Summary of Judgment

1. Introduction

The matter concerned an application for review brought in the Labour Court in terms of section 145 of the Labour Relations Act 66 of 1995 (the LRA). The applicant sought to review and set aside an arbitration award issued under the auspices of the Metal and Engineering Industries Bargaining Council (MEIBC) by the second respondent commissioner on 4 May 2007 (case number MEGA 7310). The applicant also sought a stay of enforcement of the award pending finalisation of the review, purportedly in terms of section 145(3) of the LRA.

The applicant was Air-O-Thene Products (Pty) Ltd, and the first respondent was Christine Ford, a former employee of the applicant. The second respondent was Zodwa Mdladla, the MEIBC commissioner who presided over the arbitration proceedings and issued the award under review.

The underlying dispute arose from the employee’s dismissal, which the commissioner classified as a dismissal for poor work performance. The commissioner found the dismissal to be both substantively and procedurally unfair and ordered reinstatement with back pay. The review proceedings thus concerned whether the commissioner’s findings on fairness and remedy were reviewable, and whether any aspects of the award required correction or substitution.

2. Material Facts

The first respondent was employed by the applicant on 4 December 2003 as a Sales Representative. On or about 15 December 2004, the applicant charged her with misconduct and poor work performance, she was found guilty, and she was dismissed.

After her dismissal, the first respondent referred a dispute to the Bargaining Council on 11 February 2005. The dispute was conciliated but remained unresolved. It proceeded to arbitration, which commenced on 23 March 2006 and concluded on 27 February 2007, with the award being issued on 4 May 2007.

On the substantive fairness aspect, it was not in dispute that the applicant’s complaint before dismissal related to alleged poor performance, and the commissioner accordingly treated it as such. It was also not in dispute that, at the time when a manager (Mr Lance Whitford) introduced the use of computers and required reporting by spreadsheet, the employee did not have computer skills, and the applicant knew she lacked those skills. The court further recorded that no evidence had been tendered at arbitration that the employee was trained in order to enable her to compile the required computer-generated reports.

On procedural fairness, it was common cause that the applicant did not provide the employee, prior to the disciplinary hearing, with a bundle of documents that it intended to use, despite the employee having requested the documents before the hearing. The applicant contended it could not provide documents because the essence of the charge was that the employee had not prepared the documents in question. The court, however, relied on the disciplinary hearing minutes (referenced as page 79 line 16 of “A2”) reflecting that Mr Whitford in fact produced a bundle of documents during the disciplinary hearing to support the allegations.

It was further accepted by the court that the employee was only given the documents during the disciplinary hearing and was required to proceed immediately, without being allowed an opportunity to peruse the documents and prepare her response. The chairperson’s refusal to grant a postponement in those circumstances was treated by the court as materially relevant to whether the procedure was fair.

Regarding remuneration and compensation, it was not in dispute that before the applicant took over a business referred to as Versapak, the employee’s remuneration included commission, and that the applicant later removed commission from the calculation of remuneration. The court treated the removal of commission as the principal change to the employee’s terms and conditions following the transfer.

3. Legal Issues

The central legal questions were whether the arbitration award was reviewable under section 145 of the LRA on the grounds advanced, namely whether the commissioner failed to apply her mind, committed reviewable irregularities, or reached unreasonable conclusions on substantive fairness and procedural fairness, and whether the commissioner committed an error in the calculation of compensation.

The dispute required the court to consider a mixture of the application of legal standards to largely common-cause facts (for example, whether the employee was afforded a fair opportunity to meet performance standards, and whether the disciplinary procedure was fair given the timing of disclosure of documents), together with a review assessment of whether the commissioner’s conclusions were ones that could reasonably be reached on the material before her.

A further issue concerned the correct legal interpretation and application of section 197 of the LRA in relation to whether commission should have been included as part of the employee’s remuneration for purposes of calculating compensation.

4. Court’s Reasoning

On substantive fairness, the court accepted that the dispute was properly characterised as one of poor work performance. It referred to Schedule 8 item 9(b)(ii) of the LRA, which requires consideration of whether the employee was given a fair opportunity to meet the required performance standard. Applying this framework, the court emphasised that the employee lacked computer skills when computer-based reporting was introduced, that the employer knew this, and that there was no evidence the employer had provided training to enable compliance with the required standard.

Against that factual matrix, the court held that the commissioner’s conclusion that the dismissal was substantively unfair was not reviewable, stating in substance that it was not a conclusion that a reasonable decision-maker could not reach on the materials before the commissioner. The court therefore rejected the review attack directed at the substantive fairness finding.

On procedural fairness, the court considered the effect of the employer’s failure to provide the employee with the documents in advance of the disciplinary hearing, despite a prior request. It rejected the employer’s justification that it could not provide documents because the allegation was non-production by the employee, on the basis that the disciplinary hearing minutes reflected that the employer’s representative in fact produced and relied on a bundle of documents during the hearing.

The court reasoned that providing the documents only during the hearing and requiring the employee to proceed immediately, without an opportunity to study and prepare, undermined the employee’s ability to prepare for the hearing and to cross-examine effectively. The court treated the chairperson’s refusal of a postponement as unjustified in context, and as rendering the disciplinary proceedings unfair. On that basis, it rejected the contention that the commissioner failed to apply her mind or erred in concluding that the dismissal was procedurally unfair.

On compensation, the court accepted the applicant’s criticism that the commissioner had erred by including commission in calculating remuneration for purposes of compensation. The court analysed the commissioner’s reliance on section 197 of the LRA, holding that the commissioner’s view—namely that section 197 precludes an employer from unilaterally changing terms and conditions of employment at all—was not correct. The court interpreted section 197 as permitting unilateral changes provided they are not substantial, and it then assessed the particular change in issue.

Applying that approach, the court found that, although the employee retained salary and other conditions, the only relevant change was the removal of commission. On the court’s assessment, this change did not constitute a substantial change to terms and conditions “in the circumstances” of the case. Consequently, commission should not have been included in the remuneration figure used for compensation calculation. The court therefore corrected the award only to that limited extent by substituting the compensation paragraph with a recalculated amount.

5. Outcome and Relief

The Labour Court dismissed the application to review and set aside the arbitration award. However, it substituted paragraph 4.1.2 of the award, replacing it with an order that the applicant pay the first respondent compensation of R192 000.00, being the equivalent of 12 months’ remuneration calculated at the rate of R16 000.00 per month (the employee’s remuneration at the time of dismissal), with commission excluded.

The court made no order as to costs. The order did not separately address the requested stay of enforcement pending review in its final terms.

Cases Cited

No cases were cited in the judgment.

Legislation Cited

Labour Relations Act 66 of 1995, section 145.

Labour Relations Act 66 of 1995, section 145(3).

Labour Relations Act 66 of 1995, Schedule 8 item 9(b)(ii).

Labour Relations Act 66 of 1995, section 197.

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The Labour Court held that the commissioner’s findings that the dismissal was substantively unfair and procedurally unfair were not reviewable on the grounds advanced. In particular, the court accepted that the employee was not shown to have been trained to meet newly imposed computer-based reporting requirements, and that she therefore had not been given a fair opportunity to meet the standard as contemplated in Schedule 8.

The court further held that the disciplinary process was procedurally unfair because the employer failed to provide the employee with relevant documents in advance despite request, provided a bundle only during the hearing, and required her to proceed immediately without time to prepare; the refusal of a postponement in that context rendered the proceedings unfair.

The court held, however, that the commissioner erred in including commission in the remuneration used to calculate compensation, and also erred in her articulation of section 197 insofar as she treated it as prohibiting any unilateral changes to terms and conditions. The court substituted the compensation order accordingly, while otherwise leaving the award intact and dismissing the review.

LEGAL PRINCIPLES

The judgment applied the principle that, in cases of dismissal for poor work performance, fairness requires consideration of whether the employee was afforded a fair opportunity to meet the required standard, as reflected in Schedule 8 item 9(b)(ii) of the LRA. Where performance expectations change (such as through the introduction of computer-based reporting), the absence of evidence of enabling measures (such as training) may support a conclusion of substantive unfairness.

The judgment also applied the principle that procedural fairness in disciplinary proceedings is undermined where an employee is denied a reasonable opportunity to prepare. Where an employer intends to rely on documentary material to prove allegations, the employee’s receipt of those documents only during the hearing, coupled with a refusal of postponement, may render the process procedurally unfair.

In relation to section 197 of the LRA, the court applied the principle that a transferee employer may not make substantial unilateral changes to transferred employees’ terms and conditions, and that section 197 does not necessarily preclude any unilateral change whatsoever. Whether a particular change is substantial requires an evaluative assessment on the circumstances identified by the court.

Finally, the judgment illustrates that, even where a review application is dismissed in substance, the Labour Court may substitute part of an arbitration award where it finds a material error in a discrete aspect of the remedy, such as the calculation basis for compensation.