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[2011] ZALCCT 24
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Weber v Ordertalk SA (Pty) Ltd (C945/2009) [2011] ZALCCT 24 (1 September 2011)
GUSH J
IN THE LABOUR COURT OF SOUTH AFRICA
(HELD AT CAPE TOWN)
Reportable
Case Number: C945/2009
In
the matter between:
WERNER
WEBER
…..........................................................................................
Applicant
and
ORDERTALK
S A (PTY) LTD
…....................................................................
Respondent
Date of Hearing: 2 August 2011
Date of Judgment: September 2011
JUDGMENT
GUSH
J
The applicant in this matter seeks an order declaring
his dismissal by the respondent to have been substantively and
procedurally
unfair and accordingly that the respondent be ordered
to compensate him in an amount equivalent to 12 months compensation
and
costs.
The respondent is a software service provider which, at
the time of the applicant’s dismissal, developed and provided
software
services to an associated company based in the USA viz.
orderTalk Incorporated (USA). On 1st August 2008, the applicant was
employed
as “senior NET developer” responsible for the
development and enhancement of the respondent’s core product
and at the end of September 2008, the applicant was appointed to
“head up” the development department of the respondent.
On 1st September 2009, the applicant was given notice of his
dismissal which was to take effect on 30
th
September
2009. At the time of his dismissal, the applicant was earning an
amount of R61,500 per month.
A Mr. Andrew Meeding, the then respondent’s chief
financial and operating officer, gave evidence on behalf of the
respondent.
He explained that as a result of a decision made by “the
board of directors” of orderTalk Incorporated (USA) “to
close the South African development aspect”, the applicant’s
position with the respondent became redundant. On 27
th
August 2009, the head of technology of orderTalk Incorporated (USA),
a Mr John Hempe, had phoned the applicant to advise him
of the
intention to retrench him.
Later, the same day, Meeding had called the applicant
to his office to speak to him. His evidence was that he told the
applicant
he was to be made redundant and handed him a letter headed
“Operational requirements – possible termination of
services”
1
which purported to be “in compliance with the
Labour Relations Act and the Code of Good Practice”. The
letter stated
inter alia
that
the respondent was required to consult with the applicant regarding
the possible termination of his services and invited
him to make
written submissions by 31
st
August 2009 and to “revert by 12 noon on 31
st
August 2009 to the Chief Operating Officer
whether
you require a further consultation
”
.(my
emphasis). The final paragraph of the letter recorded that the
applicant was “required”
not only
to consult the respondent but also “make any
representations about any issues you wish to discuss.”
Meeding confirmed that the applicant accepted the
invitation and duly complied and had made written representations. A
Mr. P J
Eldon, the respondent’s chief executive officer, had
replied to the applicant’s representations in a letter dated
1
st
September
2009.
Neither Meeding nor Eldon consulted any further with
the applicant. Meeding handed the reply by Eldon and the letter
headed “Notice
of termination of employment” to the
applicant on 1
st
September 2009. The respondent according
to Meeding didn’t see any option other than to cut costs and
retrench the applicant.
The applicant’s evidence was that he had been
phoned by Hempe on 27
th
August
2009, a Thursday, and had been told in a short conversation that he,
the applicant, was to be retrenched as the company
intended moving
the development function back to the USA. The applicant had
requested a short break to gather his thoughts and
phoned Hempe
back. The latter conversation was recorded by the applicant, a
recording which he later transcribed and which was
annexed to his
statement of claim.
2
During the telephone conversation, Hempe advised the
applicant that two or three days previously, the board had decided
to retrench
the applicant. The reason according to Hempe was “the
board ... has decided that moving the development to the US was a
good thing.”
3
Later the same day he had met with Meeding. With
Meeding’s consent the applicant also recorded this
conversation and subsequently
transcribed it. The transcript, the
accuracy of which was not disputed by the respondent, reflects
inter
alia
the following exchange:
“
Andrew [Meeding]: Ya look all I got is a
letter informing you of effectively in official terms it is the
proposal for your retrenchment”
Werner [applicant]: “But the decision has been made already so
it, the way John [Hempe] put is that I’ve been retrenched,
we’re just going through the motions.”
Andrew: “The Company has decided that we want to, yes. That is
the decision.”
Werner: “Ok”
Andrew: You know HR people will cloud it all different of words, the
decision has been made by senior members of the company that
this is
what they want to do. It’s not fait accompli because HR process
is the HR process which they have to follow.”
4
At the conclusion of the meeting, Meeding handed the
applicant the “Operational requirements – possible
termination
of services” letter and confirmed that the
applicant was to make his submissions by 31
st
August
2009, the following Monday. This letter records
inter alia
:
“
...
we
are moving the whole development function to the US and will no
longer be running it from South Africa. As you are aware an IT
head
has been employed for this function and John Hempe will be managing
the function from the US into the future.”(my emphasis)
The applicant prepared and submitted lengthy
representations in response to the invitation to consult and in the
covering letter
to his submissions recorded the following:
“
Please find with this letter my written
submission as per the labour relations act of 1995. I have taken
great care and time putting
my thoughts into these submissions in an
attempt to engage in a meaningful joint consensus seeking process to
either avoid the
dismissals, change the timing of the dismissal or
mitigate the adverse effects on me personally due to the dismissal.
I firmly believe that there are alternative solutions and these are
detailed in my submission. I am eager to consult further with
Ordertalk and the board on these matters at your earliest
convenience.”
The respondent’s reply, which was handed to the
applicant together with his letter of termination, rejects the
applicant’s
submissions essentially on the grounds that the
respondent company and the USA company are two separate entities.
The respondent
specifically records in the document that:
“
There is no contractual or
employer/employee relationship between you and the US company”;
and
“
The issue of the development
in the US vs. South Africa is again not related to the employment
relationship between you and
orderTalk South Africa but is a
decision for orderTalk Inc to make.”
Whilst the letter does not specifically deal with the
applicant’s request to consult further nor expressly refuse
his request
for documentation it is abundantly clear from the letter
that the respondent had no intention whatsoever of providing the
applicant
with any of the information he requested or engage him in
consultation despite the respondents express invitation. This much
is obvious, if only, in that the reply to the applicant’s
submissions was accompanied by the notice of termination of his
employment.
What was clear from the evidence was that the need to
retrench the applicant arose as a result of the decision to move the
development
function performed by the applicant in South Africa to
the USA. The respondent’s case according to their witness
Meeding
was that the decision was simply foisted upon the respondent
and that the respondent was simply reacting to a decision over which
they had no control. The documentary evidence however does not
support Meeding’s version. For example the unchallenged
transcript of the telephone conversation the applicant had with
Hempe reflects that the board only decided that “moving
the
development function to the US was a
good thing
... last
week” and that the decision was made to retrench the applicant
“... like Monday or so” and the so-called
section 189(3)
letter states “
we
are moving the whole development
function to the US and will no longer be running it from South
Africa.” (my emphasis)
Suffice to say that what is clear is that a decision
was made by the respondent and its associated company to move the
development
function to the USA and therefore the respondent decided
that it was necessary to dismiss the applicant. as a consequence
thereof
in the guise of a retrenchment. Having so decided the
respondent then set about dismissing the applicant for operational
reasons.
The futile, if not somewhat contemptuous attempts at fairly
complying with the requisite procedures as set out in the Labour
Relations Act were neither fair nor compliant.
It was suggested that the primary operational
requirement which necessitated the retrenchment was financial. It
may well have
been, but the respondent certainly made no attempt
whatsoever to provide any proof or detail at all justifying the
decision.
Most alarming however was the respondent’s indecent
haste in dismissing the applicant and its inexplicable ignoring of
its own invitation to the applicant to consult on the decision to
dismiss him.
All these matters simply confirm that a decision was
made to move the whole development function to the US and as a
consequence
dismiss the person responsible for the development
employed in South Africa, viz the applicant and that having so
decided that
is what happened.
Section 188(1) of the Labour Relations Act
5
prescribes that a dismissal will be unfair if the
employer fails to prove that the reason for the dismissal is a fair
reason based
on the employer’s operational requirements and
that it was affected in accordance with a fair procedure.
Dealing first with the requirements that the reason
must be a fair reason, it is so that whilst the definition of
operational
requirements viz. “requirements based on the
economic technological structural or similar needs of an employer”
is
extremely wide, the onus rests firmly on the shoulders of the
employer to prove that the dismissal was for a fair reason. In
CWIU
v Algorax (Pty) Ltd,
6
the court considered the proposition that a court
should not criticise an employer’s reasoning behind the
decision, or need,
to retrench. The court, however, concluded that
the proposition is not absolute.
7
In
BMD Knitting Mills (Pty) Ltd
v SACTWU
8
the test to determine the substantive fairness of a
dismissal for operational requirements was enunciated as follows
“
The starting-point is whether there is a
commercial rationale for the decision. But rather that take such
justification at face
value,
a court is
entitled to examine whether the particular decision has been
taken in a manner which is also fair to
the affected party
, namely the
employees to be retrenched. To this extent the court is required to
enquire as to whether a reasonable basis exists
on which the
decision, including the proposed manner, to dismiss for operational
requirements is predicated. Viewed accordingly,
the test becomes less
deferential and the court is entitled to examine the content of the
reasons given by the employer ... Fairness
not correctness is the
mandated test”
9
(my emphasis)
Accordingly, in determining whether there was a fair
reason, the respondent bears the onus of proving not only that there
was
a fair reason, based on its operational requirements to dismiss
the applicant but that the manner in which the decision is made
is
fair. That requires more than simply stating that a decision has
been made which made the applicant redundant and/or that
it was
necessary to cut costs. Prove means to establish or demonstrate that
there was a fair reason by leading evidence.
When faced with a challenge to the substantive fairness
of a retrenchment dismissal, the employer is obliged to establish
not
only that there was a fair reason, based on its operational
requirements for the dismissal but that the reason existed
at
the time of the dismissal.
10
It is for that very reason that the LRA requires an
employer not only to engage the employees who are likely to be
affected in
consultation but to disclose sufficient information to
the employee to enable the employee to participate “meaningfully”
in the process.
11
The consultation, which should be a “meaningful
joint consensus-seeking process”,
12
is designed to allow the affected employees an
opportunity to consult with the employer and to make proposals to
avoid the dismissal.
Where, as is the case in this matter, the
respondent simply failed to provide sufficient information or
dismissed the applicant’s
request for information and ignored
the applicant’s request to consult, the applicant was then
rendered helpless in the
process. As the applicant was not in
possession of the information he required nor was he allowed to
properly consult at the
time he was retrenched, it cannot be said
that the dismissal was substantively fair in that is not possible to
assess the fairness
of the applicant’s reason to dismiss at
the time the decision was made.
The respondent elected to call only Meeding to give
evidence to establish that the reason for the dismissal was a fair
reason.
His evidence however was of little assistance. In so far as
the reason for the dismissal was financial, Meeding conceded in his
evidence that the respondent was sound “moneywise but not
cash-wise”. Conspicuous by its absence was any documentary
evidence justifying the decision made to justify the cost savings or
the detail of the supposed restructuring and or savings.
In addition to the supposed financial reasons,
Meeding’s evidence was that it was the USA company that had
decided to close
the South African “development aspect”
and that therefore the respondent couldn’t afford the
applicant. The
pleadings too, suggested that the decision was
foisted upon the respondent as a result of a decision made by a
separate USA entity.
The transcript of the conversations the
applicant had with Hempe and Meeding and the so-called letter
section 189 letter, however,
tell a different story. The reason for
the redundancy according to Hempe was that the ubiquitous “Board”
as he referred
to it, or “we”, as Meeding described it
in the letter, had decided to move the development function to the
USA from
South Africa. The record of the Hempe conversation begs the
question that if he was employed by a separate entity why was he
tasked with advising the applicant of his retrenchment.
The reasons given in the letter to the applicant at the
time he was invited to consult were that the respondent was
restructuring
as sales had not grown as expected and that it was
necessary to cut costs.
Given the paucity of evidence surrounding, and the
clear contradiction regarding quite who was responsible, for the
decision to
move the development function and given the absence of
any meaningful consultation, I am not satisfied that the respondent
has
established a fair reason for the dismissal of the applicant.
The second requirement is that the dismissal must be
effected in accordance with a fair procedure. Section 189 of the Act
specifically
prescribes the procedure to be followed. The employer,
when it contemplates dismissing an employee for operational
requirements
it is obliged to consult with the employee likely to be
affected. The Act further stipulates that these consultations must
be
meaningful joint consensus seeking process during which the
parties must endeavour to reach consensus. Additional requirements
are that the employer discloses all relevant information. Failure to
do so on the part of the employer will inevitably result
in the
dismissal being procedurally unfair.
13
It is abundantly clear that the respondent neither
intended to nor did it engage the applicant in meaningful consensus
seeking
consultation. It invited the applicant to make
representations and somewhat startlingly given its subsequent
conduct advised
the applicant that he was, by virtue of the
provisions of the labour relations act “required to consult”
with it.
The applicant accepted the invitation not only to make
representations but specifically and eagerly requested the
opportunity
to consult. All he received in return was a reply to his
submissions and a letter of termination of his services delivered
simultaneously.
The respondent’s attitude to compliance with
the requirement to meaningfully consult is best described by Meeding
when
during his meeting with the applicant he conceded that the
decision to retrench the applicant had been made but advised the
applicant
“
You know HR people will cloud it all
different of words, the decision has been made by senior members of
the company that this is
what they want to do. It’s not fait
accompli because HR process is the HR process which they have to
follow.”
There can be no doubt whatsoever that the respondent’s
dismissal of the applicant was not in accordance with a fair
procedure.
In circumstances where an employee is retrenched and
the employer is unable to show that the dismissal was for a fair
reason reinstatement
is the appropriate remedy. The applicant did
not seek reinstatement. The applicant seeks only compensation.
What remains therefore is to consider the amount of
that compensation. The applicant seeks compensation in an amount
equivalent
to 12 months remuneration. The applicant’s claim
for compensation was based on his evidence was that he was
unemployed
for a period for a period of three months following his
retrenchment whereafter whilst he had obtained other employment it
was
at a substantially reduced salary. This evidence was not
challenged by the respondent.
The principle applicable to
compensation was
enunciated
in
Ferodo (Pty) Ltd V De Ruiter
14
where the court held
“
In my view the correct approach to be
adopted is that to be found in English law, namely that the basic
principle must be that an
unfairly dismissed employee is to be
compensated for the financial loss caused by the decision to dismiss
him”
.
15
This approach was endorsed in the matter of
Le Monde
Luggage CC t/a Pakwells Petje v Dunn NO & Others
where the
court held as follows:
The compensation which must be made to the wronged party is a payment
to offset the financial loss which has resulted from a wrongful
act.
The primary enquiry for a court is to determine the extent of that
loss, taking into account the nature of the unfair dismissal
and
hence the scope of the wrongful act on the part of the employer. This
court has been careful to ensure that the purpose of
the compensation
is to make good the employee's loss and not to punish the employer.
See M S M Brassey
Commentary on the Labour Relations Act
A8-155;
also
Ferodo (Pty) Ltd v De Ruiter
(1993) 14 ILJ 974 (LAC). In
my view, an award of compensation of 12 months is not punitive but is
clearly justifiable on the basis
of the nature of the wrongful act
committed by Mrs Petje which was the key event which gave rise to the
unfair dismissal. As noted,
an assault upon an employee is an
egregiously wrongful act.
16
In the circumstances, taking into the financial loss
the applicant suffered as a result of his unfair dismissal, i am of
the view
that the appropriate compensation to which the applicant is
entitled is an amount equivalent to nine month’s salary.
As regards costs there is no reason in fairness why in
this matter costs should not follow the result.
I therefore make the following order:
The applicants dismissal by the respondent was
substantively and procedurally unfair;
The respondent is ordered to pay the applicant
compensation in an amount equivalent to nine months salary;
The respondent is to pay the applicant’s costs.
‘
_________________________
Gush J
Appearances:
For the Applicant: Adv R Kujawa instructed by Ward, Ward
and Pienaar Attorneys.
For the Respondent: C J Geldenhuys of Geldenhuys CJ@Law
Inc.
1
Page
29 of the paginated pleadings.
2
Transcript:
pages 17 to 20 of the paginated pleadings. The respondent had
initially pleaded in limine that the recordings of the
conversations
with Hempe and Meeding were unlawful and accordingly that they
should be struck out. At the commencement of the
trial the
respondent withdrew the point in limine and did not object to the
transcripts of these conversations which were accordingly
dealt with
in the same manner as the other documents.
3
Transcript:
page 18 of the paginated pleadings.
4
Transcript:
page 24 paginated pleadings
5
Act
number 66 of 1995.
6
(2003)
24 ILJ 1917 (LAC).
7
Ibid
a
t page 1939 F-G para 69.
8
(2001)
22 ILJ 2264 (LAC).
9
Ibid
at
At pages 2269 and 2270 I-B para 19.
10
Fidelity
Cash Management Service v CCMA and Others
[2008]
3 BLLR 197
(LAC) at paragraph 32.
11
Section
189(3) of the LRA.
12
Section
189(2) of the LRA.
13
See
Johnson and Johnson (Pty) Ltd v CWIU
(1999) 20 ILJ 89 LAC. This principle has been
followed in numerous subsequent decisions.
14
(1993)
14 ILJ 974 (LAC).
15
Ibid
at page 981 C.
16
(2007)
28 ILJ 2238 (LAC) at paragraphs 30-31.
13