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[2013] ZALCPE 10
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Peters v Blue Financial Services (South Africa) (Pty) Ltd (P 480/10) [2013] ZALCPE 10 (18 June 2013)
REPUBLIC OF SOUTH AFRICA
THE LABOUR COURT OF SOUTH AFRICA, PORT ELIZABETH
JUDGMENT
Not reportable
case No: p 480/10
In the matter between:
LYDIA PETERS
...........................................................................................................
A
pplicant
and
BLUE FINANCIAL SERVICES
(SOUTH AFRICA) (PTY) LTD
...............................................................................
Respondent
Heard:
26 November 2012
Delivered:
18 June 2013
Summary: A voluntary retrenchment agreement induced by
misrepresentation is void
ab initio
. A dismissal for
operational requirements of the employer in breach of the
pre-retrenchment requirements in Section 189 of the
LRA is
procedurally unfair.
Section 189 of the LRA: Unfair dismissal for operational
requirements of the employer.
JUDGMENT
LALLIE, J
The respondent is in the business of financial services. It has a
number of branches in the country. In 2006 it employed the
applicant
at its George office as a branch manager. In October 2007, it
transferred the applicant to the same position at its
30 Govan Mbeki
Avenue branch. On 1 August 2009, it again transferred her to the
same position at its 564 Govan Mbeki branch.
On 6 April 2010, the
applicant’s branch was visited by Mr Earle (Earle), the
respondent’s Country Manager, and Ms
Roberts (Roberts), its
Human Resources Manager. They held a meeting of all the employees at
the branch and informed them that
the branch would be closing down
at the end of the month as it was being sold. They gave the branch
employees including the applicant
an opportunity to choose from the
following options:
1.1 A transfer to the new owner on the same terms and condition of
employment;
1.2 A voluntary severance package VSP, or
1.3 To apply for internal positions that would be advertised during
the course of the month.
The applicant asked to be transferred to the position of branch
manager of 30 Govan Mbeki branch which was vacant at the time.
Earle
responded that the position and any other vacancies had to be
advertised so that the applicant and other interested employees
could
apply for them.
On 7 April 2010, the applicant directed an email to Roberts raising
a number of issues including reasons for the staff to apply
for one
position and the identity of the new owner of the business. The
reason proffered by Roberts was that the respondent wanted
to give
employees equal opportunities. She promised that the position would
be advertised. On 14 April 2010, the applicant chose
the VSP option
and on the 16 April 2010 she received all the money due to her in
terms of the Basic Condition of Employment Act
75 of 1997 (the
BCEA). In addition she signed the voluntary retrenchment agreement
(the agreement). Her last day on duty was
30 April 2010.
On 3 May 2010, the applicant discovered that Mr Bain (Bain) had been
transferred from the position of branch manager of the Cleary
Park
branch to the same position at the 30 Govan Mbeki branch with effect
from 14 April 2010 after making this discovery the
applicant felt
that she had been deceived by the respondent into entering into the
agreement. She also felt that she had been
discriminated against as
the respondent had chosen to offer the position she requested to a
white male with less service. She
approached the Commission for
Conciliation Mediation and Arbitration (the CCMA) for relief. She
ultimately referred her dispute
to this court.
The issues before this court were crystalized to two, namely, the
validity of the agreement and the procedural fairness or otherwise
of the applicant’s retrenchment.
I now consider whether the agreement can be set aside in terms of
section 77(A), 77(3) and 77A (e) of the BCEA. The relevant
parts of
the agreement are the following:
‘
Termination of Employment
5.1. The company and the employee hereby agree that the consultation
process and all the other provisions of Section 189 of the
Labour
Relation Act have hereby been complied with.
5.2. The company and the employee further agree that the employment
of the employee with the company will terminate by agreement
with
immediate effect on 30 April 2010.
5.3. This agreement is entered into by the employee and of her own
desire and accord. It is recorded that the employee was not
in any
manner forced or coerced to conclude this agreement.
Settlement
5.4. This agreement is entered into in full and final settlement of
all claims of any nature whatsoever arising from the termination
of
the employment of the employee with the company.
5.5. It is further agreed that this agreement was reached in full
compliance with all procedural requirements in terms of the Labour
Relation Act, 1995, and all procedural requirements pertaining to
termination by agreement.
5.6. The employee fully understands and is aware of all the provision
of this agreement.
Payment
5.7. The company undertakes to pay the employee as follows:
Pay the following on or before the last working day of April 2010
Salary for April 2010 (last day: 30 April 2010)
7591.00
Leave pay out (11.167)
3260.33
1 Months (sic) Salary (notice pay)
7591.00
Severance Pay (1week for every completed year’s services(3))
4379.42
UIF and PAYE to be deducted off the finale amount due.
TOTAL 22821.76
General
5.8. ‘This agreement constitutes the required statutory written
notice of the termination of the employment of the employee’.
The applicant relied on
Goddard v Metcash Trading Africa
(Pty)Ltd
1
where the court dealt with the issue of misrepresentation as
follows:
‘
it is
trite that a misrepresentation effectively removes the applicant’s
assent thereby resulting in a situation in which
no agreement exists.
The agreement will accordingly be void
ab
initio
.
In order to be successful, the complaining party must show that he
was induced by a misrepresentation to enter into a contract.
In other
words, he must show that he would not have entered into the contract
but for misrepresentation. The court was referred
to the following
passage from RH Christie in the
Law
of Contracts in South Africa
3ed
at 316-317:
The
victim
of misrepresentation cannot be permitted to rescind the contract
unless he can show that he was induced by the misrepresentation
to
enter into a contract… the requirement has been expressed in
different ways: he must have acted upon misrepresentation
in entering
into the contract, he would not have entered into the contract but
for the misrepresentation; acting with ordinary
prudence and
discretion, he would not have entered into the contract if he had
know the truth…
A person who knew the truth all
along, or to whom it was revealed by the maker of the
misrepresentation or who discovered it in
some other way before the
contract was entered into cannot claim to have been induced by the
misrepresentation; nor can a person
who would still have signed the
contract if he had known its true nature…nor can a person who
does not care where the truth
lies because he does not regard the
presentation as material…
’
See also
Bowditch v Peel and Magill
2
where the court pointed out that the person who has been induced must
make an election as to whether he stands by the contracts
or claims
damages:
‘
A
person who has been induced to contract by the material and
fraudulent misrepresentation of the other party may either stand by
the contract or claim rescission...It follows that he must make his
election between these two inconsistent remedies within a reasonable
time after knowledge of the deception. The choice of one necessarily
involves the abandonment of the other. He cannot both approbate
and
reprobate’.
Only the applicant testified on the issue of misrepresentation. Her
evidence was that contrary to the terms of the agreement,
she is and
was at no stage aware of the provisions of section 189 of the LRA
and whether the respondent had complied with all
the procedural
requirements pertaining to the termination of her contract of
employment by agreement. She only believed that
the respondent had
complied with the requirements of the LRA. No evidence was led by
the respondent to gainsay the applicant’s
version which she
maintained even under vigorous cross-examination.
It is common cause that at the meeting in which the applicant was
informed of the sale of the branch where she was working, she
was
presented with three options from which she, after a few days had to
choose. She made her choice. Section 189 (1) of the
LRA requires an
employer which contemplates dismissing employees for reasons based
on its requirements to consult, inter alia,
its employees likely to
be affected by the proposed dismissal. Section 189 (2) of the LRA
requires the employer and the consulting
parties to engage in a
meaningful joint consensus seeking process during which an attempt
to reach consensus on a number of issues
must be made. Those issues
include the method of selecting employees to be dismissed and
severance pay for dismissed employees.
Consultation as envisaged in
section 189 of the LRA requires both consulting parties to make a
contribution to the discussions.
It does not give the employer party
power to dictate to employee parties.
At the meeting of 6 April 2010, the respondent acted in breach of
section 189 of the LRA in that it denied the applicant of the
opportunity to influence the selection procedure as the respondent
had pre-determined it. She had to choose from the three options
the
respondent presented. The applicant’s severance pay was also
pre-determined. It was the statutory minimum.
The signing of the agreement was also not preceded by a written
notice inviting the applicant to consult with the respondent
disclosing information stated in section 189 (3) of the LRA. When
the agreement was signed the respondent knew that it had not
complied with its pre-retrenchment statutory obligations. In an
attempt to conceal the omission it included in the settlement
agreement clauses to the effect that it had complied. In so doing it
deliberately misrepresented to the applicant who knew no
better that
her retrenchment was effected in compliance with the relevant
legislation. As the applicant trusted, the respondent
she entered
into the agreement. Our law protects litigants who are victims of
misrepresentation from being bound by agreements
they would not have
consented to but for the misrepresentation. The applicant’s
evidence that she would not have signed
the agreement had she known
that it was in breach of the LRA was not challenged. Her evidence
under cross-examination that she
was bound by the agreement as she
has signed it and that she was happy with the terms and condition of
the agreement does not
vitiate her evidence that she is not a lawyer
and had no knowledge of the provisions of the LRA. The totality of
her evidence
proves that she was induced by misrepresentation to
enter into the agreement. The prejudice the applicant suffered by
enter into
the agreement is that she was denied of all the benefits
that come with compliance with the requirements of section 189
including
an opportunity of protecting herself from being retrenched
by suggesting a selection procedure which favoured her and a
possibility
of influencing her severance pay.
The clause that the applicant fully understood and was aware of all
the provisions of the agreement does not assist the respondent.
The
respondent had to ensure that the applicant understood the entire
agreement before signing it as that would have placed her
in a
position to give her consent. Its failure constituted
misrepresentation which rendered the agreement void
ab initio
.
In the circumstances, the voluntary retrenchment agreement entered
into by the applicant and respondent is set aside.
The termination of the employment relationship between the applicant
and the respondent was triggered by the sale of the respondent’s
branch where the applicant worked. Section 197 governs transfer of
contracts of employment and mainly protects employees from
losing
their jobs unfairly as a result of the sale of business. It provides
that a transfer of business can take place with or
without agreement
with employees. The effect of section 197 (2) of the LRA is that
when the transfer is without agreement with
employees the transfer
becomes a seamless exercise in which the new employer is
automatically substituted in the place of the
old one in respect of
all contracts of employment existing immediately before the date of
transfer. When the transfer takes place
by agreement, the employer
party is required in terms of section 197 (6) of the LRA to disclose
to the appropriate employee party
all relevant information that will
allow it to engage effectively in the negotiation. The appropriate
employee party in this
case would have been the applicant.
The respondent did not provide the applicant with the required
information. It refused even to disclose the identity of the new
employer. It limited the content of the negotiations to providing
three options from which the applicant had to choose. Termination
of
employment by agreement may result from a proper application of
section 197. However, in all the events which preceded the
signing
of the agreement the respondent did not comply with provisions of
section 197 of the LRA.
I now consider whether the applicant’s retrenchment was fair.
Section 189 (1) of the LRA requires an employer contemplating
retrenching employees to consult appropriate persons. For purposes
of this case, the applicant was one of the appropriate persons
as
she was likely to be effected by the contemplated retrenchment as no
evidence of the existing of a trade union at the respondent
was led.
The respondent was required by section 189 (3) to issue the
applicant with a notice disclosing relevant information
for purposes
of consultation. In the consultation, the respondent was required to
engage in a meaningful joint consensus-seeking
process and attempt
to reach consensus on
inter alia
appropriate measures to
avoid dismissal, the procedure to select employees to be retrenched
and their severance pay.
If the meeting of 6 April 2010 was meant to be a pre-retrenchment
consultation, it did not comply with the requirements of section
189
as it was not a meaningful joint consensus-seeking process. It
limited the issues which the applicant and respondent consulted
about as the respondent had pre-determined the issues which were the
subject of the consultation and limited them to an offer
of three
options from which the applicant had to select one. The offer of
voluntary severance package did not relieve the respondent
of its
pre-retrenchment statutory obligations. Section 189 required the
respondent to have given the applicant an opportunity
to influence
the amount of the severance pay. The choice of accepting the
severance pay should have been a product of consultation.
The
applicant should have been given an opportunity to attempt to save
her job by suggesting a selection procedure in her favour.
Had LIFO
been applied as a selection procedure, the applicant might have been
saved from retrenchment without the need of having
to compete for a
position with other employees. The applicant was never given an
offer to choose between a guaranteed job at
the respondent and a
severance package. For these reason. I find that the applicant’s
retrenchment was in breach of section
189 of the LRA and unfair.
The applicant sought compensation equivalent to remuneration she
would have earned over the 3
1/2
months she was
unemployed between the date of her unfair retrenchment and the date
on which she started working on the job she
got thereafter. The
compensation is just and equitable considering the applicant’s
length of service and her procedurally
unfair retrenchment as a
result of misrepresentation by the respondent. The applicant
received severance package in the amount
of R22821.76 consisting of
her last salary, leave pay, one month’s salary as notice pay
and severance pay in the sum of
R4379.42. All the other amounts but
the severance pay was due to the applicant. It must therefore be
deducted from the compensation
due to the applicant.
In the circumstances, the following order is made:
17.1. The voluntary retrenchment agreement entered into between the
applicant and the respondent in April 2010 is void
ab nitio
and is set aside.
17.2. The applicant’s dismissal for operational requirements of
the respondent was procedurally unfair.
17.3. The respondent is directed to pay the applicant compensation in
the amount of R22188.08 which is equivalent to remuneration
she would
have earned over a period of 3
1/2
months minus
the R4379.42 severance pay she received in April 2010.
_______________________
LALLIE, J
Judge of the Labour Court of South Africa
Appearances
For the Applicant: E Van Staden of Legal Aid Port Elizabeth
For the first Respondent: Advocate PL Vys
Instructed by: Gerhardt Botha and Partners
1
[2010]
2 BLLR 186
(LC) at 191 G-192B
2
1921
AD 561
at 572-573