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[2017] ZALAC 84
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Kenco Engineering CC v National Union of Metalworkers of South Africa (NUMSA) obo Members (JA29/16) [2017] ZALAC 84 (1 August 2017)
LABOUR
APPEAL COURT OF SOUTH AFRICA, JOHANNESBURG
Not
Reportable
Case no: JA29/16
In
the matter between:
KENCO ENGINEERING
CC Appellant
and
NATIONAL UNION OF
METALWORKERS
OF SOUTH AFRICA
(NUMSA) OBO MEMBERS First
Respondent
Heard:
16
March 2017
Delivered:
01
August 2017
Summary:
Selection criteria in
terms of section 189 of the LRA – held that employer bears the
onus
to prove that the dismissal of the employees was fair. The employer
must prove that it selected the employees to be dismissed according
to the selection criteria that have been agreed to by the consulting
parties, or if no criteria have been agreed, criteria that
is fair
and objective.
The
Labour Appeal Court finding -
that employer failed to place
sufficient evidence before the Court
a quo
to enable the Court
to assess whether or not it used and applied skills, work
performance, attendance records and safety records
in a fair and
objective manner, thereby discharging the
onus
reposing on it.
Further finding - that the employer failed to show that, in awarding
the amount of compensation it did, the Court
a quo
did not
pass a value judgment or that the discretion it exercised was
capricious or founded on a wrong principle. Further finding
- that it
could not
interfere with the amount of
compensation determined by the Labour Court.
Coram:
Waglay
JP,
Kathree-Setiloane
AJA
and
Phatshoane AJA
JUDGMENT
PHATSHOANE AJA
[1] This
is an appeal against the whole of the judgment and order of the
Labour Court (per Lagrange J) handed down
on 11 November 2015 in
having found that the retrenchment of the 19 individual respondents
was substantively unfair in that Kenco
Engineering CC (Kenco), the
appellant, failed to prove that it fairly and objectively applied its
selection criteria in identifying
these respondents as candidates for
retrenchment.
[2]
The
appeal is with leave of the Court
a quo
.
The facts upon which the appeal fall for decision are common
cause and lie within a narrow compass. Kenco is an engineering
company that operated mainly in the mining industry, in particular at
Foskor Mine. It was a subcontractor of an entity called Bateman,
an
industrial engineering company. The expiry of its subcontract with
Bateman on 31 March 2011 heralded its financial woes. Following
the
expiry of this contract another company, Gauge Engineering (Pty) Ltd,
stepped in and threw Kenco a lifeline by subcontracting
some of its
work to the embattled corporation. According to Mr Nicholas Van
Pittius, the mediator/facilitator in respect of the
agreement between
Gauge and Kenco, Gauge had set certain conditions to Kenco as part of
the agreement. These included,
inter alia
, that Kenco employs
skilled employees who could manufacture and install mining
instruments (pipelines and valves) according to
Gauge’s
standards.
[3] On
05 April 2011 Kenco issued a Notice in terms of s189(3) of the Labour
Relations Act, 66 of 1995 (the LRA),
to all its employees notifying
them that it contemplated dismissing some its employees based on its
operational requirements. It
is set out in the notice that the reason
for the proposed retrenchment was that its “
contract with
Bateman at Foskor had expired on 31 March 2011. There was a serious
down-turn in contract work from major industries
in the area.
”
It proposed that skills, work performance, attendance records and
safety records be used as the selection criteria. It further
proposed
to have a consultation with the workplace forum or the union on 11
April 2011 at 10h00.
[4] On
07 April 2011 Mr Fani Lebepe, the local organiser of National Union
of Metalworkers of South Africa (NUMSA),
acknowledged receipt of the
Notice in terms of s 189(3) and explained that he was not available
to attend the proposed consultation
on the scheduled date due to
other official commitments. He suggested that the consultation be
held on 21 April 2011.
[5] On
08 April 2011 Kenco acknowledged receipt of the aforementioned
correspondence from the NUMSA and furnished
to NUMSA the contact
details of its representative, Mr Leon Lourens (Mr Lourens) of
Amalgamated Employers’ Association. On
15 April 2011 Mr Lourens
sensitised NUMSA to the fact that an information session or
consultation had been held on 11 April 2011
and that the
non-unionised employees of Kenco were requested to establish a
workplace forum or to nominate at least two representatives
for
purposes of attending the consultation meeting which had been
scheduled for 21 April 2011.
[6] Mr
Lourens stated that on 21 April 2011 he waited for NUMSA for about
one and half hours but Mr Lebepe did
not turn up as agreed. He
decided to leave due to other commitments. Two and half hours later
Mr Lebepe phoned and enquired where
he was as he needed to consult.
In light of their separate locations at the time, according to Mr
Lourens, Mr Lebepe gave an undertaking
to submit a written response
to Kenco’s Notice in terms of s189(3) on or before 25 April
2011, after NUMSA had had the opportunity
to secure a mandate from
the individual respondents. Save to admit that an undertaking was
made by NUMSA to provide its response
to the Notice in terms of
s189(3) the turn of events of 21 April 2011, as testified to by Mr
Lourens, were by and large disputed
by Mr Lebepe.
[7] On
29 April 2011 NUMSA filed a response to Kenco’s Notice in terms
of s189(3). It proposed that the LIFO
method be used as the
appropriate selection criteria. By quirk of coincidence, on that same
day, Kenco issued notices terminating
the services of 23 employees
which included the 19 individual respondents. Mr Lourens testified
that he became aware of the letter
of 29 April from NUMSA after the
individual respondents had already been given their notices of
termination of services when he
had already left Kenco’s
premises. The retrenched employees were paid their severance
packages.
[8] Aggrieved
by the retrenchments NUMSA, on behalf of the individual respondents,
referred a dispute to the Centre
for Dispute Resolution on 06 June
2011. On 22 July 2011 a certificate of non-resolution of the dispute
was issued by the Centre
which resulted in the dispute being referred
to arbitration. On 01 September 2011 Commissioner J Moolman issued a
ruling to the
effect that the Bargaining Council did not have
jurisdiction to entertain the dispute. On 10 November 2011 NUMSA
filed its statement
of case with the Labour Court claiming that the
dismissals of the respondents, on account of Kenco’s
operational requirements,
were procedurally and substantively unfair.
The
proceedings before the Labour Court
[9] At
the commencement of the trial Kenco took a point
in
limine
contending
inter
alia
,
that the respondents ought to have applied to the Labour Court in
terms of s189A(13) of the LRA
[1]
for an order either compelling Kenco to comply with a fair procedure;
or interdicting Kenco from dismissing the individual respondents
prior to compliance with a fair procedure; or directing Kenco to
reinstate the individual respondents until it has complied with
a
fair procedure. Having heard the argument the Court
a
quo
concluded that, in the absence of an application in terms of
s189A(13) of the LRA, it did not have the power to determine the
procedural unfairness of the individual respondents’ dismissal.
The Court
a
quo
upheld Kenco’s objection. Some controversy followed relating to
the verification of the number of the individual respondents.
The
Judge deferred this aspect to the parties to resolve during an
adjournment and to report back. In the end Kenco accepted the
list of
the 19 individual respondents as set out in annexure SC1 to the
statement of claim.
[10] During
the trial Mr Lourens, called by Kenco as a witness, testified
comprehensively on the procedure followed
leading up to the
termination of the individual respondents’ contracts of
employment and on the different topics as captured
in the Notice in
terms of s189(3) and further on the correspondence exchanged between
Kenco and NUMSA. Mr Lourens had no knowledge
of how the affected 23
employees were evaluated and selected for retrenchment in terms of
the selection criteria set by Kenco.
He went on to say “
the
selection criteria were in a notice. There was a certain percentage
attached to each criteria and how they did that and so forth,
I was
not involved in that.”
[11] Mr
Van Pittius presented the method that was supposedly used in
evaluating the employees likely to be retrenched
to Mr Gary McNorton
of Gauge, Mr Costa of Kenco and to one general manager of Kenco,
whose name he could not recall. The selection
criteria adopted by
Kenco were based on skills, work performance, attendance records and
safety records. Mr Van Pittius also suggested
that someone, whose
name he could not say, at Bateman
[2]
and “certain operational” employees of Kenco conduct the
evaluation. When asked how he arrived at the evaluations his
response
was as follows:
‘
This is the reason
why they made use of three evaluators who know the jobs done by those
people. And then they give them a point
between naught and ten on
that specific score, skill or whatever. And they discuss; if there is
a difference in the opinion, somebody,
someone will give a 4 out of
5; someone will give 6. If the margin of difference is too big, it
differs more than 20 percent, then
the three evaluators must discuss
it’”.
[12] Mr
Van Pittius explained that his work, insofar as this dispute is
concerned, ended after he had explained
the process of evaluation to
Kenco and Gauge. He does not know who the evaluators were because he
did not take part in the process
of evaluating employees likely to be
retrenched. He also had not had sight of the results of the
evaluation process.
[13] At
the end of the trial the Court narrowed down the issues as follows:
‘
..(T)he thrust of
the case, subject to what the applicants (the individual respondents)
say, as I understand it, is that the applicants
attack the
objectivity of the selection process and also associated with the
attack why they were selected in particular, rather
than other people
and in particular those people who had been, according to them,
working temporarily or had been specifically
employed for Bateman
contract, who they felt should have gone first’.
[14] The
Court
a
quo
held that the individual respondents were unable to provide any
cogent challenge to the general need to retrench and focused their
main attack on the selection criteria. Insofar as the selection
criteria are concerned, they were also unable to meaningfully
challenge the need for adopting them in light of the joint-venture
[3]
commitments which offered some meaningful prospects of alternative
work to Kenco at the time.
[15] The
Court found that there was no evidence led by Kenco demonstrating
that the individual respondents had
been evaluated and found to be
wanting in terms of the chosen criteria. The Court was satisfied that
Kenco did establish a general
need to retrench and that there were no
viable alternatives to retrenchment of staff. The Judge
a quo
was of the view that even if the criteria might be considered fair
and could have been applied in a sufficiently fair and objective
manner, Kenco did not demonstrate that the selection of the
individual respondents for retrenchment, using those criteria, was
done in a fair and objective manner. However, on the evidence
available, the judge remarked, he could not go so far as to say that
the individual respondents would not have been retrenched if the
criteria had been fairly and objectively applied.
[16] In
respect of the relief sought the Court
a quo
held:
‘
[26] The
applicants have asked for reinstatement or alternatively
compensation. The basis on which the retrenchment
of the individual
applicants is found to be substantively unfair is confined to a
finding that the respondent (Kenco) did not prove
that it applied its
selection criteria fairly and objectively in choosing the individual
applicants for retrenchment.
[27] There
was no evidence that the business conditions which had led to the
retrenchment had improved. Nor was
there reliable evidence that the
applicants’ skills could be utilised in the restructured
business, in line with its changed
operational requirement. In view
of the unresolved issue of whether the applicants would still have
been selected for retrenchment
if the criteria had been fairly and
objectively applied, the Court would just be assuming they would have
been selected and that
their skills did meet the requirements of the
new business, if it ordered their reinstatement. In the
circumstances, I do not think
it would be practicable to reinstate
them.
[28] Consequently,
bearing in mind the length of service of most of the applicants, the
failure of the union to
engage meaningfully with the respondent on
the selection issue and the limited basis on which I find the
retrenchment was substantively
unfair, I believe eight months’
remuneration is a fair measure of compensation.’
[17] As
already alluded to, the Court found that the retrenchment of the 19
individual respondents was substantively
unfair solely because the
respondent failed to prove that it had fairly and objectively applied
its selection criteria in identifying
them as candidates for
retrenchment. It ordered Kenco to pay each of the individual
respondents eight months’ remuneration,
within 14 days from
date of the order.
The
grounds of appeal
[18] Kenco
raised two grounds of appeal. In summary:
18.1
The first ground is predicated on the Court
a quo
’s
having found that the retrenchment of the 19 individual respondents
was substantively unfair solely because Kenco failed
to prove that it
had fairly and objectively applied its selection criteria in
identifying the respondents as candidates for retrenchment.
18.2
The second ground is founded on the relief granted by the Court
a
quo
.
The
analysis
[19] Mr
Meyer, for Kenco, argued that the fairness of the application of the
selection criteria was never raised
prior to 12 June 2014, the date
of the trial; nor was the issue raised in NUMSA’s statement of
case. He further contended
that the first and second pre-trial
minutes do not show the existence of an agreement between the parties
to widen the issues in
dispute and/or to vary NUMSA’s statement
of case. He further argued that the only issue properly before the
Court
a quo
concerned the procedural fairness of the
dismissal. Insofar as the Court
a quo
concluded that s189A of
the LRA applied and that the individual respondents had failed to
bring an application in terms of s189A(13),
they were accordingly
barred from pursuing the aspect of procedural fairness.
[20] Mr
Meyer further contended that the Court
a quo
was not entitled
to widen the dispute between the parties where same had not been
properly raised in the statement of case. He
urged that, in light of
the unchallenged evidence with regard to the commercial rationale for
the retrenchments and the uncontested
evidence relating to the
fairness and objectiveness of the criteria selected by Kenco, the
Court
a quo
ought to have accepted Kenco’s version given
the reasonableness thereof and the absence of any
mala fides.
[21] Concerning
the relief granted, Mr Meyer argued that the Court
a quo
did
not consider the fact that the individual respondents were paid
severance packages, calculated in accordance with the Metal
and
Engineering Industries Bargaining Council (MEIBC) collective
agreement, as a consequence of their dismissal for operational
requirements, which payments they unconditionally and voluntarily
accepted.
[22] The
question arising for determination in this appeal is whether the
Court
a quo
erred in finding that the retrenchment of the
individual respondents was substantively unfair as a result of
Kenco’s stated
failure to present evidence demonstrating that
the application of the selection criteria it set was conducted in a
fair and objective
manner.
[23] The
argument that the individual respondents did not make out their case
in the statement of case is unmeritorious.
Apparent from the
statement of case and minutes of the pre-trial conferences held is
that NUMSA placed the substantive fairness
of the dismissals in
dispute. It painstakingly detailed the unfairness of the selection
criteria applied. The union went as far
as naming the employees whom,
in their view, ought to have been selected for retrenchment. To
mention a few examples where the
selection criteria were placed in
dispute:
23.1 At
para 4.10 of the statement of case NUMSA stated that Kenco did not
apply LIFO in selecting the employees
likely to be retrenched. On the
legal issues arising from the facts NUMSA contended the following in
its statement of case:
‘
5.1.4 [Unfair]
selection criteria were used to determine which employees to retrench
and LIFO was not implemented.
5.1.5 The
respondent dismissed permanent workers and retained some of the
workers that were employed for the Bateman
contract that had
allegedly expired. Therefore selection criteria were not objective.’
23.2 In
the minutes of the pre-trial conference dated 16 August 2012, ad para
3.6 thereof, under issues to be
decided by the Court, it is recorded,
inter alia
:
‘
Whether the
respondent applied any selection criteria in selecting the applicants
for retrenchment and, if so, whether this was
fair.’
Ad
para 11.3 the individual respondents further state:
‘
The applicants
state that the selection criteria were unfair since the respondent
retrenched workers with long service and retained
workers with
shorter service. The employer also retained workers who were employed
strictly for the duration of the contract that
expired and retrenched
permanent employees.
The selection criteria
targeted the union.’
[24] Section
189A(19)(d) of the LRA provides:
‘
In
any dispute referred to the Labour Court in terms of section
191(5)(b)(ii) that concerns the dismissal of the number of employees
specified in subsection (1), the Labour Court must find that the
employee was dismissed for a fair reason if –
…
(d) selection criteria
were fair and objective.’
[25] In
Super
Group Supply Chain Partners v Dlamini and Another,
[4]
this
Court pronounced:
'It is trite that an
employer is permitted to dismiss an employee for its operational
requirements. However, for the employer to
do so successfully, it is
obliged to have a bona fide economic rationale for the dismissal and
to comply with the provisions of
s 189 as well as s 189A of the Act
where applicable. Section 189 imposes an obligation on the employer
to consult the employee
or its representative on the matters listed
in subsection (2). There is a duty on the employer not only to
consult the affected
employee(s) but to take appropriate measures on
its own initiative to avoid and minimize the effect of the dismissal.
The consultation
envisaged by the Act is a "meaningful joint
consensus-seeking process" in which parties to the process
should attempt
to reach some agreement on a range of issues that may
best avoid the dismissal and where not possible to ameliorate the
effects
of the dismissal for operational requirements.'
[26] The
employer bears the
onus
to prove that the dismissal of the
individual respondents was fair. The duty to show that the criteria
used was both objective
and fair in its application rests on the
employer. The employer must prove that it selected the employees to
be dismissed according
to selection criteria that have been agreed to
by the consulting parties, or if no criteria have been agreed,
criteria that are
fair and objective. Kenco was required to place
sufficient evidence before the Court
a quo
to enable the court
to assess whether or not it used and applied skills, work
performance, attendance records and safety records
in a fair and
objective manner, thereby discharging the
onus
reposing on it.
It did not do so.
[27] The
following
dictum
in the judgment of this Court in
General
Food Industries Ltd t/a Blue Ribbon Bakeries v Food & Allied
Workers Union and Others
[5]
is
apposite and instructive:
‘
[37]
Another reason which the court a quo gave for its finding that the
dismissal was substantively unfair was that the appellant
had failed
to discharge the onus of proving that in selecting the second and
further respondents for dismissal, it had applied
selection criteria
that are fair and objective as required by s 189(7)
(b)
of
the Act which applies when no agreement has been reached on the
selection criteria to be used. The appellant did not
lead any
evidence at the trial as to the skills which the employees had who
had shorter service periods than the second and further
respondents
but were retained. The appellant bore the onus to prove that the
selection criteria that were applied to select
the second and
further respondents for dismissal were objective and fair. Both
during the consultation and at trial the respondents
challenged the
appellant to say what skills it was relying upon and the appellant's
witnesses never explained these. In these circumstances
one
finds oneself in a position where one looks at the list of
employees who were selected for retrenchment, namely, the second
and
further respondents and looks at the list of those employees in
exhibit B who were retained and who had shorter service periods
than
the second and further respondents and asks the question: what skills
did those who were retained and who had shorter service
periods than
the second and further respondents have which the second and further
respondents did not have? The answer is that
on the evidence in this
case one simply does not know. In the light of this can it be said
that the appellant discharged the onus
to prove that the selection
criteria applied to select the second and further respondents were
fair and objective? The answer is,
in my judgment, a clear and
unequivocal no. In that event was the court a quo's finding that
the dismissal was substantively
unfair right? In my judgment, without
any doubt!’
[28] Without
knowing what skills or special skills the employees who remained
behind had; what skills the individual
respondents had compared them
to; what years of service they all had; what performance records,
safety records and attendance records
all the employees including the
individual respondents had; the Court
a quo
was left unable to
conclude on the basis of Kenco’s mere
ipse dixit
that
there was a fair reason for the selection of the individual
respondents for retrenchment. The selection criteria were simply
not
demonstrated to have been fairly and objectively applied.
[29] On
the second ground of appeal.
A
challenge to an order of the Labour Court awarding or refusing an
employee compensation in terms of s193(1)(c) of the
Act is
not limited to the grounds applicable where an order is made pursuant
to the exercise of a true discretion or narrow discretion.
It is only
in regard to the determination of the amount of compensation that the
Labour Court or arbitrator exercises a true or
narrow discretion. It
is in regard to that decision that the powers of this Court is
circumscribed and can only be exercised
on the limited grounds.
These
grounds include the following: That the Labour Court or arbitrator
(a) did not exercise a judicial discretion; or (b)
exercised its
discretion capriciously; or (c) exercised its discretion upon a
wrong principle; or (d) has not brought
its unbiased judgment to
bear on the question; or (e) has not acted for substantial
reason; or (f) has misdirected
itself on the facts; or
(g) reached a decision in which the result could not reasonably
have been made by a court properly
directing itself to all the
relevant facts and principles. In the absence of one of those
grounds this court has no power
to interfere with the amount of
compensation determined by the Labour Court.
[6]
[30] Kenco’s
argument concerning the relief granted by the Court
a quo
is
ill conceived. It failed to show that the Court
a quo
did not
pass a value judgment or that the discretion it exercised was
capricious or founded on a wrong principle.
[31] On
the above conspectus, I am satisfied that the Court
a quo
correctly concluded that the dismissal of the individual respondents
was substantively unfair. It follows that this appeal should
fail.
Having had regard to the requirement of law and fairness I can
conceive of no reason why costs should not follow the result
of this
appeal. In the result, I make the following order.
Order
1.
The
appeal is dismissed with costs.
MV
Phatshoane
Acting Judge of the
Labour Appeal Court
Waglay
JP and
Kathree-Setiloane AJA
concur in the judgment of Phatshoane AJA
APPEARANCES:
FOR THE
APPELLANT: Adv
M Meyer
Instructed
by Basie Gey Van Pittius
FOR THE FIRST
RESPONDENT: Adv L
Malan
Instructed
by Finger Phukubje Inc
[1]
Section 189A(13) provides:
(13)
If an employer does not comply with a fair procedure, a consulting
party may approach the Labour Court by way of an application
for an
order-
(a)
compelling
the employer to comply with a fair procedure;
(b)
interdicting
or restraining the employer from dismissing an
employee
prior
to complying with a fair procedure;
(c)
directing
the employer to reinstate an
employee
until
it has complied with a fair procedure;
(d)
make
an award of compensation, if an order in terms of
paragraphs
(a)
to
(c)
is
not appropriate.
[2]
He possibly meant from Gauge.
[3]
The joint-venture referred to by the Court a
quo
was in respect of the work subcontracted to Kenco by Gauge.
[4]
(2013)
34 ILJ 108 (LAC) at 116 para 24.
[5]
(2004)
25 ILJ 1655 (LAC)
at 1668 para 37.
[6]
See
Kemp
t/a Centralmed v Rawlins
(2009) 30 ILJ 2677 (LAC)
at
2688-2690 paras 21-23.