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[2011] ZALCD 20
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Solidarity obo Bransby and Others v Debis Fleet Management (D682/02) [2011] ZALCD 20 (20 January 2011)
IN THE LABOUR COURT OF
SOUTH AFRICA
HELD IN DURBAN
Case No. D682/02
Not Reportable
In the matter between:
SOLIDARITY obo G A
BRANSBY
.........................................
1
ST
Applicant
GERALD DOUGLAS FAIRMAN
............................................
2
ND
Applicant
MERVYN GRAHAM HULL
.....................................................
3
RD
Applicant
And
DEBIS FLEET MANAGEMENT
................................................
Respondent
JUDGMENT
____________________________________________________________
Gush J.
The material facts in
this matter are largely not in dispute. The applicants had been
employed by the Department of Post and Telecommunications
on the 2
nd
January 1967, 2
nd
January 1968 and the 3
rd
January 1968 respectively. In 1991
the Department became a limited company, Telkom Ltd.
The applicants were all
members of the Telkom Pension Fund and fell within a group of
employees which was later referred to as
the Telkom Pension Fund
members (TPF).
During March 2000
Telkom and the respondent concluded a
contract in terms of which a division of Telkom, “Fastfleet”,
was sold together
with its assets to the respondent as a going
concern.
The applicants were
all employed in the “Fastfleet” division.
The contract recorded
that the contracts of all the employees of Fastfleet would be
transferred to the respondent on the effective
date
“
...
and that such employees will be employed by the
[respondent]
in
accordance with section 197 of the Labour Relations Act [LRA] on
terms and conditions of employment and employment benefits which
will
be the same as the terms and conditions and employment benefits which
applied immediately prior to the Effective Date”.
1
(
The
effective date of the sale was the 31
st
March
2000.)
It is common cause that
the applicants’ contracts of employment at the time of the
transfer were subject to and included
benefits contained in the
“(Statutes)”.
2
Section 4.7 of the
Statutes provided that if the services of an employee of Telkom were
terminated in certain circumstances set
out below the employee would
be deemed to be a pensioner and would be entitled to those benefits
enjoyed by pensioners. Section
4.7 read as follows:
“
... as a result of the
abolition of his post or a reorganisation of the employer’s
organisation, the following benefits shall
be paid to the member:
...
If the pensionable service of such member is ten
years or longer: an annuity and gratuity calculated as in clause
4.4(1). The
member shall become a pensioner for the purposes of the
Statutes at the date of termination of his services, and shall
become
entitled to benefits and subject to the conditions applicable
to pensioners of the Fund.”
3
One of the benefits to
which pensioners were entitled and therefore members when their
services were terminated in the circumstances
provided for in
section 4.7 of the “Statutes” was the right to continued
membership of the medical aid scheme in
accordance with the Telkom’s
terms and rules as set out in the Telkom Human Resource Manual.
At the time of the time
of the purchase of Fastfleet and thereafter the respondent further
undertook to Telkom that the terms
and conditions applicable to the
employment of the employees would be no less favourable and issued
various statements at in
which statements it inter alia advised the
Telkom employees that they would not lose any employment benefits;
that the respondent
would replicate their pension benefit; that they
would not be in a less favourable position and later that they would
be transferred
into a “ring fenced retirement fund”
which would mirror and preserve their section 4.7 benefits.
During June 2001 the
respondent commenced a retrenchment exercise pursuant to a decision
to outsource the workshop services and
related functions. As the
applicants were employed in the workshop services they were
identified as employees to be retrenched.
The applicants however
fell within a group of employees referred to as the TPF members,
whose employment was subject to the provisions
of the “Statutes”
and in particular section 4.7 thereof. When the respondent reached
agreement regarding the retrenchment
of the affected employees the
agreement specifically excluded the TPF members save for inter alia
the severance pay clause.
4
The agreement also
specifically recorded that the TPF members’ provisional notice
of termination of employment was extended
to the 30
th
November 2001. The end
of November 2001 passed without the applicants’ employment
being terminated.
The respondent had
previously issued “provisional notices of termination of
employment which had been extended from time
to time. The respondent
did not dispute that the applicants’ contracts of employment
required that they be given a “months
notice” and it was
clear from the notices issued by the respondent that it intended to
give the applicants one months notice.
5
On the 4
th
December 2001 the respondent wrote a letter to the applicants
advising them that:
“
...
as the retirement fund members have not been finalised and checked
the provisional notice of termination is hereby extended
to the 31
st
December
2001”
;
(sic) and that
“
Should
an employee have secured a new employment position ... during
December ... we are prepared to waive the months notice period”
.
6
This letter was only
handed to the applicants around the 14
th
December 2001.
On the 31
st
December 2001 the respondent terminated the applicants’
employment and calculated the severance package and payment due
to
them as at the 31
st
December 2001. The amount so
calculated was paid to them some time later in 2002. The applicants
were not afforded the benefit
of continued membership of the medical
aid scheme.
The applicants firstly
disputed that they had been given adequate notice and maintained
that accordingly they remained employees
of the respondent during
January 2002 and that therefore their severance pay and benefits on
termination had been incorrectly
calculated. Their second dispute
concerned the refusal of the respondent to allow them to remain
members of the medical aid scheme
as pensioners.
The parties were at idem
that there are two issues to be decided:
The first issue
involved the termination of the applicants’ employment and
more particularly the date of termination and
the consequences that
would flow from the determination of that date.
The second issue
concerned the section 4.7 benefit. What was the extent of the
liability the respondent assumed for the applicants’
employment benefits when they took transfer of the applicants
contracts of employment and did the respondent specifically assume
the obligation to afford the applicants the benefit of continued
membership of the medical aid scheme post their retrenchment.
The Termination of
the applicants’ employment.
The pertinent facts are:
The applicants’
contracts of employment entitled them to one month’s notice;
The respondent intended
to give the applicants one month’s notice;
The letter giving
notice upon which the respondent relied in terminating their
employment purported to give the applicants “provisional
notice” of the termination of their employment which
apparently from the letter was dependent upon the “
finalisation
of the retirement fund numbers
”
The letter was dated
the 4
th
December 2001 and only delivered on or about
14
th
December 2001;
The respondent
terminated the applicants’ employment on the 31
st
December 2001.
It has been held that an
employer is obliged to give “
clear
and unequivocal
”
notice
of its intention to terminate the contract of employment.
7
Whilst it is so that the
notice upon which the respondent relied was expressly stated to be
“
provisional
” the respondent steadfastly
maintained that it was proper notice and that the applicants could
have been in no doubt as
to the intention of the respondent to
terminate their employment.
Mr Sutherland argued
that the respondent’s provisional notice in September,
extended in October to the end of November and
then again
purportedly extended in a letter dated 4
th
December which was only
delivered on the 14
th
December justified a
conclusion that “
the
fact of termination
[was]
effectively
communicated
”
.
8
Whilst it is difficult
to reconcile this argument with the fact that the reason for
“provisional” nature of the notice
was the outstanding
issues referred to in the notice which had not been resolved the
respondent insisted that it had communicated
its intention and that
it had accordingly terminated the applicants’ employment on
the 31
st
December 2001.
It was the respondent’s
case that the purpose of the letter of dated the 4
th
December 2001 but only delivered on the 14
th
December was
to give the applicants notice of the termination of their employment
on the 31
st
December 2001 and that the respondents acted
accordingly in dismissing them.
It is equally clear that
the respondents intended to give the applicants one months notice
but they did not. The prior provisional
notices that the applicants
would be dismissed had been extended to the 30
th
November
2001, ostensibly by agreement. It is a fact however that the 30
th
November passed and the applicants were not dismissed. The
respondents then purported to once again give the applicants
“provisional”
notice but this time there was no
reprieve.
As far as the required
period of the notice is concerned in Labour and Employment Law the
learned author says:
“
Where
notice is given it must be given so as to expire at the end of one of
the periods contractually stipulated for the payment
of remuneration.
So in the case of a monthly contract ... a month’s notice is to
be given expiring at the end of a month.
... Where notice is given
late it will expire at the end of the end of the following
contractual period” and to give sufficient
and compliant notice
where one months notice is required It is clear that not only must
the employee be left in no doubt as to
the fact that his employment
is to terminate but when. A failure to do so will result in the
notice expiring at the end of the
following month”
.
9
The facts are that the
applicants were entitled to one month’s notice, the respondent
did not give them one months notice
and the termination of the
applicants employment was by the respondent was premature. The
effect of giving notice late is that
the termination of their
employment should have taken place on the 31
st
January
2002 as opposed to the 31
st
December 2001. What that
means is that the applicants’ severance benefits as agreed and
recorded in the “Record of
Agreement” should have been
calculated with effect from the 31
st
January 2002.
An issue arose as to
what the correct amount was in respect of the applicants’
monthly remuneration which should be applied
in the calculation of
the applicants’ severance benefits as at the end of January
2002. Mr Schumann argued that the applicants
would have received an
increase of 5% on the first January 2002 and that according their
remuneration for the purposes of the
calculation should increased
accordingly.
Two issues arise in
respect of this submission:
Firstly the applicants
were required to establish that the respondent did in fact award
all its employees a 5% increase on the
1
st
January 2002
and that they would have been entitled to receive that increase.
The 1
st
applicant was the only witness who in any way
dealt with this issue. The 1
st
applicant’s
evidence was that the 1
st
January was the respondent’s
“
increase day
” and that the applicants believed
that they were entitled to “
the 5% increase which kicked
in on the 1
st
January”.
Save for
this evidence the applicant gave no direct evidence that the
respondent had in fact increased the salaries of all
its employees
by 5% or at all on the 1
st
January 2002 nor that they,
the applicants were contractually entitled to that increase. The
only other references the applicants
made to the 5% increase in
their evidence were in explanation of how an increase of 5% on
their salaries on the 1
st
January 2002 would have
affected the quantum of their severance pay.
Secondly it is highly
improbable, in the absence of any proof of a either a contractual
right to an increase or that the respondent
in fact awarded a 5%
increase, that the respondent would have in the circumstances paid
the applicants an increase in salary
in the last month of their
employment being their notice period. It is unlikely that the
respondent would have been that generous
particularly given that it
at all times that it intended to terminate the applicants’
services on the 31
st
December 2001.
I am not satisfied that
the applicants have established that the respondent did in fact pay
its employees an increase on the 1
st
January 2002 in an
amount of 5% or at all nor that they were contractually entitled to
or would have received an increase. Their
evidence was speculative
rather than based on facts.
B
The section 4.7
benefit.
In order to establish
the terms and conditions of the applicants’ contracts’
of employment and their entitlement to
benefits and the extent to
which the respondent assumed the obligation to afford the applicant
these benefits it is necessary
to consider:
The terms and
conditions of the applicants’ employment (and benefits) that
existed immediately prior to their transfer
to the respondent;
The provisions of
section 197 of the LRA (as at the time of the transfer); and
The undertakings given
by the respondent regarding the applicants terms and conditions of
employment and benefits prior to,
at the time of and subsequent to
their transfer.
The “statutes”
conferred on the applicants a benefit that as members of the Telkom
Pension Fund they were entitled
in the event that their employment
was terminated as the result of the abolition of their post or a
reorganisation of their employer’s
activities to the benefits
applicable to pensioners.
10
What those benefits were
are recorded in the Telkom Human Resource Manual which specifically
deals with medical aid.
Chapter 49 of the Telkom
Human Resource Manual is headed “
Summary of Benefits for
Pensioners and Deceased Employees
”., Under the heading
“
Medical Aid
”, it provides that:
“
Employees
who are members of one of the medical schemes recognised by Telkom
... have the option upon retirement ... to decide whether
they want
to continue membership as pensioners of one of the said schemes...
”
11
The benefit that the
applicants as members of the Telkom Pension Fund enjoyed at the time
of their transfer, therefore, was simply
that if they were
retrenched they would become pensioners and would be treated as if
they had retired and therefore receive the
benefits accruing to
pensioners in accordance with Telkom’s conditions of
employment. Accordingly they were entitled to
“
continue
membership
[of the medical aid scheme]
as pensioners”.
The respondent contended
that this benefit was conferred on the applicants by the Telkom
Pension Fund and specifically by the
“Statutes” or rules
of the pension fund and therefore could not “govern nor
regulate anything other than what
is in the Rules”
.
12
This meant that the only
benefits the applicants were entitled to as deemed pensioners were
those conferred by the pension fund
only. The deeming provision
could not apply for the purposes of any benefit not included in the
pension fund rules.
In addition it was
argued that the benefit provided for in Chapter 49 of the Telkom
Human Resource Manual is headed “
Summary of Benefits for
Pensioners
and Deceased Employees
”
(emphasis added) only applied to retirees and therefore as the
applicants were only deemed to be pensioners they were
not retirees
but retrenchees.
These arguments ignore
the purpose and function of the “Statutes” regarding the
benefits provided for in the Telkom
Human Resource Manual. (Manual).
The Statute specifically provides that the deemed pensioners will be
entitled to the benefits
applicable to Telkom pensioners which
benefits are conferred and regulated by Telkom in the Manual.
There is no reason to
suggest that it was the intention of Telkom to exclude persons in
the position of the applicants from the
medical aid benefits
specifically provided for pensioners in the Manual. The “Statute”
deemed the applicants to be
pensioners specifically for the purpose
of conferring on them the benefits due to pensioners which are
provided for in the Manual.
The respondent recorded
in the agreement for the purchase of Fastfleet that it was taking
transfer of the Telkom employees in
accordance with section 197 of
the LRA. At the time that the respondent acquired Fastfleet, section
197 of the LRA simply provided
that:
“
...
unless
otherwise agreed, all rights and obligations between the old employer
and each employee at the time of the transfer continue
in force as if
they were rights and obligations between the new employer and each
employee...
”
.
13
In the matter of
NEHAWU
v University of Cape Town
14
the court interpreted
section 197 of the LRA as it was before the 2002 amendment:
“
...
the section makes it possible to transfer the business on the basis
that the workers will be part of the transfer. ... The section
makes
a distinction between contracts of employment, on the one hand, and
the rights and obligations that flow from such contracts
on the
other. ‘All the rights and obligations’ must include all
the terms and conditions of the contracts of employment.
... The
section is premised on the continuity of employment of the workers
which is not interrupted by the transfer ... all the
rights and
obligations flowing from employment with the transferring employer
are transferred to the new employer...”
15
The respondent at no
stage advised the applicants that they were to claim their benefits
from the Telkom Pension Fund in terms
of section 4.7, or from Telkom
itself. Instead apart from recording the statutory transfer of “
all
the rights and obligations
” to which the applicants were
entitled, the respondent gave a number of specific undertakings
regarding the benefits that
the applicants enjoyed by virtue of
their employment and consequential membership of the Telkom Pension
fund. These undertaking
were made prior to, at the time of and
subsequent to the transfer of Fastfleet and included:
Recording in the
agreement for the purchase of “Fastfleet” that the
contracts of employment of all the employees
(including the
applicants) would be transferred to it on the same terms and
conditions and “
employment
benefits
”
(emphasis
added) which applied immediately prior to the transfer and that the
terms and conditions would be no less favourable
16
;
Publically announcing
that the erstwhile Telkom employees had the security of knowing
that they would not lose “
any
salary or other employment benefits...
”
17
;
Advising all employees
in a letter dated 4
th
October 2000 that in
respect of their pension fund that the respondent was “replicating”
“their existing benefits”
and that they would not be in
a less favourable position
18
;
Advising the 3
rd
applicant “The
provisions
of section 4.7 of [
the
Statute
]
are exceptional in the retirement benefit industry and, as such you
have been advised that the Daimler Chrysler Pension Fund
is not
prepared to include this provision in its rules. However debis
Fleet Management as your employer is prepared to assume
the
liability that may arise from this provision in respect of
yourself”
19
;
Issuing an email
recording the respondent’s position regarding section 4.7 of
the Statute: “
The
position of the Company on this matter is clear. The provisions of
rule 4.7 have a material adverse financial impact on
the overall
cost of the reorganisation that is taking place within the
Workshops. ... nor does the company seek to avoid the
consequences
of the defined benefit fund’s statutes
”
20
;
Advising the applicants
that their benefits were being replicated and that they would not
be in a less favourable position and
that they would be transferred
into a “ring fenced retirement fund” which would mirror
their section 4.7 benefits
and preserve their benefits and that the
provisions of section 4.7 would be honoured.
There is no doubt that
the respondent was well aware of the implications of section 4.7
band the benefits it bestowed on the applicants.
The clear intention
expressed by the respondent prior to dismissing the applicants was
that, albeit reluctantly, the respondent
would give effect to the
benefits to which the applicants were entitled by virtue of the
provisions of section 4.7 of the “Statutes”.
It is clear that the
respondent at very least held out to the applicants that it intended
honouring the benefit to which the applicants
were entitled by
virtue of section 4.7.
The specific benefit
that the applicants now seek is that their entitlement to continued
membership of the medical aid scheme
be given effect to.
It became clear during
the evidence that the applicants were unable to quantify any claim
for damages or past expenses arising
arose from the fact that they
were not retained as members of their medical aid scheme. Mr
Schumann conceded in those circumstances
the applicants’ were
only entitled to an order directing that the respondent place them
on an appropriate Telkom approved
medical aid scheme and to make
such contributions as required in accordance with rules applicable
to Telkom pensioners, subject
naturally to the applicants complying
with their concomitant obligations and that this could only be given
effct to from the
date of judgment.
I accordingly give
judgement in favour of the applicants and make the following order:
The termination of the
applicants’ employment on the 31
st
December 2001
pursuant to the notice given by the respondent by letter dated 4
th
December 2001 and handed to the applicants on or about the 14
th
December was premature. In the result the termination of the
applicants’ employment should have taken effect on the 31
st
January 2002 as opposed to the 31
st
December 2001.
Accordingly the
determination of the applicants’ severance and termination
benefits should have been calculated based
on the applicants’
contracts of employment being terminated on the 31
st
January 2002.
The respondent is
ordered to recalculate, in consultation with the applicants, the
severance and termination benefits paid to
the applicants based on
the 31
st
January 2002 as the termination date; and to
pay to the applicants the difference within one month of the date
of this judgement.
The applicants are
entitled, in accordance with the provisions of section 4.7 of the
Statutes of the Telkom Pension Fund read
with section 49.5 of
Chapter 49 (Summary of Benefits for Pensioners and Deceased
Employees: Medical Aid), of the Telkom Human
Resource Manual is
headed “., Under the heading to become members of a medical
scheme recognised by Telkom.
The respondent is
ordered to take such steps as are necessary to enrol the applicants
as members of a Telkom approved medical
aid scheme within one month
of the date of this judgment and to make such contributions as are
required in accordance with
the rules applicable to Telkom
pensioners; subject to the applicants complying with their
concomitant obligations.
In the event that the
parties are unable to agree on the calculation of the severance and
termination benefits severance the
application of the order
pertaining to the applicants’ membership of the medical aid
the parties shall be entitled to
approach the court on basis of a
stated case in order that the dispute be resolved.
The respondent is
ordered to pay the applicants costs confined only to the cost of
the trial only.
____________
GUSH J
Date of hearing : 6, 7
and 8 September 2010
Date of judgment : 20
January 2011
Appearances
FOR THE 1
ST
APPLICANT : D GROENEWALD of
SOLIDARITY
FOR THE 2
nd
&
3
rd
APPLICANTS : Advocate P Schumann
Instructed by : Dass
Vedan and Partners.
FOR THE RESPONDENT :
Advocate R Sutherland
Instructed by : PG Bam
Attorneys.
1
The
“Sale of Business Agreement”. Bundle A page 21.
2
The
“Statutes” were promulgated in Government Gazette No.
13543 dated the 27
th
September 1991. Bundle A pages 137/8
3
Clause
4.7(ii) of the “Statutes” Bundle A page 138.
4
“
Record
of Agreement” Bundle A pages 93A and following and page 94 and
following.
5
See
inter alia the letter in Bundle A at page 128.
6
Bundle
A of documents at page 128.
7
1992
(13) ILJ 1154 D
8
Respondent’s
h
eads of argument para 5.1
9
Labour
and Employment Law; MJD Wallis Chapter 5 para 33; Honono v
Willowvale Bantu School Board & ano 1961 (4) AD; and SA
Music
Rights Organisation Ltd v Mphatsoe
[2009] JOL 23476
(LC)
10
Section
4.7(ii) of the “Statutes”. Bundle A page 138. The
applicants all had in excess of ten years pensionable service
which
was also a requirement.
11
Section
49.5. page 2 of Bundle A.
12
Respondent’s
heads of argument para 13
13
Section
197 (2)(a) prior to the amendment in 2002 by section 49 of Act 12 of
2002.
14
(2003)24
ILJ 95 (CC)
15
At
pages 121 - 122
16
Bundle
A page 21
17
Bundle
B page 1
18
Annexure
E
19
Bundle
B page 93
20
Bundle
B page 117