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[2014] ZALAC 37
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Mtshali v Bell Equipment (DA16/12) [2014] ZALAC 37 (22 July 2014)
REPUBLIC
OF SOUTH AFRICA
IN THE LABOUR APPEAL
COURT OF SOUTH AFRICA, DURBAN
Reportable
Case no: DA16/12
In
the matter between:
NKOSINATHI
MBONGISENI MTSHALI
Appellant
and
BELL
EQUIPMENT
Respondent
Date
Delivered: 22 July 2014
Summary: Dismissal for
operational requirements- Agreed selection criteria- Employee
contending that agreed selection criteria not
properly applied, the
criteria applied unfair and not objective- Labour Court finding that
selection criteria fair and objective-
Appeal - Respondent failing to
show that the agreed selection criteria for retrenchment was fair,
objective and was fairly applied.
Respondent failing to consider and
apply bumping as part of LIFO. Dismissal for operational requirements
substantively unfair -
Labour Court judgment set aside. Appeal upheld
with costs.
CORAM:
Tlaletsi ADJP, Dlodlo et
Mokgoathleng AJJA
JUDGMENT
TLALETSI
ADJP
Introduction
[1]
This is an appeal against the order of the
Labour Court (Van Voore AJ) in an alleged automatically unfair
dismissal dispute alternatively,
an alleged unfair dismissal dispute
referred to that court by the appellant against his former employer,
the respondent. The respondent
contended that the appellant’s
dismissal was due to the respondent’s operational requirements
and was fair. The appellant
did not challenge the procedural fairness
of his dismissal. The Labour Court dismissed the appellant’s
claim of automatically
unfair dismissal, found that the appellant’s
dismissal was substantively fair and ordered the appellant to pay the
respondent’s
costs. The appellant is in this Court with leave
of the court below.
Background
[2]
The respondent manufactures and distributes
a range of heavy material handling equipment, notably the articulated
dump trucks. Its
headquarters is at Richards Bay where the appellant
was employed. The respondent has distribution operations network in
Kuruman,
Bloemfontein, throughout the African Continent, Europe and
the rest of the world. The production facility at Richard’s Bay
includes the building of articulated dump trucks, research and
development facility. The respondent is the only company in South
Africa that does work of this nature.
[3]
The appellant was employed since 2004 and,
at the time of his dismissal on 30 September 2009, he was holding the
position of production
supervisor 1 in the building of chassis for
the B40 articulated truck. It is common cause that during 2009, the
respondent was
experiencing economic and financial difficulties. The
respondent’s profits dropped drastically due to a decline in
world
markets. The respondent issued a letter dated 31 March 2009 to
all employees informing them of possible staff, salary and wage
reductions.
[4]
Despite
embarking on two rounds of voluntary retrenchments, termination of
all independent contractor’s contracts and salary
reductions,
it became evident to the respondent that forced retrenchments would
still be necessary. By this time, the situation
was so grave that the
respondent’s auditors would not certify its going concern
status. On 6 May 2009, an official notice
in terms of section 189 of
the Labour Relations Act
[1]
(“the Act”) was issued to the employees. This process
culminated in the formal facilitation by the Commission for
Conciliation, Mediation and Arbitration (CCMA). There were
consultation meetings and interactions that took place over the
period
April to August 2009. The meetings took place between the
respondent, the unions and other employees not belonging to the
unions.
The unions involved were NUMSA, UASA and Solidarity of which
the appellant was a member.
[5]
In the process, the respondent considered
moving employees between various and far flung geographic centres
such as Kuruman and
Bloemfontein. However, in the respondent’s
view, it would be difficult given the associated costs involved to
implement such
a programme. On 26 August 2009, the respondent
concluded a Retrenchment Agreement with Solidarity, UASA, NUMSA and
representatives
of non-unionized non-scheduled employees. The
agreement was intended to regulate the retrenchment and related
matters between the
respondent and the unions. In terms of the
agreement, the agreed selection criteria were formulated as follows:
‘
The
parties agree that where positions are not critical to the operations
of the Group in the short to medium term, the following
criteria will
be used:
a.
The geographical location of the position;
b.
Qualification, competency and experience;
c.
Last-In-First-Out (LIFO).’
[6]
According to the respondent, having agreed
on the selection criteria, the respondent looked at its current
circumstances as well
as production trends in relation to each
specific product. A production rate was given and a structure was put
in place. The respondent
looked at how many managers, welders,
supervisors and other employees who would be required to achieve the
production rate. Following
voluntary retrenchments and cutting down
on contractors, a number of employees still remained unsustainably
high. Consideration
was then given to business process by process.
The respondent was reluctant to move persons from one production line
or store to
another as this would, according to the respondent, lead
to what it called, a range of unintended consequences.
[7]
The respondent had 19 Production
Supervisors and only needed 8. Through a process of voluntary
retrenchments, 5 Production Supervisors
level 1 left the employ of
the respondent. With regard to B40 at Supervisors level 1 was the
appellant and there was also one Naidoo
who was a Supervisor level 2,
a level higher than that of the appellant. He commenced employment
with the respondent about two
years prior to the retrenchment
exercise and according to the respondent had the most experience in
large truck chassis. The respondent
needed only 1 Supervisor in this
division.
[8]
The evidence tendered by the respondent was
further that they considered retaining the appellant in another part
of the business.
However, they were of the view that moving someone
from one area or line of the business to another was not part of the
criteria
and further that the respondent wanted to avoid the “domino
effect” and further avoid putting people into positions
for
which they had no experience.
[9]
On the appellant’s selection for
retrenchment, the respondent’s evidence (Hodgson) was that it
was not motivated by
a personal vendetta and that it was not ‘some
grandiose scheme to get rid of one individual.’ The appellant
was identified
for retrenchment because he was in a “company”
that was eventually going to “shut down”. The selection
was not on qualification as he had “excellent qualifications”.
The part of the business which produced or manufactured
articulated
dump trucks was severely affected by the dire economic conditions.
[10]
It was put to Hodgson that there was a
position that was offered to one J Naicker and not to the appellant.
He replied that the
position was not a permanent vacancy that was in
existence and re-employing someone into a temporary vacancy would
have aggravated
the situation. He testified that temporary vacancies
were not advertised and that J Naicker had taken a voluntary
retrenchment
package.
[11]
Hodgson testified that bumping would have
involved moving one employee from one process or post to another
process or post. However,
it had been agreed with all the parties
during the consultation process that the respondent should not
consider or apply bumping.
He mentioned further that an employee
named Rolando was preferred over the appellant because,
inter
alia
, the appellant had no prior safety
experience and did not possess the necessary qualifications that
would enable him to satisfy
safety requirements. Rolando on the other
hand had acquired the necessary safety courses and experience from
the previous company
he came from and was safety orientated. He
showed an interest in safety which was not shown by the appellant.
[12]
The appellant’s evidence relevant for
this appeal is that Rolando was junior to him and lacked experience
in fabrication or
welding. He mentioned that he did a course in risk
assessment, legal liability, health and safety. As a supervisor he
had to be
competent in health and safety matters. He was therefore
proficient in safety matters. He was upset upon receiving a notice of
his retrenchment and believed that Rolando should have been the one
to be retrenched as he was employed after him.
[13]
The appellant testified that he had
consulted his union organiser, Vosloo who was to discuss his
selection for retrenchment. Vosloo
later informed him of a settlement
offer made by the respondent and he rejected it. He would have
accepted it if it was payment
equivalent to 12 months remuneration.
The appellant confirmed that he did receive an advertisement for
vacancies and he did not
apply. Other jobs were also brought to his
attention including supervisory post and he did not apply for them.
The Labour Court
[14]
In its judgment, the Labour Court remarked
that a further issue to consider was whether the dismissal was
substantively unfair because
the selection criteria were not properly
applied, alternatively because the selection criteria were in and of
themselves fair and
objective. The Labour Court held that the
established evidence shows that the selection criteria was agreed and
further that the
respondent’s witnesses gave detailed evidence
on the application of those selection criteria across various
production lines
or units including the B40 production area. The
Labour Court held:
‘
I
am satisfied that the selection criteria were in and of themselves
objective, fair and reasonable. I am also satisfied that the
company
had established that the consultation process included the
application of the selection criteria in various business units
and
productions lines. In these circumstances the company considered LIFO
and the retention of skills.’
[15]
As regards the application of the principle
of bumping, the Labour Court held that:
‘
Counsel
for [the appellant] contended that the dismissal was also unfair
because the company did not consider bumping. However,
the evidence
points against the application of bumping. This was the first time
that the company had undergone a retrenchment exercise
and so there
is no practice of bumping. Yet further the largely undisputed
evidence is that the company has operations at Richards
Bay,
Bloemfontein in the Orange Free State and Kuruman in the Northern
Cape. The undisputed evidence was also that it was not reasonably
practicably possible for employees to be moved from one facility to
another. In these circumstances no case has been made out on
facts
for either horizontal bumping or indeed vertical bumping. The company
had in assessing its staffing needs in the face of
a severe crisis
conducted a careful assessment of the various business units. On the
facts of this matter I am satisfied that no
proper case would be made
out for the application of bumping.’
[16]
The Labour Court continued thus:
‘
Whilst
it is so that Mr Mtshali was understandably upset at being selected
for retrenchment, this does not compromise the essential
features of
the consultation process. The company had embarked on a
thorough-going consultation process which involved also the
unions to
which its employees belong and CCMA facilitation. On the largely
undisputed facts of the matter the company’s selection
criteria
were fair and objective and were in fact consistently applied. On or
about 5 August 2009 the company distributed a list
of proposed
retrenchment. Mtshali’s post of productions supervisor 1 was on
that list. From that time Mtshali and the union
representative knew
that his post level was affected. They had a reasonable opportunity
to engage the company with queries and
concerns. Mr Mtshali’s
union was consulted during the process and participated in the
consultative process. Mr Mtshali’s
selection for retrenchment
was the outcome of the reasonable application of fair selection
criteria. In all of the circumstances
the company has established a
fair reason for Mr Mtshali’s selection for retrenchment.’
[17]
As pointed out already the Labour Court
rejected the appellant’s claims of unfair discrimination,
automatically unfair dismissal
and found that his dismissal was
substantively fair and ordered the appellant to pay the respondent’s
costs.
The Appeal
[18]
The appellant has filed a notice of appeal
without stating his actual grounds of appeal against the judgment of
the Labour Court.
The appellant had lodged several claims against the
respondent in his statement of claim which had to be adjudicated by
the Labour
Court. The respondent was placed in a situation whereby it
believed that each and every finding made by the Labour Court was
being
challenged. However, it only became clear in the heads of
argument filed on behalf of the appellant that not all of the
findings
made by the Labour Court were being challenged. It is in my
view imperative that an appellant should serve and file a notice of
appeal stating in some detail the grounds of appeal on which it
relies to challenge the judgment appealed against. Doing so would
inter alia, remove any element of surprise and direct focus on the
real issues from an early stage.
[19]
In this Court, counsel for the appellant
indicated that the appellant does not pursue his initial contention
that his dismissal
was automatically unfair as well as his
allegations regarding racial discrimination. The challenge was only
limited to the Labour
Court’s finding that the appellant’s
dismissal due to the respondent’s operational requirements was
fair. It
was contended that the appellant’s selection for
retrenchment was neither in accordance with the criteria that had
been agreed
between the parties nor criteria that were fair and
objective.
[20]
As regards the agreed criteria, it was
submitted that there is nowhere in the Retrenchment Agreement where
the respondent was authorised
to apply the selection criteria
selectively per lines of production but between geographical
locations. The respondent’s
limitation of the criteria to the
lines of production was therefore an unfair application of the agreed
selection criteria. Put
differently, it was contended that the agreed
selection criteria meant that the employees would not be moved or
bumped between
the respondent’s centres such as Kuruman,
Bloemfontein and Richards Bay to avoid retrenchment but that an
employee in the
position of the appellant would be compared against
all other supervisors employed at the Richards Bay Plant without
limitation
to production lines only. For this reason, it was
contended, the appellant’s selection for retrenchment was
therefore substantively
unfair because it was not in accordance with
either agreed or objectively fair criteria.
[21]
LIFO (last in, first out) as a method of
selection entails that employees are selected for retrenchment
according to the period
they have been with the employer. It simply
means that employees who have served for a shorter period would be
higher on the list
of those likely to be retrenched. Although it has
its own difficulties, LIFO is still regarded as the most objective
and fair method
of selecting employees.
[22]
The
application of LIFO may also have the effect of longer serving
employees being moved to take up positions of employees with
less
service and who were not necessarily targeted for retrenchment. This
process is known as bumping. This Court had an occasion
to consider
bumping as a method of selection in our law in
Porter
Motor Group v Karachi.
[2]
The Court summarised the principles applicable to bumping as
follows:
[3]
‘
(1).
It should be reiterated once again that
fairness is not a one way street. It must accommodate both
employer
and employee. Section 189(2) of the Act requires both parties to
attempt to reach consensus on alternative measures to
retrenchment,
so there is a duty on an employee as well to raise bumping as an
alternative. An employer is obliged to consult with
an employee about
the possibility of bumping.
(2).
Bumping is situated within the “last in-first out” (LIFO)
principle which is
itself rooted in fairness for well-established
reasons. Longer serving employees have devoted a considerable part of
their working
lives to the company and their experience and expertise
is an invaluable asset. Their long service is an objective tribute to
their
skills and industry and their avoidance of misconduct. In the
absence of other factors, to be enumerated hereinafter, their service
alone is sufficient reason for them to remain and others to be
retrenched. Fairness requires that their loyalty be rewarded.
(3).
The nature of bumping depends on the circumstances of the case. A
useful distinction is
that of dividing bumping into horizontal and
vertical displacement. The former assumes similar status, conditions
of service and
pay and the latter any diminution in them.
(4).
The first principle is well established, namely, that bumping should
always take place horizontally,
before vertical displacement is
resorted to. The bumping of an individual, in the absence of the
other relevant factors, seldom
causes problems and the fact of longer
service establishes the inherent fairness thereof. Vertical bumping
should only be resorted
to where no suitable candidate is available
for horizontal bumping. Where small numbers are involved the
implementation of horizontal
or vertical bumping should present few
problems.
(5).
Where large scale bumping, sometimes referred to as “domino
bumping”, necessitates
vast dislocation, inconvenience and
disruption, consultation should be directed to achieving fairness to
employees while minimising
the disruption to the employer. Examples
of disruption include difficulties caused by different pay levels,
client or customer
reaction to a replacement of employees and staff
incompatibility. In evaluating the competing interests of the
employer and the
affected employees the consulting parties should
carry out a balancing exercise. Where minimal benefits accrue to
employees, while
vast inconvenience is the lot of employers, fairness
requires that fewer employees should move.
(6).
There will always be geographical limitations to bumping in that
fairness will require
that limits be placed on how far an employee is
expected to move to bump another. Although prejudice to the employer
in long distance
relocation cannot be excluded, in practice this will
be rare. Generally it will be the employee who will suffer as a
result of
being removed from a cultural and social environment he or
she has become accustomed to. Second-guessing the desires of the
employees
is undesirable; if they are happy to translocate then
bumping should take place whatever the distance involved.
(7)
The pool of possible candidates to be bumped should be established
and the circumference
thereof will depend on the mobility and status
of the employees involved. The managerial prerogative entails moving
employees to
the best advantage of the company within the parameters
if its activities, national or international; fairness requires that
the
same circumference should define the limits of potential
candidates to be bumped. The career path of the employee in the
company
will often be a useful indication of scale of mobility.
(8).
The independence of departments as separate business entities may be
relevant but the argument
that a company’s departments are
managed separately should be strictly scrutinised. Even if there is
no past practice of
transferring between branches or departments, the
employer must consider interdepartmental bumping unless it is
injurious to itself
and to other employees.
(9).
Bumping does not apply to employees in a different grade if the
longer-serving employees
cannot do the work of the employee with
shorter service in that grade. This limitation applies most
frequently where competence,
technical or professional knowledge or
experience and specialised services are involved. Where the necessity
arises of retaining
those, who are transferred, this should be
carried out, unless it places an unreasonable burden on the employer.
(10).
The status of the post into which an employee is bumped is relevant,
as the employer’s prerogative
to choose someone of
managerial/supervisory level should be respected. Management concerns
that downgrading an employee will be
demoralising will not justify a
decision not to bump downwards where the employee is prepared to
accept downgrading. On the other
hand the unwillingness of the
affected employee to accept a lower wage may justify not bumping.”
[23]
In
General
Food Industries Ltd t/a Blue Ribbon Bakeries v FAWU and Others,
[4]
this Court held,
inter
alia
,
that the fact that the employees had not explored the possibility of
“bumping” during consultations did not mean that
they
were precluded from challenging the fairness of their selection
during the trial. The preclusion could only be applicable
where an
employee or its union has specifically made an undertaking not to
rely on bumping in challenging the fairness of a dismissal
arising
from the consultation process in question.
[24]
The
Retrenchment Agreement concluded between the consulting parties in
this case constitutes a binding collective agreement. The
consulting
parties have agreed on the selection criteria to finally identify and
select the employees to be retrenched. The selection
criteria agreed
to in the agreement is therefore the only basis for identifying the
employees to be retrenched. However, the agreement
makes provision
for its variation. It provides that variation of the agreement shall
not be of any force or effect unless reduced
to writing and signed by
the parties or duly authorised by their agents.
[5]
Any other basis for selection of employees for retrenchment outside
or contrary to the agreement can therefore not be regarded
as the
agreed method for selection. There would in that case have to be
justifiable reasons for the application of the said method
for
selection and the method itself and its application would have to
pass the test of fairness.
[25]
To recap, the agreed selection criteria for
employees to be retrenched in this case provided that where the
positions are not critical
to the operations of the Group in the
short to medium term, the criteria to be used is the geographical
location of the position,
qualification, competency and experience
and LIFO. It means therefore that the respondent bore the
onus
to prove on a balance of probabilities that it applied the selection
criteria as agreed and that its application was done fairly.
[26]
In my view, it is important to note that
the common cause facts that follows: The entire process of
restructuring of the respondent’s
business was a subject of an
extensive process of consultation and negotiations. The employees
were part of the process as represented
by their trade unions. The
appellant was no exception as he was represented by his union
Solidarity which played an active role
in the consultation process.
The procedural fairness of the process is not challenged. The need to
restructure the respondent’s
operations as well as the need to
retrench the employees is not disputed. What is challenged is
therefore the application of the
agreed selection criteria that led
to the retrenchment of the appellant.
[27]
It is not disputed that the appellant
identified other employees who according to him should have been
retrenched if LIFO together
with “bumping” was applied.
These employees were David Ronaldo, Mashudu Mafinya and Asogan
Naidoo. These employees,
together with others such as Alfreds, Kanaye
and Blignaut had fewer years’ service with the respondent than
the appellant.
[28]
The reasons advanced on behalf of the
respondent why these other employees were not retrenched are simply
that they were incumbents
in their current positions and were at the
crucial time not considered for retrenchments; that because of the
approach adopted
by the respondent it was never a consideration that
the appellant had more years of experience; or that in some cases he
had similar
qualifications and was capable of performing the
functions of the other employees with less experience and
qualifications than
him. The respondent simply decided not to
consider applying bumping at all or across the lines of production.
No cogent evidence
was presented to show that the employees that were
retained were better skilled, qualified or capable than the
appellant. Some
of the employees such as Ronaldo and Robertson were
only redeployed to their positions a few months before the
retrenchment.
[29]
The respondent could not produce any
evidence to support its view that the retrenchment agreement
precluded the consideration and
application of bumping across the
production lines. There is also no provision that one can find in the
agreement that supports
that view. Prohibition if any, may be against
moving employees across geographical regions; that is moving
employees from Richards
Bay to either Kuruman, Bloemfontein or vice
versa. The finding by the Court
a quo
to the effect that it was agreed in the consultation process that
bumping would not be applied between the lines is in my view
not
correct. In any case, such agreement, be it by either implication or
inference would be contrary to the written agreement and
would
therefore be of no force or effect.
[30]
It is clear from the authorities referred
to above that bumping forms part of LIFO as a method for selection of
employees to be
retrenched. It was therefore incumbent on the
respondent to have consulted on its application to determine whether
its application
would have been appropriate in the circumstances of
this case. It was not for the respondent to decide unilaterally that
it would
not be appropriate to apply bumping especially where it was
not specifically prohibited in the collective agreement. Reasons why
the respondent considered the application of bumping inappropriate or
unfair should have been tabled for consideration by the consultation
parties before a final decision could be taken. Any decision taken
together with the consulting parties should have been reduced
to
writing and singed by the parties if it was to contradict the
collective agreement.
[31]
The appellant has, in my view, succeeded to
show on a balance of probabilities that had bumping been applied he
would not have been
dismissed because of,
inter
alia
, his years of experience,
qualifications and skills. He was also not offered other positions
for which he qualified. Bumping in
this case would not qualify to be
regarded as large scale bumping. There is also no cogent evidence on
record to suggest that bumping
would have led to disruptions,
dislocation or inconveniences.
[32]
Advising the appellant to apply for a
position is not tantamount to offering him a position for his
consideration. His application
may be ruled unsuccessful and remain
retrenched. If the respondent was of the view that the appellant was
suitable for the positions
he was advised to apply for it was
necessary for it to offer those positions to the appellant for him to
decide whether to accept
them or not. This was not an instance where
positions for a structure were identified and all the employees were
to compete in
a selection process in filling those positions in a
newly created structure. I am of the view that the respondent has
failed to
show that the agreed selection criteria was applied
alternatively that the selection criteria it applied to select the
appellant
for retrenchment was fair, objective and was fairly
applied. For these reasons his dismissal for operational requirements
was substantively
unfair.
[33]
The appellant prayed that he be reinstated.
I am mindful of the fact that a period of time has lapsed since his
unfair dismissal.
That reason on its own is not sufficient to deny
him his primary remedy for a substantively unfair dismissal. It is
also not his
fault that there has been a delay between his dismissal
and the prosecution of the appeal to finality. It was also not the
respondent’s
case that the exceptions listed in section 193(2)
of the Act are in existence for one to conclude that he should not be
reinstated.
The appellant’s reinstatement should be with full
retrospective effect and inclusive of all benefits that he would have
been
entitled to but for his unfair dismissal. The parties have
agreed to place on record the fact that the appellant had been
unemployed
until a month prior his testimony during May 2011. On that
day, he commenced a temporary employment earning a monthly salary of
R17 000,00 as opposed to the amount of R21 215,00 he earned at
the respondent at the time of his dismissal. The appellant
has been
permanently employed on contract since that time. The period of his
employment as well as his earnings should be taken
into account when
calculating the benefits due to the appellant.
[34]
As regards costs both parties have
submitted that costs must follow the result. I am of the view that it
would be according to the
requirements of the law and fairness that
the respondent should be ordered to pay the appellant’s costs.
[35]
In the result the following order is made:
a)
The appeal is upheld and the order of the
Labour Court is set aside and replaced with the following:
1)
The appellant’s dismissal is hereby
declared substantively unfair.
2)
The appellant is to be reinstated with
retrospective effect to the employ of the respondent and is to
receive the benefits he would
have been entitled to but for his
dismissal, and such benefits are to exclude the agreed remuneration
the appellant received whilst
employed by another employer during the
period of his dismissal.
3)
The respondent is to pay the costs.
b)
The respondent is ordered to pay the costs
of the appeal.
___________________
Tlaletsi
ADJP
Dlodlo
et Mokgoatlheng AJJA concur in the judgment of Tlaletsi ADJP
APPEARANCES:
FOR
THE APPELLANT:
Adv Shuman
Instructed
by Brett Purdon Attorneys
Durban
FOR
THE RESPONDENT: Adv M M
Poseman
Instructed
by Macgregor Erasmus Attorneys
Durban
[1]
66
of 1995.
[2]
[2002]
4 BLLR 357
(LAC).
[3]
At
para [16].
[4]
[2004]
9 BLLR 849 (LAC).
[5]
Clause
15.1 of the agreement which also provides that “The Agreement
records all the terms that have been agreed upon between
the
parties.”