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[2013] ZALCJHB 107
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National Union of Metal Workers of South Africa (NUMSA) and Others v Feltex Automotive Trim (Pty) Ltd (JS413/09) [2013] ZALCJHB 107 (5 June 2013)
REPUBLIC
OF SOUTH AFRICA
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Not Reportable
Case no: JS413/09
In the matter between:
NATIONAL UNION OF
METAL WORKERS
OF SOUTH AFRICA
(NUMSA)
....................................................................
First
Applicant
S.MBONAMBI AND ANOTHER
..........................................
Second
to Further Applicants
and
FELTEX
AUTOMOTIVE TRIM (Pty) Ltd
..........................................................
Respondent
Heard:
4 March 2013 & 5 March 2013
Delivered:
05 June 2013
Summary: Issue for
decision whether dismissal of second to further defendants was
substantively unfair, and if so, ordering the
company to reinstate
applicants retrospectively on same terms and conditions of employment
with effect from date of dismissals.
Evidence at trial was that sales
of the company’s car components to its customers, car
manufacturers, was so badly affected
by the 2008, 2009, 2010 world
wide economic recession that it had no alternative but to embark on a
cost cutting exercise in order
to survive. For consultation purposes
it provided applicants with its own proposals for compliance with
section 189(3) requirements
for retrenchment. After several
consultation meetings, under the auspices of the CCMA, which failed,
the matter was referred to this court for determination. Court
found on evidence presented by the parties that the company did
engage
in a genuine joint consensus seeking process on all the issues
that had to be achieved under the section and therefore there had
been proper compliance with the section. Application dismissed.
______________________________________________________________________
JUDGMENT
______________________________________________________________________
KUMALO,
AJ
Background
facts
The first applicant is
the National Union of Metalworkers of South Africa (NUMSA), a trade
union registered in accordance with
the provisions of the Labour
Relations Act, 66 of 1995 (LRA).
The second to further
applicants are Mr Sibusiso Mbonambi and Mr Caiphus Tshukudu, who are
members in good standing of the union
and former employees of the
respondent before they were dismissed.
The respondent is Feltex
Automotive Trim (Pty) Ltd (‘the company’), duly
incorporated in terms of the company laws
of South Africa, situated
at 41 Martinus Ras Street, Rosslyn, Pretoria.
The respondent company
manufactures automotive components, boot trimmers for supply to
automobile companies, in particular, BMW,
Ford/Nissan and GMSA.
During or about 2008,
the automobile industry suffered heavy losses as a result of the
global economic recession. This resulted
in the respondent’s
main customers, to wit, BMW reducing their motor vehicle production
from 55,000 units to 48,000 units.
Ford also reduced their
production from 72,000 cars to 33,000 cars. The respondent’s
response to the reduced demand for
its products was also to reduce
its production of the automotive products.
The production levels
continued to dwindle and the respondent had to proceed with
initiating the consultation process with the
union.
The consultation
process
On or about 29 January
2009, the company and the union commenced consultation over what the
company referred to as possible redundancy/operational
requirements
termination.
At the first
consultation, the company offered voluntary severance packages which
would reduce its headcount from 233 employees
to 156. The respondent
stated that during December 2008, eight salaried employees took
voluntary packages and 19 had voluntarily
left employment and were
not replaced. The respondent had in its employ about 72 labour
broker employees who were on the Motor
Industries Bargaining Council
(MIBCO) rates of pay, and wanted to reduce its labour costs to 12%
turnover. The facilitation process
was adjourned to 4 February 2009.
It was agreed that the company will furnish the union with the
following information prior
to the next consultation:
8.1 The 2007 – 2008
audited financial report/statement;
8.2 the 2008 – 2009
audited financial report/statement;
8.3 the total number of
labour broker employees and their job categories.
On the 4 February 2009
consultation, the respondent company presented the following
information:
9.1. The company had
undertaken investigations and had identified positions that would be
affected by retrenchment:
9.1.1 That five full time
positions will become redundant;
9.1.2. The company will
offer alternative employment to the 5 employees affected on condition
that they accept MIBCO rates of pay.
The union’s
response was that there was no need for the company to retrench the
full time employees as the company employed
about 72 broker
employees. In the event that the company was to retrench, then:
10.1. any employee who is
offered re-employment within a period of 36 months, such employee
must be employed on conditions no less
than those that applied before
they were retrenched;
10.2. if any employees
were to volunteer for retrenchment, they should be replaced
immediately.
At the next consultation
held on 12 February, 2009, the company reduced the number of
employees to be retrenched to 25. The company
stated that 16 labour
broker employees and five full time employees will now be
retrenched.
11.1 The company further
increased severance pay to 2 weeks for each completed year of service
with the company.
11.2 The company stated
that should any transfer of employees to another position be made,
such will be done on reduced rates of
pay. This was an alternative to
dismissal.
The union in evidence
said it had earlier undertaken its own investigations which revealed
that the positions of the individual
applicants were not redundant.
The union demanded that individual applicants be retained and in the
event that the company proceeds
to retrench them, the following
proposals should be considered:
12.1. The individual
applicants should be redeployed to the positions occupied by the 72
labour broker employees, retaining the
same rates of pay they were
earning.
12.2. Should the
individual applicants however be forcefully retrenched, they must be
given first preference when vacancies arise
within 36 months on no
less favourable terms that those they enjoyed before their
dismissals; and
12.3. that each
individual applicant be paid an amount of R350,000 ex-gratia over and
above the MIBCO severance package.
During the consultation,
it was explained to the union retaining the retrenched employees’
rates of pay was unaffordable
to the respondent. The respondent
counter-proposed to employ the dismissed employees to the positions
occupied by the labour
broker employees at the rates paid to labour
broker employees which were on par with MIBCO rates. The union
rejected the respondent’s
offer.
The union’s
proposals were also rejected as the respondent wanted to give
preference to the dismissed employees whenever
any position became
available. They would be paid the rate that applied to the vacant
positions. The respondent regarded the
union’s proposed
R350,000 as ex-gratia and salaries above MIBCO severance package, as
totally unrealistic given the company’s
financial woes.
An impasse having been
reached, the respondent company retrenched the two applicants on the
28 February 2009.
The union referred the
dispute challenging the fairness of the dismissal of the second to
further applicants to the Bargaining
Council for the Motor Industry
on 29 June 2009.
The bargaining council
issued a certificate of outcome of the dispute on 6 November 2009
confirming that the dispute concerning
the unfair dismissal of the
second to further applicants remained unresolved.
Onus of proof
As the onus of proof
that the dismissals for operational reasons were fair, Mr Ganswen S
Murugan, who was a production controller
at the respondent’s
Rosslyn plant at the time, gave evidence first for the respondent
company.
He stated that he was
involved in the consultation process together with Ms Dolly Msomi,
the HR Manager, who is now deceased.
He referred to the respondent
company’s “Proposal: Redundancy due to Operational
Requirements Feltex Trim Rosslyn
2009” which was in the form
of slide presentations which he said was done on more than one
occasion to the union. In summary
form, the slide presentations
dealt with following requirements of section 189(3):
19.1 a. Reasons for the
proposed dismissals: Reduction in production volumes by 41%: BMW
55,000 cars to 48,000 and Ford from 72,000
to 33,000.
b. The alternatives the
employer considered before proposing dismissals and the reasons for
rejecting each of those alternatives.
Considered short time –
already the Ford production line is on a 4 day working week –
cannot afford to increase short
time due to production capacity to
meet customer daily needs. Offered voluntary packages to 19
employees, who left in December
2008, to minimise the impact of
forced retrenchments.
c. The number of
employees likely to be affected: 21 positions.
d. The proposed method
for selecting which employees to dismiss. The company is proposing to
use skill and affordability.
e. The time when or
period during which the dismissals are likely to take effect: from 28
February 2009 due to time pressure caused
by drastic changes in
economic climate. This is mainly to sustain the business and not to
undermine any legislation.
f. Severance pay
proposed: As per the MIBCO agreement ie 2 weeks for the 1
st
4 completed years of service; thereafter 1 week for each completed
year of service.
g. Any assistance
employer proposes to offer employees likely to be dismissed:
financial management training to assist employees
to learn techniques
of investing their money.
h. Possibility of future
re-employment of dismissed workers. Should the economic situation
within the company improve, employment
opportunities will be offered
firstly to affected employees if they remain unemployed.
i. The total number of
employees employed by the company: 166.
j. The number of
employees dismissed for reasons based on its operational requirements
in the preceding 12 months:
In January 2008, there
were 240 employees: 19 accepted voluntary packages as at end of
December; 13 salaried jobs became redundant
and have been terminated;
35 contract workers have been terminated; and 7 normal retirements
not replaced.
Referring to the letter
dated 23 February 2009 from the first applicant (p 7 Annexure B),
Murugan said he disagreed that the respondent
company had failed to
prove that the positions and/or jobs performed by the second to
further applicants were redundant. He said
the alternative
employment the company proposed was for the applicants to take up a
different job at a lower rate of pay. In
that way service with
Feltex Automotive Trim would be maintained. Moreover, the ex gratia
payment offered to them would cushion
the effect of the lower pay.
The letters dated 26 February 2009 from the company (at pp19 to 22
Annexure B) confirmed the retrenchment
package offered to the
applicants, and, though their services would be terminated on 31
March 2009, the company would release
the applicants immediately
with full severance package so that they would use the time to seek
alternative employment. The severance
pay would be based on two
weeks wages for each completed year of service plus a pro rata bonus
and all outstanding leave pay.
Tshukudu had 19 years service and the
severance pay amounted to R118,056.20 without the outstanding bonus
and leave pay which
would be calculated at the time of termination
of employment. The amount for Mbonambi was R13,652.04 based on 3
years service.
Tshukudu rejected the
retrenchment offer; Mbonambi signed and accepted it, though at trial
he said he signed under duress, if
he did not sign he would not get
anything. This was supposedly said by the managing director of the
plant who he said was also
a shareholder.
Evidence of second
applicant
Mr Sibusiso Mbonambi
gave evidence. He stated that he started working for the respondent
company in March 2003 at its Durban plant.
He was transferred to the
Rosslyn plant where he was production supervisor until his
retrenchment. There were two of them in
his team exchanging shifts.
He had two operators reporting to him. At the end of November 2008,
he was verbally asked by Murugan
to replace Sifiso who was the
process engineer. In 2008, they worked on a project from TC6 which
was to make a new development
product for a client. There was a
student, Lyndall, who had come for in service training to get her
qualifications and Thabo,
who was a labour broker employee. They
were both reporting to him.
He had been in the
process department for three weeks when in December 2008 he received
a retrenchment letter, dated 12 December
2008, giving him four
weeks’ notice of termination of employment. In terms of the
notice, he was required to work his notice
period until 31 January
2009. He would also receive outstanding leave pay, severance pay two
weeks per completed year of service,
withdrawal from the provident
fund and in terms of the Provident Fund Rules would be paid a
benefit according to the rule applicable
to retrenchment.
He took the letter to
the first applicant’s representative, Mr Sekome Tshoga, who
contacted the HR Group Manager, Mrs Msomi,
informing her that the
retrenchment letter did not comply with the provisions of section
189(3) LRA. Hence the respondent company
withdrew it on 14 January
2009.
He said that he did not
participate in the consultation process. He relied on the feedback
from the union representatives and
shop stewards. He recognised the
retrenchment notice which he had signed but said it was not
numbered, saw only the amount he
was to receive. He maintained that
his position was not redundant.
In cross examination, he
said he was asked by Kobus Ooshuysen, the plant manager, to sign the
retrenchment notice (page 20 Annexure
B). He was told to sign,
negotiations would follow. He saw the figure of R13,652.04. Money
was important to him. He said he was
told that he would not get that
money if he did not sign. He knew Kobus to be a director and
shareholder, he felt he was forced
to sign, everything was done
hastily. He wanted to give it to his shop steward to be advised. He
denied that he signed knowing
that it was in full and final
settlement.
He said he had a Diploma
in Production Management, having done a three year Technikon course
before joining the company in 2003.
The LIFO principle should have
been applied.
Evidence of Caiphus
Tshukudu
In evidence he said he
started working for the company in September 1989 as a machine
operator. This was at its Durban plant.
In June 1999, he became a
production clerk till 2008. He explained how they were allocated
work: management would first check
to see what materials the company
had and whether their customers, Toyato, Daimler Chrysler had the
necessary materials at affordable
prices and to see how long the job
would take and how many people will be required to execute it.
He denied that in 2008
there were any reductions or cut backs in production. He was
requested to go and help in the container
section, reason being that
the company was losing a lot of money. He was shown the sales
figures and also sales figures for something
the company did not do.
He said the logistics
manager was Liam who had started in April 2008. There was also Tommy
de Beers who joined as a learner, fresh
from college. This was
towards the end of 2007. He said that he taught him how work was
done inside the factory, was supervising
him and giving reports on
his training, up to the time he took over his job.
He stated that in
December 2008 during the Xmas shut down he received the retrenchment
letter.
As a shop steward, he
attended all the consultation meetings. The others present were Mrs
Dolly Msomi, Group HR Manager, the plant
manager, the process and
quality manager, the production manager, the union organiser for the
region Mr Sekome, shop stewards
from NUMSA, Shirley Motsepe from
SACTU. He said Murugan was never part of any of those meetings.
He said the union came
up with several suggestions like to watch over casual workers, to
reduce the hours of work, to check those
who intend to leave
voluntarily, check what the position was in other companies
affiliated to Feltex and to reduce money wastage
and/or any other
ways of reducing costs. The intention of the union was to save the
jobs of their members but the respondent
employer had no intention
of going through proper consultations. When he asked why he had been
selected for retrenchment, he
said he was told he did not have
sufficient skills and that was said in a racist manner.
In cross examination, he
disputed that there was an economic downturn leading to lower car
sales by their customers which in turn
meant that their own
production and sales went into a dip as well. When he was shown the
sales figures that were used in the
slide presentations, his
response was that they were not his figures so he could not accept
them but neither he nor the union
had any documents with financial
figures. He said the company did not offer them any alternative
positions and that the reason
for that he is that they were being
victimised for being members of NUMSA, and he for being a shop
steward. But under cross examination
he could not explain why his
union never complained to the respondent company about any racism or
victimisation of its members,
either before or during consultation.
Furthermore, neither complaints were stated in the pre-trial minutes
nor in his statement
of case.
Evidence of Mr Sekome
Tshoga
Mr Tshoga said in
evidence that he was the local organiser of NUMSA and the Rosslyn
plant fell within his jurisdiction. Prior
to the consultation
meetings under the auspices of the CCMA, he had been shown the
retrenchment notices served on Mbonambi and
Tshukudu dated 12
December 2008. He spoke to the company HR Manager pointing out that
the notice did not comply with the requirements
of section 189(3)
LRA. Hence the company withdrew the notices of retrenchment on the
14 December 2008.
He was adamant in his
evidence that Murugan, whom he knew, was not in any of the
consultation meetings held under the auspices
of the CCMA and
therefore whatever he said in evidence was inadmissible.
He said the company had
to get rid of casual workers, labour broker employees whose
positions should be taken by the union members,
retaining their
current conditions of service and their rates of pay.
The legal framework
Retrenchment
Employers are frequently
compelled for economic reasons, financial viability and
sustainability to review their staffing levels
and to terminate the
employment of some of their employees to effect savings. The
dismissals based on operational requirements
are expressly regulated
by
sections 189
and
189A
of the
Labour Relations Act, Act
66 of
1995.
The LRA permits
employers to dismiss employees for “operational requirements”,
defined as “requirements based
on economic, technological,
structural or similar needs of an employer;”
(s 213
LRA). This
is an expansive definition which is reconcilable with the approach
taken by the labour courts that a retrenchment
is bona fide if it is
designed not only to stem losses but also to increase profits.
1
In
Johson
and Johson (Pty) Ltd v Chemical Workers Industrial Union
,
2
Froneman DJP had this to
say about the concept of fairness:
‘
[23] Every person has a
fundamental right to fair labour practices (section 23(1)(a) of the
Constitution). In the present context
expression is given to this in
the LRA by affording an employee the right not to be unfairly
dismissed (s 185) and an employer
the right to dismiss an employee
for a fair reason based on the employer’s operational
requirements and in accordance with
a fair procedure (section
188(1)(a)(ii) and (b)).
[24] Section 189 regulates the
exercise of the competing fundamental rights of an employee not to be
unfairly dismissed and that
of an employer to dismiss for operational
reasons. It is a provision that is intricably linked to the fairness
or otherwise of
a dismissal based on operational requirements. Apart
from that it serves no other purpose.
[26] The section places some primary
obligations on an employer in order to ensure that an employee is not
unfairly dismissed. The
employer must initiate the consultation
process when it contemplates dismissals for operational reasons
(section 189(1); cf
FAWU and another v National Sorghum Breweries
[1997] 11 BLLR 1410
(LC) at 1420F-1421B, (1998) 19 ILJ 613 (LC)
at 623C-1)). It must also disclose relevant information to the other
consulting party
(section 189(3)). It must allow the other consulting
party an opportunity during consultation to make representations
about any
matter on which they are consulting (section 189(5)); It
must consider those representations and, if it does not agree with
them,
it must give its reasons (section 189(6)).
[27] But all these primary formal
obligations of an employer are geared to a specific purpose namely to
attempt to reach consensus
on the objects listed in section 189 (2).
The ultimate purpose of section 189 is thus to achieve a joint
consensus seeking process.
In this manner the section implicitly
recognises the employer’s right to dismiss for operational
reasons, but then only if
a fair process aimed at achieving consensus
has failed. This is also apparent from section 189(7) which provides
that the employer
must select the employees to be dismissed on
criteria either agreed to, or if that is not possible, on criteria
that are fair and
objective.
[28] The achievement of a joint
consensus seeking process may be failed by either one of the
consulting parties. The employer may
obviously frustrate it by not
fulfilling its obligations under section 189(1), (3), (5) (6) and
(7). The other consulting party
may do it by refusing to take part in
any of the stages of the consultation process, or by deliberately
delaying the whole process…
It may also appear that any one of
the parties simply went through the entire formal process with no
intention of ever genuinely
reaching agreement on the issues
discussed. These different possibilities depend on the facts of each
particular case.
[29] If that purpose is achieved,
there has been proper compliance with the section. If not, the reason
for not achieving the purpose
must be sought. If the employer alone
frustrated the process in some way or another, there can be no
compliance. If the employer
was not at fault and did all it could,
from its side, to achieve the kind of consultation referred to above,
the purpose of the
section would also have been achieved.’
Application of the law
to the facts
The test as to whether
there has been genuine consultation prior to a retrenchment exercise
is whether the employees and the union
concerned have been given a
fair opportunity to suggest ways in which job losses might be
avoided or the effects of retrenchment
might be ameliorated.
The employer is not
bound to accept the suggestions; they must merely be seriously
considered
and
consultation will not necessarily
be
held to be a mere pretence if the employer approaches the matter
with a pre-disposition to a particular solution: the test
is whether
management retained a sufficiently open mind to be persuaded by
practical and rational alternatives.
3
The final decision,
whether to retrench
rests with the employer,
but
the ultimate decision on whether that decision was fair rests with
the court.
In
Van
Rooyen and Others v Blue Financial Services (SA) (Pty) Ltd
,
4
is a case in point where
Van Niekerk J said that a restructuring strategy that was a
“life-saving measure” was a valid
reason to retrench.
The Court accepted that the employer had sufficient justification
for its decision to retrench and that it
was a necessary measure to
prevent the further decline of the business.
In the case
in
casu
what
is objectively clear from the respondent’s evidence is that in
the years 2008, 2009, 2010 there was a wide world economic
recession
that directly led to the respondent’s motor vehicle customers
drastically reducing production of motor vehicles.
That in turn
resulted in reduction of sales of motor vehicle components that the
respondent company made for its automotive customers.
The evidence of Murugan
who was the respondent company’s production supervisor was
unchallenged in that respect. The applicants
could only make a bare
denial that there was no reduction in sales of the respondent
company’s automotive components to
its customers. Although
they themselves stated that their investigations did not reveal any
reduction in sales of motor vehicles
and of automotive components,
they could not produce a shred of evidence that the retrenchment
consultation was a sham or was
done in bad faith ie without a
reasonable and justifiable economic rationale.
I believe, on a balance
of probability, that Murugan was telling the truth when he said he
attended some of the consultations
with the applicants. It is
inconceivable that as a production controller and part of management
he would not have known or would
not have been told by HR Department
what the impact of the wide world economic downturn was on the
company’s sales of automotive
components because he was part
of management that had to find ways avoid retrenchments and come up
with ameliorating measures
where dismissals were unavoidable.
On the evidence that the
court heard from Murugan, I am satisfied that the company did listen
to the representations made by the
applicants on measures that it
should take to avoid retrenchments for operational requirements and
did yield to their demands
that casual workers and labour broker
employees should be drastically reduced and their positions be taken
up by the affected
applicants and that the company should offer
their members alternative employment.
I am equally satisfied
that the allegations of racism and victimisation, leveled at the
company, of the applicants on account
of trade union membership is
spurious and opportunistic because Mrs Dolly Msomi the HR Manager is
deceased. One needs to only
look at the applicants’ pleadings,
the pre-trial minutes to show that there is no merit in these
accusations.
What is also equally
clear is that the applicants were not prepared to move from their
demand that the employees should not only
keep their jobs at current
rates of pay but the employer should over and above that pay each
employee an
ex gratia
payment equal to R350,000.00 over and
above MIBCO retrenchment package; guarantee re-employment within 36
months from date of
retrenchment with no conditions and or
conditions not less favourable than it was before their
retrenchment. When I enquired
from the applicant’s witnesses
as to how this figure had been reached, Mr Luthuli their
representative was unable to provide
an answer even though I had, at
his request, allowed him an adjournment to take instructions.
I am satisfied on the
evidence before me that the restructuring strategy of the company
was a “life-saving measure”
and was a valid reason to
retrench. I accept that the employer had sufficient justification
for its decision to retrench and
that it was a necessary measure to
prevent further decline of the business. I also bear in mind that
the dismissals were not
just a “life-saving measure” but
that they were necessary to prevent the business from going under
completely, given
that the prospects for 2012 were not that bright
either. In those circumstances, I find that the timing of the
dismissals was
for a fair reason. Accordingly, the application for
an order declaring that the dismissal of the second to further
applicants
was substantively unfair and ordering the company to
retrospectively reinstate the second to further applicants on the
same terms
and conditions of employment, with effect from the date
of their dismissal and costs against the respondent, is without
merit
and stands to be dismissed.
There remains the
question whether the second to further respondents should pay costs
either on their own or jointly and severally
with first applicant,
the one paying the other to be absolved. I am satisfied that this is
not an appropriate case in which to
make such an order. The evidence
of the second to further applicants is that they are unemployed,
have young children and their
prospects of employment on the open
labour market are dim. It would be unfair to saddle them with the
extra burden of costs when
they do not have the financial ability to
pay those costs. In so far as the first applicant is concerned I
have no reason to
depart from the provisions of section 162(3) LRA
that as the applicant is a party to the dispute before this Court,
this Court
may order costs against it, and, in the light of the role
it played, I so order.
Order
In the result, the
application is dismissed with costs to be paid by the first
applicant.
______________
D Kumalo AJ
Acting Judge of the
Labour Court
APPEARANCES
For the Applicants: Cyril
Luthuli, of National Union of Metal Workers of South Africa
For
the Respondent: MG Maeso of Shepstone and Wylie Attorneys
1
See
Food and Allied Workers Union and Others v Kellogg SA (Pty) Ltd
(1993) 14 ILJ (IC) at 413A;
NUMSA v Fry’s Metals
[2003]
2 BLLR 140
(LAC) at paras 32-3;
General Food Industries v FAWU
(2004) 25 ILJ 1260 (LAC) at para 32.
2
(1999)
20 ILJ 89 (LAC) at paras 23-29.
3
See
SATAWU v Roadway Logistics (Pty) Ltd
(2007) 28 ILJ 937 (LC).
4
(2010)
31 ILJ 2735 (LC) at para 20.