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[2013] ZALCJHB 101
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National Union of Mineworkers and Others v Assmang Ltd (JS1117/09) [2013] ZALCJHB 101 (19 April 2013)
REPUBLIC OF SOUTH AFRICA
THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Not Reportable
case no: JS1117/09
In the matter between:
NATIONAL
UNION OF MINEWORKERS
.........................................................
First
Applicant
MESCHACK
SHONGWE AND 13 OTHERS
(WHOSE
NAMES APPEAR ON
ANNEXURE
A)
.........................................................................
Second
to Further Applicants
and
ASSMANG
LIMITED
.............................................................................................
Respondent
Heard: 19 September 2011, 14 May 2012
Delivered: 19 April 2013
Summary: Large scale retrenchment. Dismissal substantively fair.
JUDGMENT
AC BASSON J
Introduction
[1] This is an action in terms of section 191(5)(v)(ii) of the Labour
Relations Act
1
(‘the
LRA’) in which the second to further applicants (‘the 14
individual applicants’) dispute the fairness
of their dismissal
for operational reasons on 14 August 2009. The applicants seek
reinstatement and compensation as the relief
should the Court find
that their dismissal was substantively unfair.
[2] The action that was referred to this Court also disputed the
procedural fairness of the dismissal. I have ruled that the
dismissals
in this particular matter were part of a large scale
retrenchment exercise and therefore the provisions of section 189A of
the
LRA are applicable. The applicants are therefore precluded in
terms of section 189A(18) of the LRA from disputing the procedural
fairness of the applicants’ dismissals on the basis of
operational reasons.
The parties
[3] The First applicant is the National Union of Mineworkers on
behalf of Mr Meschack Shongwe and thirteen others (the second to
further applicants). The respondent is Assmang Limited. This dispute
is confined to the respondent’s operations at Machadodorp
Works.
The facts
[4] Most of the facts were common cause and I will suffice with a
brief summary of the relevant facts.
[5] It was common cause that, at the time of the retrenchments, four
trade unions were representing employees of the respondent.
They were
the National Union of Mineworkers (‘the NUM’ – the
first applicant); the National Union of Metal Workersof
South Africa
(‘NUMSA’); Solidarity and UASA. It was common cause that
Solidarity and NUMSA enjoyed majority status.
[6] It appears from the evidence that as a consequence of the serious
economic downturn which occurred late in 2008, the respondent
experienced a significant drop in sales and oversupply of ferrochrome
in the market. The respondent took a decision to drastically
cut back
on production and to curb production costs. In this regard, Mr
Meintjies (the then General Manager of the respondent),testified
that
there was a significant reduction in the price of ferrochrome and a
reduction of some 80 percent in the volume of sales. This
had
resulted in the cost of labour increasing from R600.00 per ton in
July 2008 to R 1032.00 per ton in March 2009.The global economic
meltdown also resulted in a 40 percent reduction in the volume of
ferrochrome produced at Machadodorp Works. As will be pointed
out,
one of the consequences of the downturn in sales was the decision to
reduce the output of the furnaces.
[7] In December 2008,the respondent took a decision to drastically
cut back on production. As one of the measures to avoid a
possibleretrenchment,
a collective agreement (‘The Extended
Leave Agreement’) was concluded with NUMSA and Solidarity. In
terms of this agreement,employees
were able to exhaust their annual
leave entitlement. The agreement affected employees employed in all
categories at Machadodorp
Works.Voluntary separation packages were
also offered to the workers.
[8] Before the decision to consider retrenchment was taken, the
respondent therefore had already exhausted the option of extended
leave as well as voluntary retrenchment. Posts were furthermore
frozen and the respondent had targeted fixed term contractors.
The
labour costs of R5 to R6 milliona month for fixed term contractors
were reduced in March 2009 to R1 million a month. The voluntary
retrenchment option was extended a few times and was further extended
for the last time to the end of May 2009. Despite the deadline,
the
voluntary retrenchment option was again extended to 15 July 2009. A
number of employees did apply for voluntary retrenchment.
The section 189(3) Notice
[9] A formal section189 (3) notice in terms of the LRA was issued on
6 April 2009. The notice,
inter alia
, advised organised labour
of the economic downturn and the urgent need to restructure. NUM was
also specifically invited to the
meeting to be held on 24 April 2009.
Meeting on 24 April 2009
[10] Prior to the commencement of the formal consultations, the
respondent held a special meeting on 24 April 2009 with all the
unions including with NUM (Mr Khambule attended).During this meeting,
the following issues werediscussed: the company’s performance,
the operational plan for 2009/2010 shut down periods, alternatives
considered before contemplating any retrenchment, the number
of
employees likely to be affected; andmeasures to minimisethe possible
number of retrenches. The presentation was done in the
manner of a
slide show. The financial situation of the respondent was discussed.
The respondent explained to the meeting that there
was at present a
drop of40percent in sales. During this presentation, the respondent
indicated that the contractor’s costs
would fall from a high of
R6 millionto a low of only R1 million a month in March 2009. The fact
that labour costs per ton in March
2009 had soared considerably as a
result of the drop in sales, was also discussed.
[11] It was also specifically discussed that, dueto the drop in
demand, it was decided to close two of the four furnaces operating
in
Machadodorp Works. The minutes of the meeting reflect that only two
furnaces would be operating for the next two years depending
on the
market conditions. The minutes further reflect that two of the
furnaces were already shut down in November 2008. If regard
is had to
the slides that were used for the presentation, it is clear that it
indicated that Furnace 3 was shut down in November
2008 and Furnace 2
was shut down from December 2008. Furnace 5 was shut down from
November 2008 but would operate in April and
May 2009 and again shut
down in June 2009. Furnace 1 would be shut down in June 2009 for
repairs. On this point, I must indicate
that there was some
disagreement between Meintjies and Mr Shoba (who testified on behalf
of the applicants) about when and whether
the furnaces were indeed
shut down. In this regard, I must point out that if regard is had to
the slides and the minutes, it is
clear that at least two furnaces
were shut down during late 2008. These dates for shutdown
were,therefore,known to the parties
long before this trial commenced.
There is no indication from the papers and specifically the minutes
of the various meetings that
it was ever disputed that the furnaces
(at least two) were at some stage shut down. The applicants are also
vague in their statement
of claim in respect of their version
regarding the closure of the furnaces. However, as will be pointed
out, it was common cause
-even Shoba admitted this-, that the parties
have agreed on the operational plan as set out in the minutes of 24
April 2009. This
operational plan clearly shows that two furnaces
were shut down. For purposes of deciding this dispute, I am therefore
accepting
that at least two furnaces were shut down and were
non-operational at the time of the meeting in April 2009.
[12] During this meeting, feedback was also given regarding the
extended leave agreement and the voluntary separation packages
that
were offered. The meeting was further informed that there would be no
further appointments and promotions. At the meeting,
the first date
for consultations was set for 7 May 2009.
[13] It appears that, at the time of the issuing of thesection 189(3)
notice, approximately 234 of the 667 workforce were targeted
as
possibly affected by a retrenchment. Ultimately, only 45 employees
were identified for retrenchment. 27 of these employees (all
NUMSA
members) were not retrenched following an agreement with NUMSA in
terms of which these NUMSA members wouldretain their jobs
but their
salaries would be paid by other NUMSA members who would forfeit part
of their salaries. The “savings” generated
by the
forfeiture of the salary increase was in the case of NUMSA members
sufficient to pay their full salaries. (I will return
to this
agreement herein below.) A number of employees were also accommodated
in other positions and that also resulted in a reduction
in the
number of retrenches.
The first consultation meeting
[14] The first consultation meeting was held on 7 May 2009. During
this meeting,the presentation given on 24 April 2009 was revisited.
Broad consensus was reached over a number of issues such as voluntary
separation, early retrenchment, and selection criteria. The
parties
then agreed to draw up a “Framework Agreement” that would
be signed by all the stakeholders. A “Joint
Workers Committee”
was established to consult with individual employees and to explore
and investigate any possible measures
to alleviate the current
situation.
[15] A further consultation meeting was held on 25 May 2009. This
meeting was postponed to 2 June 2009. During June the respondent
met
with the trade union parties on 5 separate occasions. It was during
these discussions under the leadership of the appointedfacilitator
that various topics were discussed.
[16] During the consultation process, the respondent presented a
business plan to the trade unions including the applicant. The
so
called new production plan included contemplating closing two of its
four furnaces and to reduce the production of ferrochrome.
The new
production plan was adopted in June 2009 and was accepted by all the
unions (including NUM). In terms of the new production
plan for
2009/2010, furnaces were closed in November 2008. This operation plan
is contained in the minutes of the meeting of 24
April 2009 and was
accepted by all the trade unions in June 2009.
[17] On 22 July2009 the Framework Agreement on the Restructuring in
respect of the Assmang Chrome Operations was concluded between
the
respondent and NUMSA. NUM did not sign the agreement. Under selection
criteria, it was agreed to use one or a combination of
the following
criteria: (i) qualifications requirements for the position (this
criterium weighed 50 points); (ii) Applied skills
and knowledge
(thiscriterium weighed 50 points); (iii) LIFO in the case where the
scores of employees based on the first two criteria
were the same;
and (iv) Equity must also be considered. NUM refused to apply these
criteria and insisted that only LIFO should
be applied. The
respondent did not agree with NUM in light of the agreement that was
reached with the majority union.Meintjies
explained in respect of the
agreed selection criteria that because the respondent operated
furnaces it was necessary to retain
people who were multi-skilled. In
order to apply the selection criteria equitably, the respondent
developed a software programme.
The programme was then used to assess
the employees. The 45 employees who remained were those who scored
the lowest. The software
programme did not take into account trade
union affiliation nor disciplinary records.
[18] Ultimately (as already pointed out),approximately 28 NUMSA
members were amongst those who were targeted for retrenchment.
14 NUM
members were affected.
The Salary Sacrifice Agreement
[19] An agreement (the so-called ‘Salary Sacrifice Agreement’)
was concludedwith NUMSA in terms of which NUMSA members(employees
of
the respondent)would be prepared to forego a salary increase due on 1
July 2009 which amounted to a 9% increase on their current
wages.
This saving would then be paid over to those members of NUMSA who
were selected for retrenchment as a salary. In effect,
NUMSA members
then subsidised the salaries of those NUMSA members who were to be
retrenched by foregoing the monetary value of
the increase in salary
of 9%. Because NUMSA had more members (NUM members were less than
14%), NUMSA members had sufficient funds
available to pay NUMSA
members their full salaries. The result of this salary sacrifice
agreement was that the 28 NUMSA members
were not retrenched.
[20] Because NUM had fewer members, a salary sacrifice from their
side would not have been sufficient to pay thefull salary to
their
members (those who were identified to be retrenched). At best, it
would have been able to pay them a salary of approximately
R 5 445
per month.This would have resulted in the 14 NUM members to accept a
huge salary sacrifice. NUM rejected this offer.
NUM was unhappy and
wanted the respondent to top up the difference but the respondent
refused. A letter from NUM’s Legal
Unit confirmed their
rejection of the offer. In fact, on 3 August 2009 NUM made it clear
that NUM is a trade union and that it
will not be liable for payment
of wages or any shortfall in the salaries of employees of the
respondent. The respondent’s
position regarding the proposed
salary sacrifices is contained in a letter dated 28 July 2009:
‘
It
appears as if there is a serious misunderstanding regarding our
discussion on 27 July 2009. The Company’s position is quite
clear on the matter and I reiterate. In principle the Company has no
objection with your proposal. However, the monetary value
of the
9%increase to the NUM members not affected is R 76.231 per month and
the cost of retaining the 14 affected members is R
158,910 per month.
Due
to this, the Company cannot accede to your request
.
The only other way to accommodate the 15 affected employees is if
they are prepared to accept a package of R 5 445 per month
which
is the equivalent of the R 76, 231 divided by the number of employees
affected.
This
is a proposal and not a request
.’
[21] The respondent later responded and stated that this offer was
merely a
bona fide
attempt to keep NUM members in its service.
The respondent confirmed that NUMSA has accepted this option and this
had resulted
in 28 NUMSA members not being retrenched. Due to the
fact that NUM refused to accept the salary sacrifice proposal, 14
NUMSA members
were consequently identified for retrenchment.
Consultation meeting on 7 August 2009
[22] A consultation meeting was held on 7 August 2009. A list of 14
names was presented to NUM. It is clear from this list that
some of
these employees (NUM members) had very long service with the
respondent. Meintjies agreed that these employees had long
service
but explained that the respondent could not agree on LIFO alone
asthey needed skills because of the economic crisis. The
parties
failed to reach an agreement on alternatives to retrenchment. A final
decision was made and notices of termination of service
wereissued on
14 August 2009.
[23] Despite the clear evidence of Meintjies in respect of the need
to retrench and the evidence regarding the respondent’s
financial situation, the applicants continued to dispute the general
need to retrench and persisted with the contention that the
retrenchment was unfair. They based their submission on the
contention that two of the furnaces were not closed as per the
business
plan and secondly, that the respondent re-employed
previously retrenched employees inSeptember 2009.
Is there any merit in these submissions?
[24] In respect of the re-employmentissue, a notice dated 28
September 2009 was issued in terms of which it was stated that the
re-employment had nothing to do with the market conditions and that
the ferrochrome markets were still very volatile and unpredictable.
Meintjies also testified in this regard that the respondent could not
reasonably have foreseen a temporary increase in the demand
for
ferrochrome as at 14 August 2009 when the final decision was taken to
retrench on the basis of operational requirements.
[25] On the facts presented to theCourt,I find that the respondent
had shown that there was, at the time the decision to retrench
was
taken a valid and fair economic rationaleto retrench. The evidence,
which was not seriously disputed, was that there was a
worldwide
economic crisis in 2009 and that that had resulted in a reduction in
the demand for ferrochrome. Meintjies’ evidence
further was
that, as a result of the reduction in the demand, the labour costs
per ton had increased significantly. Because of
these factorsthe
respondenthad as early as December considered measures to avoid
retrenchment. The respondent considered the following
in the middle
of 2009: (i) To reduce contractors’ costs from R5 toR6
millionin August 2008 to R 1 millionin March 2009; (ii)
To reduce
capital expenditure in 2008/2009 financial year from R 299 million to
R 88 million in the 2009/2010 financial year; (iii)
To reduce labour
costs and to consider alternatives to retrenchment. The measures were
considered before the section 189(3) notice
was issued and certainly
underscores the contention that there were huge financial pressures
on the respondent. Certainly, as at
August 2009, the respondent had a
valid economic rationale to retrench.
[26] The respondent concludedthat,after the retrenchment, there was a
sudden increase in the demand for ferrochrome. In September
2009, a
communication letter was sent out to employees. In terms of this
communication, management informed employees that all
furnaces would
run as a temporary measure. The decision was taken as a temporary
measure because of market conditions that remained
volatile and
unpredictable. The communication further stated that there was a need
for labour a month after the retrenchment. Meintjies
conceded that
had they known that the markets would improve in September he would
not have retrenchedbut, at the time of the retrenchment,
there was a
need to retrench. On behalf of the applicants, it was put to
Meintjies that in light of this communication there was
no reason to
retrench. Meintjies testified that,at the time the decision to
retrench was taken, not all four of the furnaces were
operating in
full capacity and that the respondent had experienced a drop of 40%
in sales. He testified that they could not have
foreseen the sudden
demand for ferrochrome in September 2009.Mr VanAs reminded the Court
in respect of this point that the case
before this Court was not
whether it was unfair not to re-employ the retrenched employees as
this was not pleaded nor does this
Court have jurisdiction. It was
conceded on behalf of the applicants that this was indeed not their
case. What was their case was
that a month after the retrenchment the
respondent operated at an optimal level. Meintjies did not dispute
the fact that there
was a sudden increase in the demand for
ferrochrome. Meintjies testified that the responded decided to recall
those employees who
had taken voluntary retrenchment and those 27
members of NUMSA who were not retrenched as part of the salary
sacrifice deal. There
was, therefore, no need to pay extra for them.
Meintjies could not recall how long the furnaces were switched on. He
could merely
recall that they were switched on at the end of 2009. I
should, however, point out that the September issue does not form
part
of the applicant’s statement of claim: No averments are
made in the statement of claim that the respondent had operated at
an
optimum in September 2009 nor is the averment made that other
employees were recalled to operate the furnaces in September 2009.
[27] I am satisfied that the respondent had a valid economic
rationale in taking a decision to retrench as on 14 August 2009. I
am
further satisfied that there was a proper consideration of
alternatives before the respondent embarked on the retrenchment
exercise: An extended leave agreement was concluded with NUM and
UASA. An offer was also made for voluntaryretrenchment packages.
This
offer was later extended to 15 July 2009. An offer for early
retirement was made to those who would qualify for early
retirement.The
use of contractors wasreduced and new positions were
frozen. A salary sacrifice agreement was concluded with NUMSA. The
same offer
was extended to members of NUM,however NUM rejected the
offer. Meintjies was cross-examined on the latter offer. He testified
that
the respondent was not prepared to subsidise the difference of
some R 72 000.00 between the individual applicants’
salaries
and the aggregate amount of salary increases sacrifices of
the remaining NUM members as this would not have resulted in a
significant
reduction of labour cost. I will return to these
conclusions hereinbelow.
[28] Mr Shoba on behalf of the applicants testified that they were
not prepared to accept this proposal because it would have resulted
in a significant reduction in their salaries whereas NUMSA
retrenchees would receive their full salaries because the aggregate
amount of salary increase sacrificed by the remaining NUMSA members
was sufficient to cover the full salaries of the NUMSA retrenchees.
[29] Shoba, further testified that there were no financial problems
and, therefore,the respondent had no reason to dismiss. He
also
insisted that he had the necessary skills. Shoba, however, conceded
that on 2 June 2009 NUM accepted the business plan proposed
by the
respondent. He, however, could not answer why not one of the trade
unions questioned the rationale for the retrenchment
during any of
the consultation meetings.
The merits
[30] In deciding the fairness of the dismissal, the Court must
consider the provisions of section 189A(19) of the LRA which states
the following:
‘
(19)
In any dispute referred to the Labour Court in terms of section
191(5)(b)(ii) that concerns the dismissal of the number of
employees
specified in subsection (1), the Labour Court must find that the
employee was dismissed for a fair reason if –
the dismissal was to give
effect to a requirement based on the employer’s economic,
technological, structural or similar
needs;
the dismissal was
operationally justifiable on rational grounds;
there was a proper
consideration of alternatives; and
selection criteria were fair
and objective.’
[31] The applicants’ main contention was that there was no
reason to dismissin light of the fact that the furnaces were not
closed down. I have already referred to this issue. I am satisfied
that there was a valid economic rationale to retrench as at
14 August
2009. I am also satisfied that two of the furnaces were in fact
closed at least during April 2009. In respect of the
September
events, I have already pointed out that Meintjies conceded that if it
was six weeks later, it may not have been necessary
to retrench.
However, at the time of the retrenchment the respondent had a valid
and fair economic rationale to retrench. It is
indeed unfortunate to
the employees that the markets did not turn around earlier. However,
can it be said that their retrenchment
was unfair merely because six
weeks later the market turned? I have carefully considered the
evidence. The respondent could not
foresee at the time of the
retrenchment that the markets would turn. I have also taken note of
the lengths at which the respondent
went to avoid retrenchment. The
process hasalready started in December with a compulsory leave
agreement and culminated in an agreement
which resulted in a wage
sacrifice. The process took months to complete and many consultation
meetings were held. Why would the
respondent embark on this lengthy
process if there was no economic rationale? Furthermore, no less than
four major trade unions
were involved in the process. I
can,therefore,find no reason not to believe Meintjies’ evidence
that at the time the decision
to retrench was taken, there was a
valid economic rationale to retrench. What happened post retrenchment
when there was a turn
around in the market cannot, in my view, affect
the fairness of the decision at the time particularly in
circumstances where there
is no evidence that the respondent could
have foreseen the upturn in the markets in September 2009.
Furthermore, there is no evidence
of
mala fides
on the side of
the respondent. It is clear from the evidence before the Court that
the real reason for the retrenchment was the
drop of 40% in
production. This resulted in the furnaces not operating at full
capacity or not operational at all. In respect of
the dispute that
exists about whether the furnaces were closed, I have already
indicated that it is clear from the business plan
presented to the
unions in respect of the furnaces that some furnaces were shut down.
It was common cause that this operation plan
was accepted by the
trade unions. If two of the furnaces were not shut down, the question
arises why then did the four tradeunions
agree to the plan? Shoba’s
evidence that all four furnaces operated cannot therefore be
accepted.
[32] I am, therefore, satisfied that as of 14 August 2009 when the
decision was taken to retrench, the respondent had a valid and
fair
economic rationale to retrench.
[33] In respect of reasonable alternatives, I am of the view that all
reasonable alternatives have been explored. I have also considered
whether the salary sacrifice agreement constituted a reasonable
alternative to retrenchment and I am satisfied that it did. NUMSA
and
its members were prepared to sign such an agreement. If NUM and its
members were prepared to sign the agreement it would have
resulted in
the individual applicants remaining in the employ of the respondent
and at least receive a portion of their salaries.
In any event, this
did not happen as NUM and its members did not accept the proposal.
[34] In respect of the selection criteria, it is clear from the
framework agreement what the selection criteria were. NUM did not
agree to these selection criteria and instead proposed LIFO as the
exclusive selection criteria. Because the other trade unions
represented by far the majority (approximately 85% of the employees),
the criteria proposed by themajoritywere applied. I can find
no
reason to conclude that these criteria are not fair, nor that they
were nor fairly applied. In fact, the respondents went at
great
lengths to ensure that they were fairly and objectively applied. I
therefore find that the selection criteria were fair and
objective.
[35] In light of the fact that this Court has found that the four
requirements for a fair dismissal were satisfied, it is concluded
that the dismissal of the individual applicants was fair. I can find
no reason why costs should not follow the result. My order
is that
only the first applicant is to pay the costs.
[36] In the event, the following order is made.
36.1 The dismissal of the second to further applicantswas
substantively fair.
36.2 The first applicant is ordered to pay the costs of this
application.
___________________
AC BASSON J
Judge of the Labour Court
APPEARANCES:
For the Applicants: Advocate M Zondo
Instructed by: Finger Phukubje Incorporated
For the Respondent: Advocate M Van As
Instructed by: Cliffe Dekker Hofmeyr Incorporated
1
Act
66 of 1995.