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[2018] ZALAC 38
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South African Commercial Catering and Allied Workers Union and Others v JDG Trading (Proprietary) Limited (JA140/17) [2018] ZALAC 38; (2019) 40 ILJ 140 (LAC); [2019] 2 BLLR 117 (LAC) (17 October 2018)
IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case
no: JA 140/17
In
the matter between:
THE
SOUTH AFRICAN COMMERCIAL CATERING
AND
ALLIED WORKERS
UNION First
appellant
SACCAWU
MEMBERS Second
and Further Appellants
and
JDG
TRADING (PROPRIETARY)
LIMITED Respondent
Heard:
26 September 2018
Delivered:
17 October 2018
Summary:
Application and interpretation of section
189A(13) – union contending that employer had already made its
mind to retrench
the employees through a resolution – union
contending that in light of the final decision, subsequent
consultation was a
sham and dismissal was a
fait
accompli
– court called upon
to consider whether on the evidence a final decision had been taken
prior to the issuing of the section
189(3) notice. Held that the
resolution stands to be interpreted regardless of its context and
JDG’s subsequent conduct thus
contradicts the established legal
position that conduct subsequent to a section 189 notice may well be
determinative of the extent
of the employer’s compliance with
its statutory duties. Further that employer’s conduct
contradicts union’s version
that dismissal was
a
fait accompli
.
Labour Court’s judgment upheld and appeal dismissed.
Coram:
Phatshoane ADJP, Murphy and Kathree-Setiloane AJJA
JUDGMENT
MURPHY
AJA
[1]
The appellants appeal against the
ex tempore
judgment and
order of the Labour Court (Steenkamp J) of 18 May 2017 dismissing
their urgent application in terms of section 189A(13)
of the Labour
Relations Act 66 of 1995 (“the LRA”).
[2]
The respondent (“JDG”) is a retail company that owns a
number of retail chain stores. The first appellant, the South
African
Commercial Catering and Allied Workers Union (“SACCAWU”),
has concluded collective agreements with JDG including
a
“relationship agreement” governing bargaining and
organisational rights and a “job security agreement”
dealing with closures, relocations, restructuring and operational
requirement decisions.
[3]
On 17 February 2017, JDG issued a notice to SACCAWU headed
“
Notification regarding consultation in respect of proposed
operational requirements”
in terms of section 189(3) of the
LRA, read with clauses 3.1 and 4.2 of the job security agreement. The
opening paragraphs of the
notice read:
‘
This is a
Notification in terms of
Section 189(3)
of the
Labour Relations Act
66 of 1995
as amended, in respect of proposed operational
requirements. The Group and Management formally notify SACCAWU…that
it contemplates
to effect certain operational requirements that may
impact the job security of SACCAWU members. The Company wishes to
formally
inform the Union of its intention to invoke clause 3.1 and
4.2 of the….job security agreement.
The Group contemplates
the following work place closures and restructuring…;
[4]
Clause 3.1 of the job security agreement provides that when the
company contemplates dismissing one or more employees on operational
requirement grounds, it will notify SACCAWU at national level in
terms of
section 189(3)
of the LRA. Clause 4.2 of the job security
agreement reads:
‘
[T]he parties
shall at the quarterly meetings, dates to be agreed, address and
discuss the performance of loss making and marginal
places of work,
with the focus being to assist with the rectification thereof and/or
positively influence the situation, as well
as to consult on issues
covered under the provisions of clauses 3 and 4 of this agreement
and/or any aspect relating to operational
requirements which may
affect the job security of employees within the bargaining unit.’
[5]
The
section 189(3)
notice set out in tabulated form the contemplated
closures and employees affected in the bargaining units across the
various workplaces.
It continued with a proposal to offer enhanced
voluntary severance packages (“ESVP’s”) to various
administrative
personnel across the group as an “attempt to
minimise or possibly prevent any forced retrenchments and business
disruption”.
Alternatives for consideration by the parties are
identified in the job security agreement and referred to in the
letter as including:
re-deployment in the group, retirement,
voluntary early retirement or retrenchment and natural attrition. The
letter also dealt
with selection criteria, timelines, severance pay
and assistance to be offered to employees selected for retrenchment.
On the face
of the
section 189(3)
notice, the total number of
employees likely to be affected was 1951
.
However, JDG
subsequently clarified on 7 March 2017 that the total number of
employees likely to be affected was in fact 1095. The
section 189(3)
notice concluded by saying:
‘
We are looking
forward to a meaningful and constructive consultation process
regarding these matters.’
[6]
On 23 February 2017, SACCAWU sent a letter to JDG stating
inter
alia
that the
section 189(3)
notice did not demonstrate any
genuine commitment by JDG to a consultation process. SACCAWU’s
scepticism was based on a suggestion
in the letter which aimed at
avoiding a consultation process at national level as envisaged in the
job security agreement. The
proposal read:
‘
In terms of the
management of the affected employees, it is proposed that, in order
to expedite the process and to avoid any unnecessary
inconvenience
experienced by the said employees, the responsible Human Resources
Executives and respective Cluster/Division/Chain
Full-Term Shop
Steward (where applicable) to be given the mandate by both parties to
manage the process, in accordance with the
parties Job Security
Agreement.’
[7]
SACCAWU prefers as a general rule for consultations to be conducted
by skilled union officials at national level. It was bothered
also by
the proposal to expedite the process. Nonetheless, SACCAWU committed
to the process and despite its misgivings requested
further detailed
information.
[8]
JDG responded to SACCAWU’s letter and provided comprehensive
information. A first consultation meeting was held on 7 March
2017.
On 10 March 2017, SACCAWU sent another letter to JDG in which it
sought additional information regarding
inter alia
the date on
which the decision to initiate the consultation process was taken and
a copy of the minutes of the meeting at which
it was resolved to
initiate the consultation process. JDG responded in a letter dated 14
March 2017 and cited an extract of the
draft minutes of JDG’s
executive committee meeting of 25 January 2017 recording the
resolution to initiate the operational
requirements consultation
process. The extract reads:
‘
The meeting
resolved that as a result of the ongoing poor economic trading
conditions, the lack of growth in the furniture industry
and the
resultant negative financial impact, the furniture brands of the
Group must further reduce store staff numbers through
operational
requirements to reduce operational costs.’
[9]
On 29 March 2017, a second consultation meeting was held between the
parties at which SACCAWU raised reservations about the
resolution.
The minutes record the disquiet of the Deputy Secretary-General of
SACCAWU as follows:
‘…
The
concern on the decision from the Exco meeting is when looking at the
extract of the minutes it reads “Furniture brand
of group must
further reduce store staff numbers”. You don’t have
any powers to change this decision of Exco,
therefore this
consultation process becomes superficial.’
[10]
The minutes later record the response of JDG as follows:
‘
In response to the
concern on the Exco resolution, so that there is no misunderstanding
herewith our response:
‘
Exco’s
resolution highlights that for the reasons stated we have more staff
than required to conduct our operations. It further
refers to the
fact that the number of staff, in light of the aforesaid, must be
reduced. It does not state that staff services
must be terminated or
that staff must be retrenched but specify that reduction must be
considered “through Operational Requirements”
referring
to the required OR processes.
We have therefore been
instructed to engage in terms of the required process to consult and
consider possible retrenchment or alternatives
/ ways relating to the
excess staff and requirement to reduce operational costs…’
[11]
On 6 April 2017, SACCAWU sent a letter to the Chief Executive Officer
of JDG, in which it stated
inter alia
that the resolution had
undermined the consultation process in that a decision had been made
in terms thereof to retrench employees.
JDG responded on 7 April 2017
in a letter stating:
‘
1. Your inference
that the word “must” in the Exco draft resolution
indicates that management has made a final decision
to retrench
workers, is with respect, incorrect.
2. The manner in which
the consultation process has been conducted (and the minutes will
reflect that) cannot be construed as “merely
going through the
motions” and this was put into perspective at the consultation
meeting of 29 March 2017.
3. We reiterate that Exco
took the preliminary decision to reduce store staff numbers in order
to reduce operational costs and considered
and established that other
alternatives would not achieve the cost cutting objective.
4. The consultation
process was to allow the role players to engage the company to seek
viable alternatives to avoid or minimize
retrenchments.
5. The consultation
process will, accordingly proceed on this basis.’
[12] SACCAWU maintains
that its various proposals regarding alternatives to retrenchment
were rejected without valid reason and
that this was an indication
that a decision had already been made to reduce store staff numbers,
and any consultation on restructuring
was pre-determined. For
example, SACCAWU felt its suggestion to reduce staff store numbers
through natural attrition and the transfer
of employees was rejected
without adequate reasons. Likewise, SACCAWU suggested that JDG
introduces a government-funded training
layoff scheme, which JDG
rejected on the basis that it purportedly did not qualify for the
funding as it was not a “business
in distress”
.
[13]
A third consultation meeting was held on 7 April 2017. Again, SACCAWU
raised its concerns regarding the resolution. It was
also agreed
during this consultation meeting to vary the job security agreement
in respect of the offering of voluntary severance
packages. At the
end of the third consultation meeting, a fourth consultation meeting
was scheduled for 20 April 2017.
[14]
On 11 April 2017, and prior to the fourth consultation meeting that
had been scheduled for 20 April 2017, JDG referred a dispute
to the
Commission for Conciliation Mediation and Arbitration (“the
CCMA”) in terms of
section 189A(8)(a)
of the LRA. In terms of
this provision, a party may not refer a dispute to the CCMA unless a
period of 30 days has lapsed from
the date notice was given in terms
of
section 189(3)
of the LRA. As the relevant period had lapsed, JDG
was within its rights to make the referral. The relief sought by JDG
in the
LRA Form 7.11 was the “implementation of retrenchments
where required.”
[15]
A fourth consultation meeting was held between the parties on 20
April 2017. At the conclusion of this consultation meeting,
JDG
advised SACCAWU that any further engagement could either be through
formal written correspondence or at the CCMA.
[16]
After further correspondence was exchanged between the parties, the
appellants launched an urgent application (the subject
matter of this
appeal) seeking orders: i) declaring the consultation process to be
unfair and a sham; ii) declaring the resolution
to be in
contravention of JDG’s duty to consult in terms of
section 189
and
189A
of the LRA; iii) interdicting JDG from retrenching the
individual applicants; and iv) compelling JDG to comply with a fair
procedure
regarding the contemplated retrenchments by
inter alia
withdrawing the resolution and the
section 189(3)
notice and
re-issuing it. The order was sought in terms of
section 189A(13)
which permits a consulting party, if an employer does not comply with
a fair procedure, to approach the Labour Court for an order
compelling compliance with a fair procedure and interdicting
retrenchments prior to compliance.
[17]
SACCAWU contended before the Labour Court that the resolution was
couched in peremptory terms and that its grammatical and
ordinary
meaning was clear and unambiguous, namely that JDG “must”
further reduce store staff numbers through operational
requirements
in order to reduce operational costs. It argued that JDG thus took a
decision to retrench employees for operational
requirements prior to
the issuing of the
section 189(3)
notice and hence that the dismissal
of employees for operational requirements was a
fait accompli
.
JDG contended to the contrary that the resolution constituted a
decision in principle which was not final, being merely contemplation
on its part that a reduction of staff was needed for operational
reasons and that at that point it still intended to follow a
section
189
consultation process in a fair manner.
[18]
The Labour Court accepted that the resolution was cast in peremptory
terms but held that it could be interpreted with reference
to the
events that transpired after its adoption. Once the resolution had
been adopted, JDG did what it was supposed to do in terms
of
section
189
and
189A
of the LRA. It embarked on a consultation process and
invited proposals from SACCAWU. In response to requests from SACCAWU,
it
disclosed all relevant information. It also established a data
room to facilitate full access to information. Moreover, at the time
of the application, the consultation was ongoing. JDG had not taken
any final decision to dismiss, nor issued any dismissal notices.
[1]
The Labour Court found that the process had not been derailed in any
way. It concluded that the words “must further reduce
store
staff members” in the resolution could be read in the light of
the surrounding circumstances as “may have to
reduce store
staff members”. The wording of the resolution did not mean that
the decision to dismiss was a
fait
accompli
.
It, therefore, dismissed the application but made no order as to
costs.
[19]
SACCAWU submits on appeal that the Labour Court erred in finding that
the resolution could be interpreted having regard to
the events that
transpired after its adoption. It argued that it was entitled to be
consulted prior to the taking of a decision
to retrench, and an
ex
post facto
consultation
process was improper. Fairness is bound up in the requirement of
consultation prior to reaching a final decision on
retrenchment.
[2]
In terms of
section 189
of the LRA, consultation is required once the
employer contemplates dismissal for operational requirement reasons.
Consultation
must precede a final decision on retrenchment since it
is impossible to determine beforehand what might emerge from the
consultation
and to what extent these results might influence a final
decision. Allowing for representations after the decision has been
made,
cannot inform the decision already taken and will be met by a
justification of the original decision taken before any
consultation.
[3]
[20]
The issue on appeal, therefore, is whether on
the evidence a final decision had been taken prior to the issuing of
the section 189(3)
notice.
The only basis upon which SACCAWU
rests that claim is the wording of the resolution and the rejection
of some of its proposals.
JDG counters that the resolution was no
more than a decision to proceed with the consultation process once
retrenchments had been
contemplated.
[21]
In support of its submission that it was impermissible for the Labour
Court to rely on the surrounding circumstances to construe
the
meaning of the resolution to a mere contemplation of dismissals
rather than a final decision, SACCAWU relied on
Urban
Hip Hotels (Pty) Limited v K Carrim Commercial Properties (Pty)
Limited (Urban Hip Hotels
)
[4]
where the Supreme Court of Appeal (“SCA”) considered the
use of surrounding circumstances, and in particular the manner
in
which the parties carry out a contract, as aids to contractual
interpretation. It said:
‘
It is now well
established that the meaning of a contract must be ascertained by
consideration of the words used, the contract as
a whole and the
context or factual matrix in which the contract was concluded,
irrespective of whether there is an ambiguity in
the meaning
thereof…I accept that in an appropriate case the manner in
which the parties to a contract carried out their
agreement, may be
considered as part of the contextual setting in which the terms of
the contract are to be determined….The
use of such evidence
is, however, subject to three provisos. First, the evidence must be
indicative of a common understanding of
the terms and meaning of the
contract. Second… the evidence may be used as an aid to
interpretation and not to alter
the words used by the
parties.….Third, as Harms JA cautioned in
KPMG Chartered
Accountants (SA) v Securefin Ltd & another
… the
evidence must be used “as conservatively as possible”’.
[22] In
KPMG
Chartered Accountants (SA) v Securefin Ltd and Another,
[5]
the SCA
held:
‘
First, the
integration (or parol evidence) rule remains part of our law.
However, it is frequently ignored by practitioners and
seldom
enforced by trial courts. If a document was intended to provide a
complete memorial of a jural act, extrinsic evidence may
not
contradict, add to or modify its meaning… Second,
interpretation is a matter of law and not of fact and, accordingly,
interpretation is a matter for the court and not for witnesses...
Third, the rules about admissibility of evidence in this regard
do
not depend on the nature of the document, whether statute, contract
or patent …Fourth, to the extent that evidence may
be
admissible to contextualise the document (since “context is
everything”) to establish its factual matrix or purpose
or for
purposes of identification, “one must use it as conservatively
as possible”….. The time has arrived
for us to
accept that there is no merit in trying to distinguish between
“background circumstances” and “surrounding
circumstances”. The distinction is artificial and, in addition,
both terms are vague and confusing. Consequently, everything
tends to
be admitted. The terms “context” or “factual
matrix” ought to suffice.’
[23]
SACCAWU submitted that the Labour Court’s approach was at odds
with these authorities. The evidence was not indicative
of a common
understanding of the meaning of the resolution. Secondly, the Labour
Court used evidence of the manner in which the
resolution was carried
out to alter the words in the resolution in order to support a
finding that JDG simply intended to consider
or contemplate the
reduction of store staff numbers. Thirdly, the Labour Court did not
use the evidence before it conservatively
but instead used it to
determine the matter. SACCAWU accordingly submitted that the Labour
Court ought to have found, without reference
to any evidence of what
transpired after the adoption of the resolution, that a decision to
retrench employees was made prior to
the purported consultation
process, and that the JDG did not comply with a fair procedure.
[24]
JDG submits that the
dicta
in
Urban
Hip Hotels
find no application to the present facts because there is no basis
for the extension of a principle of contractual interpretation
to a
unilateral statement such as the resolution. However, a proper
reading of the authorities supports the proposition that the
context
and the manner of implementing an executive resolution would normally
be relevant and are legitimate aids to interpretation.
As these two
decisions of the SCA confirm, it is well-established in the law of
contract that the subsequent conduct of parties
is relevant as part
of the matrix of surrounding circumstances in light of which the
contract should be interpreted;
[6]
and there is no reason why the principles of contractual
interpretation should not be extended by analogy,
mutatis
mutandis,
to other documents.
[25]
SACCAWU’s argument
that
the resolution stands to be interpreted regardless of its context and
JDG’s subsequent conduct thus contradicts the established
legal
position that conduct subsequent to a
section 189
notice may well be
determinative of the extent of the employer’s compliance with
its statutory duties
.
[7]
Certainly, the admonitions to act conservatively and to avoid unduly
altering the language should generally be heeded; but a purposive
and
contextual approach, in this case, defies a conclusion that the
Executive Committee intended to close the company’s mind
to
consultations on averting or minimising retrenchments. The job
security agreement, an important part of the context in the light
of
which the resolution stands to be interpreted, leaves no doubt about
the intended practice of the parties and the process to
be followed
in relation to contemplated retrenchments.
[26]
It is trite that
section 189(1)
of the LRA obliges an employer to
consult on contemplation of retrenchments. Du Toit et al
Labour
Law Through the Cases,
[8]
after a discussion of the authorities, accurately capture the
prevailing legal position about what is required as follows:
‘
It would therefore
seem that the weight of authority has shifted from a broader to a
narrower interpretation of the term “contemplates”.
Having initially accepted that contemplation of dismissal as one of
various options was sufficient to trigger the employer’s
duty
to consult, the courts now appear to take the view that, for purposes
of
section 189
, “contemplates” refers to dismissal as the
preferred or most likely option from the employer’s point of
view
rather than a mere possibility. It follows that the employer is
entitled to go through a process of weighing up various alternatives
before dismissal can be said to be “contemplated”.
However, the employer may not embark on consultation with a closed
mind but must be willing to seriously consider any further
alternatives to dismissal that may emerge in the process.’
[27]
The retrenchment decision and process expressed in and initiated by
the resolution were on their face proper and valid. SACCAWU
did not
challenge the commercial or business rationale for retrenchment in
its application. Facing a dire financial situation,
JDG engaged with
SACCAWU, as the union with the highest number of members employed by
it, through an exchange of written correspondence
and a series of
four consultative meetings over a sustained period from 23 February
2017 to 20 April 2017. The resolution to initiate
a retrenchment
process was taken on 26 January 2017 and a three-month process of
engagement with the appellants ensued.
[28]
The evidence as a whole indicates that JDG was prepared to discharge
its statutory consultation duties with an open mind, to
consult in
good faith, and to seriously consider alternatives to dismissal
during the consultation process. SACCAWU’s contention
that the
subsequent conduct of JDG confirms that the process was a sham does
not withstand scrutiny. The record reveals a dire
business
environment; an employer willing to respond to the union’s
requests for information; a sustained, three-month period
of
meaningful engagement; and four consultative meetings. JDG received
and considered suggestions from SACCAWU to avert job losses,
and
provided reasons for its decisions in respect of these suggestions.
JDG accepted and implemented SACCAWU’s proposal to
extend the
EVSP’s to sales staff and it appears that placements into
available vacancies reduced the ultimate number of retrenchments
significantly. There is no basis upon which JDG’s averments in
the answering affidavit that it genuinely considered and responded
to
SACCAWU’s representations can be rejected as un-creditworthy or
untenable. JDG accordingly complied with its procedural
duties in
terms of
section 189(5)
and (6) of the LRA.
[29]
JDG’s conduct belies any description of the process as a
fait
accompli
.
The most probable inference to be drawn regarding the resolution is
that JDG had merely formed a
prima
facie
view on the likelihood of retrenchments. An employer in such
situations invariably will form a
prima
facie
view on the need for retrenchments.
[9]
It is unrealistic, technical and formalistic to seize upon the word
“must” in the initiating resolution and to divorce
it
from its context. That context includes the process stipulated in the
job security agreement and the subsequent engagement of
the parties
in a
section 189(3)
consultation exercise. The perhaps injudicious
use of language in the resolution does not lead inescapably to the
conclusion that
the employer had closed its mind to alternatives. An
employer cannot be held to a standard of a genuine commercial
rationale for
retrenchment if it would be prejudiced in subsequent
court proceedings precisely for making such an assessment of its
commercial
realities. The employer must be entitled to form a
prima
facie
view on retrenchment, even a firm one, provided it demonstrates and
keeps an open mind in the subsequent process of consultation,
which
was the case here.
[30]
In the premises, it is clear from the subsequent conduct of JDG that,
properly interpreted, the resolution did not amount to
a final
decision to dismiss employees for operational requirements. Events
following the resolution reveal that JDG meaningfully
engaged in a
genuine retrenchment consultation process which was still underway
when the urgent application was launched. The Labour
Court hence did
not err in dismissing the application.
[31]
Neither party seeks costs.
[32]
In the result, the appeal is dismissed.
_________________
JR Murphy
Acting Judge of Appeal
Murphy
AJA (with whom Phatshoane ADJP and Kathree-Setiloane AJA concur)
APPEARANCES:
FOR
THE APPELLANTS: Adv FA Boda SC
Instructed
by Dockrat Inc
FOR
THE THIRD RESPONDENT: Adv G Fourie SC
Instructed
by Cliffe Dekker Hofmeyr
[1]
We
were advised from the bar that of the more than 1000 employees
identified as likely to be affected, ultimately less than 100
were
dismissed. 729 employees accepted the EVSP’s.
[2]
SACTWU
and Others v Discreto (a Division of Trump and Springbok Holdings)
(1998)
12 BLLR 1228 (LAC).
[3]
Kotze
v Rebel Discount Liquor Group (Pty) Ltd (
2000)
21 ILJ 129 (LAC) at 138J to 139B
.
[4]
(2016)
JOL 36943
(SCA) at para 21.
[5]
(2009)
(4) SA 399
(SCA) at para 39.
[6]
G4S
Cash Solutions (SA) (Pty) Ltd v Zandspruit Cash & Carry (Pty)
Ltd and Another
2017 (2) SA 24 (SCA).
[7]
Arthur
Kaplan Jewellery (Pty) Ltd v Van De Venter
[2006] ZALAC 7.
[8]
LexisNexis,
LRA Chapter 8, Commentary on
s189(1).
October 2017 update.
[9]
Visser
v Atronic International Bmgh
[2009] ZALC 76.