the evidence that such had already
taken place. The mill had sold its ageing fleet of vehicles and had
not replaced
them.
[84] The respondent
also suggested in the alternative that the assets be sold and then
rented back by the appellant. Such a procedure
was not feasible on
the evidence. The plant was worth R65 million but would only fetch
some R10 million in the event of a sale. It
was obvious to all that a
drastic reduction in salaries and flexibility were required if the
retrenchment option was to be countered
by the existing workforce.
Such a solution was unpalatable to the union and the affected workers
and was not proffered.
[85] Arendse AJ also
held that the company’s inflexible attitude was evidenced by the
unilaterally shortened time periods it imposed
on the union in the
retrenchment notice in contravention of the recognition agreement,
and were also unreasonable. The notice of
retrenchment was sent on 16
November 1999 and proposed implementation on 1 January 2000. Because
of annual leave of the union representatives
and the failure to
appoint alternate representatives, the implementation date was
extended to 15 February, giving a period of three
months. The
evidence revealed that the recognition agreement had been validly
cancelled - as the CCMA arbitrator eventually found
- and I am of the
view that, in all the circumstances, including the lengthy and
tortuous road outsourcing had taken in the past,
a period of three
months was reasonable. I do not think that the notice period that the
appellant gave was indicative of any inflexible
attitude.
[86] Arendse AJ held
that a further indication of the company’s closed attitude was the
fact that Nelissen appears to have reached
an agreement with Staffgro
even before the consultations with the union began. He held that
Nelissen failed to disclose this to the
union. That he (Nelissen) was
of the view that such disclosure was to be “
fruitless
”,
so held the learned Acting Judge, was no excuse for non-disclosure in
the light of section 189(3)(b) of the Act.
[87] Arendse AJ held
that a further pointer is that Nelissen had indicated already at the
8 December 1999 consultation meeting that
all retrenchments had to be
finalised by 15 February 2000. The Court a quo took the view that the
only conclusion to be drawn from
the facts was that Nelissen had
already contracted with Staffgro (before 8 December 1999) to start on
15 February 2000.
[88] Nelissen
testified that he telephoned Mr Marais of Staffgro on 8 February or
thereabout and told him he had the contract. Counsel
for the
respondent Mr Kahanovitz asked him:
“
So
is it still your version that you wrote him a letter to tell him he
got the contract?”
He answered:
“
--- I phoned him after the last consultation which was on 2
nd
February and we decided we needed to carry on. It was only after that
meeting that I phoned him and said that he could carry on.”
This
evidence by Nellissen was not contradicted. It is true that Nellissen
had had discussions with Staffgro before the conclusion
of the
consultation process which may have reached a stage where they all
knew what the terms of their outsourcing arrangement were
likely to
be or would be eventually if the appellant proceeded on the
outsourcing route but there is no evidence on the basis of
which it
can be said that, if a viable alternative was put forward, he would
have proceeded to sign an outsourcing agreement with
Staffgro.
[89] The court a quo
held that there was procedural unfairness because there was an
insufficient disclosure of the information, more
especially
concerning the Staffgro contract. This was important because of two
reasons, the first being that Staffgro was willing
to consider
transfers in terms of section 197 of the Act, alternatively to offer
employment on its terms, and, secondly, the union
could possibly have
engaged Staffgro as a source of alternative employment. Arendse AJ
held that in relation to Staffgro, the evidence
of Nelissen was not
satisfactory, and, indeed, was quite unconvincing and illogical at
times.
[90] I do not share
Arendse AJ’s misgivings. As I understood the evidence a transfer in
terms of section 197 was never a possibility
as it would have
resulted in an even higher wage and other costs structure, given that
Staffgro had to also build in its own administration
costs. The
workers repeatedly refused the offer to work for Staffgro for the
reason that the wages and other conditions of employment
were far too
disadvantageous in comparison with those they enjoyed with appellant.
[91] Did they have
enough information to deal with the consultations sufficiently
comprehensively? As I understand it they were promised
all the
information that they required. The evidence did reveal that some of
it had to be inspected at the mill because of the confidential
nature
of it. The respondent was told that the information was confidential
because as a union FAWU represented its members in competing
companies as well. Nelissen asked that the information be requested
in writing so that if a dispute arose about the adequacy of
the
answers there would be tangible proof. It seems from the record that
FAWU did not do what it was asked to do if it wanted information.
Accordingly, the appellant is not to blame if FAWU did not have
certain information.
[92] Arendse AJ held
further that the failure to give proper notice of termination was a
further indication of a closed mind. Since
the issue of unlawful
notice was, of course, settled before the hearing in this matter
commenced, it is difficult to see how it can
be a factor to be taken
into account in considering the fairness of the dismissals. The
evidence revealed that Nelissen was perfectly
prepared to pay what
the law required and regretted the miscalculation. In my view it does
not show a closed mind on the question
of consultation. It was a
regrettable lapse, which has subsequently been remedied.
[93] The Court a quo
found that the fact that Staffgro was willing to offer employment or
even to guarantee alternative employment
to the retrenched workers,
was not disclosed to the union by Nelissen. I am not convinced that
this finding was justified by the
evidence. Nelissen testified as
follows:
“
It
was my suggestion that I would approach these companies that had
brought in quotes, so that they could engage with them in terms
of
what were their working conditions, terms of employment etc, as at
that stage I didn’t even know that, but I was willing to
put them
face to face together if they so wished, so that they could explore
that alternative, but it was completely denied and it
never went
further.”
This evidence was repeated in a
number of passages in the evidence. The minutes of the meeting of 25
January 2000 reflected as much.
They read thus: “
Mr
Nelissen wanted to offer the individual employees an opportunity of
exploring the possibility of alternative employment with the
outsourcer who would ultimately be appointed
.”
[94] There was
nothing wrong with the appellant exploring possibilities of service
contractors and obtaining quotes from them. It
would, of course, have
been the ultimate folly to have concluded contracts with them and
alerted the union to that fact during what
purported to be open
consultations. Staffgro were even going to put up notices to alert
the retrenched workers to the opportunities
that presented themselves
with it. The letter of 8 February records as much:
“
I further
propose that we place the Staffgro Vacancy memo on your internal
notice boards, to allow affected employees to apply for
various
positions.”
[95] Nelissen also
testified to seeing Pohlongo at his work position in the mill
laboratory and asking him why the workers were not
taking up the
positions with the service provider. Pohlongo told him that he had
spoken to the union official, Lookington Ndongeni,
who had stated
that the procedures were unlawful and they were not going to take up
the job offers.
[96] The Court a quo
held that what made the company’s conduct even more unreasonable in
the circumstances was the fact that more
than half the adversely
affected employees at the Salt River Mill had more than 20 years’
service, and five of them in fact had
more than 30 years’ service.
It is always tragic when any employee loses employment and that is
always exacerbated with longer
serving workers. I do not believe that
in itself it is a decisive factor in determining that there was
procedural unfairness.
I would therefore
conclude that no procedural unfairness was proved.
[97] In
the result I would make the following order:
The
appeal is upheld with costs including those consequent upon the
employment of two counsel.
The
order of the court a quo is set aside and replaced by the following
order:
“
The
claim is dismissed with costs, including those consequent upon the
employment of two counsel
.”
Nicholson AJA
I
agree.
ZONDO
JP
I
agree.
JAFTA
AJA
Appearances:
For
appellant: Adv J Gauntlett SC and Adv RGL Stelzner,
instructed
by: Deneys Reitz
For
respondent: Adv MJD Wallis SC and Adv C Kahanovitz,
instructed
by : Cheadle Thompson & Haysom
Date
of judgment: 11 May 2004