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[2014] ZALCJHB 139
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National Union of Metalworkers of South Africa and Others v Crabtree Electrical Accessories SA: A division of Powertech Industries (Pty) Ltd (JS1327/09) [2014] ZALCJHB 139 (29 April 2014)
REPUBLIC
OF SOUTH AFRICA
THE LABOUR COURT OF
SOUTH AFRICA, JOHANNESBURG
JUDGMENT
NOT REPORTABLE
CASE NO: JS 1327/09
NATIONAL UNION OF
METALWORKERS
OF SOUTH AFRICA
First
Applicant
ELSIE KUNENE and 23
OTHERS
Second-Further
Applicants
And
CRABTREE ELECTRICAL
ACCESSORIES
SA: A DIVISION OF
POWERTECH
INDUSTRIES (PTY)
LTD
Respondent
Heard:
27; 28; 29; 30 May 2013
Delivered:
29 April 2014
Summary:
Retrenchments: Not sufficient for employees
to merely allege that in general,
the employer had no need to
retrench. Employees must lay factual basis for conclusion that there
was no need to retrench.
Selection criteria:
The selection of employees for retrenchment purely to inflate the
numbers not fair and objective
JUDGMENT
TLHOTLHALEMAJE, AJ
Introduction
:
[1] The Second to further
Applicants’ services were terminated on 7 August 2009 on the
grounds of operational requirements.
They dispute the procedural and
substantive fairness of the dismissal and seek retrospective
reinstatement. In the alternative,
they seek maximum compensation.
The
identity of the individual Applicants
:
[2] In its response to
the Applicants’ statement of claim, the Respondent objected to
the jurisdiction of the Court in relation
to two of the Applicants
that were retrenched, viz, Diphoko Molefi (24
th
Applicant)
and ENT Maphisa (25
th
Applicant). In this regard, it was
submitted that the two individuals were not part of the initial
referral of the dispute to the
Metal and Engineering Industries
Bargaining Council (MEIBC) as their names were not included in the
list of Applicants attached
to the referral form.
[3] The Applicants in the
pre-trial minute that was signed on 15 September 2011, conceded to
the preliminary point raised, and the
dispute in respect of the two
individuals was withdrawn. However, when the trial commenced, Mr.
Motaung on behalf of the Applicants
brought an application to
reinstate the dispute in respect of the two individuals. Arguments
were heard in this regard and the
proceedings were adjourned until
the next day when a ruling was to be delivered. Before a ruling could
be delivered, Mr. Motaung
advised the Court that the application was
abandoned. To this end, this application only involves 22 Applicants.
Background
and common cause facts:
[4] The Respondent is a
manufacturer and supplier of electrical equipment and accessories
such as sockets, switches and allied products.
It had initially
embarked on a restructuring process in 2007, and following inputs
from NUMSA, some aspects of its operations were
outsourced to service
providers (SMMES) created by its former employees. These were
employees who had accepted voluntary packages
at the time, rather
than an automatic transfer into the employ of other service providers
who were at that stage operating the
outsourced
operations/departments on behalf of the Respondent.
[5] Notwithstanding the
restructuring process in 2007, the Respondent introduced short-time
in October, November and early shut-down
in December 2008 as a result
of non-viability of its operations. On 28 January 2009, the
Respondent issued to all affected employees
and to NUMSA, a notice in
terms of section 189 (3) of the Labour Relations Act (The Act). The
departments that were affected were
PVC Moulding, Metal Fabrication,
Cover Plate, Nylon Moulding and Printing. With effect from February
2009, consultation meetings
were held with NUMSA regarding the
restructuring and possible retrenchments. In total, eleven
consultative meetings were held between
04 February 2009 and 30 July
2009. During this period, NUMSA utilised no less than four different
representatives.
[6] Following from the
consultation process, 102 employees, including members of NUMSA
accepted voluntary retrenchment packages.
Consultations continued in
respect of some remaining 38 employees who had not accepted the
voluntary retrenchment packages. Some
of these employees were then
transferred to the Nylon Department and then later recalled back to
their previous departments. Ultimately,
the jobs of 16 employees were
saved, leaving the remaining 24 employees. Consultations however in
respect of the remaining employees
collapsed around June 2009, and
NUMSA through its erstwhile attorneys Routledge Modise threatened
urgent action against the Respondent
were it to proceed with
transferring the remaining employees to the SMMES. The
Respondent conceded at the time that its intended
transfer of the
affected employees to the SMMES did not amount to a transfer as
contemplated in section 197 of the Act, and it
agreed to continue
with the consultation process with NUMSA in respect of the remaining
employees.
[7] On 16 July 2009, the
parties met with a view of concluding the consultation process.
However, not much progress was made as
NUMSA wanted to start the
process afresh and sought further documentary information which the
Respondent had provided. NUMSA was
of the view that the Respondent
had no compelling reasons to retrench the 24 remaining employees. The
deadline of the consultation
process of 15 July 2009 had passed and
was extended to 30 July 2009.
[8] On 30 July 2009,
NUMSA was still of the view that there was no need to retrench and
declared a dispute. The Respondent informed
NUMSA that in the light
of the latter’s position, the consultation process was
exhausted and that notices of retrenchments
would be issued to the 24
employees. On 07 August 2009 such notices were issued, and the
employees were paid out their severance
packages. A dispute was then
referred to the MEIBC. This resulted in a certificate of
non-resolution being issued, enabling NUMSA
to initiate these
proceedings.
The Respondent’s
evidence:
[9] Pierre Northal, who
is now retired and was previously the Respondent’s Managing
Director between 2003 and 2011 testified
as follows:
Following the
restructuring process in 2009, the Respondent has since 2011, merged
as a division into a larger business group. From
2004, the Respondent
encountered business challenges as a result of cheap imports from
China and other countries. This resulted
in an escalation of local
costs. The factory part of the Respondent consisted of various
sections including moulding shop, paint
shop, metal, and assembly.
The second to further Applicants were less skilled and were mainly
employed as operators in the moulding
shop. Between 2004 and 2005 the
Respondent’s financial position was relatively healthy.
However, towards the end of 2005,
the business faced challenges from
an influx of cheap imports, high costs of raw material and increased
competition. This resulted
in the Respondent having to increase its
prices, and thus making it less competitive. Between 2006 and 2009
the Respondent’s
financial position remained precarious as
business had continued to decline.
[10] Amongst other
measures the Respondent had taken was to introduce short time in
March 2007. In May 2007, the Respondent commenced
consultations with
NUMSA regarding retrenchments. This process was concluded in August
2007, and also resulted in the creation
of SMMES which were managed
by ex-employees affected by that process. Also flowing from that
restructuring process was that the
relocation of the assembly portion
of the factory to Lesotho. The Respondent also approached the
National Department of Trade and
Industry for assistance and
intervention more specifically with regard to cheap imports. However
nothing came out of these initiatives.
[11] Northal also made
reference to the Respondent’s financial results for the period
2005 to 2010 as contained in pp203 –
213 of the Respondent’s
bundle. As shareholders wanted a return on assets of 15%, this was
only reached once in 2005. Thereafter
this had significantly dropped
over that period and by 2009, it had only reached between 3 and 3½%.
Sales marginally increased
in 2008. Net margins (profits after tax)
declined significantly from 7% in 2005 to 2.9% in 2010. As at 2009
the figures in this
regard were 2.7%. In regards to pricing
comparisons with its competitors (viz, Clipsol and CBI), the
Respondent could only compete
in respect of four products which were
below price, and this was despite competitors having dropped the
price of their own products
even further as a consequence of cheap
imports. As competitors had targeted the Respondent’s high
volume products, the difference
in pricing was between 35% and 50%.
[12] Northal further
blamed the global economic meltdown in 2008 for compounding the
Respondent’s economic woes. The Respondent
experienced an
increase in total manufacturing costs despite taking measures to curb
administration and delivery costs, overheads,
and other associated
costs. Contract workers were also reduced and following from the
first retrenchment exercise in 2007 one unit
was also merged with
another company. The outsourcing exercise flowing from restructuring
had also resulted in some cost saving,
but still there was not much
improvement in the Respondent’s financial position
[13] Under
cross-examination of Northal had conceded that part of the
outsourcing plan was to retrench employees in order to make
savings.
He contended that he was not aware that the Respondent could have
applied for exemptions from MEIBC in respect of wage
increases or
costs of labour. He further conceded that it was possible that the
established SMMES could have paid their employees
less. He however,
did not know how those entities were operating as they were
completely separate and independent from the Respondent.
[14] Mike Hlongwane was
previously employed as the Respondent’s Employee Relations
Manager and was involved in the restructuring
process and
consultations with NUMSA from the beginning. In March 2007 he had
notified NUMSA of the Respondent’s decision
to implement short
time as a result of reduction in orders experienced by the
Respondent. He confirmed that in 2007, the assembly
plant was
relocated to Lesotho, and that as a result of NUMSA’s input,
some operations were outsourced to the SMMES following
a section 189
process. In October 2008, the Respondent again introduced short time
with a view of avoiding retrenchments. This
was for the period 24
th
and 31
st
October and 07
th
and 14
th
November. The period between 01 and 12 December 2008, and 09 January
2009 was considered as a lay off or early shut down period.
In
January 2009, despite the short-time, lay-offs and early shut down,
the business had still not improved. On 28 January 2009
notices in
terms of section 189 (3) of the Act were issued. Hlongwane had
attended all eleven meetings that were held between 04
February and
30 July 2009.
[15] Hlongwane further
testified that during these consultation meetings, NUMSA did not at
any stage raise any objections about
outsourcing, nor did it
challenge the Respondent’s financial reports. He further
contended that NUMSA did not at any stage
propose any alternative to
retrenchments even though it held the view that there was no need to
retrench. The fact that NUMSA also
utilised four different
representatives did not add to progress and this had further
prolonged the consultation process. In the
fourth consultative
meeting held on 31 March 2009, the focus had shifted to the issue of
severance package. Consensus was reached
on the voluntary severance
packages. More than a hundred employees had accept voluntary
severance packages. The rest of the employees
had refused to even
consider a transfer to the SMMES that came about as a result of the
2007 restructuring process.
[16] Under
cross-examination, Hlongwane conceded that his knowledge of the
commercial rationale for the retrenchments was limited.
He was,
however, aware that the Respondent’s products were between 30%
to 40% more expensive than those of competitors. He
conceded that the
Respondent’s other products such as cables, cords and
multi-plugs were less expensive than those of competitors.
He denied
that the assembly part that was relocated to Lesotho was still part
of the Respondent and contended that it was an entity
on its own.
Hlongwane further testified that short-time could not have been
implemented indefinitely in order to save jobs, and
furthermore, this
measure would not have in the long term turned the business around.
[17] With regard to
employees or areas that were to be affected by the retrenchment,
Hlongwane had testified that mainly operators
were identified. Thus
employees in the “C” category who were machine setters
were not to be affected by the exercise.
It was put to him during
cross-examination that the 4
th,
14
th
and 21
st
applicants, viz, Messrs Joseph Tyomane, Esau Thulani Hlatshwayo and
Fanuwu Mlotshwa were employed as setters and yet they were
retrenched. Hlatshwayo had denied that these Applicants were employed
in that capacity at the time of the retrenchments. He however,
conceded that if they were indeed setters at the time, it would have
been a mistake to retrench them.
Evidence on behalf
of the Applicants:
[18] Nothing turned on
the evidence of Sifiso Msibi, who is currently employed by the
Respondent as a stores assistant and who is
also a NUMSA shop
steward. He he had merely confirmed that the SMMES that came into
place in 2007 were still in operation, and
they had employed about
120 of the Respondent’s former employees following the
retrenchments.
[19] Esau Hlatshwayo is
the fourteenth Applicant and was previously employed as a machine
setter since 20 July 1995 until his retrenchment.
His position was at
grade C and he was employed in the Respondent’s Metal
Fabrication and Cover Plate Cell unit. His main
functions entailed
setting and operating machines. Under cross-examination, he conceded
that at the time that he was retrenched,
he had been moved to the
Nylon Moulding unit, and further that he was not performing duties of
a setter. He had maintained his
grade C status and was paid at that
level even though he no longer performed functions of a setter. He
was moved to the other unit
in early August 2009, and conceded that
it was not unusual for the Respondent to move employees within units.
[20] The evidence of
Matli Joseph Tyomane followed a similar pattern as that of
Hlatshwayo. He is the Fourth Applicant and also
testified that he was
initially employed as a setter. He was however moved to the position
of operator in the Moulding unit before
some three weeks prior to the
retrenchments. He denied under cross-examination when it was put to
him that the machines in his
previous department were obsolete hence
he was moved. He contended that those machines were still functional,
as the products it
produced were still in demand.
[21] The testimony of
Fanuel Mlotshwa, the Twenty First Applicant also followed the same
pattern as that of the last two witnesses
on behalf of the Applicants
and it is not worth repeating.
The
legal framework
:
[22]
Where an employer dismisses employees on account of its operational
requirements, the provisions of section 188(1) of
the Act obliges the
employer to prove that the reason for the dismissal was fair. The
burden of proof on the employer is also imposed
by the provisions of
section 192 (2) of the Act. In emphasising the question of onus,
Tlaletsi JA in
Super
Group Supply Chain Partners v Dlamini and Another
[1]
restated
that it is expected of the employer to discharge the onus of proving
that that the dismissals of the employees were
fair. In doing so,
evidence was to be presented to show that there was a need to
retrench, there was a fair reason to retrench
the employees, the
selection criteria was fair; and the dismissals were effected in
accordance with the requirements of a fair
procedure.
[23]
The Labour Appeal Court has over time adopted different approaches
when evaluating the substantive fairness of dismissals related
to
operational requirements. The exposition of these various tests is to
be found in
PAK
Le Roux’s article in Contemporary Labour Law
[2]
.
These test, adopted within the context of the now repealed Labour
Relations Act 28 of 1956 included firstly, that the decision
to
retrench must be taken in a “
bona
fide and business-like manner”
approach
[3]
. The second test
adopted in
National
Union of Metalworkers of South Africa v Atlantis Diesel Engines (Pty)
Ltd
[4]
was
the ‘
Dismissal
as the last resort’,
in terms of which an element of fairness was added to the first test.
Thus in terms of this test, it was not merely the correctness
or
otherwise of the decision to retrench, but the fairness thereof, and
whether the decision to retrench was the only reasonable
option given
the circumstances. Thirdly, the “
Rationality”
test, which found favour in
SA
Clothing and Textile Workers Union and Others v Discreto – a
Division of Trump and Springbok Holdings
[5]
.
The
essence of this test is to enquire into whether the decision to
dismiss was genuine and not a sham. In deciding whether this
was the
case, the court would assess whether the ultimate decision was
operationally and commercially justifiable on rational grounds.
The
fourth and last, “Fairness/reasonableness” approach, was
obiter
,
mentioned in
BMD
Knitting Mills (Pty) Ltd v SACTWU
[6]
within the context of the
Labour Relations Act 66 of 1995
. The
approach looked at reasonableness of both the decision and the way in
which it is given effect to.
[24]
The introduction of
section 189A
(19) in the 2002 amendments to the
Act placed a requirement that the courts must be interventionist and
decide whether retrenchment
was “operationally justifiable on
rational grounds”. Coincidentally, the same phraseology was
used by Davis AJA (as
he then was) in
BMD
Knitting Mills (Pty) Ltd
[7]
.
A
court must enquire whether there was in fact a genuine reason behind
the decision to reduce operating costs.
However,
due to the prescriptive nature of section 189A (19) of the Act, the
drafters of the anticipated amendments to the Act have
seen it fit to
remove it from the Act (See clause 33 (b) of the Labour Relations
Amendment Bill, and also the Memorandum of Objects
on Labour
Relations Amendment Bill, 2012).
[25]
In his closing arguments, Mr. Malan on behalf of the Respondent had
made reference to
Van
Rooyen and Others v Blue Financial Services (South Africa) (Pty) Ltd
[8]
in which Van Niekerk J had referred to the objective enquiry
enunciated in
BMD
Knitting Mills (Pty) Ltd (supra)
.
In this case, Davis AJA (as he was then) formulated the principles 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, albeit
that the enquiry is not
directed to whether the reason offered is the one which would have
been chosen by the court. Fairness,
not correctness is the mandated
test’
.
[26]
Recently, the Labour Appeal Court in
Super
Group Supply Chain Partners (supra)
endorsed
its earlier decision in
Kotze
v Rebel Discount Liquor Group (Pty) Ltd
[9]
.
In
Kotze
(supra)
the Labour Appeal Court, per Mogoeng AJA (as he then was) stated the
following;
‘
The
final decision to retrench must be informed by what transpired during
consultation. That is why consultation must precede the
final
decision. The requirement of consultation is essentially a formal or
procedural one, but it also has a substantive purpose.
That purpose
is to ensure that such a decision is properly and genuinely
justifiable by the operational requirements or by a commercial
or
business rationale.’
And
‘
The
function of the court in scrutinising the consultation process is not
to second-guess the commercial or business efficacy of
the employer’s
ultimate decision but to pass judgment on whether such a decision was
genuine and not merely a sham. The court’s
function is not to
decide whether the employer made the best decision under the
circumstances, but only whether it was a rational
commercial or
operational decision, properly taking into account what emerged
during the consultation process. ’.)
Evaluation
[27] An evaluation of the
above Labour Appeal Court decisions, more specifically those in
favour of the hybrid between the “rationality”
and
“fairness/reasonableness” approach, indicates that in
applying the provisions of section 189A (19) of the Act,
an
assessment of the substantive fairness of a retrenchment, requires a
court to adopt an objective approach based on the information
available to it and to enquire whether from the consultations that
took place, it can be said that the decision to retrench was
not a
sham but was based on genuine economic rationale.
Were the
retrenchments “operationally justifiable on rational grounds”?
[28] In the parties’
pre-trial minute, the Applicants had made numerous allegations
including
inter alia
that the meetings held between January
and July 2009 did not constitute proper consultations; that the
voluntary packages were
offered outside of the consultation process;
that the short-time was implemented to unprocedurally and unfairly
prejudice union
members and shop-stewards; that the decision to
retrench was a foregone conclusion and the identity of possible
retrenches was
unilaterally predetermined. Despite making these
serious allegations, no evidence was however tendered by the
Applicants during
these proceedings to substantiate them, and this is
apparent from the above summary of their witnesses’ testimony
[29] The Applicants had
further alleged that in general, there was no need to retrench as the
Respondent was still in active business,
and profitable. The
Applicants’ contention as per their statement of claim was that
the Respondent merely sought to “berid”
itself of its
workforce by this alleged retrenchment. They had further alleged that
their transfer to a third party service provider
was a sham as these
providers were merely an alter ego of the Respondent. Mr. Motaung on
behalf of the Applicants had in his closing
submissions, further
argued that NUMSA’s position has always been that the
retrenchments were merely a ploy to bring in the
SMMES to run the
Respondent’s operations.
[30] It needs to be
pointed out at the onset that despite Northal’s elaborate
testimony in regards to the need to retrench
in the light of the
Respondent’s finances since 2005, the Applicants did not deem
it fit to call upon any witness to rebut
such evidence. The
Applicants’ best shot at attempting to dispute the state of the
Respondent’s finances was merely
through a belaboured
cross-examination of Northal. Curiously for the Applicants, the only
evidence that was adduced on their behalf
was merely in respect of
the selection of the three individual Applicants that had testified
in these proceedings in regards to
their positions at the time of
retrenchments.
[31] The Respondent’s
evidence through Northal in particular was that despite having
embarked on a retrenchment exercise in
2007, it had continued to be
faced with substantial economic problems. The source of the problem
was rationally analysed and was
linked to a variety of factors. These
included cheap imports from China, the pricing of its products as
against competitors, the
cost base, particularly pertaining to
labour, raw material, manufacturing, and delivery costs. The
Respondent’s financial
position as further evinced by the
factory results can be gleaned from page 209 of its bundle. Various
measures were taken in order
to contain the situation, and when all
else had failed, a large number of employees were retrenched in
August 2007. After these
retrenchments, and in early 2008, the
financial position of the Respondent had marginally improved. However
with the global economic
meltdown of 2008, the Respondent’s
financial position had deteriorated despite pro-active measures being
taken in respect
of administration costs, overheads, delivery costs,
and slashing of contract workers.
[32] Northal had during
his cross-examination, made concessions that before the
retrenchments, some of the Respondent’s products
were
over-priced as against those of its competitors. In early 2008 there
was a marginal increase in the volume of sales and there
was a slight
improvement in containing costs. However on the whole, the Respondent
was not in a position to compete or to make
profits.
[33] In my view, the
purpose of the cross-examination of Northal and Hlongwane was merely
to nitpick rather than to counter the
factual reality that there was
a need to retrench. In this regard, the Respondent’s witnesses
were asked at length about
the reason the Respondent had not sought
exemptions or extensions from the MEIBC in respect of lay-offs and
wage increases. It
was not in dispute that with a view of avoiding
retrenchments, the Respondent had over 2007 and into 2009 before the
retrenchments,
implemented lay-offs, introduced short time and early
shut-downs. The issue of exemptions at the time was governed by
Clause 23
of the MEIBC Consolidated Main Agreement (For the period 01
July 2008 to 30 June 2011). As was correctly pointed out by Mr. Malan
on behalf of the Respondent, an application for exemption was a
matter that should have been jointly agreed to by the Respondent
and
NUMSA. Furthermore, exemptions were not guaranteed by the MEIBC, and
even if granted, there was no suggestion from the Applicants
that
they would have alleviated the Respondent’s financial problems
in the long term. I further did not understand it to
be the
Applicants’ case that this was one of the alternatives they had
proposed to the Respondent in any one of the 11 consultative
meetings
held between February 2009 and July 2009. In effect, this issue came
up as an afterthought during cross-examination of
the Respondents’
witnesses. This can only add credence to Hlongwane’s
contentions that NUMSA did not come up with tangible
alternatives to
retrenchment during the consultation process.
[34]
Mr. Motaung had argued that the SMMES were a sham, and were created
merely to off-load employees in order to alleviate the
Respondent’s
labour costs. It was common cause that the SMMES to which some of the
Respondent’s operations were outsourced
came into being as a
direct result of consultations with NUMSA in 2007 in order to
minimise the effects of retrenchments at the
time. They were set up
by ex-employees with the assistance of the Respondent. For the
purposes of the retrenchment exercise embarked
upon in January 2009,
I fail to appreciate how the creation of these SMMES in 2007 is
pertinent in establishing fairness or otherwise
of those
retrenchments. It was common cause that the proposals to invoke the
provisions of section 197 of the Act in order to transfer
the
employees to these SMMES in 2009 during consultations were abandoned
as NUMSA was of the view that their transfer would not
have been
within the prescripts of that provision. Some of those employees that
joined these SMMES after accepting voluntary retrenchment
packages in
2009 did so out of choice. There is thus no merit in the submission
that there was a causal connection between the
creation of the SMMES
in 2007 and the retrenchment of the employees in 2009. Other than
mere conjecture and unsubstantiated allegations
from the Applicants,
the evidence of Northal pointed to these entities as being
independent from the Respondent. The SMMES were
only provided with
financial and logistical support in their initial stages when they
came into being. Otherwise for all intents
and purposes, they were
and are independent entities.
[35] A further argument
raised on behalf of the Applicant by Mr. Motaung was that the real
reason the Respondent had retrenched
the employees was in order to
reduce its large employee salary bill and to increase its profit
margins. Northal conceded that labour
cost was one of the
considerations when the decision to retrench was contemplated.
However these costs were looked at as a whole
in conjunction with
other costs already alluded to above. It is common knowledge that the
global economic meltdown of 2008 had
devastating effects on all
modern economies. Employers and employees alike were not spared, and
the effects of the melt-down differed
in scale from business to
business. Some businesses were so affected that they had to close
down completely, whilst others the
effects of the melt-down were only
in respect of their profit margins.
[36]
The question whether a restructuring was necessary in order to
increase the business’ competitiveness or to increase
efficiencies by cutting labour costs was also considered in
General
Food Industries Ltd v FAWU
[10]
.
The
Labour Appeal Court, per Nicholson JA (Zondo JP and Jafta AJA (as
they were then) concurring), held that the Act recognises
the right
of an employer to dismiss employees for a reason based on its
operational requirements without distinguishing between
a business
struggling to survive and a profitable business wanting to increase
its profits . To this end, the Labour Appeal Court
accepted that an
employer was entitled to retrench employees in order to increase its
profits rather than to avoid losses. This
is to be expected in
capitalist and modern economies where the main aim of any business is
to generate profits. Notwithstanding
this principle, the overriding
consideration in cutting labour costs by way of retrenchments in
order to make a business more profitable
will always remain that of
fairness.
[37] In this case, I am
satisfied that the Respondent has discharged the onus of proving that
its decision to retrench was to give
effect to requirements based on
its economic needs as they prevailed at the time. That decision was
based on a genuine commercial
rationale and there is no contrary
evidence to suggest that the decision was a sham. In also coming to
this conclusion, regard
is had to previous similar exercises in 2007,
the Respondent’s failure to remain commercially viable
thereafter, and the
demands from its share-holders. The Applicants
could not dispute the clearly perilous financial status of the
Respondent as gleaned
from the evidence of Northal which was
supplemented by documentary evidence. I am further satisfied that the
Respondent had more
particularly in 2008, taken measures with a view
of preventing the retrenchments, and that there were no guarantees in
the measures
pertaining to exemptions, which in any event, the
Applicants did not deem fit to propose during the consultation
process. The Respondent
had considered and implemented alternatives
available to it at the time and its decision to ultimately retrench
cannot be faulted.
[38] An observation needs
to be made in respect of how the Applicants, more particularly NUMSA
had approached the consultation process.
Section 189 (2) of the Act
enjoins the employers and other consulting parties to engage in
meaningful joint consensus-seeking process
and to attempt to reach
consensus on items listed in sub-sections (a) to ( c). In my view,
logic dictates that in such consultations,
the starting point would
be for the parties to reach agreement that the employer has indeed a
genuine need to retrench. This would
obviously be after consideration
of all reasonable measures taken to avoid retrenchments. Furthermore,
once the parties have passed
that hurdle, and then in earnest start
consulting over the method of selection, the timing of the
dismissals, and severance packages,
an inference should be drawn that
consensus was reached on other prior issues, more particularly the
employer’s need to retrench.
This is even more apposite where
the Union as in this case, had proceeded to consult with the
Respondent over retrenchment packages
as evidenced from the fourth
consultative meeting held on 31 March 2009 (Vide p79 of the
Respondent’s bundle). In the absence
of evidence to suggest
that the parties had during consultations agreed to reserve
discussions surrounding whether there is a need
to retrench, and to
therefore discuss other aspects of the retrenchments, it becomes a
contradiction for a Union to consult over
other issues including
severance packages, and when a group of its members refuse to accept
the packages, to then claim that there
was no need to retrench in
general.
The
selection criteria
:
[39] The crux of the
Applicants’ case appeared to be the selection of Esau
Hlatshwayo, Matli Joseph Tyomane and Fanuel Mlotshwa
for
retrenchments. It was common cause that the procedural fairness of
the dismissal was not placed in dispute, and to the extent
that the
selection of these individual Applicants was in dispute, Mr. Malan
had argued on behalf of the Respondent that the court
was precluded
from making any determination in that regard.
[40] Section 189 (19) (a)
of the Act provides
inter alia
that the Labour Court must find
that the employee was dismissed for a
fair reason
(my
emphasis) if –
(d) –
selection criteria were fair and objective.
It is
apparent from this wording that the legislature acknowledged that
issues of procedural fairness are intrinsically linked to
those of
procedural fairness in retrenchments, and to that end, the selection
of employees for retrenchment must also be based
on a fair reason.
Within the context of a retrenchment falling under s 189A of the Act
this Court in
Perumal
and Another v Tiger Brands
[11]
found
that the employee was barred by s189A(18) from contesting the
procedural fairness of her dismissal. Nevertheless, the court
went on
to find that the issues of procedural fairness could not neatly be
severed from those of substantive fairness and took
certain
procedural failings into account when assessing whether the
retrenchment had been substantively fair. In dealing with a
similar
issue, Van Niekerk J in
Van
Rooyen and Others
[12]
held
as follows;
‘
The
application of fair selection criteria is the second component of
substantive fairness. There is a procedural component to the
enquiry
– s 189(2) (b) requires the parties to consult and to attempt
to reach consensus on the method for selecting the
employees to be
retrenched. Section 189(7) gives substantive content to this
requirement by stipulating that the employer select
the employees to
be retrenched according to selection criteria that have been agreed
or, in the absence of agreed criteria, fair
and objective criteria
must be applied’.
[41] When an employer
ultimately decides to retrench, it is important to point out that all
its employees are equally entitled to
be considered on the basis of
criteria that are both “objective” and “fair”.
Objectivity implies that the
selection of employees for retrenchment
is not influenced by mere preferences or based on the whims of the
employer. Such a selection
must also not be based on nefarious
reasons to prejudice employees who would otherwise not have been
targeted for retrenchment.
Fairness in my view would imply that the
choice for selection will be in line with the finding that there was
indeed a need to
retrench, and that in the circumstances, the choice
of one employee over the other was less unfair. Ultimately, the
objectivity
or fairness of the selection criterion must be causally
linked to, and be operationally justifiable on rational grounds.
[42] In respect of the
three individual Applicants in question, it was common cause that
their positions prior to the retrenchments
were those of Setters. The
Moulding Division had been targeted for retrenchments long
before the consultation process started.
The three individual
Applicants were moved to this unit some few weeks prior to the final
decision to retrench being taken. Mr.
Malan had argued that at the
time that they were retrenched their positions had become redundant
as Setters hence they were transferred
to the new department.
[43] Hlongwane in his
evidence on behalf of the Respondent had conceded that if indeed the
three individual Applicants were Setters
at the time of
retrenchments, then they should not have been retrenched as their
grade and unit had not been identified for retrenchments.
There was
no evidence proffered to indicate the reason the three were selected
from their original unit amongst other employees
in that unit other
than that their machines were allegedly obsolete. This allegation was
refuted by these employees during their
cross-examination, and
Hlongwane’s contention that at the time they were not
performing the functions of setters is not sufficient
for a
conclusion to be made that their selection was fair. Furthermore,
there was no evidence tendered on behalf of the Respondent
as to the
reason the removal of these individuals was so proximate to the date
of the final decision to retrench.
[44] In my view, the
timing of the removal of the three individual Applicants to the unit
affected by restructuring process was
not a mere coincidence or as a
consequence of their machines having become obsolete. I am satisfied
that their transfer given its
timing was simply to make up the
numbers of employees to be retrenched. A selection of employees for
retrenchment simply to make
up and inflate the numbers of retrenchees
cannot be said to be based on fair or objective criteria, and to this
end, it follows
that the selection of the individuals concerned was
unfair.
Relief:
[45] The Applicants
sought retrospective reinstatement in the event that the court found
that their dismissals were substantively
unfair. In the light of the
finding that the dismissals were substantively unfair only in respect
of Messrs Esau Hlatshwayo, Matli
Joseph Tyomane and Fanuel Mlotshwa
and only on the basis that a fair and objective criteria for their
selection was not proven
they are entitled to some relief.
[46] Section 193 (1) of
the Act provides,
inter alia
, that if the Labour Court or an
arbitrator finds that the dismissal of an employee is unfair, it may
order the employer to reinstate
the employee from any date not
earlier than the date of dismissal, order re-employment, or order the
employer to pay compensation
to the employee. Section 193 (2) enjoins
the court to require the employer to reinstate or re-employ unless
(a) the employee does
not wish to be reinstated or re-employed; (b)
the circumstances surrounding the dismissal are such that a continued
employment
relationship would be intolerable; (c) it is not
reasonably practicable for the employer to reinstate or employ the
employee; or
(d) the dismissal is unfair only because the employer
did not follow a fair procedure.
[47] In view of the
conclusions that the retrenchments of the three individuals were only
unfair on account of their selection,
and further in view of the
principles enunciated in
Van Rooyen and Others (supra)
and
Perumal and Another (supra)
, it is my view that any form of
relief to be awarded to them should take account of the exception in
section 193 (2) (d) of the
Act. The fact that section 189(7) of the
Act gives substantive content to the requirement of fair and
objective selection criteria,
does not in my view imply that the
primary remedy should necessarily follow. To this end, the
appropriate remedy to be considered
is that of compensation as
contemplated in section 194 (1) of the Act.
[48] When assessing the
appropriate amount of compensation to which these three individual
applicants are entitled to, the court
must arrive at an amount that
is fair to both parties. This implies the court must have regard to
inter alia
, the magnitude of the unfairness found. In this
case, despite the Respondent’s main contention that these three
individuals’
machines were obsolete, no evidence was tendered
in that regard. Secondly, other than making these allegations, no
effort was made
by the Respondent to indicate on what other basis
these individuals were selected amongst other setters. Thirdly,
Hlongwane had
conceded that if they were indeed setters at the time
of retrenchments, it would have been a mistake to retrench them. To
the extent
that no discernible objective and fair criteria was
applied in selecting them, the Respondent acted in a grossly unfair
manner
towards them. On the other hand, the three individual
applicants remain unemployed since July 2009, and nothing further was
advanced
on their behalf insofar as the alternative remedy was
concerned. Taking these factors into account, compensation equivalent
to
six months’ remuneration is deemed to be fair and equitable.
Costs:
[49]
Mr. Malan sought a cost order against the Applicants more
specifically in view of their ill-considered application brought
on
the first day of trial to pursue the dispute in respect of the 24
th
and 25
th
Applicants. This was after the Applicants had correctly conceded in
the pre-trial that the two individual Applicants were not properly
before the court. For the Applicants to nevertheless have
somersaulted by bringing and thereafter withdrawing that application
was vexatious in the extreme. This was even moreso in light of the
well-known principle that a pre-trial minute constitutes a binding
agreement between the parties
[13]
.
To this end, considerations of law and fairness dictate that a
cost order should follow in respect of that application.
Other than
these costs, no further order of costs shall be made in view of the
Applicants’ claim being partially successful.
[50]
Order:
50.1
The dismissals of the individual Applicants
except in respect of Matli Joseph Tyomane (4th Applicant), Esau
Hlatshwayo (14
th
Applicant), and Fanuel Mlotshwa (21
st
Applicant), were substantively fair.
50.2
The Respondent is ordered to pay to each of
the individual Applicants, mentioned in 50.1 above, compensation in
the amount equivalent
to six months’ remuneration calculated at
their individual rate of pay as at 09 July 2009.
50.3
The Applicants are ordered to pay the costs
in respect of the application brought on 27 May 2013 and subsequently
withdrawn on 28
May 2013 in respect of the 24
th
and 25
th
Applicants.
________________
Tlhotlhalemaje, AJ
Acting
Judge of the Labour Court of South Africa
Appearances:
For the
Applicants:
Mr. P Motaung of Nomali Tshabalala Attorneys
For
the Respondent: Mr.
F Malan of Edward Nathan Sonnebergs Inc
[1]
(2013)
34 ILJ 108 (LAC)
at
para 27
[2]
(Vol
21 No.6 January 2012).
[3]
(See
Morester
Bande (Pty) Ltd v NUMSA and Another (1990) 11 ILJ 687 (LAC)
and
Seven
Able CC t/a Crest Hotel v HARWU and Others (1990) 11 ILJ 504 (LAC
[4]
(1993)
14 ILJ 642 (LAC
[5]
[1998]
12 BLLR 1228 (LAC)
[6]
[2001]
7 BLLR 705 (LAC)
[7]
(supra)
[8]
(2010)
31 ILJ 2735 (LC) at para 15.
[9]
(2000)
21 ILJ 129 (LAC
)
at para 18(h)-(i)
[10]
[2004]
7 BLLR 667
(LAC)at para 52.
[11]
(2007)
28 ILJ 2302 (LC)
[12]
(supra)at
para 16
[13]
See
Filta-Matix
(Pty) Ltd v Feudenberg and Others
[1997] ZASCA 110
;
1998
(1) SA 606
(SCA) and also
South
African Transport and Allied Workers Union and Others v Collett
Armed Security Services
(JS
1280/09) [2013]).