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[2011] ZALCD 43
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Wallis v Schmidt Industrials (Pty) Ltd (D35/2008) [2011] ZALCD 43 (20 October 2011)
IN
THE LABOUR COURT OF SOUTH AFRICA
(HELD
AT DURBAN)
NOT
REPORTABLE
CASE
NUMBER: D35/2008
In
the matter between:
LES
WALLIS
Applicant
and
SCHMIDT
INDUSTRIALS (PTY)
LTD Respondent
Date
of Hearing:
21
– 23 and 29 March 2011
Date
of Judgment:
20 October 2011
JUDGMENT
GUSH
J
1.
The applicant who was employed by the
respondent as a manager of the respondent's RELI-ON product
department was retrenched by the
respondent on 30 September 2007.
2.
The
applicant, averring that the respondent did not comply with the
provisions of section 189 of the Labour Relations of Act of
1995
(LRA)
[1]
applies to be
reinstated retrospectively alternatively compensated which
compensation was to include six months notice pay.
3.
The relevant background to the matter is as
follows:
3.1.
In October 2003, the applicant was
appointed by the respondent to project manage the construction of an
additional factory for the
respondent. This position was
initially a part time position (two weeks per month).
3.2.
When the factory project was completed, the
applicant was permanently employed as the manager of the RELI-ON
factory which was responsible
essentially for the manufacture of
garden tools. The respondent in addition to the RELI-ON factory
operated a second factory
which was largely involved in the
manufacture of toolboxes.
3.3.
The respondent company had been established
by a Mr. H W Schmidt who had died on 25
th
February 2007. The founder’s
son Mr W Schmidt who was also the manager of the toolbox factory
succeeded his father as
Managing director of the respondent.
3.4.
On 23
rd
April 2007, the respondent’s financial director Mr. Graham Dow
approached the applicant informally advising him that the
respondent
was looking to cut costs and that his cost to company was one of the
issues the respondent which was the subject of
consideration. There
was some dispute between the applicant and Dow regarding the actual
words used during this exchange.
The applicant averred that he
had made a contemporaneous note regarding this conversation which he
included in his bundle
of documents which recorded that he had been
told by Dow that his [the applicant’s] cost was too high and
that basically
he “needed to go”. I shall return to
this issue below. Suffice to say that the applicant indicated to Dow
that
he would respond in writing which he did by letter on 4th May
2007.
3.5.
On 30
th
May 2007, W Schmidt addressed a formal letter to the applicant headed
CONSULTATION IN TERMS OF
SECTION 189
OF
THE
LABOUR RELATIONS ACT 1995
.
This
letter advised the applicant that the respondent was experiencing
considerable financial difficulties, explained what efforts
had been
made to reduce costs and pointed out that the respondent was
concerned about the staff costs and the performance
of the RELI-ON
factory. The letter went on to indicate that the respondent was
particularly concerned at the cost of employing
a qualified engineer
[the applicant] at a cost of approximately 43% of the RELI-ON
departments salary/wage bill.. W It further
contained an invitation
to the applicant to consult regarding the possible retrenchment of
the applicant.
3.6.
This letter set in motion a consultation
process which included a number of consultations and the exchange of
correspondence and
submissions.
3.7.
The first meeting took place on 1
st
June 2007 followed by further meetings on 6
th
June 2007, 20
th
August 2007 and 22
nd
August 2007. The applicant recorded these meetings with the
respondent’s consent and transcribed the record of each
meeting
which formed part of his bundle of documents.
3.8.
The exchange of correspondence and
documents relevant to the consultation process included the
applicants letters and submissions
of 30
th
May 2007, 6
th
June 2007, 21
st
August 2007, 23
rd
August 2007 and 24
th
August 2007; the respondents replies of 3
rd
August 2007, 24
th
August 2007 and 31
st
August 2007.
3.9.
The matter was finalised in the
respondent’s second letter of 31
st
August 2007 in which letter the respondent gave the applicant notice
of the termination of his employment with effect from 30
th
September 2007.
4.
In his statement of claim, the applicant
avers that the respondent “failed to consult with him in terms
of the provisions
of section 189 of the Labour Relations of Act of
1995 and labour relations norm (sic) and that the applicants
dismissal for (sic)
the respondent operational requirements was
substantively unfair” and as a result seeks reinstatement
alternatively compensation
"which is to include six months
notice".
5.
The parties concluded a pre-trial minute
which minute
inter alia
listed the facts which were common cause, the facts which were in
dispute and recorded the agreement that the respondent would
start.
The pre-trial minute records that the issue to be decided by
the court was whether the termination of the applicant's
employment
by the respondent was procedurally and/or substantively unfair.
6.
The respondent having agreed to start
commenced by leading evidence of Mr Graham Dow, followed by Mr
Wolfgang Schmidt. The
applicant gave evidence himself and
called no other witnesses.
7.
Mr Dow in his evidence explained the
history of the respondent and the events leading up to the decision
to engage the applicant
in consultation over his possible
retrenchment. Dow explained with reference to financial
statements and other supporting
documentation that the respondent had
serious financial problems and the steps it had and was taking to
reduce its costs.
His evidence was that the applicant’s
salary constituted 43% of the employee costs of RELI-ON and he
detailed the extent
of the production and the number of employees in
that section. He, with reference to the bundles of documents,
explained the respondent’s
financial predicament and what the
operational requirements were that necessitated the retrenchment of
the applicant.
8.
It was clear from Dow’s evidence that
he was acutely aware of the respondent’s financial difficulties
and that he had
introduced a number of measures to cut costs and he
explained in detail why and on what basis he believed it was
necessary to have
retrenched the applicant and why he believed
that the alternatives suggested by the applicant were not feasible.
9.
Dow, in particular, explained that he
had considered the submissions the applicant had made during the
consultation process
regarding alternatives to his retrenchment and
that he was of the opinion that the applicant had not “come up
with
anything that constituted a viable alternative” to the
applicant’s retrenchment. Dow also confirmed that the
other directors of the respondent (viz: W Schmidt and a Ms Meirelles)
had also considered all the submissions and proposals made
by the
applicant before they decided to terminate his services.
10.
Dow was patently an honest witness. There
are a number of issues which demonstrated Dow’s honesty in
contrast with that
of the applicant. An example of this was the
dispute regarding what Dow had allegedly said to the applicant on the
23
rd
April 2007. There was no suggestion that Dow in any way was
prejudiced against the applicant or that he was not honest in
his
evidence. He explained that he had grown up and gone to school
with the applicant and had originally recommended the
applicant for
employment. Dowconfirmed that he had met with the applicant on 23
rd
April 2007 to advise him informally of the possibility of the
applicant retrenchment. This he explained was to warn him so
that he could prepare himself.
11.
The
applicant in both his pleadings and his evidence made much of Dow’s
apparent statement to him that “basically he
should go”
which he supposedly recorded at the time
[2]
.
As set out above, Dow’s version and the applicant’s
version of what was said differ. What is clear however
is that,
according to the note, the applicant indicated that he would respond
in writing to Dow. This he did on 4
th
May 2007. Nowhere in the letter of 4
th
May is there any mention of Dow having told the applicant that he
should go
[3]
. It is
inconceivable that in the circumstances the applicant would not have
mentioned this in his response dated 4
th
May to the meeting with Dow on 23
rd
April 2007.
12.
In his evidence Dow explained, in respect
of the applicant’s remuneration exactly what the applicant was
and had been paid
during and at the date of termination of his
employment. Despite this it was specifically put to Dow that the
applicant had received
the remuneration as set out in his pleadings.
As it transpired the applicant admitted during his evidence that he
had never received
the amounts referred to in his pleadings and that
they were merely “an expectation” I deal with this issue
in more
detail below.
13.
W Schmidt was the respondent’s second
witness. He is the son of the founder of the respondent and was
the managing director
at the time of the applicant’s
retrenchment. Schmidt in his evidence explained what had
transpired during the consultation
process. The meetings that
Schmidt had had with the applicant had as explained above been
recorded and transcribed. Schmidt’s
evidence supported
the evidence given by Dow and in particular that the decision to
retrench the applicant was made by the directors
together. He
conceded that he had sought legal advice prior to proceeding with the
retrenchment and consultation process
and that he did not like the
applicant. His evidence however clearly established that the
consultation process was conducted in
good faith and that the
applicant was given every opportunity to make representations
regarding alternatives to his retrenchment
Schmidt was
undoubtedly however an honest witness.
14.
Unfortunately, the same cannot be said of
the applicant. During his evidence, he repeatedly sought to
misinterpret or obfuscate
the facts in the furtherance of his case
and during cross-examination was repeatedly evasive and disingenuous
in his answers. What
was abundantly clear from his evidence and
the documents was that the applicant tried his best to derail or
delay the process.
This is perhaps understandable when an
employee is placed in the position the applicant found himself. The
LRA however
enjoins
both
parties to engage in meaningful joint consensus seeking process.
15.
Of particular concern was the relief
regarding his remuneration sought by the applicant in his pleadings,
repeated in the pre-trial
minute and his evidence in this regard..
The relief claimed by the applicant was retrospective
reinstatement. In the
pleadings and the pre-trial minute, the
applicant specifically records his annual remuneration as at the date
of the termination
of his employment as being R912,055.34 made up as
follows: a salary of R588,000, a 13
th
cheque of R49,000, a company car valued at R120,000, medical aid
valued at R83,604 and pension contributions in the sum of R71,151.34.
In addition, the applicant claimed an amount equal to 6 months
remuneration in lieu of notice pay which he claimed
to have
been a term and condition of his employment.
16.
This version of his income was put to the
respondent’s witnesses. The documentation however which
the applicant himself
put up suggests something completely different.
The applicant maintained that he had reached an agreement with
Mr H W Schmidt
the then managing director of the respondent. Mr
Schmidt who fortuitously for the applicant had died had according to
the
applicant agreed to pay the applicant in addition to his salary
the benefits set out above. Unfortunately for the applicant,
this version falls to be considered in light of the following:
16.1.
The
applicant attached a copy of a note he wrote to H W Schmidt on 22
nd
June 2005 when Schmidt supposedly agreed to pay him the benefits in
addition to his salary. The note reads: “following the
discussion the other day concerning future employment,
I
would be happy to come to an acceptable arrangement.
I
would like to discuss this matter further
regards”
[4]
. (my emphasis)
The applicant’s evidence under cross-examination was that this
constituted acceptance of the benefits he now
claimed. This was
despite the uncontradicted earlier evidence of Dow that the
applicant’s total remuneration at the
time of his dismissal was
R49,000 per month and that he had never received any of the benefits
he claimed.
16.2.
In his letter dated 4 May 2007 addressed to
Dow, the applicant recorded the following "during those
discussions, Mr Schmidt
said that in determining a salary package
that included benefits, he needed to take into consideration the
packages of other senior
employees with long service. He said
that this needed his close attention but that he was in dispute with
Gedore and was
very busy with preparations, as intended disposing of
the Gedore shares. We agreed that I would be employed and he asked if
it
would be acceptable if we
finalise
the benefits package
once the Gedore
matter had been settled”( my emphasis).
16.3.
In his statement of claim the applicant
records under the heading statement of facts that will be relied upon
that his annual remuneration
was R912,055.34 and that he was subject
to a notice period of six calendar months. In the pre-trial
minute, the applicant
accordance that the annual remuneration at the
date of his termination was as set out in paragraph 14 above.
16.4.
Somewhat startlingly given the above the
applicant conceded during his evidence not only that he had never
received the income he
claimed to have received in his pleadings but
that he had never agreed that he would receive such benefits. He
stated that he merely
had an expectation to receive the benefits
17.
As far as the facts in dispute are
concerned as recorded in the pre-trial minute, they can be divided
into two basic issues namely:
17.1.
Firstly: a dispute concerning the
consultation process and whether the termination was for valid and
substantial reasons based on
valid and substantial grounds.
17.2.
Secondly: a dispute over the period
during which the applicant was employed, the capacity in which he was
employed; the terms and
conditions of his employment and his
remuneration at the time of his retrenchment.
I
have carefully considered and taken into account the record of the
consultation process and the evidence of Dow and W Schmidt.
I
have no doubt that the procedure adopted by the respondent was fair
and reasonable. There is no evidence to suggest
that the
directors of the respondent who conducted the process did not act
properly and honestly in their dealings with the applicant.
Despite
the applicant’s persistent argument that the respondent hadn’t
taken into account his submissions during this
evidence Schmidt
handed in two emails, dated 23
rd
August and 27
th
August 2007 (admitted by consent), that clearly demonstrated that the
respondent’s directors had in fact read and considered
all the
applicant’s submissions. . The evidence clearly
establishes that the applicant was given a number of
opportunities to
make submissions which he did. The evidence established that
the respondent gave due consideration to the
proposals before
deciding to terminate the applicant’s employment for
operational reasons..
I
am satisfied that the procedure adopted by the applicant was fair and
complied with the provisions of section 189 of the LRA.
18.
This leads to the enquiry as to whether
termination was for valid and substantive reasons based on valid and
substantive grounds.
I have to a large extent dealt with the
substantive reasons why the respondent dismissed the applicant above.
It is clear
from the evidence that the applicant was not
convinced that it was necessary to retrench him and that measures
could have been
taken to avoid his retrenchment without jeopardising
the continued operation of the respondent.
19.
Operational
requirements are defined in the LRA as “requirements based on
the economic technological structural or similar
needs of an
employer”
[5]
. Whilst
the onus rests firmly on the shoulders of the employer to prove that
the dismissal was for a fair reason, the court
has held that it
should not lightly second guess an employer’s reasoning behind
its decision, or need, to retrench. In
CWIU
v Algorax (Pty) Ltd,
[6]
the court considered this proposition and accepted the proposition
concluded that it 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 than 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]
20.
Accordingly, in determining whether there
was a fair reason, it is necessary to consider the respondent’s
reasons and the
manner in which the decision was made and not simply
defer to the employer’s explanation.. I am satisfied that the
respondent
has explained and established a reasonable basis for its
decision , and that its reasons why it found it necessary to retrench
the applicant were fair and reasonable.
I
am in therefore satisfied that the applicant’s dismissal was
both substantively and procedurally fair.
21.
That being so it is unnecessary to deal
with the second dispute referred to in paragraph 16.2 above.
22.
As regarding costs, I can find no reason in
fairness why costs should not follow the result.
23.
In the circumstances, I make the following
order:
23.1.
The applicant’s claim is dismissed
with costs.
_________________________
Gush
J
Appearances:
For the
Applicant:
Adv M B Pitman instructed by A J prior of Prior and Prior Attorneys.
For
the Respondent:
Adv L C A Winchester SC instructed by G Cummings of JH Nicolson
Stiller and Geshen Attorneys.
[1]
66 of 1995.
[2]
Bundle
of Documents A Page 5.
[3]
Bundle
of Documents A Page 6.
[4]
Bundle
A page 1.
[5]
Section
189.
[6]
(2003)
24 ILJ 1917 (LAC).
[7]
Ibid
at page 1939 F-G para 69.
[8]
(2001)
22 ILJ 2264 (LAC).
[9]
Ibid
at pages 2269 and 2270 I-B paras 19.