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[2017] ZALCPE 9
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Parmalat SA (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (PR157/15) [2017] ZALCPE 9; [2017] 9 BLLR 958 (LC); (2017) 38 ILJ 2586 (LC) (31 May 2017)

Of
interest to other judges
THE
LABOUR COURT OF SOUTH AFRICA,
HELD
IN PORT ELIZABETH
C
ase No: PR
157/15
In
the matter between:
PARMALAT
SA (PTY) LTD
Applicant
and
COMMISSION
FOR CONCILIATION,
MEDIATION
AND ARBITRATION
First Respondent
COMMISSIONER
M KOORTS
N.O
Second Respondent
JERMAINE SCHARNECK
Third Respondent
Heard
:
25 May 2017
Delivered
:
31 May 2017
Summary:
(Review – incapacity dismissal – settlement agreement
resulting in hearing – dispute
originating from failure to
retain employee in laboratory assistant post – employment as a
general worker not considered
– employee working as a general
worker prior to incapacity hearing)
JUDGMENT
LAGRANGE
J
Introduction
and background
[1]
This is a review application of an arbitration award in which the
arbitrator found that the dismissal of the 3
rd
respondent
(the employee) was substantively and procedurally unfair and
inter-alia
ordered his reinstatement in the position he held
at the time of his dismissal namely that of a general worker.
[2]
The incapacity hearing had come about after the employee had referred
a dispute over his alleged unfair demotion from his previously
held
position as a Junior Laboratory Analyst (JLA). The referral of this
dispute resulted in the conclusion of a settlement agreement
in the
following terms:
“
1. The applicant on 27
September 2013 referred an ULP dispute relating to demotion. The same
dispute had previously been referred
to the CCMA that resulted in a
process agreements been concluded. Terms of the process agreement
concluded under ECPE 3806-12,
the applicant would present the
respondent with medical reports relating to whether you spent to work
as a junior analyst in the
laboratory. The agreements did not resolve
the substantive nature of the dispute. The applicant’s stance
has been that he
is mentally fit to resume duties in the laboratory.
2. The applicant prior to a diagnosis
of a mental condition was temporarily incapacitated from work for the
period November 2010
to 1 March 2012. The applicant prior to the
diagnoses was employed in the respondent laboratory as a junior
analyst and was remunerated
accordingly.
3.
On 23 August 2012, the applicant
was placed as a general worker and paid at a rate of a general worker
that was substantially less
than what he received as a junior
analyst
.
4.
Currently, a dispute exists as
to whether the applicant is fit to resume duties as a Junior
laboratory analyst
.
5.
In order to resolve this impasse
the respondent agrees to convene and commence with them incapacity
enquiry as provided for in terms
of Item 10 of schedule 8 of the
LRA’s Code of Good Practice by no later than 11 December 2013.
Should the enquiry determined
that the applicant is fit to resume
duties in the position he was employed for, he shall be reinstated
and paid as a junior nap
analyst. However, should the enquiry
determined that the applicant is not fit to resume duties in the post
unless an alternative
is identified and agreed to, the respondent
would have the right to terminate the applicant’s contract
subject to what is
contained in the LRA
.
6. The applicant voluntarily withdraws
the referral and abandons this dispute against the respondent in
settlement of his case at
the CCMA.”
(Redundant
capitalisation omitted-emphasis added)
[3]
Pursuant to the settlement agreement, an incapacity enquiry was
conducted by the applicant which resulted in his dismissal on
28
February 2014.
The
arbitrator’s award
[4]
The arbitrator concluded that on the evidence, the employee was not
fit to be placed in the position of a JLA. The arbitrator
also
considered whether the applicant had complied with the provisions of
the LRA code of good practice regarding termination based
on
incapacity. In that regard, he considered the steps outlined in
Standard Bank of South Africa v CCMA and others
[2007] ZALC 98
;
[2008] 4 BLLR
356
(LC), which may be stated in summary as:
4.1
whether the employee is able to do their work;
4.2      to
what extent the employee is able to perform their duties;
4.3
Whether it is feasible to adapt the employees work circumstances so
they can continue to perform
their duties, and
4.4      if
no adaptation is suitable, “the employer must inquire of any
suitable work is available”.
[5]
The arbitrator was satisfied that the applicant had complied with the
first three stages and that it had fairly denied the employee
an
opportunity to work as a JLA. However, the arbitrator found that the
applicant had fallen at the last hurdle, namely in considering

whether there was any suitable alternative work available. The
reasons given by the arbitrator for this finding were:
5.1      The
employee had worked as a general worker for approximately 18 months
and the applicant never
found this arrangement to be an acceptable to
it, even if it created the position for him.
5.2      The
applicant only and instituted the incapacity enquiry as a result of
the demotion dispute which
led to the agreement.
5.3
There was no evidence that there was a problem with the applicant’s
attendance when he was
employed as a general worker at the time he
was so employed.
5.4      Cost
considerations raised by the respondent in retaining the applicant as
a general worker had
never been an obstacle to keeping him in that
occupation before, nor had it been said that the position was a
temporary one.
5.5      The
incapacity enquiry was “entirely focused” on whether the
employee could be reinstated
as a JLA and “there was no debate
on alternatives”. In so far as consideration was given to the
issue by the chairperson
of the enquiry, that investigation took
place in the absence of the employee which directly contravened the
LRA code.
5.6      The
fact that the dispute which led to the settlement agreement and the
incapacity enquiry arose
because the employee was unhappy with being
demoted to the position of a general worker and was unwilling to
continue working in
that position did not “exonerate” the
applicant from considering alternatives as required by the code.
5.7
There was no evidence to suggest the applicant could not continue
working as a general worker.
[6]
The arbitrator concluded:
“
In the premises are of the view
that under the circumstances the respondent should have considered
alternative positions and offered
the position of general worker to
the applicant at his incapacity hearing as an alternative to
dismissal and it will at the time
have been for the applicant to
decide whether or not he would accept such a position.”
Grounds
of review
[7]
The applicant submits that the review turns exclusively on whether
the arbitrator adopted the correct approach in his reasoning
and if
he was wrong whether his error led to an unreasonable outcome. There
is of course a further leg to the review test which
is whether the
outcome could reasonably have been arrived at, anyway. The judgement
in Head of the Department of Education v Mofokeng
and others
[2015] 1
BLLR 50
(LAC) illustrates the nuanced nature of the test. The LAC
emphasised an interpretation of the test which means that a
misdirection
which has a material distorting effect on the
arbitrator’s reasoning is a strong indicator that the result
might be reviewable,
but it is still necessary that the
reasonableness of the result must be evaluated quite apart from the
erroneous path of reasoning
which lead to the arbitrator to it:
[30]
The failure by an arbitrator to apply
his or her mind to issues which are material to the determination of
a case will usually be
an irregularity. However, the Supreme Court of
Appeal (“the SCA”) in Herholdt v Nedbank Ltd 5 and this
court in Goldfields
Mining South Africa (Pty) Ltd (Kloof Gold Mine) v
CCMA and others  have held that before such an irregularity will
result
in the setting aside of the award, it must in addition reveal
a misconception of the true enquiry or result in an unreasonable
outcome.
[31]
The determination of whether a
decision is unreasonable in its result is an exercise inherently
dependant on variable considerations
and circumstantial factors. A
finding of unreasonableness usually implies that some other ground is
present, either latently or
comprising manifest unlawfulness.
Accordingly, the process of judicial review on grounds of
unreasonableness often entails examination
of inter-related questions
of rationality, lawfulness and proportionality, pertaining to the
purpose, basis, reasoning or effect
of the decision, corresponding to
the scrutiny envisioned in the distinctive review grounds developed
casuistically at common law,
now codified and mostly specified in
section 6 of the Promotion of Administrative Justice Act8
(“PAJA”); such
as failing to apply the mind, taking into
account irrelevant considerations, ignoring relevant considerations,
acting for an ulterior
purpose, in bad faith, arbitrarily or
capriciously etc.
The court must nonetheless still consider
whether, apart from the flawed reasons of or any irregularity by the
arbitrator, the result
could be reasonably reached in light of the
issues and the evidence
.  Moreover, judges of the Labour
Court should keep in mind that it is not only the reasonableness of
the outcome which is
subject to scrutiny. As the SCA held in
Herholdt, the arbitrator must not misconceive the inquiry or
undertake the inquiry in a
misconceived manner. There must be a fair
trial of the issues.
[32]
However, sight may not be lost of the
intention of the legislature to restrict the scope of review when it
enacted section 145 of
the LRA, confining review to “defects”
as defined in section 145(2) being misconduct, gross irregularity,
exceeding
powers and improperly obtaining the award. Review is not
permissible on the same grounds that apply under PAJA. Mere errors of
fact or law may not be enough to vitiate the award. Something more is
required. To repeat: flaws in the reasoning of the arbitrator,

evidenced in the failure to apply the mind, reliance on irrelevant
considerations or the ignoring of material factors etc must
be
assessed with the purpose of establishing whether the arbitrator has
undertaken the wrong enquiry, undertaken the enquiry in
the wrong
manner or arrived at an unreasonable result.11  Lapses in
lawfulness, latent or patent irregularities and instances
of
dialectical unreasonableness should be of such an order (singularly
or cumulatively) as to result in a misconceived inquiry
or a decision
which no reasonable decision-maker could reach on all the material
that was before him or her.
[33]
Irregularities or errors in relation
to the facts or issues, therefore, may or may not produce an
unreasonable outcome or provide
a compelling indication that the
arbitrator misconceived the inquiry. In the final analysis, it will
depend on the materiality
of the error or irregularity and its
relation to the result. Whether the irregularity or error is material
must be assessed and
determined with reference to the distorting
effect it may or may not have had upon the arbitrator’s
conception of the inquiry,
the delimitation of the issues to be
determined and the ultimate outcome. If but for an error or
irregularity a different outcome
would have resulted, it will
ex
hypothesi
be material to
the determination of the dispute. A material error of this order
would point to at least a prima facie unreasonable
result. The
reviewing judge must then have regard to the general nature of the
decision in issue; the range of relevant factors
informing the
decision; the nature of the competing interests impacted upon by the
decision; and then ask whether a reasonable
equilibrium has been
struck in accordance with the objects of the LRA Provided the right
question was asked and answered by the
arbitrator, a wrong answer
will not necessarily be unreasonable. By the same token, an
irregularity or error material to the determination
of the dispute
may constitute a misconception of the nature of the enquiry so as to
lead to no fair trial of the issues, with the
result that the award
may be set aside on that ground alone. The arbitrator however must be
shown to have diverted from the correct
path in the conduct of the
arbitration and as a result failed to address the question raised for
determination.”
[1]
(emphasis
added - footnotes omitted)
[8]
The applicant submits that the arbitrator adopted the incorrect
approach in deciding that the failure to offer the employee
the last
position he occupied as a general worker was unfair. The applicant
contends that in the context of the history of the
matter, the
applicant was not obliged to even consider offering the employee that
position. Had the arbitrator properly considered
the developments
which led to the incapacity hearing, he could never have reached that
conclusion.
[9]
In support of its argument, the applicant rightly points out that the
primary object of the incapacity hearing was to address
the
employee’s complaint that he had been unfairly refused the
opportunity to return to the JLA position on account of his
mental
health. It is certainly true that in the incapacity hearing, the
focus of the enquiry was on the employee’s fitness
to resume
that occupation. It is also true that even though the employee
testified in the arbitration that he would be willing
to take the
alternative position of a general worker if he was found not to be
fit for the JLA position, his acceptance of that
as an alternative
had to be coaxed out of him and was clearly grudgingly conceded. Even
then, he agreed he would accept it only
if he could have another
opportunity within a few months to demonstrate his suitability for
the JLA position. It was also clear
from his cross-examination at the
arbitration that the employee expressed doubt whether he would have
gone back to his position
as a general worker at the salary he was
earning in that position. The applicant argues that, this indicates
that even if he had
been offered the post, it is unlikely he would
have accepted it and the arbitrator failed to appreciate the
implication of that
in deciding that the post should have been
offered to the employee. The employee retorts that this would amount
to an application
of the “no difference principle”, which
has long been discredited as a basis for ignoring procedural
unfairness.
[10]
The applicant also argues that the arbitrator failed to appreciate
that the settlement agreement did not imply that if the
employee was
unable to continue working as a JLA, the employer was then obliged to
offer him a post at a completely different and
materially less
favourable level such as that of a general worker.  In fact, the
context in which the agreement was reached
was one in which the
employee had complained about being relegated to that obviously
inferior position. All along his contention
had been that he was fit
to occupy his former post as a JLA. This argument was succinctly
expressed in the applicant’s heads
of argument in the following
terms, with reference to the phrasing of clause 5 of the settlement
agreement:
“
The possible “alternative”
that had to be “identified and agreed to” before the
applicant could exercise
its right to terminate the contract could
only have been an alternative other than that the employee had
already rejected and,
presumptively, on a salary level more or less
comparable to that of a JLA. The Commissioner accepted that there was
no such alternative.
To offer the employee that very post which had
led to the proceedings from which the agreement float would have been
absurd - to
do so would merely have revived the dispute that had been
initiated by the employee himself.”
[11]
The applicant argues that in purporting to apply the fourth leg of
the test for fairness in incapacity cases as outlined in
the
Standard
Bank,
the arbitrator ignored the principle that the alternative
an employer is obliged to consider must be ‘suitable’ and
it was inconceivable that the position of a general worker at a
salary of R 4,300 per month compared with the JLA salary of
approximately
R 14,000 per month could not be considered ‘suitable
alternative work ’. To take the argument on principal further,

the applicant also points out that the code requires an employer to
consider ‘similar’ alternative work, which the
arbitrator
also ignored in identifying the job of a general worker as fitting
the bill. Accordingly, the arbitrator misconstrued
the test in that
case and this led him to an irrational conclusion which necessarily
fatally flaws his finding. The applicant also
points out that in that
case the court was considering a situation which was completely
different, namely where the employer had
completely failed to apply
any of the steps which could legitimately lead to dismissal for
incapacity.
[12]
There is much to be said for the applicant’s argument that the
arbitrator’s conclusion that the employee should
have been
placed in the last post he occupied as a general worker is at odds
with the general test of what constitutes suitable
alternative work
and in the context of the employee’s failure to unequivocally
accept that as a suitable alternative to the
JLA post he sought, even
when he was given the opportunity to deal with that possibility at
the arbitration. But before dealing
with that aspect of the
arbitrator’s findings, I will address the arbitrator’s
findings on whether the applicant conducted
the incapacity hearing
fairly.
[13]
The interpretation of paragraph 5 of the settlement agreement is
plainly critical to the dispute between the parties. I accept
that to
some extent, it might be capable of different interpretations, but it
is clear that it does refer to items 10 and 11 of
the LRA Code and
anticipates that the enquiry will be conducted in accordance with
those provisions. One of those provisions is
item 11(3)(iii) which
requires an employer to consider the availability of suitable work.
The settlement agreement reaffirmed the
applicability of item 11 to
the incapacity procedure that was going to be followed. The agreement
further anticipated that the
enquiry could result in the applicant’s
dismissal if he was not fit for the JLA post, but this was subject to
there being
no alternative identified and agreed to. The right to
terminate even if no alternative was identified and agreed to was
still subject
to the LRA. Undoubtedly, there are ambiguities in
paragraph 5 of the settlement agreement, but it cannot be said that
it is an
implausible or unreasonable interpretation to infer that the
applicant would still consider the existence of suitable alternatives

and that any possibilities that existed would be discussed with the
employee since the settlement agreement only envisaged an alternative

being implemented if there was agreement on it.
[14]
I agree that under ordinary circumstances, the prospect of the
general worker’s post at a third of the rate of a more

specialised and skilled job such as a JLA could not reasonably be
considered “suitable alternative work”. However,
in the
context of the history of the dispute and given that the employee had
worked in that low position for 18 months already,
it was not
unreasonable of the arbitrator to conclude that this alternative
employment or to have been offered to the employee
before deciding to
dismiss him. It is common cause that, to the extent that any
alternatives were contemplated they were not canvassed
with the
employee during the incapacity hearing nor were they put to him
before the decision was made to dismiss him. In the context,
I cannot
say that was unreasonable of the arbitrator to find that this failure
was procedurally unfair.
[15]
Nonetheless, it is difficult to understand how the arbitrator could
have confidently reinstated the employee in the alternative
position
of a general worker given the absence of any evidence that he
unconditionally accepted and agreed to, that as an alternative.
When
he was pressed on the issue, he either hedged his answer with
concerns about the salary or implied it would only be acceptable
on a
temporary basis. Mr
Unwin
for the employee contended that this
ambivalence was to be understood in the context of the employee’s
natural reluctance
to accept something less than the JLA position in
case he might have been  misconstrued as accepting that he was
not fit for
that position, but there was nothing in the way the
questions were put to him to suggest that any willingness on his part
to accede
to reverting to being a general worker might suggest that
he conceded the merits of his claim that he was not incapacitated. It

is difficult to understand how the arbitrator could reasonably
believe that the employee would genuinely accept the position of
a
general worker at a lower salary as a suitable alternative if he was
found unfit for his preferred occupation. It is one thing
for the
arbitrator to have inferred that the employer acted unfairly in not
dealing with the existence of an alternative in the
enquiry: it is
quite another to have concluded on the evidence before him that the
position of a general worker at the existing
wage was something that
the employee accepted would be a suitable alternative.
[16]
In the circumstances, I accept that the arbitrator was not
unreasonable in finding that the employees dismissal for incapacity

was procedurally unfair, but on the evidence before him, there was no
rational basis for him to conclude that the general worker
position
was suitable alternative employment, even allowing for the context of
the dispute, given that the employee did not unconditionally
accept
that if he was found unfit for the JLA post, the general worker
position was acceptable. Had the employee emphatically asserted
his
willingness to accept the lower position, the arbitrator’s
finding that it was substantively unfair of the employer to
offer it
to him would have been one that could be justified on the evidence.
[17]
Accordingly, the arbitrator’s finding that the employee’s
dismissal was procedurally unfair withstands the standard
of
reasonableness on review, given the somewhat unusual factual context
of the case, but the finding that the dismissal was substantively

unfair cannot be sustained on any reasonable basis. I appreciate
that, often the questions of substantive and procedural unfairness
in
cases of incapacity are inextricably linked, but in this instance, on
the facts, each aspect of unfairness demands its own justification.
[18]
The question then arises what relief is appropriate. In the
circumstances an award of compensation for procedural unfairness

should be substituted for the relief awarded by the arbitrator,
bearing in mind that the applicant was employed for approximately
5
years and that the need for the applicant to canvass possible
alternatives in the enquiry ought to have been obvious even if
the
prospects of reaching consensus on that issue might rightly have been
perceived to be minimal.
[19]
On the matter of costs, neither party pressed this question and that,
both parties have been partially successful. Consequently,
fairness
and equity demands in my view that each party pay their own costs.
Order
[1]
The second respondent’s finding in his award issued on 15
September 2015 under case
number ECPE 1096-14 that the third
respondent’s dismissal was substantively unfair is reviewed and
set aside and substituted
with a finding that the third respondent’s
dismissal for incapacity was substantively fair.
[2]
The relief set out in paragraphs 91 to 94 inclusive of the award, is
substituted with an
order that the applicant must pay the third
respondent 6 months’   remuneration as compensation
for his procedurally
unfair dismissal amounting to R 25800-00, within
15 days of the date of receipt of this judgement.
[3]
Each party must pay their own costs.
_______________________
Lagrange
J
Judge
of the Labour Court of South Africa
APPEARANCES
APPLICANT:
J
Grogan instructed by Joubert Galpin &
Searle
THIRD
RESPONDENT:
C
Unwin of Kaplan Blumberg Attorneys
[1]
At 59-61.