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[2014] ZALAC 78
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National Union of Mineworkers and Another v Black Mountain Mining (Pty) Ltd (CA22/2012) [2014] ZALAC 78 (10 December 2014)
REPUBLIC OF SOUTH AFRICA
LABOUR
APPEAL COURT OF
SOUTH
AFRICA, CAPE TOWN
Reportable
Case no: CA22/2012
In
the matter between:
NATIONAL
UNION OF
MINEWORKERS
.............................................................
First
Appellant
T
G
LINDEN
.....................................................................................................
Second
Appellant
and
BLACK
MOUNTAIN MINING (PTY)
LTD
.................................................................
Respondent
Heard:
...........
12
September 2013
Delivered:
.....
10
December 2014
Summary: Dismissal for operational
requirements – employer dismissing employee based on commercial
and economic reasons –
Labour Court upholding dismissal –
appeal – evidence showing that employer employing contractors
to do employee’s
job – employer not considering
alternative to dismissal – employer’s commercial and
economic reason for dismissal
unjustifiable – appeal upheld –
Labour Court’s judgment set aside.
Coram:
Waglay JP, Dlodlo and Francis AJA
JUDGMENT
FRANCIS
AJA
Introduction
[1]
The first appellant, the National Union of Mineworkers, had on
behalf of its member, the second appellant, referred an
unfair
retrenchment dispute to the Labour Court for adjudication and
contended that their member’s dismissal by the respondent
for
alleged reasons of its operational requirements was substantively and
procedurally unfair. At the commencement of the trial,
the appellants
conceded that the dismissal was procedurally fair. The court found
that the dismissal was substantively fair and
dismissed the referral
with costs.
[2]
This is an appeal against the judgment of Van Voore AJ delivered
on 28 June 2012. The appeal is with leave granted by the
court
a
quo
.
The
facts
[3]
The respondent is a mining company situated in Aggenys in the
Northern Cape. The town of Aggenys is geographically apart
from other
towns in the region and exists solely for the purposes of the mines
activities and those services related to it. The
town has some 4000
individuals. It is for all intents and purposes an extension of the
respondent’s business. The respondent
is the
de facto
governance of the town which does not have a municipality and is
obliged to maintain not only the structural functionality to its
mining activities, but must also maintain the buildings and
infrastructure used by the mine staff. The township is not a cost
centre in the sense that it is able to generate profit revenue. It
does not levy rates and must fund the operating expenses of the
town
out of its operating budget.
[4]
The second appellant was employed by the respondent since 1989
and at the date of his retrenchment was employed as a mason
in the
respondent’s Town Engineering unit that conducts maintenance
for the town and its various facilities.
The
Town Engineering unit is a non-mining or non-core function particular
to the nature of the respondent and Aggenys
.
Prior to the
restructuring, the second appellant was one of eight artisans
reporting to a foreman (James Richards) who in turn reported
to the
town engineer Kobus Zandberg. His duties involved general masonry
work such as rebuilding and repairing walls, plastering,
tiling,
fixing potholes and paving, road signage, cement work and the like.
He resides in Aggenys with his wife, who works at a
local school, in
accommodation that is rented from the respondent at a nominal cost as
a result of his employment with the respondent.
[5]
The respondent has operated the mine at the town since 1977.
Prior to 1 October 2008, the respondent operated as a division
of
Anglo American Operations, but was then unbundled with the result
that it became an independent private entity, responsible
for its own
financial affairs. To generate its working capital, it took loans
from Anglo American Finance which eventually totalled
R500 million.
By the end of 2009, the respondent was still indebted to Anglo
American Finance to the value of R155 million and
was technically
insolvent. One of the strategies that had been identified by the
respondent to ensure its long term sustainability
was the sinking of
a new deep shaft that took place during 2005. This shaft was required
to attain a certain design capacity to
be profitable. Historically,
the shaft had not met this level of production to the extent that the
shortfall in budget, from mining,
was said to be some R200 million
annually. Various other financial pressures such as the strengthening
of the rand and the lowering
of metal prices caused additional
financial pressures to be felt.
[6]
The respondent’s first attempt to turn its financial
fortunes around was the implementation of “operation survival”
during March 2009, a strategy aimed largely at the improvement of
production and the cutting of associated mining costs. This strategy
only had limited success. On 1 October 2008, the respondent issued a
notice in terms of section 189(3) of the Labour Relations
Act 66 of
1995 (the LRA) with a referral to the Commission for Conciliation,
Mediation and Arbitration (the CCMA) for facilitation
in terms of
section 189A of the LRA. An initial meeting was held with the first
appellant. The reasons for the restructuring were
listed as lack of
competiveness, under performance, low production, increased costs and
the strength of the rand. These reasons
relate to the core activities
of the respondent, namely the functioning of the mine itself. As at 1
October 2009, the respondent
contemplated when the process commenced
that there would be a retrenchment of up to 100 positions.
[7]
A first facilitation meeting took place under the auspices of
the CCMA on 14 October 2009 where the respondent made a presentation
of its restructuring objectives. The respondent intended to cut 93
positions from its organisational structures, 29 from the engineering
department and 7 from the town engineering unit where the second
appellant was employed. No actual posts were identified, nor was
any
cost-benefit analysis presented to demonstrate why this should be the
case. The respondent committed itself to the reduction
in the number
of contractors and that it would endeavour to place employees in such
positions. In response to a request for information
tabled by the
first appellant at the facilitation meeting, the respondent issued a
response on 23 October 2009 indicating that
a total of 640
contractors/service providers were currently engaged. There was also
a commitment to reduce the use of contractors
in part by replacing
them with permanent positions. It is unclear to what degree those
numbers included the various contractors
then conducting township
maintenance. The first appellant requested such information on 2
November 2009 together with a disclosure
of the identity of the
employees filling the positions earmarked for retrenchment. On 4
November 2009, the respondent said that
it viewed the request for
identification and disclosing the identity of the contractors engaged
as at that date as premature.
[8]
A fourth and final facilitation meeting was conducted at the
CCMA on 24 November 2009 and a presentation was made by the
respondent. It was indicated that two unidentified artisans from the
town engineering unit were earmarked for retrenchment. This
was
clarified as being one mason and one carpenter. The respondent
undertook to offer the affected employees vacancies filled by
“labour
hire”. Various vacancies were identified.
[9]
On 30 November 2009, a further consultative meeting was held and
a further presentation was made by the respondent. For
the first
time, the second appellant with a fellow retrenchee AL Biba a
carpenter were identified as two of twelve affected employees
who
could not yet be placed, but who could apply for the listed
vacancies. The second appellant did not qualify for any of the
listed
vacancies,
ex facie
the listed requirements, save for that of
“serviceman” which would have required a drop in salary
of approximately
70%, and the ability to work underground. The
respondent agreed that this position was not a reasonable alternative
to the second
appellant’s retrenchment. The respondent’s
response to certain proposals tabled by the first appellant at the
meeting
was to the effect that it was only prepared to offer Biba and
the second appellant the generally offered “retraining
allowance”
of R3 000,00 to
inter alia,
form a close
corporation and that they would then be “free to tender on any
applicable work”. There was no undertaking
to prefer them as
contractors for work at the respondent, and the respondent was bound
by its own procurement policy.
[10]
Around the same date, the first appellant responded to the
respondent’s presentation. It submitted that the
contemplated retrenchment of the second appellant and Biba was
unjustified due to fact that there were a shocking number of
contractors
which are the respondent’s preferred services
providers with fixed rates. It listed the contracting companies
and pointed
out further that due to the high workload, the said
contracting companies engaged sub-contractors to assist them in the
performance
of their duties. It pointed out that the second
appellant was recalled from the plant to service the township due to
the
high work load at the township but that the respondent still
showed a preference to using contracting companies. It proposed
that if the respondent was insisting on retrenching two employees
then it should assist them with the registration of a close
corporation and make them preferred service providers with fixed
rates and accommodation. It believed that the principle of
removing fixed-term employees and employees from labour brokers in
other areas should apply even in the township. The respondent
did not respond to the aforesaid proposal. It was not prepared
to give any preferential status to the second appellant and
Biba in
respect of tendering for work and they would ultimately be on an
equal footing as other companies tendering in terms of
its
procurement policy.
[11]
No written or other response was made by the respondent to those
proposals. The respondent did not consider removing contractors
as an
alternative to retrenchment of the two employees, nor was it able to
substantiate the alleged improvements in costs and efficiency
of
service. The respondent was not prepared to give any preferential
status to the employees in respect of tendering for work and
they
would ultimately be on an equal footing as other companies tendering
in terms of the respondent’s procurement policy.
[12]
On 3 December 2009, the second appellant received a formal letter
from the respondent informing him that his position had
been made
redundant and advising him that he could apply for vacancies as per
the list attached, failing which his services would
terminate on 1
January 2010. Whilst the respondent did extend the offer to pay the
retraining allowance, it did not provide any
undertaking regarding
preferential engagement. The vacancies set out in the list required
qualifications or skills that the second
appellant did not possess.
The second appellant accepted the retraining allowance and registered
a close corporation. He has not
however engaged in any business with
the respondent.
[13]
On 23 December 2009, the second appellant received a
pro forma
letter formally terminating his services. He was informed
inter
alia
that he was not successful for the alternative positions
that he had applied for due to his current skills that did not match
any
of the positions. He was advised that there were no further
alternatives available for the respondent to consider and that his
services would be terminated. He was required to vacate his occupied
company accommodation within 30 days from the date of the termination
of his services. It was accepted by one, van der Mescht that the
reference to the positions applied for was an error and that the
respondent had subsequently agreed to allow the Lindens to rent the
accommodation provided to them as a consequence of Mrs Linden’s
work at the local High School. Van der Mescht did however confirm
that in the ordinary course, the second appellant would have
been
obliged to vacate on the legally required month’s notice. The
second appellant served out his notice month and thereafter
referred
an alleged unfair dismissal dispute to the CCMA for conciliation.
Whilst Biba was included in that referral, he elected
not to proceed
with his dispute beyond that stage. Only the second appellant and
Biba and another employee outside the bargaining
council were
“‘forcibly” retrenched.
[14]
Following the retrenchment of the second appellant and Biba, the
respondent engaged the services of various contractors
(including
Biba who was able to generate business in excess of R1,5 million
within an 18-month period for “general work”)
in order to
perform the type of work previously conducted by the township
engineering unit. The nature and the extent of work being
performed
had not changed in any fundamental way after the restructuring and it
was really an operational decision which had been
made by the
respondent to contract out that work. No evidence was presented by
the respondent to show the cost effectiveness of
that strategy or
whether it was a preferable option from an efficiency point of view.
The
proceedings in the court
a quo
[15]
The appellants felt aggrieved with the second appellant’s
retrenchment and referred to the dispute to the CCMA and
thereafter
to the court
a quo
for adjudication. The challenge was limited
to substantive fairness only.
[16]
The court
a quo
set out the evidence that was led before
it. It is not necessary to repeat it. The court said that the further
evidence of the respondent’s
witnesses was that during the
consultation process, one of the proposals made by the first
appellant was a suggestion that the
respondent should completely do
away with “contractors” and that the work done by
contractors should be done by employees.
This was however not
considered as a viable proposal. At the time the respondent was using
contractors and giving them work as
and when the need arose. It was
the respondent’s evidence that in relation to some of the work
done by contractors, it did
not at the time have the capacity to
attend to the projects internally and did not want to expand its
non-mining operations.
[17]
The court
a quo
said that it was the evidence of the
respondent that if it were to retain the second appellant in the face
of the restructuring
which led to other employees leaving the
maintenance department in which the second appellant worked, then the
respondent would
have to provide him with support to perform those
services because in its then existing structure he would not be able
to carry
out services by himself. The respondent chose not to go down
that path because of the express purpose of the restructuring was to
re-allocate human and other resources from non-essential or
non-critical support services.
[18]
The court
a quo
said that the appellants raised a number
of issues and responses. The first appellant contended that there
were approximately 640
contractors or services providers engaged by
the company and that there was some level of commitment to reducing
the use of contractors/services
providers. Ultimately, the respondent
did not consider the blanket removal of all service
providers/contractors as an alternative
to its right-sizing or
restructuring initiatives. Furthermore, the respondent was not in a
position to or prepared to give any
guarantee to retrenched employees
in respect of allocating them work should they establish an
enterprise which would apply or tender
for work to be done on behalf
of the mine. The respondent’s evidence was that it had reduced
its “above-ground”
maintenance work to such an extent
that only work that was genuinely essential would be done. In those
circumstances, it could
not provide any guarantee to any service
provider.
[19]
The court
a quo
said that it is further common cause that
on or about 2 November 2009, the first appellant requested
information pertaining to the
contractors used by the respondent and
the positions that would be affected by possible retrenchments. The
respondent did engage
the first appellant on that aspect. In its
view, the respondent reasonably and fairly decided that doing away
with contractors
or outside service providers was not viable in light
of the way in which it had decided to run the business of the mine.
[20]
The court
a quo
said evidence of van der Mescht was that
“right-sizing” as contemplated by the respondent referred
to the development
of a second “deep shaft” at the mine
which was being brought into full production and “town
maintenance”
within the service department. Throughout the
respondent contended that it needed the mine to achieve “design
capacity”
in the generation of ore. Further the respondent
contended that its efforts in restructuring also town maintenance
formed part
of this broader purpose. It appears to be the first
appellant’s contention that the restructuring of town
maintenance could
also only have fallen within the mine’s
purpose of reaching “design capacity” if staff in town
maintenance were
moved into production departments. However this does
not necessarily follow.
[21]
The court
a
quo
said that it was common cause that a further consultation meeting
facilitated by the CCMA took place on 24 November 2009. At that
meeting, the respondent,
inter
alia,
informed
the first appellant that two artisans from the town engineering were
identified for retrenchment. Those persons were one
mason and one
carpenter. Further the respondent undertook to offer the affected
employees the opportunity to apply for vacancies.
The court
a
quo
said
that in the
Forecourt
Express (Pty) Ltd v SATAWU and Others
[1]
matter,
it was held that:
‘…
as
a general rule an employer has a right to choose the way in which he
will run his business provided that in so far as workers
are
concerned, he respects their contracts of employment and obtains
their consent if he wishes to amend such contract or consults
with
them or their representatives as contemplated by section 189 of the
Act if he contemplates dismissing them for operational
requirements
arising out of such choice’.
[22]
The court
a quo
said that whilst it is so that under our
law it is in certain circumstances required of an employer not to
dismiss affected employees
if there is work which they can do with
minimal or no retraining, that does not apply in the present matter.
It was also put to
the respondent’s witnesses in
cross-examination that following the retrenchment, it has made
extensive use of contractors/service
providers for doing “general
work” and other work. In particular, it was claimed that Biba
had apparently been paid
approximately R1,5 million over an 18 month
period for what appears to be “general work”. The court
said that in its
mind this did not undo the essential rationale for
the respondent’s decision to allocate more of its resources to
“below-ground”
activity and less to “above-ground”
activities such as town maintenance.
[23]
The court
a quo
held that it is part of our law that an
employer has the right to choose the way in which it will conduct or
run its business. This
is of course subject to employees being
treated fairly in the process of the employer’s decision-making
and subject to the
employer’s decision-making being based on
its “operational requirements” as reasonably assessed by
it. There
is no evidence to suggest that the respondent had
prematurely and unfairly made a final decision on retrenchment prior
to the consultation
process and its conclusion. The court
a quo
found that on a proper assessment of the evidence, the respondent
has established that it had decided to run its affairs or manage
the
business differently. Those changes are properly grounded in the
respondent’s operational requirements. It was claimed
that
after the retrenchment, the respondent has apparently made extensive
use of contractors/service providers in certain areas.
The court said
that even if this was true, it did not serve to undermine the
respondent’s reasonable assessment of the way
in which it is
running the business and the changes which are reasonably assessed
are necessary for restructuring. The court said
that in those
circumstances and its view, the respondent has established that the
retrenchment was effected for a fair reason.
The court found that the
dismissal of the second appellant was for a fair reason and ordered
the appellants to pay the respondent’s
costs.
The
grounds of appeal
[24]
The appellants contended that the court
a quo
erred
generally in finding that the dismissal of the second appellant was
for a fair reason and thus that the appellants’
referral ought
to be dismissed with costs. More particularly, and without derogating
from the generality of the aforegoing, the
acting learned judge erred
in finding that the respondent had acted fairly and reasonable in
making use of outside contractors
as a replacement for the services
performed by,
inter alia,
the second appellant; finding that
the respondent had acted within its general right to conduct its
business as it wished; finding
that the respondent had acted
rationally in restructuring its business so as to result in the
retrenchment of the second appellant;
failing to find that the second
appellant was not dismissed as a last resort and that it would have
been fair, under the circumstances,
to retain his services; failing
to find that the respondent had not properly considered and
implemented alternatives to the second
appellant’s dismissal;
failing to find that the second appellant’s dismissal was not
operationally justifiable on rational
grounds, particularly given the
respondent’s extensive use of outside contractors following the
dismissal; failing to find
that the dismissal of the second appellant
per se
could never have genuinely been for the respondent’s
“economic, structural, technological or similar needs”;
failing to find that the respondent was obliged to retrench according
to the principles of proportionality and that such principles
justified the retention of second appellant’s services and
failing to find that as a consequence of second appellant’s
personal circumstances, his dismissal by the respondent was
substantively unfair.
The
parties’ contentions on appeal
[25]
The appellants contended that the court
a quo
erred in
adopting a so-called “deferential approach” to the
respondent’s decision to retrench the second appellant
whereas
the law generally requires the reason for a retrenchment to have been
a fair one and ultimately a decision of last resort.
To the extent
that the second appellant’s dismissal may have been motivated
by the respondent’s “economic, technological,
structural
or similar” needs, the dismissal of the second appellant was
not reasonably necessary to fulfil those needs. Furthermore,
the harm
caused by the dismissal of the second appellant was not proportional
to the benefit or utility of the respondent’s
business or the
alleged operational requirements.
[26]
The appellants contended further that the respondent failed to
reassess during the course of the restructuring exercise
whether it
was necessary to dismiss the second appellant at all, particularly in
light of the second appellant’s limited
costs to the respondent
and the respondent’s widespread engagement of contractors
immediately and after the retrenchment
in order to perform,
inter
alia,
the second appellant’s job. The respondent has failed
to discharge the
onus
resting upon it to demonstrate that,
under all the circumstances, the dismissal of the second appellant
was for a fair reason and
ultimately a measure of last resort.
[27]
The respondent contended that the restructuring was motivated
primarily to focus on its core function of mining ore for
on-selling.
This restructuring was not limited to “economic reasons”
as specifically referred to in section 189 of
the LRA but falls
within the meaning “operational requirements” as
contemplated in section 213 of the LRA. It contended
that it is
entitled and indeed permitted to deal with “economic
inefficiencies” and “structural problems”.
The
restructuring was aimed at dealing with both “economic
inefficiencies” and “structural problems”. It
accepted that maintenance could not be ignored or delayed. It decided
that the kind of maintenance that the second appellant and
the others
did could be attended by “outside” service providers and
that this would have the result that the respondent
does not bear the
costs of a fully fledged maintenance services department. The
previous maintenance done by the second appellant
carried out by
outside contractors/service providers would result in it being in a
position to incur expenses on such maintenance
when it needed to
rather than having to cover the costs of such maintenance even when
there was no need for it. This approach it
was contended falls within
the meaning of “operational requirements” as contemplated
in section 213 of the LRA. Its
approach so it was contended is
“rationally justifiable” in view of its decision to scale
down or not to carry on at
all any “non-essential or
non-critical maintenance”. This approach fell within the
reasoning of the Labour Appeal Court
in the matter of
ForeCourt
Express
where the court reasoned that as a general rule an
employer has the right to choose the way in which he will run his
business. It
did indeed consider employing the second appellant in
its “below-ground” activity. However, he did not apply
for any
“below-ground” jobs. It considered alternatives
and implemented these wherever possible and alternatives were offered
to the second appellant. He declined it for various reasons.
Analysis
of the evidence and arguments raised
[28]
The appellants had referred an unfair dismissal dispute to the
Labour Court for adjudication. The respondent had called
three
witnesses during the trial. They were Louisa Jakoba Carstens, the
financial director of the respondent; Malcolm Lesley Frank
van der
Mescht, the human resources manager and Jacobus Christoffel Zandberg
the section engineer of the respondent. The appellants
did not lead
any evidence. Carstens dealt with reasons for the respondent
embarking on a restructuring exercise. Van der Mescht
testified about
the consultation process that was followed. Zandberg testified about
what the position is within the maintenance
department of the
respondent. It is not necessary to repeat their evidence since those
are set out in the background facts.
[29]
It is clear from the evidence led that the parties had been
involved in extensive consultations that were facilitated by
the
CCMA. At the commencement of the trial, the appellants stated
that they were no longer challenging the procedural fairness
of the
retrenchment. They were also not stating that the selection criteria
were unfair or non-objective or applied inconsistently.
Their attack
was brought in terms of section 189A(19) subsection (c) of the LRA
that requires an employer to prove that there was
a proper
consideration of alternatives. They had proposed alternatives which
ought to have been considered by the respondent but
were not, so the
appellants contended that the respondent’s failure to do so
infected the substantive fairness of the dismissal.
The appellants
alleged that on the evidence, the dismissal of the second appellant
was not objectively justifiable nor did the
respondent appropriately
consider alternatives to the dismissal.
[30]
It is clear that the alternative that was proposed by the first
appellant during the consultation process was that the
contemplated
retrenchment of the second appellant and Biba was not justified due
to fact that there were numerous contractors which
were the
respondent’s preferred services providers with fixed rates. It
listed the contracting companies and pointed out
further that due to
the high workload, the said contracting companies engaged
sub-contractors to assist them in the performance
of their duties. It
pointed out that the second appellant was recalled from the plant to
service the township due to the high work
load at the township but
that the respondent still showed a preference to using contracting
companies. It proposed that if the
respondent was insisting on
retrenching two employees then it should assist them with the
registration of a close corporation and
make them preferred service
providers with fixed rates and accommodation. It believed that the
principle of removing fixed-term
employees and employees from labour
brokers in other areas should apply even in the township.
[31]
It is common cause that no written or other response was made by
the respondent to those proposals. The respondent did
not consider
removing contractors as an alternative to retrenchment of the second
appellant and Biba, nor was it able to substantiate
the alleged
improvements in costs and efficiency of service. The respondent was
not prepared to give any preferential status to
the second appellant
and Biba in respect of tendering for work and they would ultimately
be on an equal footing as other companies
tendering in terms of the
respondent’s procurement policy.
[32]
Despite the aforegoing, the court
a
quo
found
for the respondent. It adopted what has been termed a deferential
approach to the determination of substantive fairness in
the
retrenchment context. It quoted
Forecourt
Express
)
namely that as a general rule an employer has the right to choose the
way in which it will run his business. The deferential or
abstentionist approach has its roots under the 1956 LRA in
Morester
Bande (Pty) Ltd v NUMSA and Another
[2]
where
it was stated that as long as dismissals were linked to a genuine
economical rationale, the courts were generally reluctant
to
interfere in legitimate business decisions, even if those may have
been unwise or incorrect.
[33]
The deferential approach is no longer part of our law. It was
called into question and rejected in
BMD
Knitting Mills (Pty) Ltd v SACTWU
[3]
and
in
CWIU
and Others v Algorax (Pty) Ltd.
[4]
.
In
BMD
Knitting Mills,
this
Court observed at paragraph 18 that the test enunciated in
Discreto
was
one amounting to the judicial review of an administrative action akin
to that utilised in applications for review under section
145 of the
LRA as then understood following
Carephone
(Pty) Ltd v Marcus NO and Others,
[5]
namely
that the courts should not impose value judgments or concepts of
correctness on administrative bodies. The true test was
whether the
decision was rationally justifiable. The court then proceeded as
follows at paragraph 19:
‘
I
have some doubt as to whether this deferential approach which is
sourced in the principles of administrative review is equally
applicably to a decision by an employer to dismiss employees
particularly in the light of the wording of the section of the Act,
namely, ‘the reason for the dismissal is a fair reason’.
The
word ‘fair’ introduces a comparator, that is, a reason
which must be fair to both parties affected by the decision.
The starting point is whether there is a commercial rationale for the
decision. But, rather than take such justification
at face
value, a court is entitled to examine whether the particular decision
has been taken in a manner which is also fair to
the affected party,
namely the employees to be retrenched. To this extend the court
is entitled to enquire as to whether
a reasonable basis exists on
which the decision, including the proposed manner, to dismiss for
operational requirements is predicated.
Viewed accordingly, the
test becomes less deferential and the court is entitled to examine
the content of the reasons given by
the employer, albeit that the
enquiry is not directed to whether the reason offered is the one
which would have been chosen by
the court. Fairness, not correctness,
is the mandated test.’
[34]
In
CWIU
and Others v Algorax,
this Court per Zondo JP (as he then was) dealt with the issue as
follows:
‘
Sometimes
it is said that a Court should not be critical of the solution that
an employer has decided to employ in order to resolve
a problem in
its business because it normally will not have the business knowledge
or expertise which the employer as a business
person may have to deal
with the problems in the workplace. This is true.
However, it is not absolute and should not
be taken too far.
When either the Labour Court or this Court is seised (sic) with a
dispute about the fairness of a dismissal,
it has to determine the
fairness of the dismissal objectively. The question whether the
dismissal was fair or not must be
answered by the court. The
court must not defer to the employer for the purpose of answering
that question.’
[35]
The Court rejected the notion of a deferential approach to
operational requirements, preferring instead an objective approach
where a court must determine what was fair. The Court then considered
the standard to which the employer should be held when testing,
objectively, the fairness of the dismissal and held at 1940 D –
F as follows:
‘…
resort
to dismissal, especially a so-called no-fault dismissal, which some
regard as the death penalty in the field of labour and
employment
law, is meant to be a measure of last resort… It seems to me
that the reason for the lawmaker to require all
of these things from
the employer was to place an obligation on the employer only to
resort to dismissing employees for operational
requirements as a
measure of last resort. If that is correct, the court is
entitled to intervene where it is clear that certain
measures could
have been taken to address the problems without dismissals …
or where it is clear that dismissal was not
resorted as a measure of
last resort.’
[36]
Section 189A(19) of the LRA provides that the Labour Court must
find that the employee was dismissed for a fair reason
if – (i)
the dismissal was to give effect to a requirement based on the
employer’s economic, technological, structural
or similar
needs; and (ii) the dismissal was operationally justifiable on
rational grounds; and (iii) the selection criteria were
fair and
objective. Since the procedural fairness of the second appellant’s
dismissal is not in issue and the process that
concluded with his
dismissal was one that fell within the parameters of section 189A,
the question that had to be determined in
the court
a quo
was
whether the three aforementioned preconditions were met.
[37]
Various guidelines have been given over the years about how one
determines if the aforementioned preconditions have been
met. It does
not follow that just because an employer dismisses an employee due to
its “economical, technological, structural
or similar need”
that the precondition has been met. An employer must first establish
on a balance of probabilities that
the dismissal of the employee
contributed in a meaningful way to the realisation of that need. In
my view, dismissals for operational
requirements must be a measure of
last resort, or at least fair under all of the circumstances. A
dismissal can only be operationally
justifiable on rational grounds
if the dismissal is suitably linked to the achievement of the end
goal for rational reasons. The
selection of an employee for
retrenchment can only be fair if regard is had to the employee’s
personal circumstances and
the effect that the dismissal will have on
him or her compared to the benefit to the employer. This takes into
account the principles
that dismissal for an employee constitutes the
proverbial “death sentence”.
[38]
The aforementioned questions must be asked and answered by the
employer not only at the commencement of the restructuring
process,
but continually throughout that process as considerations will
naturally change as the process plays itself out. This
principle was
endorsed in
Kotze v Rebel Discount Liquor Group (Pty) Ltd
(2000)
21 ILJ 129 (LAC) at paragraphs 42 to 45. See also
Atlantis Diesel
Engines (Pty) Ltd v NUMSA
(1994) 15 ILJ 1247 (A). An employer
cannot prejudge the consultative process which will render the
dismissals a
fait accompli
.
[39]
It is trite that in retrenchments, the real question is not
merely the employer’s
bona
fides
and
commercial justification but whether the dismissals were the only
reasonable option under the circumstances. In this regard,
see
NUMSA
v Atlantis Diesel Engines (Pty) Ltd
(1993)
14 ILJ 642 (LAC). In
SACTWU
and Others v Discreto – A Division of Trump & Springbok
Holdings
[7]
the court stated at paragraph 8 as follows:
‘
The
function of a court scrutinising the consultation process is not to
second guess the commercial or business efficacy of the
employer’s
ultimate decision … but to pass judgment on whether the
ultimate decision arrived at was genuine and not
merely a sham.….
It is important to note that when determining the rationality of the
employer’s ultimate decision
on retrenchment, it is not the
court’s function to decide whether it was the best decision
under the circumstances, but only
whether it was a rational,
commercial or operational decision…’.
[40]
The appellant's attack is contained in section 189A(19) of the
LRA that requires the respondent to prove that there was
a proper
consideration of alternatives that were proposed and which ought to
have been considered by the respondent off its own
back and was not
and that affects the substantive fairness of the dismissals. As
stated earlier, the respondent did not respond
to the first
appellant’s proposal and this much was conceded by van der
Mescht namely that the respondent did not consider
removing the
contractors as an alternative to retrenchment of the second appellant
and Biba, nor was it able to substantiate the
alleged improvements in
costs and efficiency of service. The respondent was not prepared to
give any preferential status to the
employees in respect of tendering
for work and they would ultimately be on an equal footing as other
companies tendering in terms
of the respondent’s procurement
policy.
[41]
Following the retrenchment of the second appellant and Biba, the
respondent engaged the services of various contractors
in order to
perform the type of work previously conducted by the township
engineering unit. Van der Mescht conceded that the nature
and the
extent of work being performed had not changed in any fundamental way
after the restructuring and it was really an operational
decision
which had been made by the respondent to contract out that work. No
evidence was presented by the respondent to show the
cost
effectiveness of that strategy or whether it was a preferable option
for an efficiency point of view. The first appellant’s
position
regarding the second appellant and Biba was that their jobs could be
saved if some contractor agreements were cancelled.
[42]
I accept that as a general rule an employer has a right to choose
the way in which he will run his business provided that
in so far as
workers are concerned, he respects their contract of employment and
consults with them if he contemplates dismissing
them for operational
requirements. It is unfair for an employer, in selecting a solution
to deal with problems in his business
to choose a solution that
entails job losses if there is another solution which can
satisfactorily address its problems without
job losses. Dismissals
must be a last resort and if they are not that renders them unfair.
[43]
A court in considering a dismissal for operational requirements
is obliged to ask not only whether there was a
bona fide
commercial rationale to begin with, but also whether the reason
for the dismissal was a fair one. An employer must establish on a
balance of probabilities that the reason for the dismissal was fair.
[44]
In
CWIU
and Others v Latex Surgical Products (Pty) Ltd,
[8]
the
employer had retrenched certain of its employees, on the basis of its
financial difficulties, and had then engaged approximately
80 to 100
contractors through a labour broker to fulfil its needs. This Court
noted that the determination of substantive fairness
in the
retrenchment context required a determination of whether there was
both a general need to dismiss employees at all, and
whether there
was a need to dismiss specific employees, namely those that were
before the court. Thus whilst the court accepted
that the employer
did have cause to retrench employees generally because of its
operational requirements, the court nonetheless
had to determine
whether the dismissal of the employees before it was fair. The
employer had failed to explain how it could have
employed those
contractors when it stated that financial losses were the reason for
the dismissal of the employees. The court accepted
that the
onus
was on the employer to explain its behaviour, irrespective of whether
the point had been put to its witnesses by counsel for the
employees
as it ultimately had to prove that the dismissals were substantively
fair. The employer’s failure to do so left
unexplained this
contradictory conduct and allowed the court to find the dismissals
substantively unfair.
[45]
The respondent bears the
onus
to prove that the dismissal
was substantively fair. It has failed to discharge that
onus
.
It is clear from the evidence led that the dismissal of the second
appellant was not a measure of a last resort. The maintenance
department of the respondent was not closed down entirely. They still
had to and are still rendering a service on behalf of the
respondent.
The second appellant could easily have been accommodated in it. No
cogent reasons were given why this option was not
considered by the
respondent. The position might have been different if the entire
maintenance department was closed. Based on
the evidence let at the
trial proceedings, I am satisfied that the dismissal of the second
appellant was not objectively justifiable
nor did the respondent
appropriately consider the alternatives to the dismissal and that was
the nub of the case put before the
court
a quo
.
[46]
It was contended on behalf of the respondent that the court had
adopted the correct approach in its decision as to the
fairness of
the retrenchment. It was further contended that the court
a
quo
did not just accept the commercial rationale at face value
but instead undertook an investigation of the evidence led in support
of its rationale by the respondent, which evidence it found to be
compelling proof that the decision to dismiss the second appellant
for operational requirements was fair in the circumstances.
[47]
There is no substance to the respondent’s contentions. The
court
a quo
adopted the deferential approach. The respondent
has failed to prove that the second appellant’s dismissal was
motivated by
“economic, technological, structural or similar”
needs and that the dismissal of the second appellant was reasonably
necessary to fulfil those needs
[48]
The court
a quo
erred when it dismissed the appellants’
referral. It should have found that the second appellant’s
dismissal was substantively
unfair.
[49]
The second appellant sought reinstatement. No evidence was led by
the respondent that it would be impossible to reinstate
him. None of
the exceptions in section 193 of the LRA have been shown to exist.
There is no reason why he should not be reinstated
from the date of
his dismissal.
[50]
I do not believe that it will be in the interest of justice and
fairness to order that costs should follow the result.
I have taken
into account that the parties will have an ongoing relationship. An
appropriate order would be to order that each
party is to pay its own
costs.
[51]
The appeal accordingly succeeds.
[52]
In the circumstances, I make the following order:
52.1
The appeal is upheld with no order as to costs.
52.2 The decision of the court
a
quo
is set aside and is replaced with the following order:
52.2.1 The second applicant’s
dismissal was substantively unfair.
52.2.2 The respondent is ordered
to reinstate the second applicant from date of his dismissal.
52.2.3 Each party is to pay its
own costs.
_____________
Francis
AJA
Waglay
JP and Dlodlo AJA concur in the judgment of Francis AJA.
Appearances:
For
Appellants:
....................
J Whyte
of Cheadle Thompson & Haysom
For
Respondent:
.................
E. Ellis
Instructed by Edward Nathan Sonnenberg
[1]
(2007) 1 BLLR 101
LAC.
[2]
(1990) 11 ILJ 687
(LAC).
[3]
(2001) 22 ILJ 2264
(LAC).
[4]
(2003) 24 ILJ 1917
(LAC).
[5]
(1998) 19 ILJ 1425
(LAC),
[6]
(2003)
24 ILJ 1917 (LAC) at paras 69.
[7]
(1998) 19 ILJ 1451
(LAC) at para 8.
[8]
[2006] 2 BLLR 142
(LAC).