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[2015] ZALCJHB 96
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National Union of Metal Workers of South Africa Obo Hlongwane and Others v Wilro Supplies CC (JS 207/12) [2015] ZALCJHB 96 (16 March 2015)
REPUBLIC OF SOUTH
AFRICA
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Judgment
Case No: JS
207/12
DATE: 16 MARCH
2015
Not Reportable
In the matter
between:
NATIONAL UNION OF
METALWORKERS OF
SOUTH AFRICA OBO
E. HLONGWANE AND
15
OTHERS
..............................................................................................................................
Applicants
And
WILRO SUPPLIES
CC
........................................................................................................
Respondent
Heard
: 11 and 12 March 2015.
Judgment
: 16 March 2015.
Summary :
Retrenchment unfair: No consultation in respect of selection
criteria.
Judgment
AC
BASSON, J
[1]
The
issue before this Court is whether the retrenchment of the 61
employees was substantively and procedurally fair. It was not
in
dispute that there was a general need to retrench. The dispute is
confined to whether there was a need to retrench the specific
individual applicants before Court and whether the application of the
selection criteria of “special skills” was applied
fairly.
[2]
It
is common cause that the respondent (Wilro Supplies CC) had issued
the individual applicants with a “Notification of a
perceived
need to implement retrenchments” on 31 August 2011. This notice
sets out the reasons for the proposed retrenchment
and fixes the
proposed date for the retrenchment as 31 October 2011.
[3]
It
is common cause that on 15 September 2011 a consultation meeting was
held between NUMSA (the union representing the individual
applicants)
and the respondent. It was the evidence of Mr Steenberg (the manager
of the respondent) that Mr Bhekisisa Mzimelo of
the union had
informed the meeting that the union will fax a proposal through to
the respondent and that the next meeting will
then be scheduled. It
is common cause that no further meetings were held with the union or
with any of the individual applicants
nor with the shop stewards
after the meeting of 15 September 2011 until 31 October 2011 when the
individual applicants were informed
of their retrenchment. In fact,
Mr Steenberg and Mr Human (the respondent’s operation and
technical manager) conceded that
they did not contact the union at
any stage after the meeting on 15 September 2011. Therefore, for a
period of 1 ½ months
no attempts whatsoever were made to
contact the union either to enquire about the proposal or to schedule
a next consultation meeting.
More in particular, Mr Human also
conceded that he had no individual meetings with any of the
individual applicants prior to the
dismissal on 31 October 2011 not
even to discuss whether they had the necessary skills to fulfil
certain positions. Mr Steenberg
also conceded that he made no attempt
whatsoever to contact the union after the meeting of 15 September
2011. His excuse was that
he was waiting for the union to approach
the respondent with their proposals.
[4]
It
is also common cause that no agreement on the selection criteria had
been reached between the company and the union. In fact,
no meeting
was even scheduled to discuss how employees would be selected for
retrenchment. The respondent unilaterally decided
to apply “special
skills” as a criteria and not LIFO which is generally regarded
as an objective criterion. Not only
did the respondent unilaterally
and without any consultation with the union decide to apply “special
skills” as a criterion
but also proceeded to apply the
criterion with no input whatsoever from the union or from any of the
individual applicants.
[5]
Mr
Human, the operation and technical manager, testified that he had
been with the respondent for approximately 13 years. He also
testified that he had many more years’ experience in this
specific industry. He testified that during October 2011 he in
consultation with Mr Steenberg and other managers decided which
employees should be retrenched and which employees should be
retained.
This the company did with no input whatsoever from the
union or the individual employees. Mr Human conceded that the
selection
criterion that he had applied was “special skills”
and that he had subjectively decided who had the necessary skills
and
who did not. His evidence was that he had drawn up a schedule at the
time and that he then decided which employees would be
able to do
more than one particular task in the operation. He was however not
able to produce this schedule to the Court. It is
also common cause
that no such document was ever presented to the trade union or to any
of the individual applicants for their
input. Mr Human in fact
conceded that, although he decided subjectively which employees
should be retrenched and which employees
should be retained, he never
discussed this with the union nor with the individual employees even
though his decision adversely
affected the applicants. To a question
posed by the Court why he did not discuss the selection process and
the actual selection
with the employees, he conceded that “looking
back” they should have consulted with the individual
applicants. He also
conceded that if he had consulted the individual
employees, it is possible that his decision may have been influenced
by their
input.
[6]
Mr
Human gave extensive evidence with reference to a schedule that was
prepared shortly before trial why he had decided to retain
certain
employees and not others. He conceded that he made the selection on
the basis of his subjective view regarding the skills
and
competencies of the different applicants. Apart from Mr Human’s
say-so in respect of the level of skills possessed by
the different
applicants, no other documentation was placed before the Court that
could have enlightened the Court what skills
these individual
applicants objectively have and why other employees had better skills
than they. Although Mr Human was adamant
that he was best placed to
decide what skills the employees in the company had, this does not
take away the fact that this was
his subjective opinion and that not
one of the individual applicants had any input in his subjective
assessment.
[7]
It
should also be pointed out that Mr Human also effectively conceded
that some employees were retrenched because their positions
became
redundant as a result of the purchase of a new machine and because of
the downturn in consumer demand in the security gate
department.
[8]
The
applicants closed their case without leading any evidence.
The
issue before this Court
[9]
As
already pointed out, the issue before this Court is confined to the
question whether the application of the selection criteria
of
“special skills” was applied fairly. This decision must
be decided against the following background:
(i)
No
agreement had been reached with the union or with the individual
applicants as to what selection criteria would be applied. The
employer unilaterally decided to apply “special skills”
as opposed to a more objective selection criteria such as LIFO.
(ii)
No
meeting was held with the union or with the individual applicants to
discuss the application of the selection criteria of “special
skills”.
(iii)
Mr
Human subjectively decided which employees had the necessary special
skills to fulfil certain tasks with no input whatsoever
from the
union and the affected employees. Mr Human therefore subjectively
decided who should be retrenched and who should be retained.
(iv)
Mr
Human conceded that in hindsight, the respondent should have
consulted with the individual applicants when the decision regarding
their skills was made.
(v)
Mr
Human conceded that it was possible that his decision may have been
influenced if he had afforded the individual applicants an
opportunity to give some input.
(vi)
The
respondent had made no effort whatsoever to contact the union after
the meeting of 15 September 2011 for a period of approximately
1 ½
months. Even after the selection had been made the respondent still
made no effort to engage the union or, at the very
least, inform the
individual applicants of the selection that had been made.
(vii)
When
the applicants were eventually retrenched on 31 October 2010 they
were not even informed as to why they were selected to be
retrenched.
(viii)
On
31 October 2011 when the union arrived at the respondent’s
premises to continue with consultations, Mr Steenberg informed
the
union that 31 October 2011 was the date on which the retrenchment was
implemented.
[10]
Is this fair?
It is trite that although parties may agree that there is a need to
retrench there still rests an obligation on the
parties to
consultation properly before a final decision to retrench is taken.
It is especially important that consultation takes
place in respect
of the selection criteria as this would ultimately determine who will
and who will not be retrenched.
[11]
It
is common cause that no consensus
seeking
process was followed by the respondent in respect of the selection
criteria and in respect of who should be selected to
be retrenched.
The excuse of the respondent was that it was waiting for the union to
put forward its proposal. Although it is accepted
that consultation
is a joint consensus seeking process, the respondent’s inaction
in this particular case for more than a
month can never be an excuse.
The Labour Relations Act
[1]
places the primary obligation on the employer to ensure that an
employee is not unfairly dismissed. This obligation implies that
not
only must the employer initiate the consultation process, the
employer must also facilitate the conciliation process. The
respondent failed dismally in this regard. At the very least the
respondent ought to have contacted the union when it realised that
no
proposal was forthcoming and set up a meeting to discuss the
selection of the employees. The employer not even made enquiries
to
the union as to why the so-called proposal was not forthcoming.
[12]
It
is trite that consultation has a specific purpose in the context of a
retrenchment
.
See
in this regard the well-known decision of the Labour Appeal Court in
Johnson
and Johnson (Pty) Ltd v CWIU
[2]
where
the Court emphasised the importance of a joint consensus-seeking
process and the obligation of the employer:
“
[26]
The section places some primary obligations on an employer in order
to ensure that an employee is not unfairly dismissed. The
employer
must initiate the consultation process when it contemplates
dismissals for operational reasons (
section
189(1)
;
FAWU
and another v National Sorghum Breweries
[1997]
11 BLLR 1410 (LC)
at
1420F–1421B
;
(1998) 19
ILJ
613
(LC) at 623C–I). It must also disclose relevant information to
the other consulting party (
section
189(3))
;
it must allow the other consulting party an opportunity during
consultation to make representations about any matter on which
they
are consulting (
section
189(5))
;
it must consider those representations and, if it does not agree with
them, it must give its reasons (
section
189(6))
.
[27]
But all these primary formal obligations of an employer are geared to
a specific purpose, namely to attempt to reach consensus
on the
objects listed in
section
189(2)
.
The ultimate purpose of
section
189
is
thus to achieve
a
joint consensus-seeking process
.
In this manner the section implicitly recognises the employer’s
right to dismiss for operational reasons, but then only
if a fair
process aimed at achieving consensus has failed. This is also
apparent from
section
189(7)
which
provides that the employer must select the employees to be dismissed
on criteria either agreed to, or if that is not possible,
on criteria
that are fair and objective.
[28]
The achievement of a joint consensus-seeking process may be foiled by
either one of the consulting parties. The employer may
obviously
frustrate it by not fulfilling its obligations under
section
189(1)
,
(3), (5), (6) and (7). The other consulting party may do it by
refusing to take part in any of the stages of the consultation
process, or by deliberately delaying the whole process (cf
NEHAWU
v University of Fort Hare
[1997]
8 BLLR 1054
(LC)
;
UPUSA
and others v Grinaker Duraset
[1998]
2 BLLR 190
(LC)
at
204D
;
Fowlds
v SA Housing Trust Ltd and another
,
unreported case no J561/98 (LC) at paragraph 11). It may also appear
that any one of the parties simply went through the entire
formal
process with no intention of ever genuinely reaching agreement on the
issues discussed. These different possibilities depend
on the facts
of each particular case.
[29]
The important implication of this is that a mechanical, “checklist”
kind of approach to determine whether
section
189
has
been complied with is inappropriate. The proper approach is to
ascertain whether the purpose of the section (the occurrence
of a
joint consensus-seeking process) has been achieved (cf
Maharaj
and others v Rampersad
1964 (4) SA 638
(A) at 464;
Ceramic
Industries Ltd t/a Betta Sanitaryware
(
supra
)
at 701G–702H (BLLR); 676B–677C (
ILJ
);
Ex
parte Mohuloe (Law Society Transvaal intervening)
1996 (4) SA 1131
(T) at 1137H–1138D).”
[13]
I am not persuaded that the
respondent had fulfilled its statutory obligation to consult. More in
particular, the respondent has
failed to persuade the Court that it
had applied the selection criteria of “special skills”
fairly: Firstly, apart
from the say-so of Mr Human, nothing was
placed before the Court to justify the selection of one employee over
the other. The selection
of the employees were not only subjectively
but was extremely one-sided in the sense that the respondent did not
even bother to
engage any of the individual applicants for their
input regarding his view about their skills. Secondly, the respondent
was aware
of the fact that the union was representing the individual
applicants yet made no attempt to engage with the union even in
circumstances
where the union did not put forward any proposals.
Thirdly, the document referred to during the trial which makes a
comparison
between those employees who were selected to be
retrenched
vis à vis
those employees that were found to possess the necessary skills and
therefore retained, was prepared shortly before the trial and
was in
fact prepared for trial purposes. Nothing was placed before this
Court to show how the selection process actually took place
despite
the fact that Mr Human averred that he had prepared a schedule at the
time.
[14]
The
importance of consultation in respect of the selection of employees
for retrenchment has also been emphasised Labour Appeal
Court in
CWIU
and others v Latex Surgical Products (Pty) Ltd:
[3]
“
The
selection criteria
[83]
Section
189(2)
of
the Act deals with matters that are required to be the subjects of
consultation when an employer contemplates the dismissal of
one or
more employees for operational requirements. One of these is provided
for in
section
189(2)(b)
.
It is “the method for selecting the employees to be dismissed.”
Section
189(5)
requires
the employer to allow the other consulting party an opportunity
during consultation to make representations about any matter
on which
they are consulting.
Section
189(6)
obliges
the employer to “consider and respond to the representations
made by the other consulting party and, if the employer
does not
agree with them, the employer must state the reasons for
disagreeing”.
[84]
Section
189(7)
makes
provision for what happens at the end of the process of consultation.
Where attempts at finding measures that would avoid
the dismissal of
employees have failed, the end of the consultation process is the
selection of the employees to be dismissed and
then, finally, the
dismissal. With regard to what selection criteria an employer must
use when selecting employees to be dismissed,
counsel for the
appellants submitted that, where the employer and the union have not
agreed upon the selection criteria, the employer
is obliged in terms
of
section
189(7)(b)
to
use fair and objective selection criteria. I agree.
Section
189(7)
of
the Act contemplates two types of selection criteria that may be used
in the selection of employees to be dismissed. The one
type is
provided for in
section
189(7)(a)
and
the other in
section
189(7)(b)
.
Section
189(7)(a)
and
(b)
read:
“
(7)
The employer must select employees to be dismissed according to
selection criteria–
(a)
that have been agreed to by the consulting parties;
(b)
if no criteria have been agreed, criteria that are fair and
objective.”
The
type provided for in
section
189(7)(a)
is
for a situation where the consulting parties have reached an
agreement on the method of selection (selection criteria) to be
used
to select employees to be dismissed. The one provided for in
section
189(7)(b)
is
for a situation where the parties have not reached an agreement on
the method of selection to be used to select the employees
to be
dismissed. The two types of selection criteria can be referred to as
the agreed selection criteria and the fair and objective
selection
criteria respectively. Obviously the agreed selection criteria are
selection criteria that have been agreed upon between
the consulting
parties. The fair and objective selection criteria must be used where
the selection criteria have not been agreed
upon between the
consulting parties. What
section
189(7)
,
therefore, means is that, where the consulting parties have agreed
upon the selection criteria, the employer is obliged to use
the
agreed selection criteria to select the employees to be dismissed.
Where there are no agreed selection criteria, the employer
is obliged
to use only fair and objective selection criteria to select the
employees to be dismissed.
[85]
An employer and a union are free to agree upon selection criteria
that are or may be subjective. When the agreed selection
criteria are
subjective, the employer does not act unfairly in using such
selection criteria to select the employees to be dismissed.
Indeed,
he may be acting unfairly if he departed from the agreed selection
criteria simply because they are or may be subjective
or may include
a certain element of subjectivity. If the agreed selection criteria
are contained in a collective agreement, he
may be acting in breach
of a collective agreement if he departed from them. However, where
the employer does not use agreed selection
criteria to select the
employees to be dismissed, he may not use selection criteria other
than “fair and objective”
selection criteria.
The
effect of
section
189(7)
is
therefore that, when the court deals with a dispute concerning a
dismissal for operational requirements where the selection criteria
used by the employer to select employees for dismissal are
challenged, it must first determine whether the selection criteria
used were agreed or not. If they were agreed,
section
189(7)(a)
applies.
If they were not agreed,
section
189(7)(b)
applies.
[86
] The rationale for this is that the use of agreed selection criteria
will not produce a dispute about the fairness of such
criteria
whereas the use of selection criteria that have not been agreed upon
has the potential to lead to dissatisfaction and
disputes about such
criteria. The whole idea of the consultation process required by
section
189
before
dismissals for operational requirements can be effected is fairness
and the prevention of unnecessary disputes that could
otherwise arise
if such dismissals occurred without such a process. Obviously, there
are many dismissals for operational requirements
which do not produce
dismissal disputes precisely because of the consultation process
required by
section
189
and
there would be many disputes that would arise if such a process did
not occur.
[87]
In this matter the scenario was a
section
189(7)(b)
scenario
because the parties had not agreed upon the selection criteria.
Accordingly, it was not permissible for the respondent
to use any
selection criteria other than those that were “fair and
objective” as required by
section
189(7)(b)
of
the Act. The use of selection criteria that are not fair and
objective in a
section
189(7)(b)
scenario
– in other words where the selection criteria have not been
agreed upon – renders a dismissal substantively
unfair. The use
of subjective selection criteria in a
section
189(7)(a)
scenario
– that is where the selection criteria – have been agreed
upon does not render the dismissal unfair because,
although the
criteria are not objective, their use is, as it were, by mutual
consent.
[4]
[88]
The use of subjective selection criteria where they have not been
agreed upon can easily lead to abuse of such criteria. This
would be
the case where they are used to get rid of employees that the
employer may view as unwanted but against whom it is unable
to
produce acceptable proof of unacceptable conduct. That is why
the Act contemplates the use of subjective selection criteria
only
where the parties have reached agreement thereupon. In other words
the policy behind the provisions of the Act is that there
is a price
to be paid by an employer if he wants to use subjective selection
criteria in a retrenchment case. That price is to
secure an agreement
with the other consulting party about the use of such selection
criteria. If an employer strikes such a deal,
it can go ahead and use
subjective selection criteria. However, if it does not strike a deal
with the other consulting party on
the use of such criteria, the
price it pays for not reaching an agreement thereon is that it may
not use subjective selection criteria
to select employees to be
dismissed, in such a case, it must use selection criteria that are
“fair and objective” as
required by
section
189(7)(b)
of
the Act.”
[15]
Employees
also have the right to challenge their assessment – something
that was not done in this case
:
National
Union of Metalworkers of SA on behalf of Members v Timken SA (Pty)
Ltd:
[5]
“
[26]
In support of its argument the respondent relied on the case of
Engineering
Industrial and Mining Workers Union and another v Starpack (Pty) Ltd
(1992)
13 ILJ 655
(IC),
where the court held that productivity and conduct have been held to
be fair selection criteria provided that the affected
employees are
given the opportunity to challenge the assessment. In the present
instance the applicants were not afforded the opportunity
to
challenge the data used in arriving at the conclusion that the
attendance records were negative and therefore influenced their
scores in the assessment of whether or not they should be retrenched.
[27] It is generally
accepted in retrenchment cases that LIFO is the most objective and
fair criterion to use. This criterion need
not be applied in those
cases where its application could result in loss of skills or disrupt
the business operations. There was
no evidence to that effect in the
present instance.
[28] Where the
selection of employees is based on factors such as attendance record,
tardiness and performance, such employees should
be given an
opportunity to make representation against the negative conclusion
that may be drawn against them as a result thereof.
[29] In the present
instance the analysis of the selection criterion shows clearly, in my
view, that it was subjectively based on
the elements of discipline.
The criterion excluded from its scope skills, qualifications,
experience and long service. What is
also clear is that even if it
was to be found that the criterion itself was objective and fair, its
application was clearly unfair.
[30] The duty to
show that the criterion used was both objective and fair in its
definition and application rests on the employer.
It was therefore
the duty of the respondent in the present instance to show that the
exclusion of factors such as skills, qualifications,
experience and
long service did not result in unfairness to those selected for
retrenchment as a result thereof. I have already
indicated that
once an employer successfully demonstrates that the criterion by its
definition was fair, it then has to show that
its implementation was
also fair.”
[16]
In light of the fact that no
consultation procedure whatsoever has been followed in respect of the
selection criteria and the ultimate
selection of the employees -
prior to dismissing them, it is the finding of this Court that the
dismissal was procedurally unfair.
It is also the finding of this
Court that the dismissal of the applicants was substantively unfair
in that no consultations took
place in respect of the selection of
the individual applicants and in light of the fact that no input
whatsoever was sought from
the union and the individual applicants
before selecting them for retrenchment. In fact, the individual
applicants were not even
informed on the day of their retrenchment
why they were selected to be dismissed. Furthermore, no objective
evidence was placed
before this Court to assist the Court in deciding
who ought to have been retrenched and who ought not to have been
retrenched.
It is simply not adequate for an employer to belatedly
try and justify the selection of an employee in Court years after the
actual
selection had taken place in circumstances where it had failed
to involve the union and the individual applicants in the selection
process.
Appropriate
remedy
[17]
The
respondent urged this Court not to reinstate the individual
applicants in light of the financial position of the company. The
individual applicants on the other hand insisted that they should be
reinstated and that they have been prejudiced by their retrenchment.
Mr Cartwright on behalf of the applicants was not unsympathetic to
the financial plight of the company and submitted that if the
Court
is not inclined to award reinstatement with full retrospectivity in
light of the fact that the retrenchment took place more
than 3 years
ago, the Court should consider limiting the retrospectivity of the
reinstatement.
[18]
It
is for the Court to consider what an appropriate remedy should be
against the trite principle that reinstatement is the primary
remedy
where dismissal is found to be substantively fair. See in this regard
the Constitutional Court’s decision in
Billiton
Aluminium SA Ltd t/a Hillside Aluminium v Khanyile and others
where
the Court sets out what the role of the Courts are in considering an
appropriate remedy:
[6]
“
Role
of courts in ordering a just and equitable remedy
[26]
After
Equity
Aviation
,
supra
,
there can be no doubt that reinstatement is the primary remedy in
unfair dismissal disputes and that
section
193(1)(a)
of
the LRA confers a discretion on the commissioner or court of first
instance to determine the extent of retrospectivity of the
reinstatement. In
Equity
Aviation
,
Nkabinde J stated:
“
The
ordinary meaning of the word ‘reinstate’ is to put the
employee back into the same job or position he or she occupied
before
the dismissal, on the same terms and conditions. Reinstatement is the
primary statutory remedy in unfair dismissal disputes.
It is aimed at
placing an employee in the position he or she would have been but for
the unfair dismissal. It safeguards workers’
employment by
restoring the employment contract. Differently put, if employees are
reinstated they resume employment on the same
terms and conditions
that prevailed at the time of their dismissal. As the language of
section
193(1)(a)
indicates,
the extent of retrospectivity is dependent upon the exercise of a
discretion by the court or arbitrator. The only limitation
in this
regard is that the reinstatement cannot be fixed at a date earlier
than the actual date of the dismissal. The court or
arbitrator may
thus decide the date from which the reinstatement will run, but may
not order reinstatement from a date earlier
than the date of
dismissal. The ordinary meaning of the word ‘reinstate’
means that the reinstatement will not run
from a date after the
arbitration award. Ordinarily then, if a Commissioner of the CCMA
orders the reinstatement of an employee
that reinstatement will
operate from the date of the award of the CCMA, unless the
Commissioner decides to render the reinstatement
retrospective. The
fact that the dismissed employee has been without income during the
period since his or her dismissal must,
among other things, be taken
into account in the exercise of the discretion, given that the
employee’s having been without
income for that period was a
direct result of the employer’s conduct in dismissing him or
her unfairly.”18 (footnotes
omitted).
[19]
I have taken
into account the submissions on behalf of both parties and I have
decided to limit the reinstatement of the individual
employees to two
years.
[20]
One individual applicant – Mr
Sidney Nyathi - has since passed away. Mr Lucky Desmond Nyathi has
been duly appointed as the
executor of his estate. In respect of this
applicant I award him 12 month’s compensation.
[21]
Mr Ramohale is currently of
pensionable age. He also sought compensation equal to 12 months
remuneration.
[22]
In respect of cost, I can see no
reasons why costs should not follow the result.
Order
[23]
In the event the following order is
made:
23.1
The dismissal of the applicants was substantively and procedurally
unfair.
23.2
The respondent is ordered to reinstate the individual applicants. The
retrospectivity of the reinstatement is limited to two
years.
23.3
The respondent is ordered to pay the estate of the deceased Mr Nyathi
compensation in an amount equivalent to 12 months' salary.
23.4
The respondent is ordered to pay Mr Ramohale compensation in an
amount equivalent to 12 months' salary.
23.5
The respondent is to pay the costs of the first applicant, the
National Union of Metalworkers of South Africa.
AC
Basson
Judge
of the Labour Court
Appearances
For
the Applicants : Mr D. Cartwright of David Cartwright attorneys
For
the Respondent : Advocate EJ Steenkamp
Instructed
by : Z De Lange Incorporated
[1]
Act
66 of 1995.
[2]
[1998]
12
BLLR
1209 (LAC).
[3]
[2006]
2 BLLR 142 (LAC)
[4]
Court’s
emphasis.
[5]
(2009)
30 ILJ 2124 (LC).
[6]
[2010]
5 BLLR 465
(CC).