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[2004] ZALAC 18
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Mazista Tiles (Pty) Ltd v National Union of Mineworkers and Others (JA52/02) [2004] ZALAC 18; [2005] 3 BLLR 219 (LAC); (2004) 25 ILJ 2156 (LAC) (22 September 2004)
48
IN THE LABOUR APPEAL COURT OF SOUTH AFRICA
HELD IN JOHANNESBURG
CASE NO: JA52/02
In the matter between
MAZISTA TILES (PTY) LTD Appellant
And
NATIONAL UNION OF MINEWORKERS First Respondent
MOTHLOKI & 143 OTHERS Second& Further
Respondents
JUDGMENT
JAFTA AJA
Introduction
[1] The appellant has been involved in the manufacturing
industry since 1927 when it was formed. It produces slate tiles for
roofing
and flooring purposes at its plant at Swartruggens. The
second and further respondents were its employees at that plant. They
are
members of the first respondent which is a well- known trade
union in the mining industry. During April 2001 the second and
further
respondents (to whom I shall refer as
“the
employees”
) were dismissed from the appellant’s
employ. They regarded that dismissal as unfair for a number of
reasons. Naturally, the
appellant regarded it as fair. A dispute then
arose as to the fairness of the dismissal.
[2] In due course the respondents referred the dismissal
dispute to the Labour Court for adjudication and sought the
reinstatement
of the employees as well as payment of compensation.
The dismissal was challenged on three principal bases, namely, that:
the dismissal
was automatically unfair, it was not effected for a
fair reason and that a fair procedure was not followed. The Labour
Court upheld
the three contentions raised by the respondents and
ordered the employees’ reinstatement with full benefits. With
the leave
of this Court, the appellant now appeals against the
judgment and order issued by the Labour Court.
The facts
[3] Due to fierce competition in the tile manufacturing
industry, the appellant started losing its market in 1995 and
considered
restructuring its business in order to regain the lost
market and remain competitive. The appellant first raised the issues
of
productivity and restructuring with the employees’ union
during wage negotiations in 1997. It raised the same issues again
in
the wage negotiations for 1998 and 1999. The appellant’s
concern at that stage was that certain units at its plant
were
operating at half their normal capacity causing financial loss to
the company. Meanwhile its competitors were able to produce
tiles of
good quality at lesser costs which led to lower prices than those
charged by the appellant.
[4] In a letter dated 8 May 1997 addressed to the
committee that represented the employees in the wage negotiations,
the appellant
highlighted the problem of low productivity and
emphasized that the increase asked for by the employees could lead
to retrenchment
of approximately 75 workers. It went on to state
that the number of workers to be retrenched could be cut down by
half if the
employees agreed to working hours proposed by the
management. On 4 July 1997 the appellant addressed another letter
to the first
respondent inviting it to a meeting which was scheduled
for 9 July. The invitation contained the agenda for the meeting
which
included an item on retrenchment.
[5] It is not clear from the record whether the meeting
scheduled for 9 July 1997 was held but it is clear that meetings on
retrenchment
were held by the parties after that date. Mr Michael
Tully
(“Tully”)
, who was one of the three
witnesses called by the appellant at the trial, testified that the
appellant did not pursue the issue
of retrenchment in 1997 because it
thought that it could solve the problem by keeping operational costs
low and bargaining harder
with its suppliers. Apparently this did not
succeed because the issue of retrenchment was raised again during
wage negotiations
in 1998 and also in 1999. On 1 January 1999 the
parties agreed that they would negotiate the restructuring issue in a
separate
forum.
[6] On 5 March 1999 the first respondent addressed a
letter to the appellant demanding that it be furnished with the
reason for
the proposed retrenchment and certain information relevant
thereto. On 25 March the appellant responded thereto by a letter. It
stated that the reason for retrenchment was the lack of orders from
clients. It invited the first respondent to a consultation
meeting
scheduled for April 1999 with a view to finding a solution to the
problem. The appellant said that in the event of the
parties failing
to find a solution, 16 workers would be retrenched. Again it is not
clear whether the parties did meet but it appears
that 16 employees
were subsequently retrenched but they were all not members of the
first respondent.
[7] During year 2000 the appellant still experienced
problems relating to low production and the issue was raised with the
first
respondent. The matter was again referred to during the wage
negotiations on 20 June 2000. The appellant and the first respondent
agreed to set up a separate forum to deal with the restructuring
process. This agreement indicated a change of attitude on the
part
of the first respondent. Prior to this the first respondent had
declined to respond to the appellant’s plan on restructuring
for the reason that the plan did not, according to the first
respondent, involve job losses.
[8] After the conclusion of the agreement to set up a
forum to consider and deal with restructuring, the appellant invited
the
first respondent to consultations on restructuring. The
appellant proposed that benefits and conditions of employment
should
be revised by, inter alia, terminating both the hostel
accommodation and the feeding scheme provided by the appellant to
its
employees. It also proposed changes to the remuneration
structure then existing and that it be replaced with a remuneration
structure linked to productivity. The appellant stated that the
proposed changes were necessitated by operational requirements.
However, at that stage the appellant did not contemplate
retrenchment as a possible solution.
[9] The first respondent did not respond to the
appellant’s invitation referred to above. The appellant was
eager to have
consultations on the issue of restructuring and it
engaged the services of a firm called Henry Holland and Associates
(“the firm”)
to act on its behalf in taking the
process forward. On 5 July 2000 the firm wrote a letter to the
first respondent inviting it
to a consultation meeting scheduled for
11 July. On 6 July Tully also addressed a letter to the shop
stewards committee inviting
it to the same meeting. On 7 July, Tully
wrote to the first respondent bitterly complaining about its failure
to respond to the
appellant’s previous invitations to
meetings and emphasizing that the meeting of 11 July would go on
whether or not the
first respondent attended.
[10] Indeed, on 11 July a meeting was held between the
appellant and the shop stewards. The first respondent’s
representatives
did not attend the meeting despite having been
invited to attend. At the meeting the appellant proposed to close
hostels and stop
offering accommodation to its employees as well as
terminating the feeding scheme. It offered to increase wages to cover
the costs
of food and accommodation. The shop stewards did not object
to the proposal but asked for time to consult the employees. It was
decided that the appellant’s human resources manager, a Mr
Walter Lukhuleni, would address the entire workforce on the plan
on
13 July and invite them to put forward alternative proposals. The
next meeting was scheduled for 19 July.
[11] At the time of the meeting of 11 July the appellant
contemplated retrenchment as a possible solution in the event of the
workers
rejecting its proposal. As a result of that contemplation the
appellant instructed the firm to give the first respondent and the
workers notice of the restructuring. On 13 July the firm complied
and issued a detailed notice. In that notice the firm gave the
reasons for the proposed restructuring as being to:
establish an efficient and cost- effective structure
whilst increasing turnover;
make the company more competitive as a South African
supplier of natural tiles;
provide shortened lines of communication, control and
direction;
position the company closer to the goal of being the
most economical and natural tile supplier in South Africa.
[12] The notice also referred to alternatives considered
by the appellant before proposing restructuring. It further stated
that
approximately 307 workers at Mazista Quarry would be affected.
It concluded by inviting alternative proposals from the workers.
On
13 July the firm also invited the first respondent to a consultation
meeting which was scheduled for 19 July. The minutes
of the meeting
held on 11 July were furnished to the first respondent.
[13] On 19 July a further meeting was held. Once again
the first respondent did not send any officials. The meeting was
attended
by the appellant’s representatives and the shop
stewards. The minutes of the meeting reveal that the workers were
consulted
in relation to the proposed plan and that they did not
object to it. It also appears from those minutes that the first
respondent
was aware of the plan and had a positive attitude towards
it. The next meeting was scheduled for 27 July but it did not take
place
on that day. Instead, the appellant, which was concerned about
the union’s non- attendance at the previous meetings, addressed
a letter to the union’s regional secretary and drew his
attention to the matter.
[14] The next meeting was held on 3 August between the
appellant and the shop stewards. The union representatives did not
attend.
The appellant indicated that the hostels would be closed by
not later than 1 December 2000 and also proposed 30 August as the
date
on which the feeding scheme would be terminated. The same
parties met again on 17 August. At that meeting, the shop stewards
informed
the appellant that the workers rejected the draft agreement
which it had given to all workers. In the draft agreement the
appellant
had proposed that the workers be given two options. In
terms of the one option the workers were to become independent
contractors
who would be self – employed. Under the other
option, the workers would become “
incentive employees
”.
In terms of the latter scheme the workers would receive a reduced
basic wage and an “
incentive payment
” based on
their productivity. They said the workers wanted to remain employees
of the appellant without changes to their
terms and conditions of
employment. Regarding the closure of the hostels, the workers
proposed that it be delayed until new houses
had been built. After
deliberating, the parties agreed to adjourn the meeting and to meet
on a later date.
[15] On 13 September a further meeting was held between
the appellant and the first respondent. At this meeting the appellant
enquired
if the workers had any counter- proposals to its draft
agreement which contained the two options referred to above. The
first respondent
informed it that the workers rejected the draft
proposal. The reasons advanced were that there was no working area at
the plant
for independent contractors and the company’s
machinery was old. Regarding counter- proposals the first respondent
stated
that the workers wanted the status quo retained. It proposed
that the hostels should be converted into family units. It further
said the issue of the feeding scheme should be negotiated with
workers.
[16] The appellant was surprised by what it perceived to
be a change of attitude on the part of the workers particularly in
relation
to the closure of the hostels. The appellant pointed out
that in the previous meeting with shop stewards it was informed
that
the workers accepted the hostel closure and were excited about
getting new houses. The appellant also responded to the reasons
given
by the workers for rejecting its proposal. It assured the union that
its working area would be made available to all workers
who were
interested in participating in the scheme. Regarding the machinery
the appellant stated that it was in the process of
upgrading its
machinery. After further deliberations the meeting adjourned and the
parties agreed to meet again and the next meeting
was scheduled for
28 September.
[17] On 21 September the appellant sent an invitation to
the first respondent inviting it to the meeting scheduled for 28
September.
On 27 September the appellant again sent a reminder to the
first respondent about the meeting which was to be held on the
following
day. The district council which had been approached by the
appellant to establish a township where its employees were to be
accommodated
was also invited to the meeting.
[18] The first respondent failed to attend the meeting
on 28 September. The appellant did not take kindly to the union’s
absence and instructed the firm to record its displeasure in a letter
sent to the first respondent on 2 October. The first respondent
was
informed in that letter that the meeting it failed to attend had been
rescheduled for 20 October. At that stage the appellant’s
attitude was that the first respondent was being obstructive and that
the latter’s conduct hampered its restructuring process.
On 5
October the appellant sent a letter to the first respondent accusing
it of obstructiveness and reminding it of an agreement
signed by the
parties in 1999 in terms whereof the first respondent had agreed that
there was a need for engaging in a restructuring
process. The
appellant lamented the fact that the first respondent had attended
only one of the six meetings already held. It concluded
by urging the
first respondent to attend the meeting of 20 October.
[19] The first respondent attended the meeting of 20
October where the appellant persisted on its proposal and pointed
out that,
should the parties fail to agree thereon, retrenchments
would take place. The first respondent indicated that it was in
principle
not opposed to the proposal but that it wished to be
furnished with details on how the proposal would be implemented. The
appellant
undertook to furnish it with such details and the parties
agreed to meet once the first respondent had considered the
detailed
proposal.
[20] On 9 November the appellant furnished the first
respondent with a detailed proposal and the parties had a further
meeting on
10 November. At that stage the first respondent had not
come up with a counter proposal except the earlier indication of
preferring
the retention of the status quo. At the meeting the
appellant and the first respondent agreed to brief the workers on the
issue
separately and that the first respondent would submit any
concerns raised by the workers on the restructuring process in
writing.
[21] However, the first respondent did not revert to the
appellant regarding concerns raised by the workers nor did it
indicate
that the proposal was accepted or rejected. On 21 November
the appellant addressed a further letter to the first respondent
urging
it to respond as a matter of urgency. The first respondent
failed to respond and on 28 November the appellant sent another
letter
to the first respondent pointing out that the consultation
process had been carrying on for a long time and that the parties
needed
to finalise it. It invited the first respondent to a meeting
on 1 December 2000 to complete the process.
[22] At the meeting of 1 December the first respondent
informed the appellant that the workers had agreed to the closure of
the
hostels but only after the establishment of the township where
they would be accommodated. It also informed the appellant that the
workers had agreed to the termination of the feeding scheme provided
that the company provided them with money for food. The first
respondent further stated that the workers rejected the proposal on
the independent contractor scheme and that they proposed that
the
status quo should remain unchanged. The appellant attempted to
persuade the first respondent to change its position by further
motivating its proposal. No agreement could be reached. At the
conclusion of the meeting the parties agreed to have another meeting
on 12 December.
[23] On 12 December the first respondent failed to
attend the meeting. A letter addressed to it on that date by the
appellant reveal
that, when the latter telephoned the union official
concerned and asked why he failed to turn up for the meeting, the
official
said that he had had no transport and the meeting was not
confirmed. It appears further from that letter that the appellant
rejected
the reasons furnished as lacking in merit. In the same
letter the appellant invited the first respondent to submit its
alternative
proposals within 48 hours.
[24] The record of the proceedings does not indicate
whether the first respondent took up the invitation and submitted
alternative
proposals. A further meeting between the parties was held
on 18 January 2001. It appears that a breakthrough was achieved at
that
meeting. Although the first respondent had indicated that its
members wanted the status quo to be retained, at that meeting it
accepted the appellant’s proposal as reasonable and promised to
convince its members to accept it provided a specified amount
was
guaranteed as a fixed wage. The parties agreed that the basic wage
should be fixed at an amount of R550 -00 including the cost
for food.
They agreed that a draft agreement reflecting the terms would be
telefaxed to the first respondent for consideration
by its legal
unit. Both parties were optimistic that an agreement could be reached
and signed by 29 January. As a result they agreed
to have the next
meeting on that day.
[25] The appellant could only furnish the first
respondent with a copy of a draft agreement at the meeting of 29
January. Having
perused the draft agreement, the first respondent
raised concerns about the fact that the draft agreement reflected
that the incentive
scheme would run for one year and thereafter
workers on that scheme would automatically become independent
contractors. The first
respondent pointed out that it would be very
difficult for it to convince its members to accept the agreement
because it had thought
that the terms of the agreement were that,
after a year of implementing the incentive option, the two options
(ie the incentive
and the independent contractor option) would still
be available to workers. The first respondent stated further that
during consultation
with its members it had informed them that, after
a period of a year, workers would still have a choice between the two
options.
[26] The appellant responded by stating that the draft
agreement could be modified to reflect that further consultations
would be
held on whether or not the incentive scheme should be made
available to workers after a year provided that the first respondent
agreed to the incentive scheme being implemented on 28 February 2001.
The first respondent then indicated that it would still submit
the
draft agreement to its legal unit for approval. It stated that if the
agreement was approved by the legal unit, it would be
prepared to
sign the agreement. On 31 January the appellant sent an amended copy
of the draft agreement to the first respondent
with a covering note
suggesting 6 February as the date for the signing of the agreement.
[27] In terms of the amended draft agreement the
appellant would have two types of workers, namely, the
“incentivised
employees and contractors”
. All workers would sign
individual agreements in terms of which they would accept the closure
of hostels and the termination of
the feeding scheme. During the
currency of the incentive scheme, workers on that scheme could
voluntarily be transferred into the
independent contractor scheme.
Clause 8 of the draft agreement read as follows:
“
8. After one year from the date of this
agreement, subject to consultation, it is the company’s
intention that all Incentive
Employees will become Contractors and
the Incentivised Employee Scheme will fall away”.
[28] On 6 February a representative of the first
respondent failed to arrive at the meeting scheduled for the signing
of the agreement.
The shop stewards were present at the meeting but
refused to sign the agreement in the absence of the first
respondent’s
representative. The appellant contacted the union
official by telephone who said that he could not make it to the
meeting. The
appellant then signed the agreement and handed it to the
shop stewards with a request that they should take it to the first
respondent’s
representative for signing.
[29] The appellant did not receive any communication
from the first respondent regarding the agreement. On 20 February the
appellant
addressed a letter to all its workers on the implementation
of the restructuring process. In it the appellant, once more,
lamented
the first respondent’s non- cooperation and stated
that, as the consultation process had ended in a deadlock, it had no
other
option but to go ahead with the structuring. The appellant
informed its workforce that as from 1 March 2001 their conditions of
service would change. The appellant stated that the workers could
either choose to become “
incentivised employees
”
or to be “
independent contractors”
failing which
they would be retrenched and they would receive no severance pay as
they would have rejected alternative employment.
It further stated
that the workers who refused to make a choice would be regarded as
incentivised employees for a period of one
year whereafter they would
automatically be transferred to the independent contractor scheme.
[30] On 27 February the first respondent replied to the
appellant’s letter of 20 February. The first respondent’s
reply was couched in the following terms:
“
While understanding your intention to
implement the above process, we as the union feel that it is also
proper to do so with all
our members understanding the whole process
and implications. We propose to meet with yourselves on the 06 March
2001 to finalise
this matter. Prior to that we intend to have the
mass meeting with our members. Be informed that our Regional person
will be also
attending on the 06/03/01.”
The appellant denied having received the first
respondent’s letter of 27 February.
[
31] It seems that the appellant felt that there
was some confusion among the workers on whether or not an agreement
had been reached
between itself and the first respondent.
Accordingly, the appellant convened a meeting of the workers on 28
February. The appellant
explained the restructuring process to them
as well as its intention to implement the proposed changes. During
the meeting the
workers informed the appellant that as from 1 March
they would embark on a strike action. The appellant pointed out that
the strike
would be unprotected. It also contacted the union
officials and later had a meeting on the strike with the first
respondent and
shop stewards. The attempts to avert the strike by
both the appellant and the first respondent were unsuccessful.
[32] On the 1
st
March the workers commenced
with a strike. The appellant and the first respondent held a meeting
on 2 March at which the first
respondent requested that the
appellant should suspend the implementation of the restructuring
process until the union had held
a meeting with its members to
resolve the misunderstanding among the workers. The first respondent
promised to have a meeting with
its members on 4 March in an attempt
to persuade them to return to work. On 4 March the first respondent
informed the appellant
by means of a letter that the workers would
resume work on 5 March. On that date the appellant advised the
workers that they were
suspended pending the outcome of a
disciplinary enquiry.
[33] The disciplinary hearings were held on 6 March. The
employees were found guilty and were given a final written warning.
On
the same day the appellant issued an invitation to the first
respondent to return to the consultation process. The parties then
met on 7 March. They resolved that the appellant would furnish the
first respondent with a copy of the proposed changes on the
same day
and that the first respondent would consult its members until 11
March before the parties’ next meeting which was
scheduled for
12 March. The parties further agreed that, should the workers reject
the proposed changes, s189 of the Labour Relations
Act of 1995 (the
Act) would be applied. That is the section that sets out the
procedure that must be followed by an employer when
he contemplates
the dismissal of employees for operational requirements.
[34] According to Tully a copy of the proposal was sent
to the first respondent on 7 March. Tully subsequently telephoned the
union
for its response but was informed that the first respondent had
not received the proposal. He then sent a copy on 12 March. At that
stage the appellant was frustrated by what it perceived as the first
respondent’s lethargic attitude towards the finalisation
of the
restructuring process. The appellant addressed a letter to the first
respondent on 13 March and urged it to respond to its
proposal by not
later than 15 March. On 14 March Tully had a telephonic conversation
with a union official who informed him that
the first respondent
would only meet and consult its members on 15 March. They agreed that
the next meeting between the parties
would be held on 19 March.
[35] The parties met on 19 March and the appellant asked
for the first respondent’s response to its proposal. The
latter
stated that its members held the view that the proposal was
unacceptable because they would lose their long service if it was
implemented. The appellant then asked the first respondent to put
its counter proposal on the table. The first respondent stated
that
it had none other than that the workers wanted the status quo to be
maintained. The appellant respondent by stating that
in view of the
fact that the first respondent had no counter proposal, it would
inform it about what was going to happen to
the workers once its
directors have met.
[36] On 22 March the appellant addressed a further
letter to the first respondent in which it recorded its
disappointment with
the rejection of its proposal after a
consultation process that had lasted for 9 months. The appellant
informed the first respondent
that its members were being retrenched
and stated:
“
As has been laboriously and repeatedly
explained the company wishes to survive well into the future but this
is impossible under
the current structure.
In terms of section 189 of the LRA, the company
hereby inform the union and its members, that the consultation
process in so far
as the final decision of dismissal is concerned,
has now been exhausted and that all workers are dismissed from the
employ Mazista
Quarry with effect of 26/03/ 2001 (sic), for
operational reasons. All effected (sic) workers will be given notice
of 30 days as
per BCEA and will be expected to work their notice out.
Please note that the last working day for all workers will be
Thursday
19
th
April 2001.”
The letter concluded by inviting the first respondent
to a meeting on 29 March to consult on severance packages and other
incidental
issues.
[37] The first respondent replied to the appellant’s
letter on the same day. In its brief response the first respondent
stated:
“
It is our understanding that the process that
we were engaged in was not consultation on redundant procedures but
rather negotiations
on the change of the conditions of employment.
Whiles (sic) we don’t have any problem with the proposed
meeting of the 29
March 2001 at Mazista Quarry, an attitude is that
we will be consulting for the first time with yourselves on the above
issue,
in terms of section 189 of the LRA. It is further more to our
(sic) believe that all the related issues should be discussed in the
(sic) consult process in terms of the labour relations Act.
[38] At the meeting of 29 March the first respondent
and the appellant discussed the contents of the first respondent’s
letter
of 22 March pertaining to whether previous consultations
between the parties were held in terms of s189 of the Act. Persisting
in its stance that consultations were conducted in terms of s 189,
the appellant enquired from the first respondent which of the
requirements of the section had not been complied with in the
previous meetings. The first respondent replied by stating that the
issues such as the selection criteria, the disclosure of information
and assistance to be rendered to the workers to be retrenched
had not
been discussed and it suggested that those issues be considered. The
appellant responded by saying that it also wished
to discuss the
issues raised save for the disclosure of information which it
maintained to have made. The appellant also invited
the first
respondent to furnish it with counter proposals to its proposal. The
appellant’s proposal then was that the workers
should either
accept the new conditions of employment or be retrenched with no
severance pay. The first respondent said that it
had no counter-
proposals because it believed that that was the first meeting to
discuss retrenchments. The first respondent then
declared a dispute
on the issue.
[39] Shortly after the parties’ meeting and on the
same day, the first respondent referred the dispute to the Commission
for
Conciliation Mediation and Arbitration
(“CCMA”)
.
The following day the appellant addressed a letter to the first
respondent informing it that all workers who had refused offers
of
alternative employment would be dismissed with effect from 26 April
2001 as stated in a notice of 22 March. It stated further
that no
severance pay would be paid to the workers to be retrenched because
they had refused alternative employment.
Proceedings in the Labour Court.
[40] In due course the dismissal dispute was referred to
the Labour Court for adjudication. The respondents contended that the
employees
were dismissed because the appellant wanted to compel them
to accept its proposal to change their terms and conditions of
employment.
It contended that the dismissal was, therefore, in breach
of sec 187 (1)(c) of the Act. Section 187(1)(c) reads:-
“
(1) A dismissal is automatically unfair if
the employer, in dismissing the employee, acts contrary to section
5, or, if the reason
for the dismissal is-
(a) …..
(b) …...
(c) to compel the employee to accept a demand in
respect of any matter of mutual interest between the employer and the
employee.”
Furthermore, they argued that the dismissal was not
effected for a fair reason relating to the appellant’s
operational
requirements and that a fair procedure was not followed
in the process leading up to the dismissal.
[41] In Court a quo came to the conclusion that the
dismissal was automatically unfair. The Court a quo said the
following among
other things:
“
46. The parties had reached a deadlock in
respect of changes to conditions of employment. There are prescribed
procedures in the
Act that the respondent should have complied with
if it wished to pursue the matter further. The process of redundancy
and changes
to conditions of employment are two distinguishable
aspects and each has a specific procedure to be complied with.
The only inference that can be drawn from the
evidence that was led is that the reason for the retrenchment was to
compel the
individual applicants to accept the respondent’s
proposals on changes to their terms and conditions of employment.
The purpose of the retrenchment was simply to put
pressure on the dismissed employees to accept the respondent’s
proposed
changes to their terms and conditions of employment. The
dismissal accordingly falls squarely within the prohibition
contained
in the provisions of section 187 (1) (c) of the Act. The
dismissals amount to an automatically unfair dismissal.”
[42] Regarding substantive and procedural unfairness the
Court a quo took the view that the evidence led established that the
discussions
between the appellant and the employees’
representatives related to the appellant’s proposal on changing
terms and
conditions of employment, which, so the Court a quo held,
did not amount to consultation on retrenchment as envisaged in s189
of
Act. It also held that the appellant had failed to show that the
dismissal was for a fair reason because, in that Court’s
view,
the appellant had options, other than dismissal, available to it to
deal with the matter. The Court a quo reasoned that the
appellant
could have
“implemented its agreement with the individual
applicants and if necessary, used discipline to enforce it” or
it could
have “utilised a lock– out to effect the changes
to terms and conditions of employment it desired”
. The
Court a quo found that the outsourcing of the quarry indicated that
the reasons put forward by the appellant did not justify
the
dismissal because the jobs for the dismissed workers still existed.
As a result the Court a quo concluded that the dismissal
was
procedurally and substantively unfair. As already stated, it ordered
the employees’ reinstatement.
The appeal
[43] On appeal the appellant challenged the Court a
quo’s finding that the dismissal was automatically unfair or
alternatively
that it was without a fair reason and it was
procedurally unfair. Mr Redding, who appeared for the appellant,
submitted that the
dismissal in the present matter was not in breach
of sec 187(1)(c) and was, therefore, not automatically unfair as
contemplated
in s 187(1) (c) of the Act. He submitted that the
dismissal effected in this case was not of the nature covered by the
section
because it was a final dismissal. Reliance for this
contention was placed on the decision of this Court in
Fry’s
Metals (Pty) Ltd v NUMSA & others (2003) 24 ILJ 133 (LAC)
where
it was decided that a dismissal that is of a final nature falls
outside the ambit of sec 187 (1)(c).
[44] Mr van der Riet, who appeared for the respondents,
argued that the appellant’s aim in holding consultations with
its
employees was to persuade them to accept changes to terms and
conditions of employment. In this regard he argued that the appellant
also wished to retain its skilled employees. Mr Van der Riet
submitted that in the light of this the only probable inference to
be
drawn from the proved facts is that the dismissal was effected in
order to compel the employees to agree to the new terms and
conditions of employment proposed by the appellant. He submitted that
the present matter was distinguishable from
Fry’s Metals
on
which the appellant relied. He also argued that the pronouncement on
the meaning of s187 (1) (c) in
Fry’s Metals
was obiter
and that we should not follow it. In the alternative, Mr van der Riet
submitted that the meaning given to s187 (1) (c)
in
Fry’s
Metals
was incorrect as it ignored the clear language of the
section.
[45] I do not agree that the pronouncement on the
meaning of s187 (1) (c) in
Fry’s Metals
was obiter. At
the beginning of its judgment in that case the Court succinctly
defined the issues it was required to determine
as follows:
“
(a) Does an employer have a right to dismiss
employees who are not prepared to agree to certain changes being
effected to their
terms and conditions of employment when such
changes are necessary for the viability of the employer’s
business or undertaking
or are necessary to improve productivity or
efficiency in the business?
(b) If an employer has such right, what is the
relationship between that right, on the one hand, and, on the other
an employee’s
right implicit in s 187 (1) (c) of the Labour
Relations 66 of 1995 (the Act) not to be dismissed for the purpose of
being compelled
to agree to a demand in respect of a matter of mutual
interest between employer and the employee?”
The Court then proceeded to consider the proper meaning
of the section in the context of those issues.
[46] In
Fry’s Metals
this Court drew a
distinction between a dismissal which is effected in order to compel
employees to accept a demand in respect
of a matter of mutual
interest and a dismissal for operational requirements. In that case
Zondo JP
expressed himself as follows at para [31]:
“…
In the light of all of the above I
conclude that there is a distinction between a dismissal for a reason
based on operational requirements
and a dismissal the purpose of
which is to compel an employee or employees to accept a demand in
respect of a matter of mutual
interest between employer and employee.
The distinction relates to whether the dismissal is effected in order
to compel the employees
to agree to the employer’s demand
which would result in the dismissal being withdrawn and the employees
retained if they
accept the demand or whether it is effected finally
so that, in a case such as this one, the employer may replace the
employees
permanently with employees who are prepared to work under
the terms and conditions that meet the employer’s
requirements.”
[47] The next issue for consideration is whether the
dismissal was effected for a purpose such as is contemplated by sec
187(1)(c)
of the Act. In the present case the changes to terms and
conditions of employment proposed by the appellant were intended to
lead
to the termination of the employment between the appellant and
the employees. The appellant wanted the employees to terminate their
employment relationship with it and become independent contractors.
Furthermore, when it eventually decided to dismiss them,
such
dismissal was not a temporary measure which was to be withdrawn if
the employees accepted the proposed changes. It would,
therefore,
have made no sense for the appellant to dismiss the employees in
order to compel them to agree to a termination of their
employment.
Accordingly, the present dismissal does not fall within the
definition of an automatically unfair dismissal contemplated
by s 187
(1)(c).
[48] An employer who is desirous of effecting changes to
terms and conditions applicable to his employees is obliged to
negotiate
with the employees and obtain their consent. A unilateral
change by the employer of the terms and conditions of employment is
not
permissible. It may so happen, as it was the position in the
case, that the employees refuse to enter into any agreement relating
to the alteration of their terms and conditions because the new terms
are less attractive or beneficial to them. While it is impermissible
for such employer to dismiss his employees in order to compel them to
accept his demand relating to the new terms and conditions,
it does
not mean that the employer can never effect the desired changes. If
the employees reject the proposed changes and the employer
wants to
pursue their implementation, he has the right to invoke the
provisions of s 189 and dismiss the employees provided the
necessary
requirements of that section are met.
[49] The fact that the dismissal came about after the
employees’ rejection of the proposed changes cannot affect the
fairness
of the dismissal if the employer established that it was
effected for a fair reason relating to his operational requirements
and
not in order to compel the employees to accept the proposed
changes. The prohibition in s 187(1) (c) cannot apply to it as long
as it was effected for a purpose other than to compel the employees
to accept the employer’s demand. In
Chemical Workers
Industrial Union v Algorax (Pty) Ltd (2003) 24 ILJ 1917 (LAC) Zondo
JP
emphasized that what is most important is to determine the
purpose of the dismissal. The learned Judge President stated at para
[37]:
“
[37] Such an employer may then dismiss the
employees for operational requirements in order to get rid of them
permanently and employ
a new workforce that will be prepared to work
in accordance with the needs of his business. In such a case the
employer will be
dismissing the old workforce because the contracts
of employment he has with them can no longer properly serve his
operational
requirements. That was the nature of the dismissal that
the employer effected in TAWU & others v Natal Co- operative
(Pty)
Ltd (1992) 13 ILJ 1154 (D) as well as in Fry’s Metals
(Pty) Ltd v NUMSA & Others (2003) 24 ILJ 133 (LAC). However, in
a
case where it requires the working of short- time, such as has been
referred to above, the employer could take the attitude
that for
certain reasons such as their experience and skills he does not want
to get rid of his workforce permanently but wishes
to retain them
and for that reason dismiss them not for the purpose of employing
others in their position permanently but for the
purpose of
compelling them to agree to work short- time. If he did that, he
would be hoping that the implications and consequences
of dismissal
would be such that the employees would feel they should rather agree
to the employer’s demand and face such
consequences. Under the
repealed Labour Relations Act 28 of 1956 (the old Act), such a
dismissal was permitted. Under the current
Act it is not permitted
and it is automatically unfair. From this it must be abundantly clear
that the existence of valid operational
requirements does not prevent
a dismissal being effected for the purpose contemplated by s 187 (1)
(c). What is most important
is to determine what the purpose of the
dismissal is.”
[50] In this matter, the purpose of the dismissal was,
in the language used in Algorax, to get rid of the entire workforce
of
the appellant and replace it with independent contractors. When
the appellant decided to dismiss the employees, it had no intention
of later withdrawing the dismissal and re-employing them. Instead
what appears to be clear is that even after the dismissal
the
appellant was prepared to engage them not as employees but as
independent contractors. Consequently, the present dismissal
has
none of the two essential features of an automatically unfair
dismissal identified in
Fry’s Metals
and
Algorax
.
As a result I conclude that the Court a quo erred in holding that
the employees’ dismissal constitutes an automatically
unfair
dismissal as contemplated in s 187 (1) (c).
Substantive unfairness
[51] As it appears above, the Labour Court’s
conclusion to the effect that the dismissal was substantively unfair
was based
on two key findings. The first finding was that the
appellant had alternative options to dismissal by means of which it
could have
implemented its proposal. As an example of such options
the Labour Court suggested that the appellant could have unilaterally
implemented
the proposal and if the workers resisted, it could have
enforced the implementation by disciplinary action or used a lockout.
For
this finding reliance was placed on the decision of the Labour
Court in
NUMSA & others v Fry’s Metal & others (Pty)
Ltd (2001) 22 ILJ 701 (LC)
and
SACWU v AFROX Ltd (1999) 20 ILJ
1718 (LAC) at 1731
.
It needs to be noted that the decision
of the Labour Court in Fry’s Metal has since been overturned by
this Court on appeal
in the Fry’s Metal case referred to above.
As to the reference to 731 of the judgment of this Court in Afrox, a
reading of
that page of the judgment does not reveal any support for
that finding of the Labour Court nor is there support for that
proposition
anywhere in the judgment of this Court in Afrox.
[52] The other finding is that the appellant failed to
prove that the increase in production costs and decrease in
productivity
justified the retrenchment of the employees because it
did not close down the quarry but simply outsourced it as the jobs
for the
retrenched employees still existed.
[53] It seems to me that the alternative options
suggested by the Court a quo as having been available to the
appellant were not
viable options. It is not permissible for an
employer to unilaterally change the existing terms and conditions of
employment applicable
to his employees. Nor will he be justified to
institute disciplinary action against the employees who resist the
implementation
of the unilaterally changed terms and conditions. The
employees’ resistance against such unilateral changes cannot be
regarded
as constituting misconduct. In my view, the reliance on both
Fry’s Metals
and
Afrox
on this point was
misplaced.
[54] Furthermore, I do not agree that the continued
production at the quarry invalidates the reason given for dismissal.
In a case
where a dismissal for operational requirements is directly
linked to the employees’ rejection of the proposals to changing
terms and conditions of service, the continuing existence of the
employees’ jobs is irrelevant to the determination of whether
or not there was a fair reason for the dismissal because such
dismissal would have been necessary by virtue of changing business
requirements and not that the jobs themselves were redundant. As it
was stated in
Algorax
an employer who requires to effect
changes to terms and conditions of service due to operational needs
of the business may dismiss
the employees who reject such terms and
replace them with new employees who are prepared to work in
accordance with the needs of
the business provided the requirements
of s 189 are met.
[55] Mr van der Riet submitted that the evidence placed
before the Court a quo by the appellant was not cogent and not
sufficient
to establish reasons for retrenchment. I disagree. While
it may be true that some of the evidence led had flaws, there was
sufficient
evidence which proved competitiveness as one of the
reasons for the dismissal. The appellants Human Resources Manager, Mr
Walter
Lukhuleni (spelt Lukeleni), testified that when he joined the
appellant in 1998 he was informed about the production targets each
division was expected to meet and he observed that such targets were
not met by the employees. He discussed the issue with the
supervisors who were also elected shop stewards and new production
targets were agreed to by him and the employees’
representatives.
Notwithstanding this agreement the issue of
productivity remained a serious problem because targets were not met,
Mr Lukhuleni
further testified. He also said that the issue remained
a problem even after the appellant had taken remedial steps such as
talking
to supervisors and taking disciplinary action against
individual employees who under -performed.
[56] The evidence referred to above was neither
challenged nor rebutted by the respondents. In fact during his cross-
examination
Mr Lukhuleni was not cross- examined on that portion of
his testimony. Therefore, it should be accepted as correct. His
evidence
showed clearly that production targets agreed to in order to
make the appellant competitive were not met despite certain remedial
steps having been taken by the appellant.
[57] The fact that during the period leading up to and
at the time of the retrenchment the appellant made some profits does
not
mean that it was precluded from retrenching the employees. The
appellant could still decide that its business required that the
employees’ terms and conditions of service be changed in order
to be more profitable and more competitive. If the employees
rejected its proposal on changing the terms and conditions, as it was
the position in this matter, then the appellant would be
entitled to
dismiss them for operational requirements under s189. In
Fry’s
Metals
Zondo JP
rejected an argument that a dismissal for
the purpose of making more profit is not a dismissal for operational
requirements. In
this regard the learned Judge President said at para
[33]:
“
(T)hat argument has no statutory basis in our
law. This is so because all that the Act refers to, and recognises,
in this regard
is an employer’s right to dismiss for a reason
based on its operational requirements without making any distinction
between operational requirements in the context of a business the
survival of which is under threat and a business which is making
a
profit and wants to make more profit. Neither Thompson in his article
nor counsel in his argument has pointed to any provision
in the Act
that can be relied upon to make the distinction. Accordingly, I would
have rejected the contention in any event.”
[58] Therefore, I find that the employees in the present
case were dismissed for a fair reason based on the appellant’s
operational
requirements and consequently that such dismissal was
substantively fair.
Procedural unfairness
[59] Mr Redding argued that the Court a quo erred in
concluding that the issue of retrenchment was not considered by the
parties
at their consultation meetings. The appellant contended that,
although it did not expressly say that it was consulting the
respondents
in terms of s189, it was clear from the evidence led
that such consultation was aimed at achieving a solution to existing
operational
requirements with retrenchment as a possibility should
the parties fail to reach a consensus on the solution.
[60] The Court a quo, in concluding that the dismissal
was procedurally unfair, also found that the appellant had regarded
consultations
on terms and conditions of employment to have been
consultations under s 189 simply because they were necessitated by
operational
requirements. Insofar as reference having been made to
closure of the quarry and retrenchment the Court stated:
“
It is clear from the evidence that the
reference to the retrenchment and closure of the business during the
consultations on terms
and conditions of employment during the period
of July to February did not amount to an indication by the respondent
[appellant]
to the applicants [the respondents] that it wanted to
discuss retrenchments with the first applicant [first respondent] as
contemplated
in section 189 of the Act. The discussions between the
parties related to the respondent’s [appellant’s]
proposed changes
to terms and conditions of employment and did not
amount to retrenchment consultations in terms of section 189 of the
Act.”
[61] In support of the Labour Court’s judgment Mr
van der Riet argued that the basic issues which should be
considered at
a consultation in terms of s189 are the need to
retrench and the reason why the employer regards retrenchment as an
appropriate
measure in the circumstances. He submitted that the
appellant referred to retrenchment only as a threat to influence the
employees
to agree to the enforcement of an agreement on changing
the terms and conditions which was reached between the appellant
and
the first respondent.
[62] Before us Mr van der Riet adopted a position that
differed from the respondent’s case in the Court a quo. In that
Court
the respondents had contended that they did not reach any
agreement on the new terms and conditions proposed by the appellant.
Before us Mr van der Riet submitted that an agreement was reached
between the first respondent and the appellant but it could not
be
implemented because some of the workers did not accept the agreement.
He argued that instead of retrenching the employees the
appellant
could have implemented the agreement. In other words Mr Van der Riet
accepted that an agreement had been reached between
the appellant and
the respondents.
[63] The respondents’ contention on the existence
of an agreement seriously undermines their argument on procedural
unfairness
because, if such agreement was reached, there could not be
any complaint of procedural unfairness because this would mean that
the consultation between the parties achieved the main objective of a
consultation under sec 189 of the Act.
[64] However, the Court a quo decided the matter on the
basis that the appellant had failed to indicate to the respondents
that
it wanted to discuss retrenchment as required by s189. While it
may be true that the appellant did not expressly state that the
consultations were held in terms of s189, it was, nonetheless, clear
from the agenda of the issues to be considered at some of
the
consultation meetings that the parties were required to consider
issues relevant to a consultation process in terms of the
section.
Even if the respondents had initially laboured under the impression
that the purpose of the consultation was to seek the
employees
consent to the proposed changes to terms and conditions of service,
such a misunderstanding must have been cleared by
the terms and the
language employed in some of the notices they received from the
appellant.
[65] Tully’s evidence was to the effect that when
the appellant contemplated retrenchment as a possible solution in the
event
of the employees rejecting its proposal on restructuring, it
instructed the firm to give the necessary notice to the first
respondent.
Indeed, on 13 July such notice was issued to the shop
stewards’ committee and the relevant portion thereof reads as
follows:
“
The company has now reached a stage where it
needs to enter into consultation with all affected employees. Below
are further details
which in terms of the
Labour Relations Act, need
to be made available to the affected employees.
1. VALIDITY OF BUSINESS REASONS FOR RESTRUCTURING
As previously indicated by the company, the purpose
of the restructuring is to ensure competitiveness and to secure the
future of
the company
2. APPROPRIATE MEASURES
To secure all jobs
To close the hostel
To abolish the feeding scheme
To restore dignity of all employees
3. SELECTION CRITERIA
The selection criteria would be for all employees at
the Quarry.
In order to assist all employees in making a
meaningful representation to management we have to set all the
relevant information
pertaining to the proposed restructuring
process.
(a) REASONS FOR THE PROPOSED RESTRUCTURING
If the company were to restructure in the manner
proposed. The following business imperatives would be achieved:
Render the company more competitive as a South
African supplier of natural tiles.
Establish an effective and cost- effective
organisational structure whilst increasing turn over and thus
becoming a more stable
employer. In this way the company will be
better placed to meet the difficult trading conditions in the
future.
Provide shortened lines of communication, control
and direction.
Position the company closer to its ultimate goal of
being the most economical natural tile supplier in South Africa.
ALTERNATIVES CONSIDERED BY MANAGEMENT BEFORE
PROPOSING RESTRUCTURING
The process of repositioning the company is an
ongoing exercise which (sic) the poses a constant challenge to
management who carry
the responsibility of changing the company in a
business and market environment. The purpose behind this approach is
to constantly
enhance the viability of the company by increasing our
cost effectiveness to our clients and in this way, increase our
competitiveness
in the industry. We remain open for suggestions and
discussions, which ensure that the company reaches its stated goal.
(c) NUMBER OF EMPLOYEES AFFECTED
Employees at Mazista Quarry. This total should not
exceed 307 persons
(d) ALTERNATIVES TO THE PROPOSED RESTRUCTURING
In the event that the employees have alternative
proposals to our proposed restructuring process, we would like to
have such proposals
to be tabled with management via their
representatives.”
[66] The above notice formed the agenda of the meeting
which was proposed for 19 July and to which the first respondent and
the
shop stewards committee were invited. This meeting was convened
after the appellant had complained to the first respondent for its
failure to attend the previous meetings. It is significant to note
that the agenda consisted of the issues referred to in
s189
(2) and
(3) such as appropriate measures, reasons for restructuring, the
number of the employees likely to be affected and the
selection
criteria. Furthermore, the notice states that the information given
therein is furnished in terms of the
Labour Relations Act.
[67
] The relevant portion of
s 189
reads as follows:
“
(1) When an employer contemplates dismissing
one or more employees for the reasons based on the employer’s
operational requirements,
the employer must consult-
(a) ….
(b) if there is no collective agreement that requires
consultation-
…
any registered trade union whose members are likely
to be affected by the proposed dismissals;…
(2) The employer and the other consulting parties
must in the consultation envisaged in subsections (1) and (3) engage
in a meaningful
joint consensus- seeking process and attempt to reach
consensus on-
appropriate measures
(i) to avoid dismissals;….
the method for selecting the employees to be
dismissed; and
the severance pay for dismissed employees.”
[68] In
Baloyi v M& P Manufacturing (2001) 22 ILJ
391 (LAC)
the purpose of
s189
(1) and (2) was described in the
following terms at paras [20] and [21]:
“
In short,
s189
(1) provides for the identity
of the parties to be involved in the process of consultation with the
employer.
Section 189
(2) sets out the agenda and objectives of the
process to be adopted by an employer when the latter contemplates
dismissing employees
for reasons based upon operational requirements.
[21] Read together, the two subsections represent the
codification of the standards which had previously been developed by
way of
the principle of fairness as contained in the concept of an
unfair labour practice.
Section 185
may well require that an employer
must comply with both the substance and the form of the requirements
as contained in
s189
, but it adds nothing to the content of the
process to be followed.”
[69] In the present matter the appellant invited the
first respondent whose members were likely to be affected by the
restructuring
to a meeting which was scheduled for 19 July and also
issued an agenda which covered issues referred to in
s189
(2).
Moreover, it appears that, at the initial stages of the consultation
process, the first respondent was prepared to reach consensus
with
the appellant by accepting its proposal and have appropriate
contracts drawn up. It was only later that the first respondent
indicated that the employees rejected the appellant’s proposal
and preferred that the status quo be maintained. At that stage
the
appellant asked to be furnished with the employees counter- proposals
but the first respondent failed to come up with any counter
-proposals despite the appellant having pointed out that the
employees would face retrenchment if an acceptable solution was not
found.
[70] For the above reasons I am unable to agree that
the consultation which took place between the parties did not comply
with
the requirements of
s189
and that the dismissal was procedurally
unfair. In my view, the respondents were given an adequate
opportunity to furnish the
appellant with whatever counter- proposals
they had in order to avoid being retrenched and they had failed to do
so. Instead, they
claim that they perceived the entire process to
have amounted to negotiations for the proposed changes to terms and
conditions
of employment. According to them the appellant should have
commenced a fresh process of consultation when the employees rejected
its proposal even though they had no counter- proposals to make. In
view of the notice issued by the appellant on 13 July setting
out the
agenda of the meeting of 19 July, it is inconceivable that the
respondents could still argue that the consultation was
about
changing the terms and conditions of service.
[71] In the light of all the above I conclude that the
dismissal was fair both substantively and procedurally. Accordingly
the appeal
must succeed.
Costs
[72] As to costs Counsel on both sides asked that the
costs of the appeal should follow the result and that the costs order
in the
Court a quo remain unchanged. As this suggestion appears to be
fair I intend to give effect to it.
[73] Accordingly the following order is made:
The appeal is upheld with costs.
The order of the Court a quo is set aside and the
following order is substituted for it:
“(a) The claim is dismissed.
(b) There is no order as to costs.”
JAFTA AJA
I agree.
ZONDO JP
I agree.
MOGOENG JA
Appearances:
For the appellants : Adv. A. Redding
Instructed by : Van Zyl Du Randt Incorporated
For the respondents: Adv. H. Van der Riet SC
Instructed by : Cheadle Thompson & Haysom Attorneys
Date of judgment : 22 September 2004