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[2014] ZALCCT 20
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Rogers v Exactocraft (Pty) Ltd (C1142/10) [2014] ZALCCT 20; (2015) 36 ILJ 277 (LC) (16 April 2014)
REPUBLIC
OF SOUTH AFRICA
THE LABOUR COURT OF
SOUTH AFRICA, CAPE TOWN
JUDGMENT
REPORTABLE
OF
INTEREST TO OTHER JUDGES
CASE
NO: C 1142/10
In
the matter between:
PAUL E ROGERS
Applicant
and
EXACTOCRAFT (PTY)
LTD
First Respondent
Heard
:
5-6 June; 19-20 June 2013; 5 March 2014
Delivered
:
16 April 2014
Summary:
Dismissal for operational requirements. Premature termination of
fixed-term contract entered into post-retirement.
Claim for
compensation, severance pay and damages. Entitlement to severance pay
and application of BCEA s 84(1) considered.
JUDGMENT
STEENKAMP J
Introduction
[1]
The applicant, Paul Rogers, worked for the
respondent for 21 years. He retired when he reached the compulsory
retirement age of
65 on 14 November 2009. The next day he entered
into a fixed term contract for two years with the respondent,
terminable on three
months’ notice.
[2]
The
respondent dismissed the applicant for operational requirements on
three months’ notice, with effect from 31 August 2010.
He
claims that the dismissal was not for a fair reason or in accordance
with a fair procedure as envisaged in s 189 of the Labour
Relations
Act.
[1]
He claims compensation
for unfair dismissal in terms of s 194 of the LRA. He also claims
severance pay in terms of ss 41 and 84
of the Basic Conditions of
Employment Act
[2]
; and damages
for short notice. Although some confusion was initially created in
the pleadings and the pre-trial minute, neither
party ultimately
relied on
Buthelezi
v Municipal Demarcation Board
[3]
to claim that the applicant was entitled to damages for the unexpired
portion of the fixed term contract or that s 189 of the LRA
did not
apply. Mr
O’Dowd
and Ms
Brummer
both agreed that the fixed term contract in this case was
distinguishable from that in
Buthelezi.
In that case, the contract made no provision for early termination;
in this case, it did. But both parties agreed that the reason
for
early termination was operational requirements; that the respondent
had to show that it was for a fair reason and in accordance
with a
fair procedure; and that s 189 of the LRA applied.
Background
facts
[3]
On the day after his retirement, Mr Rogers
entered into a new contract of employment for a fixed term from 15
November 2009 until
14 November 2011. That contract spelled out
inter alia
the applicant’s working hours, leave entitlement and the
duration of the contract. It also referred under the heading
of
“Company Policies, Procedures and Rules” to the
conditions of service detailed in the contract itself; the conditions
of service laid down in the Employer’s Policies and Procedures;
and the Labour Relations Act, the Basic Conditions of Employment
Act;
and various other statutes dealing with the employment relationship.
[4]
The contract also provided for the
automatic termination of the contract on 14 November 2011 and further
for a three month notice
period specifying that in the case of
“termination for any cause recognised by law as sufficient”
the notice period
could be waived.
[5]
It is common cause that the contract was
terminated prematurely. The circumstances were that on 18 May
2010 the respondent
handed the applicant a letter headed:
“
Contemplation
of potential termination of services based on operational
requirements”.
[6]
The respondent made certain suggestions
which were rejected by the employee. The outcome was that his
employment was terminated
with effect from 31 August 2010.
[7]
The applicant maintains that his dismissal
was unfair. The respondent argues that it was for a fair reason,
namely its precarious
financial position; and that it had followed a
fair procedure in terms of s 189 of the LRA.
[8]
Ms Ingrid Painczyk, the respondent’s
managing director, testified that the applicant was a highly skilled
and valuable employee.
That is why the respondent offered him a fixed
term contract after his retirement in order to retain his skills.
However, the respondent
started experiencing financial problems
towards the end of 2008 and the beginning of 2009. That led to a
retrenchment agreement
with NUMSA in March 2009 and the voluntary
retrenchment of 11 NUMSA members. The applicant was not a NUMSA
member and was not part
of the consultation process culminating in
this agreement. It also preceded the fixed term contract that the
parties entered into
on 15 November 2009.
[9]
During March and April 2010 the company put
up notices on its notice boards informing employees of short time.
The applicant testified
that he did not read any of them. I find that
to be improbable. There was a notice board directly above the tea
trolley. It is
improbable that he would not have seen these notices.
He conceded that he saw some notices relating to birthday cake and
fire drills.
It is unlikely that he would have been oblivious of any
notices regarding the company’s financial situation and
employees
working short time. He was in any event aware of some
employees working short time and of the shift system having been
changed.
He was placed on short time himself. He could have been
under no illusion that the company was doing well financially.
[10]
On 18 May 2010 Ms Painzcyk addressed a
letter to the applicant. It appears to have been drafted with the
provisions of s 189(3)
of the LRA in mind, although it does not
contain all the information envisaged by that subsection. It is
headed, “
CONTEMPLATION OF
POTENTIAL TERMINATION OF SERVICES BASED ON OPERATIONAL REQUIREMENTS
”.
She referred to a downturn in orders and indicated that the company
wished to enter into a consultation process with him.
She continued:
“
It
is important to note that no final decision has been made, but that
the initial assessments have indicated that your position,
in its
current format, may potentially become redundant.
The
following issues are therefore relevant to form the basis of our
consultation process:
1.
The forecast for 2010/2011 is rather bleak
seen in the context of the following:
1.1
The economic recession in South Africa;
1.2
Fluctuating exchange rates;
1.3
The loss of the Yardley contract;
1.4
The general flow of orders;
1.5
It appears that retrenchments are
inevitable, resulting in a smaller and more manageable structure;
1.6
All costs and expenditure relevant to such
a revised structure need therefore to be carefully assessed;
1.7
This could mean that alternative
contractual options within the company could be considered, if the
appropriate skills and operational
requirements are met and the needs
for these are clearly identified;
1.8
Possible issues for consideration could
include (but will not be limited to):
1.8.1
re-structuring your contract as an
independent contractor; or
1.8.2
a more flexible employment relationship
1.8.3
any other feasible or viable options that
you may wish to put forward for consideration.
2.
The consultation process will deal with the
following matters and all attempts will be made to reach consensus
regarding the following:
a)
appropriate measures to:
I.
avoid dismissals – i.e. to explore
viable alternative proposals
II.
change the timing of dismissals
III.
mitigate the adverse effects of the
dismissals
b)
The method for selecting the potentially
affected employees;
c)
The severance payment as proposed at this
stage is based on the statutory guideline of the Basic Conditions of
Employment Act 75/1997
[as amended], i.e. one week’s
remuneration for each completed year of service.
Other
issues that will be discussed during the course of the consultation
are:
·
assistance by the employer to the employee.
You
may be represented at the consultation process by a fellow employee.
Minutes will be kept of all the discussions and you will
be given
copies of same.
1)
20 May 2010 at 15h00 – explanation of
this letter
2)
24 May 2010 – receiving your input
regarding alternative options
3)
24 May 2010 – feedback regarding your
proposals
4)
27 May 2010 - making the final decision
5)
31 May 2010 – the implementation of
the final decision.
We
accept that this matter should receive all our attention. The time
frame will of course be flexible if circumstances so dictate.”
[11]
The parties met on 20 May 2010. On 2 June
2010 Ms Painzcyk presented Rogers with a document in the following
terms:
MEMORANDUM
OF UNDERSTANDING BETWEEN PAUL ROGERS AND EXACTOCRAFT (PTY) LTD
THIS
MEMORANDUM SETS OUT THE DISCUSSION POINTS FOR ACCEPTANCE BY ROGERS OF
THE MEETING CONDUCTED ON THURSDAY, 20 MAY 2010:
1.
The company indicated the [
sic
]
due to the prevailing economic conditions, the status of orders and
the consequent drop in production, that it needs to invoke
the three
(3) months’ notice period as indicated in Rogers’ limited
duration contract.
and
2.
The said notice period will commence with
effect from 1 June 2010 and will complete on 31 August 2010.
and
3.
Short time will continue to apply during
the notice period.
and
4.
The notice pay will therefore be calculated
as follows:
4.1
three days per week during June
4.2
four days per week during July
4.3
five days per week during August
and
5.
Rogers will be required to tender his
services on this basis during the notice period
and
6.
The company undertakes to indicate to
Rogers by the beginning of July 2010, if there is any possibility of
a continued relationship
after 31 August 2010, for example in the
capacity as a Consultant
and
7.
The company will honour its agreement with
Rogers as applicable to the arrangements regarding his motor vehicle.
[12]
Rogers did not agree to the proposal and
did not sign the “memorandum of understanding”. On 21
July 2010 Ms Painczyk
presented him with a further proposal in the
following terms:
“
RETAINER
PROPOSAL
“
I
refer to our previous discussions and would like to explore the
further option of a retainer / consultancy agreement between
Exactocraft and yourself [
sic
]
at the conclusion of your notice period at the end of August 2010.
As
indicated during many discussions with you, we do find your services,
experience, skills and knowledge absolutely invaluable
, but due to
the current economic and trading conditions, we can no longer
afford the cost of your full time employment (which
matter was the
subject of previous consultation)
Our
current thinking, which we would like to discuss with you to gain
your input and opinion, is along the following lines:
·
For you to attend the Product meeting every
Tuesday for 3 hours.
·
For you to be available for brainstorming
with, and guidance to employees on Thursdays for e.g. 2
hours
and to mentor employees where needed.
·
The retainer/consultancy agreement would be
for 22 hours every month and would continue for a minimum period of
12 months.
·
Based on your current hourly employment
rate of R225, we believe that R350.00 per hour is an appropriate
rate; our proposal is that
hours over and above the 22 proposed, will
be paid at a higher rate of R450 per hour.
·
The nature of the relationship will
be that of an independent contractor and not as an employee. You
would accordingly invoice Exactocraft
and would need to register as a
provisional tax payer. You would obviously also need to be free to
consult with other entities.
You
are welcome to consult with your attorney regarding this option, but
we are not going to conduct our current relationship and
this
proposal via lawyers. Your personal input and comments in this regard
are therefore expected. As mentioned yesterday I would
like to
discuss this with you briefly at 14h00 today and get your input on
this matter next Monday, 26 July 2010
.”
[13]
Rogers had a further meeting with the
respondent’s Ms Veerle Witdouck on 13 August 2010. They
discussed a further proposal,
including his continued use of his
company car, but could not reach agreement. He was presented with a
draft agreement, referred
to as a “service provider agreement”
dated 19 August 2010, but he did not accept or sign it.
[14]
On 30 August 2010 Ms Painzcyk presented
Rogers with the following document:
“
RE:
RETAINER PROPOSAL
CONCLUSION OF THE
NOTICE PERIOD
DOCUMENTATION
“
I
refer to our numerous discussions, written communiqués and
proposals from Exactocraft with regards to the options which
are
available at the conclusion of your notice period.
As
indicated during many discussions with you and again reiterated in
this letter, we do find your services, experience, skills
and
knowledge absolutely invaluable, but due to the economic and trading
conditions, we can no longer afford the cost of your full
time
employment (which matter was the subject of previous consultation) on
a limited duration, post retirement contract.
I
want to make the legal position very clear to you:
1.
Your employment relationship terminated due
to you reaching your retirement age, as per the company’s
policies and procedures
in November 2009.
2.
This means that for all intents and
purposes, and the application of labour laws and legislation, the
employment relationship concluded
at that stage.
3.
A
post-retirement
agreement was entered into to retain your skills, with the express
provision that either party may give the other 3 months’
notice.
4.
You have been well aware of the prevailing
economic and trading conditions which placed Exactocraft in a
precarious position for
at least the past 18 months.
5.
Your termination clause was thus invoked,
in consultation with yourself, based on the fact that the option of
continuing on the
conditions contained in the post-retirement limited
duration contract, were no longer viable from a financial viewpoint.
6.
As your relationship with Exactocraft is
one of
post retirement employment
,
this is not deemed as a retrenchment. This means the following:
6.1
there is no severance pay applicable
6.2
there is also no obligation to explore
alternative options within the company , but as you are very well
aware during all our discussions,
there is no alternative placement
available in any event.
7.
You have received the company’s
proposals regarding the car which you are currently utilising and
which belongs, at
this stage still Exactocraft, and in addition to
that retainer proposal for your professional services.
8.
You have to date not responded to either of
these proposals, which, as indicated in the said documentation are
interlinked and dependent
on each other.
This
letter therefore serves as confirmation that the limited duration
contract, as per the notice period agreed upon and discussed
during
the consultation meetings, terminates with effect from 31 August
2010.
You
are kindly reminded to treat this with the urgency it requires, as of
1 September 2010; there will be no contractual relationship
between
yourself and ExactoCraft. If you however wish to continue with the
independent contractor option, which would allow you
to also consult
to other entities, we require the signed documentation prior to any
further professional services could be tendered.”
[15]
Rogers’s employment was terminated
with effect from 31 August 2010.
Evaluation
/ Analysis
[16]
I will deal with each of the applicant’s claims in turn. I
shall also make mention of my previous judgment regarding
various
points
in limine
raised
by the respondent.
Points
in limine
[17]
The respondent initially raised six points
in limine.
I
dealt with those points in an
ex tempore
judgement handed down on 7 September
2011. I need not repeat the reasons for that judgment here. The
preliminary points were dismissed
with costs. The respondent accepted
that ruling and the matter proceeded to trial.
Severance
pay
[18]
It is trite that an employee who is
dismissed for operational requirements is entitled to severance pay
as provided for in s 41(2)
of theBCEA:
“
An
employer must pay an employee who is dismissed for reasons based on
the employer’s operational requirements ... severance
pay equal
to at least one week’s remuneration for each completed year of
continuous service with that employer”.
[19]
Rogers worked for the respondent for a
continuous period of 21 years, from 1988 to 14 November 2009. But
then he retired at the
agreed retirement age of 65; he was not
dismissed for operational requirements at that stage. He then entered
into a new contract
of employment. He was employed in terms of that
contract for less than a year – from 15 November 2009 to 31
August 2010 –
when he was dismissed for operational
requirements. Therefore, argues the respondent, no severance pay was
payable. But Mr
O’Dowd
argued
that s 84(1) of the BCEA applied:
“
For
the purposes of determining the length of an employee’s
employment with an employer for any provision of this Act, previous
employment with the same employer must be taken into account if the
break between the periods of employment is less than one year”.
[20]
On the plain grammatical reading of that
subsection, Mr
O’Dowd
argued,
the applicant was entitled to a minimum of 21 weeks’ severance
pay. The break between his periods of employment was
less than one
day.
[21]
I
have been unable to find any binding precedent for a claim such as
this one, and neither of the parties referred me to any. The
CCMA
dealt with a similar situation in
Solomons
and Usabco (Pty) Ltd.
[4]
In that case, the employee had resigned and was then re-employed on a
fixed term contract nine months later. He was then dismissed
for
operational requirements. Commissioner Bill Maritz pointed out that,
under the common law, his contract of employment would
have been
novated; but he was compelled to apply the provisions of s 84 of the
BCEA. He noted:
“
It
should be noted that s 84 does not refer to the manner in which the
relationship between the parties had been terminated and
the fact
that he had resigned is therefore irrelevant to the enquiry.”
[22]
I am inclined to agree. But is the position
any different where the employee had retired and he had received all
his retirement
benefits, such as a provident fund pay-out?
[23]
The
preamble to the BCEA and section 2 sets out as one of its primary
objectives to comply with the obligations of the Republic
as a member
state of the International Labour Organisation. ILO Convention 158
[5]
provides that a worker whose employment has been terminated shall be
entitled, in accordance with national law and practice, to:
“
(a)
a severance allowance or other separation benefits, the amount of
which shall be based
inter alia
on length of service and the level of wages, and paid directly by the
employer or by a fund constituted by employers’ contributions;
or
(b) benefits from
unemployment insurance or assistance or other forms of social
security, such as old-age or invalidity benefits,
under the normal
conditions to which such benefits are subject; or
(c) a combination of such
allowances and benefits”.
[24]
The national law that regulates severance
pay is s 41 of the BCEA, providing for one week’s remuneration
for each year of
continuous service. In this case, Mr Rogers was paid
out the “old-age benefits” to which he was entitled when
he retired
at age 65. Should his prior 21 years of service
nevertheless be taken into account as “continuous service”
for the
purposes of calculating severance pay arising from his
dismissal for operational requirements, subsequent to him entering
into
a fixed term contract the next day, as the proper interpretation
of s 84(1)?
[25]
Should s 84(1) be interpreted to include a
situation such as this one, an anomalous situation arises. Had the
applicant simply retired
at age 65, there is no dispute that he would
not have been entitled to severance pay. Should he then be able to
benefit from the
fact that he had been re-employed a day later, and
dismissed for operational requirements nine months after that?
[26]
Unfortunately
the Explanatory Memorandum to the BCEA does not address the
legislative aim behind the enactment of s 84. ILO Convention
158 does
not address this specific conundrum head-on either. The purpose of
severance pay has been the subject of some debate.
A comprehensive
study
[6]
showed that the origin
of mandated severance pay can be traced to three main events: the
creation of labour codes; the first events
of large scale industrial
restructuring starting at the end of the 19th century and pressures
of the interwar high unemployment
episode; and the expansion of the
welfare state after WWII. Despite these common origins, the review of
existing severance pay
programs showed that countries use widely
differentiated designs, or at least parameter values. The paper also
examined the economic
rationale for severance pay and found partial
support for all three hypotheses it advanced: that severance pay
serves as a social
benefit payment, a human resource management tool,
and a job protection mechanism.
[27]
In
another article, the author
[7]
considered South African case law (none of which specifically dealt
with the application of s 84 in the circumstances of this case)
and
came to the conclusion that s 41(4) of the BCEA rewards the employer
for offering or securing alternative employment for the
employee.
[8]
It promotes sustained employment by giving employers an incentive to
procure alternative employment for employees facing dismissal
for
operational requirements. Absent such an offer, the employer has to
pay severance pay – whether it is to “tide
the employee
over” until he or she finds another job, as some commentators
would have it, or to reward the employee for long
service, does not
really matter.
[28]
In the current case, the applicant was
offered an alternative, but it cannot be said to have been a
reasonable one. At best, the
company proposed to enter into an
independent contractor relationship with him with a potential income
of less than half his remuneration
as an employee. But in any event,
if he is not entitled to severance pay in terms of s 84 of the BCEA,
the question of a reasonable
alternative becomes moot.
[29]
The principal question remains whether an
employee who has retired and then entered into a new contract of
employment with the same
employer, is nevertheless entitled to
severance pay in terms of ss 41 and 84.
[30]
In order to give effect to the intention of
the legislature, the Court will have to adopt a purposive
interpretation. ILO Convention
158 appears to contemplate either a
severance benefit in the case of redundancy, or old-age benefits in
the case of retirement.
The BCEA must be interpreted in that context.
It is common cause that the applicant received his retirement
benefits, such as his
provident fund pay-out, upon retirement. In my
view, the legislature could not have contemplated that he should also
benefit in
the form of severance pay arising from his dismissal for
operational requirements in circumstances where he entered into a
subsequent
and separate fixed-term contract of employment.
[31]
In
an early and insightful article, Alan Rycroft
[9]
referred to a CCMA arbitration
[10]
where the commissioner held that where an employee reaches retirement
age and decides to retire on full benefit, but continues
to work
thereafter, the retirement can be construed as a termination of the
employee’s contract by effluxion of time and
that the
retirement does not constitute a dismissal. A decision to allow the
employee to enter into a further employment contract
therefore starts
a new employment relationship. The period of service before
retirement, the commissioner found, should not be
taken into account
when calculating the employee’s severance pay in accordance
with s 41(2) and s 84 of the BCEA. Prof Rycroft
appears to agree with
that view. So do I.
[32]
As
explained in the article by Holzmann and others
[11]
,
severance pay is both a form of compensation for a no-fault
termination of the contract of employment as well as recognition of
the employee's 'investment' in the employer's enterprise. This is
captured in an early case which, in justifying severance pay,
said
the employee had 'sacrificed his best employment years in building,
or contributing to, the business of the company'
[12]
.
Severance pay is for an unexpected termination of one’s
expectations. In the situation before me, the employee’s
expectation was for just two years of further employment. In my view,
it would be anomalous if a right to severance pay for the
20 years
prior to retirement could be created simply by re-employment when
there was never a right to severance pay on retirement.
In terms of
the purposes of severance pay as outlined above, there was no need to
compensate the employee on retirement because
this was not a
dismissal but a termination of the contractual relationship. The
employee’s investment in the company was
taken care of through
the provident fund.
[33]
The anomaly that arises in this context is
analogous to the one catered for in s 187(2)(b) of the LRA. That
subsection makes it
clear that a dismissal based on age is fair if
the employee has reached the normal or agreed retirement age.
Unfortunately the
legislature has not addressed the anomaly that
arises in situations such as this one by explicitly building an
exception into s
84(1) of the BCEA.
[34]
In my view, though, there is a strong
policy argument for a purposive interpretation of s 84. The ability
to retain scarce skills
after retirement is highly desirable because
it allows employers to provide a mentor for new inexperienced
employees as well as
ensure continuity of productive work. In
this case, the employer’s Ms Painczyk was adamant that the
company wished
to retain Mr Rogers’s special skills and
expertise after retirement – an understandable and laudable
position. A literal
interpretation of s 84 would discourage employers
from re-employing skilled retired employees.
[35]
The
only other case law I could find that may be relevant – counsel
did not refer to any -- is not on point, but does distinguish
between
different kinds of relationship between an employer and an
individual. In
Elston
v McEwan NO & others
[13]
a computer trainer was employed by a company from 1 June 1995 to 30
April 2007. Her services were rendered in three distinct periods:
two
years as an employee (the first period); over two years (the second
period) when she rendered services through a close corporation
which
invoiced the company for the work done by her; and six years (the
third period) when she was once again employed by the company.
When
she was retrenched, the company paid her severance pay for the third
period only. The first period was not included in the
calculation of
severance pay because the second period was not considered
'continuous service' for purposes of s 41(2) of the BCEA.
The second
period was in turn not considered for severance pay because the
company took the view that the applicant was not its
employee during
that period. The Labour Court upheld a finding that the employee was
not eligible for severance pay for the first
and second periods of
service.
[36]
In the case before me, Mr Rogers was
obviously not eligible for severance pay on retirement –
similar to the employee in
Elston
for the second period. This then focuses the right to severance
pay on the final period of employment in both cases. I am
of the
opinion that Rogers entered into a new employment relationship after
retirement, and that his employment before retirement
cannot be
considered for the purposes of calculating severance pay. And his
employment post retirement was for less than a year;
therefore, he is
not entitled to severance pay in terms of s 41 of the BCEA.
Damages
[37]
It is common cause that the fixed term
contract was terminable on notice (but that it had to be for a fair
reason and in compliance
with s189 of the LRA). The stipulated notice
period was three months. The applicant does not claim damages for the
unexpired period
of the contract (15 months). But he does claim
damages for what he alleges was short notice of two weeks.
[38]
The respondent gave the applicant notice of
termination on 2 June 2010, effective 31 August 2010. On the face of
it, that would
only constitute one day’s short notice. However,
the notice was not handed to the applicant on 2 June. Ms Painzcyk
testified
that she sent it to the applicant by registered mail. It
appears from the documentary evidence that it was still with the
postal
services on 12 June 2010. Mr Rogers says he received it some
days thereafter. He argues that the notice period was short by two
weeks.
[39]
Mr
O’Dowd
referred to the unreported judgment of Cheadle AJ in
Lottering
and others v Stellenbosch Municipality
[14]
where he held:
“
The
failure to give proper notice is a breach of contract entitling the
employer under the ordinary principles of law relating to
breach to
either accept the repudiatory breach and terminate the contract
summarily or to hold the employee to the contract. But
in these
circumstances, holding the employee to the contract would mean no
more than requiring the employee to work out her notice…”
[40]
This
principle applies equally to an employer giving notice of
termination. If the employee elects to accept the breach (as opposed
to holding the employer to the contract) he is entitled to damages
for the unexpired portion of the notice period.
[15]
Those damages equate to the amount that the employee would have and
during those two weeks, which amounts to R 20 033, 00.
Compensation
[41]
I accept that there was a commercial
rationale, i.e. a fair reason to dismiss. The company was in dire
straits financially. That
led to a retrenchment agreement with the
majority trade union, NUMSA, and the retrenchment of a number of
other employees, whether
voluntarily or at the instance of the
employer.
[42]
Mr
O’Dowd
criticised the selection of Mr Rogers for retrenchment. There is no
need to draw a bright line between substance and procedure
in this
regard; in my view, the issue of selection criteria can be considered
under the rubric of procedural fairness. What the
Court ultimately
has to decide, is whether the dismissal was fair. In cases of
dismissal for operational requirements, some aspects
– e.g.
whether there was a commercial rationale – fit comfortably
under the question of a fair reason for dismissal.
Others, e.g.
whether the employer consulted, clearly go to the question of a fair
procedure. The question of whether fair selection
criteria were used,
has elements of both.
[43]
There can be no doubt that the company was
under financial strain. It had reached more than one retrenchment
agreement with NUMSA.
Mr Rogers could not but have noticed that a
number of fellow workers had been retrenched. A tool maker in his
department was one
of those. He was placed on short time. He must
have been aware of the memoranda placed on the notice boards. In
short, there was
a fair reason for retrenchment.
[44]
The main line of attack put forward by Mr
O’Dowd
was the selection of the applicant for retrenchment. He argued that
it was possible to avoid the dismissal of the applicant by
cost-cutting elsewhere. I am not persuaded. The company had already
cut costs by retrenching other employees. Mr Rogers was the
highest-paid employee in the company. The company simply could not
afford to keep him on at his current salary for another 15 months.
The question remains whether process was fair, in other words,
whether it complied with the provisions of section 189 of the LRA.
[45]
It is clear that the respondent was
initially advised or formed the view that section 189 was not
applicable and that it could simply
terminate the fixed term contract
on three months’ notice. Ms
Brummer
conceded as much. However, when it presented the applicant with the
letter of 18 May 2010 it purported to do so in terms of section
189
(3). But even without following a formalistic checklist approach, the
notice fell far short of that envisaged by the subsection.
Ms
Painzcyk conceded that under cross-examination. For example, the
notice did not set out –
45.1
the alternatives the respondent considered
before proposing the applicant’s dismissal and the reasons for
rejecting those
alternatives;
45.2
the number of employees likely to be
affected and the job categories in which they were employed;
45.3
the proposed method for selecting which
employees to dismiss;
45.4
the possibility of future re-employment;
45.5
the number of employees employed; or
45.6
the number of employees the respondent had
retrenched in the preceding 12 months.
[46]
The respondent was willing to renegotiate
the terms of the applicant’s employment. It was willing to
consider an independent
contractor relationship as set out in the
“service provider agreement”. Failing that, however, it
is quite clear that
Ms Painczyk had formed a fixed view that the
company could no longer afford the applicant’s services.
[47]
The initial notice of 18 May 2010 was
followed two days later by the meeting of 20 May 2010. At that
meeting Ms Painczyk told the
applicant that the company intended
invoking the early termination clause in his contract. On 2 June 2010
she prepared the memorandum
that the applicant received on about 14
June 2010. It notified in writing of the termination of his
employment as of 31 August
2010. It is only later, in July 2010, that
the respondent put forward alternative proposals to retain the
applicant’s services.
At that time, the respondent had already
unilaterally given notice of the termination of the applicant
employment. There was no
prospect of meaningful consultation in those
circumstances.
[48]
However, section 189 envisages a
joint
consensus seeking exercise. Having been
made aware of the company’s financial position, the applicant
did not come up with
any viable proposals to ensure his continued
employment either. He could not gainsay Ms Painczyk’s evidence
that he was,
in fact, difficult to get hold of. Even in these trial
proceedings he created the impression that he was unwilling to
cooperate.
In his view, the respondent was duty bound to honour the
terms of his contract until it expired. He did very little to explore
any alternatives.
[49]
I have come to the conclusion that the
dismissal was procedurally unfair but that the applicant was at least
partly to blame. In
my view, he is entitled to compensation; but that
compensation should not exceed another three months.
Conclusion
[50]
The dismissal of the applicant for
operational requirements was for a fair reason but not in accordance
with a fair procedure. In
my view, the equivalent of three months’
remuneration would be fair compensation for that element of
unfairness.
[51]
On my interpretation of sections 41 and 84
of the BCEA the applicant is not entitled to severance pay.
[52]
The applicant is entitled to damages
equivalent to two weeks’ remuneration for short notice.
[53]
With regard to costs, I take into account
that there is no longer any employment relationship between the
parties and that the applicant
has been successful. In law and
fairness, the respondent should be held liable for his costs.
Order
[54]
The respondent is ordered to pay the
applicant the following amounts:
54.1
Compensation of R 136 593, 84, being
the equivalent of three months’ remuneration;
54.2
R 20 033, 00 as damages for short
notice;
54.3
Costs of suit.
_______________________
Anton Steenkamp
Judge
of the Labour Court of South Africa
APPEARANCES
APPLICANT:
Brendan
O’Dowd
Instructed
by Bagraims attorneys.
RESPONDENT:
Cecilia
Brummer
Instructed
by Chris Smit attorneys.
[1]
Act 66 of 1995 (the LRA).
[2]
Act 75 0f 1997 (the BCEA).
[3]
(2004) 25
ILJ
2317 (LAC).
[4]
(2002) 23
ILJ
786 (CCMA).
[5]
Termination of Employment Convention (23 November 1985) article 12.
[6]
Robert
Holzmann, Yann Pouget, Milan Vodopivec and Michael Weber
:
Severance
Pay Programs around the World: History, Rationale, Status, and
Reforms
(IZA
DP No. 5731, May 2011).
[7]
DW de Villiers, “The Entitlement to Severance Pay Revisited”
(2010) 22
SA
Merc LJ
114-126.
[8]
Cf
Irvin
& Johnson Ltd v CCMA
[2006]
7 BLLR 613
(LAC) para 42.
[9]
Alan Rycroft, “Severance Pay: The Emerging Legal Issues”
(2001) 22
ILJ
2131
at 2138.
[10]
Watson
and another v Burman Katz Attorneys
(2000) 21
ILJ
2337 (CCMA).
[11]
Supra
.
[12]
Ellerine
Holdings Ltd v Du Randt
(1992)
13
ILJ
611 (LAC) 616.
[13]
(2009)
30
ILJ
2079 (LC).
[14]
Labour Court, Cape Town, case no C 159/2010.
[15]
See
Morgan
v Central University of Technology, Free State
[2013] 1 BLLR 52
(LC);
NEWU
v CCMA & others
[2007]
7 BLLR 623
(LAC), (2007) 28
ILJ
1223 (LAC) para [15].