South African Municipal Workers Union (SAMWU) and Others v Kannaland Municipality (CA5/2007) [2010] ZALAC 2; (2010) 31 ILJ 1819 (LAC) ; [2010] 12 BLLR 1243 (LAC) (29 January 2010)

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South African Municipal Workers Union (SAMWU) and Others v Kannaland Municipality (CA5/2007) [2010] ZALAC 2; (2010) 31 ILJ 1819 (LAC) ; [2010] 12 BLLR 1243 (LAC) (29 January 2010)

IN LABOUR APPEAL COURT OF SOUTH
AFRICA
HELD AT JOHANNESBURG
CASE NO:
CA5/2007
In the matter between:
SOUTH AFRICAN
MUNICIPAL WORKERS
1
st
APPELLANT
UNION (SAMWU)
AA EWERTS &
16 OTHERS 2
nd
to 18
th
APPELLANTS
and
KANNALAND
MUNICIPALITY RESPONDENT
Judgment
Tlaletsi AJA
Introduction
[1]
This
is an appeal from a judgment of Nel AJ sitting in the Labour Court in
a trial relating to a dismissal dispute between the appellants
and
the respondent. The first appellants contended that the second to
eighteenth appellants (“the individual employees”) who
were all
members of the first appellant, a representative trade union
(“SAMWU”)
,
were unfairly dismissed by the respondent on 30 November 2004. The
respondent on the other hand, contended that the dismissal of
the
individual employees was based on its operational requirements and
was fair.
[2]
The
dispute concerning the fairness of their dismissal was referred to
the
South
African Local Bargaining Council-Western Cape
(“the Bargaining Council”). The dispute remained unresolved as at
27 November 2004 and a certificate to that effect was issued
by the
Bargaining Council on 5 December 2004. The matter was referred to the
Labour Court for adjudication.
[3]
It
is perhaps apposite to state that the matter was heard by the Labour
Court from 11 to 15 September 2006. Only the respondent tendered
oral
evidence.
[4]
The
Labour Court gave its judgment on 23 January 2007. The Labour Court
found that the dismissal of the individual employees was
substantively fair but procedurally unfair. Although the Labour Court
found the dismissal to be procedurally unfair, it made no order
for
compensation and costs.
[5]
Aggrieved
by that part of the order of the Labour Court relating to the
substantive fairness of the dismissal and failure to make
an order
for compensation and costs, the appellants applied for leave to
appeal against “the whole of the judgment” of the Labour
Court.
Leave was granted on 28 May 2007.
Factual background
[6]
The
following facts are either common cause or not in dispute. The
respondent is a municipality established in terms of the
Local
Government: Municipal Structures Act
117 of 1998
(“the
Structures Act”)
.
The process of establishing the respondent involved the amalgamation
of several municipalities, namely
Ladysmith,
Calitzdorp, Zoar
and
Van Wyksdorp.
[7]
During
2003, representatives of the
South
African Local Government Association (“SALGA”)
(of which the respondent is a member), the first appellant as well as
its sister trade union, the
Independent
Municipal and Allied Trade Union
(“IMATU”)
entered into a collective agreement termed the
Organisational
Rights Agreement
("the
ORA")
under the
auspices of the Bargaining Council. The ORA sought to regulate
inter
alia
, the organisational
rights afforded to the trade unions, the conduct of collective
bargaining and the resolution of disputes at national
level. The
agreement was binding on all municipalities affiliated to
SALGA
.
[8]
Clause
7 of the
ORA
made provision for the establishment of
Local
Labour Forums
at each
workplace. The workplaces in this instance were the member
municipalities. Such
fora
were compulsory dispute
resolution bodies at the workplaces. Disputes could be referred by
either the trade unions or municipalities
to these
fora
.
It is important to note that the
Local
Labour Forums
were not
empowered to deal with matters that are bargained at national and
provincial forums. Their powers and scope were only limited
to
matters relating to the work places and which were not the subject of
bargaining at either national and or provincial level.
[9]
During
December 2002 SALGA, SAMWU and IMATU entered into a collective
agreement which was commonly known as the
Placement
Agreement
. Clause 3 of
the
Placement Agreement
required each new municipality to prepare final organograms of all
departments and to submit it to the
Local
Labour Forum
s for
consultation prior to their finalisation by the Councils of the
municipalities. Should such consultation at the
Local
Labour Forums
fail to
reach consensus, the concerned municipality had the right to
unilaterally adopt and implement the aforesaid new organogram.
[10]
Following
its amalgamation, the respondent produced an organogram containing
the proposed structure for the municipality as envisaged
by the
Placement Agreement
.
This organogram was consulted on in the
Local
Labour Forum
and
agreement was reached. Placements in terms of the organogram were
subsequently effected. The date when the agreement on the organogram
and when it was subsequently implemented are not provided. However,
nothing turns on the said dates safe to note that the respondent
had
complied with the
Placement
Agreement
by submitting
the final organograms to the
Local
Labour Forum
for
consultation and an agreement was reached.
[11]
During
March 2004 an organisation known as
Zader
Municipal Services
was
tasked with investigating the parlous financial state of the
respondent. Out of this exercise a report dated 23 March 2004 known
as the
“Zader Report”
was produced. The report made certain proposals that included a new
organogram for the municipality. The report stated
inter
alia
that the new
organogram had been drawn up in conjunction with the Municipal
Manager and Heads of Departments of the respondent; that
there had
not been consultation at the
Local
Labour Forum
and that the
consultation process be completed once the
Local
Labour Forum
had been
reconstituted and its powers defined. It is important to note that
the new organogram had the effect of rendering at least
28 employees
redundant as they would not be catered for in the budget of the
respondent.
[12]
During
the course of the year 2004 the Member of the Executive Council
(“MEC”) responsible for Local Government and Housing in
the
Western Cape Province, acting in terms of Section 106 of the
Local
Government: Municipal Systems Act No
:
32 of 2000, (“the Systems Act”) appointed L A Dekker (“Dekker”)
and Oppelt to conduct an investigation into the affairs
of the
respondent. There were at that time serious allegations of
maladministration at the respondent. Dekker testified that he is
an
attorney specialising in Labour Law and Municipal Law. He had been in
the municipal field for about thirty years and also ten
years doing
Labour matters. The investigating team produced a report on its
activities dated 16 April 2004. This report became known
as the
“Dekker Report”
.
All relevant stakeholders including the trade unions, councillors,
officials and members of the public participated in the process.
Dr
Kaap whose entity produced the
Zader
Report
also made a
presentation to the investigating team.
[13]
Dekker
and Oppelt’s brief were to investigate alleged maladministration
and allegations concerning corrupt activities that were
taking place
at the respondent. The investigators were to gather evidence, make
findings and recommendations to the MEC. The following
are some of
the findings of the investigation relevant to this appeal:
13.1 It was found that the
recommendation that was made by a certain municipal finance official
who was appointed to assist the respondent
during 2002 about ways to
deal with the respondent’s financial deficit were not as yet
implemented by 2004;
13.2
Zader
Report
had established
that the income of the respondent was below than what was budgeted
for, and that there had been personnel appointed
without being
budgeted for. The team then prepared a financial recovery plan that
was adopted by the respondent and approved by the
MEC. This plan had
also not been implemented;
13.3 Loans and overdrafts were not
being repaid;
13.4 Politicians at the respondent
were involved in appointing staff. Through this unauthorised
process they improperly appointed
their family members and relatives;
13.5 Staff appointments were made
outside the policy framework of the respondent. The municipal
manager was contrary to policy framework
not involved in the
appointment process. The staff policy framework was only one page and
proved inadequate;
13.6 Post levels were not allocated
and job descriptions were incomplete. A glaring example is that of a
general labourer at the cemetery
at post level 14, who was rewarded
by being elevated eleven notches up to the position of
internal
auditor
by the Mayor
after he testified in the mayor’s defence at a rape trial.
Unsurprisingly, the appointee did not have the necessary
qualifications and experience of internal auditor position;
13.7 There were irregular and
ad hoc
upgrading of post
levels without changing the content of the post or providing reasons
for such steps;
13.8 Appointments, promotions and
upgrading of posts were done by the
Local
Labour Forum
and
submitted to the Executive Mayoral Committee only for information and
without taking the financial implications into account.
The City
Treasurer was not even part of the
Local
Labour Forum
. This
conduct together with others rendered the staff establishment of the
respondent to be unaffordable.
[14]
The
Dekker Report
made a number of recommendations aimed at improving the situation at
the respondent. Those relevant for this matter included:
that the respondent should create
an affordable staff establishment;
the
Local
Labour Forum
should be
reconstituted and its powers be limited to what was agreed
previously at SALGBC;
that a policy framework of the
respondent provided for in section 55 and 66 of the Systems Act be
revised, improved and approved
by the Council of the respondent;
that any possible dismissal of
employees based on operational requirements that might be considered
in terms of Section 189 of the
Act be done with the help and advice
of the
Western Cape Local
Government Association
(“WECLOGO”).
The report was handed to the MEC on
16 April 2004.
[15]
On
21 June 2004 the MEC for Local Government published a set of
directives emanating from the
Dekker
Report
. In addition the
MEC wrote a letter to the Mayor and the Speaker of the respondent’s
Council. In the letters the MEC outlined the
findings of the
investigating team and listed directives with time frames that were
to be implemented by the respondent. Some of
the directives were
that:
the respondent was to revise and
improve its policy framework in terms of section 55 and 66 of the
Systems Act
so as to enable the municipality to perform its statutory functions
(by 31 August 2004);
the respondent was to restructure
the organogram to make its staff structure “
leaner
and more streamlined
”
cost effective;
the
Local
Labour Forum
was to be
revived;
the revised organogram was to be
implemented once the Council had approved it and any possible
retrenchments were to be carried
out with the assistance of WECLOGO;
the timeframe set for completion of
the process was within three months.
[16]
It
is common cause that during April 2004, the first appellant was
advised by the respondent that approximately 28 employees of the
municipality were not catered for in the municipal budget and that,
as a result, the municipality was in financial difficulty.
[17]
On
28 April 2004 a
Special
Council Meeting
was
convened. Adv. Etienne Vermaak from SALGA had been appointed to
conduct the consultations for the envisaged retrenchments on
behalf
of the respondent. His appointment coincided with the recommendations
of the Dekker Report and the subsequent directive by
the MEC that any
possible retrenchments were to be carried out with the assistance of
WECLOGO
.
Vermaak as well as Mr Besselsen representing
ZADER
attended the meeting. A letter from SAMWU requesting some
clarification on the 28 employees not catered for in the budget was
presented
to the Council. The Council resolved to note the letter.
Both Vermaak and Besselsen addressed the council on the process
relating
to the negotiations about the restructuring that had taken
place up to that stage. They also reported to the Council what else
was
still to be done. Council resolved to approve their report and
that the unions be provided with a copy of the report.
[18]
It
is common cause that on 7 June 2004 Vermaak held a consultation
meeting with the unions. The meeting was postponed at the instance
of
the unions to enable them to study the Zader report.
[19]
A
second meeting was held on 21 June 2004 between Vermaak and the
unions. The meeting was also postponed so that the union could be
provided with the Section 106 report commissioned by the MEC. It is
also on this day that the MEC made the Dekker report public.
[20]
On
29 June 2004 a council meeting was held. At this meeting a new
organogram was tabled. Council noted the organogram.
[21]
On
19 July 2004
a
meeting was held between Vermaak and SAMWU. It would appear that
SAMWU was handed a Section 106 report. According to Johan De Wet,
who
was the
Manager:
Administration
at the
respondent, the purpose of the meeting was to consult on the
organogram. De Wet testified that he does not know whether the
minutes of this meeting were available. He however recalled that
SAMWU’s representatives at this meeting requested certain documents
relating pensions as well as the
Integrated
Development Plan (“IDP”)
of the respondent. De Wet testified further that the agendas, minutes
and other documents of the respondent were confiscated by the
South
African Police Services during an investigation conducted by
Dekker
during the year 2000 to 2004. De Wet confirmed that the process for
the preparation for the IDP was undertaken by the respondent
with the
participation of all stakeholders, including the unions. The IDP
document was ultimately adopted by the respondent on 24
April 2002
after it lay for inspection and comments for a period of 21 days. He
mentioned that it was the responsibility of the Municipal
Manager
that the
IDP
was
prepared and that it was ultimately implemented. The Municipal
Manager was also responsible for the preparation of a budget and
organogram of the respondent in terms of the
IDP
and to appoint staff that would deliver services in terms of the
IDP
.
De Wet testified further that the meeting of 19 July 2004 was
postponed in order to allow the
SAMWU
and also
IMATU
who was not represented at this meeting time to study the Section 106
report. This arrangement was confirmed by a letter from Vermaak
to
SAMWU
on 21 July 2004.
[22]
On
27 July 2004 Vermaak addressed a letter in terms of Section 189(3) of
the Act to the unions in which he,
inter
alia
, advised that:
22.1.the respondent’s Council had
approved the new organogram in principle and would take a final
decision on receiving a report
from WECLOGO on 30 July 2004;
22.2 the approval of the organogram
by Council would lead to dismissals of some employees;
23.3 a final request for
consultation in terms of Section 189 was being made.
[23]
On
30 July 2004
SAMWU
replied to Vermaak’s letter. In their reply they mentioned inter
alia
that:
23.1 there had up to that stage not
been any real consultation;
23.2 the organogram had not served
before the
Local Labour
Forum
and that a date
should be set for that purpose to finalise the organogram;
23.3 the section 189 (3) notice was
issued prematurely as the organogram had not been subject to
consultation before the
Local
Labour Forum
.
[24]
It
is common cause that there was no response to the aforesaid letter
from
SAMWU
wrote another letter to Vermaak in which they stated the following:
24.1 the issuing of the notice in
terms of Section 189 was premature as there had not been a
consultation on the new organogram and
also that the organogram had
not been approved by Council;
24.2 the consultation before the
Local Labour Forum
had been required by the
Zader
Report
and was also
compulsory;
24.3 a meeting before the
Local
Labour Forum
be convened;
that the forum be revised as suggested by the MEC and the
Zader
Report
; that the
organogram then be finalised and the affected employees be placed.
The letter made further submissions
regarding the effect of the new organogram on service delivery and
SAMWU’s proposals on the
organogram as well as their “expenditure
limiting strategy.”
[25]
In
the meantime Mr B G Seitisho had in the beginning of August 2004 been
appointed Acting Municipal Manager of the respondent. He
was
appointed to assist in resolving the administrative as well as the
financial problems at the respondent. According to Seitisho
there
were serious problems relating to lack of service delivery,
“
logistical
arrangements
” and the
administration was in a chaotic state. The MEC responsible for local
government had provided him with a two paged letter
containing things
that he had to perform. Seitisho was at the same time involved at
Kokstad and Plattenberg Bay municipalities in
the same capacity.
These Municipalities faced some challenges as well.
[26]
It
is not disputed that some of the serious problems discovered by
Seitisho were that the respondent was unable to fund its loans
from
the
Southern African
Development Bank
and
ABSA
bank. Funds from national and provincial governments intended for
projects were wrongly utilized to fund operational expenses; there
were no funds to run the sewer networks, water purification works and
road maintenance; UIF, PAYE, Pension and Medical Aid deductions
were
made from employee’s salaries but were not paid over to their
intended beneficiaries. This meant that book entries on these
items
were made without the necessary transfer of fund’s being made.
[27]
Seitisho
testified that upon his arrival at the respondent he was briefed by
Vermaak on what had transpired in the process that far.
He also met
the union leaders who were at that point not satisfied with the
consultation process that was supposed to have taken
place. Some of
the union’s complaints were that the organogram had not been
consulted on at the
Local
Labour Forum
. On the
other hand, Vermaak advised him that there had been proper and
adequate consultation. However, Vermaak was unable to produce
minutes
of consultation meetings he held with the unions
to support his claim. As
part of his mandate was to deal with retrenchments, Seitisho felt
duty bound to report to Council of the
respondent that there might
not have been enough consultation process and that to be on the safe
side, he needed more time to sort
out the consultation process.
[28]
There
was once again no response from the respondent to
SAMWU’
s
letter dated 15 August 2004 referred to above. However, on 16 August
2004 a Special Council Meeting of the respondent was held.
The
following was recorded on the minutes:
the Acting Mayor notes that the
two letters from SAMWU had been replied;
Mr Seitisho noted that the
respondent had possibly not consulted sufficiently enough with the
union;
Mr Seitisho requested a week to
finalise the consultation with the unions;
the matter would be finalised
during a Special Council Meeting to be held the following week.
[29]
On
30 August 2004 another Special Council Meeting was held. The minutes
reflected that:
“
it was noted that the “relevant
policy” was in place;
the Council would not take a
decision;
‘
Seitisho opined that the
decision rested with him’
;
The Council again would not take a
decision.”
[30]
On
31 August 2004 the individual employees were handed letters of
termination of employment for operational requirements dated 30
August 2004, with the termination date set as 30 September 2004.
[31]
It
is not disputed that a series of correspondence passed between the
appellant’s attorneys and Vermaak regarding the unlawfulness
or
otherwise of the intended dismissals of the employees. The appellants
demanded that the dismissals be withdrawn and in turn the
respondent’s officials were not prepared to do so.
[32]
On
29 September 2004 the appellants launched an urgent application
seeking to have the dismissals set aside. The application was set
down for hearing on 30 September 2004.
[33]
On
29 September 2004 the respondents held a meeting with the unions in
the evening. A settlement agreement was entered into. The terms
thereof were that:
SAMWU
withdrew its urgent application;
The respondent unconditionally
withdrew the notices of termination of employment;
The parties undertook to engage in
further consultations outside of the Local Labour Forum;
The parties undertook to finalise
the consultation by 29 October 2004 and attempt to reach consensus;
If no consensus is reached the
respondent would be entitled to “initiate the provisions of
Section 189 of the LRA;”
The parties agreed to finalise
voluntary retrenchments at their first consultation which would
then form the basis for further
consultations.
In consequence, the retrenchment
notices were withdrawn on 30 September 2004. The Agreement of
settlement was made an order of court
on 30 September 2004.
[34]
It
is not in dispute that on 30 September 2004 Vermaak sent a letter to
SAMWU
requesting it to urgently inform him of five possible dates on which
they would be available for consultations.
SAMWU
did not reply to this letter.
[35]
On
5 October 2004 Vermaak sent a further letter to
SAMWU
noting their failure to reply to his aforesaid letter and again
requesting them to urgently inform him of five possible dates on
which they would be available for consultations. Once again SAMWU
failed to reply to this letter.
[36]
On
6 October 2004 IMATU which was also requested to supply dates for
consultations, replied and provided possible dates on which
it would
be available for consultations.
[37]
On
11 October 2004 Vermaak sent a letter to Seitisho expressing his
concerns about the fact that
SAMWU
had failed to make itself available for consultations and that he was
going to seek an opinion from an advocate. The said opinion
was
subsequently obtained on 12 October 2004. A copy of the letter dated
14 October 2004 from
SAMWU
is not provided.
[38]
On
11 October 2004
IMATU
sent a letter to Vermaak expressing their concerns that no
consultations had taken place and further requesting an urgent
meeting
to be held on 15 October 2004.
[39]
On
15 October 2004 Vermaak sent a letter to
SAMWU
in which he referred to the letter from
SAMWU
dated 14 October 2004. He further expressed his surprise that SAMWU
failed to attend a meeting in Ladysmith and furthermore, confirming
SAMWU
’s
undertakes to attend the meeting to be held on 18 October 2004.
[40]
On
18 October 2004 a consultation meeting took place between
SAMWU
,
IMATU
,
Vermaak, G J Louw and De Wet. Louw, who was a financial consultant
and also part of the ZADER team, attended the meeting at the
invitation of Vermaak. Louw testified that he addressed the meeting
on the problematic cash flow situation at the respondent, outstanding
debt and unpaid short term creditors. He further informed the meeting
that the respondent was in dire financial problems and was
unable to
obtain credit and financial assistance because of its uncredit worthy
position. He was only called into the meeting at
the end in order to
make a presentation on the respondent’s financial position. At this
meeting his input on the financial situation
of the respondent was
not disputed.
[41]
It
is common cause that a consultation meeting with the trade unions was
scheduled for 29 October 2004 at SALGA offices. Amongst
those who
attended were Seitisho, Vermaak and representatives of
IMATU
.
According to Seitisho the meeting started by confirming the agenda
and thereafter they waited for the arrival of the representatives
of
SAMWU
.
They waited for about two and half hours. They were telephoned
several times and they did not answer their phone. They later managed
to speak to one of them. He mentioned that they were lost. The
representatives of
IMATU
became impatient and indicated that they were leaving as they had
waited for a long time and that they had no interest in the proposed
meeting.
IMATU
representatives indicated
further that they were not going to participate in the meeting.
[42]
Seitisho
testified further that as they were leaving the premises they met
SAMWU’s
representatives at the stairs. He asked one of them, Mr Baartman who
was one of his co-employees in Plattenburg Bay where they had
been.
He reported that they had been lost. He told him that he found it
strange that they were all full time shop stewards and also
members
of
SALGA
but they got lost when they knew where the
SALGA
offices were. Seitisho mentioned further that there was no discussion
about further meetings with
SAMWU
representatives. He denied that
SAMWU
representatives requested another meeting. They all left without
having discussed about what was to happen thereafter.
[43]
On
the same day, Seitisho held a meeting with the Mayor and Vermaak at
the latter’s office. The two reported to the Mayor about
the failed
meeting and that they were running out of time and further that the
respondent did not have the funds to maintain the
staff component as
it was. They also expressed the view that the appellants were
deliberately delaying the process and that the process
had become
costly to the respondent. It was then decided that letters
terminating services be issued on the same day as the time
frame set
for consultation as per the agreed court order had come to an end.
The selection criteria for the employees to be dismissed
were based
on the LIFO principle as previously resolved at the Council meeting.
[44]
As
pointed out already the appellants did not tender any evidence at the
court
a quo
.
It was contended on behalf of the appellants that the decision to
dismiss the employees for operational requirements was taken by
Seitisho as the Acting Municipal Manager and was
ultra
vires.
The reasons why
the decision was said to be
ultra
vires
were based on the
following argument:
In the first place it was contended
that only the respondent’s Council had the power to retrench
employees; secondly, and in the
alternative, Seitisho was only able
to exercise the power to retrench once a policy had been promulgated
by the respondent’s Council
under section 55, 66 and 67 of the
Systems Act; and thirdly, also in the alternative to the first
submission, it was contended that
Seitisho and or the respondent was
only able to exercise his powers in accordance with the directions
made by the MEC in terms of
sections 106 of the Systems Act.
[45]
The
Labour Court held that the Acting Municipal Manager was empowered to
appoint employees in terms of the
Systems
Act
, and when necessary
could dismiss the employees of the Municipality. With regard to the
first alternative argument that the Acting
Municipal Manager could
only dismiss employees once policy had been promulgated by the
respondent’s Council, the Labour Court held
that there was a policy
in existence at the respondent at the time. This conclusion was based
on the findings by both the
Zader
and
Dekker
reports that appointments had been made outside the municipal policy
and that those appointments were not budgeted for. Withregard
to the
second alternative argument relating to the directives issued by the
MEC, the Labour Court found itself not persuaded by the
argument that
the directives issued in terms of section 106 of the
Systems
Act
constituted statutory
framework within which the respondent had to from that point act upon
failing which its actions would be
ultra
vires
.
[46]
Withregard
to the procedural fairness of the retrenchment process the Labour
Court held that there had not been sufficient consultation
as
required by section 189 of the Act. The Labour Court found that the
respondent had not proved that the appellants’ representatives
wilfully stayed away from the meeting of 29 October 2004 and that it
would have been reasonable for the respondent to reschedule
the
meeting to conclude the consultation process. By doing so, the Labour
Court reasoned, the process would have complied with the
procedural
fairness requirements. The court
a
quo
held further that it
was satisfied, in the absence of evidence to the contrary, that the
17 individual appellants had been properly
selected by applying the
LIFO criteria for retrenchment.
[47]
Withregard
to order of compensation, the Labour Court considered the role played
by the respective parties during the period of consultation
and also
what caused the last meeting not to take place and decided not to
order compensation for procedural unfairness. In doing
so, it
considered as paramount the following factors: Firstly, that the
employees had a benefit of an extra month’s income due
to the
settlement agreement to pursue consultations for a further month;
secondly, the fact that the employees received three weeks
salary
instead of the “obligatory” one week salary for each year of
service; thirdly, the Labour Court held that the individual
employees
were appointed under the circumstances where they ought not to have
been appointed resulting in them receiving a benefit
of income. The
Labour Court, however, held that there was no evidence to suggest
that the individual employees themselves acted improperly
for them to
be appointed. As regards costs, the Labour Court held that the
procedural fairness only related to failure to hold one
further
meeting which was to a large extend unsuccessful due to the conduct
of
SAMWU
.
For this reason the Labour Court ordered that each party should pay
its own costs.
The appeal
[48]
Both
in this Court and in the heads of argument filed on behalf of the
appellants, they persisted in the same argument that was presented
in
the Labour Court. As regards substantive fairness, it was argued on
behalf of the appellants that the Acting Municipal Manager
did not
have the power to dismiss the employees and as an employee of the
respondent he could only acquire such powers through either
legislation or a delegation from the Council. The Labour Court, it
was argued, should therefore have found that the Acting Municipal
Manager acted unlawfully and as such the reason for the dismissal
would fall away. In the alternative, it was submitted that the
Acting
Municipal Manager could only act in terms of a policy directive in
place entitling him to dismiss the employees, and as such
policy was
not in existence he acted in a vacuum. It was further argued that the
Labour Court should have found that the directives
issued by the MEC
in terms of section 106 of the
Systems
Act
created rights for
the appellants and as such the respondent was obliged to follow those
directives.
[49]
Withregard
to procedural fairness the attorney for the appellants submitted that
although there is no appeal against the finding
of the Labour Court,
it should have been found that the respondent failed to comply with
the directives from the
Dekker
Report
and that such a
finding would have had the effect of a substantial amount of money as
compensation being awarded in favour of the
individual employees for
procedural unfairness.
[50]
The
appellants do not challenge the Labour Court’s findings that the
respondent was in a financial crisis which necessitated the
dismissals of employees. It was also not their case that the
individual employees were not employed under the circumstances
presented
by the respondent through the evidence of its witnesses. It
is also not the appellants’ contention that the individual
employees
were incorrectly or unfairly identified for dismissal. In
any case no evidence was tendered by the appellants in the Labour
Court
that could support any challenge to the above findings.
[51]
It
must therefore be accepted that if the three grounds upon which the
appellants are contending the substantive fairness of the dismissal
of the individual employees; i.e. the authority of the Acting
Municipal Manager and failure to comply with the MEC’s directives,
are found to be without foundation, then the dismissal of the
individual employees would have been
for
a
fair reason. Put
differently, the appellants’ only challenge to the substantive
fairness of the dismissal is not based on the financial
crisis that
the respondent is in and its actions to restructure its operations to
free itself from the crisis, but on the authority
to dismiss and the
procedure followed in dismissing the employees.
[52]
The
relevant provisions of the Systems Act on which the appellants base
their challenge to the Acting Municipal Manager’s authority
are
sections 55, 56 and 67. The relevant parts thereof are quoted
hereunder in full for a better understanding of the responsibilities
of Municipal Managers and the framework within which they operate:
“55 Municipal
managers
(1) As head of administration the
municipal manager of a municipality is, subject to the policy
directions of the municipal council,
responsible and accountable for-
(a) the formation and development
of an economical, effective, efficient and accountable
administration-
(i) equipped to carry out the
task of implementing the municipality's integrated development plan
in accordance with Chapter 5;
(ii) operating in accordance with
the municipality's performance management system in accordance with
Chapter 6; and
(iii) responsive to the needs of
the local community to participate in the affairs of the
municipality;
(b) the management of the
municipality's administration in accordance with this Act and other
legislation applicable to the municipality;
(c) the implementation of the
municipality's integrated development plan, and the monitoring of
progress with implementation of the
plan;
(d) the management of the
provision of services to the local community in a sustainable and
equitable manner;
(e) the appointment of staff
other than those referred to in section 56 (a), subject to the
Employment Equity Act, 1998 (Act 55 of
1998);
(f) the management, effective
utilisation and training of staff;
(g) the maintenance of
discipline of staff;
(h) the promotion of sound labour
relations and compliance by the municipality with applicable labour
legislation;
(i) advising the political
structures and political office bearers of the municipality;
(j) managing communications
between the municipality's administration and its political
structures and political office bearers;
(k) carrying out the decisions of
the political structures and political office bearers of the
municipality;
(l) the administration and
implementation of the municipality's by-laws and other legislation;
(m) the exercise of any powers
and the performance of any duties delegated by the municipal council,
or sub-delegated by other delegating
authorities of the municipality,
to the municipal manager in terms of section 59;
(n) facilitating participation by
the local community in the affairs of the municipality;
(o) developing and maintaining a
system whereby community satisfaction with municipal services is
assessed;
(p) the implementation of
national and provincial legislation applicable to the municipality;
and
(q) the performance of any other
function that may be assigned by the municipal council.
(2) As accounting officer of the
municipality the municipal manager is responsible and accountable
for-
(a) all income and expenditure
of the municipality;
(b) all assets and the discharge
of all liabilities of the municipality; and
(c) proper and diligent
compliance with the Municipal Finance
66 Staff
establishments
(1) A municipal manager, within a
policy framework determined by the municipal council and subject to
any applicable legislation,
must-
(a) approve a staff
establishment for the municipality;
(b) provide a job description for
each post on the staff establishment;
(c) attach to those posts the
remuneration and other conditions of service as may be determined in
accordance with any applicable
labour legislation; and
(d) establish a process or
mechanism to regularly evaluate the staff establishment and, if
necessary, review the staff establishment
and the remuneration and
conditions of service.
(2) Subsection (1) (c) and (d) do
not apply to remuneration and conditions of service regulated by
employment contracts referred to
in section 57.
67 Human
resource development
(1) A municipality, in accordance
with applicable law and subject to any applicable collective
agreement, must develop and adopt appropriate
systems and procedures
to ensure fair, efficient, effective and transparent personnel
administration, including-
(a) the recruitment, selection
and appointment of persons as staff members,
(b) service conditions of
staff;
(c) the supervision and
management of staff
(d) the monitoring, measuring and
evaluating of performance of staff
(e) the promotion and demotion
of staff;
(f) the transfer of staff;
(g) grievance procedures;
(h) disciplinary procedures;
(i) the investigation of
allegations of misconduct and complaints against staff
(j) the dismissal and
retrenchment of staff, and
(k) any other matter prescribed
by regulation in terms of section 72.
[Sub-s. (1) amended by s. 38 of
Act 51 of 2002.]
(2) Systems and procedures
adopted in terms of subsection (1), to the extent that they deal with
matters falling under applicable
labour legislation and affecting the
rights and interests of staff members, must be consistent with such
legislation.
(3) Systems and procedures
adopted in terms of subsection (1), apply to a person referred to in
section 57 except to the extent that
they are inconsistent with that
person's employment contract.
(4) The municipal manager must-
(a) ensure that every staff
member and every relevant representative trade union has easy access
to a copy of these staff systems
and procedures, including any
amendments;
(b) on written request by a staff
member, make a copy of or extract from these staff systems and
procedures, including any amendments,
available to that staff member;
and
(c) ensure that the purpose,
contents and consequences of these staff systems and procedures are
explained to staff members who cannot
read.”
[53]
Section
106 of the Systems Act in terms whereof the MEC commissioned the
Dekker Report reads thus:
“
106 Non-performance
and maladministration
(1) If an MEC has reason to
believe that a municipality in the province cannot or does not fulfil
a statutory obligation binding on
that municipality or that
maladministration, fraud, corruption or any other serious malpractice
has occurred or is occurring in a
municipality in the province, the
MEC must-
(a) by written notice to the
municipality, request the municipal council or municipal manager to
provide the MEC with information
required in the notice; or
(b) if the MEC considers it
necessary, designate a person or persons to investigate the matter.
(2) In the absence of applicable
provincial legislation, the provisions of sections 2, 3, 4, 5 and 6
of the Commissions Act, 1947
(Act 8 of 1947), and the regulations
made in terms of that Act apply, with the necessary changes as the
context may require, to an
investigation in terms of subsection (1)
(b).
(3) (a) An MEC issuing a notice
in terms of subsection (1) (a) or designating a person to conduct an
investigation in terms of subsection
(1) (b), must within 14 days
submit a written statement to the National Council of Provinces
motivating the action.
(b) A copy of the statement
contemplated in paragraph (a) must simultaneously be forwarded to the
Minister and to the Minister of
Finance.
[Sub-s. (3) substituted by s. 18
(b) of Act 19 of 2008.]
(4) (a) The Minister may request
the MEC to investigate maladministration, fraud, corruption or any
other serious malpractice which,
in the opinion of the Minister, has
occurred or is occurring in a municipality in the province.
(b) The MEC must table a report
detailing the outcome of the investigation in the relevant provincial
legislature within 90 days from
the date on which the Minister
requested the investigation and must simultaneously send a copy of
such report to the Minister, the
Minister of Finance and the National
Council of Provinces.”
[54]
The
argument presented on behalf of the appellants is that what is
clearly absent from Sections 55, 66 and 67 of the Systems Act is
the
power of the
Municipal
Manager
to initiate a
retrenchment exercise or to retrench employees in the absence of a
delegation or assignment from the
Municipal
Council
. The attorney
submitted that it does not appear that the Council at any stage
assigned or delegated its power to implement a retrenchment
exercise
to the
Acting Municipal
Manager
.
[55]
Counsel
for the respondent has refereed us to Chapter 5 of the
Structures
Act
which outlines the
functions and powers of municipalities. She correctly pointed out
that Section
83
1
of the
Structures Act
refers to the functions and powers assigned to municipalities in
terms of sections 156
2
and 229
3
of the
Constitution of the
Republic of South Africa
Act
1996 (Act 108 of 1996) while section 83(3)(a) to (d) of the
structures Act lists the specific functions and powers of
municipalities,
and that section 4 of the Systems Act outlines the
rights and duties of
Municipal
Councils
. She submitted
that none of the aforesaid provisions empower the
Municipal
Council
to exercise the
power to initiate a retrenchment exercise. Indeed, the rights and
duties of
Municipal
Councils
are general in
nature and constitute a combination of policy and duties in respect
of service delivery to the communities.
[56]
In
contrast with the general powers and policy functions of the
Municipal Council
,
the
Structures Act
and
Systems Act assign
a hands on administrative role to the
Municipal
Manager
. It is evident
from the above quoted sections that a
Municipal
Manager
is empowered to
appoint, manage, effectively utilise and train staff
4
;
maintain discipline; promote sound labour relations; to account for
all income and expenditure of the municipality
5
.
The
Municipal Manager
is also empowered to, within a policy framework approved by the
Municipal Council
and subject to any applicable law, approves a staff establishment for
the municipality and provide a job description for each post
on the
staff establishment
6
.
[57]
It
is in my view logical that the power to appoint, discipline, manage,
utilise and train staff should include the power to initiate
a
retrenchment exercise. However, even if this interpretation may be
found to be incorrect, the facts of this case have shown that
the
Council of the respondent was at all times kept abreast of the
developments and that at the Special Council Meeting in August
2004
noted that the decision to retrench lied with the
Acting
Municipal Manager
and
allowed the process to proceed. The Council also gave Seitisho
additional time to engage in negotiations with a view to cure
whatever
defects that may have existed in the consultation process
that took place before Seitisho’s appointment. The argument
therefore
that the
Acting
Municipal Manager’s
actions should be found to be
ultra
vires
is without merit.
[58]
The
next issue raised is that the retrenchments could only take place
once there was a policy in place and that in this instance the
respondent had no policy in place. It is not disputed, as the
Labour
Court
also found, that
there was a one page policy that existed at the respondent. According
to Dekker, that policy was developed in compliance
with the
provisions of sections 55 and 56 of the
Systems
Act
. The
Acting
Municipal Manager
and the
respondent’s Council acted in terms of that policy. The revised
policy that was not as yet approved by Council cannot be
taken to
have negated the existing policy before its approval. Furthermore,
the fact that the policy in existence may have been inadequate
in
certain respects as Dekker testified does not mean that there was no
policy in place. Appellants’ contention therefore in this
regard is
also without merit.
[59]
The
last alternative argument relate to failure to comply with the
directive of the MEC by the respondent. I find no fault in the
Labour
Court’s
finding that
the appellant’s argument in this regard is not persuasive. There is
no provision in Section 106 of the
Systems
Act
as it was then or
elsewhere that gave the MEC’s letter containing directives
statutory powers. What the MEC was authorised to do
was to submit a
written statement to the
National
Council of Provinces (“NCOP”)
.
It remained up to the
respondent whether the recommendations from the MEC were followed or
not. Although some of the directives from
the MEC required that the
existing policy be revised, improved and approved, there is no
evidence to suggest that the retrenchment
exercise was conditional
upon the MEC’s directives. The retrenchment exercise had been
initiated by the respondent and was never
challenged. It is also
important to note that the MEC had not taken any steps against the
respondent for its failure to comply with
his directives.
[60]
This
matter must be understood in the context that until the stage that an
application was launched to challenge the retrenchment
process, the
parties entered into a settlement agreement in terms whereof they
agreed that the dismissal letters be withdrawn, the
parties to engage
in further consultations outside the
Local
Labour Forum
, the
consultations be finalised by 29 October 2004, and that an attempt be
made to reach consensus and that if no consensus is reached
the
respondent would be entitled to initiate the provisions of section
189 of the LRA. It is apparent from the terms of the settlement
agreement that
SAMWU
agreed to a retrenchment process, and agreed to a month’s time
frame to finalise the process. All that was to follow from here
on
was the consultation meetings to be held. The matters relating to the
policy framework, and the authority of the Acting Municipal
Manager
to initiate a retrenchment were never an issue. In fact
SAMWU
agreed that the process should take place outside the
Local
Labour Forum
. They cannot
now be heard to complain that the
Local
Labour Forum
was not
revised, improved and approved as directed by the MEC, and use that
as a bar to the retrenchment process.
SAMWU
made an election to continue with a process and their election was
made an order of court.
[61]
The
submission that the respondent was obliged by the Placement Agreement
to negotiate the new organograms at the Local Labour Forum
is thus
without merit. In my view the Placement Agreement only applied at the
initial stage of the establishment of the Respondent
when various
municipalities were amalgamated. The process had long been finalised
after the then new organogram served before the
Local Labour Forum,
agreement reached and placement made as agreed.
[62]
It
is clear from the evidence tendered that the respondent took the
necessary steps to comply with the agreed court order. Requests
were
made to
SAMWU
to
provide dates for consultation meetings.
SAMWU
did not respond to the requests. A meeting was held on 18 October
2004 at which the financial position of the respondent was presented
and the voluntary retrenchment applications were discussed as agreed.
Furthermore, another meeting was held on 29 October 2004. This
is the
meeting that
SAMWU
representatives failed to attend. In my view, the conclusion by
Seitisho that
SAMWU
delegation intentionally
stayed away from the meeting in order to drag the process is not
unreasonable. Seitisho’s evidence that
they knew very well where
the venue of the meeting was and they could not have got lost was not
controverted by any evidence. No
explanation was placed on record
about circumstances that could have caused them not to find the venue
of the meeting and where they
had been.
[63]
The
attorney for the appellants contended that it was not open to the
respondent to simply terminate the contracts of the individual
employees when the period set aside for consultations came to an end.
He argued that the settlement agreement stipulated that the
respondent had to
“formally
initiate a retrenchment process in terms of section 189”
.
By this submission he meant that after the consultation for
retrenchments had been finalised by 29 October 2004 and there being
no consensus, then the respondent was obliged to issue a formal
notice in terns if section 189 of the Act and invite the parties
to
participate in the process. Surely, this interpretation cannot be
what was intended. If that was the case, what would have been
the
point of having a consultation in the first place. It would make no
sense and also be a waste of time to undergo the same process
twice
with the same result. Such interpretation would also defeat the
purpose of the clause in the agreed court order relating to
the
voluntary retrenchments and the entire spirit and purpose of the
agreed court order.
[64]
In
relation to the relief for procedural unfairness, the appellants
contended that they should have been awarded compensation equivalent
to twelve month’s remuneration. In support of this contention, the
appellants referred us to the alleged
mala
fide
conduct
of the respondent before the signing of the settlement agreement and
also that they were forced to approach the
Labour
Court
on urgent basis to
prevent a patently unfair dismissal. Unfortunately no evidence
relating to the conduct of the respondent and the
circumstances that
led to the bringing of the urgent application was tendered in the
Labour Court
.
The
Labour Court
in arriving at a decision to award no compensation was exercising a
discretion. Its reasons for the decision are in my view reasonable.
Its decision should therefore not be tempered with.
[65]
As
regards costs, I am of the view that it would be in accordance with
the requirements of the Law and fairness that each party should
pay
its costs as ordered by the Labour Court. The same would apply in
this Court.
In the result the following order
is made:
The appeal is dismissed.
Each party is to pay its costs.
_____________
Tlaletsi AJA
I agree.
___________________
Waglay ADJP
I agree
____________________
Khampepe JA
Representations
:
For the Appellants : Mr J White
Instructed by : Cheadle
Thompson & Haysom Inc.
For the Respondents : Adv R Nyman
Instructed by : L
Scholtz-Muller
Date of judgment : 29 January 2010
1
(1) A municipality has the functions and powers assigned to it in
terms of sections 156 and 229 of the Constitution.
(2) The functions and
powers referred to in subsection (1) must be divided in the case of
a district municipality and the local
municipalities within the area
of the district municipality, as set out in this Chapter.
(3) A district
municipality must seek to achieve the integrated, sustainable and
equitable social and economic development of its
area as a whole by-
(a) ensuring integrated
development planning for the district as a whole;
(b) promoting bulk infrastructural development and services for the
district as a whole;
(c) building the capacity of local municipalities in its area to
perform their functions and exercise their powers where such

capacity is lacking; and
(d) promoting the equitable distribution of resources between the
local municipalities in its area to ensure appropriate levels
of
municipal services within the area.
2
(1) A municipality has executive authority in respect of, and has
the right to administer-
(a) the local government matters listed in Part B of Schedule 4 and
Part B of Schedule 5; and
(b) any other matter
assigned to it by national or provincial legislation.
(2) A municipality may
make and administer by-laws for the effective administration of the
matters which it has the right to administer.
(3) Subject to section
151 (4), a by-law that conflicts with national or provincial
legislation is invalid. If there is a conflict
between a by-law and
national or provincial legislation that is inoperative because of a
conflict referred to in section 149, the
by-law must be regarded as
valid for as long as that legislation is inoperative.
(4) The national
government and provincial governments must assign to a municipality,
by agreement and subject to any conditions,
the administration of a
matter listed in Part A of Schedule 4 or Part A of Schedule 5 which
necessarily relates to local government,
if-
(a) that matter would
most effectively be administered locally; and
(b) the municipality
has the capacity to administer it.
(5) A municipality has
the right to exercise any power concerning a matter reasonably
necessary for, or incidental to, the effective
performance of its
functions.
3
(1) Subject to subsections (2), (3) and (4), a municipality may
impose-
(a) rates on property and surcharges on fees for services provided
by or on behalf of the municipality; and
(b) if authorised by national legislation, other taxes, levies and
duties appropriate to local government or to the category of
local
government into which that municipality falls, but no municipality
may impose income tax, value-added tax, general sales
tax or customs
duty.
(2) The power of a municipality to impose rates on property,
surcharges on fees for services provided by or on behalf of the
municipality,
or other taxes, levies or duties-
(a) may not be exercised in a way that materially and unreasonably
prejudices national economic policies, economic activities across
municipal boundaries, or the national mobility of goods, services,
capital or labour; and
(b) may be regulated by
national legislation.
(3) When two municipalities have the same fiscal powers and
functions with regard to the same area, an appropriate division of
those powers and functions must be made in terms of national
legislation. The division may be made only after taking into account
at least the following criteria:
(a) The need to comply
with sound principles of taxation.
(b) The powers and
functions performed by each municipality.
(c) The fiscal capacity
of each municipality.
(d) The effectiveness
and efficiency of raising taxes, levies and duties.
(e) Equity.
(4) Nothing in this section precludes the sharing of revenue raised
in terms of this section between municipalities that have fiscal
power and functions in the same area.
(5) National legislation envisaged in this section may be enacted
only after organised local government and the Financial and Fiscal
Commission have been consulted, and any recommendations of the
Commission have been considered.
4
Section 55 (1) (b) – (h)
5
Section 55 (2)
6
Section 66(1)