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[2017] ZALCPE 26
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National Union of Metalworkers of South Africa (NUMSA) v General Motors South Africa (Pty) Ltd (P341/10) [2017] ZALCPE 26 (14 December 2017)
IN
THE LABOUR COURT OF SOUTH AFRICA, PORT ELIZABETH
Not Reportable
Case No: P341/10
In
the matter between
:
THE
NATIONAL UNION OF METALWORKERS
OF
SOUTH AFRICA (NUMSA)
Applicant
and
GENERAL
MOTORS SOUTH AFRICA (PTY) LTD
Respondent
Heard:
5-7 September 2012, 12-15 March 2013, 18 June 2013
Delivered:
14 December 2017
Summary:
The gravity of the procedural unfairness resulting from the
respondent’s failure to issue the notice in terms of
section
189(3) of the LRA when it contemplated retrenching the individual
applicants warrants an order for compensation for the
procedurally
unfair retrenchment.
JUDGMENT
LALLIE
J,
[1]
The applicant, the National Union of Metalworkers of South Africa
which will be referred to as the NUMSA in this judgment approached
this court challenging the substantive fairness of the dismissal of
the individual applicants for operational requirements of the
respondent. The respondent is a motor vehicle manufacturer and had
employed the individual applicants in different positions. Some
as
permanent employees and others on fixed term contracts. In 2009,
pursuant to the dismissal of the individual applicants, NUMSA
launched an application in terms of section 189A (13) of the Labour
Relations Act
[1]
(the LRA) for
an order declaring the dismissal of the individual applicants
procedurally unfair and concomitant relief. In the
judgment handed
down on 17 June 2009, the court found the individual applicants’
dismissal procedurally unfair. The court
left the determination of
the amount of compensation (if any), due to the individual applicants
to the court determining the substantive
fairness of the individual
applicants’ retrenchment. This matter is opposed by the
respondent. I am indebted to Mr Niehaus
and Mr Redding SC (with him
Mr Wesley); the parties’ legal representatives for their heads
of arguments.
[2]
The respondent’s case was that the individual applicants’
retrenchment was substantively fair as it was a product
of the global
economic meltdown which led to the reduction in the demand for its
products. The applicant differed and submitted
that there was no
economic rationale for the retrenchment. The individual applicants
were dismissed as punishment for not accepting
a new shift
configuration which the respondent sought to introduce in its
restructuring. They further submitted that in the absence
of a proper
consultative process, alternatives to their dismissal were not
properly considered. A further ground was that the selection
criteria
were neither fair nor objective.
[3]
In an attempt to discharge the onus of proving the substantive
fairness of the individual applicants’ dismissal, the
respondent called Ms Logie, its Human Resources Manager. During the
retrenchment exercise which led to the dismissal of the individual
applicants she was the respondent’s Industrial Relations
Manager. She testified that in determining the number of vehicles
that have to be produced the respondent makes a projection in terms
of the number of vehicles it anticipates selling in a given
year. The
respondent then set a budget of one year for the next year. The
projections are reviewed at least monthly. In January
2008 the
respondent anticipated building 72 600 vehicles. The respondent
follows a procedure known as rebalancing to ensure that
the number of
its employees is commensurate to the volume of work that has to be
done. A decrease in demand of the respondent’s
products
translates into a decrease in the number of the employees it needs.
[4]
In 2008 the respondent budgeted for 72 689 units but managed to build
only 51 822. In 2009 the respondent budgeted for 37 599
units but
produced 25 846 vehicles. As a result of the reduction in production
volume which was informed by the need for the respondent’s
vehicles, the respondent decided to engage NUMSA in connection with
its employment levels. It consequently issued NUMSA with a
notice in
terms of section 189 (3) and 189A of the LRA July 2008. The rationale
for the notice is stated as follows:
“
RATIONALE
3.1
The Company’s manufacturing operations as conducted in the
Kempston Road and Struandale
facilities, are currently geared to
produce a total of approximately 300 vehicles per day.
3.2
This daily production capacity comprises the following:
3.2.1
140 vehicles on the Corsa line.
3.2.2
105 vehicles for the Isuzu line.
3.2.3
40 vehicles on the Hummer line.
3.2.4
16 vehicles on the Commercial line.
3.3
The numbers of employees engaged on the production lines, and in
allied functions in direct
support of production remain directly
proportional to the employment levels required to meet this
production output.
3.4
In January 2008, the projection of production requirements for
locally produced vehicles
for the year was in the order of 68 500
vehicles.
3.5
The Company’s production capacity, including its employment
levels, accorded with
this projection.
3.6
Since January 2008 a dramatic shift has taken place in the market for
the Company’s
locally produced vehicles.
3.7
The projected production requirements for the year, as at June 2008,
have declined by some
24%.
3.8
The total annual requirement for locally produced vehicles is now in
the order of 50 000
vehicles.
3.9
All production lines are equally affected.
3.10 During
the intervening period between January and June 2008, the company has
endeavoured to absorb
the steady decline in production requirements,
by implementing short time.
3.11 This
however is a short-term solution which has failed to adequately
address the nature and extent
of the market shifts which have
occurred, and which has not addressed the ever- increasing stockpile
of unsold vehicles.
3.12 It is
clear that the forecast referred to above will not improve, and at
best for the Company, will
remain stable in the medium to longer
term.
4
PROPOSAL
In order to address the decline in
production requirements, and give effect to the Company’s
objectives as referred to above,
the Company proposes to reduce its
employment level to one commensurate with its projected production
requirements”.
[5]
The applicant’s attempts to substantiate the allegation of the
absence of an economic rationale for the individual applicants’
dismissal have been rendered unsuccessful by the concession the
applicant made during the urgent application in which the applicant
successfully challenged the procedural fairness of the individual
applicants’ dismissal. The concession was that the global
economic meltdown had a negative effect on the respondent’s
business. The concession led to the court in the urgent application
to note that “The parties to this application (to whom I shall
refer as NUMSA and GM) have been directly and adversely affected
by
the global economic crisis”. The respondent’s allegation
in the urgent application that in January 2009 there was
a further
and dramatic decline in the demand for its vehicles was not
challenged. The applicant’s concession led the court
to refer
to the situation the respondent was in as ‘undeniable
operational requirements’. In paragraph 5.1 of the statement
of
case, the applicant conceded that the respondent issued the section
189A notice on 1 July 2008 because it was confronted with
the global
collapse in markets and the commensurate decline in actual and
projected sales figures for its locally produced vehicles
in 2008.
The applicant’s argument that there was no economic rationale
for the individual applicants’ dismissal for
operational
requirements of the respondent is therefore untenable and rejected.
[7]
The applicant submitted that the true reason for the retrenchment was
that the respondent used the retrenchment exercise to
punish the
applicant for refusing to participate in the implementation of the
respondent’s new working arrangement. The allegation
was not
supported by evidence. It further does not negate the concession the
applicant gave that the decrease in the demand for
the respondent’s
products led to the retrenchment. I therefore accept the respondent’s
version that the individual
applicants were dismissed for the
respondent’s operational requirements
[8]
The applicant argued that the procedure and substance were
inextricably linked in the matter at hand because the dismissal fell
within the ambit of section 189A therefore, the applicant and its
members were denied the opportunity to enjoy the benefits of
a
facilitation by an independent third party. As there was no proper
consultation, alternatives to dismissal were not considered
and the
respondent applied selection criteria which were neither fair nor
objective. The applicant further argued that the respondent
did not
even follow the criteria it set for the 2008 retrenchment but took
into account other considerations like wage anomalies
in selecting
employees for retrenchment. In support of the argument that the
procedural unfairness of the dismissal cannot be separated
from its
substantive unfairness as the two are inextricably linked, the
applicant relied on
National
Union of Metalworkers of SA obo members and others v Bell Equipment
Co SA (Pty) Ltd
[2]
and
Buthelezi
v Municipality Dermacation Board
[3]
.
[8]
The respondent denied that it failed to apply its own selection
criteria which the applicant found unfair. The respondent argued
that
it informed the applicant of its selection criteria and its intention
to apply it in letters of 4 February 2009 and 8 April
2009 and in
meetings of 16 February 2009 and 8 April 2009. The applicant did not
object to the selection criteria but acquiesced
to them. The
respondent denied deviating from the criteria.
[9]
I have considered both cases the applicant sought to rely on in
arguing that the procedural unfairness of the dismissal is
inextricably linked to its substantive unfairness and therefore
rendered the dismissal also substantively unfair. Each case is judged
on its merits. The facts of both cases are distinguishable from the
fact of the matter at hand. A material difference is that when
the
decisions were taken, the procedural fairness of the dismissals had
not been determined. In this matter the court, in the urgent
application dealt extensively with the procedural fairness of the
dismissal particularly the respondent’s failure to issue
the
applicant with a notice in terms of section 189 (3) for the 2009
retrenchment. The court found the dismissal procedurally unfair.
In
view of my finding based on the concession given by the applicant
that there was an economic rationale for the dismissal and
the fact
that the procedural fairness of the dismissal has already been
determined, I am not convinced that the procedural unfairness
is
inextricably intertwined with the substantive fairness of the
dismissal or has an impact on it. The procedural defects therefore
did not render the dismissal substantively unfair.
[10]
The applicant sought maximum compensation for the procedurally unfair
retrenchment of the individual applicants. The respondent
denied that
the individual applicants should be compensated on the basis that
notwithstanding its failure to issue the notice in
terms of section
189 (3), there was sufficient interaction between the parties in the
form of correspondence and meetings which
preceded the retrenchment
in which issues affecting the retrenchment were discussed. It was the
respondent’s further argument
that the applicant led no
evidence of the prejudice the individual applicants suffered as a
result of its omission. I do not agree.
I accept the applicant’s
argument that the purpose of issuing the section 189 (3) notice is
clear. It is to afford the parties
involved in a retrenchment
exercise an opportunity to consult and engage in a meaningful joint
consensus - seeking process and
attempt to reach consensus on a
number of prescribed issues. Before the individual applicants’
dismissal, the applicant asked
the respondent to issue the section
189 (3) notice but the respondent refused. The refusal had serious
consequences because section
189 (3) creates rights and obligations
for the consulting parties. The respondent did not fulfil its
obligation to disclose to
the applicant its anticipation of the
retrenchment. The applicant was denied of information the respondent
would have been obliged
to disclose had the notice been issued. The
power of having relevant information during a retrenchment exercise
cannot be underestimated.
The applicant was unable to influence
important aspects of the retrenchment and was further denied of the
intervention of an independent
facilitator whose duty was to ensure
the fairness of the retrenchment. The interaction between the parties
that the respondent
seeks to rely on does not constitute consultation
as envisaged in section 189. Failure to issue the section 189 (3)
notice was
not a mere omission to follow a procedural step in a
retrenchment exercise. It is a violation of rights of employees who
faced
the reality of losing their jobs through no fault on their
part. I am therefore satisfied that compensation is due to the
individual
applicants.
[11]
I have considered the applicant’s argument that the individual
applicants be awarded the maximum compensation prescribed
in section
194 of the LRA as well as the authority that the applicant sought to
rely on. I am not convinced that the circumstances
of this case
justify the amount sought by the applicant. Section 194 (1) of LRA
requires compensation to be just and equitable
in all the
circumstances. When all those requirements are taken into account
including of the existence of an economic rationale
for the
retrenchment by the applicant, it is just and equitable to grant each
individual applicant compensation equivalent to six
months’
remuneration.
[12]
The respondent argued that not all the individual applicants were
properly before court because the applicant failed to discharge
the
onus to prove that all the persons listed in schedule A to the
statement of case were its members and retrenched during the
2009
retrenchment exercise. It submitted that only 99 of the individual
applicants were NUMSA members and were dismissed during
the
retrenchment exercise. One has since passed away. According to the
respondent, only 98 individual applicants are properly before
court.
The applicant argued that the deceased employee did not automatically
lose his right to compensation as it can be paid into
his estate.
Absent the date on which the individual applicant died, denying his
estate of compensation cannot be justified. I further
accept the
applicant’s argument that the evidence led by Ms Logie in an
attempt to prove that certain employees were not
properly before
court was inadmissible hearsay evidence. When the urgent application
to determine the procedural fairness of the
retrenchment was argued,
the respondent did not raise the issue that not all the individual
applicants were properly before court.
The court therefore found the
retrenchment of all the individual applicants procedurally unfair. It
is impermissible for the respondent
at this late stage, after
judgment on procedural fairness of the retrenchment has been handed
down to allege that some of the individual
applicants are not
properly before court. In the urgent application the court found the
retrenchment of all the individual applicants
which appeared before
it procedurally unfair and left the issue whether those individual
applicants should be granted compensation
and the amount of
compensation due to them to be determined by this court. The
individual employees before the urgent court are
the same persons
listed in schedule A of the statement of case. This court lacks
jurisdiction to interfere with the judgment on
the procedural
fairness of the retrenchment.
[13]
I could find no reason both in law and fairness for costs not to
follow the result.
[14]
In the premises, the following order is made:
Order:
1.
The dismissal of the persons listed in schedule A of the statement of
case for
operational requirements of the respondent was substantively
fair.
2.
The respondent is ordered to pay each person listed in schedule A of
the statement
of case compensation for that person’s
procedurally unfair retrenchment.
3.
The respondent is ordered to pay each person listed in schedule A
compensation
in an amount equivalent to 6 months’ remuneration
calculated at that person’s rate of remuneration on the date of
his
retrenchment.
4.
The respondent is ordered to pay the applicant’s costs.
Z
Lallie
Judge
of the Labour Court of South Africa
Appearances
For
the Applicant:
Mr Niehaus of Minnar
Niehaus
For
the Respondent:
Advocate Redding SC with Advocate Wesley
Instructed
by
Chris Baker Attorneys
[1]
Act
66 of 1995 as amended.
[2]
(2011) 32 ILJ 382 (LC)
.
[3]
(2004) 25 ILJ 2317 (LAC)
.