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[2015] ZALCJHB 390
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NUMSA obo Members v Kenco Engineering CC (JS947/11) [2015] ZALCJHB 390 (11 November 2015)
Of
interest to other judges
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
C
ase
no: js 947/11
In the
matter between:
NUMSA obo MEMBERS
Applicants
And
KENCO ENGINEERING CC
Respondent
Delivered
:
11 November 2015
Summary:
(Retrenchment – substantive fairness)
JUDGMENT
LAGRANGE
J
Introduction
[1]
In this matter, the individual applicants
were retrenched on 29 May 2011. They allege that their retrenchment
was substantively
unfair. In essence, the applicants dispute that:
there was a valid and fair reason for their retrenchment; whether
there was a
proper consideration of alternatives, and whether they
were selected for retrenchment using fair and objective criteria. The
respondent
admits that it did not follow LIFO, but in selecting
candidates for retrenchment, it used criteria based on skills, work
performance,
attendance records and safety records. The applicants
believe they were selected based on the basis of their union
membership,
though they did not claim that their dismissal was
automatically unfair as a result. They also argued that the employer
retrenched
longer serving permanent workers and retained shorter
serving employees on fixed term contracts.
[2]
Initially, the applicants had also disputed
the procedural fairness of their dismissals, but as the retrenchments
were large-scale
retrenchments falling within the scope of section
189A of the Labour Relations Act, 66 of 1995 (‘the LRA’)
and as no
application had been launched under s 189A (13) of the LRA,
they could not pursue this aspect of the claim in the course of this
trial. A ruling to this effect was made at the commencement of
proceedings.
[3]
Mr L Lourens, an employer’s
organisation representative who represented the company in the
retrenchment consultations (‘Lourens’),
and Mr N van
Pittius, a business consultant to the respondent at the time (‘van
Pittius’), gave evidence for the respondent.
Mr F Lebepe, a
former NUMSA official (‘Lebepe’), and Mr W Mailula, a
former employee and shop steward of NUMSA (‘
Mailula’)
testified for the applicants.
Consideration
of the evidence
[4]
The notice of possible retrenchment under
section 189 (3) was given to employees and sent to the union on 5
April 2011, though the
union claimed that it first received the
notice from its members the following day. In any event, the union
responded on 7 April
after Lebepe said he received a copy faxed by
one of the shop stewards from another union’s office. The
principal reason
highlighted for the possible retrenchments was that
the respondent’s major sub-contract with Bateman, an industrial
engineering
firm contracted to the Foskor mine in Phalaborwa, came to
an end on 31 March 2011. The notice also cited a serious downturn in
contract work from other major industries in the area. Without the
Bateman contract, the company could not sustain itself in its
existing form.
[5]
The company’s first strategy was to
look for other contracts in the region, in particular, at Phalaborwa
Mining Company (‘PMC’).
It also invited employees to
apply for voluntary severance packages but granting an application
was at its discretion. It also
offered to reemploy people for the
period of any new contract obtained in the next three months.
[6]
The respondent proposed that candidates for
retrenchment would be selected on the basis of skills, work
performance, attendance
record and safety record.
[7]
Retrenched employees were given a month’s
notice at the end of April 2011.
Consultations
[8]
For the sake of contextualisation only, it
is useful to outline the consultation process. It must be said that
both parties focused
unduly on the consultation process, even though
that should no longer have been the main focus of the evidence. The
employer had
called for a meeting with the workplace forum or the
union on 11 April 2011, but Lebepe said he was not available for a
meeting
because of a CCMA commitment and would only be available on
21 April. In defending his unavailability, Lourens said that he was
the only organiser responsible for the Limpopo province and in that
month the region was ‘overloaded’ with work.
[9]
Lourens claimed that Lebepe had said that
he could nonetheless address employees in his absence on 11 April.
The meeting proceeded
on 11 April and was attended by 52 of the
entire workforce of 74, including the two owners of the business.
Mailula claimed that
the meeting had only consisted of union members,
even though Lebepe claimed that the union had 31 paid-up members. At
the meeting,
Lourens claimed that non-unionised workers had been
asked to elect a so-called workplace forum of two individuals to
consult at
the next round of consultations to be dealt with the union
on 21 April. Lourens had gone through the notice with the meeting and
advised workers to consider the proposals and come with others at the
next consultation meeting.
[10]
However on the appointed date, Lebepe had
not arrived by 11H30 and Lourens had to leave for another
appointment. He had attempted
to meet with shopfloor representatives
of the union but they would not meet without Lebepe present. Lourens
angrily denied the
contention that the shop stewards had said they
wanted to discuss selection criteria with him claiming that was a
complete fabrication.
Mailula claimed that they had said they could
talk to him but he had declined to do so without Lebepe being
present. When Lebepe
testified he also gave the impression that it
would have been improper for Lourens to hold discussions with the
shop stewards,
contrary to the view held by Mailula.
[11]
An hour after leaving the respondent,
Loourens claims he got a call from Lebepe who had arrived for the
10h00 meeting, two and a
half hours late. He heard that the reason
for Lebepe being late was that his car had broken down on the Tzaneen
Phalaborwa road,
but he did not see him when he travelled on that
road afterwards. When Lebepe testified he also made various other
claims about
his interaction with Lourens and Mailula but these were
not canvassed with Lourens in cross-examination. In any event, when
they
spoke on the phone they agreed that he could make written
representations by 25 April but Lourens said that if they did not
receive
anything by then he would assume that the union accepted the
firm’s proposals. Lourens claimed that it was only when he was
already near Tzaneen that he received the call from Lebepe. In the
days following 21 April, he spoke to Lebepe again who said that
he
could not make representations until he had met with members.
[12]
No written representations were received
from the union by 25 April, apparently because of the Easter weekend
and Lebepe’s
commitments on subsequent days up to and including
28 April. On 29 April final notices of retrenchment was sent to the
23 workers
identified for retrenchment. Originally, it had been
suggested that 32 employees might be retrenched. The number of
retrenches
was determined by the availability of funds at the time.
The letter recorded the failed consultation process with the union
and
the fact that no proposals had been received.
[13]
Lourens claimed that was only after the
individual retrenchees had been issued with the letter that a letter
was received from Lebepe
in which it was proposed that:
13.1
Employees on the Bateman contract should be
retrenched because their contracts have expired.
13.2
LIFO and not the ‘bumpy method’
should be the method of selection because by now long serving
employees should have
a good knowledge of the work and it was for the
company to explain why they were not suitable despite this.
13.3
The letter confirmed that the severance
packages laid down by the main engineering agreement should be
applicable.
Lebepe
agreed that at the time he had not suggested alternative candidates
for retrenchment as was suggested in paragraph 11.4 of
the pre-trial
minute, because at the time he believed that the proposals made were
sufficient and at the time he did not know the
names of the temporary
employees engaged on the Bateman contract.
[14]
The letter containing the union proposals
was received at approximately 10 h38 that morning and Lebepe doubted
that Lourens had
left the firm already. He and Mailula further
claimed that the retrenchment notices were only given to workers at
around lunchtime
though this version was not put to Lourens during
his cross-examination. The firm did agree to adjust the severance pay
in line
with the main agreement.
The
selection of retrenchees
[15]
The union contended that all the employees
on the Bateman contract had been employed for the duration of the
contract and therefore
ought to have been the ones who were
retrenched, whereas it claimed that all those who had been retrenched
were permanent employees
who started working for the respondent
before the Bateman contract began in 2010. According to Lourens, who
was not directly involved
in the selection process, a percentage
score was attributed to each employee based on the listed criteria.
It was put to him that
it was the higher paid permanent employees who
had been retrenched and not the contract employees whose wages were
lower, but he
was unable to comment on this.
[16]
Van Pittius testified that in 2011 an
alternative source of work for the respondent became available from a
firm of design engineers,
Gauge Engineering (‘Gauge’).
Gauge was a smaller contractor which was required to develop
instrumentation and valve
controls for Foskor and PMC. It needed a
reliable partner that could manufacture and install the finished
products and entered
into a joint-venture with the respondent, which
could do the manufacturing and installation. The nature of the work
involved required
a skilled workforce. Gauge had previously suffered
when its own manufacturing partner had produced poor quality
products, which
had necessitated the reinstallation of valves.
[17]
Van Pittius, who acted as a consultant in
the joint venture between Gauge and the respondent, assisted in
advising on the staff
capabilities required for the new joint-venture
and skills were given a weighting of 40% because of the risks of
employing unskilled
workers. If the joint-venture failed it would be
the end of the respondent and Gauge. There were other companies that
could have
been considered by Gauge for the manufacturing work but
the respondent was given preference because of the quality of its
work.
These requirements were the reason why skills and work
performance were prominent amongst the selection criteria applied by
the
respondent. Gauge also identified attendance records and health
and safety records. This was because the installation work was done
in teams and the absence of one member of the team created problems,
and the mines placed great emphasis on health and safety issues.
LIFO
was discussed but Gauge insisted that skill and attention should be
prioritised. The evaluation of individuals selected for
retrenchment
was done by three persons who knew each individual and if they
arrived at a scoring which differed by more than 20%
they were
supposed to discuss the score and try and agree. If the respondent
had not been willing to use such criteria in determining
the
character of the workforce which had retained after retrenchment,
Gauge would probably have considered other manufacturers
as partners.
With the benefit of hindsight, the joint-venture proved a lifeline to
the respondent’s business. Like Lourens,
van Pittius had no
first-hand knowledge of how the evaluation was implemented by the
respondent. Mailula claimed he was unaware
of any evaluation process
being conducted by the respondent.
[18]
In his evidence, Lebepe explained that when
the union referred to the ‘bumpy method’ it was a
reference to the fact
that the employer was picking and choosing
those who were retrenched so the result was that the majority of
those retrenched were
union members. Of the 19 applicants retrenched
only 4 were general workers: the others were semi-skilled workers
classified as’
assistants’ who actually did the work of
the person they were assisting if that person was absent. Mailula
made a similar
claim and said that most of those retrenched were
semi-skilled or qualified staff who had been working for the
respondent for more
than seven years. However, of the 17 applicants
whose commencement dates are set out on the list containing the
applicants details
attached to their statement of case, only seven of
those had service of seven years or more, though it does seem that
the remaining
10 were employed before the commencement of the Bateman
contract in 2010.
[19]
Lebepe also asserted that those who were
not working on the Bateman Project were retrenched and most of them
were union members.
When it was suggested to him that there were good
reasons for the employer requiring certain technical expertise of the
kind outlined
by van Pittius, Lebepe retorted that this is what the
employer should have debated with the union at the time. Had it done
so,
the parties would not have found themselves sitting in court, in
his view.
[20]
Lebepe contended that the union had 31
members at the time and all 19 of the applicants were NUMSA members.
The other four retrenchees
who were not union members were
re-employed shortly after their retrenchment according to Lebepe.
None of these specific contentions
were put to the respondent’s
witnesses. He could not dispute that one of the persons subsequently
employed on a fixed term
contract in 2012 was a former union member,
but argued that this fact did not detract from the way retrenchees
were selected in
2011. Mailula claimed that he had heard from a
colleague that Lourens had been given a budget to get the union out
of the company.
This claim, which had never been mentioned until
Mailula gave his evidence cannot be given much credit. If it had been
sent it
would no doubt have featured prominently in the applicants’
pleadings.
Evaluation
[21]
As mentioned in the above, much of the
evidence dwelt on the failure of the parties to engage with each
other in the consultation
process. Because the only matter to
consider is the substantive fairness of the retrenchments, the
importance of this evidence
is less significant in determining that
question, though it may have a bearing on any relief awarded.
[22]
It was the respondent’s case that it
used fair and objective selection criteria,. It did not contend that
those criteria were
the result of a consensus, which they clearly
were not. The union argued firstly that LIFO ought to have applied
and secondly that
if the respondent had in fact prioritised the
retention of skill and work experience, it would not have retrenched
the applicants.
In the pre-trial minute it identified 10 other
employees who ought to have been considered for retrenchment as they
had been employed
only since 2010. While it is true that these names
were not put forward by the applicants before the retrenchments took
place,
the identity of the retrenchees was only known on the day that
they were issued with their notices of retrenchment, and the
applicants
were hardly in a position to suggest those individuals as
alternative candidates for retrenchment before then. On the other
hand,
the union had dragged its heels in the consultation process.
Lebepe’s delay in responding with its proposals cannot be
justified
just on the basis of his other priorities. He was aware of
the respondent’s timeline but did not engage until the eleventh
hour. Had he been more proactive, the union would have been in
a position to make its proposals before a final decision was
taken
and could have engaged with the selection process more meaningfully
instead of doing it retrospectively in court. His failure
to engage
timeously on this, also means the issue of LIFO as an alternative
method of selection was not deliberated on. While LIFO
has been
recognised as a fair method of selection, the failure to adopt it
does not necessarily mean the chosen criteria will be
found to be
unfair.
[23]
The evidence led by the respondent in
support of the substantive fairness of the retrenchments was twofold:
firstly, it was faced
with the loss of a major contract which placed
it under great financial strain and secondly it had adopted selection
criteria in
line with the requirements needed to perform the
manufacturing and installation work obtained from Gauge, without
which it could
not have survived. The applicants were unable to
provide any cogent challenge to the general need to retrench and
focused their
main attack on the selection criteria. In relation to
the justification of the criteria used, the applicants also were
unable to
meaningfully challenge the need for adopting them in light
of the joint-venture commitments which offered some meaningful
prospect
of alternative work to the respondent at the time.
[24]
However, when it came to demonstrating that
the applicants had been evaluated and found wanting in terms of the
chosen criteria,
the respondent led no evidence whatsoever. The
extent of the respondent’s evidence in this regard was the
evidence of van
Pittius, who could only testify as to the reasons why
the criteria were adopted and the method that was supposed to be
applied
in evaluating prospective candidates for retrenchment. No
evidence was led by anyone who had conducted the evaluation process
to
demonstrate that the candidates had been evaluated and that their
scores were lower than employees who were retained. Potentially,
the
criteria might have been fairly applied and a reasonably objective
process might have been used if the panel evaluation method
coupled
with a predetermined weighting of criteria and the moderating
mechanism mentioned by van Pittius had been used. However
nobody was
called by the respondent to verify that this is indeed what took
place and what the outcome of the process was and in
particular how
the applicants scored in relation to the other employees that the
applicants believed were more suitable candidates
for retrenchment. I
am mindful that the applicants did suggest, indirectly, that they
were sufficiently skilled to be retained
by the respondent on the
basis of its criteria, but this also was not properly canvassed with
the respondent’s witnesses.
[25]
I am satisfied that the employer did
establish a general need to retrench and that there were no viable
alternatives to retrenchment
of staff. As concerns the selection of
those to be retrenched, even if the criteria might be considered fair
and could have been
applied in a sufficiently fair and objective
manner in the circumstances, bearing in mind the operational needs of
the respondent,
the respondent did not demonstrate that the selection
of the applicants for retrenchment using those criteria was done in a
fair
and objective manner. However, on the evidence available I also
cannot go so far as to say that they would not have been retrenched
if the criteria had been fairly and objectively applied to them.
Relief
[26]
The applicants have asked for reinstatement
or alternatively compensation. The basis on which the retrenchment of
the individual
applicants is found to be substantively unfair is
confined to a finding that the respondent did not prove that it
applied its selection
criteria fairly and objectively in choosing the
individual applicants for retrenchment.
[27]
There was no evidence that the business
conditions which had led to the retrenchments had improved. Nor was
there reliable evidence
that the applicant’s skills could be
utilised in the restructured business, in line with its changed
operational requirements.
In view of the unresolved issue of whether
the applicant’s would still have been selected for retrenchment
if the criteria
had been fairly and objectively applied, the court
would just be assuming they would not have been selected and that
their skills
did meet the requirements of the new business, if
it ordered their reinstatement. In the circumstances, I do not think
it
would be practicable to reinstate them.
[28]
Consequently, bearing in mind the length of
service of most of the applicants, the failure of the union to engage
meaningfully with
the respondent on the selection issue and the
limited basis on which I find the retrenchment was substantively
unfair, I believe
eight months’ remuneration is a fair measure
of compensation.
[29]
On the question of costs, in view of the
union persisting with its claim of procedurally unfair retrenchment,
its partial success
in the substantive claim and its failure to
engage timeously in consultations, I do not think it appropriate that
a cost award
should be made in its favour.
Order
[30]
The retrenchment of the 19 individual
applicants in this matter was substantively unfair solely because the
respondent failed to
prove that it had fairly and objectively applied
its selection criteria in identifying them as candidates for
retrenchment.
[31]
The respondent must pay each of the
applicants, eight months’ remuneration, within 14 days of this
judgment, as follows:
Name of Applicant
Monthly Salary
Compensation due (Rands)
1
Widgar Magula
7,510.82
60,086.54
2
Aaron Malesa
5,196.00
41,568.00
3
Mponkwane C Pilusa
3,680.50
29,444.00
4
Masilu A Shayi
3,680.50
29,444.00
5
Stone Mametja
4,110.04
32,880.29
6
Fas Mathebula
4,110.04
32,880.29
7
Johana S Malatji
4,113.50
32,908.00
8
Eddie Mangena
3,897.00
31,176.00
9
Jacob Pilusa
6,231.89
49,855.10
10
Traully Monyela
3,734.63
29,877.00
11
German Mboneni
6,668.20
53,345.60
12
Lawrence Khoza
3,422.87
27,382.92
13
Edward Rapatsa
4,110.04
32,880.29
14
Samuel Mbombi
8,133.80
65,070.37
In the
event the parties cannot agree on the monthly rate of remuneration of
Shadrack Sepawa, Daniel Madiba, Theo Sepawa, Kaizer
Makofane and
Jonas Khoza, either party may approach the court on application to
determine the same
[32]
No order is made as to costs.
_______________________
Lagrange
J
Judge
of the Labour Court of South Africa
APPEARANCES
APPLICANT:
C Phukubje of Finger Phukubje Inc
RESPONDENT:
M Meyer instructed by G van Pittius