About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Labour Appeal Court
SAFLII
>>
Databases
>>
South Africa: Labour Appeal Court
>>
2012
>>
[2012] ZALAC 5
|
|
Long v Prism Holdings Ltd and Another (JA 39/10) [2012] ZALAC 5; [2012] 7 BLLR 672 (LAC); (2012) 33 ILJ 1402 (LAC); 2013 (1) SA 533 (LAC) (6 March 2012)
REPUBLIC
OF SOUTH AFRICA
Reportable
THE LABOUR APPEAL
COURT OF SOUTH AFRICA, HELD IN JOHANNESBURG
JUDGMENT
case
no: JA 39/10
In the matter between:
MARTIN LONG
…............................................................................................
Appellant
and
PRISM HOLDINGS LIMITED
…..........................................................
First
Respondent
NET 1 APPLIED TECHNOLOGIES SA LTD
….............................
Second
Respondent
Heard
:
17 August 2011
Delivered: 06 March 2012
Summary:
alleged
automatically unfair dismissal for
reason related to the
transfer of a business as a going concern; acquisition of shares does
not amount to transfer of a business
as a going concern; dismissal of
appellant substantively fair for operational requirement but
procedurally unfair; appellant granted
compensation equivalent to
three months remuneration and 50% of his costs.
______________________________________________________________
CORAM: WAGLAY, DJP,
DAVIS JA
et
SANDI
AJA
JUDGMENT
SANDI AJA:
[1] On 15
December
2006, the appellant, Mr. Long (“Long”), was dismissed
from employment for alleged operational reasons. Long
referred a
dispute to the Commission for Conciliation, Mediation and Arbitration
(“CCMA”) alleging that his dismissal
was automatically
unfair in terms of the provisions of section 187 of the Labour
Relations Act (“the LRA”)
1
for the reason that it was related to
the transfer of a business as a going concern in terms of section 197
of the LRA. In the alternative,
Long alleged that his dismissal was
unfair. Conciliation failed and Long referred the dispute to the
Labour Court. The Labour Court
dismissed his claim with costs. This
is an appeal, with the
leave of
the court
a quo,
against
the
whole of the judgment and order of the Labour Court.
Factual Background
[2] Long was employed by the first
respondent, Prism Holdings Limited (“Prism”), as a Human
Resources Director as from
1
November
1998. On 3 July 2006, the second respondent, Net 1 Applied
Technologies SA Ltd (“Net 1”), acquired the whole
of the
shareholding of Prism in terms of section 311 of the Companies Act.
2
Thereafter the two companies still
remained separate legal entities. One Mr. Chalmers (“Chalmers”)
was the Group Human
Resources Manager of Net 1, a position he
occupied as from 1
April
1998.
[3] Prism was involved in the business
of electronic payments. Some of the major retailers were its
customers. It supplied them
with credit card terminals and the
software necessary to operate those credit card terminals.
[4] Net 1’s major business was
Cash Paymaster Services which was contracted by the government to pay
social grants. Cash Paymaster
Services had issued about 4 million
smart cards which were used at smaller retailers only.
[5] The evidence tendered on behalf of
Net 1 was that, its acquisition of Prism would enhance its business
in that after the acquisition,
its smart cards would be used at major
retailers, such as Pick’n Pay and Shoprite. In other words, Net
1’s 4 million
cardholders would be able to make purchases at
all major retailers who are using Prism’s technology. In that
way, Prism’s
business complemented that of Net 1.
[6] It was common cause that Net 1 was
five times the size of Prism and had some 2000 (two thousand)
employees, while Prism had
about 280 (two hundred and eighty)
employees.
[7] After the acquisition of Prism, a
process of integration and restructuring followed. The reason for
this being the fact that
certain business units (such as Human
Resources) in both Net 1 and Prism were performing the same
functions. They had to be integrated.
The positions of human
resources managers held by Chalmers and Long were merged.
[8] On 20
September
2006, Chalmers circulated a memorandum to all members of staff.
Attached to the memorandum was a proposed new group structure.
Each
staff member was invited to comment or make proposals on the
structure before 29
September
2006. In the proposed structure, Chalmers was reflected as the group
HR Manager. Long’s name did not appear on the
proposed
structure.
[9] On 22 September 2006 and at the
suggestion of Mr. Els (“Els”), the Chief Executive
Officer of Prism, Long submitted
his
curriculum
vitae
to the head of
finance, Mr Kotze (“Kotze”) which set out his experience
and functions as human resources manager at
Prism. Long did not
comment on the position to which Chalmers was appointed. He stated
the following:
‘
The
big vision of Net 1 is an exciting one and, given the above, one in
which I feel I am adequately capable of assisting the progress
and
success in a senior capacity. Given the expansive nature and vision I
foresee many challenges with the establishment of ‘international’
operation from a HR perspective and perhaps with this the broader
sphere of HR there are specific avenues and opportunities for
myself
to have contributed substantially to the continued success in a
senior capacity - as I have been proud to have done that
thus far.’
[10] Long testified that after the
publication of the proposed structure on 20
September
2006, he attempted unsuccessfully to contact Kotze in order to
explain to him why he was of the view that he should be
the HR
Manager in the position occupied by Chalmers.
[11] On 05
October 2006,
the proposed structure was confirmed by the executive committee and
it was circulated to all members of staff after
certain amendments
had been effected to it. Again, Long’s name was not reflected
on that structure.
[12] On 09 October 2006, Chalmers
circulated a memorandum to the staff at Prism advising that, as part
of the integration and restructuring
process, Prism’s head
office situated at Four Ways would be closed and that the Prism staff
that could be accommodated in
the new Net 1 structure would be moved
to Net 1’s head office in Rosebank. Those who could not be
accommodated faced the
possibility of retrenchment or being placed
elsewhere in the Net 1 group. This memorandum was first sent to Long
for his comment.
[13] On 10
October 2006,
Kotze, Chalmers and Long held a meeting at which Long presented his
C.V and commented on the memorandum sent to him
by Chalmers on 09
October 2006. At that meeting, Long did not discuss the
selection of Chalmers as HR Manager. In his evidence he said it would
not
have been appropriate to do so in Chalmers presence. Kotze
testified that by this date, Chalmers had already been appointed to
the position of Manager and that it was inevitable that Long would
not be appointed to that position. Under cross-examination, Kotze
conceded that in those circumstances Long had to be dismissed unless
an alternative position could be found for him.
[14] On 12 October 2006, Chalmers
prepared a draft notice of contemplated retrenchment with the
intention of circulating it to all
staff members. Before its
circulation, Long was given an opportunity to comment on it. The
notice mentioned the possibility of
retrenchment of some staff
members. Long was not happy with the notice and made suggestions as
to how it should be structured.
He also preferred that the affected
employees be addressed individually. The said notice was issued by
Chalmers on 13 October 2006
in a revised form as suggested by Long.
It stated that the heads of departments listed on the approved
organogram dated 05 October
2006 were considering the resources
requirements of the units for which they had been appointed.
[15] On 17 October 2006, Long wrote to
Kotze requesting a meeting to discuss the proposals he had made in
his C.V. Kotze advised
Long that he had asked Chalmers to “pursue
the opportunities” that Long had identified in his C.V. On 20
October 2006,
Chalmers visited Long in his office and informed him
that Kotze had given him the task to investigate the opportunities he
had
identified in his CV.
[16] At a meeting held between Long
and Chalmers on 05 October 2006, the following was discussed:
‘
No
opportunities were available to Long at a senior level, including Net
1’s international initiatives, the only position
Chalmers could
offer Long was that of Human Resources Manager under him and at half
his salary, and that in the event that no alternatives
were available
Long’s retrenchment was unavoidable. As an alternative to
dismissal, Long proposed that he be placed at the
position of HR
Manager suggested by Chalmers at his current salary which would be
frozen for sometime until it became market-related.
Net 1, was not
prepared to accept this proposal.’
[17] After the meeting, Long
telephoned Chalmers requesting reasons why they were not able to
offer him a position in their international
initiatives. Chalmers
replied advising that there were no positions available at his
current salary and that no dedicated HR Manager
was required. Long
requested to be furnished with certain documents and information.
[18] In his letter of 09 November
2006, Chalmers furnished the information and documents requested. He
further explained why he
had been appointed to the position of head
of Human Resources. In response to this letter
,
Long said he accepted that only one head of Human Resource was
required by the company. He, however, objected to the manner in
which
Chalmers was appointed. He disputed that Chalmers satisfied the
requirements for the appointment to the senior position.
[19] On 15 November 2006
,
Long received a notice advising him that ‘… your current
position has become redundant and that your services will
be
terminated because of the Company’s operational requirements.’
The dismissal was effective from 15 December 2006.
[20] On 12 December 2006
,
Long referred a dispute to the CCMA. After conciliation could not
resolve the dispute, Long referred the matter to the Labour Court.
[21] At the trial, Long and his
witnesses gave evidence. Net 1 led the evidence of Chalmers and
Kotze.
[22] Before the Labour Court, Long
sought an order declaring that:
his dismissal was automatically
unfair in that he was dismissed as a result of a transfer or a
reason related to the transfer
of a business as a going concern,
in the alternative, that his
dismissal was unfair for failure to comply with the provisions of
section 189 of the LRA. He asked
for reinstatement, alternatively,
compensation.
[23] The Labour Court dismissed Long’s
claim with costs.
Analysis of the evidence
[24] It is significant that Long did
not comment, object or make a counter-proposal when invited to do so
at the time the new structure
was proposed. The proposal stated that
the Executive Committee of Net 1 had taken a decision to investigate,
amongst others, the
integration of ‘Prism into the Net 1’s
operation.’ An organogram was furnished to Long which reflected
Chalmers
as the Head of the new proposed business unit of human
resources. The proposal was made on 20 September 2006 and the
deadline for
comment or proposals was 29 September 2006. On 22
September 2006, Long furnished his
curriculum vitae
to Kotze
in which he made no comment about Chalmers being proposed to be the
new head of human resources. Instead
,
he
saw himself as being suitable to some other position in the
international operations of Net 1 and the “broader sphere”
of human resources. He was silent about the proposed appointment of
Chalmers to the position of the HR manager.
[25] Even after publication of the
final structure on 05 November 2006, Long did not make any move to
object or challenge Chalmers
appointment until after he was told (on
26 October 2006) that the position in which he wanted to be appointed
was not available.
[26] I find it difficult to understand
why a person in his position would not have taken steps at the
earliest available opportunity
to have made his position known to Net
1 that it was his desire to be appointed to the position held by
Chalmers.
[27] Kotze’s evidence makes
sense to me. Chalmers was the right person for the job. He had a good
track record within the
Net 1 group and was more experienced than
Long. In his evidence, Long conceded that Chalmers had longer service
than he did. His
conduct seems to indicate that he accepted that
Chalmers position was not available to him.
Whether the dismissal was
automatically unfair by virtue of section 187 reads together with
section 197 of the LRA.
[28] Section 187(1)(g) provides that
‘a dismissal is automatically unfair if the employer in
dismissing the employee, acts
contrary to section 5 or, if the reason
for dismissal is -
(g) a transfer or a reason related to
a transfer, contemplated in section 197 or 197A. Transfer, as defined
in section 197(1) means
“the transfer of a business by one
employer (‘the old employer’) to another employer (‘the
new employer’)
as a going concern.’
Section 197 (2) provides as follows:
‘
(2)
If a transfer of a business takes place, unless otherwise agreed in
terms of subsection 6-
(a)
the new employer is automatically substituted in the place of the old
employer in respect of all contracts of employment in
existence
immediately before the date of transfer;
(b)
all the rights and obligations between the old employer and an
employee
at the time of the transfer continue in force as if
they had been rights and obligations between the new employer and the
employee
;
(c)
…
(d)
…’
[29] The evidence which has not been
challenged is that Net 1 acquired all the shares in Prism and that
the two remained separate
legal entities. Net 1 exercised control
over Prism and designed its policies.
[30] The question to be answered is
whether, in these circumstances, Prism was transferred to Net 1 as a
going concern in terms
of the provisions of section 197 of the LRA.
[31] Before acquisition Net 1 and
Prism were not in competition with one another. Each entity carried
out its business in its own
field. Kotze testified that these two
businesses complemented each other. Each entity retained its assets.
[32] In
Ndima
and Others v Waverly Blankets Ltd,
3
Zondo J (as he then was) stated that
the transfer of ‘possession and control of a business’
are two ‘separate
concepts’ - and that transfer of
possession and control do not trigger the operation of section 197 of
the LRA. In
National
Education Health and Allied Workers Union v University of Cape Town
and
Others,
4
the Constitutional Court held that ‘s
197 is for the benefit of both employers and workers. It facilitates
the transfer of
business while at the same time protecting the
workers against unfair job losses.
[33] Todd et al, state that:
‘
It
is clear from a wording of section 197 that the old and the new
employers must be two separate entities. It is for this reason
that
the section will not apply where control of the business is
transferred by way of a share transfer. In such cases control
is
shifted, but the legal identity of the employer remains the same. Of
course, the change in the proprietor of the share capital
might be
considered just as important to employees as a change in employer
following a transfer of a business. The new owner of
the share
capital may wish to introduce major changes in order to make the
business more profitable. That might impact on employees’
terms
and conditions of employment and the manner in which they work. But
even if the envisaged changes are significant there would
appear to
be no reason why section 197 should apply where there is a change in
the control of the enterprise, but the employer
stays the same. The
employees are not in danger of losing their employment because there
has been a share transfer. There is no
need to provide for the
transfer of contracts and rights and obligations because they never
resided anywhere other than between
the exiting employer and its
employees. Nor is there any inherent danger of a change in employment
conditions as a result of a
share transfer. Of course, the employer,
under new direction, is entitled to make changes to the employment
relationship by way
of negotiation, lock-out or ultimately dismissal.
Treating the transferor of shares as an ‘old employer’
and the share
transferee of shares as a ‘new employer’
would, apart from being illogical, only have the effect of binding
the new
controller of the business to respect employees’ terms
and conditions of employment for a while after the transfer before
it
can amend them in the normal course.’
5
[34] My view which is in line with the
reasoning of Zondo J
in
Ndima
(supra)
is that the
acquisition of shares by Net 1 from Prism did not amount to the
transfer of business from one employer to another as
set out in
section 197 of the LRA. See too:
Schutte
and Others v Powerplus Performance (Pty) Ltd and Another.
6
The identities of the entities
remained the same and the employees are able to enforce their rights.
[35] From the evidence, it is clear
that the reason for the dismissal of Long was the operational
requirements of Net 1. In order
to determine whether section 197
applies
,
the question that has to be asked is
whether the probable cause of the dismissal was the transfer of the
business as a going concern
or a reason related to such transfer.
See:
SA Chemical Workers
Union and Others v Afrox Ltd.
7
[36] On a conspectus of the evidence,
Long failed to show that the probable cause of his dismissal fell
within the provisions of
section 187(1)(g) of the LRA. On the other
hand, Net 1’s evidence to the effect that Long’s
dismissal was for operational
reasons is more probable.
[37] From what is stated above, I
conclude that the dismissal of Long does not fall within the ambit of
the provisions of section
187(1)(g) of the LRA. It follows that the
Labour Court was correct in dismissing this leg of Long’s
claim.
Alleged unfair dismissal
[38] As the circumstances of the
present case demonstrate, in the majority of cases, acquisition of
one entity by another invariably
results in the integration and
restructuring of the workforces. In that process, some employees
become redundant, unless alternative
employment can be found for
them. If this cannot be achieved, their dismissal for operational
reasons is unavoidable.
[39] The evidence on behalf of Net 1
was that Long was dismissed for reasons based on the operational
requirements of Prism. The
integration of certain business units of
Net 1 and Prism had to take place and a duplication of functions
within these units had
to be eliminated if Prism was to be
financially viable.
[40] Only one HR manager
was required to serve both Net 1 and Prism. Long conceded this.
[41] Net 1 appointed
Chalmers to the position of HR manager without any objection having
been raised by Long despite invitation
by Net 1 to do so.
[42] As early as 22
September 2006, Long’s conduct was such as to give a clear
impression that he had no interest in Chalmers’
position.
Instead, he identified other positions where he could be fitted in.
His belated objection to Chalmers’ position
was made long after
Chalmers had assumed that position and Chalmers’ appointment
was irreversible.
[43] Looking at this
matter objectively, Long was in any event not
a
suitable candidate for the HR director occupied by Chalmers, in view
of the latter’s experience in the job. Besides
,
Net 1 was satisfied with the performance of Chalmers. The same cannot
be said about Long. Net 1 could not see its way clear in
entrusting
the combined HR positions to him in view of his limited experience.
[44] No alternative
vacancies were available save the position of HR manager falling
under Chalmers, which he refused to accept.
[45] In the
circumstances, I conclude that Long’s dismissal was fair.
Procedural Fairness
[46] In
Unitrans
Zululand (Pty) Ltd v Mhambiseni Johnson Cebekhulu,
8
Zondo JP stated
that:
‘
With
regard to procedural fairness, the question is not whether a fair
procedure was followed in Court. The question is whether,
prior to
the dismissal, the employer followed a fair procedure.’
[47] The evidence shows
that Long appreciated that retrenchments were going to take place at
Prism. Chalmers even invited him to
comment on a draft memorandum to
be circulated to staff members. Among others, the draft memorandum
stated those staff members
who could not be accommodated by Net 1
were to be retrenched. He has himself to blame for not having
participated and asserted
his position when given an opportunity to
do so.
[48] Long sought to
challenge Chalmers’ appointment to the position of HR manager
after confirmation of the latter’s
appointment.
[49] Thereafter he was
dismissed from employment.
[50] His main complaint
was the manner in which Chalmers was appointed.
[51] To my mind, Prism
did not comply with its obligation to consult with Long before
Chalmers was appointed. Long had a right to
be consulted in the
manner set out in section 189. Long was correct in stating that he
had not been advised as to what selection
criteria were applied in
the appointment of Chalmers.
[52] The evidence shows
overwhelmingly that before Long’s dismissal Net 1 did not
employ a fair procedure.
Remedy
[53] In these
circumstances, Long is entitled to compensation by Net 1 for its
failure to conform to a fair procedure.
Costs
[54] Counsel submitted
that if Long is successful on appeal he should be awarded his costs
both in this Court and in the court below.
In the alternative, he
submitted that in the event that Long is unsuccessful, this Court
should reverse the costs orders issued
by the court
a quo
and
order each party to pay its own costs in this Court and in the court
below.
[55] In my view, Long has
been substantially successful in this matter. In the exercise of this
Court’s discretion, there
appears to be no reason why he should
not be awarded 50 % of his costs. Net 1 flagrantly disregarded the
provisions of section
189 of the Labour Relation Act, which has been
the subject of interpretation in many decisions of this Court.
[56] In the result the
following order is made:
Paragraph (i) of the
order issued by the Labour Court is confirmed;
Paragraphs (ii) and
(iii) therefore are set aside and are replaced with the following:
Applicant’s
dismissal was for a fair reason related to the respondent’s
operational requirement;
In dismissing the
applicant the respondent did not follow a fair procedure;
The respondents are to
pay the applicant the equivalent of three months’
remuneration;
The respondents are to
pay 50 % of the applicant’s costs on appeal as well as in the
labour Court.
________________
Sandi AJA.
I agree
________________
Waglay DJP
I agree
________________
Davis JA
APPEARANCES:
FOR THE APPELLANT: Adv. M.A Wesley
Instructed by Perrot van Niekerk
Woodhouse Matyolo Inc
FOR THE RESPONDENT: Adv. W Hutchison
Instructed by Fluxmans Inc
1
66
of 1995.
2
61
of 1973.
3
(1999)
6 BLLR 577
(LC) at 591, para 66
4
(2003)
24 ILJ 95(CC) at para 70.
5
Chris
Todd,
Darcy
Du Toit
,
Craig
Bosch
Business
Transfer and Employment Rights in South Africa
(LexisNexis
Butterworths, 2004).
6
[1999]
2 BLLR 169
(LC) at para 32.
7
(1999)
20 ILJ 1718 LAC at para 46-49.
8
[2003]
7 BLLR 688
(LAC) at para 25.