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
>>
2016
>>
[2016] ZALCCT 32
|
|
Armscor Dockyard, a division of Armscor SOC v CCMA and Others (C853/15) [2016] ZALCCT 32 (14 September 2016)
REPUBLIC
OF SOUTH AFRICA
Not
reportable
Of interest to
other judges
THE
LABOUR COURT OF SOUTH AFRICA, CAPE TOWN
JUDGMENT
C
ase
no: C 853/15
In the
matter between:
ARMSCOR DOCKYARD, a division
of
ARMSCOR SOC
Applicant
And
CCMA
First Respondent
Tariq JAMODIEN N.O.
Second Respondent
Raynold Thabo NGCOBO
Third Respondent
Heard
:
7 September 2016
Delivered
:
14 September 2016
Summary:
Review – LRA s 186(1)(b) – legitimate
expectation of renewal of fixed term contract. Arbitration award not
reviewable.
JUDGMENT
STEENKAMP
J
Introduction
and background
[1]
Mr
Raynold Thabo Ngcobo
[1]
was employed by the applicant, Armscor, at the Simon’s Town
naval dockyard as senior human resources manager. Armscor wanted
to
make a permanent appointment but, as the employee was 59 years old at
the time, it would have been too expensive, given the
costs of the
medical aid scheme and provident fund. The parties found a way out.
The employee was employed on a fixed term contract.
Armscor’s
senior employee relations manager, Dr Phasoane Mokgubu, sent the
employee an email confirming his employment on
a fixed term contract
for three years “which is renewable subject to performance”.
The employee performed well; but
at the end of three years, his
contract was not renewed. He referred an unfair dismissal dispute to
the CCMA
[2]
in terms of s 186(1)(b) of the LRA.
[3]
The arbitrator, Tariq Jamodien
[4]
,
found that the employee had been dismissed; and that it was unfair.
He ordered Armscor to reinstate the employee on a fixed term
contract
from 1 July 2014 until 31 December 2016. Armscor seeks to have the
award reviewed and set aside.
The
arbitration proceedings and award
[2]
Both parties were legally represented at
the arbitration. By agreement, the arbitrator considered the record
of a previous arbitration
that had been set aside and remitted. He
also heard the further evidence of Dr Mokgubu (via video conference)
and the General Manager
to whom the employee reported, Mr Themba
Goduka.
[3]
The initial fixed term contract was due to
expire on 31 March 2014. In July 2013 the employee and Goduka started
discussing its
extension or renewal. On 29 July 2013 Goduka wrote a
letter addressed to the acting CEO, Mr JS Mkwanazi. He
motivated for
the renewal of the contract and recommended its
extension for a further three years, when the employee would reach
retirement age
of 65. However, he did not send the letter off and
only raised the issue directly with Mr Mkwanazi in December 2013.
[4]
It is not disputed that Goduka supported
the employee. It went so far as the employee submitting a draft to
Goduka in October 2013
setting out his motivation to extend the
contract and highlighting the successes he had achieved during his
tenure. It is common
cause that the employee performed well.
[5]
There was no indication to the employee
between July 2013 and March 2014 that the renewal of his contract
would not be approved.
(There is a dispute whether Goduka told him
that it was subject to the CEO’s approval). Only on 4 March
2014 did Goduka tell
him that the CEO refused to renew it because
Parliament had insisted on a permanent appointment. Armscor
advertised a permanent
position on 5 March 2014. On the same day, the
employee wrote to Goduka and to the general manager: human resources.
He noted that
Goduka had supported his request for an extension of
his contract; that he had submitted his motivation in October 2013;
and that
he had achieved significant successes. He concluded: “I
therefore plead that the matter be reconsidered with a view to extend
the contract.”
[6]
Goduka responded on 12 March 2014, offering
the employee an extension of three months only, until 30 June 2014.
The employee responded
that the offer did not comply with the terms
of his contract. He stated (in a letter dated 17 March 2014):
“
The
provisions of my fixed term contract of employment create a
legitimate expectation that my contract of employment will be renewed
on the same or similar terms as set out therein, which includes the
period of renewal thereof.”
[7]
Goduka responded on 24 March 2014:
“
In
the light of the reasons provided in our letter dated 12 March 2014,
Management’s decision to appoint a HR manager for
the Dockyard
on a permanent basis remains highly significant for business.
Therefore your fixed term contract which expires on
31 March 2014 can
only be extended for three months.”
[8]
The arbitrator correctly noted that he had
to determine whether the employee had a reasonable expectation of
renewal of his fixed
term contract; and if so, whether its
non-renewal constituted an unfair dismissal. That is consequent upon
the provisions of s
186(1)(b)(i) of the LRA:
“’
Dismissal
means that –
(b) an
employee employed in terms of a fixed term contract of employment
reasonably expected the employer –
(i) to
renew a fixed term contract of employment on the same or similar
terms but the employer offered to renew it on less favourable
terms,
or did not renew it”.
[9]
The arbitrator correctly summarised the
test to be applied:
“
The
view seems to be that the expectation must be reasonable in the
objective sense. The question that one has to ask is whether
the
circumstances were such that any reasonable employee would, in the
circumstances, have expected the contract to be renewed
on the same
or similar terms.”
[10]
He
referred to relevant case law against which to assess the evidence
before him. In
McInnes
v Technikon Natal
[5]
the court adopted the following approach:
“
Here
the court has to conduct a two-stage enquiry. The first stage is to
determine what the applicant’s subjective expectation
actually
was in relation to renewal. This is a question of fact. Only once the
subjective expectation has been established as a
fact does the court
then go on to decide the second stage, namely whether this
expectation was reasonable in the circumstances.
As to the
former, what is required is that the applicant must subjectively have
held the expectation that her contract would be
renewed on terms
which are the same or similar to the terms which prevailed during her
fixed-term contract.”
[11]
The
arbitrator also considered
Auf
der Heyde v University of Cape Town
[6]
in which the court, in turn referred back to
Dierks
v University of South Africa
[7]
:
“
The
gravamen of s 186(b) in the context of what an employee would be
entitled, all other things being equal, reasonably to expect
at the
conclusion of the specified period of a fixed term contract was
examined by this court in
Dierks v
University of South Africa.
The issue
for determination in that matter bore a basic similarity, insofar as
the interpretation and applicability of s 186(b)
of the Act was
concerned, to this case… Citing
Olivier
with apparent approval, the court (Oosthuizen AJ), noting that the
concept of ‘reasonable expectation’ as expressed
in s
186(b) has no statutory definition, characterised it as including,
essentially, ‘an equity criterion, ensuring relief
to a party
on the basis of fairness in circumstances where the strict principles
of law would not foresee a remedy’. Whether
or not the
employee’s expectation was reasonable, the court commented,
must be deduced on the basis that ‘apart from
the subjective
say-so or perception there is an objective basis for the creation of
his expectation’. This must be assessed
on an analysis of the
facts and relevant circumstances bearing upon it.”
And in
Dierks
the court held that the surrounding circumstances must
be evaluated, including –
“
the
significance or otherwise of the contractual stipulation, agreements,
undertakings by the employer or practice or custom in
regard to
renewal or re-employment, the availability of the post, the purpose
of or reason for concluding the fixed term contract,
inconsistent
conduct, failure to give reasonable notice and nature of the
employer’s business.”
[12]
In
summary, the test remains that set out by the LAC in
SA
Rugby Players’ Association v SA Rugby (Pty) Ltd:
[8]
“
The
enquiry is whether a reasonable employee, in the circumstances
prevailing at the time, would have expected the employer to renew
his
or her fixed term contract on the same or similar terms.”
[13]
Applying these principles, the arbitrator
took account of the fact that the initial advertisement to which the
employee responded
envisaged a permanent position. The parties only
agreed to a fixed term contract in order to mitigate the impact of
the huge financial
implications in respect of medical aid and
provident fund should he have been permanently employed, given his
age. That much was
confirmed by Goduka. And the arbitrator rejected
the belated version of Dr Mokgubu that that employee had to mentor a
successor
– that had never been raised before Mokgubu
testified.
[14]
The arbitrator agreed with Armscor that the
fact that the contract was “renewable” did not amount to
a guarantee –
it merely meant that it was “able to be
renewed”. But, given the assurance in the email from Mokgubu
that it was “renewable
subject to performance”, he
likened it to a suspensive condition – performance was the only
significant condition set
for the possible renewal of the contract.
If the employee performed, he was “in line to have his contract
renewed”.
He had performed. Goduka supported the renewal of his
contract. In those circumstances, he held a subjective expectation of
renewal.
[15]
Goduka confirmed during cross-examination
that he had the delegated authority to appoint employees, i.e. to
renew the contract;
but the arbitrator noted that he also then said
that he needed approval from the CEO. The arbitrator accepted, having
considered
all the evidence, that Goduka, who was the general manager
and delegated authority, wanted to exercise the “option to
renew”
the contract up to the employee’s retirement age
at 65. He had communicated this to the employee; what he had not
done, is
to tell the employee that it was subject to approval by the
CEO. Hence from October 2013 (when the employee and Goduka drafted
the joint motivation) until March 2014, the employee had reasonably
held the expectation that his contract would be renewed. And
in
any event, given that the contract was renewable ‘subject to
performance’, the employee had persuasively demonstrated
his
subjective expectation. Furthermore, the arbitrator found, the
employee had met the standard as stated in
SA
Rugby
, i.e. that “a reasonable
employee, in the circumstances prevailing at the time, would have
expected the employer to renew
the contract on the same or similar
terms”.
[16]
The arbitrator then considered whether the
dismissal was fair, or, as he put it, whether or not the employer’s
reasons for
non-renewal were valid.
[17]
The reason given by Goduka was simply that
Parliament had questioned the use of fixed term contracts. The
arbitrator found that
Armscor had taken a unilateral approach to
terminate the contract, without considering the peculiarities of the
situation. The
resultant termination was unfair.
[18]
As to remedy, the arbitrator took into
account that the contract had been renewed for three months. He
ordered Armscor to renew
it further from 1 July 2014 until 31
December 2016. He did not order costs.
Review
grounds
[19]
Mr
Ackermann
,
for the applicant, set out five grounds of review, arguing that the
arbitrator was wrong on the facts:
19.1
Goduka’s support did not lead to a
reasonable expectation of renewal.
19.2
The contract itself did not envisage its
automatic renewal or a reasonable expectation of renewal.
19.3
Performance was not the only criterion for
renewal.
19.4
The arbitrator was wrong in concluding that
other criteria were not communicated to the employee.
19.5
Goduka did not have the authority to renew
the contract.
Evaluation
/ Analysis
[20]
As Mr
Ackermann
correctly submitted, the question whether there was a dismissal in
terms of s 186(1)(b) goes to jurisdiction. The test on review
is
therefore not whether the arbitrator acted reasonably, but whether he
was correct in determining that the employee had been
dismissed.
[9]
[21]
The
onus was on the employee to show that he held a reasonable
expectation of renewal.
[10]
Tlaletsi AJA
[11]
posited
this test to discharge the onus:
“
[The
employee] had to place facts which, objectively considered,
established a reasonable expectation. Because the test is objective,
the enquiry is whether a reasonable employee in the circumstances
prevailing at the time would have expected the employer to renew
his
or her fixed-term contract on the same or similar terms. As soon as
the other requirements of s 186(1)(b) have been satisfied
it would
then be found that [the employee] had been dismissed, and [the
employer] would have to establish that the dismissal was
both
procedurally and substantively fair.”
The first
stage: a subjective expectation?
[22]
The starting point is the wording of the
contract itself. It sets out the fixed term period as follows: “You
are appointed
on a 3 year (fixed term, renewable contract) from 1
March 2011 until 31 March 2014.”
[23]
It is clear that the parties envisaged a
renewable contract. That was amplified in the email from Dr Mokgubu
to the employee that
confirmed:
“
As
discussed the offer will be a three year fixed term contract which is
renewable subject to performance.”
[24]
I agree with Mr
Ackermann
that “renewable” does not mean that the contract would
automatically be renewed. But, given that the employee had performed,
I agree with the arbitrator that this factor reasonable raised the
expectation of renewal with the employee.
[25]
The
employee formed the impression, based on Goduka’s assurances
and support, that his contract would be renewed. That subjective
expectation was bolstered by the common cause fact that he had
performed well. It is a similar situation to that in which the
employee in a recent private arbitration found herself when her
immediate superior assured her that her contract would be renewed
but
she was then informed by a more senior person that the company had
decided against it.
[12]
[26]
It seems clear to me that the employee did
subjectively expect his contract to be renewed. Mr
Ackermann
argued that this is not borne out by
his motivation and “plea” for renewal; but, having
motivated why the contract should
be renewed, the employee was
assured of Goduka’s support. That could only have bolstered his
expectation.
The
second stage: Was the expectation reasonable?
[27]
Whether the expectation was reasonable must
be assessed in the light of the context and other factors such as
those outlined in
Dierks.
One of the primary factors is the purpose for concluding the fixed
term contract in the first place, i.e. that the employee would
have
been appointed in a permanent position had it not been for his age,
that made the cost of the provident fund and medical aid
prohibitive.
Was the
dismissal fair?
[28]
The arbitrator found that the reasons for
non-renewal were not valid. I agree.
[29]
The
only criterion stipulated for renewal was that of performance. The
employee met that criterion. In the absence of other valid
reasons
having been communicated to the employee beforehand, the finding that
the dismissal was unfair, is a reasonable one.
[13]
Specific
review grounds on the facts
[30]
Insofar as the specific review grounds
based on the arbitrator’s factual findings have not been
addressed in the discussion
so far, I consider them individually.
Goduka’s
suppport
[31]
Mr
Ackermann
argued that, if the employee subjectively believed that the contract
would be renewed, he would not have needed to motivate for
its
renewal.
[32]
I do not think that the employee adopting a
“belts and braces” approach negates his subjective state
of mind. Goduka
led him to believe that, since he had performed well,
his contract would be renewed once more until he reached retirement
age.
He assisted Goduka in drafting the motivation. The employee
subjectively believed that the renewal would then be a formality,
given
Goduka’s support. That led to a subjective expectation of
renewal.
The
wording of the contract
[33]
The contract itself states that it is
“renewable”. I agree with Mr
Ackermann
that that in itself does not imply an automatic renewal, but merely
an option to renew. But the contract must be read together
with the
email from Dr Mokgubu containing the offer of employment on a fixed
term contract “which is renewable subject to
performance”.
That would have raised the reasonable expectation in the mind of the
employee that, should he perform satisfactorily,
his contract would
be renewed. And that expectation was bolstered by Goduka’s
support.
Performance
criterion
[34]
The only criterion for renewal mentioned by
Dr Mokgubu in his offer of employment was that of performance.
Neither Goduku nor Mokgubu
ever raised a different criterion with the
employee during the three years that he performed well. And the
arbitrator correctly
rejected the belated evidence of Dr Mokgubu that
the employee was meant to mentor a successor: that version was not
put to the
employee in cross-examination, it was not raised in any
performance discussions with the employee, and there was no evidence
that
the employee in fact mentored a successor or was expected to do
so.
Other
criteria
[35]
No other criteria, other than performance,
were communicated to the employee. As the arbitrator found, “there
were no further
indications about any other possible reasons which
may lead to a renewal and conversely there is no indication in the
contract
that there is no prospect of renewal or that renewal is
dependent upon the operational requirements of the [employer].”
[36]
The issue of Parliament wanting Armscor to
appoint someone in a permanent position was not raised with the
employee until March
2014. From July 2013 – when Goduka drafted
his recommendation for renewal – until March 2014, the employee
was oblivious
of this motivation not to renew coming from outside the
employer. It could not have detracted from his reasonable expectation
of
renewal.
[37]
The employee’s evidence in chief that
Goduka did not tell him about the CEO’s lack of support in
December 2013 went
unchallenged in cross-examination. On a balance of
probabilities he only learnt of it on 4 March 2014. Had Goduka raised
it before,
either one of them would surely have followed it up in
writing.
Implied
authority
[38]
Goduka said under cross-examination that he
had the authority to appoint, i.e. to renew the contract. He then
went on to say that
he needed approval from the CEO. But he created
the impression in the employee’s mind that he had, at the
least, ostensible
authority. He wanted to exercise “the option
to renew”. I do not think that the arbitrator is wrong when he
finds that
Goduka adopted the position that renewal was a
fait
accompli
.
Conclusion
[39]
I agree with the arbitrator that the
employee formed an expectation that his contract would be renewed;
that the expectation was
a reasonable one in all the circumstances;
and that the failure to renew it on the same or similar terms
amounted to a dismissal
as defined in s 186(1)(b) of the LRA. I also
agree that the dismissal was unfair, given the paucity of reasons for
the non-renewal
communicated to the employee. And the remedy was a
fair and reasonable one.
[40]
The award is not reviewable. Both parties
asked for costs to follow the result. I see no reason in law or
fairness to disagree.
The employee’s renewed fixed term
contract will in any event come to an end in three months’
time, on 31 December 2016.
Order
The
application is dismissed with costs.
_______________________
Anton
Steenkamp
Judge of
the Labour Court of South Africa
APPEARANCES
APPLICANT:
Lourens Ackermann
Instructed by Bowman Gilfillan
Inc.
THIRD RESPONDENT:
Guy Elliot
Instructed by Dorrington Jessop
Inc.
[1]
The third respondent.
[2]
The Commission for Conciliation, Mediation and Arbitration (the
first respondent).
[3]
Labour Relations Act 66 of 1995
.
[4]
The second respondent.
[5]
(2000) 21
ILJ
1138 (LC) paras [15] – [16].
[6]
(2000) 21
ILJ
1758
(LC) para [26].
[7]
[1999] 4 BLLR 304 (LC).
[8]
(2008) 29
ILJ
2218
(LAC) para [44].
[9]
SA Rugby
(above)
para [41]. See also
Gubevu
Security Group (Pty) Ltd v Ruggiero NO and Others
[2012] 4 BLLR 354
(LC); (2012) 33 ILJ 1171 (LC).
[10]
SA Rugby
para [44].
[11]
(as he then was) in
SA
Rugby
para [44].
[12]
Jossel
and Old Mutual Life Assurance Co Ltd
(IRC
private arbitration award, 29 August 2016).
[13]
The test for deciding whether there was dismissal is correctness;
but, once that has been established, the test on review concerning
the arbitrator’s finding that the dismissal was unfair, and
the appropriate remedy, is the reasonableness test outlined
in
Sidumo.