About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Cape Town Labour Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Cape Town Labour Court, Cape Town
>>
2015
>>
[2015] ZALCCT 1
|
|
Myburgh v Barinor Holdings (Pty) Ltd and Another (C 820/13) [2015] ZALCCT 1 (28 January 2015)
REPUBLIC
OF SOUTH AFRICA
THE
LABOUR COURT OF SOUTH AFRICA, CAPE TOWN
JUDGMENT
CASE
NO: C 820/13
DATE:
28 JANUARY 2015
NOT
REPORTABLE
OF
INTEREST TO OTHER JUDGES
In
the matter between:
JAN
ALEXANDER
MYBURGH
...................................................................
Applicant
And
BARINOR
HOLDINGS (PTY)
LTD
.................................................
First
Respondent
BARINOR
MANAGEMENT SERVICES (PTY) LTD
..............
Second
Respondent
Heard:
11-13 August; 17 November 2014
Delivered:
28 January 2015
Summary:
Dismissal for operational requirements
JUDGMENT
STEENKAMP
J
Introduction
[1]
The
applicant, Jan Myburgh, was dismissed for operational requirements by
the respondent, Barinor
[1]
. He
claims that it was substantively and procedurally unfair.
Background
facts
[2]
The applicant was appointed as Barinor’s
financial manager in July 1998 and promoted to financial director in
November 2000.
In November 2005 he also assumed the title of deputy
chief executive officer. Those were his job titles at the time of his
dismissal
in September 2013.
[3]
Towards the end of 2011, Barinor
experienced cash flow problems. The company was, as one of its
witnesses put it, “asset rich
but cash poor”. It embarked
on a cost-cutting exercise. After obtaining advice from a
remuneration consultant, the non-executive
directors decided to offer
the four senior employees – including the CEO, Mr Boshoff, and
the applicant – reduced salaries.
In the case of Boshoff and
Myburgh that would be alleviated by a substantial bonus if two
pending property developments (Driehoek
and Door de Kraal) were
realised. Although there was some dispute about the exact amounts, it
appears that Boshoff would receive
5 to 7 times his annual salary and
Myburgh 3 to 5 times his annual salary as a bonus.
[4]
The
other three employees accepted the restructured remuneration
packages. Myburgh did not. Barinor then embarked on a consultation
process in terms of section 189 of the Labour Relations Act.
[2]
Barinor served a notice in terms of s 189(3) of the LRA on Myburgh on
25 January 2013. The consultation process was conducted largely
by
way of correspondence between the parties’ attorneys.
[5]
The parties could not reach consensus and
the applicant was dismissed on three months’ notice, effective
September 2013. He
referred an unfair dismissal dispute to the CCMA
and, when conciliation failed, to this court.
Substantive
fairness
[6]
The applicant admits that there was a need
in general to retrench. However, he claims that his dismissal was
substantively unfair
because Barinor should have accepted either of
the two alternative structures that he proposed, namely:
6.1
a combination of the positions of CEO and
financial director; or
6.2
the creation of a “junior CEO”
position.
[7]
The applicant also alleges that his
dismissal was substantively unfair because Barinor did not consider
him for the position of
CEO in the new structure that it implemented.
[8]
Following a belated amendment to the
statement of claim brought on the day of argument, the applicant also
claims that his dismissal
was substantively unfair “due to the
fact that the reduced salary offered to him is not based on a job
description for a
job grading exercise”.
[9]
Mr
Nieuwoudt
,
for the applicant, relied heavily on the following
dictum
from
NUMSA
v Atlantic Diesel Engines (Pty) Ltd
[3]
where the Labour Appeal Court, he suggested, moved away from the
so-called ‘abstentionist’ approach by stating:
“
However,
we respectfully differ from their suggestion that the decision to
retrench could be fair simply because it is bona fide
and made in a
businesslike manner. That approach suggests that the court’s
function is merely to determine whether or not
the decision has been
correct. What is at stake here is not the correctness or otherwise of
the decision to retrench, but the fairness
thereof. Fairness in this
context goes further than bona fides and the commercial justification
for the decision to retrench. It
is concerned, first and foremost,
with the question whether termination of employment is the only
reasonable option in the circumstances.”
[10]
He
also referred to
CWIU
v Algorax (Pty) Ltd
:
[4]
“
Sometimes
it is said that the court should not be critical of the solution that
an employer has decided to employ in order to resolve
a problem in
its business because it normally will not have the business knowledge
or expertise which the employer as a business
person may have to deal
with problems in the workplace. This is true. However, it is not
absolute and should not be taken too far.
When either the Labour
Court or this Court [the LAC] is seized with a dispute about the
fairness of a dismissal, it has to determine
the fairness of the
dismissal objectively. The question whether the dismissal was fair or
not must be answered by the court. The
court must not defer to the
employer for the purpose of answering that question. In other words
it cannot say that the employer
thinks it is fair, and therefore, it
is or should be fair.”
[11]
On
the other hand, in
SACTWU
v Discreto
[5]
Froneman DJP held:
“
For
the employee fairness is found in the requirement of consultation
prior to a final decision on retrenchment. This requirement
is
essentially a formal or procedural one, but, as is the case in most
requirements of this nature, it has a substantive purpose.
That
purpose is to ensure that the ultimate decision on retrenchment is
properly and genuinely justifiable by operational requirements
or,
put another way, by a commercial or business rationale. The function
of a court in scrutinising the consultation process is
not to
second-guess the commercial or business efficacy of the employer’s
ultimate decision (an issue on which it is, generally,
not qualified
to pronounce upon), but to pass judgment on whether the ultimate
decision arrived at was genuine and not merely a
sham (the kind of
issue which courts are called upon to do in different settings, every
day). The manner in which the court adjudges
the latter issue is to
enquire whether the legal requirements for a proper consultation
process has been followed and, if so, whether
the ultimate decision
arrived at by the employer is operationally and commercially
justifiable on rational grounds, having regard
to what emerged from
the consultation process. It is important to note that when
determining the rationality of the employer’s
ultimate decision
on retrenchment, it is not the court’s function to decide
whether it was the best decision under the circumstances,
but only
whether it was a rational commercial or operational decision,
properly taking into account what emerged during the consultation
process.”
[12]
What can be gleaned from these authorities,
it seems to me, is that the Court must not defer to the employer’s
decision; it
must decide whether the decision to dismiss was fair
under the circumstances. However, the Court need not decide whether
dismissal
was ultimately the only solution; it must merely decide
whether the decision to dismiss was a fair one, given the
circumstances
that prevailed at the time and the process followed,
i.e. whether the parties embarked on a meaningful joint
problem-solving exercise
or consensus-seeking process.
[13]
Perhaps
the most succinct summary is to be found in the
dictum
of Murphy AJ
[6]
in
SATAWU
v Old Mutual:
[7]
“
The
test formulated by the legislature in the 2002 amendments [to s 189
of the LRA] harkens back to the principle of proportionality
or the
rational basis test applied in constitutional and administrative
adjudication in other jurisdictions. As such, the test
involves a
measure of deference to the managerial prerogative about whether the
decision to retrench is a legitimate exercise of
managerial authority
for the purpose of attaining a commercially acceptable objective.
Such deference does not amount to an abdication,
and as stated in
BMD
Knitting Mills (Pty) Ltd
, the court is
entitled to look at the content of the reasons given to ensure that
they are neither arbitrary nor capricious and
are indeed aimed at a
commercially acceptable objective. The second leg of the enquiry is
directed at the investigation of the
proportionality or rationality
of the process by which the commercial objectives are to be achieved.
Thus, there should be a rational
connection between the employer's
scheme and its commercial objective, and through the consideration of
alternatives an attempt
should be made to find the alternative which
least harms the rights of the employees in order to be fair to them.
The alternative
eventually applied need not be the best means, or the
least drastic alternative. Rather it should fall within the range of
reasonable
options available in the circumstances allowing for the
employer's margin of appreciation to the employer in the exercise of
its
managerial prerogative. The formulation of the test in this way
adds nothing new. It simply synthesises what has already been said
in
Discreto
and
BMD Knitting Mills
.
The two decisions are not entirely at odds with one another. They are
simply elucidations of the governing principle that the
decision to
dismiss must be operationally justifiable on rational grounds, which
permits some flexibility in the standard of judicial
scrutiny,
depending on the context.”
[14]
It is against that background that the
decision to dismiss the applicant must be tested.
Alternatives
proposed by Myburgh
[15]
Myburgh argued that Barinor should have
accepted his proposal to combine the positions of CEO (occupied by
Boshoff) and financial
director (occupied by him). The implication
was that he should have been given the opportunity to take on the
position of CEO,
combined with his position as FD, while Boshoff
should have retired. That would have brought about a significant cost
saving by
removing Boshoff’s salary.
[16]
Barinor had two answers to this proposal.
The first is that, on a practical level, it needed to retain
Boshoff’s expertise
while negotiations for the two big property
developments were ongoing. The second was a more principled one,
based on the King
code on corporate governance: that is that the
executive positions of CEO and FD should be kept apart.
[17]
On the first proposal, although the
respondent’s witnesses – especially Mr Gous, whose
testimony was at times unnecessarily
garrulous – may have
gilded the lily somewhat insofar as Boshoff’s ostensible
extensive dealings with shareholders
are concerned, it could not be
gainsaid that he was playing an important role in engaging with
stakeholders in finalising the two
important property deals in the
pipeline. It was not reasonable to change that structure at a
sensitive time in the company’s
history when Boshoff was
willing to accept another, more reasonable, proposal that would
ensure his continued role in the company
for another year or two.
[18]
With regard to the second proposal, the
current structure – of a financial manager reporting to the CEO
– is not ideal.
The incumbent of the financial manager position
has made a number of elementary errors. But that in itself does not
make the dismissal
substantively unfair merely because Barinor
rejected Myburgh’s proposal. Its reliance on the King III
principles is persuasive.
It is preferable in the interests of good
corporate governance to divorce the positions of CEO and that of
finance director or
financial manager. In circumstances where Myburgh
refused to countenance a lower salary in order to remain in such a
position,
it was not unreasonable to make that position redundant and
to rely on a junior financial manager, coupled with a CEO who
accepted
a reduced salary, in order to save costs. The Court must
look at the structure, not the incumbent. The fact that the present
incumbent
has made some errors does not make the structure unviable
or unreasonable or Myburgh’s dismissal unfair.
[19]
Myburgh’s other proposal was to
create a “junior CEO” position. He could not explain with
any particularity what
this meant. Eventually, it transpired under
cross-examination that it was essentially the same as his other
proposal, i.e. that
he would fulfil the roles of CEO and FD at the
same salary as the existing CEO. Ultimately, it simply meant that
Boshoff would
retire and that he would become the CEO.
The
position of CEO
[20]
In the new structure that Barinor
implemented, the position of FD fell away. A financial manager
(instead of a financial director)
now reports to the CEO. Myburgh’s
alternative argument was that, given the new structure, he –
instead of Boshoff –
should have been considered for the
position of CEO.
[21]
The flaw in this proposal is that the CEO
position remained. Myburgh did not argue that Boshoff should have
been “bumped”.
Boshoff accepted the alternative to his
dismissal and stayed on in the CEO position. That was not unfair to
Myburgh in circumstances
where the CEO position was not affected by
the restructuring, other than to attract a lower salary. And in any
event, Myburgh had
no right to the CEO position. As Prof Esterhuyse
explained, when the position of CEO became vacant – e.g. when
Boshoff retired
– it would be advertised and a transparent
process would be followed to appoint his successor.
No
job grading exercise
[22]
As a further ground of substantive
unfairness introduced at the stage of argument, Myburgh argues his
dismissal was substantively
unfair “due to the fact that the
reduced salary offered to him is not based on a job description or a
job grading exercise”.
[23]
It is common cause that the parties did not
engage in a job grading exercise in order to assign grades to jobs
on, for example,
a Peromnes scale. Myburgh provided the remuneration
consultant with his job description. The consultant, Ms Saayman,
benchmarked
his job against that of a financial manager rather than
FD/Deputy CEO. She appeared to do that because his job description
was
more closely matched to the position of “Financial Manager
II” in the Deloitte “national remuneration guide”
and the non-executive directors accepted that at a meeting on 20
August 2012.
[24]
Saayman did not testify. Yet it seems to me
that the offer of a reduced salary to Myburgh – similar to the
offers made to
the other top executives as an alternative to
dismissal – was a reasonable one, even though it was not
benchmarked against
a Peromnes or other job grading. The question is
simply whether it was reasonable for the employer to make such an
offer and for
the employee to refuse it, in circumstances where it
would obviate his dismissal. It my view, the offer was reasonable and
Myburgh’s
refusal was unreasonable in the circumstances. It
does not make his resultant dismissal unfair.
Myburgh’s
refusal of alternatives proposed by Barinor
[25]
Consultation in the context of s 189 is a
two way street. Myburgh argues that Barinor should have accepted his
proposals; but the
Court must also consider whether his refusal of
Barinor’s alternatives to dismissal was reasonable. It is a
question of fairness
to both sides.
[26]
At no stage during the formal s 189 process
did Myburgh budge on his position that he would not accept a lower
salary. His attorney
did make a “without prejudice”
proposal that was disclosed to the court during trial; but that sort
of behind the scenes
“second stream” negotiation does not
form part of the formal consultation process.
[27]
If anyone had a closed mind, it was Myburgh
rather than Barinor. He was fixed in his view that he remained
entitled to his substantial
salary. If anything, he was of the view
that he should become the CEO as the anointed crown prince. He was
not prepared to accept
the reasonable alternatives proposed by
Barinor – possibly for a few years only – in order to
avoid his dismissal.
Conclusion:
substantive fairness
[28]
Barinor’s
proposal to avoid dismissal, i.e. a reduction in salary for the top
four executives, appears to me to have been
a reasonable one. Mr
Leslie,
for
Barinor, noted that Myburgh also conceded under cross-examination
that the proposal was reasonable; but a concession, like other
viva
voce
evidence, must be weighed by the Court in the light of the totality
of the evidence before it and the probabilities revealed thereby.
[8]
It is also telling that the other three executives, apart from the
applicant, viewed that proposal as sufficiently reasonable to
have
accepted it. And in the case of the applicant and the CEO, there was
an additional sweetener – he would in any event
receive a
substantial bonus, equivalent to 3-5 times his annual salary, once
the two proposed property developments were approved
and,
consequently, the company’s cash flow would improve.
[29]
Myburgh’s insistence that his
proposals be accepted, on the other hand, did not go far enough to
try and achieve consensus.
It was primarily aimed at securing a
continued lucrative position for himself at the expense of the CEO,
Boshoff. It is understandable
that Myburgh felt that the time had
come to put Boshoff out to pasture, given that he had reached
retirement age; but I find Barinor’s
reasons for splitting the
CEO and financial positions, and to keep Boshoff on in order to
finalise the all-important property deal
that would address the
company’s cash flow woes, persuasive.
Procedural
fairness
[30]
The applicant alleges that his dismissal
was procedurally unfair because Barinor “approached the
consultation process with
a closed mind”.
[31]
The underlying rationale was to save costs,
and not to get rid of Myburgh. Barinor made the same proposal to him
as it did to the
other three top executives in order to avoid
dismissals. Insofar as any criticism of a closed mind could be
levelled at it, it
cannot be in the sense that his dismissal was a
fait accompli
,
but rather that it was not open to alternatives other than its
proposal of a reduced salary.
[32]
Firstly, the applicant argues that Barinor
decided to benchmark his position against that of “Financial
Manager II”
before it initiated the s 189 process. But that was
done at the behest of a committee – appointed by the Board,
including
Myburgh – and on the advice of the remuneration
consultant on the strength of Myburgh’s own job description. It
was
merely a tool that was used to investigate alternatives to
dismissal, of which reduced salary packages to the top executives
appeared
to be the most reasonable option. It did not mean that
Barinor closed its mind to other reasonable proposals; but those
proposed
by Myburgh were not, on balance, more reasonable or viable.
[33]
What is not clear, is whether Barinor
decided at an early stage to abolish the positions of Deputy CEO and
FD. Mr Gous and Prof
Esterhuyse indicated that, should Myburgh have
accepted the offer of a reduced salary, he could have retained those
titles. Not
much turns on the titles; had Myburgh accepted the
reduced salary (coupled with a substantial bonus in due course), he
would have
retained his position and fulfilled the same functions.
And in any event, Myburgh implied in his letter of 19 April 2013 that
job
titles were not important to him. It is evident that his salary –
and his eventual accession to the position of CEO –
was more
important.
Conclusion
[34]
In my view, Barinor’s eventual
decision to dismiss was a reasonable and fair one. It considered and
rejected the proposals
made by the applicant for good reasons. On the
other hand, the applicant refused to consider the alternative
proposed by Barinor
that would have saved his job whilst ensuring a
substantial continued income, especially once the property
development in the pipeline
had been approved. There was an
alternative to his dismissal, but he rejected that alternative. Seen
holistically, the dismissal
was substantively and procedurally fair.
[35]
With regard to costs, although there is no
longer any employment relationship between the parties, I bear in
mind that Mr Myburgh
remains a shareholder of Barinor. Circumstances
may also change with the imminent retirement of Mr Boshoff and Prof
Esterhuyse
as CEO and chairman respectively. The relationship between
the parties – including the possibility of future re-employment
– may not be entirely beyond repair. In those circumstances,
taking into account the principles of law and fairness, I do
not
consider a costs award to be appropriate.
Order
[36]
The referral is dismissed.
Anton
Steenkamp
Judge
of the Labour Court of South Africa
APPEARANCES
APPLICANT:
Hermann Nieuwoudt of Norton Rose Fulbright.
RESPONDENTS:
Graeme Leslie
Instructed
by Cliffe Dekker Hofmeyr Inc.
[1]
The
first respondent is Barinor Holdings (Pty) Ltd. The second
respondent is Barinor Management Services (Pty) Ltd. The parties
agreed that the employer can simply be referred to as Barinor.
[2]
Act 66 of 1995.
[3]
(1993) 14
ILJ
642 (LAC) 648C-D.
[4]
[2003] 11 BLLR 1081
(LAC) para 69.
[5]
SACTWU
v Discreto (a division of Trump & Springbok Holdings)
[1998]
12 BLLR 1228
(LAC) para [8].
[6]
As he then was.
[7]
(2005) 26
ILJ
293 (LC) para [85].
[8]
Harleck
Jones
Treasure
Architects
CC v University of Fort Hare
2002 (5) SA 32
(E) para [88].