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[2016] ZALCJHB 126
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SACCAWU and Others v Woolworths (Pty) Ltd (J3159/12, JS1177/12) [2016] ZALCJHB 126 (5 March 2016)
THE LABOUR COURT OF
SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Reportable
Case
nos:
J
3159/12 & JS 1177/12
In the matter between:
SACCAWU
First Applicant
C MOENG AND OTHERS
Second to Further Applicants
and
WOOLWORTHS (PTY) LTD
Respondent
Heard:
1 June 2015
Delivered:
5 March 2016
Summary:
Dismissal
for operational requirements – dismissal of employees who had
accepted its commercial reasons to work flexible hours
–
employer alleging pay inequity as a ground for operational
requirements – it is incompetent for an employer to seek
to
address unfair pay differentiation through an operational
requirements process and thereby circumventing its obligation under
Chapter III of the EEA –
dismissal
not
operationally
justifiable.
Dismissal
for operational requirements – employer dismissing who had
employees commercial and economic reasons in order to
make profit –
employer
did not produce evidence on the costs associated with the employment
of affected employees; total amount of targeted cost
reduction and
whether such a target had been achieved – it is not possible to
decide if the employer’s decision is
a rational or reasonable
one
–
dismissal
not operationally justifiable.
Dismissal for
operational requirements – Consultation – employer
failed to consult with a derecognised trade
union during voluntary
phase – in the absence a recognised union or workplace forum,
there is a duty to consult with a registered
trade – dismissal
procedurally unfair.
JUDGMENT
Nkutha-Nkontwana, AJ
Introduction
[1]
The
issue for determination in this matter is whether the dismissal of
the second to further Applicants for operational reasons
by the
Respondent was automatically unfair, alternatively, that it was
substantively and procedurally unfair. The dispute about
the fairness
of the procedure was duly brought by way of application in accordance
with section 189A(13) of the Labour Relations
Act 66 of 1995 (“LRA”).
It is apparent from the pre-trial minute that the parties have agreed
that the affidavits exchanged
in the application may be admitted as
evidence, unless the truth of their contents is challenged.
[2]
Mention
must be made that the Applicants have since conceded in their written
submissions that this court is bound to give authority
to past
judgments of the superior courts, pertinently the
NUMSA
and Others v Fry’s Metals (Pty) Ltd
,
[1]
on the question of automatically unfair dismissal as pleaded. I
believe the concession is rightfully made in the light of the
doctrine of
stare
decisis
.
I also take notice that embedded in the Applicants’ concession
is a deferral of this issue to appeal as opposed to retraction.
Background facts
[3]
The
facts
in this matter are substantially common cause. The second to further
Applicants were employed as full-time employees but in
different
categories of contracts known as full-timers, part-timers, key-timers
and rollers. For the purpose of this judgment,
they are collectively
referred to as “full-timers”. They all worked within the
Respondent’s (“Woolworths”)
corporate stores
nationally, a business operated within the retail sector.
[4]
The
second to further Applicants (“affected employees”) are
members of the first Applicant (“SACCAWU”) which
had 15%
membership within the bargaining unit in 2012. Since it was not a
majority trade union, it only enjoyed access and stop
order
organisational rights. By agreement between the parties, the list of
the affected employees was amended and the number has
since reduced
to 44.
[2]
[5]
Woolworths
ceased to employ full-timers sometime in 2002. All employees employed
thereafter were flexi-time employees (“flexi-timers”)
who
work flexible hours that correspond with the peak trading hours of
its stores. By 2012, the Woolworths’ workforce was
comprised of
about 16 400 flexi-timers and 590 full-timers, about 3.5% of the
workforce, throughout its 200 corporate stores. The
categories of
full-time contracts were found to be inflexible and no longer
suitable to meet Woolworths’ operational requirements.
[6]
In
July 2012, Woolworths embarked upon a staff career paths project
which culminated in the adoption and implementation of a formal
grading and remuneration system, and plotting a career path for
employees within corporate stores. The new grading system introduced
five bands from CS1 to CS5 and a remuneration system with minimum
being 25
th
percentile,
median being 50
th
percentile and upper being 75th percentile.
[7]
Correspondingly
and as part of the career path project, Woolworths sought to convert
the remaining 590 full-timers to flexi-timers
to standardised terms
and conditions of employment. Woolworths contended that the
conversion of the full-timers was premised on
three operational
requirements drivers, that is, flexibility, cost efficiency, and
equality. The Applicants, on the other hand,
conceded the need for
flexibility but disputed the other two drivers.
[8]
On
4 August 2012, Woolworths commenced consultation sessions with the
individual full-timers where its decision to convert them
to
flexi-timers was communicated. That process was termed “voluntary
phase”. On 20 August 2012, the full-timers were
offered three
options, on a voluntary basis, consequent to the said sessions and
are as follows:
8.1
To
convert to flexi contracts with remuneration at the 75
th
percentile of the hourly rate applicable to a particular grade in
which the employee’s job was slotted; the benefits aligned
to
those of the flexi-timers and R70 000.00 once off conversion
payment.
8.2
Early
retirement with severance pay calculated from 1 week to 2 weeks’
pay for every completed year of service depending on
an employee’s
length of service.
8.3
Voluntary
retrenchment with severance pay calculated from 1 week to 2 weeks’
pay for every completed year of service depending
on an employee’s
length of service.
[9]
The
above offer was a revised final offer after
Woolworths’
first
offer to convert with a remuneration that was less than 75
th
percentile and R60 000.00 conversion payment did not appeal to
the full-timers.
[10]
The
letters containing voluntary offers were brought to the attention of
SACCAWU which in turn challenged the offers as unilateral
change to
terms and conditions of employment as per its letter dated 23 August
2012. A plethora of correspondence ensued between
the parties which I
shall deal with in due course, save to state that Woolworths was
adamant in one of its responses that it had
no intentions to dismiss
any of its full-timers during the voluntary phase.
[11]
At
the conclusion on the voluntary phase on 4 September 2012, out of 590
full-timers, 413 accepted one of the voluntary options
and 177
rejected the offers. Woolworths, accordingly, progressed to the
second phase in accordance with section 189A of the LRA.
This process
was accordingly termed “section 189A phase”. The 177
affected full-timers were issued with notices in
terms of section
189(3) of the LRA. SACCAWU was also notified of the contemplated
operational requirements dismissals since some
of the affected
full-timers were its members.
[12]
During
the section 189A phase, 85 out of 177 full-timers accepted one of the
voluntary options. Ultimately, only of 92 full-timers
were retrenched
and 44 thereof are the affected employees.
[13]
The
section 189A phase was conducted under the auspices of the CCMA in
terms of the section 189A(3) of the LRA and SACCAWU was representing
51 of its affected members. There were five facilitation meetings
facilitated by the CCMA commissioner and were held on these dates;
21
September, 5 October, 26 October, 29 October, and 3 November 2012.
[14]
What
transpired during the facilitation meetings is largely common cause,
save for the fourth meeting in respect of which there
is a dispute
about disclosure of information. Also, throughout the section 189A
phase, Woolworths’ stuck to its initial offer
which, in
essence, extended the three voluntary options it had offered during
the voluntary phase. In response, the Applicants
offered to convert
to flexi-timer contracts without changes to their terms and
conditions of employment.
[15]
On
3 November 2012, section 189A phase was concluded without reaching
consensus. On 4 November 2012, Woolworths went ahead and dismissed
the 92 full-timers.
Legal principles on
substantive fairness
[16]
Section
189A(19), as was before the 2014 amendments, states that:
“
In any
dispute referred to the Labour Court in terms of section
191(5)(b)(ii) that concerns the dismissal of the number of employees
specified in subsection (1), the Labour Court must find that the
employee was dismissed for a fair reason if -
(a)
the
dismissal was to give effect to a requirement based on the employer’s
economic, technological, structural or similar needs;
(b)
the
dismissal was operationally justifiable on rational grounds;
(c)
there
was a proper consideration of alternatives; and
(d)
selection
criteria were fair and objective.”
[17]
The
legal representatives for both parties gave a detailed analysis of
applicable case law in their written submissions which was
of great
assistance and I am, accordingly, indebted to them.
[18]
In
BMD
Knitting Mills (Pty) Ltd v SACTWU,
[3]
the
LAC as per Davies, AJA (as he was then) stated that:
‘
I have some
doubt as to whether this deferential approach which is sourced in the
principles of administrative review is equally
applicable to a
decision by an employer to dismiss employees particularly in the
light of the wording of the section of the Act,
namely, “the
reason for dismissal is a fair reason”. The word “fair”
introduces a comparator, that is a
reason which must be fair to both
parties affected by the decision
.
The starting point is whether there is a commercial rationale for the
decision. But, rather than take such justification at face
value, a
court is entitled to examine whether the particular decision has been
taken in a manner which is also fair to the affected
party, namely
the employees to be retrenched. To this extent the court is entitled
to enquire as to whether a reasonable basis
exists on which the
decision, including the proposed manner, to dismiss for operational
requirements is predicated. Viewed accordingly,
the test becomes less
deferential and the court is entitled to examine the content of the
reasons given by the employer, albeit
that the enquiry is not
directed to whether the reason offered is the one which would have
been chosen by the court. Fairness,
not correctness is the mandated
test
.”
[Emphasis added]
[19]
The
same sentiments expressed above were given a further context by
Murphy, AJ (as he then was) in
SATAWU
v Old Mutual Life Assurance Company South Africa Ltd and Another,
[4]
where
he stated that:
‘
The test
formulated by the legislature in the 2002 amendments 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 (Ply) Ltd
(
supra
),
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 employee in the exercise of
its managerial prerogative
.’
[Emphases added]
[20]
In
a nutshell, in determining the fairness on the dismissals for
operational requirements, this court must interrogate, objectively,
whether the three preconditions in terms section 189A(19) of the LRA
were met.
Application of legal
principles on substantive fairness
[21]
In
the matter at hand, t
he
issues that require determination on substantive fairness as
articulated by the Applicants are as follows:
21.1
Whether
the
dismissal of the affected employees was for a fair reason or
operationally justifiable on rational grounds, especially given
the
fact that they were willing to work flexible arrangements without
loss of wages, benefits and other conditions of employment
as
proposed in accordance with Woolworths’ first option proposal;
21.2
Whether the insistence by Woolworths to downgrade the affected
employees’ wages and benefits was rational,
necessary or fair;
and given the experience, length of service and age of the second to
further Applicants;
21.3
Whether there was a financial necessity for Woolworths to reduce the
affected employees’ wages and
benefits to the extent it had
proposed;
21.4
Whether Woolworths’ operational requirements could have been
met through other reasonable options such
as natural attrition and
migrating employees to the flexi-timer arrangement upon similar or
comparable wages and benefits as when
they were full-timers;
21.5
Whether there were rational reasons for the timing of the dismissals
and the urgency that accompanied the
consultation process;
21.6
Whether the Woolworths’ rejection of the SACCAWU’s
alternatives was rational or valid;
21.7
Whether the conversion of key-timer employees to flexi-40 employees
was rational or fair; and
21.8
Whether there was proper consideration of alternatives.
Whether the dismissals
were operationally justifiable
?
[22]
It
is common cause that the Applicants accepted that there was a need
for Woolworths to adapt the full-timers’ contracts in
line with
its current trading patterns and trends. Hence, they did not have any
difficulties with the conversion to flexi-timer
arrangement with the
proviso that their wages and benefits would remain the same.
[23]
The
question that arises in this regard is whether the said acceptance of
flexible contracts without reduction in wages and benefits
would have
met Woolworths’ operational requirements and thereby obviate
the dismissals.
[24]
Ms
Coleen Slabbert (“Slabbert”), Woolworths’ employee
relations manager, testified that t
he
whole process of rationalisation of business operations was informed
by three operational requirements drivers; i.e. the need
for
flexibility, equality in wage rates, and cost efficiency in relation
to 16 000 flexi-time employees.
[25]
In
addressing the alleged inadequacy of SACCAWU’s proposal to deal
with equality, Slabbert states the following in paragraph
57 of
Woolworths answering affidavit:
‘
It was made
clear to the Applicant that to employ the full-timers on a
flexi-timer basis, but on the same rates of remuneration
and/or
benefits as they enjoyed prior to their contemplated retrenchment,
would create an anomaly within the Respondent’s
business. It
would result in a group of flexi-timers enjoying remuneration and the
benefits which far exceeded those of their colleagues.
I must point
out that at the time just prior to the retrenchments of the
individual Applicants in this matter, the Respondent employed
16593
employees in its stores. Of these, 16000 were flexi-timers. There was
no justifiable basis, in the circumstances to continue
with
full-timers categories and not to standardise its workforce.’
[5]
[26]
Slabbert
testified further that the extent of the downgrading per Applicant
was in direct proportion to the extent that she or he
had been
earning in excess of the 75
th
percentile applicable to his or her grade. She particularly referred
to the case of Ms Kate Moloi (“Moloi”), Applicant
number
32, whose salary would have been reduced by a 54% of hourly rate
(from R44.77 to R22.62). According to Slabbert, she had
been earning
54% in excess in the 75
th
percentile applicable to her grade (CS2). Despite conceding under
cross examination that, unlike the full-timers, the flexi-timers
would have contracted to their terms and conditions of employment,
she was adamant that terms and conditions of employment are
subject
to constant change and nothing was guaranteed.
[27]
Slabbert
further pointed out that the extent of the downgrading was also
required in order to address the wage anomalies that gave
rise to the
concerns about equality. Using Moloi’s instance again, she
painted the following picture:
27.1
She
was worked at the Menlyn store as grade CS2 employee and earning a
wage rate in excess of all six of the fellow applicants who
were
graded as CS5 (supervisory positions);
27.2
She
was earning R44.77 per hour, while two of the supervisors at the
Menlyn store were Saul Moloisane and Louisa Kgobo, applicant
number
22, who were earning an hourly rate of R38.02 and R39.20
respectively;
23.1
She
was 55.02 years old and had 17.90 years' service, while Moloisane was
49.75 years old and had 28.81 years' service. Despite
having more
service (by 10 years) than Moloi and despite being three grades up
from her and occupying a supervisory position, he
was earning an
hourly rate 15% less than her.
[28]
Woolworths’
counsel submitted that Woolworths was entitled to seek to address the
issues of equality in order to anticipate
the impending equal pay
amendments at that time, which have since came into effect. Notably,
section 198C(3) of the LRA, introduced
in 2014; and section 6(4) of
the EEA, introduced in 2013, enjoin the employers to deal with
income differentials and pay
discrimination. Since SACCAWU had 15%
representation at that time, Woolworths could not have opted out of
the EEA obligations through
a collectively bargained option. As a
result, Woolworths would have been exposed to equal pay claims by the
85% of employees who
were not union members, so it was argued
further.
[29]
It
was also contended that SACCAWU’s final proposal was utterly
without merit and, as a result, little must be read into its
rejection in the light of the following concessions made by the
Applicants’ witness, Mr Noel Mbongwe (“Mbongwe”),
the deputy secretary of SACCAWU, under cross-examination:
29.1
That
the Applicants proposal was inadequate as it failed to resolve the
equality issue and did not address the cost efficiency issue;
29.2
That Woolworths had a problem in relation to equality and was
entitled to address it; and
29.3
That
there
was nothing wrong with the company seeking to align itself with
pending legislative amendments.
[30]
Woolworths
maintained that the changes resulted in
cost-efficiency
and, consequently, it managed to effect an annual saving of R24
million, which equated to a saving of 3.7% on its
wage bill.
[31]
The
Applicants vehemently opposed Woolworths’ equity claim as a
justifiable ground for operational dismissals. Mbongwe testified
that
the issue of pay equity ought to have been dealt with in terms of
EEA, alternatively, through collective bargaining. He was
resolute
that SACCAWU was not oblivious to the changes in trading patterns
within the retail sector; hence it was willing to accept
flexibility.
Since it is organising the whole of the retail sector, it was aware
that other stores have since adapted to the new
flexible trading
hours as Woolworths but kept their full-timers.
[32]
SACCAWU
further challenged the timing of the implementation of pay equity
given the fact that pay disparity endured for over a decade
owing to
Woolworths’ decision in 2002 to cease from employing
full-timers and as such all employees subsequently engaged
were
flexi-timers. Therefore, there was no rationality in a decision that
brought about the dismissal of highly experienced long
serving
employees, especially, since Woolworths was in a financially sound
position and undergoing a substantial growth phase.
[33]
The
Applicants further contented that there was no compelling financial
need on the part of Woolworths to remove the pay disparity.
In
section 189(3) notice, Woolworths gave only one reason for the
retrenchments that ‘the company needs to be in a position
to
employ employees who are able to be used on a flexible basis’.
Therefore, Woolworth’s attempt to add further reasons
(equity
and costs efficiency) in order to justify the retrenchments must be
rejected since it was clearly an afterthought and a
cynical attempt
by Woolworths to extricate itself from its self-created predicament.
Pay
inequity operational requirement
[34]
Before
I deal with Woolworths’ claim that it sought to deal with pay
inequity, I wish to address the legal principles
applicable. Whilst it is true that, at that time, there were proposed
changes to both the LRA and EEA, which have since been implemented,
aimed at eliminating discrimination based on equal pay for work of
equal value, the very same issue was not novel in 2012. Conversely,
this court had pronounced on the same issue on different occasions
prior to the amendments. In
Mangena
and Others v Fila South Africa (Pty) Ltd and Others,
[6]
Van
Niekerk, J stated the following:
‘
The first
question that arises is whether pay claims equal, and in particular
claims for equal pay for work of equal value, are
contemplated by the
EEA. Unlike equality legislation in many other jurisdictions, the EEA
does not specifically regulate equal
pay claims. Section 6 of the Act
prohibits unfair discrimination in any employment policy or practice,
on any of the grounds listed
in s 6 (1) or on any analogous ground,
if an applicant is able to show that the ground is based on
attributes or characteristics
that have the potential to impair the
fundamental human dignity of persons or to affect them in a
comparably serious manner. (See
Harksen
v Lane NO and Others
[1997]
ZACC 12
;
1998 (1) SA 300
(CC) at 325A). ‘Employment policy or
practice’ is defined by s 1 of the EEA to include remuneration,
employment benefits
and terms and conditions of employment. To pay an
employee less for performing the same or similar work on a listed or
an analogous
ground clearly constitutes less favourable treatment on
a prohibited ground, and any claim for equal pay for work that is the
same
or similar falls to be determined in terms of the EEA.
Similarly, although the EEA makes no specific mention of claims of
equal
pay for work of equal value, the terms of the prohibition
against unfair discrimination established by s 6 are sufficiently
broad
to incorporate claims of this nature. In relation to claims
where the differential that is asserted by the claimant is a
difference
in sex, the ILO Equal Remuneration Convention 1951 (No.
100) situates the comparison to be made at the level of the value of
work,
and obliges ratifying member states to give effect to the
principle of equal remuneration for men and women workers for work of
equal value. To this extent, this court is required to interpret the
EEA in compliance with South Africa’s public international
law
obligations1. In the present instance, the differential asserted by
the claimant is one of race rather than sex, but I see
no reason why
the principle of equal pay for work of equal value should not be
extended beyond the listed ground of sex to other
listed and
analogous grounds and why, in principle, an equal value claim based
on race should not be admitted. This would be consistent
with the
substantive conception of equality that the Constitution and the EEA
adopt, and in particular, a recognition that since
race historically
played a role in the value attributed to particular jobs, a systemic
approach to the elimination of what might
often be structural
inequality is necessary. Moreover, the principle that an equal value
claim was competent under a general prohibition
of unfair
discrimination was recognised by this Court some years ago. In
Louw
v Golden Arrow Bus Services (Pty) Ltd
(2000)
21 ILJ 188 (LC), Landman, J said the following:
“
In other
words, it is not an unfair labour practice to pay different wages for
equal work or for work of equal value. It is however
an unfair labour
practice to pay different wages for equal work or work of equal value
if the reason or motive, being the cause
for so doing, is direct or
indirect discrimination on arbitrary grounds or the listed grounds,
eg race or ethnic origin.”
(at 196-F)’
[35]
Therefore,
it stands to reason that the amendments to both the LRA and EEA were
just a mere codification of the principles articulated
in
Mangena
.
As such, any of the flexi-timers could have challenged Woolworths,
even then, on the same basis even though there were no specific
provisions in both legislations.
[36]
The
issue that arises in this matter is whether Woolworths’
decision to dismiss employees for operational requirements in
order
to eliminate discrimination based on pay inequity was operationally
justifiable. Since I was referred to section 198C of
the LRA, it will
be more expedient to quote it in its entirety as I do hereunder:
‘
Section
198C Part-time employment of employees earning below earnings
threshold
(1)
For the purpose of this section—
(a)
a
part-time employee is an employee who is remunerated wholly or partly
by reference to the time that the employee works and who
works less
hours than a comparable full-time employee; and
(b)
a
comparable full-time employee —
(i)
is an
employee who is remunerated wholly or partly by reference to the time
that the employee works and who is identifiable as a
full-time
employee in terms of the custom and practice of the employer of that
employee; and
(ii)
does
not include a full-time employee whose hours of work are temporarily
reduced for operational requirements as a result of an
agreement.
(2)
This section does not apply—
(a)
to
employees earning in excess of the threshold determined by the
Minister in terms of section 6(3) of the Basic Conditions of
Employment Act;
(b)
to an
employer that employs less than 10 employees or that employs less
than 50 employees and whose business has been in operation
for less
than two years, unless—
(i)
the
employer conducts more than one business; or
(ii)
the
business was formed by the division or dissolution, for any reason,
of an existing business;
(c)
to an
employee who ordinarily works less than 24 hours a month for an
employer; and
(d)
during
an employee’s first three months of continuous employment with
an employer.
(3)
Taking into account the working hours of a part-time employee,
irrespective of when
the part-time employee was employed, an employer
must—
(a)
treat a part-time employee on the whole not less favourably than a
comparable full-time
employee doing the same or similar work,
unless
there is a justifiable reason for different treatment;
and
(b)
provide a part-time employee with access to training and skills
development on the
whole not less favourable than the access
applicable to a comparable full-time employee.
(4)
Subsection (3) applies, three months after the commencement of the
Labour Relations
Amendment Act, 2014, to part-time employees employed
before the commencement of the Labour Relations Amendment Act, 2014.
(5)
After the commencement of the Labour Relations Amendment Act, 2014,
an employer must
provide a part-time employee with the same access to
opportunities to apply for vacancies as it provides to full-time
employees.
(6)
For the purposes of identifying a comparable full-time employee,
regard must be had
to a full-time employee employed by the employer
on the same type of employment relationship who performs the same or
similar work—
(a)
in the same workplace as the part-time employee; or
(b)
if there is no comparable full-time employee who works in the same
workplace, a comparable
full-time employee employed by the employer
in any other workplace.’
[Emphasis
added]
[37]
Clearly,
in terms of subsection 3(a), employers could still maintain a
different reward system for full-timers and part-timers if
they have
a justifiable reason for different treatment. This, then, takes me to
section 6 of the EEA, which provides that:
‘
(1)
No person may unfairly discriminate, directly or indirectly, against
an employee, in any
employment policy or practice, on one or more
grounds, including race, gender, sex, pregnancy, marital status,
family responsibility,
ethnic or social origin, colour, sexual
orientation, age, disability, religion, HIV status, conscience,
belief, political opinion,
culture, language, birth or on any other
arbitrary ground.
(2)
It is
not unfair discrimination to—
(a)
take
affirmative action measures consistent with the purpose of this Act;
or
(b)
distinguish,
exclude or prefer any person on the basis of an inherent requirement
of a job.
(3)
Harassment
of an employee is a form of unfair discrimination and is prohibited
on any one, or a combination of grounds of unfair
discrimination
listed in subsection (1).
(4)
A
difference in terms and conditions of employment between employees of
the same employer performing the same or substantially the
same work
or work of equal value that is directly or indirectly based on any
one or more of the grounds listed in subsection (1),
is unfair
discrimination.
(5)
The
Minister, after consultation with the Commission, may prescribe the
criteria and prescribe the methodology for assessing work
of equal
value contemplated in subsection (4).’ [Emphasis added]
[38]
Whilst
both sections quoted above prohibit unfair discrimination in
provision of terms and conditions of employment, including
remuneration, there is an acknowledgement that a room exist for
justification of any identified differentiation.
[39]
Even
though section 198C(3)(a) of the LRA does not define what is meant by
“justifiable reasons”, the answer is found
in the
EEA
Regulations, as repealed by the Minister of Labour in a notice
published under Government Notice number 378733 of 1 August 2014.
Regulation 7 deals with
f
actors
justifying differentiation in provision of terms and conditions of
employment and states that:
‘
(1)
If employees perform work that is of equal value, a difference in
terms and conditions of
employment, including remuneration, is not
unfair discrimination if the difference is fair and rational and is
based on any one
or a combination of the following grounds:
(a)
the
individuals' respective seniority or length of service
;
(b)
the
individuals' respective qualifications, ability, competence or
potential above the minimum acceptable levels required for the
performance of the job;
(c)
the
individuals' respective performance, quantity or quality of work,
provided that employees are equally subject to the employer's
performance evaluation system, that the performance evaluation system
is consistently applied;
(d)
where
an employee is demoted as a result of organisational restructuring or
for any other legitimate reason without a reduction
in pay and fixing
the employee's salary at this level until the remuneration of
employees in the same job category reaches this
level
;
(e)
where
an individual is employed temporarily in a position for purposes of
gaining experience or training and as a result receives
different
remuneration or enjoys different terms and conditions of employment;
(f)
the
existence of a shortage of relevant skill, or the market value in a
particular job classification; and
(g)
any
other relevant factor that is not unfairly discriminatory in terms of
section 6(1) of the Act.”
[Emphasis
added]
[40]
Coming
back to the case in hand, it is common cause that all the full-timers
had long length of service than the flexi-timers. In
fact, according
to
the
Applicants, the pay disparity challenge came about due to Woolworths’
operational changes in 2002 when it decided not
to employ full-timers
and employees subsequently engaged were all flexi-timers on different
terms and conditions of employment.
Also, it is not disputed that, by
accepting the flexi-timer contracts, the full-timers lost some
benefits that were not linked
to pay, such as working five hours on
Saturdays, not working on Sundays, leave (maternity, family
responsibility and study), etc.
[41]
I
accept Woolworths’ Counsel’s submission that Woolworths
was entitled to seek to address the issues of equality in
order to
anticipate the impending equal pay amendments at that time, which
have since came into effect. However, I am not certain
as to what
canons were applied to justify Woolworths’ decision to use
equity as one of its grounds for operational requirements.
What is
apparent now, with the benefit of having both the LRA and EEA
amendments enforced, is that the foul that Woolworths hoped
to
anticipate was illusory.
[42]
It
is also patent that the pay inequity that arose as result of
implementing flexitime contracts could have been easily justified
in
terms of Regulation 7(1)(a) since the full-timers had longer service
period than the flexi-timers. Alternatively, Regulation
7(1)(d) could
have been a perfect justification because as a result of the whole
restructuring and grading system, the full-timers
had to be demoted,
so to say. In essence, this Regulation gives credence to SACCAWU’s
submissions that it was unfair to dismiss
long serving employees when
there were realistic alternatives in a form of natural attrition
and/or a wage freeze for full-timers.
[43]
It
is also clear from the Code of Good Practice on Equal
Pay/Remuneration for Work of Equal Value
[7]
that even if there are instances where differentiation is found not
to be justifiable, employers would have to develop plans to
address
inequalities identified and, pertinently, without reducing the pay or
remuneration of affected employees in order to bring
about pay
equity.
[8]
[44]
Section
27 of the EEA deals with income differentials and provides that:
‘
(1)
Every designated employer, when reporting in terms of section 21(1),
must submit a statement,
as prescribed, to the Employment Conditions
Commission established by section 59 of the Basic Conditions of
Employment Act, on
the remuneration and benefits received in each
occupational level of that employer’s workforce.
(2)
Where disproportionate income differentials, or unfair discrimination
by virtue of
a difference in terms and conditions of employment
contemplated in section 6 (4), are reflected in the statement
contemplated in
subsection (1), a designated employer must take
measures to progressively reduce such differentials subject to such
guidance as
may be given by the Minister as contemplated in
subsection (4).’
[45]
In
a nutshell, the principles expounded in
Dudley
v City of Cape Town and Another
[9]
are also applicable in this instance. Indeed, whilst unfair
discrimination disputes falling under chapter II of the EEA can be
referred to the Labour Court for adjudication and this can be done by
an individual, a “right to affirmative action”
or “pay
equity” in this instance, is not an individual right.
Accordingly, it is incompetent for an employer to seek
to protect an
individual right not to be unfairly discriminated through an
operational requirements process and thereby circumventing
its
obligation under Chapter III of the EEA to develop a plan to deal
progressively with any unfair pay differentiation. Woolworths,
as
designated employer, ought to have dealt with pay inequity issues in
accordance with chapter III of the EEA.
[46]
I
align myself with the sentiments expressed in
NUM
and Another v Black Mountain Mining (Pty) Ltd
[10]
where the LAC, as per Francis, AJA, held that:
‘
It does not
follow that just because an employer dismisses an employee due to its
“economical, technological, structural or
similar need”
that the [Section 189A(i)] precondition has been met. An employer
must first establish on a balance of probabilities
that the dismissal
of the employee contributed in a meaningful way to the realisation of
that need.
In
my view, dismissals for operational requirements must be a measure of
last resort, or at least fair under all of the circumstances.
A
dismissal can only be operationally justifiable on rational grounds
if the dismissal is suitably linked to the achievement of
the end
goal for rational reasons. The selection of an employee for
retrenchment can only be fair if regard is had to the employee’s
personal circumstances and the effect that the dismissal will have on
him or her compared to the benefit to the employer. This
takes into
account the principles that dismissal for an employee constitutes the
proverbial “death sentence
”.’
[Emphasis added]
[47]
Interestingly,
Woolworths’ section 189(3) of the LRA notice states only
one
reason for the retrenchments being that ‘the company needs to
be in a position to employ employees who are able to be
used on a
flexible basis’. In this regard, it was contented on behalf of
the Applicants that Woolworths, as an afterthought,
cynically sought
to add further reasons of equity and costs efficiency in order to
justify the retrenchments. I am inclined to
accept this submission
given the fact that the affected employees readily accepted
Woolworths’ business rational and were
willing to move to
flexitime contracts, of course without loss of benefits.
Cost
efficiency operational requirement
[48]
Whilst
it is given that Woolworths might have made huge savings consequent
to the implementation of flexitime contracts, those savings
are
inextricable linked to the drastic reduction of full-timers’
pay and changes to their conditions of employment. As such,
since it
is clear that pay equity ground was untenable, the cost saving ground
must also suffer the same demise.
[49]
Even
if cost efficiency
was
a standalone operational requirement, Woolworths did not produce any
evidence
pertaining
to the costs associated with the employment of full-timers, total
amount of targeted cost reduction and whether such
a target had been
met. Slabbert only dealt with the ultimate saving that had been made
without any reference to the actual costs
before restructuring or a
set target for reduction. Accordingly, I could not agree more with
the court’s findings in
Ndhlela
v SITA Information Networking Computing BV (Incorporated in the
Netherlands)
[11]
to the effect that ‘in the absence of this information, it is
not possible for a court to decide if the decision is not arbitrary
or capricious. Nor is it possible to decide if the decision is a
rational or reasonable one, based on the information which was
available to an employer at the time it decided to embark on a
restructuring exercise’.
Proper
consideration of alternatives
[50]
As
stated above, the Applicants’ claim, in this regard, is that
Woolworths did not properly consider rejected realistic alternatives
to retrenchments; such as natural attrition and/or a wage freeze for
full-timers.
Slabbert
conceded that Woolworths did not consider these two alternatives but
was adamant that natural attrition could not have
addressed the issue
of pay equity and anomalies since it occurred at a rate of 6-8% per
annum.
[51]
Nothing
turns on Mbongwe’s concession that the issue of natural
attrition was never raised again after SACCAWU’s letter
of 7
September 2012.
The
onus is on Woolworths to prove that it had adequately considered all
alternatives to retrenchment, a
question
that should arise not only at the commencement of the consultation
but continually throughout the process as considerations
will
naturally change as the process plays itself out.
[12]
A caveat is that employers are prohibited from presuming the outcome
of a consultation; lest the dismissals be rendered a
fait
accompli
.
[13]
[52]
In
SACTWU
and Others v Discreto – A Division of Trump and Springbok
Holdings,
[14]
dealing
with the question on whether the dismissals were the only reasonable
option under the circumstances, the court held that:
‘
The function
of a court scrutinising the consultation process is not to second
guess the commercial or business efficacy of the
employer’s
ultimate decision… but to pass judgment on whether the
ultimate decision arrived at was genuine and not
merely a sham…
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…’
[53]
It
was contended on behalf of the Applicants that the average age of the
affected employees was 50 years, with majority being between
45 and
59. They had been in Woolworths’ employ for 20 years on
average, ranging between 12 and 32 years. Their benefits were
concluded over many years and received regular increase over the
years. For most of the Applicants were about to reach the retirement
age and the prospects of finding other jobs were almost non-existent,
it would seem that natural attrition would have been the
best
alternative to retrenchments, especially, in the light of my finding
that any differentiation in pay or conditions of employment
could
have been justified in terms of EEA and/or LRA alternatively dealt
with in terms of the Chapter III of the EEA.
[54]
In
the premises, it is my view that Woolworths failed to prove, on a
balance probabilities, that the dismissal of affected employees
was
operationally justifiable.
By
the same token, Woolworths failed to appropriately consider the
alternatives to dismissal.
Procedural
Fairness
[55]
The
issues for determination on the fairness of the procedure can be
summarised as follows:
55.1
Whether Woolworths failed to commence the consultation process when
it first contemplated retrenchments,
i.e. during the voluntary phase;
55.2
Whether Woolworths failed to consult meaningfully about the terms and
conditions that would have applied
to the converting full-timers, and
instead reiterated its offer made before the formal
consultation process began and pushed
through the retrenchment of the
applicants in the minimum period of time (60 days);
55.3
Whether Woolworths
failed
to provide reasons, or cogent reasons, for rejecting representations
or proposals made by the union, a contravention of sections
189A(6)(a) and (b) and indicative of the company's refusal or failure
to engage in meaningful consultations;
55.4
Whether, in contravention of section 189 read with section 16, the
Woolworths refused or failed to disclose
information relevant to
determining:
55.4.1 the appropriate
and fair terms and conditions of employment of convertors, which
included: (i) the pay scales (including
hourly rates) of all
flexi-timer workers; (ii) the pay scales of all non-flexi-time
workers; (iii) the pay scales of the applicants
before and after
conversion; and (iv) the medical aid and retirement fund benefits
that would change as a result of the conversion;
and
55.4.2 whether natural
attrition would have been an appropriate and fair alternative to
retrenchment, which included details
about the rate of natural
attrition of full-time and key-time employees.
Commencement of
consultation process during the voluntary phase
[56]
The
Applicants took issue with Woolworths; assertion that it genuinely
believed that all the full-timers would accept one of the
voluntary
options hence it did not anticipate retrenchments. Mbongwe testified
that given the drastic reduction in wages and other
benefits,
retrenchments were conceivable and as such SACCAWU ought to have been
involved even during the voluntary phase, in particular
on 20 August
2012, when its affected members were presented voluntary options to
consider.
[57]
Slabbert
was resolute in her evidence that Woolworths did not contemplate
dismissing anyone before 4 September 2012 even after the
union’s
letter challenging the voluntary phase. I have a serious difficulty
with this version, especially, given the fact
that some of the
full-timers were members of SACCAWU and ordinarily unions would
always try to get better deals for their members.
Therefore, it is my
view that Woolworths ought to have foreseen a possibility of
retrenchments at least as early as
20
August 2012.
[58]
However,
be that as it may, the crisp issue that arises in this regard is
whether Woolworths approached both the voluntary and compulsory
phases in a constructive spirit and invited relevant proposals to
resolve its operational requirements.
[15]
[59]
It
is trite that any contemplated dismissals for reasons based on the
employer’s operational requirements must be preceded
by a
consultation process. In terms of section 189 of the LRA, the
employer is enjoined to consult:
‘
(a)
any person whom the employer is required to consult in terms of a
collective agreement;
(b)
if there is no collective agreement that requires consultation:
(i)
a
workplace forum, if the employees likely to be affected by the
proposed dismissals are employed in a workplace in respect of which
there is a workplace forum; and
(ii)
any
registered trade union whose members are likely to be affected by the
proposed dismissals;
(c)
If
there is no workplace forum in the workplace in which the employees
likely to be affected by the proposed dismissals are employed,
any
registered trade union whose members are likely to be affected by the
proposed dismissals; or
(d)
If
there is no such trade union, the employees likely to be affected by
the proposed dismissals or their representatives nominated
for that
purpose.’
[60]
Clearly,
section 189(1) of the LRA places a duty on any employer to consult
any person that it is required to consult in terms of
a Collective
Agreement or other structures, including a registered trade union,
where there is no Collective Agreement.
[61]
It
is common cause that on 5 August 2012, Woolworths commenced with
“voluntary phase” consultation sessions with the
individual full-timers, including SACCAWU members, where it
communicated its decision to convert them to flexi-timers. Despite
the fact that SACCAWU is a registered union and the fact that there
was no recognised union nor did a Collective Agreement on
retrenchment exist, Woolworths did not deem it necessary to consult
with SACCAWU during the voluntary phase.
[62]
As
stated above, on 20 August 2012, the full-timers were offered the
following three options, on a voluntary basis:
62.1
To
covert to flexi contracts with remuneration at the 75
th
percentile of the hourly rate applicable to a particular grade in
which the employee’s job was slotted; the benefits aligned
to
those of the flexi-timers and R70 000.00 once off conversion
payment;
62.2
Early retirement with severance pay calculated from 1 week to 2
weeks’ pay for every completed year
of service depending on an
employee’s length of service; and
62.3
Voluntary retrenchment with severance pay calculated from 1 week to 2
weeks’ pay for every completed
year of service depending on an
employee’s length of service.
[63]
The
above options were obviously ranked in a manner that if employees
were to refuse the first options, which is conversion to flexitime
with reduction of benefits, dismissal would be inevitable. Therefore,
Woolworths’ assertion that it did not contemplate dismissing
any of the full-timers is without merit. Clearly, its voluntary
proposals were never meant to avoid dismissals.
[64]
Similarly,
Woolworths’ Counsel submission that even if I find that
Woolworths
ought
to
h
ave
foreseen the possibility of a retrenchment as at 20
A
ugust
2
0
12,
it
would not necessarily
mean
that
it offended section 189(1), stand to be rejected. Woolworths was
adamant that it ‘had
undertaken
a large-scale internal consultation process; received feedback from
employees; and made a substantially increased offer
to affected
employees, with the deadline for acceptance having been 13h00 on 3
September 2012’. It is clear in this regard
that the whole
consultation processes began way before Woolworths issued the section
189(3) notice and even then dismissal of affected
employees was not a
mere possibility but reality.
[65]
In
my view,
in
the absence of any Collective Agreement regulating retrenchment
process, Woolworths was obliged to consult with SACCAWU even
during
the voluntary phase.
[16]
Did
Woolworths consult meaningfully during the second phase
?
[66]
The
meaningfulness of the second phase consultation is
inextricably
tied
to
the voluntary phase. Woolworths commenced the second phase with 85%
of the affected employees having accepted one of the voluntary
options. In essence, those who had accepted the new conditions of
employment were already employed as such; and those who had accepted
termination of the employment, either through an early retirement or
voluntary retrenchment options were already dismissed.
[67]
In
fact, one of the reasons provided by Woolworths for rejecting
SACCAWU’s proposal as an alternative to retrenchments, was
that
‘
…
510
Full-timers of 593 have accepted one of the voluntary offers made
available during August and simple assessment must indicate
that the
offers have provided a reasonable alternative to previous employment
type. To accede to the alternative proposal as proposed
creates a
complex consideration in respect of those arrangements as already
implemented.’
[17]
[68]
Clearly,
Woolworths believed that the three options that it had offered during
the voluntary phase were reasonable, hence it could
not budge.
Instead, it urged SACCAWU to convince its members to accept one of
those options as they were beneficial to them than
the statutory
severance pay.
[18]
This was the attitude
displayed by Woolworths throughout the consultation sessions. As a
result, Woolworths never bothered to interrogate
the last alternative
proposal by SACCAWU as contained in its letter dated 30 October 2012.
Slabbert conceded that Woolworths misunderstood
same.
[69]
It
is my view, that Woolworth’s misunderstanding is very serious
in the whole scheme of events in that a thorough scrutiny
of
SACCAWU’s offer would have assisted in obviating dismissal of
the six employees (Bongani Ndaba - Applicant 7, Pamela Visagie
-
Applicant 13, Irene Malemela - Applicant 20, Saul Moloisane -
Applicant 33; Elizabeth Nkgapele - Applicant 34, and Sharon Adams
-
Applicant 39) who clearly stood to benefit from converting to
flexi-timer contract.
[19]
[70]
Accordingly,
I accept the Applicants’ assertion that the termination of the
affected employees was a
fiat
accompli
and Woolworths’ conduct during the section 189A phase was
consistent with it decision.
[71]
Whilst
I accept Slabbert’s evidence that the urgency in the process
was informed by the festive season that was soon approaching,
I still
believe the consultation ought to be have been approached with more
sincerity, sensitivity and amenableness. I also find
it very
insensitive of Woolworths to totally release the affected employees
from work even though nothing much turns on it.
[72]
On
the letter of termination that was sent to Madikela before the
conclusion of the facilitation process, I am not persuaded that
it
was an error. Woolworths made it clear in its letter dated 31 October
2012 that it was not willing to proceed with the consultation
meeting
scheduled for 3 November 2012 but would rather make interim
arrangements in the event 4 November 2012 becomes the termination
date. Indeed, Woolworths went ahead and made those arrangements and
hence the termination letter sent to Madikala on 2 November
2012.
Therefore, there is merit in SACCAWU’s submission that by the
time the parties met on 3 November 2012, Woolworths had
already made
up its mind to terminate the affected employees.
[73]
The
last issue raised on the fairness of the procedure is whether
Woolworths failed to disclose information that was relevant to
the
process of determining appropriate and fair terms and conditions of
employment for the effected employees. Slabbert has testified
that
her approach to disclosure of information was informed by the advice
that she had received from Commissioner who was the CCMA
facilitator
and since deceased. I am willing to excuse Macgregor’s
misdirection in this regard. However, it is apparent to
me that,
especially having had the benefit of the schedule of benefits pre and
post conversion, had SACCAWU had access to same,
it would have been
able to meaningfully engage with Woolworths and advise its members
accordingly.
[74]
In
the premises, I am persuaded that that Woolworths failed to
meaningfully consult with SACCAWU and, accordingly, the dismissal
of
second to further applicants was procedurally unfair.
Relief
[75]
The
Applicants seek reinstatement with effect from the date of dismissal
without loss of pay. In the absence of any evidence by
Woolworths to
indicate that Applicant’s reinstatement would not be reasonably
practicable, I am inclined to order
reinstatement
since it is the primary statutory remedy in unfair dismissal
disputes.
[20]
Even
though there was a delay in the persecution of this matter, none of
the parties claimed prejudice or sought redress.
Costs
[76]
There
is no reason why costs should not follow the result. In Woolworths’
own version, SACCAWU is no longer a recognised trade
union. As such,
there is no persisting Collective Bargaining relationship between the
parties.
[77]
In
the circumstances, I make the following order:
1.
The
dismissal of the second to further Applicants was substantively and
procedurally unfair.
2.
Woolworths
is ordered to reinstate the second to further Applicants
retrospectively from date of their dismissal without loss of
pay.
3.
Woolworths
is ordered to pay costs.
__________________
Nkutha-Nkontwana AJ
Judge
of the Labour Court of South Africa
APPEARANCES:
For
The Applicant:
Advocate A Myburgh
SC
Instructed
by:
Mervyn Taback Incorporated
For the
Respondents: Advocate
P Kennedy SC
Instructed
by:
Haffegee Roskam Savege Attorneys
[1]
(2005) 26
ILJ
69 (SCA).
[2]
See page
36(a) of Bundle “A”.
[3]
[2001] 7
BLLR 705
(LAC) at para 19; see also
CWIU
and Others v Algrorax (Pty) Ltd
[2003] 11 BLLR 1081
(LAC) at paras 69 – 70.
[4]
[2005] 4
BLLR 378
(LC) at para 85.
[5]
A 159-160.
[6]
(2010) 31
ILJ
662 (LC);
[2009] 12 BLLR 1224
(LC) at para 5.
[7]
Gazetted
under notice No. 38837, issued on 1 June 2015 by the Minister
of Labour in terms section 54(1) of the Employment
Equity Act, 1998
(Act No 55 of 1998 as amended).
[8]
See Item 8
of the Code of Good Practice on Equal Pay/ Remuneration for Work of
Equal Value.
[9]
[2008] 12
BLLR 1155
(LAC); (2008) 29
ILJ
2685 (LAC).
[10]
(CA22/2012)
[2014] ZALAC 78
(10 December 2014) at para 37.
[11]
(2014) 35
ILJ
2236 (LC) at para 44.
[12]
NUMSA v
Atlantis Diesel Engines (Pty) Ltd
(1993)
14
ILJ
642 (LAC).
Kotze
v Rebel Discount Liquor Group (Pty) Ltd
(2000)
21
ILJ
129 (LAC) at paras 42 to 45. See also
Atlantis
Diesel Engines (Pty) Ltd v NUMSA
(1994)
15
ILJ
1247 (A).
[13]
NUM and
Another v Black Mountain Mining (Pty) Ltd
above
n 9 at para 28.
[14]
(1998) 19
ILJ
1451 (LAC) at para 8.
[15]
SASBO v
Standard Bank of South Africa
(2011)
ILJ
1236 (LC) at para 32.
[16]
Aunde South Africa (Pty)
Ltd and Others v NUMSA
[2011] 10 BLLR 945
(LAC) at para 38.
[17]
See
Woolworths letter dated 3 October 2012 at page 122 of Bundle “A”.
[18]
Ibid
.
[19]
See
breakdown of pay and benefits pre and post conversion at page 339 of
Bundle “A”.
[20]
Section
193(a) and (b) of the LRA.