IN THE LABOUR COURT OF SOUTH AFRICA
HELD IN JOHANNESBURG
CASE NO: J190/97
In the matter between:
Workers Labour Consultants
on behalf of
Petros Khoza And Twenty Nine Others Applicants
and
Zero Appliances Cc Respondent
J U D G M E N T
Van Niekerk A.j.
1) The individual Applicants in this case, Petros Khoza and
Twenty Nine Others, were formerly employed by the
Respondent. They were retrenched by the Respondent
on 6 December 1996 on operational grounds.
2) The individual Applicants contend that they were
unfairly dismissed for both substantive and procedural
reasons.
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3) The Respondent raised a defence in limine concerning
the Court's jurisdiction which I dismissed for reasons
given. An application for leave to appeal against that
decision was refused for the reasons that I have
provided in a separate judgment.
THE BACKGROUND FACTS
4) The Respondent manufactures gas chest freezers for
mainly the rural market. Due to the electrification of
rural areas and the downturn in the economy, the
Respondent embarked upon the production of electric
freezers. Strong competition in this sector of the market
caused this venture to fail. At the end of 1995 the
Respondent decided to cease manufacturing electric
freezers and to retrench most of its employees who
worked on that project. This led to the retrenchment of
sixty workers in January 1996. The remaining
employees, numbering thirty, were then utilised in the
manufacture of gas chest freezers.
5) The Respondent's fortunes did not improve. The
utilisation of the thirty employees in the manufacturing
of gas chest freezers resulted in an over supply of stock.
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The accumulation of stock coupled with the cost of
wages, caused the Respondent to become unprofitable.
THE RETRENCHMENT
6) The Respondent embarked upon the process of
retrenching the individual Applicants on 28 November
1996. It did so by distributing to certain staff
representatives a confidential memorandum in which
they were informed that the company was experiencing
financial difficulty and that management had identified
the need to conduct an investigation into the problem.
The representatives were invited to attend a meeting on
29 November 1996 to discuss the matter. Importantly,
the notice contained the following:
"The investigation should be finalised soon and it
is foreseen that we will be able to inform
everybody by 6 December 1996 of the results of
the investigation and the recommended action to
be taken under these circumstances."
7) On 29 November 1996 four representatives including Mr
Elias Maphanga went to the meeting on behalf of the
individual Applicants. There they encountered Mr A.W.
Tuinder, a member of the Respondent, and two other
persons unknown to the Applicants' representatives.
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They were Mr Jordaan and Mrs Huyser from Gouws &
Associates, labour consultants. Mr Maphanga testified
that the Applicants' representatives were, for a number
of reasons, uncomfortable with the presence of these
two persons. It mainly boiled down to this. The
Respondent had urged its employees to keep their
problems "within the family" and not to involve
outsiders with internal company affairs. The employees
understood this to mean that the Respondent did not
wish its employees to join a trade union. When they
encountered Mr Jordaan and Mrs Huyser they saw this
as a breach of the Respondent's own injunction.
8) The representatives met again on Monday, 2 December
1996, when no progress was made. The Applicants'
representatives did not want to participate in the
consultation process because they demanded that they
be given the right to be represented by their own
representative. As an alternative, they suggested that a
mediator be appointed to assist in the conciliation of this
dispute. In paragraph 4 of its memorandum to all
employees dated 2 December 1996 management
recorded the following:
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"DUE TO THE SEVERITY OF THE OPERATIONAL
AND ECONOMIC LOSSES OF THE COMPANY AND
THE SENSITIVITY OF THE ISSUE YOU WILL
UNDERSTAND THAT MANAGEMENT ARE UNDER
TREMENDOUS PRESSURE TO FINALISE THE
CONCERNED CONSULTATIONS:
CONCLUSION DATE: 6 DECEMBER 1996"
9) A final meeting took place on Tuesday, 3 December
1996, at which the dispute concerning representation
remained unresolved. The Applicants' representatives
refused to participate in the process of consultation until
this problem was resolved. Management had a change
of heart and during the course of this meeting tried to
reach Mr C. Ndlovu from Workers Labour Consultants,
the individual Applicants' chosen representative. He
could not be contacted but during the telephone call one
of his employees was questioned about the credentials
of Workers Labour Consultants. After the telephone call
was terminated, the Applicants' representatives were
told that Workers Labour Consultants could not
represent them.
10) On the same day Mr Ndlovu sent a fax to the
Respondent in which he inter alia stated the following:
"We have been informed that you are busy with
the negotiations of retrenching and you have your
own representatives (Name of Company supplied
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to us).
We therefore strongly object that our clients
negotiate without any representatives from
outside. Our clients have therefore requested that
we negotiate the retrenchment process on their
behalf since you also have an external
representative."
11) A response to this fax was addressed to Workers Labour
Consultants on Friday, 6 December 1996. In its letter
management confirmed its plan to retrench some of its
employees and stated:
"1.3 We further wish to place on record that we
have tried since 29 november (sic) 1996 to consult
with the employee's representatives on this
matter, but that they have not made one
constructive proposal and are obviously trying to
delay the process.
1.4 In terms of section 189 of the Act, you and
your organisation cannot represent the employees in this
matter."
The reference to section 189 of the LRA probably
intended to be to section 200.
12) On 6 December 1996 the Respondent issued a notice in
which it recorded that management had not been
presented with any proposals or co-operation from the
employees regarding the proposed retrenchment and
that the Respondent was left with no option but to
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continue with the process. The notice further recorded
that employees were well aware that the target date for
finalisation of consultations was set for 6 December
1996.
13) The individual Applicants received with their wages a
notice of termination with effect from 13 December
1996. They were told that they need not work for the
period 6 to 13 December. In terms of the notice they
were paid wages, leave pay, a week's notice, a pro rata
bonus and a severance package of one week's pay for
each completed year of service.
THE APPLICANTS' CASE
14) Although Mr Crots who represented the Respondent
contended that the individual Applicants' claim was in
respect of substantive unfairness only, I granted Mr
Connell for the individual Applicants leave to amend
prayer 1 of their Statement of Case to include relief
based on both substantive and procedural grounds. I did
so because, as I pointed out to Mr Crots, the body of the
Statement of Case and particularly paragraphs 8.4 and
8.5 thereof foreshadowed relief based on unprocedural
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fairness.
15) The Applicants pray for retrospective reinstatement,
alternatively compensation in an amount to be
determined by this Court.
THE CASE OF SUBSTANTIVE UNFAIRNESS
16) The evidence of Mr Maphanga was that at the time of
his retrenchment he inter alia performed duties of a
despatch supervisor and stock counter. He was,
therefore, in a position to know to what extent the
Respondent was able to produce, stockpile and sell its
stock. His evidence was that the Respondent's business
was doing well in the sense that towards the end of
1996 it was selling its stock faster than it could be
produced.
17) Mr Tuinder testified that the company was heading for
trouble. In support of this contention he produced the
Respondent's work in progress figures for November and
December 1996. He also produced a set of the
Respondent's annual financial statements dated 28
February 1997.
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18) According to the work in progress statements, the
Respondent had 3,977 units in stock in November and
2,699 units in December 1996. According to Mr Tuinder
this was unusual because in normal trading years most
if not all of the stock is depleted by December. That is
because the Christmas season is the Respondent's best
business trading period. According to the financial
statements the Respondent made an after tax profit of
R264,471.00 in the 1996/97 financial year.
19) It is true, as Mr Connell pointed out, that the company
improved its financial position in the 1996/97 financial
year compared to the 1995/96 year. It must be borne in
mind, however, that had the Respondent not retrenched
thirty of its employees the salaries and wages bill of
R6,548,482.00 for the year in question would have been
even greater and that this would have affected the
company's profitability.
20) I am inclined to accept the evidence of the Respondent
that the company was heading for trouble. The evidence
of Mr Tuinder is supported by the financial documents
and the work in progress statements bears out his
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testimony. The evidence of Mr Maphanga was not, in the
very nature of this situation, as accurate as that of Mr
Tuinder.
21) I am, therefore, satisfied that the Respondent was
justified in embarking upon the retrenchment of the
individual Applicants. It was entitled to restructure the
company to avoid suffering a loss. See SACTWU and
Others v Discreto (a Division of Trump and Springbok
Holdings) [1998] 12 BLLR 1228 (LAC) and Imperial
Transport Services (Pty) Ltd v Stirling [1999] 3 BLLR 201
(LAC) at paragraph 25.
THE CASE OF PROCEDURAL UNFAIRNESS
22) The case that the individual Applicants sought to make
out is set out in paragraphs 8.4 and 8.5 of the
Statement of Case. In summary it is this:
22.1 the Respondent refused to allow the individual
Applicants to be represented;
22.2 the Respondent failed to give sufficient notice of
its intention to retrench or to allow sufficient time during the
retrenchment procedure for proper consultation to take place;
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22.3 the Respondent failed to supply the individual
Applicants with all relevant information;
22.4 the Respondent failed to use fair and objective
selection criteria.
23) I am satisfied that the Respondent behaved in a
manifestly unfair manner towards the individual
Applicants. Not only did management impose an
unreasonably short time frame within which
consultations were to be completed but management
also decided to embark on the retrenchment before
consulting with the individual Applicants. This became
clear from the evidence of Mr Errol Saunders, the
Respondent's marketing director, who testified that
before consultations took place;
"We considered how to solve the problem and
decided to retrench (the remaining employees
who had not been retrenched in January 1996)"
24) He further testified that management decided to consult
with Gouws & Associates and that their advice was to
retrench the employees concerned. Although Mr Tuinder
sought to deny these allegations, I am satisfied that Mr
Saunders should be believed. The evidence of Mr
Saunders struck me as being candid and sincere
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whereas Mr Tuinder after an overnight break tendered
evidence to the contrary. This evidence cannot be
reconciled with the documents circulated by the
Respondent such as the general notice of 28 November
1996.
25) The Respondent made no attempt to disclose to the
individual Applicants the information that is required in
terms of section 189(3) of the LRA. It also made no real
attempt to reach consensus on those issues set out in
section 189(2). The Respondent's version was that it
attempted to consult with the individual Applicants but
that they refused to participate in the consultation
process. Once it became clear that the individual
Applicants were not going to change their minds about
consulting without their own representative, the
Respondent went ahead with the retrenchments on 6
December 1996.
26) This was unreasonable in a number of respects. There
was, firstly, undue haste in wanting to complete the
consultation process. The reason for this haste I was told
by Mr Tuinder was that the Respondent wished to
complete the retrenchment exercise before the
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Christmas shutdown which was due to commence on 15
December 1996. This undue haste by necessity not only
reflects on the Respondent's bona fides as far as the
consultation process is concerned but also on the
efficacy of the consultation process. It is unfair for an
employer to unreasonably curtail the consultation
process. Chemical Workers Industrial Union and Others v
Sopelog CC (1994) 15 ILJ 90 (LAC) at 105.
27) I also consider that in the circumstances of this case,
the Respondent's refusal to allow the Applicants their
own representative or at the very least, a mediator to
facilitate the resolution of the dispute, as unfair. The
evidence of Mr Maphanga rang true when he said that
the Respondent had exhorted its employees to keep and
resolve disputes "within the family". This was not
disputed by any of the Respondent's witnesses. For the
Respondent to refuse the individual Applicants the
representative of their choice on the grounds that he
was not a person entitled to represent them when
Gouws & Associates itself was not registered as an
employer's organisation is, in my view, unreasonable.
That much was conceded by Mr Tuinder when I asked
him why management had changed its mind and tried
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to contact Mr Ndlovu from Workers Labour Consultants.
His reply was that management did so, "so as to be
more fair to them (the employees)".
28) Mr Crots argued with reference to Secunda Supermarket
CC t/a Secunda Spar and Another v Dreyer NO and
Others (1998) 19 ILJ 1584 (LC) at 1588-1590 and the
cases referred to in that judgment that Gouws &
Associates was, because it was awaiting registration as
an employer's organisation, entitled to represent the
Respondent. This submission misses the point. It is not a
question of construing the LRA with reference to the
right to representation in the CCMA or Labour Court but
what fairness in the circumstances demanded.
29) Had the Respondent not imposed the unreasonably
short time frame within which to complete consultations
and had it not behaved unreasonably towards the
individual Applicants insofar as a representative was
concerned, the individual Applicants may well have
consulted with the Respondent in regard to the matters
set out in section 189 of the LRA. The fact that they did
not consult with Respondent was a situation of its own
making.
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30) The Respondent, while contending that the criterion that
it applied in selecting the individual Applicants was "last
in first out", conceded during the course of the trial that
in respect of Applicants number 4, 7, 10, 12, 13 and 18
on Exhibit "F" it did not apply LIFO as a criterion but
retrenched these individual Applicants because of their
poor attendance at work. It was common cause that
none of these Applicants had been disciplined for such
poor attendance. It goes without saying that this is
unacceptable as a criterion for retrenchment.
THE INDIVIDUAL APPLICANTS' REMEDY
31) Mr Connell submitted that the individual Applicants
ought to be reinstated in their employment with the
Respondent. Because of the finding that I have made in
regard to the substantive fairness of the retrenchment,
this is not a remedy available to the individual
Applicants.
32) In the alternative, Mr Connell submitted that I should
order the Respondent to pay the individual Applicants
compensation from the date of their retrenchment to
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the last day of the hearing. Because of the long delay
that occurred before the matter came to trial, this would
in effect mean compensation for a period of two and a
half years. It was not argued that there was any
unreasonable period of delay caused by the individual
Applicants in initiating or prosecuting their claim.
33) I consider that the individual Applicants are entitled to
compensation for a period of twelve months. I say so
because I consider that section 194(1) should be
interpreted in such a fashion that the limit of twelve
months' remuneration referred to in sub-section (2) is
equally applicable to sub-section (1). Were this not to be
the case it would lead to the anomalous interpretation
that for dismissals which are substantively unfair,
compensation is limited to twelve months' remuneration
but in cases of procedural unfairness there is no limit
apart from the fact that compensation may not be
awarded beyond the last day of the hearing of the
adjudication. This result could not have been intended
by the legislature. See Whall v BrandAdd Marketing (Pty)
Ltd [1999] 6 BLLR 626 (LC) at paragraph 37 and Vickers
v Aquahydro Projects (Pty) Ltd [1999] 6 BLLR 620 (LC) at
paragraph 26. This anomaly is demonstrated by the
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case in point. Some of the individual Applicants elected
not to claim reinstatement. Had they been entitled to
reinstatement their compensation would have been
limited to twelve months' remuneration as opposed to
remuneration for a period of some thirty months.
34) I do not consider this to be a case in which I should
exercise my discretion against an award for
compensation. Johnson & Johnson (Pty) Ltd v Chemical
Workers' Industrial Union (1999) 20 ILJ 89 LC at
paragraph 40.
35) I say so for the following reasons. Firstly, a number of
the individual Applicants had a substantial number of
years of service with the Respondent. Some had been
employed for a period of some six years or more.
Secondly, I consider it unlikely that the individual
Applicants will easily find alternative employment. Most
of them elected to be reinstated. This is indicative of the
fact that these Applicants have not been able to find
employment or employment at the same level at which
they were remunerated by the Respondent. Thirdly, I
take into consideration that the Respondent could not
justify the hasty manner in which it performed the
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retrenchment.
36) Compensation must accordingly be awarded in
accordance with the formula set out in section 194(1).
Johnson & Johnson (Pty) Ltd v Chemical Workers'
Industrial Union (loc.cit).
THE ORDER
37) The order that I make is that each the individual
Applicants whose names and details appear on the
agreed schedule, Exhibit "F", are entitled to be paid at
their weekly rate from 14 December 1996 for a period of
twelve months. I also order the Respondent to pay the
costs of suit.
G.O. VAN NIEKERK SC
ACTING JUDGE OF THE LABOUR COURT
DATE OF HEARING:
7TH, 8TH, 9TH AND 25TH JUNE 1999
DATE OF JUDGMENT:
FOR THE APPLICANTS:
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ATTORNEY L.F. CONNELL
FOR THE RESPONDENT:
ADV E.S. CROTS instructed by PHILIP VAN STADEN
ATTORNEYS
GVN.99\WORKERS2.JUD