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[2017] ZALCD 9
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National Union of Metalworkers of South Africa (NUMSA) obo Members v Toyota South Africa Motors (Pty) Ltd (D135/17) [2017] ZALCD 9; (2017) 38 ILJ 1162 (LC) (3 March 2017)
IN
THE LABOUR COURT OF SOUTH AFRICA
(Held
at Durban)
Reportable
Case No: D135/17
In
the matter between-
NATIONAL
UNION OF METALWORKERS
OF
SOUTH AFRICA (NUMSA) on behalf of Members
Applicant
and
TOYOTA
SOUTH AFRICA MOTORS (PTY) LTD
Respondent
Heard
:
24 February 2017
Delivered
:
03 March 2017
Summary:
section 189A (13) application for an order declaring that the
Respondent is obliged to comply with the provisions of section 189
and 189A before it may lawfully effect the termination of its
employees – consultation was at the time outside of section
189/189A - section 189A (13) is a remedy to a “consulting
party” when an employer does not comply with fair procedure
in
a consultative process within the ambit of sections 189 and 189A -
section 189A (13) remedy designed to correct a derailment
of
consultations in a consensus seeking process prescribed by Sections
189 and 189A.
JUDGMENT
Cele
J
Introduction
[1]
In terms of section 189A (13) of the Labour Relations Act,
[1]
the Applicant, on urgent basis seeks to be granted an order declaring
that the Respondent is obliged to comply with the provisions
of
section 189 and 189A before it may lawfully effect the termination of
596 employees currently in its employ; that the employment
of those
596 employees is deemed to be of indefinite duration, and that any
notices of termination already issued to any of the
596 employees are
invalid in law and any terminations already effected are unlawful or
unfair terminations. The Applicant also
seeks an order that the
Respondent be ordered not to terminate the services of any employees
based on its current operational requirements
without first complying
with the provisions of section 189 and 189A of the LRA, and to
reinstate, with immediate effect, any of
the 596 employees whom it
has already dismissed.
[2]
The Respondent denies that this matter is urgent. Further, the
Respondent has opposed this application and raised two preliminary
points on which basis it submits that the application ought to be
dismissed, alternatively struck from the roll, with costs.
Factual
Background
[3]
A number of facts in this matter stand as common cause either because
they have not specifically been disputed or when disputed,
because
the Respondent has demonstrated that its version amounts to a denial
of the Applicant’s version which raises a real,
genuine and
bona fide dispute of facts
[2]
.
[4]
The Respondent is a company duly incorporated in accordance with laws
of the Republic of South Africa. It carries on business
in the
production of Toyota motor vehicles in a competitive international
motor industry. Its labour force comes from its permanent
and fixed
term contract (FTC) employees. The majority of the workforce earns
below the earnings threshold and the minority earns
above that
threshold. The Applicant is the representative union for fixed term
and permanent employees. From around 2005 the Applicant
has been
representing the labour force of the Respondent in labour issues on
the National and Regional levels.
[5]
In its competitive field the Respondent’s greatest competitors
are other Toyota manufacturers around the world. In this
regard, the
Respondent tenders against other Toyota Motor Corporation (TMC) Japan
subsidiaries for the manufacturing work in respect
of any existing or
new models. TMC Japan regulates the volumes to various of its
subsidiaries based on who it considers to be the
most competitive
manufacturer. By way of example, the Respondent tendered against,
inter alia
, the Respondent Turkey, a TMC affiliate and in 2017
lost production to it of 9 000 Toyota Corollas due to Respondent
(TSAM) not
being competitive. Once the tender is won by a competitor,
the manufacturing of that vehicle will almost never be relocated by
TMC Japan to another Toyota subsidiary. The reason for this is that
there are then investments made in the physical infrastructure
necessary to support the production such as bridges, roads and
logistic facilities necessary for the manufacture of that vehicle
in
Toyota Turkey.
[6]
The Respondent’s volumes for motor vehicle production in South
Africa are planned annually and revised every six months.
However,
certainty of volume lies only in three month cycles. This is due
inter alia
to global customer demand, planning timelines and
parts procurement lead time. The Respondent’s geographic
location and the
fact that 50% of parts are sourced from global
markets means that the Respondent can only have confirmed volumes
over rolling three
month cycles.
[7]
The Respondent has utilised FTC employees since 2005 to manage the
fluctuation in production volumes inherent in the nature
of its
business and for the reasons broadly stated above. The average
fluctuation has been 25% in the intervening period. Whilst
over the
past years the Respondent has employed FTC employees to support
operational requirements it has also had to release some
if FTC
employees due to declines in volumes in 2008, 2010, 2013 and 2014
respectively. Arrangements to release or accommodate FTC
employees
(as the case may be) on these occasions were concluded between the
Applicant and the Respondent and included the following
measures:
1.
limited early retirement packages offered to permanent employees over
the age
of 60 to alleviate the impact on FTC employees;
2.
offers of permanent employment to some long serving FTC’s;
3.
retention of affected FTC employees in a Work Security Fund (“
WSF
”)
training pool for attrition replacement and future model
requirements;
4.
re-employment of ex-FTC employees as a priority when the opportunity
presented
itself.
[8]
The industry in which the Respondent operates is globally, highly
competitive and its ability to maintain a sustainable business
is
dependent on its ability to compete with other Toyota manufacturers
worldwide. In 2015 the Respondent set about trying to understand
the
Australian motor industry and then set out its plans to ensure that
it had a sustainable industry in South Africa. In 2016
a delegation
which included members of the Applicant went to Thailand to study and
learn productivity improvement and how TSAM
needs to be more
competitive. The Respondent undertook to continue its competitive
initiatives, aim for zero interruptions during
the wage negotiations
and successfully launched a new Innovative Multi-purpose Vehicle
(IMV), of which the Hilux referred to is
one, into all markets.
However, the global, African and domestic economies declined, which
resulted in the associated decline in
demand for vehicles, largely
negating these efforts.
[9]
The African market has especially seen a significant decline and as
matters stand the Respondent has not been able to supply
any new IMVs
into key countries like Nigeria and Algeria, where TSAM was reliant
on those markets. For the last quarter of 2016,
the Respondent
continued to produce vehicles on both the Corolla and IMV lines, with
the objective to attract more volume, eliminate
inefficiency and
prevent takt time, (Takt time literally means the rate at which the
product is completed). In the present context
takt time is
the average time between the start of production of one unit and the
start of production of the next unit, provided that commencement
of
production is set to match the rate of customer demand.
As demand decreases, required production decreases and so do the
number of parts required to be manufactured per time interval,
resulting in idle time. A takt change from 1.95 minutes to 2.05
minutes means that the production has decreased resulting in a
longer
time interval per vehicle. This in turn means less demand for
labour.
[10]
Contrary to most businesses, the Respondent is alerted three months
in advance of the required manufacturing volumes and accordingly
the
necessary takt changes to its manufacturing process, whether this
results in an increased takt changes or a decrease in takt.
Because
the Respondent is afforded that insight into future production, which
is guaranteed, but only guaranteed for that period,
the Respondent
makes use of FTC employees. Without this flexibility, the Respondent
believes that it would be engaging and retrenching
staff throughout
the year, causing an operational logjam and financial millstone
around its neck as the takt changes are issued
every three months.
While facilitation could take two months, this could trendering
compliance with s189A wholly incompatible with
the need to have a
measure of fluid staffing to meet the fluctuating production volumes.
[11]
Well aware of this reality, the OEMs have entrenched, in the
collective agreement, the recognition of the need for fixed term
contract employees and in exchange for that flexibility, the
Applicant negotiated increased separation benefits above those
prescribed
by the LRA amendments. In addition there have been
other measures to train and re-engage FTC employees after release.
The
Respondent has also ensured that any conversion to permanent
staff, given the Applicant’s concern for its core membership
of
permanent employees, is done in consultation with the Applicant.
[12]
Currently, the Corolla is built with a very inefficient
build-one-skip-one process and the IMV has significant idle time.
Currently the Applicant’s planned idle time is 5.5 hours per
day (incorporating the day and night shift) and the outlook for
2017
and 2018 is also severe. It is anticipated that the idle time
situation will continue to worsen. With the decline in
demand for the
Corolla, the Respondent’s parent company, TMC Japan, announced
that the next major model change of the new
generation Corolla will
no longer be manufactured at the Respondent from 2020 onwards. The
Respondent’s performance (quality,
safety, stability and cost)
over the next year is going to be vital in presenting the
Respondent’s case to secure manufacture
of a replacement
passenger vehicle.
[13]
For IMV, the forecast indicates that the economy will not recover in
the near future in the Respondent’s key African
markets like
Nigeria and Algeria, hence the Respondent announced its planned takt
change effective January 2017, with the concomitant
necessity to
reduce employee numbers, and in particular FTC employees who are
specifically engaged on the understanding that their
FTC’s are
necessitated by the cyclical nature of the production requirements
communicated to the Respondent. The Respondent
has very short
timeframes within which to implement the necessary Takt changes. The
Respondent duly announced its planned changes
to take place in phases
beginning at the end of December 2016 and January 2017
respectively, with the resultant release of
the FTC employees,
whereupon the Applicant intervened on behalf of FTC employees.
[14]
Late in 2016 the Respondent invited the Applicant to a discussions on
a purely without prejudice basis the fate of the FTC
employees as the
Respondent considered releasing them due to a decline in demand for
its product. When it became apparent that
discussions had to extend
beyond January 2017, the FTC employees’ contracts were extended
until 17 February 2017 and thereafter
on certain other end dates.
[15]
The first group of releases was scheduled for December 2016. On 06
December 2016 senior officials of the Applicant met with
the
Respondent’s management where agreement was reached to keep all
releases or terminations in abeyance until the new year
in order to
provide the parties with an opportunity to further engage given the
Applicant. The Applicant took a firm position that
the FTC employees
were in fact permanent employees and accordingly that the Respondent
was obliged to issue a Section 189 Notice
and to engage with the
Applicant in meaningful joint-consensus seeking consultations. At a
meeting held on 17 January 2017 the
Respondent made a presentation to
the Applicant in which it
inter alia
disclosed the following:
1.
Whilst the projected volume of production for 2016 was set at 140 000
units
per annum, the actual demand and volume produced was only
92 000 units;
2.
Projected volume for 2017 was only 86 000 units;
3.
As a consequence the Respondent was compelled to adjust its
production output
and processes accordingly with a concomitant impact
on 1147 positions in its staff establishment (i.e. 481 permanent
positions
and 656 so-called FTCs);
4.
The Respondent proposed that the parties engage outside of a formal
Section 189
process;
5.
For these purposes it proposed accommodating all affected permanent
positions
and in respect of the 656 FTC employees it proposed that:
5.1
The 60 employees with service between four and six years be converted
to permanent positions;
5.2
The remaining 596 will terminate on a phased basis as from 31 January
2017 to 31 March 2017 and on the basis
of applying First-In-First-Out
(FIFO).
[16]
The Applicant went on record that it insisted upon the issuing of a
formal Section 189 Notice with concomitant facilitation
and
meaningful joint-consensus seeking consultations and accordingly
management was proceeding at its own peril and the Applicant
furthermore recorded that its participation in the proceedings was
without prejudice to its right to insist on the proper issuing
of a
Section 189 Notice. The Applicant recorded that should the process of
engagement fail to resolve the issues between the parties
it would
insist on the issuing of a Section 189 Notice as a consequence of
which the Respondent would not be able to terminate
any services
without first following a 60 day consultation process. The Respondent
persisted with its approach and refusal to issue
a Section 189 Notice
on the basis that the employees concerned were on fixed term
contract. The engagement of the parties was focussed
on discussions
surrounding a possible voluntary severance package in order to reduce
employee numbers on a voluntary basis.
[17]
The Respondent employed 596 employees on consecutive fixed-term
contracts for the extended periods.
Most
of these employees were recruited for the 640 project which started
in September 2015 as a built up for start-of production
in January
2016. The company put capital investment to go to 140 000 per year,
but now the company was sitting on 87 000 units.
The
640 project is the Hilux model with a life-span of in excess of 10
years, inclusive of face lifts. These FTC contracts were
concluded
for periods of three months and periodically renewed for periods of
up to 6 years, with up to 24 renewals. Almost without
exception there
were no interruption in employment and employment remained
continuous. Employment contracts were often signed long
after expiry
of the previous contract and in circumstances where the relevant
employee was simply permitted to continue rendering
services without
any contract having been signed. In other instances contracts were
only signed way into the next contract period.
Despite the repetitive
renewals and continuous employment of the affected employees over
extended periods of time, these contracts
contain a standard clause
in respect of probation of 4 weeks. This position must however be
juxtaposed with a crucial difference
between the lifespan of the
Hilux and consistency of demand for the Hilux range of vehicles
which, according to the Respondent
is the real issue and the cause
for the need to conclude FTC’s.
Brief
engagement history between Applicant and Respondent.
[18]
There is a settlement agreement signed by both parties on 11 June
2010 in settlement of a dispute raised by the Applicant during
or
about April 2010, in circumstances where the Respondent saw a
reduction in volume and as a consequence sought to release FTC
employees. In settlement of that dispute, approximately 20 FTC
employees were either offered permanent positions, subject to a
skills level match or retained in a temporary position until a
permanent position matching their skills level and multi-skilling
stream was available for placement. The balance of the FTC employees
were released and not placed.
[19]
On or about 1 April 2014 again, faced with the reduction in volumes,
the Applicant and Respondent concluded a collective agreement,
in
terms of which 423 affected FTC employees were dealt with. The
material express terms of the April 2014 collective agreement
was
that the 249 affected individuals who would be released,
notwithstanding the mitigation measures agreed to, would be placed
into the training pool and offered fixed term contracts of employment
by no later than 31 December 2014. In respect of those individuals
still in the training pool at the time the offer of employment was
made. In terms of clause 2.3 thereof, it was expressly agreed
that
the affected individuals in the training pool were no longer
considered the respondent’s employees, but were awaiting
possible future re-employment. Of importance to this matter is that
174 FTC employees were converted into permanent contracts with
effect
1 April 2014 in terms of clause 6.
[20]
In terms of clause 7 of the agreement, the parties agreed that “
going
forward
”, in other words in all future separation scenarios
where FTC employees were released, the principle of LIFO by model,
line
and process based on the date of first engagement with the
respondent (not last FTC contract) would be the criteria to be used
in the release of fixed term contract employees affected by takt
down. In terms of clause 8, the applicant pledged its full support
in
respect of all the terms contained therein. Of the affected employees
in this application, 296 of those were re-engaged pursuant
to the
terms of the 2014 collective agreement. According to the
understanding of the Respondent, the Applicant has already agreed
on
what the selection criteria for the release of affected FTC employees
would be in the event of a release in future due to affected
takt
down. Clause 12 of the agreement provides that any dispute arising in
terms of the agreement would be resolved by way of the
dispute
resolution mechanisms as set out in clause 10 of the MasiBambane pact
which dispute resolution provides that there be an
expedited
arbitration. The Applicant contends that self-evidently, the signing
of these contracts was a sham and constituted a
rather sinister
attempt to circumvent the law. It says that what the Respondent
attempted to do was to somehow confer the status
of fixed-term
contract employment on employees who were self-evidently employed on
a permanent basis, both on a level of fact and
as a matter of law.
Evaluation
[21]
In opposing this matter the Respondent challenged the Applicant on
urgency of the application and then raised two points
in limine
in the form of lack of
locus standi
and absence of
jurisdiction to determine a section 198B dispute. An application in
terms of Section 189A (13) is by its very nature
and as a matter of
law urgent. Support for this view is found in the remedies provided
by the subsection itself in 189A (13) (a)
to (13) (c), herein below
cited, and in the provisions of section 189A (17) which reads:
(17) (a) An application
in terms of subsection (13) must be brought not later than 30 days
after the employer has given notice to
terminate the employee's
services or, if notice is not given, the date on which the employees
are dismissed.
[22]
On the factual matrix of this matter the Respondent had in fact
requested the Applicant to engage with it outside of section
189/189A
of the LRA. The Applicant did so without prejudice basis and that it
reiterated its position that the Respondent was obliged
to issue a
Section 189 (3) notice. In addition the Applicant pertinently advised
the Respondent that should their engagements not
result in a
settlement of the matter the Applicant would exercise its rights and
insist on the issuing of a section 189(3) notice.
Therefore the
Respondent took an active part in causing the delay which it now
complains of. In any event, within a matter of three
days after the
Respondent advised the Applicant of its intention to terminate
services of the employees, the Applicant launched
these proceedings.
I accordingly find that it was reasonable of the applicant to explore
the prospects of a settlement. I find
also that this application was
brought within a reasonably urgent time frame after the collapse of
the parties’ attempt to
settle their dispute.
[23]
At the commencement of the presentation of this matter Court
mero
moto
raised the question whether this application in terms of
section 189A (13) had any foundation at all. The issue arose because
the
Applicant repeatedly said that section 189 and 189A of the Act
had not been invoked by the Respondent. To this extent the Applicant
had the following to say about urgency in its replying affidavit:
“
In
circumstances where the Respondent insisted that engagements were to
take place outside of Section 189/189A of the LRA and in
circumstances where the Applicant was on record that:
Ø
Its further participating was on a without prejudice basis to its
right to insist on compliance with Sections 189/189A
of the LRA;
Ø
That the Respondent was proceeding at its own peril given that there
was no guarantee that the informal engagements
would result in a
settlement of the matter as a consequence of which the Respondent
would then be obliged to formally invoke Section
189/189A of the
LRA.”
[24]
The discussions which the parties engaged each other on were
certainly not those envisaged under sections 189 and 189A of the
Act.
The consequence is that time frames within which certain conducts of
negotiating parties are to be performed were not triggered.
Neither
the employer nor the union could request the Commission to appoint a
facilitator. The rights of the negotiating parties
which flow from
the invocation of sections 189 and 189A could accordingly not accrue
to any of the parties taking part in a discussion
playing itself out
outside of Sections 189 and 189A of the Act. The provisions of
section 189A (13) are clear as they read:
“
If
an employer does not comply with a fair procedure a consulting party
may approach the Labour Court by way of an application for
an order –
a)
compelling the employer to comply with a fair procedure;
b)
interdicting or restraining the employer from dismissing an employee
prior to complying with a fair procedure;
c)
directing the employer to reinstate an employee until it has complied
with a fair procedure;
d)
make an award of compensation if an order in terms of paragraphs (a)
to (c) is not appropriate.”
[25]
Section 189A (13) is therefore a remedy to a “consulting party”
when an employer does not comply with fair procedure
in a
consultative process within the ambit of sections 189 and 189A. A
“consulting party” is any person or entity whom
or which
the employer is obliged to consult in terms of section 189 (1) of the
Act. The expression “consulting party”
therefore acquires
a limited interpretation as is envisaged in sections 189 and 189A.
For purposes of a relief under section 189A
(13), there is no
authority for extending the meaning of “consulting party”
beyond the purview of sections 189 and
189A so as to include a
consultation of the union and an employer on any other labour related
issues falling outside of sections
189 and 189A. The section 189A
(13) remedy was clearly designed to correct a derailment of
consultations in a consensus seeking
process prescribed by Sections
189 and 189A of the Act. In its own evidence and submissions the
Applicant was not such a consulting
party. The Applicant has
therefore failed to demonstrate how in law it is entitled to be
accorded this relief. On this basis alone
this application is to be
dismissed. There is accordingly no need to interrogate the two points
raised in limine. Nor is it proper
to interrogate the merits of the
matter canvassed by the parties as these may be the subject of
another matter likely to play itself
elsewhere.
[26]
In the circumstances and taking into account the law and fairness
impacting on the costs order, the following order shall issue:
1.
The application is dismissed.
2.
No costs order is issued.
________
Cele J
Judge
of the Labour Court of South Africa.
APPEARANCES:
FOR
THE APPLICANT:
Mr M Niehaus
FOR
THE RESPONDENT:
Adv C Watt –Pringle (Sc) & Adv Cooks
INSTRUCTED BY: Macgregor
Erasmus Attorneys
[1]
Act Number 66 of 1995, hereafter referred to as the LRA.
[2]
See
Plascon-Evants
Paints v van Riebeeck Paints
1984 (3) 623 (AD).