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[2015] ZALCJHB 304
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Solidarity obo Van Emmenis v Sirius Risk Management (Pty) Ltd (J1610/12) [2015] ZALCJHB 304; (2015) 36 ILJ 3175 (LC) (20 August 2015)
IN
THE LABOUR COURT OF SOUTH AFRICA JOHANNESBURG
JUDGMENT
Reportable
Case
No.: J 1610/12
In the matter between:
SOLIDARITY OBO L.P.
VAN EMMENIS
Applicant
and
SIRIUS RISK
MANAGEMENT (PTY) LTD
Respondent
Heard:
06 March 2014
Delivered:
20 August 2015
JUDGMENT
NGCUKAITOBI
AJ
Introduction
[1]
In this matter, two questions stand to be
decided. First, whether the dismissal of Mr Lukas Van Emmenis (the
employee) by the Respondent
on grounds of operational requirements
was procedurally fair. Second, whether the employee is entitled to
financial compensation.
[2]
The question relating to the fair reason
for dismissal is not disputed. The employee’s claim is that the
dismissal was not
effected in accordance with a fair procedure in
terms of sections 188(1)(b) and 189 of the Labour Relations Act, 66
of 1995 (‘the
LRA’). The basis for this is that there was
no meaningful consultation as envisaged by section 189 of the LRA.
[3]
The Respondent (the employer) disputes the
employee’s claims. It states that the consultation process
achieved the objects
of section 189 of the LRA. It submits that the
employee is not entitled to any compensation even if this court
concludes that the
dismissal was procedurally unfair. This is because
of two reasons. The first is that the employer discovered, after the
dismissal
of the employee, that he was involved in a business which
competed with that of the employer, in conflict with the restraint of
trade clause in his contract of employment. The second is that the
employee was at any rate paid in excess of the minimum payment
prescribed by section 41 under the Basic Conditions of Employment
Act, 75 of 1997 (‘the BCEA’).
[4]
I commence this judgment with the issue of
procedural fairness and thereafter consider whether the employee is
entitled to compensation
and, if so, the amount thereof. However, it
is necessary to recount the material facts as they appear from the
pleadings and the
evidence led.
M
aterial
facts
[5]
The Respondent is a security firm. At the
time of his dismissal, the employee was the branch manager at the
Midrand office of the
Respondent. He was dismissed with effect from
15 March 2012 by way of a letter dated 15 February 2012.
[6]
For reasons which will become apparent
later, it is important to mention at this stage that the son of the
Applicant, also called
Lukas Van Emmenis, was employed by the
Respondent in the position of technical manager.
[7]
The substantive justification of the
dismissal related to the financial difficulties experienced by the
Respondent consequent upon
the loss of certain important client
contracts. This, in turn, must be understood against the nature of
the business of the Respondent,
which is the provision of security
services. Mr Theodorus Vermaak, who testified for the Respondent
explained that the Respondent
lost four important client contracts:
Mooikloof, a housing estate situated in Pretoria; Equestrian Estate,
also a housing estate
in Pretoria East; a contract to provide
security at a German school, in Pretoria East; and a contract to
provide security services
at the office of the Auditor-General.
[8]
The Midrand branch also serviced the
Pretoria area. The reasons for the expansion of the area of focus of
the Midrand office were
also related to the operational requirements
of the Respondent. At a certain point in time in the past, a decision
was taken provide
managerial support over Pretoria from the Midrand
office. Since the employee was branch manager, he was intimately
knowledgeable
with the financial situation confronting the
Respondent.
[9]
The total financial loss, resulting from
the loss of the contracts aforementioned was estimated to be in the
region of R500,000
per month. The consequence of this loss was that
the Respondents began to consider ways in which it could reduce its
costs and
thus sustain its viability. This included restructuring of
its workforce resulting in dismissals being considered. The
employee’s
position became one of those affected by the
restructuring which ensued. Indeed, it was the argument of the
Respondent that the
employee, being the most senior employee in the
Midrand branch, should have been aware of the financial situation of
the Respondent
and should have been an active player in developing
solutions to the problem identified. Thus began a wide scale
retrenchment,
during which some 400 employees lost their jobs. The
majority of those who were dismissed were security guards. The
testimony of
Mr Vermaak was that the number of security guards was
reduced from about 700 to about 400. Some managerial employees,
including
the employee, were also affected by the dismissals.
[10]
The testimony of Mr Vermaak was that on 31
January 2012, he sent an email to the employee. The email reads:
“
The
viability of the company is now being subjected to further financial
strain due to the recent spate of cancellation of security
contracts.
I regret to confirm that the company has no option but to embark upon
an operational restructuring exercise.
This
having been said, meeting requests will be sent shortly as to the way
forward for your area of operation.
I
would appreciate your input in this regard as to potential changes in
restructuring your division.”
[11]
According to Mr Vermaak, the meeting
proposed in the e-mail was held with the employee on or about 2
February 2012. Although Mr
Vermaak initially stated that in his
recollection three parties attended the meeting, he accepted in
cross-examination that only
two people were present at that meeting,
being himself and the employee. What was discussed at this meeting
did not prove to be
contentious at the trial, although some dispute
appears from the pleadings. Mr Vermaak accepted that there was no
specific mention
of the possibility of the employee being considered
for retrenchment. Instead, the discussion was of a general nature,
focused
on the financial challenges faced by the company in light of
the loss of the contracts. From his perspective, the employee also
did not make suggestions relating to restructuring and particularly
which positions could be done away with so as to save costs.
In fact,
as Mr Vermaak testified, the answer of the employee was that there
was no need to embark upon any restructuring. His view
was that the
Midrand office, in fact, was understaffed.
[12]
Neither the employer nor the employee
appears to have given consideration to the issue of whether any other
aspects of the business
could be considered for cost savings.
[13]
The position of the employee was further
reiterated in an email dated 6 February 2012. In this email, the
applicant listed all positions
in Pretoria and Midrand, as being
potentially affected. In evidence, however, he denied being aware
that his position would be
identified for redundancy until 15
February 2012, when he was dismissed.
[14]
During the trial, some time was taken on
the issue of the two week sick leave taken by the employee from 30
January 2012 to 12 February
2012, which was the period during which
the consultation process took place. At this period, the office of
the Applicant was converted
into a control room. A complaint was made
regarding this and particularly its impact on the consultation. In my
view, however,
this issue is of peripheral importance to the
determination of the procedural fairness of the dismissal. On the
facts, a grievance
was made by the Applicant and seems to have been
addressed within the structures of the respondent. In any event, it
appears that
the office of the employee had previously been a control
room. The financial constraints of the Respondent also meant that it
had
to consider the utilisation of office space, which included the
conversion of individual office spaces into general and/or communal
use. Furthermore, the employee in fact was allocated an area from
which he could execute his duties, during the short period after
his
return from sick leave on 12 February 2012, until the date of his
dismissal being 15 March 2012.
[15]
Subsequent to the email addressed by the
employee to the Respondent on 6 February 2012 a decision was taken to
dismiss the employee.
Mr Vermaak testified that he had a meeting with
Mr Gerber, who was the General Operations Manager, at the time. (Mr
Gerber was
also subsequently retrenched). It was at this meeting,
held on or about 9 February 2012, that the decision to dismiss the
Applicant
was taken. Prior to this, so Mr Vermaak testified, the
dismissal of the Applicant had not been considered.
[16]
In answer to a question emanating from the
bench, regarding the reason for consulting the employee on 2 February
2012, if his position
was not considered as being liable for
dismissal, Mr Vermaak testified that “
at
that point ... we were looking for ways of resolving it; whether
there are any possible other members that we could have considered
for retrenchment
.” In
cross-examination Mr Vermaak confirmed that the employee was not in
fact informed that he was facing a possible retrenchment
until 15
February 2012, when he received a letter of dismissal.
[17]
On 15 February 2012 the employer addressed
a letter of dismissal to the employee. The letter states:
“
The
e-mail to you dated 31 January 2012, as well as a formal meeting on 2
February 2012 regarding changes in operational requirements
refers.
As indicated during the
commencement of the initial process, the viability of the company is
now being subjected to further financial
strain due to the recent
spate of cancellation of contracts. In your follow-up correspondence,
dated 6 February 2012, you indicated
that there were no operational
changes to be made and that service levels would be compromised if
any of the operational staff
were to be restructured in any way. The
financial situation of the company, and therefore the operational
requirements, however,
remains unchanged.
A decision has therefore
been taken that the position of the Branch Manager, Midrand be
declared redundant with immediate effect.
In terms of this decision
the operational staff would report directly to the Johannesburg
operations. You are herewith notified
that your service will be
terminated, effective 15 March 2012 and the period from this letter
to the date of termination will be
regarded as your notice period.
You would, however, not be required to tender your services during
this period and would be paid
in lieu of such notice.”
[18]
The letter was presented at a meeting
attended Mr Vermaak and the employee. According to Mr Vermaak the
purpose of this meeting
was to convey the decision of the employer to
dismiss the Applicant.
[19]
I mentioned earlier the position of the son
of the Applicant. It was common cause that he had volunteered for his
dismissal for
operational reasons and was paid accordingly. It was
established, in evidence, that prior to his dismissal (during the
period of
his employment) he had registered a company known as
Chronicle Solutions (also referred to as Chronicle Security). This
company
also provided security services, like the Respondent.
[20]
Some aspects about this company, the
significance of which will be dealt with later, should be mentioned.
20.1
Its registered address was the same as the
employee’s residential address.
20.2
The cell phone number, listed in its
promotion material as being the contact number for the company, was
that of the employee.
20.3
The employee accepted that he delivered
copies of the promotion material in the form of brochures of the
company to potential customers.
20.4
The Respondent lost one of its customers,
Bosal, to the company Chronicle Security.
20.5
Some of the promotional material contained
the picture of the employee as the contact person for Chronicle
Security.
[21]
In evidence, the Applicant attempted to
distance himself from Chronicle Security and claimed that he had
little or no involvement
in its affairs as it was a company run and
managed by his son. But this attempt is not credible in light of the
evidence summarised
above. Moreover, it was the employee’s own
evidence that he discussed the business affairs of Chronicle Security
with his
son. It was also his evidence that he assisted his son by
delivering promotion brochures of Chronicle Security to potential
customers.
Furthermore, he did not adequately answer the evidence
presented on behalf of the Respondent that his cell phone number and
picture
were used in promotional material of the company.
[22]
Against the above matrix of fact I consider
the issue of procedural fairness.
PROCEDURAL FAIRNESS
Principles applicable
[23]
A useful starting point is section 23(1) of
the Constitution which provides that everyone has the right to fair
labour practices.
This right, in turn, is given effect by the
LRA. In relation to dismissals specifically, the LRA provides for
certain rights and
remedies. Sections 185 and 188 of the LRA
protect employees against unfair dismissal. Section 185 says
that no employee
may be dismissed unfairly. In terms of section
188 an unfair dismissal includes a dismissal where the employer fails
to comply
with a fair procedure.
[24]
In relation to dismissals for operational
requirements, section 189 of the LRA is applicable. It contains the
following requirements
for procedural fairness:
24.1
When an employer contemplates dismissing an
employee for
operational
reasons
it must consult with the affected employee. (Section 189(1)).
24.2
The employer and the employee being
consulted must engage in a meaningful joint consensus-seeking process
and attempt to reach consensus on certain
items including measures to avoid dismissals, to minimise the number
of dismissals, to
change the timing of dismissals and mitigate their
effects on employees. Furthermore the joint consensus-seeking process
must be
aimed at reaching agreement on selection criterion and
severance pay. (Section 189(2))
24.3
The employer must issue a written notice
inviting an employee to consultation and its notice should disclose
all relevant information
which must include the reasons for the
proposed dismissals, any alternatives considered by the employee and
other relevant information.
(Section 189(3))
24.4
In the consultation process the employer
must respond to the representations
made by
an employee and where these are rejected reasons for the rejection
must be stated. (Sections 189(5) and (6)).
24.5
Where an employer proceeds with a dismissal
the selected employee
should be selected
based on agreed criteria or alternatively criteria which are fair and
objective (Section 189(7)).
[25]
Commenting on the nature of the
consultation contemplated by section 189, in
Johnson
and Johnson (Pty) Ltd v CWIU
[1998] 12 BLLR 1209
(LAC)
,
it was held:
“
[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)
.”
[26]
The purpose then, of a retrenchment
consultation, is to achieve a meaningful joint consensus-seeking
process. In the unreported
judgment
of
Supergroup Trading (Pty) Ltd v Janse van Rensburg
[2012] ZALAC 7
(25
April 2012)
the Labour Appeal Court in
a unanimous judgment criticised the consultation in these terms:
“
[20]
The consultations were a “charade” or as the court a quo
thought it was a “sham”. It was purposeless
insofar as it
deprived the Respondent of a chance to save his post or avoid his
being selected for retrenchment. His representations
on that score
were to be fruitless because restructuring was a fait accompli.”
[27]
Earlier, at paragraph [4] of the judgment
the LAC made the above point in prescient terms:
“
[4]
The decision to abolish the post of the Chief Operating Officer (the
COO) relates to the crux of the Respondent’s complaint.
The
Court a quo correctly appreciated this. The purpose of consultation
is to try and save a job or position. If this cannot be
done the next
aim is to avoid dismissal by placing the person, whose post has
become redundant, elsewhere. And if avoidance is
not possible
consultation concerns the extent to which the consequences of the
retrenchment can be mitigated.”
[28]
The court continued:
“
[5]
If the decision to make a post redundant is set in stone and not open
to revision or discussion then the main aim of consultation
has been
thwarted before it has begun. If the decision to retrench a certain
person has been pre-decided, consultation about whether
this person
should be chosen is a sham. What remains is consultation on the
mitigation of retrenchment.”
[29]
A key purpose behind a consultation is
therefore the protection of employment. This approach is consistent
with the views expressed
by the Constitutional Court in
National
Education Health and Allied Workers Union v University of Cape Town
and Others 2003 (3) SA (1 (CC)
that
security of employment is a core constitutional value protected
through the LRA.
Application to the
facts
[30]
In my view, the conduct of the Respondent
herein fell short of the procedural requirements of section 189 of
the LRA, for these
reasons:
30.1
Section 189(1) of the LRA requires an
employer, when it contemplates dismissing an employee to consult with
the affected employee
on a range of topics. On the facts herein,
there was a consultation held on 2 February 2012. No further
consultation was held.
However, it was common cause that as of 2
February 2012 the dismissal of the employee was not yet contemplated.
30.2
When an employer invites an employee for
purposes of retrenchment consultation, section 189(3) of the LRA
requires that employer
to disclose all relevant information to the
employee, prior to the intended consultation. The notice inviting the
employee to the
consultation, dated 31 January 2012, did not meet the
prescripts of section 189(3). It disclosed no relevant information,
other
than general references to the fundamental difficulties and the
need for retrenching. It did not address the specific question
whether the position of the employee was affected and the reasons why
the position was affected. During the consultation itself,
no
discussion was held with regard to whether or not the position of the
employee would be affected and the reasons why it would
be affected.
30.3
The consultation must be a meaningful
exercise, aimed, first and foremost at the retention of any job which
is affected by the potential
retrenchment. If the job cannot be
saved, the consultation must shift to other measures to ameliorate
the hardship associated with
dismissal. The consultation held herein
did not meet this object. As noted, the employer had not as yet
formulated a clear position
as to whether it was in fact
contemplating the dismissal of the employee, when a meeting was held
on 2 February 2012.
30.4
The employer only began to consider the
dismissal of the applicant on 9 February 2012 in the discussion
between Mr Vermaak and Mr
Gerber. It was common cause that there were
no consultation meetings held with the applicants after that date.
The next meeting
was on 15 February 2012, when the Applicant was
presented with a letter of dismissal.
[31]
I conclude, therefore, that the employer
has failed to prove that the dismissal was effected in accordance
with a fair procedure
in terms of sections 188(1)(b) and 189 of the
LRA.
[32]
The question remaining is whether or not
the employee is entitled to any compensation and, if so, the amount
thereof. It will be
recalled that the employer disputed the
employee’s entitlement to compensation, irrespective of my
conclusion as to whether
the dismissal was procedurally fair or not.
The two grounds upon which the entitlement was disputed related to
the conduct of the
employee in regard to his involvement in a
competing business and the fact that he was paid in excess of his
statutory entitlement
under the BCEA.
COMPENSATION
Principles applicable
[33]
The remedies for unfair dismissal are provided for in sections 193
and 194 of the LRA. Section 193 of the LRA deals with
remedies
for unfair dismissal and unfair labour practice. In terms of
section 193(1), a court or arbitrator adjudicating
an unfair
dismissal dispute, may award one of three remedies (either separately
or in combination):
33.1
reinstatement
;
33.2
re-employment; or
33.3
payment
of
compensation.
[34]
Section 194(1) of the LRA deals with limits
on compensation and provides:
“
The
compensation awarded to an employee whose dismissal is deemed to be
unfair either because the employer did not prove that the
reason for
dismissal was a fair reason relating to the employee’s conduct
or capacity, or the employer’s operational
requirements, or the
employer did not follow a fair procedure, or both, must be just and
equitable in all the circumstances, but
may not be more than the
equivalent of twelve (12) months remuneration calculated at the
employee’s rate of remuneration
on the date of dismissal.”
[35]
Compensation accordingly is a matter of remedial discretion of the
Court. The main criterion is that compensation must be just
and
equitable.
[36]
In
Equity
Aviation Services (Pty) Ltd. v Commission for Conciliation, Mediation
and Arbitration & Others
[2008] ZACC 16
;
2009 (1) SA 390
(CC)
,
the Constitutional Court emphasised the discretionary nature of
compensation under sections 193 and 194 of the LRA. This
discretion operates at two levels. First, the court has
discretion whether or not to award any compensation pursuant to a
finding of procedural unfairness. Second, once the court has
elected to award compensation, the compensation must be just
and
equitable. As such, the first point of enquiry is the likelihood of
the court granting compensation at all.
[37]
The case of
Johnson
and Johnson (Pty) Ltd v Chemical Workers Industrial Union (1999) 20
ILJ 89 (LAC)
concerned compensation to
be paid to an employee whose dismissal for operational reasons is
unfair because of the failure on the
part of the employer to follow
the procedure prescribed by section 189 of the LRA.
[38]
Leaving aside the “
all
or nothing”
approach to
compensation, which was dealt with in this case, (but is no longer
relevant since the 2002 amendments to the LRA),
this case also
explained the object behind compensation in terms of section 194 of
the LRA. The object of compensation is to compensate
an employee for
the loss of a fair procedure. It is not to pay an employee for any
actual patrimonial losses sustained. The Court
held in this regard:
“
Even
if it is accepted that that compensation means ‘a sum of money
for something lost’ the ‘something lost”
under
section 194(1) is the employee’s right to a fair hearing or
procedure prior to dismissal….The compensation for
the wrong
in failing to give effect to an employee’s right to fair
procedure is not based on patrimonial or actual loss.
It is in the
nature of a solatium for the loss of the right, and is punitive to
the extent that an employer (who breached the right)
must pay a fixed
penalty for causing that loss. In the normal course a legal wrong
done by one person to another deserves some
form of redress. The
party who committed the wrong is usually not allowed to benefit from
external factors which might have ameliorated
the wrong in some way
or another. So too, in this instance. The nature of an employee’s
right to compensation under s194(1)
also implies that the discretion
not to award that compensation may be exercised in circumstances
where the employer has already
provided the employee with
substantially the same kind of redress [always taking into account
the provisions of s 194(1)], or where
the employer’s ability
and willingness to make that redress is frustrated by the conduct of
the employee.”
[39]
In
Scribante
v Avgold Ltd (2000) 21 ILJ 1864 (LC) Damant AJ
,
after an exhaustive reference to authorities held:
“
Having
weighed up the authorities, in my view the relevant factors to be
taken into account in determining whether to award compensation
or
not are the following:
whether
the employer has already provided the employee with
substantially the same kind of redress;
whether
the employer’s ability and willingness to make that redress is
frustrated by the conduct of the employee;
the
degree that the employer deviated from the requirements of a fair
procedure;
Whether
the employer secured alternative employment for that employee.
I
am satisfied that it is not appropriate to take into account the
actual loss sustained by the employee, whether the employee
successfully obtained alternative employment immediately after the
dismissal, whether the employee did or did not mitigate his loss,
and
the period it would have taken to effect a fair dismissal. I am also
satisfied that the other factors considered in the BrandAdd
case such
as length of service, prospects of finding alternative employment and
the financial position of the employer, are not
relevant factors.”
[40]
In
Alpha
Plant & Services (Pty) Ltd v Simmonds & Others (2001) 22 ILJ
359 (LAC) Goldstein AJA
found it unnecessary to deal with the relevance or otherwise of
patrimonial loss but considered it relevant to consider the extent
of
the employer’s deviation from the requirements of consultation
and assistance laid down by the LRA when deciding whether
or not to
award compensation.
[41]
It is thus apparent from this
analysis that the paramount object behind compensation is to atone
for loss of procedure. Patrimonial
loss would ordinarily not play a
major role. Some degree of jurisprudential dissension is, however,
apparent in relation to the
issue of patrimonial loss – at
least in the context of whether an employee has “mitigated
their losses”, subsequent
to dismissal. Cases such as
Whall
v BrandAdd Marketing (Pty) Ltd (1999) 20 ILJ 314 (LC)
hold the view that the question of actual losses sustained by an
employee could be a legitimate factor to take into account in
specific circumstances. The following passages from the
Whall
is relevant:
“
[35]
When exercising the discretion as to whether to grant compensation
the Court must, in my opinion, have regard to what is fair
to both
the employee and the employer. One of the purposes of the Act is to
protect employees against unfair dismissal (section
185). Others are
to advance economic development (section 1) and to effectively
resolve labour disputes (section 1(d)(v)). While
the punitive effects
of section 194(1) may be ameliorated by the (implicit) limit of
compensation to the equivalent of 12 months'
remuneration, the
decision as to whether to order compensation must nevertheless in my
view be exercised with the above considerations
in mind.
[36]
As section 194(1) prescribes a minimum, establishing what fairness in
this context requires must entail comparing what the
Court considers
the employee should have received had there been no statutory minimum
with what the employee must receive in terms
of that statutory
minimum. If there is a substantial difference between the two
figures, the Court must decide whether denying
compensation would be
more unfair to the applicant than granting the prescribed
compensation would be to the respondent. The assessment
of what the
employee should have received must, in turn, require the Court to
examine factors such as the actual patrimonial loss
suffered by the
applicant in consequence of his or her dismissal, his or her length
of service with the employer, his or her prospects
of finding
alternative employment, the financial position of the employer, and
so on: see the criteria listed by the Court in Ferodo
(Pty) Ltd v De
Ruiter (1993) 14 ILJ 974 (LAC) at 981 D-G.”
[42]
This view, confirming
the relevance of patrimonial loss in the determination of just and
equitable compensation, appears to have
been received some support
from the Labour Appeal Court in the case of
HM
Liebowitz (Pty) Ltd t/a Auto Industrial Centre Group of Companies v
Fernandes (2002) 23 ILJ 278 (LAC)
.
Zondo JP (as he then was) concluded on the facts that patrimonial
loss was not a relevant consideration in his assessment of a
just and
equitable compensation. However, he held that it is wrong, in
principle to exclude patrimonial loss as a factor which
may be taken
into account in an enquiry about what is just and equitable in terms
of section 193 and 194 of the LRA. At paragraph
22 the court held:
“
In
such a case it seems to me that patrimonial loss is relevant because,
if no patrimonial loss was suffered, an award of compensation
exceeding the minimum may offend the requirement of the subsection
that compensation awarded must be “just and equitable
in all
the circumstances”. This does not necessarily mean that
the absence of patrimonial loss would operate as a bar
to the Court
awarding compensation exceeding the minimum. Indeed, there may well
be circumstances which satisfy the Court that,
despite the absence of
patrimonial loss, it would be “just and equitable in all the
circumstances” for the Court to
award the employee compensation
that goes beyond the minimum - even up to the maximum.”
[43]
Another
important finding made by the LAC in the
Liebowitz
decision was that
there is a distinction between compensation payable to an employee
who should not have been dismissed (this is
an instance where the
dismissal is also substantively unfair) and an employee who should
have been dismissed (this is a case of
procedurally unfair
dismissal). A Court deciding on appropriate
compensation
must reflect this
distinction in its award. In cases, such as the present, where the
dismissal is for operational reasons, it should
be remembered that
the dismissal is, by definition, a “no-fault”
termination. But the issue of whether the dismissal
is substantively
fair would still be relevant, insofar as it would show that the
decision of the employer was motivated by genuine
operational
considerations.
[44]
In
Kemp
t/a Centralmed v Rawlins (2009) 30 ILJ 2677 (LAC)
the
LAC decided to refuse compensation notwithstanding the fact that the
dismissal was held to be unfair. In coming to its decision
the LAC
tabulated the factors to be taken into account when deciding whether
to award compensation pursuant to a finding of unfairness
in a
dismissal and when deciding the amount of compensation. It held:
“
[20]
There are many factors that are relevant to the question whether the
court should or should not order the employer to pay compensation.
It
would be both impractical as well as undesirable to attempt an
exhaustive list of such factors. However, some of the relevant
factors may be given. They are:
(a)
the nature of the reason for dismissal; where the reason for
the dismissal is one that renders the dismissal automatically
unfair
such as race, colour, union membership, that reason would count more
in favour of compensation being awarded than would
be the case with a
reason for dismissal that does not render the dismissal automatically
unfair; accordingly, it would be more
difficult to interfere with the
decision to award compensation in such case than otherwise would be
the case;
(b)
whether the unfairness of the dismissal is on substantive or
procedural grounds or both substantive and procedural grounds;
obviously it counts more in favour of awarding compensation as
against not awarding compensation at all that the dismissal is both
substantively and procedurally unfair than is the case if it is only
substantively unfair, or, even lesser, if it is only procedurally
unfair;
(c)
in so far as the dismissal is procedurally unfair, the nature
and extent of the deviation from the procedural requirements;
the
minor the employer’s deviation from what was procedurally
required, the greater the chances are that the court or arbitrator
may justifiably refuse to award compensation; obviously, the more
serious the employer’s deviation from what was procedurally
required, the stronger the case is for the awarding of compensation;
(d)
in so far as the reason for dismissal is misconduct, whether or
not the employee was guilty or innocent of the misconduct;
if he was
guilty, whether such misconduct was in the circumstances of the case
not sufficient to constitute a fair reason for the
dismissal;
(e)
the consequences to the parties if compensation is awarded and the
consequences to the parties if compensation is not awarded;
(f)
the need for the Courts, generally speaking, to provide a
remedy where a wrong has been committed against a party to litigation
but also the need to acknowledge that there are cases where no remedy
should be provided despite a wrong having been committed
even though
these should not be frequent.
(g)
in so far as the employee may have done something wrong which
gave rise to his dismissal but which has been found not
to have been
sufficient to warrant dismissal, the impact of such conduct of the
employee upon the employer or its operations or
business.
(h)
any conduct by either party that promotes or undermines any of
the objects of the Act, for example, effective resolution
of
disputes.”
[45]
On the facts
of the case, the court held that the employee was not entitled to any
compensation because she had been offered reinstatement
which she
refused without reasonable grounds. It was noted that had the
employee accepted the reinstatement offer, she would not
have
suffered any patrimonial loss.
[46]
Compensation, for
procedural
unfairness, also includes a punitive element.
This has been acknowledged in the case, for instance, of
Viljoen
v Nketoana Local Municipality (2003) 24 ILJ 437 (LC)
.
In this case it was stated that compensation is not an award for
damages in the contractual or delictual sense. It includes
a
penal
element against the employer for failing to get the procedure right,
as well as an element of solace to the employee, in the sense
that
the employee has lost the right to be given a procedurally fair
dismissal, which is entrenched by the LRA.
[47]
Given the role of solace which is played
out in the assessment of compensation, the Labour Appeal Court, in
the case of
Minister for Justice &
Constitutional Development & Another v Tshishonga (2009) 30 ILJ
1799 (
LAC
)
,
had regard to the role played by
solatium
in compensation. At paragraph 18 the
following was stated:
“
The
question thus is what is just and equitable in circumstances where
the compensation is for non-patrimonial loss. In this connection,
some assistance can be gained from the jurisprudence relating to the
award of a solatium in terms of the actio injuriarum. In these
cases
the award is, subject to one exception, of a non-patrimonial nature,
and is in satisfaction of the person who has suffered
an attack on
their dignity and reputation or an onslaught on their humanity.
The exception is for the amount relating to
the costs of R177 000,00
which were incurred by respondent in having to defend himself, and
which are patrimonial by nature.
Factors regarded by the court
as relevant to the assessment of damages generally include the nature
and seriousness of the iniuria,
the circumstances in which the
infringement took place, the behaviour of the Defendant (especially
where the motive was honourable
or malicious) the extent of the
plaintiff’s humiliation or distress, the abuse of a
relationship between the parties, and
the attitude of the defendant
after the iniuria had taken place. It should be noted that this
list is not exhaustive, in
that specific forms of infringement have
their own peculiar factors to consider.”
[48]
There are two broad categories of cases
where the courts have refused compensation.
48.1
The first instance, which is typified by
the
Transnet
case, is where the conduct of the employee is sufficiently serious so
as to conclude that an employee is not entitled to any compensation,
despite the fact that the dismissal is found to be procedurally
unfair.
48.2
The second instance is that highlighted by
the
Rawlins
decision, where the LAC refused compensation because the employee had
been offered a reasonable alternative position but refused
it without
justification. In other words the unreasonable conduct on the part of
the employee, after the dismissal is a factor
to be considered,
particularly where the unreasonable conduct is in response to an
offer of reinstatement, which in effect, would
remedy the wrong
caused by the unfair dismissal.
[49]
From the judgment of
Johnson
& Johnson
compensation for
procedural unfairness flows from two considerations. The first
is to compensate the employee in the form
of
solatium
,
for the statutory right which has been lost by the procedurally
unfair dismissal. The second is to punish the employer for
failing to comply with the correct procedures which are in the LRA.
I must apply the principles by reference to the facts
herein.
Application to the
facts
[50]
On the facts, the denials of the Applicant
with regard to his involvement in Chronicle Security are rejected.
50.1
The registered address of the business was
also his residential address. That he also lived with his son is not
material. He testified
that his son paid him rental.
50.2
The profile of Chronicle Security contained
the employee’s cell phone number and his picture.
50.3
There was no credible denial that at least
one client of the Respondent, Bosal had been contacted by the
Applicant promoting Chronicle
Security and as a result had in fact
left the Respondent and signed up with Chronicle Security.
50.4
It was established in the evidence that the
Applicant “assisted his son” by dropping off copies of
the profiles of Chronicle
Security to potential customers, which was
in conflict of the business of the employer, the Respondent.
[51]
I consider these to be inconsistent with the provisions of the
contract of employment of the employee which provides, in the
relevant clause:
“
Lucas
Petrus Van Emmenis undertakes in favour of Sirius Risk Management
(Pty) Ltd that for the duration of this agreement he will
be
restraint as herein after provided, from directly or indirectly
carrying on, being involved in or interested in any business
whatsoever whether or not in competition with Sirius Risk Management
(Pty) Ltd, other than in terms of the provisions of clause
9.5 or
with the prior approval of the board of Sirius Risk Management.”
[52]
However, this dispute is not about the
breach of the contract of employment, but the fairness of the
dismissal. The issue of alleged
breach of contract only arose in the
context of an assessment of compensation to be paid. I accept that
compensation must be just
and equitable. While these terms are
necessarily inexact, they are not a licence to take into account any
information presented
to the Court including where there is no clear
evidentiary link to the dispute. The evidence which can properly be
taken into account
must be relevant to the objects of the
compensation, namely, the solace element and the punitive element, as
aforesaid.
[53]
For reasons which I set out below, I
conclude that the Applicant is entitled only to nominal compensation.
53.1
The Applicant was a senior employee. The
loss of client contracts occurred in his area of responsibility,
being Midrand and Pretoria.
He was clearly aware of the loss of
contracts, and the resultant financial impact of such losses.
Particularly, he would have been
aware of the threat to the financial
viability of the Respondent. It was, in part, his responsibility to
assist the employer in
addressing the financial challenges which it
faced. Unlike junior employees, he should have anticipated the
restructuring. When
he was specifically informed of the potential
restructuring on 31 January 2012, it is not unreasonable to have
expected the employee
to anticipate that his position could
potentially be affected. In summary, given his unique position and
access to critical information,
the employee should reasonably have
anticipated his potential dismissal for operational reasons.
53.2
I consider that the degree of departure
from a fair process was not so serious as to justify substantial
compensation. The employer
in fact consulted with the applicant,
although I have concluded that the actual consultation fell short of
the standards prescribed
by section 189 of the LRA.
53.3
The Applicant was being untruthful when he
attempted to distance himself from Chronicle Security. Ordinarily,
the issue of the potential
breach of his contract of employment in
this respect would have been an irrelevant consideration. Here, it is
relevant in the following
respects. Firstly, the reason leading to
the financial difficulties of the Respondent which necessitated the
restructuring in the
first place was the loss of contracts. The
evidence was that the employee was actively promoting a competing
business, thus contributing
to the very loss of contracts which led
to the restructuring in the first place. On the facts, it is known
that Bosal, a client
previously of the Respondent, subsequently
signed up with Chronicle Security, and terminate the relationship
with the Respondent.
Secondly, I take into account the fact that the
employee gave untruthful evidence with regard to his association with
Chronicle
Security at the trial. Thirdly, the employee derived
financial benefit from Chronicle Security, through the rentals which
were
paid by his son, who was living on his property. Fourthly, the
Respondent paid the employee in excess of the statutory minimum.
Even
though the payment was discretionary, it is relevant in the exercise
of discretion relating to just and equitable compensation.
[54]
In these circumstances, I consider that the
financial compensation of one month is just and equitable.
ORDER
The
following order is made:
(a)
The Respondent failed to prove that the
dismissal of the employee for operational reasons was effected in
accordance with a fair
procedure.
(b)
The Respondent is directed to pay the
Applicant an amount equivalent to one month compensation, at the
scale applicable at the time
of dismissal.
(c)
There is no order as to costs.
_______________________
NGCUKAITOBI AJ
Acting
Judge of the Labour Court of South Africa
APPEARACES
For
the Applicant:
Union Official
– Hendrick van der Hoven
Instructed
by:
Solidarity
For
the Respondent:
Adv B Roode
Instructed
by:
Deon de Bruyn Attorneys