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[2015] ZALCPE 33
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Almazest (Pty) Ltd v Alexander and Others (P03/2013) [2015] ZALCPE 33 (14 May 2015)
The
Labour Court of South Africa, PORT ELIZABETH
Judgment
Case
no: P03/2013
DATE:
14 MAY 2015
Reportable
Of
interest to other judges
In the matter
between:
ALMAZEST (PTY)
LTD
..........................................................................................................
Applicant
And
RALPH
ALEXANDER
................................................................................................
First
R
espondent
THE COMMISSION
FOR CONCILIATION,
MEDIATION
AND
ARBITRATION
......................................................................
Second
Respondent
BAREND
J
MELLET
.................................................................................................
Third
Respondent
Heard
:
6 MAY 2015
Delivered
:
14 MAY 2015
Summary:
(
Review – entitlement to
severance pay – s 41 of the BCEA – Demotion and salary
cut of 45 % sufficient justification
for arbitrator’s decision
that offer of alternative employment was not reasonable –
failure to suggest to new employer
following s 197 transfer that it
might wish to consider joining old employer not reviewable
irregularity – application dismissed
)
JUDGMENT
LAGRANGE,
J
Background
[1]
This matter concerns the review of an arbitration award in which the
arbitrator awarded severance pay to the third respondent
who had been
retrenched by the applicant shortly after the applicant had taken
over the business in which the third respondent
was employed as a
going concern.
[2]
The central issue in dispute was whether the third respondent, a
store manager, was entitled to severance pay in circumstances
where
he had been offered employment at a salary level equivalent to 38% of
his previous income and in a more junior position as
assistant store
manager. The arbitrator found that the third respondent had not
unreasonably refused this offer of alternative
employment and that
the third respondent was entitled to severance pay in terms of
section 41 (2) of the Basic Conditions of Employment
Act, 75 of 1997
(‘the BCEA’) calculated on the basis of his length of
service including the period of service with
the previous employer
prior to the transfer of the business as a going concern to the
applicant in terms of section 187 of the
Labour Relations Act 66 of
1995 (‘the LRA’).
The
review application
[3]
As the retrenchment took place within twelve months of the transfer
of the business, the former employer was jointly and severally
liable
for any severance pay payable to the third respondent in terms of
section 197 (7) of the LRA. However, the arbitrator did
not alert
either of the parties to the need to join the previous employer to
the proceedings. Once he was aware that the claim
involved a claim
for severance pay in circumstances where the retrenchment had taken
place within twelve months of the transfer
of the business as a going
concern under section 197, the applicant claims the arbitrator ought
to have realised that the first
employer necessarily should have been
a party to the proceedings.
[4]
Certainly, the original employer Metcash Trading Africa (Pty) Ltd
could have been cited as a co-respondent by the applicant
in the
proceedings but as the applicant and the Metcash are jointly and
severally liable, the third respondent could elect against
whom he
could proceed. The applicant was at liberty to ask to join Metcash as
a party to the proceedings but it was not incumbent
on the third
respondent to do so in order for the third respondent to pursue his
claim. In this regard see the decision of Whitcher
AJ in
Strydom
v T-Systems SA (Pty) Ltd
(2012) 33 ILJ 2978 (LC)
.
[5]
In that case, it was held that the employee’s failure to join
the original employer as a respondent in an unfair retrenchment
claim
in circumstances where the retrenchment took place less than twelve
months after the transfer of a business in terms of s
197 did not
render the employee’s claim excipiable. In other words, joinder
of the original employer was not a necessity,
but merely a matter of
convenience. The learned judge found that it was up to the new
employer, if it wished to join the original
employer as a party to
the proceedings.
[6]
In this instance, the bulk of the severance pay entitlement, if any,
due to the third respondent would have accrued from the
third
respondent’s prior service with Metcash. Metcash would also be
jointly and severally liable for any severance pay due
to the third
respondent by virtue of the provisions of s 197(8) of the LRA which
states:
“
For
a period of 12 months after the date of the transfer, the old
employer is jointly and severally liable with the new employer
to any
employee who becomes entitled to receive a payment contemplated in
subsection (7)(a) as a result of the employee’s
dismissal for a
reason relating to the employer’s operational requirements or
the employer’s liquidation or sequestration,
unless the old
employer is able to show that it has complied with the provisions of
this section.”
[7]
On the basis of this section, the applicant
might conceivably have sought to join Metcash in the arbitration
proceedings, quite
apart from any possible claim it might have had
against Metcash to indemnify it for a portion of any severance pay
due. Nothing
on the record indicates that the arbitrator made the
applicant aware of its right to do so. When the applicant’s
representative,
the new owner of the business, mentioned that Metcash
would be jointly and severally liable with the applicant, the
arbitrator
had this to say:
“
EVIDENCE
BY RESPONDENT’S REP
: Firstly, my case, I would just like to
mention, as I have already mentioned in the opening statement, that I
am the new employer
so any finding here will be jointly and
severally with the other old employer
.
COMMISSIONER
:
Okay, let me say: I know I have raised that previously, if there was
any dispute as to who was the employer,
that would have been the
case
.
RESPONDENT’S
REP
: Okay.
COMMISSIONER
:
Here there is no dispute as to who is the employer. The employer is
Almazest (Pty) Ltd and you are here, so there is no further
confusion
with regards to that part and therefore, let me clarify that as the
new employer,
you are liable for everything
.”
RESPONDENT’S
REP
: Okay.”
[8]
The
arbitrator was clearly misleading when he told the applicant’s
representative that only the applicant could be held liable
for the
severance pay, but that does not mean that the applicant was entitled
to join Metcash as a correspondent in the proceedings
as a matter of
necessity. The question which arises is whether the arbitrator should
nonetheless have asked the applicant if it
wished to join Metcash as
a party to the proceedings as a matter of convenience. Joinder may be
ordered on the basis of convenience
and common sense
[1]
,
for example if it would be in the interests of avoiding a
multiplicity of actions.
[9]
At the review application hearing, it was
argued by the applicant that if he had joined the original employer,
he could have argued
for an apportionment of any severance payment
found to be due by the arbitrator. The third respondent retorted that
s 197(8) automatically
determines that any liability for severance
pay is on the basis of joint and several liability and that the
arbitrator has no discretion
to apportion the amount due to each. I
agree that the section appears to place the new and old employers in
the position of equivalent
co-principal debtors, save only that the
old employer might escape liability if it can prove it has complied
with s 197. From the
third respondent’s perspective, he was
entitled to choose whether to proceed against either or both
employers. However, it
is only the old employer that might avoid
liability if severance pay is due and payable because it can prove it
has complied with
s 197. Accordingly, Metcash might have an interest
in joining the proceedings as a party to simultaneously determine
that it could
not
be held liable under s 197(8) if it believes it has complied with s
197. However, the applicant as the new employer cannot escape
its
liability by joining Metcash as a party after being targeted as the
co-principal debtor of choice by the third respondent.
It might be in
the employee’s interest to obtain an order against both
employers, but joinder of the old employer cannot
absolve the new
employer of liability for payment of the severance pay if it is found
to be due and payable.
[10]
Another sense in which the applicant might
conceivably have believed it would assist it if Metcash were joined
in the matter is,
if it wished to argue that Metcash has some duty to
indemnify him at least partially against any successful severance pay
claim
arising from the provisions of s 197(7) which states:
“
(7)
The old employer must-
(a)
agree with the new employer to a valuation as at the date of transfer
of-
(i)
the leave pay accrued to the transferred employees of the old
employer;
(ii)
the severance pay that would have been payable to the transferred
employees of the old employer in the event of a dismissal
by reason
of the employer's operational requirements; and
(iii)
any other payments that have accrued to the transferred employees but
have not been paid to employees of the old employer;
(b)
conclude a written agreement that specifies-
(i)
which employer is liable for paying any amount referred to in
paragraph (a), and in the case of the apportionment of liability
between
them, the terms of that apportionment
; and
(ii)
what provision has been made for any payment contemplated in
paragraph (a) if any employee becomes entitled to receive a payment
;
(c)
disclose the terms of the agreement contemplated in paragraph (b) to
each employee who after the transfer becomes employed by
the new
employer; and
(d)
take any other measure that may be reasonable in the circumstances
to ensure that adequate provision is made for any obligation on
the
new employer that may arise in terms of paragraph (a)
.”
[11]
Even if this had been the applicant’s
wish, of which there was no evidence, it would be something akin to a
third party joinder
which is permitted in terms of Rule 13 of the
High Court Rules. That procedure permits a party like the applicant
to join a third
party like Metcash on the basis that Metcash is
liable to indemnify it against part of the severance pay claim. Thus,
if there
had been an agreed apportionment of liability for severance
pay between the applicant and Metcash in terms of s 197(7)(b)(i) or,
if the applicant wanted to argue that the Metcash was obliged to make
adequate provision for its share of severance pay calculated
at the
date of the transfer under s 197(7)(d) and that it was now obliged to
use that provision to meet part of the claim against
the applicant,
there might potentially have been another basis for joining Metcash
as a matter of convenience. But that would assume
the arbitrator had
the power to determine the enforcement of obligations between the old
and new employer. This does not seem to
have been envisaged by s
41(6) read with s 41(9) of the Basic Conditions of Employment, Act 75
of 1997 (‘the BCEA’),
which merely provides for employees
to refer disputes about their entitlement to severance pay in terms
of section 41 to
arbitration for determination. S 41(2) sets
out the statutory entitlement to severance pay, on which an
arbitrator decides, but
it is the entitlement of the employee to
severance pay
per se
and
does not include the determination of the extent to which the old
employer may be obliged to indemnify the new one in relation
to such
a claim or other statutory obligations to make provision for such
payment. On the face of it, it does not seem an arbitrator
acting
under s 41 of the BCEA could entertain such related disputes.
[12]
Consequently,
joining Metcash in the proceedings would have no effect on
determining or reducing the applicant’s liability
for the
reasons mentioned, so there could be no advantage obtained by the
applicant if Metcash were joined. The third respondent
himself might
have had a greater interest in joining Metcash since he could then
proceed to execute against both or either of the
respondents if
successful proving his severance pay entitlement, without having to
initiate any further proceedings against Metcash.
All things
considered, I do not think that there was any demonstrable prejudice
the applicant suffered by not being offered the
opportunity to join
Metcash in the proceedings. Consequently, I do not think the award
should be set aside on grounds of the arbitrator’s
misconduct
in this regard. If it was an irregularity not to invite the applicant
to consider if he wanted to join Metcash, it is
unlikely the
applicant could have justified such a step considering what is stated
above, so that even if he had been invited to
do so, it would not
have affected the overall outcome of the award.
[2]
[13]
The applicant does suggest that the
arbitrator also neglected in a general sense to guide him in the
conduct of the proceedings,
but there is nothing to suggest he was
not able to convey the thrust of his argument why the third
respondent was not entitled
to severance pay in his view in the
absence of such guidance or that he was unable to present evidence
relevant to his case as
a result.
[14]
This brings me to the consideration of the
merits of the award. The essence of the attack on the arbitrator’s
reasoning is
that the applicant contends that any reasonable
arbitrator would have concluded that the third respondent’s
refusal to accept
the position of an assistant manager was
unreasonable.
[15]
When the applicant took over the business
and the third respondent was receiving a gross salary of R42, 649.52
which included a
company medical aid contributions of R3,321.49,
pension fund contribution of R 1,700.00 and a fuel and maintenance
allowance of
R 7,741.80 and travelling allowance of R 4,547.00 per
month. This was the salary he had earned as general manager of the
outlet
in George, in which capacity also had regional
responsibilities for Metcash. The applicant’s business did not
require the
third respondent to perform any regional functions and
the new owner intended to perform the store manager’s role.
Consequently,
the applicant offered the third respondent a position
in which he would be assistant store manager earning a gross salary
of R
16, 563.86, though it must be mentioned that R 2,000-00 of this
amount remained at the employer’s discretion. The applicant
argued that the third respondent no longer required the allowances
relating to travelling because he would incur no costs in that
regard. If one took into account the redundant travel related
allowances, a more accurate reflection of the third respondent’s
real salary before the transfer would be R 30,360-00, so the real
drop in his gross income to the new level would be a drop of
about
45%.
[16]
The
applicant contends that if the arbitrator had applied his mind
properly to s 41(4) of the Basic Conditions of Employment
Act, 75 of
1997 (‘the BCEA’) in conformity with the LAC decision
in
Astrapak
Manufacturing Holdings (Pty) Ltd t/a East Rand Plastics v Chemical
Energy Paper Printing Wood & Allied Workers Union
(2014)
35
ILJ
140
,
he would not have awarded the third respondent’s severance pay
because that would amount to encouraging an employee from
unreasonably rejecting an offer of alternative employment simply to
get cash in his pocket.
[3]
[17]
It may well be that the applicant had good
operational reasons for not wishing to continue to employ the third
respondent in his
previous capacity. Nonetheless, it was the owner of
the applicant’s choice to replace the third respondent as the
manager
of the outlet with himself and to demote the third respondent
to an obviously more junior position. Further, even making allowance
for excluding consideration of travel related allowances provided to
the third respondent, the reduction in the third respondent’s
remuneration was dramatic apart from the fact that a portion of it
was paid at the whim of the applicant. It is difficult in the
circumstances to see how it can be said that no reasonable arbitrator
could have viewed such a diminution of status and reduction
in income
as not being a reasonable offer of alternative employment in the
circumstances. I do not think the arbitrator’s
reasoning can be
faulted in this regard.
Order
[18]
The review application is dismissed with
costs.
R G LAGRANGE
Judge of the
Labour Court
Appearances
For the
Applicant: M Euijen
Instructed by:
Ayoob Kaka Attorneys
For the Third
Respondent: F Le Roux
Instructed by:
Bakker Attorneys
[1]
See
[zRPz]
Vitorakis
v Wolf
1973
(3) SA 928
(W)
at
932C-H
[2]
See
Gold
Fields Mining SA (Pty) Ltd (Kloof Gold Mine) v Commission for
Conciliation, Mediation & Arbitration & others
(2014) 35
ILJ
943 (LAC) at 949, para [17], viz:
“
The
fact that an arbitrator committed a process related irregularity is
not in itself a sufficient ground for interference by
the reviewing
court. The fact that an arbitrator commits a process related
irregularity does not mean that the decision
reached is
necessarily one that a reasonable commissioner in the place of the
arbitrator could not reach.”
[3]
Astrapak
at para [25]