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[2016] ZALCD 22
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Ceppwawu obo Hlophe and Others v Bayfibre Central Co-operative Limited (D1219/10) [2016] ZALCD 22; (2017) 38 ILJ 627 (LC) (10 November 2016)
THE
LABOUR COURT OF SOUTH AFRICA, DURBAN
Reportable
CASE
NO.
D1219/10
In
the matter between:
CEPPWAWU
obo S HLOPHE & OTHERS
Applicant
(Whose
names appear on annexure “A” to the
Statement
of Case)
and
BAYFIBRE
CENTRAL CO-OPERATIVE LIMITED
Respondent
Heard:
1 April 2016
Delivered:
10 November 2016
Summary:
Claim of unfair dismissal based on operational requirements of the
employer - it is not the function of the Court to second
guess the
commercial or business efficacy of the employer’s ultimate
decision – dismissal substantively unfair –
partial
retrospective reinstatement ordered.
JUDGMENT
Cele
J
Introduction
[1]
At the commencement of this matter the claim of the Applicant, acting
on behalf of its 42 members and estates of two deceased
members, was
couched in the following terms:
1.1
An order declaring that the employment contracts of its members, as
erstwhile employees
of the Respondent, were not lawfully
terminated on notice (the contractual claim), alternatively
1.2
reinstatement from date of dismissal alternatively compensation for
unfair dismissal (the
unfair dismissal claim).
[2]
The Respondent opposed both claims acting in its capacity as the
erstwhile employer of the 44 employees. After the trial ran
its full
length the first claim was correctly withdrawn by the Applicant.
Factual
Background
[3]
A number of the facts of this matter became common cause either at
the inception of the trial or in the course of the trial.
The
Respondent came into existence during or about March 2009, and as a
wholly owned subsidiary of NCT Forestry Co-operative Limited
(“NCT”).
The Respondent is thus a secondary co-operative. NCT is a primary
co-operative which has as its members some
2000 farmers, the majority
of which are small timber growers. NCT owns 18 000 hectares of
farmland, on which timber is grown. The
remainder of NCT wood supply
is produced and supplied by its member farmers. NCT as a primary
timber farmer co-operative, it is
responsible for sourcing contracts
for the supply and delivery of raw materials from its co-operative
members into the market and
in this regard, also the processing of
that timber through its wood chipping operations and accordingly for
the sourcing of supply
contracts for wood chips into the market. Its
primary concern is to ensure that the farmers obtain the best price
for their wood
and that the wood chipping operations are run as
efficiently as possible so that the benefits of those trading
operations are ultimately
received by them.
[4]
NCT has shares in 3 wood chip companies and co-operatives, being:
4.1
Durban Wood Chips (Pty) Ltd;
4.2
Shincel (Pty) Ltd;
4.3
The Central Timber Co-operative (“CTC” - of which NCT
owned 50% and a separate
company TWK (Pty) Ltd owned 50%).
[5]
On or about 31 December 2008, NCT, TWK and CTC concluded a
dissolution agreement in terms of which TWK retained one chip line
and CTC acquired one chip line. TWK’s member shares in CTC were
cancelled. NCT then established the Respondent (Bayfibre
Central
Co-operative Limited) which took over ownership of one chip line and
the entire staff compliment for both chip lines. The
undisputed
evidence of the Respondent dealt with the manner and tradition of the
Japanese end users, doing business in South Africa.
That
business was, at least in respect of Shincel and the Respondent,
placed through agents acting on behalf of the Japanese customer.
Each agent represented a specific end user, and customarily, those
customers were supplied from a particular wood chip plant, which
was
geared to meet the end user’s specific requirements insofar as
the wood chip specifications quality and dust content
was concerned.
Shincel supplied the Japanese market via the agent Marubeni,
traditionally stationed on or in the near vicinity
of the wood chip
plant. CTC, and thereafter the Respondent, conducted business through
the agent Sumitomo, also situated in Richards
Bay, and had one
customer in the open market which it supplied through NCT, namely
Nippon.
[6]
As a consequence of the dissolution of CTC and accordingly the
transfer of only one chip line to the newly established Respondent,
that:
6.1
the full staff compliment previously employed by CTC would be
transferred to the Respondent
notwithstanding the fact that TWK
retained one of the chip lines. The Respondent was thus immediately
saddled with a double compliment
of staff;
6.2
the contract previously in existence for the supply of woodchips to
Nippon, represented
by Sumitomo, by CTC was 2 million air dry tons of
woodchips whereas after dissolution, the tonnage to be supplied
by NCT
to Nippon and accordingly to be produced by the Respondent,
was reduced as per the contract value to 650 000 air dry tons. 400
000 of that was wattle and 250 000 was eucalyptus. The tonnage of 650
000 was also not guaranteed and could be reduced in terms
of clause
5.3 of the agreement.
[7]
Shortly after the dissolution of CTC in early 2009, the Japanese
customer, Nippon, communicated to NCT and accordingly the Respondent,
that its contractual requirements of 650 000 tons was not going be
called for the 2009 year, but would be reduced by 30% leaving
the
demand at a figure of 455 000 air dry tons. Therefore, at the
commencement of business of the Respondent there was a staff
compliment required to operate two chip lines, 350 000 tons less per
annum on the demand which would have been fulfilled by one
chip line
previously, that is, a maximum of 650 000 tons annually as opposed to
1 million tons which was previously being supplied
by one of the CTC
chip lines under the 2003-2008 contract. There was thus a further
reduction on the already reduced maximum contract
value of 650 000
tons, namely 650 000 tons to 455 000 tons. It had all the staff and
only 23% of the previous volume of woodchips
to produce.
[8]
In August 2009 the Respondent which operated a 4 shift system
finalized a retrenchment process of a number of its employees
due to
excessive staff compliment previously servicing two chip lines and
the reduced demand for the period. As at the end of the
August 2009
retrenchment, the Respondent had been reduced from a 4 shift system
to a 3 shift system and each shift was reduced
from 26 employees to
16 employees. According to the Respondent, after the first
retrenchment, circumstances appeared not to be
improving. It then
embarked upon a second retrenchment exercise, which was ultimately
not proceeded with in December 2009, in view
of the fact that the
Respondent was informed that an additional ship was being scheduled
for January 2010. The Respondent hoped
that matters would improve,
given the fact that the proposed second retrenchment was over
December. It then withdrew the second
retrenchment exercise.
[9]
In May 2010, the employees of the Respondent engaged in a strike and
the Respondent invoked a lock out. Ultimately, an increase
in salary
in the form of an increased housing allowance was agreed at R1000.00
per month per employee. A back-pay of approximately
R2000.00 per
employee was paid thus causing an increase in the costs of
production. The strike ended on 7 July 2010.
[10]
In the middle of 2010 NCT communicated to the Respondent and it’s
other subsidiaries, including the NCT Forestry (Pty)
Ltd, Shincel
(Pty) Ltd and Durban Wood Chips (Pty) Ltd, that the economy remained
depressed due to the infamous worldwide downturn
in the economy
during 2008/2009 and which was sustained for a substantial period.
All the subsidiaries were required to tighten
their respective belts
where they could. The retrenchment at the Respondent was reported on
at NCT board level.
[11]
On 1June 2010 the Respondent issued a notice in terms of s189 (3) of
the Labour Relations Act
[1]
(the
Act) to its 46 employees represented by the Applicant, for a proposed
restructuring due to its operational requirements. The
Respondent
indicated that it intended to reduce its shifts from 3, consisting of
16 employees, to 1 shift of 6 employees. It was
to operate that shift
in accordance with the employees listed in the production department
set out in the organigram attached to
the s189 (3) letter. Five
facilitated consultation meetings were held between the periods 17
June 2010 to 26 July 2010 by the parties
with the employees
represented by the Applicant. Such consultation included an exchange
of various correspondences, going beyond
26 July 2010. On 2 August
2010 the prescribed 60 days consultation period expired. On 4 August
2010 the 46 employees were dismissed
by the Respondent. On the same
date the Applicant referred an unfair dismissal dispute to the
Commission for Conciliation, Mediation
and Arbitration (the CCMA) for
conciliation. The dispute was not capable of a resolution and it was
referred to this court by means
of the statement of case.
[12]
After the dismissal of the employees, the Respondent ran its business
for a substantial period utilising 1 shift and boosting
production
for short periods at a time with additional shifts. For about 2 weeks
in August or September 2010 the Respondent supplied
either the
primary or the second shift from internal staff such as artisans,
supervisors and cleaning staff. In December 2010 48
employees were
employed by the Respondent through a labour Broker and a 4 shift
system was put into operation. Then in January
to February 2011 a 2
shift system was used. From 2011 to 2014 the shift system fluctuated
and in 2014 there was an upturn in the
business of the Respondent.
Evidence
Respondent’s
version
[13]
The dismissal of the employees remained common cause and therefore
the Respondent was settled with the onus of proving the
substantive
fairness thereof. As a result of the strike in 2010 a
substantial increase in the costs of production was experienced
by
the Respondent as approximately R56000.00 per month was added to the
Respondent’s costs of production from the wage increase
compelled in the strike alone.
[14]
The May 2010 NCT communication to the Respondent and its other
subsidiaries that the economy remained depressed due to the
worldwide
downturn in the economy during 2008/2009 was decisive on its way
forward. All the subsidiaries had to tighten their respective
belts.
Mr Kime who was a recipient of the communication letter and the
General Manager of NCT, confirmed that the letter meant
that all
subsidiaries were to tighten their respective belts where they could
and not that they all had to share each other’s
burdens. At no
stage did the board or author of the letter allege that Bayfibre’s
operational requirements were to be ameliorated
by inter-company
staff transfers or the sharing of customers from Shincel, or Durban
Woodchip’s only client Hokuetsu, with
which it contract
directly.
[15]
NCT communicated to the Respondent on or about 2
June
2010, that Bayfibre’s only customer’s, through NCT,
demand for wood chips would be sustained at a reduced contract
value,
namely 455 000 tons per annum. It became evident that there was no
longer a need for the Respondent to maintain full capacity
in order
to meet its maximum contract value which was not guaranteed in any
event in terms of the contract and the Respondent contemplated
to
commence once more with the second retrenchment exercise, which it
duly did. Only 9 employees were retained by the Respondent
apart from
Management staff such as Supervisors and the Production Manager. The
plan was to use crane and loco Drivers as skilled
employees to do in
a multitasking fashion. According to the Respondent its employees
were trained in all rolls, across the work
force, generally and those
who had progressed to the higher skilled positions, such as welder,
crane operator, clerk and loco driver
could perform all the tasks
below their ranks. The suggestion that the retrenchment exercise came
as surprise during the strike
was not true as it was a continuation
of the previous exercise.
[16]
The Respondent being responsible for the training of its employees
assumed that it would have been acutely aware of the various
skills
of each of them. It said that it could and did operate a single shift
system utilising only 9 employees so that 200 000
tons could be
chipped across the year, with the additional tonnage of 255 000 tons
being chipped over the wattle season which lasted
only 3 months in
the year, utilising additional temporary staff. It said that in that
seasonal period of 3 months it ran at full
capacity with a full shift
compliment chipping directly from the log deck and not storing logs
in the field. In August and September
a second shift was run for two
weeks supplied from internal staff such as artisans, supervisors and
the cleaning staff. During
the three and a half years post
retrenchment, there was a positive turnaround in the business of the
Respondent. There were periods
of additional shift work. The
Respondent resorted to the use of employees through a temporary
employment service provider. So,
in December 2010 48 employees were
employed by the Respondent through a labour Broker and a 4 shift
system was put into operation.
Then in January to February 2011 a 2
shift system was used. The Respondent conceded that from 2011 to 2014
the shift system fluctuated
and in 2014 there was an upturn in the
business of the Respondent. It assumed that each time permanent
employees were engaged,
to terminate them after the short period of
employment, would require a fresh retrenchment exercise and further
severance pay to
make.
Applicant’s
version.
[17]
The retrenchment exercise came as surprise soon just after the
strike. Soon after the retrenchment exercise there was an upward
turn
in the business of the Respondent suggestive that was no need to
retrench. In August or September 2010 there was a second
shift that
was brought into operation by the respondent. Then in December 2010
the Respondent utilised a labour broker to employ
48 people and a
four shift system was put into operation. In January and February
2011 a two shift system was in place at the Respondent.
During the
period 2011 to 2014 the shift systems fluctuated to include the use
of a four shift system. 2014 to 2015 saw an upturn
in the business of
the Respondent such that in 2015 a four shift system with 17
employees on one shift was put in place. In 2015,
of the 64 employees
on the shop-floor, nine were permanent staff retained post the 2010
retrenchment and 55 were employed through
a labour broker. When the
Respondent needed more employees after the retrenchment it never
consulted the applicant to source out
labour from the retrenched
staff.
[18]
The contention was that the dismissal was substantively and
procedurally unfair in that they were not operationally justifiable,
there was no consideration of alternatives and the selection criteria
were not fair and objective. The reduction to one shift with
nine
employees could not be sustainable. The production of 110 000 tons
for the period July to the end of 2010, referred to by
the
Respondent, was based on a shift of 16 and not 9 employees. Therefore
the capacity of one shift of 16 or 17 employees could
chip 200 000
tons per year. Post retrenchment therefore it was inevitable that the
Respondent would engage more employees. Reliance
on employees such as
Artisans and Managers could never be, and was not sustainable as the
Respondent needed to fulfil its contractual
obligation of 650 000
tons per annum. The same would apply even if the contractual volume
remained at 455 000 tons per annum. The
Respondent was supposed to
contact the dismissed employees when it needed more employees after
the retrenchment but it did not
do so as it had recourse to the
labour broker instead.
[19]
Even after the last facilitation meeting the Applicants were
expecting the Respondent to furnish them with relevant information
as
justification for retrenchment, which the Respondent had hitherto
failed to supply.
Evaluation
[20]
In scrutinising the consultation process it is not the function of
the Court to second guess the commercial or business efficacy
of the
employer’s ultimate decision. Rather, the aim is to determine
whether the ultimate decision arrived at was genuine
and not merely a
sham. When determining the rationality of the employer’s
ultimate decision, it is not the function of the
Court to decide
whether it was the best decision under the circumstances but whether
it was rational commercial or operational
decision.
[2]
A point of departure though in this matter is that the consultation
process was a facilitated exercise with the result that the
applicants are not at liberty to contest the procedural fairness of
the retrenchment exercise.
[3]
[21]
It was only after a few weeks that the Respondent realised that the
single shift it had resorted post retrenchment could not
cope with
the amount of work there was to be done in terms of its contract with
the Japanese customer. Even at this early stage
of events, there
exists an overwhelming probability that the retrenchment exercise,
even if justified, cut too deep. In a period
of four months
thereafter the Respondent employed 48 people to do precisely what the
applicant’s retrenched members had been
doing. The disturbing
feature of this development is that the Respondent never consulted
the applicant to help it trace the employees
it had recently
retrenched. There was even a collective agreement binding the
Respondent to re-employ there employees. The fear
that it could be
more expensive to have to retrench them again had no factual basis. A
conclusion is irresistible that the Respondent
wanted to rid itself
of these employees.
[22]
The period that followed these development, that 2011 to 2014, saw a
fluctuation of shifts during which even a four shift system
was
implemented. Yet again the 2010 retrenched employees were not
recalled. During the hearing of this matter the position at the
Respondent had so improved that a four shift system was running.
[23]
It certainly would not be second guessing the commercial efficacy of
the Respondent’s ultimate decision to say that there
was no
rational operational justification for the decision taken to retrench
all 47 employees, 44 of which are now before Court.
I take note that
on the Applicants’ own concessions, the Respondent would have
been fully entitled to reduce its compliment
of staff from 3 shifts
at 16 employees per shift, to 2 shifts at 16 employees per shift in
the retrenchment process. According
to this version the Respondent
only needed to retain 32 employees instead of 9, leaving a difference
of 23 employees that could
have been retained. At the times when a
four shift was used even more employees were needed. At times when a
two shift system could
be justified the Respondent could negotiate
with the Applicant on measures such as implementation of short time.
It has to be born
in mind that retrenchment proceedings are a no
fault dismissal and that the employer has an obligation to endeavour
to avoid such
dismissals.
[24]
While the economy remained depressed due to the infamous worldwide
downturn and while the Respondent also experienced economic
challenges there was still time to see how thing would pen out, as
shown by the four months following after the retrenchment. The
Respondent therefore acted precipitately in retrenching the 47
employees. This retrenchment therefore, has not been shown to have
the rational operational justification.
[25]
The Respondent dismissed the 44 employees now before Court in August
2010. A period more than 6 years has since passed. The
interests of
both parties need to be considered at this stage. All employees want
their jobs back. They have been unemployed since
their dismissal.
They had their unfair dismissal dispute referred on the date of their
dismissal thus entitling any of them who
died thereafter to the
claim. The Respondent has about 46 employees engaged through a labour
broker. The applicant contributed
to the delay in the trial as a
result of the two claims initially referred and a bulk of the time
was spent on the contractual
claim which was finally withdrawn. The
Respondent did have a financial downturn albeit not as serious as it
was understood. In
considering how reasonably practicable it is for
the employer to reinstate or re-employ, the current financial status
of the employer
is a relevant consideration.
[26]
I find no impediment against reinstatement as is contemplated in
section 193 (2) of the Act. If reinstatement is ordered with
full
retrospective effect, that would have a disastrous effect on the
business of the Respondent. All things considered, including
the
costs aspect, I find the following to be an appropriate finding and
an order:-
26.1
The dismissal of each of the 44 employees by the Respondent in August
2010 was substantively unfair;
26.2
The Respondent is ordered to reinstate each of the 42 employees with
retrospective effect of only six months,
that is, with effect from 10
May 2016. The salary of each employee should be what he would have
earned but for the dismissal;
26.3
The Respondent is granted three months within which to pay back the
arrear salary of six months, that is
up to end of February 2017;
26.4
Each employee is to report back at work on 14 November 2016 but no
later than 17 November 2016. Any employee
who fails to tender his
services on or before 17 November 2016 without an acceptable
explanation losses the right to reinstatement
and is only entitled to
10 months compensation, calculated on the salary he would have earned
but for the dismissal. Such payment
is to be made within two months
from the date of this order. Similarly, the Respondent is to pay ten
months compensation to the
estate of any of the 44 retrenched
employees who died at any time from 4 August 2010 to the date of this
judgment.
26.5
The Respondent is ordered to pay only half of the costs of this
application.
_______________
Cele
J.
Judge
of the Labour Court of South Africa
Appearance:
For
the Applicant:
Mr T E Seery
Instructed
by:
Shanta Reddy Attorneys.
For
the Respondent:
Ms C A Nel
Instructed
by:
MacGregor Erasmus Attorneys.
[1]
66 of 1995.
[2]
See
Sactwu
v Discreto (A division of Trump & Springbok Holdings)
[1998]
12 BLLR 1228 (LAC).
[3]
See section 189A (18).