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[2017] ZALAC 54
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Woolworths (Pty) Ltd v SACCAWU and Others (JA56/2016) [2017] ZALAC 54; [2017] 12 BLLR 1217 (LAC); (2018) 39 ILJ 222 (LAC) (19 September 2017)

IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case no: JA 56/2016
In the appeal between:
WOOLWORTHS (PTY) LTD

Appellant
and
SACCAWU

First respondent
C MOENG AND
OTHERS

Second to further respondents
Heard:
07 March 2017
Delivered:
19 September 2017
Summary: Dismissal for
operational requirements in terms of section 189A of the LRA –
employer engaged in costs saving measures
by converting full time
employees to flexi time workers resulting in substantial reduction in
wages, benefits and related conditions
of employment previously
enjoyed by the employees working on full time basis. Employer
retrenching full time employees who refused
conversion - distinction
between procedural unfairness and substantive unfairness restated –
purpose of section 189A(13)
of the LRA concerning unfair procedure is
to prevent unfair retrenchment as soon as the procedural flaws
surface and the appropriate
order is that of reinstatement until the
correct procedure is followed -
Held that the
distinction between procedural and substantive fairness lies close
together. It is well known that procedural unfairness
may result in
substantive unfairness. The appropriate remedy would have been to
reinstate the employees pending further consultation
on the last
mentioned proposal as clarified in evidence. The reinstatement order
made by the Court
a quo
was unconditional. This would not be
competent as regards the complaint of procedural unfairness. A
reinstatement order granted
because of the procedural unfairness that
is subject to s189A retrenchment may only endure until the employer
has complied with
a fair procedure.
Substantive unfairness
– court finding that it was common cause that the dismissal was
to give effect to the requirement based
on the employer’s
economic, technological, structural or similar needs. Held that the
dismissal of a full-time employee who
would not work flexi-time would
be a dismissal to give effect to a requirement based on the
employer’s economic, technological,
structural or similar
needs. But this element no longer applied as the employees were
prepared to work flexi-time but not on all
the terms that would be
applicable to flexi-timers. Court finding however that dismissal was
substantively unfair because employer
did not consider alternatives
to dismissal – Court finding that reinstatement not practical
as the full time employees were
redundant- Appeal partly upheld and
partly dismissed –
Labour Court’s
judgment is substituted with an order of compensation.
Coram: Tlaletsi DJP,
Landman JA and Phatshoane AJA
Neutral citation:
Woolworths (Pty) Ltd v SACCAWU obo Moeng and Others
(LAC
JA56/201
JUDGMENT
THE
COURT
[1] Woolworths (Pty) Ltd,
the appellant, retrenched a number of employees in terms of s189A of
the Labour Relations Act, 66 of 1995
(“the LRA”).
SACCAWU, on behalf of 44 of its members (the first and second to
further respondents) referred a dispute
concerning their alleged
unfair dismissal to the Labour Court. Nkutha-Nkontwana AJ found in a
judgment dated 04 April 2016 that
the dismissals were substantively
and procedurally unfair and ordered their reinstatement. The appeal
is with leave of the Court
a quo
.
Outline of facts
[2]
Woolworths is a well-known South African retail store. Until 2002,
Woolworths employed its employees on a full-time basis. These

employees (“the full-timers”)
[1]
worked fixed hours totalling 45 hours per week. In 2002, Woolworths
decided that in future it would only employ workers on a flexible

working hour basis. These workers (flexi-timers) would work 40 hours
per week.
[3] By 2012, Woolworths’s
workforce consisted of 16 400 flexi-timers and 590 full-timers.
Full-timers earned superior wage
rates and benefits. The remuneration
package of some full-timers exceeded the wages and benefits
applicable to flexi-timers by
50%. Full-time workers and flexi-timers
do the same work.
[4] Woolworths decided
that in order to cater for the current market, it needed to operate
with an entire workforce consisting of
flexi-timers. It decided to
convert the full-timers to flexi-timers on the terms and conditions
of employment applicable to flexi-timers.
In order to do this,
Woolworths first invited full timers to voluntarily convert to
flexi-timers. It did not invite the union to
participate in this
phase. Certain inducements were offered to the full-timers for the
conversion. All of the full-timers save
for 144 employees opted for
early retirement, voluntary severance or agreed to convert to
flexi-timers.
[5] As Woolworths
employed more than the number specified in s189A(1) of the LRA, it
was obliged to use the process specified by
the section to effect the
retrenchments. Woolworths gave the prescribed Notice of termination
of employment in terms of s198A(2)(a)
as regards the remaining 144
full-timers. It also engaged in a consultation process including one
facilitated by the Commission
for Conciliation, Mediation and
Arbitration (CCMA) in terms of s189A(3) of the LRA with SACCAWU
representing some of its members
who were full-timers. SACCAWU was
entitled in terms of s189A(2)(b) to strike on the issue but did not.
[6] During the course of
consultation, two things happened. Firstly, 85 of the full-timers
accepted the voluntary option; leaving
92 full timers who opposed
conversion and did not accept any of the voluntary options. Secondly,
SACCAWU and 44 members appreciated
the need to work flexi-time and
accepted that full-timers should be converted to flexi-timers.
SACCAWU initially suggested that
the full-timers retain their
existing wages and benefits.  Although these employees would
work 40 hours per week they would
be paid for working 45 hours at
their full-time wage rates. Towards the end of the consultation
process, SACCAWU varied its stance.
It proposed that the workers
would work flexi-time for 40 hours and be paid only for those hours
but at their full-time wage rates
and 11% reduction in wages.
Woolworths did not understand this to be a different proposal and
rejected it.
[7]
Woolworths was entitled to and did give notice to terminate the
contracts of employment in accordance with
section 37(1)
of the
Basic
Conditions of Employment Act, 75 of 1997
. It retrenched 92
full-timers. On 18 December 2012, SACCAWU, on behalf of 44 of these
full-timers, launched an application in terms
of
s189A(13)
of the LRA
in the Labour Court.
[2]
On 30
November 2012, in terms of
section 191(11)
of the LRA,
[3]
it referred a dispute concerning whether there was a fair reason for
the dismissal to the Labour Court for adjudication.
[8] SACCAWU applied for
the consolidation of its unfair dismissal claim and its application
seeking redress for the procedural unfairness
of the dismissal. This
application was granted.
Judgment of the Court
a quo
[9] The Court
a quo
in its judgment:
(a)
Followed
BMD
Knitting Mills (Pty) Ltd v
SA
Clothing & Textile Workers Union
[4]
and
SA
Transport & Allied Workers Union
v Old Mutual Life Assurance Company South Africa Ltd and Another
[5]
and concluded at para 20:
‘
In a
nutshell, in determining the fairness on the dismissals for
operational requirements, this court must interrogate, objectively,

whether the three preconditions in terms
section 189A(19)
of the LRA
were met.’
(b)
Outlined
the issues that required determination on substantive fairness as
articulated by SACCAWU and the 44 full-timers as follows:
‘
21.1
Whether the dismissal of the affected employees was for a fair reason
or operationally justifiable on rational
grounds, especially given
the fact that they were willing to work flexible arrangements without
loss of wages, benefits and other
conditions of employment as
proposed in accordance with Woolworths’ first option proposal;
21.2     Whether the
insistence by Woolworths to downgrade the affected employees’
wages and benefits was rational,
necessary or fair; and given the
experience, length of service and age of the second to further
Applicants;
21.3     Whether
there was a financial necessity for Woolworths to reduce the affected
employees’ wages
and benefits to the extent it had proposed;
21.4     Whether
Woolworths’ operational requirements could have been met
through other reasonable options
such as natural attrition and
migrating employees to the flexi-timer arrangement upon similar or
comparable wages and benefits
as when they were full-timers;
21.5     Whether
there were rational reasons for the timing of the dismissals and the
urgency that accompanied
the consultation process;
21.6     Whether
Woolworths’ rejection of the SACCAWU’s alternatives was
rational or valid;
21.7     Whether
the conversion of key-timer employees to flexi-40 employees was
rational or fair; and
21.8    Whether there
was proper consideration of alternatives.’
(c)
Noted
that it was common cause that SACCAWU and the 44 full-timers accepted
that Woolworths needed to adapt the full-timers’
contracts in
line with its current trading patterns and trends and did not have
any difficulties with the conversion to the flexi-timer
arrangement
provided that their wages and benefits remain the same.
(d)
Considered that Woolworths was entitled to address the issues of
equality in order to anticipate
the impending equal pay amendments at
that time, which have since come into effect but said: “
However,
I am not certain as to what canons were applied to justify
Woolworths’ decision to use equity as one of its grounds
for
operational requirements.
”
It concluded, with reference to the LRA and the amendments to the
Employment Equity Act, 55 of 1998 (EEA), “
that
the foul that Woolworths hoped to anticipate was illusory”.
The pay inequity that arose as a result of implementing flexi-time
contracts could have been easily justified in terms of Regulation

7(1)(a) of the EEA since the full-timers had longer service period
than the flexi-timers. Alternatively, Regulation 7(1)(d)
[6]
could have been a perfect justification because, in view of the
restructuring process and grading system, the full-timers had to
be
demoted, so to say. Even if there are instances where the
differentiation is found not to be justifiable, employers would have

to develop plans to address inequalities identified and, pertinently,
without reducing the pay or remuneration of affected employees,
in
order to bring about pay equity.
(e)
After referring to
Dudley
v City of Cape Town and Another
[7]
concerning unfair discrimination disputes it held that:
‘
Accordingly,
it is incompetent for an employer to seek to protect an individual
right not to be unfairly discriminated through an
operational
requirements process and thereby circumventing its obligation under
Chapter III of the EEA to develop a plan to deal
progressively with
any unfair pay differentiation. Woolworths, as a designated employer,
ought to have dealt with pay inequity
issues in accordance with
chapter III of the EEA.’
(f)
Aligned
itself with the sentiments expressed in
NUM
and Another v Black Mountain Mining (Pty) Ltd
[8]
where this Court held:
‘
It does not
follow that just because an employer dismisses an employee due to its
“economical, technological, structural or
similar need”
that the [Section 189A(i)] 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 our 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.’
(g)
Noted
that Woolworths’ Notice in terms s189(3) set out only one
reason for the retrenchments, this being that ‘
The
company needs to be in a position to employ employees who are able to
be used on a flexible basis’
.
The Court was inclined to accept that Woolworths, as an afterthought,
cynically sought to add further reasons of equity and costs

efficiency in order to justify the retrenchments because the affected
employees were willing to move to flexi-time contracts, of
course
without loss of benefits.
(h)
Found
as regards cost efficiency operational requirement that “
Woolworths
might have made huge savings consequent to the implementation of
flexi-time contracts, those savings are inextricably
linked to the
drastic reduction of full-timers’ pay and changes to their
conditions of employment. As such, since it is clear
that pay equity
ground was untenable, the cost saving ground must also suffer the
same demise
.”
(i)
Found
that even if costs efficiency was a standalone operational
requirement, Woolworths did not produce any evidence pertaining
to
the costs associated with the employment of full-timers, total amount
of targeted costs reduction, and whether such a target
had been met.
Absent this information, it held, it was not possible for the Court
to decide if the decision to retrench was not
arbitrary or capricious
or a rational or reasonable one.
(j)
Found
as regards proper consideration of alternatives, that Woolworths
conceded that it did not consider alternatives to the retrenchments

such as natural attrition and/or a wage freeze for full-timers.
However, it noted that Ms Coleen Slabbert, Woolworths’ employee

relations manager, was adamant that natural attrition could not have
addressed the issue of pay equity and anomalies since it occurred
at
a rate of 6-8% per annum.
(k)
Held
that nothing turned on Mr Noel Mbongwe’s (witness called by
SACCAWU and the 44 full-timers) concession that the issue
of natural
attrition was never raised again after SACCAWU’s letter of 07
September 2012. The Court held that the
onus
was on Woolworths to prove that it had adequately considered all
alternatives to retrenchment, “
a
question that should arise not only at the commencement of the
consultation but continually throughout the process as considerations

will naturally change as the process plays itself out
.”
(l)
Referred
to
SA
Clothing & Textile Workers Union
and
Others v Discreto - A Division of Trump and Springbok Holdings
[9]
that
held:
‘…
.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…’
(m)
Held
that the average age of the affected employees was 50 years, with
majority being between 45 and 59. They had been in Woolworths’

employ for 20 years on average, ranging between 12 and 32 years.
Their benefits were acquired over many years and received regular

increase over the years. Most of them were about to reach the
retirement age and the prospects of finding other jobs were almost

non-existent. The Court remarked that natural attrition would have
been an ideal alternative to retrenchments, regard being had
to its
conclusion that any differentiation in pay or conditions of
employment could have been justified in terms of the EEA and/or
LRA
alternatively dealt with in terms of the Chapter III of the EEA.
(n)
Found
that Woolworths failed to prove, on a balance of probabilities, that
the dismissal of the affected employees was operationally

justifiable. By the same token, Woolworths failed to appropriately
consider the alternatives to dismissal.
(o)
Found,
for reasons that are recorded in the judgment that Woolworths failed
to meaningfully consult with SACCAWU and, accordingly,
that the
dismissal of the 44 full-timers was procedurally unfair.
The issues on appeal
[10] This appeal does not
concern the alleged automatically unfair dismissal of the
respondents. This aspect was not argued in the
Court
a quo
.
SACCAWU and the 44 full-timers, however, reserved their right to do
so in the event of a further appeal against the judgment of
this
Court.
[11] The appeal is
confined to the findings of the Court
a quo
in respect of the
procedural and substantive fairness of the retrenchment of the
full-timers which was effected in terms of s189A
of the LRA. Section
189A was inserted in the LRA with effect from 01 August 2002 by Act,
12 of 2002, and repealed with effect from
01 January 2015 by the
Labour Relations Amendment Act, 6 of 2014.
[12] We deal first with
the issue of procedural fairness of the dismissal before considering
the findings on substantive fairness.
But before doing so, we make
the following observations. Although the oral evidence in the
application regarding procedural unfairness
was heard simultaneously
with the evidence adduced during the trial on the claim for
substantive unfairness, it must be borne in
mind that these are
substantially two separate legal processes. As adumbrated earlier,
s189A(13) provides that if an employer does
not comply with a fair
procedure, a consulting party may approach the Labour Court by way of
an application for relief and the
Court may make an appropriate order
including 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.
[10]
[13] The application for
relief in terms of s189A(13) must be brought no later than 30 days
after the employer has given notice
to terminate the employees’
services or, if notice is not given, the date on which the employees
are dismissed. The Labour
Court may, on good cause shown condone a
failure to comply with the time limit. Importantly, the Labour Court
may not adjudicate
a dispute about the procedural fairness of a
dismissal based on the employer’s operational requirements in
any dispute referred
to it in terms of section 191(5)(b)(ii).
The appeal: procedural
fairness
[14] The Court
a quo
found that Woolworths failed to meaningfully consult with SACCAWU
and, accordingly, that the dismissal of the 44 full-timers was

procedurally unfair. The Court
a quo
also found that the
dismissals were substantively unfair. Woolworths was ordered to
reinstate the 44 full-timers retrospectively
from the date of their
dismissal without loss of pay.
[15]
In
National
Union of Mineworkers v Anglo American Platinum Ltd and Others,
[11]
Van
Niekerk J observed that section 189A(13) contemplates “a degree
of judicial management into a contested consultation process”.
[12]
This ought to be done on an urgent basis.
[16]
Equally relevant is what Murphy AJ said in
NUMSA
and Others v SA Five Engineering and Others
:
[13]
‘
Suffice it
now to say that the intention of section 189A(13), read with section
189A(18), is to exclude procedural issues from the
determination of
fairness where the employees have opted for adjudication rather than
industrial action, providing instead for
a mechanism to pre-empt
procedural problems before the substantive issues become ripe for
adjudication or industrial action.’
[14]
[17]
In
Insurance
& Banking Staff Association and Another v Old Mutual Services &
Technology Administration and Another,
[15]
Pillay J, after referring to the explanatory memorandum accompanying
the 2002 Bill to amend the LRA, remarked:
‘
The
overriding consideration under s 189A is to correct and prevent
procedurally unfair retrenchments as soon as procedural flaws
are
detected, so that job losses can be avoided. Correcting a
procedurally flawed mass retrenchment long after the process has
been
completed is often economically prohibitive and practically
impossible.... So, the key elements of s 189A are: early expedited,

effective intervention and job retention in mass dismissals.’
[16]
[18] The reinstatement
order made by the Court
a quo
was unconditional. This would
not be competent as regards the complaint of procedural unfairness. A
reinstatement order granted
because of the procedural unfairness of a
s189A retrenchment may only endure until the employer has complied
with a fair procedure.
But of course it was competent to order
reinstatement if the dismissals were substantively unfair. The
difficulty is that the Court
a quo
made no distinction between
the remedy for procedural unfairness and the remedy for substantive
unfairness. We revert to this aspect.
[19] We are not inclined
to accept that Woolworths contemplated that every full-timer would
accept the voluntary offers put to them
and that no further action
such as retrenchment would be needed. But where the consultation
process took at least 60 days and the
dismissed employees refused the
offers; and where there is little evidence of any prejudice to them;
we are satisfied that this
failure was not one that made the
procedure followed, as facilitated by two commissioners, procedurally
unfair.
[20] The Court
a quo
considered Woolworth’s misunderstanding of SACCAWU’s
final proposal as a procedural fairness issue saying:
‘
[68]
Clearly, Woolworths believed that the three options that it had
offered during the voluntary phase were
reasonable, hence it could
not budge. Instead, it urged SACCAWU to convince its members to
accept one of those options as they
were beneficial to them than the
statutory severance pay. This was the attitude displayed by
Woolworths throughout the consultation
sessions. As a result,
Woolworths never bothered to interrogate the last alternative
proposal by SACCAWU as contained in its letter
dated 30 October 2012.
Slabbert conceded that Woolworths misunderstood same.’
[21] Woolworth’s
misunderstanding is very serious in the whole scheme of events in
that a thorough scrutiny of SACCAWU’s
offer would have assisted
in obviating dismissal of the following six full-timers ( Mr Bongani
Ndaba - Applicant 7 in the Court
a quo
, Ms Pamela Visagie -
Applicant 13, Ms Irene Malemela - Applicant 20, Mr Saul Moloisane -
Applicant 33; Ms Elizabeth Nkgapele -
Applicant 34, and Ms Sharon
Adams - Applicant 39) who clearly stood to benefit from converting to
flexi-timer contract.
[22] The distinction
between procedural and substantive fairness lies close together. It
is well known that procedural unfairness
may result in substantive
unfairness. The appropriate remedy would have been to reinstate the
employees pending further consultation
on the last mentioned proposal
as clarified in evidence. This was not done. But the Court
a quo’
s
findings may well be relevant to the substantive fairness of the
dismissals of applicants 7, 13, 20, 33, 34, and 39 and the others.
[23] It was probably an
issue related to substantive fairness of the dismissal to the extent
that the Court
a quo
took the view that the termination of the
affected employees’ services was a
fait accompli
and
that Woolworths’ conduct during the s189A phase was consistent
with its decision to dismiss the 44 full-timers. This
must then be
evaluated against the two concessions made: Firstly, the need to
restructure the business. Secondly, that the affected
employees would
work flexi-time. The only substantive issue was whether it was fair
to dismiss the full-time employees who would
work flexi-time but only
at full-time rates save for the concession in the union’s final
proposal.
[24] The Court
a quo’s
finding, based on the letter of termination that was sent to
Madikela, that by the time the parties met on 03 November 2012,
Woolworths
had already made up its mind to terminate the affected
employees, which was dealt with as a procedural issue, meant that the
consultation
process was not exhausted. Therefore, the reinstatement
order pending further consultation may have been appropriate if the
substratum
on which it was based was sound. However, as adumbrated
earlier, the reinstatement of the employees was not made conditional.
There
was nothing which precluded Woolworths, who was dealing with
the issue on a national basis, from having a contingency plan in
place
when the consultation process was nearing its completion. It is
clear that the letter was sent prematurely by a supervisor.
[25] The final issue
concerning procedural fairness relates to Woolworth’s failure
to disclose information that the Court
a quo
found was
relevant to the process of determining the appropriate and fair terms
and conditions of employment for the affected employees.
Where one
consulting party is kept in the dark about matters relevant to the
issue at hand it will be procedurally unfair.
[26] When a judgment is
granted in respect of the substantive fairness of the s189A
retrenchment an order granting relief for procedural
fairness is no
longer competent. The fact that the parties may have agreed to try
both issues simultaneously and the Labour Court
sanctioned it is of
no legal consequence.
The appeal:
substantive unfairness
[27] The facts that are
relevant to the issue of substantive fairness are relatively narrow.
At the conclusion of the trial, it
had become common cause that:
(a)
Woolworths
was justified in seeking to convert its full-time employees to
employment based on flex-time.
(b)
Woolworths
was justified in doing so in order to address the following goals:
(i)
the
new market realities, particularly customers’ preferences for
shopping at other hours than in the past, that made working

flexi-time imperative;
(ii)
the
equity considerations (equal pay for equal work and work of equal
value) being the fact that most of the full-time workers were
earning
more than their flexi-time comparators;
(iii)
a
uniform pay grade consisting of five bands;
(iv)
saving
of costs on Woolworths’ labour bill.
(c)
The
conversion of full-time workers to flexi-time workers would generally
result in lower wages. Some full-time workers would be
paid less than
what they earned as full-time workers to varying degrees, depending
on the individuals concerned, and some full-time
workers would earn
more than they had previously earned.
(d)
All
full-time workers would be entitled to significantly less benefits
than those they had enjoyed before conversion, to the extent
that
some benefits such as study leave would fall away whilst other
benefits would change such as the medical aid.
(e)
In
the event that all the 590 full-time workers would convert to
flexi-time work (with or without early retirement and voluntary

severance) Woolworths would save R24 million per year. The saving in
respect of the respondents would appreciably be less than
this.
(f)
The
situation in which the full-time workers found themselves as regards
remuneration and benefits was as result of Woolworth’s

allocation of pay increases and performance awards from time to time
in the past.
(g)
Woolworths
appreciated that some full-time workers would suffer a drastic
diminution in the take-home pay and that all full-time
workers would
experience less advantageous benefits, should they convert to
flexi-time. In order to ameliorate this situation,
Woolworths, during
the course of the consultation period, arrived at a position where it
would consider paying each full-time worker
who converted to
flexi-time an amount, initially R60 000 later raised to R70 000, to
compensate them for the conversion.
(h)
Leaving
aside nuances of how the compensation could be accessed compensation
in an amount of R70 000 would also be available to
each full-timer
targeted by the s189A process.
[28] The summary of facts
is sufficient for most purposes but also adequately convey the
magnitude of the decrease in wages and
benefits for some of the full
time employees and the extent of the new working conditions for all
the affected employees. It is
necessary to provide further details.
Salaries
[29] The wage component
of the remuneration for 38 of the 44 employees would be reduced. The
extent of this reduction is set out
in the schedule in volume 15, at
page 1432. By way of example, Kate Moloi employee 52 on the list,
would suffer a 54% drop in wages.
A further 14 employees would face a
reduction in wages of between 39% and 52%. However, 6 of the 44
employees would receive higher
wages.
[30] Adv Kennedy SC, for
SACCAWU and the 44 full-timers, submits that these employees
typically have budget commitments that they
could not simply drop,
such as home loans, school fees, vehicle and loans. He also points
out that the evidence showed that these
employees had been employed
by Woolworths for a period ranging between 12 and 32 years. They had
received regular increases, even
while Woolworths’ management
was busy with its own internal planning which ultimately led to the
retrenchments. They were
not informed what was being planned for
them. Woolworths simply continued to do what it had been doing and
increased the extent
of the disparity between the remuneration levels
of these employees and the flexi-timers.
[31] The employees were
given no warning that the salary levels would be reduced so suddenly.
The workers had a reasonable expectation
that they would be paid what
they were earning together with the increases. They had budgeted,
took on financial commitments, and
planned for the retirement based
on their respective ages, working life and pension benefits. The
youngest of these employees was
38 years old and the oldest was 59 at
the time of the retrenchment. The age spread of the 44 employees is
reflected as follows:
·
7
were in the bracket 38 to 44 years;
·
15
were in the bracket 45 to 49 years;
·
17
were in the bracket 51 to 54 years; and
·
9
were in the bracket 55 to 59 years.
[32] Mr Kennedy further
submitted that typically employees in their fifties or even mid to
late forties would be settled in their
current employment and do not
engage in job hopping as often happened in the retail sector. Those
employees of an average age of
50 would struggle to find other
employment. Mr Kennedy submitted that the employees had secured terms
and conditions of employment
in the form of salaries and other
benefits that had been achieved and maintained and increased over
many years in terms of their
contracts of employment. These
entrenched contractual rights represent an important element in the
consideration of fairness.
Benefits
[33] The benefits the
full-time employees enjoyed would decrease on conversion to
flexi-time. Their benefits on retirement would
be substantially less
than they would have been because they would be calculated on a lower
income. There would be a change to
the medical benefits in the sense
that the employees would be restricted to consulting with a fixed
panel of doctors. Maternity
benefits would be reduced from 11 months
to six months. This would affect a minority of the female employees
concerned. Ante-natal
leave, which consisted of one-day leave per
month until the commencement of maternity leave would be abolished.
Post-natal leave
of three days for six months would also be abolished
as would compassionate leave of five or six days per incident.
Paternity leave
of five or six days per incident would also be
abolished. Moving leave of one day per move would be abolished. The
study leave
of 10 days per annum would fall away.
Working conditions
[34] The full-timers
worked Monday to Friday from 08:00 to 17:00. They seldom worked on
Saturdays, but if they did so, it would
attract overtime pay at the
applicable rates. The full-timers were not required to work on
Sundays. The full-timers would be required
to work on the flexi-40
arrangement. Full-timers who were to become flexi-timers would work a
total of 40 hours per week. Their
working day would terminate at
19:00. They would work every Saturday and three out of four Sundays.
No overtime would be paid.
Mr Kennedy submitted that these changes
would have a dramatic effect not only on the employees’ daily
and weekly routines,
but also as regards their lifestyles and it
would impact on their families. The employees would not, he
submitted, have any real
time to spend with their families over most
of the weekends. On most weekdays, they would work until late into
the early evening.
This would leave them with little time to spend
with their children and partners.
What is substantive
fairness in the context of s189A dismissal?
[35]
The question whether the dismissals of the 44 full-timers were
substantively fair must be answered within the parameters set
by
s189A. It is the general consensus of writers on this subject that
the test for the fairness of a retrenchment where s189A applies

differs from that applicable to retrenchments to which the section
does not apply.
[17]
We agree
with this view. Section 189A(19)
[18]
which is worded in peremptory terms provided that in any dispute
referred to the Labour Court in terms of s191(5)(b)(ii), concerning

the dismissal of this category of employees, the Labour Court must
find that the employee was dismissed for a fair reason if four

grounds are satisfied namely:
(a)
the dismissal was to give effect to a requirement based on the
employer’s economic,
technological, structural or similar
needs;
(b)
the dismissal was operationally justifiable on rational grounds;
(c)
there was a proper consideration of alternatives; and
(d)
selection criteria were fair and objective.
It is
trite that the
onus
of proving this rests upon the employer.
[19]
[36]
In
NUM
and Another v Black Mountain Mining (Pty) Ltd
[20]
this Court held, with reference to section 189A(19)(b),  that “a
dismissal can only be operationally justifiable
on rationale grounds
if the dismissal is suitably linked to the achievement of the end
goal for rational reasons.” Adv Myburgh
SC, for Woolworths,
suggested that this test should not be followed. He argued that
insofar as the Court in
Black
Mountain Mining
found
further that “
the
deferential approach is no longer part of our law”
and that retrenchment “
must
be a measure of last resort
”
or “
the
only reasonable option under the circumstances”
,
it is based on case law that does not deal with section 189A(19)(b);
does not accord with the plain language of section 189A(19(b);
and is
at odds with the origin of the phrase “
operationally
and commercially justifiable on rational ground
”
as propounded in
SA
Clothing & Textile Workers Union & others v Discreto - A
Division of Trump & Springbok Holdings
[21]
.
There
is something to be said for the proposition that the Court in
Black
Mountain Mining
possibly intruded more on the jurisprudence concerning other
retrenchments into the sphere of section 189A than it should have

done. However, in view of our finding, it is unnecessary for purposes
of this appeal to revisit that judgment even though we take
the view
that the passing of a moral judgment has been supplanted by what is
in effect a deeming provision. If the Labour Court
finds that the
elements listed in section 189A(19) (a), (b), (c) and (d) are
satisfied, it follows that the employee was dismissed
for a fair
reason.
The purpose of the
dismissals
[37] The first inquiry
relates to the purpose of the dismissals. Was the purpose to give
effect to a requirement based on the employer’s
economic,
technological, structural or similar needs? The evidence showed and
SACCAWU accepted that the reason for restructuring
the workforce of
the class of full-timers was to give effect to a requirement based on
the employer’s economic, technological,
structural or similar
needs; in particular, those identified above. It follows from this
that the dismissal of a full-time employee
who would not work
flexi-time would be a dismissal to give effect to a requirement based
on the employer’s economic, technological,
structural or
similar needs. But this element no longer applied as the full-timers
were prepared to work flexi-time but not on
all the terms that would
be applicable to flexi-timers.
[38] The Court
a quo
pointed out that in its Notice in terms of s189(3), Woolworths gave
only one reason for the retrenchments, namely that: “
the
company needs to be in a position to employ employees who are able to
be used on a flexible basis”
. The Court
a quo
went
on to find that “
therefore, Woolworths’ attempt to add
further reasons (equity and costs efficiency) in order to justify the
retrenchments
must be rejected since it was clearly an afterthought
and a cynical attempt by Woolworths to extricate itself from its
self-created
predicament
”.
[39] The Notice in terms
of s189(3) read as a whole emphasises the “
need to employ
people who are able to work according to flexible working
arrangements. This would improve both the costs and the
operational
efficiencies of the business
.” In our view, a fair reading
of the notice identifies the need to work flexi-time because it
mentions the benefits to be
derived from this with regard to the
costs and operational efficiencies of the business. The purpose of
saving costs by insisting
that all flexi-timers will enjoy the wages
and benefits applicable to flexi-timers is identified clearly enough
and constitutes
an economic, structural or similar need. Equity
considerations are probably inherent in the conversion to flexi-time
wages and
benefits but it was not made a purpose of the exercise.
Operationally justifiable
[40]
The question, whether the dismissal was operationally justifiable on
rational grounds was answered in the negative by the Court
a
quo
.
The phrase “the dismissal was operationally justifiable on
rational grounds” is one that was used by this Court in
its
judgment in
SA
Clothing & Textile Workers Union and Others v Discreto—A
Division of Trump & Springbok Holdings
[22]
where
Froneman DJP (as he then was) held:
‘
For the
employee fairness is found in the requirement of consultation prior
to a final decision on retrenchment. This requirement
is essentially
a formal or procedural one, but, as is the case in most requirements
of this nature, it has a substantive purpose.
That purpose is to
ensure that the ultimate decision on retrenchment is properly and
genuinely justifiable by operational requirements
or, put another
way, by a commercial or business rationale. The function of a court
in scrutinising the consultation process is
not to second-guess the
commercial or business efficacy of the employer’s ultimate
decision (an issue on which it is, generally,
not qualified to
pronounce upon), but to pass judgment on whether the ultimate
decision arrived at was genuine and not merely a
sham (the kind of
issue which courts are called upon to do in different settings, every
day). The manner in which the court adjudges
the latter issue is to
enquire whether the legal requirements for a proper consultation
process has been followed and, if so, whether
the ultimate decision
arrived at by the employer is operationally and commercially
justifiable on rational grounds, having regard
to what emerged from
the consultation process. 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,
properly taking into account what emerged during the consultation

process.’
[23]
[41]
Parliament is deemed to know the law so that when it uses words that
have been employed by a Court this is generally an indication
that
the legislature intends to give it the same meeting.
[24]
Anton Roskam ‘An Exploratory Look into Labour Market
Regulation’
[25]
suggests
that: “If the union refers a dispute about the substantive
fairness of the retrenchments to the Labour Court, the
test for
substantive fairness is limited to the test set out in the
Discreto
case.” That may well be provided the test in
Discreto
is confined to paragraph (b) of section 189A(19).
Proper consideration of
alternatives
[42] The question,
whether there was a proper consideration of alternatives, in the
context where it is conceded that the employer
was justified in
restructuring its workforce, can only relate to alternatives to
dismissal as there was no possibility of avoiding
the restructuring.
A proper consideration of alternatives is not necessarily linked to
the alternatives that were raised by the
employer or employee parties
at the consultation but must be open to include the possibility that
effect would be given to meritorious
alternatives.
[43] Woolworths initially
considered the following alternatives: maintaining the status
quo
,
a voluntary offer (to convert to flexi 40 employment and voluntary
retrenchment) made to the full-timers.
[44] SACCAWU approached
the consultation on retrenchment on the basis that its members who
were full-time workers of Woolworths
would convert to flexi-time
work, but maintained, initially, that the remuneration and benefits
should remain the same. Its proposal
mutated to one in which the
full-time workers would accept an 11% reduction in remuneration while
working flexi-time. SACCAWU pursued
the consultation on a collective
basis but the problem lied, as far as the wage component of
remuneration is concerned, only with
those who would earn a lesser
wage.
[45] Woolworths did not
understand that SACCAWU’s last alternative proposal, set out in
its letter of 30 October 2012, differed
from its previous proposal
regarding an alternative to avoid dismissal. When a proposal is
misunderstood and therefore not explored
it means that the employer
has not shown that this alternative had been properly considered.
[46] It is clear that
there was no possibility of a transfer to other full-time jobs. Early
retirement was offered at the voluntary
stage and was available
during the retrenchment consultation although it would not have
avoided the retrenchment but may have been
an attractive option to a
few of the full-timers. In view of the concession, the full-time
posts were redundant which meant that
the continued payment of wages
and benefits at the full-time rates was not an alternative
(theoretically, it could have been extracted
by the duress of a
strike). The same may be said about the continuation of payment of
the wages save that overtime pay would be
paid at the rates for
flexi-timers. The continuation of payment of full-time rates until
natural attrition took place would probably
not be viable because the
full-timers were unlikely to choose other employment and the normal
rate of 6% attrition was low.
[47] The sudden decrease
in take home pay, which was a major concern for the full-timers,
would have had a severe financial impact
on them. Woolworths
appreciated this and was prepared to make available an amount of R70
000 (it is not clear whether this would
be fully taxable) during the
voluntary stage as a sweetener or inducement and at the stage of the
possible retrenchment. In the
course of the consultation process it
may have retained this character but it would also have served as
token compensation for
the loss of the employees’ full-time
status and it could be regarded, in a sense, as an alternative to
dismissal.
[48] The principle that
compensation for the loss would be payable was established. It was on
the table and the union could have
pressed for more generous
compensation as Woolworths would be making significant savings on its
wage bill. Woolworths may have
been reluctant to increase the amount
of compensation and may have pointed to the fact that other
full-timers had, during the voluntary
process accepted the R70 000.
But that was a separate process and the union was excluded. An
increase in this amount was not explored
and the union appears to
have been agreeable to accept less compensation but of course this
must be seen in the context of its
related proposal.
[49] An alternative
proposal that could have been considered would have been to have ring
fenced the wages of the full-timers and
to the extent that the law
allowed this, to forgo wage increases until the corresponding
flexi-time wage had risen, by sectoral
determination increases or
amendments and otherwise, to the level of the ring fenced wage.
[50] There could be many
permutations of such an alternative and ways of funding it. For
instance, the R70 000 could have remained
or have been exchanged for
the ring fenced option. Consideration could have been to accelerate
the meeting of a ring fenced wage
and an increasing flex-time wage,
by gradually reducing the ring fenced wage. There is no way of
knowing what the ring fenced alternative
or inducement would have
turned out had it been pursued but it is sufficient for purposes of
this appeal to find that it was a
reasonable alternative that was not
considered.
Selection criteria
[51] The selection
criteria were fair and objective because all the full-timers in the
targeted category were identified without
exception.
[52] It follows that the
dismissal of the individual respondents was substantively unfair
because Woolworths was unable to prove
that it complied with section
189A(19)(c) of the LRA, put differently, it failed to show that it
properly considered the alternatives.
The remedy
[53] The usual remedy for
substantive unfairness is an order of reinstatement. This is the
remedy which the Court
a quo
ordered. In this case, as already
alluded to, the full-time posts have become redundant and the
respondents have conceded this.
The result is that reinstatement is
not feasible. This leaves compensation. We are of the opinion that
compensation of an amount
equal to 12 months of the remuneration due
to each of the 44 full-timers should have been ordered.
[54] In the result, the
appeal should be dismissed in part and upheld in part and the order
of the Court
a quo
should be replaced with an order providing
that the application seeking relief in respect of the alleged unfair
procedure is dismissed.
The dismissal of the 44 full-timers is found
to be substantively unfair. The 44 full-timers are awarded
compensation in an amount
equal to 12 months of the remuneration due
to each of them.
Costs
[55] We are of the view
that no order should be made as regards the costs of the appeal.
[56] The following order
is made:
Order
1.
The
appeal is upheld in part and dismissed in part.
2.
Paragraph
2 of the order of the Labour Court is set aside and replaced with the
following:
‘
2.1.
The application seeking relief in respect of the alleged unfair
procedure is dismissed.
2.2.
The
dismissal of the second and further applicants is found to be
substantively unfair.
2.3.
The
second to further applicants are awarded compensation in an amount
equal to twelve months of the remuneration due to each of
the
applicants.’
3.
There
is no order as to the costs of the appeal.
_____________________
The
Court
APPEARANCES:
FOR
THE APPELLANT:

Adv A Myburgh SC
`
Instructed by Mervyn Taback Inc
FOR
THE RESPONDENTS:

Adv P kennedy SC
Instructed by Haffegee
Roskam Savage Attorneys
[1]
The
Full-timers comprised these types of employees: full-timers;
part-timers; key-timers; and rollers. They all worked within

Woolworths’s chain of retail stores.
[2]
Section
189A
(13)
provides: “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.
[3]
Section
191(11) provides for the referral of the dispute to the Labour Court
for adjudication within a period of 90 days after
the Bargaining
Council or the Commission for Conciliation, Mediation and
Arbitration (CCMA) had certified that the dispute remains
unresolved
after conciliation.
[4]
(2001)
22 ILJ 2264 (LAC) at 2269-2270 para 19.
[5]
(2005)
26 ILJ 293 (LC) at 320-321 para 85.
[6]
Regulations
7(1)(a)(d)
of the EEA stipulates:
‘
Factors
justifying differentiation in terms and conditions of employment
(1)
If employees perform work that is of equal value, a difference in
terms and conditions of employment, including remuneration,
is not
unfair discrimination if the difference is fair and rational and is
based on any one or a combination of the following
grounds:
(a)
the
individuals' respective seniority or length of service;
(c)
……..
(d)
where
an employee is demoted as a result of organisational restructuring
or for any other legitimate reason without a reduction
in pay and
fixing the employee's salary at this level until the remuneration of
employees in the same job category reaches this
level;’
[7]
(2008)
29 ILJ 2685 (LAC).
[8]
(CA22/2012)
[2014] ZALAC 78
(10 December 2014) at para 37.
[9]
(1998)
19 ILJ 1451 (LAC).
[10]
An
award of compensation made to an employee in terms of section
189A(14) must comply with section 194 of the LRA.
[11]
(2014)
35 ILJ 1024 (LC); [2013] 12 BLLR 1253 (LC).
[12]
At para 19.
[13]
[2005]
1 BLLR 53 (LC).
[14]
At para 10.
[15]
(2006)
27 ILJ 1026 (LC).
[16]
At para 9.
[17]
See
South African Labour Law, Jutastat e-publications, Clive Thompson
and Paul Benjamin at RS 66, 2016 AA1-p518 under “
The
broad section 189A formula”
where
the following is said: “Larger-scale retrenchments are
governed by both sections, with s 189A representing the extra
and
commanding layer. Smaller-scale retrenchments are governed by s189
only, with a necessarily arbitrary set of numbers determining
which
workplaces are to be governed by which bundle of rights and
obligations. Different consultation processes with different
times
limits apply,
and
the test for fairness varies as well
.”
[18]
Section
198A(19) was repealed by
s33
(b)
of the
Labour Relations Amendment
Act,
6 of 2014.
[19]
See
section 192 of the LRA.
[20]
(CA22/2012)
[2014] ZALAC 78
(10 December 2014) (
Black
Mountain
Mining).
[21]
(1998)
19
ILJ
1451
(LAC) at 1454-1455 para 8. We refer to the
Discreto
exposition in para 40 of our judgment.
[22]
(1998)
19 ILJ 1451 (LAC) (
Discreto
)
[23]
At para 8.
[24]
Cf
Randfontein
Estates Gold Mine Co v Minister of Finance
1928
WLD 77.
[25]
Development
Policy Research Unit, DPRU Working Paper 07/116, January 2007 at
ages 18-19 and 20.