Continental Tyre SA (Pty) Ltd v National Union of Metal Workers of South Africa (P301/05, PA2/06) [2008] ZALAC 4; [2008] 9 BLLR 828 (LAC); (2008) 29 ILJ 2561 (LAC) (19 May 2008)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Labour Appeal Court
SAFLII
>>
Databases
>>
South Africa: Labour Appeal Court
>>
2008
>>
[2008] ZALAC 4
|

|

Continental Tyre SA (Pty) Ltd v National Union of Metal Workers of South Africa (P301/05, PA2/06) [2008] ZALAC 4; [2008] 9 BLLR 828 (LAC); (2008) 29 ILJ 2561 (LAC) (19 May 2008)

IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA
(HELD AT
JOHANNESBURG)
Labour Court Case No.: P301/05
Labour Appeal Court Case No: PA2/06
CONTINENTAL
TYRE SA (PTY) LTD Appellant
and
THE NATIONAL UNION
OF METAL WORKERS
OF SOUTH AFRICA
Respondent
JUDGMENT
DAVIS
JA:
Introduction
[1] The respondent successfully obtained an order
declaring certain dismissals contemplated for operational
requirements to be invalid
and further directing the appellant not to
give effect to these envisaged dismissals but to include the affected
individuals within
the ambit of section 189 A of the Labour Relations
Act 66 of 1995 (‘the Act’). It is against this order that
appellant has
approached this court on appeal with leave of the court
a quo.
Factual Matrix
[2] The essence of the dispute can be set out by
adopting the following chronology:
On 15 September 2004, the product manager, of appellant
Hein Johnson, wrote to respondent proposing certain transfers from
appellant’s
Steel Truck and Extruder Departments (‘STED’).
Thereafter appellant entered into negotiations with both respondent
and the
Solidarity Trade Union with a view to converting the
appellant’s work place to a so called 6.5 day continuous shift
pattern, that
all working hours would be paid in terms of the
provisions of the relevant bargaining council collective agreement
and all the relevant
provisions contained in the Basic Conditions of
Employment Act 3 of 1983.
[3] On 30 March 2005 appellant held meetings with the
two trade unions, during the course of which it explained its
operational needs.
In terms of this explanation, it was proposed
that one shift would be declared redundant. No job losses were
contemplated at this
stage. It appears that these conversations
were directed changes with STED.
[4] According to the answering affidavit deposed to by
Ms. Kruger, the employees’ services manager of appellant, an
agreement was
reached with both Solidarity and respondent, in terms
of which, inter alia, the affected members would take up alternative
positions
within appellant’s workforce, the agreement to commence
on 1 May 2005. It appears that this agreement was not implemented
and
a further meeting was then scheduled for 10 May 2005. When the
members of respondent refused to implement this agreement which meant
that the affected employees refused to take up alternative positions,
appellant then contemplated dismissals within the STED workforce,
probably on 10 May 2005 when notices in terms of section 189 of the
Act were issued.
[5] On that day, appellant was contacted by its German
parent company and informed of a dramatic decrease in the general
demand for
tyres to the extent of some 400 000 (four hundred
thousand) tyres. This notification indicated that the overall
decrease in demand
did not only affect the appellant’s plant but
various plants within the world wide Continental Tyre group. On 11
May 2005 and
again on 18 May 2005 appellant posted notices referring
to a negotiation surrounding a 6.5 day shift pattern, the expense of
labour
and a general drop in the demand for tyres.
[6] On 11 May 2005 the following notices appeared:
‘The Company warned NUMSA that the shift pattern rendered the cost
structure of production over weekends out of line with the
requirements
of Continental AG.….. however, this shift pattern has
influenced the cost as a result of this’
On 18 May
2005 a further notice read:
‘Since April 2004, the Company has tried to implement a revised
shift system in an attempt to increase our CUD’s and become more
cost competitive. Although agreement was reached on the increase in
CUD’s, the cost of production on weekends and specifically
on
Sundays remained too expensive. As a result, of inter alia, our
inability to reach agreement on the cost structure on weekend
work,
the Company is currently faced with a dramatic reduction in demand
for our products (400 thousand tyres less in Export and
450 thousand
tyres less in the local market).’
[7] On 17 May 2005 a meeting took place between the
appellant and respondent. The meeting examined confidential
information regarding
the anticipated decrease in production. The
presentation which was made by appellant at the meeting indicated
concern about the
reduction of production volumes and, “a fixing of
our cost.” Various steps were proposed to deal with the situation,
including
the cessation of weekend production, the radial tyre truck
department to run at a maximum and a re-evaluation to be conducted at
the end of August 2005.
[8] On 26 May 2005 a meeting took place at appellant’s
premises, attended by legal representatives of both appellant and
respondent.
At this meeting respondent advised that the
operational needs of the Cross-Ply Department had to be addressed as
a matter of extreme
urgency. According to Ms. Kruger ‘the loss of
approximately one million tyres would have a severe impact on the
operational requirements
of respondent… It was, indeed, the
consistent attitude of respondent to avoid any possible dismissals
based upon operational requirements
pertaining to the respondent’s
needs that faced respondents as at 10 May 2005’. On that day
appellant recalled its section 189
(3) notice which had been issued
on 10 May 2005 and re-issued a new one to all employees in STED.
[9] On 26 May 2005 appellant issued a section 189 notice
to employees in the Cross-Ply Department. The relevant notices
explained
the rational for the decision and referred to other
alternatives which have been explored by appellant to deal with the
problem in
this particular department.
[10] On 30 May 2005 correspondence was generated between
the parties which indicated that appellant would terminate the
service of
48 employees. At the end of May 2005 appellant
terminated the weekend shift and subsequently laid off certain of its
employees.
On 31 May 2005, respondent’s attorney of record wrote
to appellant’s attorney of record suggesting inter alia: ‘it does
appear
to be patently clear that your client is indeed contemplating
the dismissal of a substantial number of employees which will quite
conceivably affect departments other than those referred to in the
two initial s189 (3) notifications’.
[11] Appellant’s attorney replied: ‘our client
confirms that, it shall proceed, to avoid, at all costs the
anticipated dismissal
of any employees within the workplace and, we
specifically refer to the rather expansive correspondence already
exchanged between
the parties. It clearly exhibiting our client’s
intention to retain all the employees concerned. To this end, our
client restates
its position, that even within their Steel Truck and
Extruder Departments reasonable alternatives have been made to all
possibly
affected employees, subject to your client’s cooperation
within the joint consensus seeking framework’.
[12] Further claims of a similar nature were made by
respondent’s attorney which elicited a reply on 3 June 2005: ‘Our
client
has made it abundantly clear during the course of the process
they will purposely implement broader alternatives to alleviate
operational
requirements rather than to contemplate the dismissal of
any employees.’
[13] A further meeting took place 13 June 2005 where
appellant met with respondent regarding the problems of STED as well
as the Cross-Ply
Department. Correspondence generated by appellant
on 14 June 2005 included the following comment: ‘it is of paramount
importance
that parties endeavor to reach consensus on the
implementation of viable production structures to accommodate this
productions in
demand’.
[14] On 7 July 2005, Ms. Kruger, on behalf of appellant,
wrote to respondent as follows: ‘With specific reference to our
ongoing
consultations regarding the Steel Truck and Cross-Ply s189
notices, the company regrets to advise that the list of alternatives
that
was provided to yourselves nearly 3 weeks ago has had to be
dramatically altered as a large portion of the stated alternative
function
are no longer existing (sic). This has come about inter
alia by the further reduction in our daily production volumes….
The
company invites NUMSA to make submissions in terms of these
alternatives’.
[15] A further meeting took place on 13 July 2005 at the
work place of appellant. At that meeting the dismissal of those
employees
whose names appear on Schedule One to the Notice of Motion
was confirmed. Ms. Kruger avers that even thereafter ‘the
applicant
absolutely failed and/or refused to provide any proposal
and/or input pertaining to the outstanding items notwithstanding my
further
request made on 19 July 2005…. and I only issued individual
termination letters containing the relevant financial information on
29 July 2005’.
[16] On 7 June 2005 respondent’s attorney wrote as
follows to appellant’s attorneys:
“Furthermore, our client anticipates that based upon the utter
exhaustion of the s189-proceedings of the Steel Truck and Cross-Ply
Departments, final decisions should be made in this regard and with
reference to the dismissal of selected employees by no later
than 8
July 2005…”
With reference to the general and decreased productivity
demands within our workplace
our client is
currently finalizing its formal notification in terms of Section
189A
, of the Act and, its rights are
similarly reserved in this regard. We confirm that all relevant
issues pertaining to our client’s
operational needs shall form part
and parcel of this process…”
[17] Section 189A notices were then issued either on 19
or 20 July 2005. In these written notifications, the reasons given
included
a fall in the volume for passenger tyre sales both locally
and internationally, no indication of improvement, a prediction of a
steady
decline and hence a further reduction of production volumes,
the effect of aggressive price wars between local manufacturers as
well
as the import of less expensive foreign made tyres direct into
the local market and, the down turning of the international market
resulting in reduced exports.
[18] In its section 189A notice, appellant sets out the
following alternatives which it had already explored:
A moratorium on recruitment since May 2005
Termination and/or non renewal of all fixed term
employment contracts
Moratorium on overtime
Lay off of fourth shift / attempt to reduce alternate
shift structure
Natural attrition i.e. resignation, transfers, earlier
retirements.
[19] As a result of these developments, respondent
approached the Labour Court for urgent relief.
Finding of court
a
quo
[20] In his judgment, Ngcamu AJ defined the key issue
for determination as to whether s189A superceded the process under
s189 of the
Act, in the case where the employer issues a s189 notice
immediately on contemplation of dismissal of employees but before
finalization
of that process contemplates the dismissal of additional
employees so that the total of contemplated dismissals falls within
s189A.
The learned judge found: ‘Section 189A notification was
issued when the Section 189 process had not been finalized. I reject
the
respondent’s submission that the process had by then been
finalized. I do so on the basis, if indeed the process had been
finalized
there was no point in furnishing information to the
appellant which was requested in June. Even if I accept that the
process in regard
to s189 has been finalized, the issuing of Section
189A immediately indicated that the respondent had not been
bona
fide.
’paras 55-56.
[21] It is
to the scope and relationship of ss 189 and 189A that we must
therefore turn.
The relevant legislation
[22] Section 189(1) provides,
inter
alia
, when an employer contemplates
dismissing one or more employees for reasons based on the employers
operational requirements, the
employer must consult-
any person whom the employer requires to consult in
terms of a collective agreement
if there is no collective agreement that requires
consultation
any registered union whose members are likely to be
affected by the proposed dismissals.
[23] Section 189 (3) provides:
The employer must issue a written notice inviting the
other consulting party to consult with it and disclose in writing all
relevant
information, including, but not limited to-
the reasons for the proposed
dismissals;
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;
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;
the possibility of the future re-employment of the
employees
who are
dismissed;
the number of
employees
employed by the employer;
the number of
employee
s
that the employer has dismissed for reasons based on its
operational
requirements
in the preceding 12 months.
[24] Before s189A was introduced into the Act in 2002,
employees could not strike over proposed retrenchments. Hence, the
precise
purpose of s189A was to provide employees with the right to
strike over dismissals based upon operational requirements provided
that
the provisions of s189 (1) were satisfied. S189 creates a
threshold prior to its operation. It only applies to employers who
employ
more that fifty employees. A cut off of ten proposed
retrenchments is required when the workforce is below two hundred,
fifty proposed
retrenchments when the workforce is over five hundred
and otherwise there must be a proposal to retrench at least 10% of
the workforce.
[25] It is common cause that, in the present dispute, if
all the proposals for retrenchment of respondent’s members were
taken into
account, more than fifty employees were to be retrenched.
[26] Mr. Niehaus, who appeared on behalf of the
respondent, submitted that the court
a quo
had been correct in its decision, because, by splitting the
retrenchment decision into three segments, firstly STED, then the
Cross-Ply
Department and finally the balance of the workforce,
appellant had sought to subvert the rights given to employees in
terms of s189A.
In his view, it was convenient for the appellant
that only forty eight workers stood to be retrenched in so far as the
first two
proposals were concerned. Mr. Niehaus contended that in
this way appellant had attempted to circumvent the possibility of a
strike
under s189A which could otherwise have taken place. By
compartmentalizing one retrenchment process into three, he contended
that
appellant had acted in
fraudem legis.
The essence of Mr. Niehaus’s submission was
that, in the last week of May 2005, a number of workers were laid
off, albeit temporarily.
These were the employees in his words were
“the subject matter” of the s189A notice. Given that the
section 189 notices indicating
that a dismissal of various workers in
the STED and Cross-Ply Departments had been issued on 25
th
May and 26
th
May
2005, it was clear, in his view that, when these notices were issued,
the possibility of a s189A retrenchment had to have been
foreseen by
the appellant. Accordingly the entire process should have been dealt
with in terms of s189A.
Evaluation
[27] In
Atlantis Diesel Engine
(Pty) Ltd v NUMSA
[1995] ZASCA 30
;
1995 (3) SA 22
(A) at 28 F
Smallberger JA held that the duty to consult arose when ‘the
employer having foreseen the need for it, contemplates
retrenchment.
This stage would normally be preceded by a perception or recognition
by management that its business enterprise is
ailing or failing; a
consideration of the causes and possible remedies; an appreciation of
the need to take remedial steps; and the
identification of
retrenchment as a possible remedial measure’. That judgment
however did not engage with the wording as employed
in s189 of the
Act based as it was on the Labour Relations Act 28 of 1950.
[28] This court in
General Food
Industries Limited v Food and Allied Workers Union
2004 (25) ILJ 1260 (LAC) considered the relevant provisions of the
Act as follows: ‘An employer is entitled to take the provisional
decision to consider the possible retrenchments 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
union 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 a dismissal of employees for operational requirements’.
Furthermore, in
Enterprise Food (Pty) Ltd v
Allen and others
(2004)25 ILJ 1251 (LAC) at
para23 this court confirmed that the word “contemplates” does not
exclude an employer ‘developing
a preliminary approach upon which a
decision may be based.’ As Martin Brassey
Commentary
on Labour Relations Act
A8-91 writes: ‘An
employer is entitled to consider whether a new scheme or structure
might be viable before initiating the process
of consultation’.
[29] In the application of the facts of the present
dispute to this legal position, it must be remembered that the relief
sought was
in the form of a final interdict. In connection with
this form of relief this court said in
Fry’s
Metal (Pty) Ltd v The National Union of Metal Workers in South Africa
& others
(2003) 24 ILJ 133 (LAC) at paras
37- 40:
‘In such a case the court makes its decision insofar as any dispute
of fact is concerned, on the basis of the version of the respondent
party unless that version is so far fetched or clearly untenable that
the court is justified in rejecting it merely on the papers
or the
denial by the respondent of a fact alleged by the applicant is such
as not to create a real or genuine or bona fide dispute
of fact. In
a case where the respondent party’s version is so far fetched or so
untenable that the court is justified in rejecting
it merely on the
papers or where the denial by the respondent of a fact alleged by the
applicant is not such as to create a real
or bona fide dispute of
fact, the court must include the fact alleged by the applicant among
the facts it takes into account in deciding
whether or not to grant
the final relief. Of course, the other facts that the court will
take into account are those that are alleged
by the applicant and
admitted by the respondent (or which the respondent cannot deny) as
well as those facts which are alleged by
the respondent’.
[30] Ms. Kruger, in her answering affidavit, contends in
relation to the s189 processes concerning STED and Cross-Ply
Department:
‘in relation to the 39 dismissed employees it should be
noted that at no stage whatsoever did the applicant during the course
of
my countless meetings and /or consultations, dispute the
fairness/or validity pertained to the operational needs of the Steel
Truck,
Extruder and/or Cross-Ply Departments. I was present at all
of the aforestated meetings, and, not once, during the course of such
meetings/consultations did the applicant even attempt to make out a
case that the respondent does not possess over such fair and/or
economical reasons’.
[31] To this averment appellant’s response in reply
was: ‘having regard to the fact that the applicant has consistently
questioned
the respondent’s
bona fides
relevant to the retrenchment processes, the applicant finds it
incomprehensible that the respondent can now allege that the
applicant
never challenged the underlying substantive reason for the
retrenchment’.
[32] Unfortunately, save for this broad statement
summarizing the general approach adopted by respondent during this
dispute, there
is no evidence provided to this court which gainsays
the averment that the commercial rationale of the s189 processes had
ever been
attacked by respondent. Furthermore, as Mr Wade, who
appeared on behalf of appellant observed, respondent had been brought
in to
a meeting on 17 May 2005 to deal with the confidential
information provided by appellant’s parent in Germany. At no
stage had
either party and, in particular respondent, raised the
question of retrenchments in terms of s189A of the Act.
[33] Mr. Wade noted that, as late as 14
th
June 2005, Ms. Kruger stated the following in a letter written to
respondent: ‘The disclosure of information to yourselves is now
fully and completely dealt with in so far as the reissuing of the
relevant information packs as well as our consultation of yesterday’.
She then went on to say: ‘In the light of the above the company
extends a final invitation to NUMSA to meet on Monday, 20 June
at
12h00 to make representations in terms of s189 (2) of the LRA
regarding the selection of affected employees and alternatives in
order for the company to make a final decision in this matter’.
[34] It appears that, until a very late stage, appellant
sought to find alternatives other than retrenchment. It is clear
from the
s189A notice of 19
th
July 2005 that appellant had considered a number of alternatives
before moving to a decision to retrench in terms of s189A, including
a moratorium on recruitments since May 2005, termination or non
renewal on all fixed term employment contracts, a moratorium on
overtime,
a layoff of the fourth shift in an attempt to introduce
alternative shifts structures, and natural attrition, being
resignations,
transfers and early retirements.
[35] In my view, it could not be said that, as at the
end of May 2005, the appellant had contemplated retrenchments as
defined in
this judgment and the other judgments of this court cited
in relation to s189A retrenchments. Indeed s189(3) makes it clear
that
an employer must issue a written notice inviting the other
consulting party to consult with it and must disclose in writing all
relevant
information including but not limited to the alternatives
that the employer considered before proposing the dismissals and the
reasons
for rejecting each of those alternatives. Applied to the
notice of 19th July 2005, it is clear that the employer considered
various
alternatives before it proposed dismissals. In short, the
contemplation necessary to trigger s189 and s189A of the Act does not
occur when the employer initially considers alternatives. In a case
such as the present, where, for the relevant period, retrenchments
were not even upon the ‘contemplative agenda’ it was only once
the alternatives had been discounted that the employer considered
a
process of dismissal and then was obliged to consult.
[36] The s189 processes commenced in this case and
continued almost to conclusion before the s189A process began. They
were separate
processes. It may well be that a process begins under
s189 which had just commenced when the employer contemplates a larger
process
of retrenchments covered by s189A. If the employer then
ignores the implications of s189A, on the particular facts, it could
be held
to have acted in a manner so as to avoid the scope of s189A
and thereby to have subverted the hard earned rights won by employees
in terms of the Act.
[37] However, based on these papers viewed in terms of
the approach adopted in
Fry’s Metal
supra it is, in my view, not possible, on a balance of probabilities,
to conclude that appellant initiated, as it was obliged to
do, a s189
process with regard to the STED and Cross-Ply Departments when it had
already contemplated retrenchments within the meaning
and scope of
s189A.
[38] Respondent contended that it had requested
information from appellant as late as 17 June 2005 and hence the
process initiated
under s189 was not yet complete. However, the
evidence indicates that there were a set of generalized requests
which were not directly
applicable to the s189 retrenchments. In
any event, prior thereto, on 14
th
June appellant had taken the view that the exchange of information
had been completed. Nowhere further on respondent’s papers,
is any
specific evidence provided which indicated that the process had been
impeded in any way or that it had not effectively run
its course to
impasse.
[39] For these reasons therefore the following order is
made:
The appeal succeeds with costs.
The judgment of the Labour Court of 13 October 2005 is
set aside and replaced with the following:
The application is dismissed with costs.
______________
DAVIS J A
_____________
LEEUW JA
_____________
TLALETSI AJA
Appearances
Date
of Judgment: 19 May 2008
For
the appellant Advocate R B Wade
For the respondent
Mr M Niehaus