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[2018] ZALCD 7
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Sidane and Another v ABV Brands (Pty) Limited (D1167/2017) [2018] ZALCD 7 (13 July 2018)
IN
THE LABOUR COURT OF SOUTH AFRICA, DURBAN
Not
Reportable
Not
of interest to other judges
Case
no: D1167/2017
In
the matter between:
JUSTICE
QALUKWENZA
SINDANE
FIRST APPLICANT
PHILLANI
PAUL
MKHULISE
SECOND APPLICANT
and
ABV
BRANDS (PTY)
LIMITED
RESPONDENT
Heard:
17,18 and 19 April 2018.
Heads
filed: 2 May 2018
Delivered:
13 July
2018
Summary:
Dismissal for operational requirements – substantive reason and
a fair procedure required-
selection criterion is that the incumbent
of the position is affected and redundant
when the position is
declared redundant – no other criteria considered or proposed –
the selection criterion is "redundancy"
– redundancy
not a fair and objective criterion - no alternatives to retrenchment
considered except to invite affected employees
to apply for vacant
positions created in the new organogram – no suitable available
positions offered to affected employees
– flawed consultation
process - retrenchment substantively and procedurally unfair
JUDGMENT
COETZEE.
AJ
[1]
The first and second applicants worked for the respondent from 18
April 2016 and 1 April 2016 respectively. The designation
of the
first applicant was that of Sales Representative – Main Market
KZN and that of the second applicant as Sales Manager
– Main
Market KZN. Both were part of the sales team in KZN.
[2]
The respondent is in the liquor business. It sells, markets,
distributes and merchandises liquor products through existing
establishments which are its customers.
[3]
The first applicant reported to the second applicant.
[4]
The respondent, according to its statement of defence, during April
2017 resolved to conduct a national restructure (‘the
restructure’) of its commercial sales team and identified five
employees whose positions might become redundant. The applicants
were
two of the five.
[5]
At the time the respondent employed 56 employees of which 25 were in
the sales team.
[6]
It is common cause that after the restructure the respondent
terminated the services of three of the five affected employees
effective 31 May 2017. The applicants are two of those dismissed.
The
issues placed in dispute
[7]
The applicants placed in dispute the substantive reason for the
restructure and the procedural fairness thereof.
The
substantive fairness
[8]
The first applicant in his
statement of case disputed the reason for the restructure as
follows
[1]
:
"The Respondent could not provide
proof that there existed an optional (sic) requirement to justify
retrenchment as a last
resort."
[9]
The first applicant also
pleaded
[2]
:
"
The
applicant did not accept that his retrenchment was either
procedurally or substantively fair …"
"The
decision to retrench the Applicant was made in advance, was
premeditated and the alleged process of retrenchment by the
Respondent was merely a smokescreen to disguise its real
deficiencies"
[3]
[10]
The second applicant similarly challenged the substantive reason
advanced by the respondent for his dismissal and the fairness
of the
procedure that the respondent followed.
[11]
The second applicant held the view that the respondent restructured
its organogram and tailored the new positions to suit certain
employees and retrench other employees, one of whom was the second
applicant.
The
procedural fairness
[12]
Both applicants specifically challenged the selection criterion
adopted by the respondent.
[13]
The two applicants in their statements of claim challenged the
fairness of the consultations and the attempt to reach consensus
on
the issues specified in section 189 and testified that the notice was
defective:
"There
was no proper or legally compliant retrenchment notice issued to the
Applicant in the circumstances."
[4]
[14]
Both complained that the respondent did not consider any alternatives
to dismissal or alternative employment for them and did
not engage in
any meaningful consultations to find suitable alternatives to
retrenchment.
[15]
First applicant for instance pleaded:
"No
alternatives to retrenchment were considered or discussed with the
Applicant"
[5]
[16]
The applicants in the trial pursued the challenges on the substantive
fairness of their dismissal and the alleged procedural
fairness.
The
respondent's business
[17]
The respondent, prior to the restructure, divided its customers into
various sectors and groups. What it called its Main Market
comprised
the customers in the informal sector (shebeens, taverns etc) mostly
(in KZN) in the townships but also those who operated
in the larger
cities.
[18]
According to the second applicant Main Market means those customers
whose clientele comprised mainly Black clients (the Black
market).
[19]
The respondent distinguishes from the Main Market customers its Key
Account customers. They are mainly in the formal sector
and include
larger retail customers such as Checkers, Tops, Makro and other
larger retail establishments.
[20]
Because some of the Key Account customers also served predominantly
the Black market, those Key Account customers also fell
in the
category of Main Market customers.
[21]
The respondent distinguishes between to the On-sale and Off-sale
customers (both Key account and Main Market) based on whether
clients
of the customers consumed the liquor at the place of sale, such as at
bars and shebeens, or elsewhere such as product purchased
from bottle
stores to be consumed somewhere else.
[22]
The respondent also served Key Account and Main Market customers in
the outlying areas such as Newcastle, Dundee and others.
The
respondent referred to those areas as the outlying areas or those
customers as the inland customers.
[23]
From inception of its business the respondent focused on selling its
products to its Key Account and Main Market customers
at the various
outlets and shops. The managers of those establishments had the
authority to procure stock from the respondent.
The respondent's
appropriate marketing strategy was to influence those managers to
procure stock from the respondent.
[24]
The respondent employed salespersons, such as the first and second
applicants, and marketing specialists. The salespersons
reported to
the sales manager in Johannesburg and the marketing specialists, also
referred to as trade specialists, reported to
their manager in Cape
Town.
[25]
The marketing or trade specialists focused on branding the products
and producing marketing material for display in the various
establishments of its customers.
[26]
The sales team was responsible for selling the respondent's products
to the Key Account and Main Market customers and to attend
to the
merchandising function in the stores. They served on-sale and
off-sale customers in the main centres and in the outlying
areas.
[27]
Merchandising comprised the correct display of the respondent's
products in the stores, ensuring that the products are on the
correct
shelves and that promotional material is displayed according to the
respondent's requirements. The respondent had a standard
template or
layout that it applied to each store or customer as to where and how
its stock was to be placed on the shelves and
the marketing material
displayed within each store.
[28]
The two applicants performed the function of sales and merchandising
in the Main Market while the second applicant in addition
was in a
supervisory role. The first applicant served the outlying (or inland)
customers.
The
role of Smollan
[29]
It is necessary to refer to the role of Smollan.
[30]
Smollan is an independent business entity that focusses on
merchandising and contact with the decision makers in procurement
at
the head-office of the larger retailers or Key Account customers.
Smollan employs more than 1000 employees.
[31]
The respondent entered into a written but unsigned agreement with
Smollan effective 1 April 2017. The respondent remunerated
Smollan
for each case of the respondent's product sold by its customers where
Smollan did the merchandising of that product.
[32]
Smollan employs merchandisers whose function is to unpack the product
at the stores and to ensure that the shelves were full
and the stock
correctly displayed. Its employees carried out the same merchandising
function as that of the respondent's salespersons.
Smollan worked for
other liquor companies too and thus could have merchandisers in
stores where the respondent was unable (for
cost considerations) to
employ its own merchandisers.
[33]
In a communication dated 28 March 2017 the applicant informed all its
employees of the presence of Smollan.
[34]
The relevant part of the communication to all the employees reads as
follows:
"Nothing changes over the next
month as there will be a transition period that you will have to
manage. At the end of April
there will be amendments to your call
cycles and also some restructuring. This new structure will allow the
ABV Sales Representatives
more capacity to focus on delivering
against an ambitious performance agenda that is in line with the
business strategy of winning
in the Off and On-Trade. These changes
and call cycles, customer allocations and teams will be communicated
to you by the regional
management as soon as there is final clarity
as to the lines of responsibilities. Over the next couple of weeks,
you will be receiving
frequent communication and updates. If you are
unsure of what it is and how it affects you, please contact your Line
Manager."
[35]
The respondent in this communication did not make any mention of
possible redundancies.
[36]
In this communication the respondent explained that during the
previous year it became evident to the respondent that its Key
Account customers changed their procurement practices by centralising
the procurement function at head office. The need to visit
local
shops of a retailer to influence the manager to procure products from
the respondent fell away.
[37]
The respondent advanced the changes to the procurement practices as
part of its motivation generally nationwide to restructure.
[38]
The procurement practices remained unchanged with
independent
Key Account customers such as independent liquor shops in the formal
sector. The need remained to visit them individually for procurement
and merchandising purposes.
[39]
The applicants in their statements of claim alleged that the
introduction of Smollan without prior consultation, affected the
workload of the sales staff and that the respondent
"…
unilaterally decided to adjust and minimise its staff requirements to
adjust to the employment of Smollan, who in
their own right employ a
large number of persons"
[6]
.
[40]
The introduction of Smollan does not appear in the pre-trial minute
as a reason or motivation for the restructuring.
[41]
In the trial the applicants adopted the strategy that the
introduction of Smollan had no effect whatsoever on the workload
and
the positions of the applicants and that the respondent could not
rely upon the introduction of Smollan to justify the dismissal
of the
two applicants.
[42]
The respondent steered clear of the introduction of Smollan as part
of the business
rationale
to restructure its business. The
association with Smollan nevertheless clearly had an impact on the
respondent's business and the
workload of the applicants as was
foreshadowed in the announcement that accompanied the introduction of
Smollan.
[43]
The respondent for instance agreed that the workload of first
applicant probably was reduced by 40% because of the introduction
of
Smollan.
The
first applicant
[44]
The first applicant joined the respondent from existing employment.
[45]
The first applicant reported to the second applicant who was his
manager. The second applicant had a team of two sales representatives
reporting to him.
[46]
From the onset there was some disagreement between the first
applicant and the respondent about his remuneration. The first
applicant contended that this was part of the reason to get rid of
him during the restructure.
[47]
The first applicant was stationed in Durban. Prior to 1 April 2017
the functions of the first applicant were to visit the Main
Market
customers in the outlying areas to influence them to purchase the
respondent's products and at the same time to ensure that
the shelves
are full and the stock and the shops are properly merchandised.
[48]
The first applicant visited customers in amongst others Umlazi,
Durban, Vryheid, Dundee, Piet Retief, Underberg, Ladysmith
and Paul
Pietersburg.
[49]
According to the respondent this necessitated that he had to travel
long distances from Durban where he was stationed and because
of the
distances he quite easily exceeded his monthly allocated fuel
allowance of R3000. To render an effective service, he regularly
stayed over and the respondent paid for his accommodation.
[50]
According to the first applicant he covered this route once a month.
He agreed that he exceeded his travel allowance from time
to time.
[51]
The respondent did not dispute the first applicant's evidence that he
travelled once a month and that even when the responsible
salesperson
would be stationed in a place like Dundee or Newcastle that person
still had to travel to all the other places to service
the customers.
Consequently, there would not be much of a reduction in expenses if
the salesperson were to be stationed somewhere
inland.
[52]
Apart from maintaining that the first applicant exceeded his travel
allowance and that the respondent had to cover the accommodation
expenses, no figures were put before Court to show the extent of the
expenses attaching to the first applicant servicing the Main
Market
and Key Account customers on his route.
[53]
The respondent conceded that the first applicant grew the inland
market. The respondent did not provide actual figures to compare
the
income and expenses in servicing the Main Market in the outlying
areas or to show as to what extent that portion of the market
has
grown over time since the appointment of first applicant.
The
second applicant
[54]
The second applicant joined the respondent on 1 April 2016. Daniel
Hawkins of the respondent approached the second applicant
inviting
him to join the respondent.
[55]
The second applicant had prior experience amongst others as a brand
builder, trade market specialist and as a trade marketing
manager and
in sales.
[56]
According to him his functions were to drive sales, introduce new
customers, manage the sales representatives reporting to
him, follow
up on their daily activities and plan promotions with them. He
personally also attended to sales.
[57]
According to the second applicant, Daniel Hawkins wanted him to join
the respondent to assist with a specified number of brands
and to
"Come and fix the trade in the Main Market in KZN". The
respondent did not set any targets for him when he was
appointed.
[58]
He met with Daniel Hawkins and agreed his remuneration subject to
confirmation thereof by the managing director. Daniel Hawkins
sent
the second applicant an email confirming the arrangement and that the
managing director had to approve the deal.
[59]
The initial appointment was for six months until September 2016.
[60]
From the onset there was disagreement between the second applicant
and the respondent about his contract and his remuneration.
At the
time of the restructure the disagreement had not been resolved. The
second applicant maintained that the respondent wanted
to get rid of
him because of the disagreement in respect of his contract and his
remuneration.
[61]
As agreed with Daniel Hawkins the second applicant appointed three
sales representatives reporting to him. One of them subsequently
resigned. The remaining two were the first applicant and one Lethu.
[62]
The respondent refers to the second applicant's managerial role as
his "Span of control".
[63]
The second applicant initially reported to Daniel Hawkins and Ross
until Brandon Ansley became the national sales manager in
October
2016. The second applicant only became aware of the need to achieve
specified volumes and sales targets in a discussion
with Brandon
Ansley during September 2016 when the first six month's contract
expired.
[64]
As a result of the restructure Lethu successfully applied for a new
position and instead of reporting to
the
second applicant, reported to the regional manager.
[65]
The second applicant retained his sales function but because of the
retrenchment of the first applicant and Lethu reporting
to the
regional manager he, according to the respondent lost his "span
of control".
The
consultations
[66]
Notwithstanding the promise in the communication of 28 March 2017 of
frequent communication and updates over the "next
couple of
weeks" and possible changes towards the end of April 2017, the
next communication came in the form of a presentation
of a national
restructure.
[67]
The organisational redesign proposed by respondent commenced with
this presentation on 11 April 2017.
[68]
Angelo Hendriks is the human resources director of the respondent. He
arranged a meeting with the managers in KwaZulu-Natal
to inform them
of the proposed restructure.
[69]
He first made the presentation to the KZN managers for them not to be
surprised when the intention to restructure was communicated
to the
rest of the employees in their presence.
[70]
It is in dispute whether Angelo Hendriks used a projector for his
presentation to the managers or whether he merely called
the
presentation up on his laptop and went through the presentation with
the managers from his laptop.
[71]
This meeting of managers was attended
inter alia,
by the
second applicant. The second applicant denied that Angelo Hendriks
did his presentation with a projector. According to him
Angelo
Hendriks called the presentation up on his laptop and went through
the presentation. According to him Angelo Hendriks said
that
questions could be asked during the one-on-one meetings that would
follow after the presentation to the managers. Angelo Hendriks
testified that in this meeting he provided time for questions.
[72]
The presentation contains the following relevant slides:
"
Business Rationale
Smollan's coalition would allow us to
secure a wider coverage of Key Account customers and allow for
greater market penetration,
opportunity to assess the efficacy of the
current field sales commercial department against the business'
strategic performance
objectives of Cost containment, Spans of
control versus impact and channel/location penetration versus
business objective.
Structural changes were needed where
certain roles were not addressing the business objective.
The Organisational Redesign allows for
the opportunity to review cost containment initiatives such as
redesigning locations of roles,
role requirements and productivity of
new roles within the business.
With this review, there is the
possibility of dismissals due to Operational Reasons."
[73]
The applicants testified that the business rationale was not
understood by them and was formulated in a difficult way.
[74]
A further slide deals with the legal obligations of the respondent:
"Legal Obligations
Considered as a No Fault (sic)
dismissal for operational reasons.
There is an opportunity to consult and
partake in a Joint Consensus seeking process.
Opportunity for employees to make
submissions for consideration on:
Timing of the Dismissals
Number of people that will be possibly
affected
Severance to be paid
Assistance to employees and the
possibility of future employment"
[75]
The applicants submitted that as is apparent from this t slide there
was no invitation to consult on the business rationale
[76]
The presentation also deals with the restructuring process itself:
"
The
Steps
One on one consultations with affected
employees will take place after this meeting.
Notification of the start of the
Section 189 Consultation Letters will be issued to affected staff.
Conversations and consultations with
affected employees will be held regularly on a one – one basis.
Once all processes are completed, we
will then issue affected staff with letters confirming the
retrenchment."
[77]
The applicants submitted that there was no regular conversations or
consultations as envisaged.
[78]
Immediately after the meeting with the managers a further meeting was
held with the affected employees attended by both applicants.
The two
applicants testified that during this meeting with the affected
employees as selected by the respondent they could not
see the slides
as Angelo Hendriks talked to them from the slides on his laptop.
Angelo Hendriks testified that he used the projector.
[79]
Both applicants testified that they were not given an opportunity to
ask questions during this meeting.
[80]
Angelo Hendriks then had a one-on-one meeting with the first
applicant and a separate one-on-one meeting with the second
applicant.
[81]
The first applicant denied that he had the opportunity to put any
questions to Angelo Hendriks during the one-on-one meeting.
He was
told that his position was redundant but that a similar position was
proposed for the inland customers based closer to the
customers at
Dundee or New Castle. He was told to apply for any suitable position.
The fact that a similar position would exist
but that it was not
offered to him created the impression with him that the company did
not want him as his position in his view
remained the same.
[82]
The second applicant testified that during the one-on-one meeting he
was told by Angelo Hendriks not to apply for any position
as there
was no position available to him. He ascribed this to the exchange
that he had in respect of his remuneration and contract.
[83]
Angelo Hendriks testified that both applicants had an opportunity to
ask questions and get clarification. He denied informing
the second
applicant not to apply for any position as there would not be a
position for him.
[84]
Angelo Hendriks prepared a script to assist the persons handing over
the section 189 notice to the affected persons. The relevant
portion
reads as follows:
"In order to align to the legal
precedent, we will follow a consultative process in order to give you
an opportunity to engage
with the business on the proposed changes.
The consultation will commence as from now and will come to an end on
Monday, 21 April
2017, 12 noon. I encourage you to use this time to
gain as much clarity on the proposals presented and discussed and how
they will
impact you. We will be communicating with you on an ongoing
basis via emails, teleconferences as well as using existing
communication
channels.
Our aim is to as far as possible,
minimise the impact and risks of job losses. As part of making this
process as efficient as possible
so to mitigate the impact and stress
on you, you will be permitted to apply for roles that are vacant in
the organisation and this
will be made available to you via email by
close of business and will also be available from your line manager
as well. In making
a final decision based on the interview, our
proposed selection criteria for the interview panel will be:
·
Functional and leadership
capabilities to that of the role that is required.
·
Mobility &
flexibility to move to where the role is based. Any cost incurred
relating to relocation to the new location would
be for your own
account."
[85]
Angelo Hendriks issued each of the applicants with a section 189
notice during the one-on-one meetings. Both applicants testified
that
the contents of the notice were not explained in detail during the
one-on-one meetings. Angelo Hendriks disputed this.
[86]
The notice in terms of section 189 reads as follows:
"1. As you were made aware
through the announcement that there has been a fundamental shift in
the operations of the company
with the introduction of Smollan as the
Sales – Merchandising company of the Grocer's Channel.
2. With the introduction of Smollan,
ABV has assessed the company's operations and future requirements and
has formulated a strategy
aimed to deliver a sustainable long-term
business model in the South African market that is focused on growth
of the on-trade spirits
portfolio.
3. Subsequent to the assessment, the
company has formulated an approach that will create a sustainable and
competitive business
strategy in order to achieve its performance
agenda. In order to obtain this competitive advantage, ABV Brands
envisages a structure
that is agile, effective and efficient and
focused on achieving the performance ambition as set by the
shareholders.
4. ABV Brands has taken a principled
decision to restructure the commercial field sales workforce, in
order to maximise the capacity
and productivity of the sales staff
and to emulate the regional net sales volume, along with the
adjustment of the spans of control
within the organisation.
5. Based on the above mentioned
structural changes, may result in possible retrenchments within the
Regional commercial field sales
teams.
6. This letter serves as notice that
your role is potentially impacted as a result of this structural
change.
7. We wish to assure you that the
company is committed to consultating (sic) with you in good faith and
on a meaningful basis and
will attempt to reach consensus with you
on:
7.1 Appropriate measures:
7.1.1 to avoid the dismissal
7.1.2 minimise the number of
dismissals
7.1.3 to change the timing of the
dismissal
7.1.4 to mitigate the adverse effects
of the dismissal
7.1.5 the method of selecting
employees who face potential dismissal; and
7.1.6 severance pay for the dismissed
employees.
8. During the consultation process ABV
Brands intends to engage with you on the following points:
T
he reason for possible
retrenchment
The position was identified as a
position which could be made redundant for the reasons set out in
business rationale above. As
your position will possibly become
redundant and will no longer be required, you were selected as an
employee who could be retrenched.
During the consultation process you
are at liberty to discuss other selection criteria which you may
believe to be appropriate.
Alternatives considered by the Company
As the company has to change the
structure as well as reduce costs, these changes may potentially make
your role redundant. We have
given immense consideration to
alternatives to the retrenchment and redundancy but none was found
that could avoid this potential
course of action. You are invited to
make representations in respect of any proposals, which you feel are
feasible and ABV Brands
will consider all proposals made and
submitted by you. Such representations are to be made in writing and
submitted to the HR Director
by no later than 16H 30 on 21 April
2017.
In order to mitigate the impact of the
retrenchment, you are able to apply to a vacant for a role (sic)
within the business that
matches your skill set. Should you be
successful in your application, you would adopt the new role's terms
and conditions and any
cost of relocation, where applicable, would be
for your cost, unless otherwise agreed in writing by the employer and
yourself.
Selection Criteria
The proposed selection criteria for
the respective impacted employees will be as follows:
Main
Market Sales Managers
:
The Western Cape Main Market Sales Manager and KwaZulu Natal Main
Market Sales Manager roles will become redundant. The individuals
occupying those roles have therefore been selected.
Sales
Representatives
: The
affected Sales Representatives will need to apply for the vacant
positions that exists within the region. Individuals will
be selected
based on the subsequent interviews and those individuals that were
not successful will be retrenched.
…
Number of people
the company envisages that only five
employees could be affected by the structural changes.
…
Consultation
We
look forward to meaningful consultations with yourself over the next
few weeks."
[87]
It was put to the respondent's two witnesses that the language in the
presentation and the section 189 notices was not such
that the
applicants could understand what the respondent tried to convey to
them. They were of the opinion that the contents were
adequately
explained to the applicants.
[88]
The respondent the next day provided the applicants with a list of
the newly created positions in the new organogram. According
to the
respondent they could apply for any of those positions that they felt
to be suitable. The list of positions included salespersons
and
marketing specialists.
[89]
After the presentation and the other meetings on 11 April 2016 Angelo
Hendriks telephoned the first applicant as promised.
According to
Angelo Hendriks the first applicant refused to talk to him and the
first applicant put the phone down. This, according
to him, happened
twice. Eventually the first applicant made a proposal about severance
pay which proposal the respondent quickly
rejected.
[90]
The first applicant testified that being inland he did not put the
phone down but that he was in an area where the reception
was poor
and the calls interrupted.
[91]
In addition, on his version he was told that he needed not apply for
any vacancy and therefore, apart from severance pay, there
was
nothing to consult on.
[92]
The first applicant testified that at the outset he formed the
impression that the respondent did not want him or his services
any
more as they required him to apply for what he regarded as his
position. For that reason, he did not apply for any other position
and did not make any other proposals.
[93]
The respondent did not make any further attempts to consult with the
first applicant as it adopted the stance that it was up
to the
affected employees to ask if they did not understand the notice, make
proposals on the selection criterion, alternatives
to dismissal and
severance pay.
[94]
Angelo Hendriks also found the second applicant unwilling to discuss
any aspect. The second applicant eventually promised to
make a
proposal but only about severance pay. On a later occasion the second
applicant indicated to Angelo Hendriks that his attorney
would
contact him. The second applicant's attorney in fact communicated
with Angelo Hendriks informing him that his client had
not been
properly informed about the restructure, that no proper consultation
followed and that he required a copy of the agreement
between the
respondent and Smollan. He also made proposals about a package.
[95]
Angelo Hendriks replied dismissing the proposal in respect of a
severance package and asking the second applicant to identify
that
part of the agreement between Smollan and the respondent he would
want to see as that contract was confidential and could
not be
provided in full.
[96]
It later surfaced that there was no agreement in writing between the
respondent and Smollan.
[97]
The second applicant testified that he was told not to apply for any
other position. That motivated him not to try and make
any proposals
or submit any alternatives expect about a severance package. His
proposal was rejected without the respondent making
an attempt to
understand the basis for his proposal.
[98]
He testified that during the last two weeks prior to the presentation
his communications were cut off and he did not receive
any response
from management with regard to his queries relating to his
remuneration and contract. This strengthened his understanding
that
the respondent used the restructure to get rid of him.
The
redundancy of the first applicant
[99]
The respondent applied its selection criterion and declared the first
applicant's position redundant. In terms of the proposed
new
organogram the respondent created a similar position located inland
at Newcastle or Dundee. The purpose of this exercise was
to reduce
the travelling and accommodation expenses.
[100]
The respondent conceded that effectively the first applicant's
position moved geographically from Durban to Newcastle or Dundee.
Otherwise everything, except the expenses, remained the same.
[101]
The result of the agreement with Smollan was that approximately 40%
of the functions of the first applicant transferred to
Smollan
employees. The respondent's case however was that the introduction of
Smollan was not the reason why the position of the
first applicant
became redundant.
[102]
The first applicant contends that his position never became
redundant. The only change was that the person filling the position
had to move to a location inland. The position should not have been
declared redundant in the first place.
[103]
In addition, the first applicant contends that there would not be a
substantial cost saving if the position is created at
Newcastle or
Dundee as the travelling would remain basically the same to visit the
various towns from where the person would then
be stationed.
[104]
The respondent advertised the position in Newcastle or Dundee and
failed to find a suitable candidate. The respondent now
serves its
customers in those areas from the call centre in Cape Town. The
respondent did not provide hard figures on whether it
lost customers
because of the retrenchment of the first applicant and its failure to
appoint somebody to what it regarded as the
newly created position
but in fact was the same position that moved geographically. The
respondent conceded that as from the date
of the retrenchment of the
first applicant it could not service those customers as effectively
as the first applicant did.
The
respondent did not think it prudent to offer the inland position to
the first applicant. The respondent proffered an explanation
for not
offering the position to the first applicant, or at least to sit down
and discuss the position with the first applicant.
The explanation
was that it did not want to prescribe to the first applicant what he
should do. By offering the position to him
it would also, so it
reasoned, prejudice other affected employees who might wish to apply
for the position and thirdly it invited
the first applicant to apply
for any vacant position which he failed to do.
The
redundancy of the second applicant
[105]
The respondent declared the position of the second applicant
redundant by applying its selection criterion.
[106]
The respondent reasoned that the second applicant lost his "Span
of control" when the first applicant became redundant
and the
second employee reporting to him, Lethu, initially became redundant
but was then appointed to a newly created position
in KwaZulu-Natal.
When he was appointed to the newly created position he reported to
the regional manager.
[107]
That left the second applicant with only his marketing function and a
very limited merchandising function.
[108]
The second applicant had experience as a trade specialist. Because he
was told not to apply for any position he did not apply
for any of
the positions in the new organogram. The respondent never enquired
from him why he did not apply for any position. The
respondent was
content with the position that the second applicant had not applied
for a vacancy.
[109]
The second applicant testified that he could also do the marketing
function. The respondent did not consider him for any marketing
position in KwaZulu-Natal and did not offer him any position. Neither
did the respondent encourage him to apply for any position.
Analysis:
The
selection criterion
[110]
The respondent in the presentation and the section 189 notice relied
upon redundancy as the selection criterion. The respondent
in oral
evidence again emphasised that it adopted "redundancy" as
the only selection criterion.
[111]
It is common cause that the respondent resolved that five positions
would be affected by its restructuring. Those were all
sales (and
merchandising) positions.
[112]
The respondent selected only the incumbents of those five positions
based on the redundancy of those positions as affected
employees. The
respondent issued the section 189 notices to only those five
employees.
[113]
The applicants challenged the selection criterion as unfair and not
objective. There was no agreement between the parties
as to what
selection criterion should be applied. The respondent as the employer
under those circumstances was under a duty to
apply fair and
objective criteria and in this trial had to justify the criteria as
fair and objective.
[114]
The respondent's argument that the affected employees could propose
other selection criteria is not a defence to its own failure
to, in
the absence of agreement or consensus, adopt a criterion that is fair
and objective.
[115]
The fact that the applicants did not propose alternative criteria at
the time does not make the criterion proposed by the
respondent fair
if otherwise it would not have been fair.
[116]
The Labour Court in
BEMAWU
obo Mohapi v Clear Channel Independent (Pty) Ltd
[7]
dismissed "redundancy" as a fair and objective selection
criterion:
"As indicated earlier, the
criterion used in selecting the applicants for retrenchment amongst
the sales employees of the respondent
was "redundancy". In
my view, this is clearly an unfair criterion. In this respect I agree
with the legal representative
of the applicants that "redundancy"
can never be a fair and objective selection criterion, as it is the
cause of the
retrenchment".
[117]
The applicants in the trial contended that the respondent should also
have considered LIFO as an appropriate criterion.
[118]
Respondent conceded that had it applied LIFO Kirthi Maharaj, also a
sales representative such as the first applicant, had
shorter service
with the respondent than the first applicant. The respondent,
however, did not include Kirthi Maharaj as an affected
sales
representative because, in its view, her position was not affected by
the single selection criterion that the respondent
adopted and in
addition making her redundant would have disrupted the operations in
the area that she served.
[119]
The unchallenged evidence of the first applicant was that he
previously served the same area and same customers as Kirthi
Maharaj.
Selecting Kirthi Maharaj for retrenchment would not have disrupted
the respondent's operations in that area.
[120]
The respondent adopted the selection criterion of redundancy and that
led to the respondent's failure to include all the sales
representatives in the area as affected employees. This was
prejudicial to the first applicant.
[121]
According to first applicant the respondent erroneously regarded his
position as redundant. All that happened was that the
position with
all its functions was relocated inland. That does not mean that the
position became redundant. All that the respondent
wished to achieve
was to reduce the costs of servicing the inland customers and that
was the reason to declare his position redundant.
[122]
The facts are not that
dissimilar from the facts in the CCMA arbitration in the matter of
Moyana and Port Wild Props
23 CC t/a Bickley Terraces
.
[8]
The employer employed the applicant as a chef. When business declined
the employer unsuccessfully tried to come to alternative
arrangements
with the applicant. The employer then declared the position redundant
and dismissed the applicant for operational
reasons. The only purpose
of the dismissal was to reduce costs. Someone else took over the
functions of the chef. The Commissioner
held the dismissal to be
substantively unfair as the position had not become redundant.
[123]
The respondent wrongly decided that the first applicant's position
became redundant. The
position
never was redundant. It moved
geographically. The respondent conceded that but for the location of
the position nothing changed.
[124]
The respondent failed to engage the first applicant on whether a
relocation would be feasible. The respondent acted procedurally
unfair in failing to engage the first applicant on this aspect. It
was, on the facts of this matter, the duty of the respondent
to
engage first applicant on a possible relocation and respondent acted
unfairly in shifting the obligation to first applicant
to have raised
this as an alternative to retrenchment.
[125]
The respondent therefore had no substantive reason to dismiss first
applicant. The respondent incorrectly identified his position
as
redundant while conceding that the position moved inland. Respondent
conceded that but for the geographical change everything
remained the
same and the position was advertised as such.
[126]
The respondent advertised the position but has not found anybody to
appoint to the position to serve the inland customers.
According to
the respondent it eventually removed the position from its organogram
and now serves those customers through a call
centre.
[127]
The first applicant justifiably formed the impression that the
respondent wanted him out of the company by declaring his position
redundant and by requiring of him to apply for the position that he
regarded as his own position.
[128]
The dismissal of the first applicant was substantively unfair because
of the wrong view of the respondent that the position
became
redundant.
[129]
The dismissal of the first applicant was also procedurally unfair in
that the respondent failed to consult the first applicant
on whether
the first applicant would be willing to relocate inland.
The
second applicant
[130]
The second applicant was selected for redundancy because of the loss
of his span of control when both the first applicant
and Lethu were
selected for redundancy.
[131]
The respondent did not consider the second applicant for an
alternative position in KwaZulu-Natal as a sales representative.
He
testified that he would have considered such a position if it was
discussed with him.
[132]
It is common cause that other sales representatives in KwaZulu-Natal
joined the respondent after the second applicant.
[133]
Both witnesses for the respondent were unaware of the second
applicant's experience and expertise as a trade specialist.
[134]
The respondent failed to justify the selection criterion as fair and
objective and this affected the substantive reason for
the dismissal
of the first applicant. This is a basis upon which the first
applicant's dismissal is substantively unfair.
[135]
The first applicant is entitled to reinstatement and there is no
reason why the first applicant cannot be reinstated into
his
position.
[136]
The respondent selected the second applicant on the same basis as it
selected the first applicant. It applied "redundancy"
as
the selection criterion. The respondent has failed to justify the
selection criterion as fair and objective. It used the cause
of the
retrenchment as the selection criterion. The respondent thereby
excluded employees that should have been affected in order
to follow
a fair procedure.
[137]
The dismissal of the second applicant was substantively unfair as the
respondent applied a selection criterion that was not
fair and
objective.
[138]
The second applicant wants to be reinstated. The respondent has not
discharged the onus to show that reinstatement is not
appropriate.
More
about the procedure
[139]
The procedure that the respondent adopted to require the affected
employees to apply for vacancies is not in itself unfair.
What makes
this procedure unfair in this matter is the fact that only some of
the employees doing the same work were regarded as
affected and had
to apply for vacancies. The procedure was unfair because of a
limitation of the vacancies by limiting the number
of affected
employees in adopting an unfair criterion.
[140]
Some employees doing the same work as the first applicant were
protected from the restructuring exercise and from having to
apply
for a position. That is unfair to the applicants.
[141]
The overall impression is that the respondent after having decided to
embark upon the restructuring process failed to meaningfully
engage
the two applicants in giving effect to the decision to restructure.
The formulation of the business rationale is not clear
and concise.
The language used by the respondent in the section 189 notice and in
the presentation describing the rationale is
difficult to follow.
[142]
The second applicant referred the section 189 notice to his attorney.
His attorney then addressed correspondence to the respondent
to which
it received no meaningful response.
[143]
The applicants also challenged the procedure on the basis that the
respondent did not consider alternatives to dismissal.
[144]
In this regard the respondent makes mention of the fact that it has
"… given immense consideration to alternatives
to the
retrenchment and redundancy …" only to concede in
evidence that the only alternative that it considered was
to make
available the vacancies in the new organogram for the affected
employees to apply for. The respondent used words on paper
that did
not mean anything in practice.
[145]
The respondent never considered as an alternative to retrenchment
whether first applicant would be prepared to move inland
to be
stationed at Newcastle or Dundee. The respondent also never
considered whether it should encourage the second applicant to
apply
for a position as a trade specialist or for any other marketing
position in KwaZulu-Natal.
[146]
Applying the dictum of the
Labour Appeal Court in
Johnson
& Johnson (Pty) LTD v Chemical Workers Industrial Union
[9]
the conduct of the respondent falls short of what is required:
"The important implication of
this is that a mechanical, 'checklist' kind of approach to determine
whether s189 has been complied
with is inappropriate. The proper
approach is to ascertain whether the purpose of the section (the
occurrence of a joint consensus
seeking process) has been achieved."
[147]
The respondent was satisfied that once it made its proposal,
everything else could be left in the hands of the few employees
that
the respondent selected for retrenchment.
[148]
The respondent also did not abide by what it told its employees when
announcing the venture with Smollan during March 2016.
[149]
The respondent announced to its workforce that respondent would keep
them informed through emails and other ways of communication
and that
by the end of April they could expect further developments.
[150]
Within two weeks the respondent had selected for retrenchment those
employees whose positions in its view became redundant.
[151]
Ordinarily adopting a process whereby, the affected employees are
invited to apply for vacancies, either existing or newly
created, in
itself is not unfair. Where a limited number of employees are
affected, such as in this case, the employer has to go
one step
further and see whether there are suitable positions and encourage
the affected employees to apply for specific positions.
[152]
If any of them do not apply for eminently suitable positions, then it
is incumbent upon the respondent to enquire into the
reasons to
attempt to avoid dismissals.
[153]
During the trial the respondent persisted with the view that once it
had made its proposals such as of a selection criterion,
it was up to
the affected employees to make counterproposals if they were not
happy with the proposals. Because the applicants
did not make other
proposals, such as LIFO, the respondent took it for instance that the
selection criterion was fair and objective.
[154]
The prevailing impression during the trial was that the respondent
was satisfied that it discharged its duty to consult after
having met
with the applicants on the day of the presentation and following up
with one or two telephone calls to find out if they
had any
counterproposals.
[155]
The respondent omitted in the presentation to invite the employees to
consult on the substantive reason (the business rationale)
for the
exercise. This again is indicative of the attitude of the respondent.
It made its proposal and then left it to the affected
employees to
deal with.
[156]
The respondent complains that the two applicants were obstructive and
that they did not wish to participate in any meaningful
consensus
seeking consultation.
[157]
Nothing however prevented the respondent from making a meaningful
attempt to understand their position and to find common
ground. They
explained the telephone calls and the circumstances surrounding the
calls. They were not obstructive and did not refuse
to communicate
with the respondent. The respondent failed to understand what their
position was and never made any attempt at finding
out.
[158]
The applicants are justified in complaining that there was no fair
process and that they were selected for retrenchment simply
on the
basis that the respondent decided that their positions were redundant
and that they have therefore been selected for retrenchment.
[159]
In conclusion the respondent failed to justify its selection
criterion as fair and objective. The respondent failed to
meaningfully
consult with the two applicants. The respondent failed
to justify the dismissal of the two applicants as substantively and
procedurally
fair. Both want to be reinstated. There is no reason why
they cannot be reinstated.
Costs
[160]
I have considered the factors that determine a cost order. The
applicants have been successful. The applicants and the respondent
will be in an employment relationship because of this order. For that
reason, a cost order is not appropriate. Each party is to
pay their
own costs.
[161]
I make the following order:
Order:
1.
The dismissal of the first and second applicants was substantively
and procedurally
unfair.
2.
The first and second applicants are reinstated on terms and
conditions not less
favourable than those that applied to them on the
date of their dismissal on 31 May 2017.
3.
Their reinstatement is retrospective with full pay and benefits to 31
May 2017.
4.
The applicants must report for duty within 14 days of the date of
this order.
5.
There is no order as to costs.
_____________________
F
Coetzee
Acting
Judge of the Labour Court of South Africa
Appearances:
For
the applicants:
Advocate N Govender
Instructed
by:
Mdu Nkomo & Company
For
the Respondent:
Felicia van Rooi of Felicia van Rooi
Attorneys
[1]
Statement of Case at para 5.37
[2]
Statement of Case at para 5.11
[3]
First Applicant's statement of case at para 5.35
[4]
First Applicant's statement of case at para 6.5
[5]
First Applicant's Statement of Case at para 5.36
[6]
First Applicant's Statement of Case at para 5.17.
[7]
[2010] JOL 25848
(LC) [43].
[8]
(2009) 30 ILJ 707 (CCMA).
[9]
(1999) 20 ILJ 89 (LAC).