VIC & DUP/JOHANNESBURG/LKS
IN THE LABOUR COURT OF SOUTH AFRICA
HELD AT JOHANNESBURG
CASE NO. J4080/98
In the matter between:
MALONEY, D Applicant
and
GENTRAVEL (PTY) LTD Respondent
J U D G M E N T
KENNEDY, AJ:
[1] The applicant's services with the respondent were
terminated for operational reasons during September 1998.
She brings this application to challenge the fairness of her
retrenchment on the basis of a failure to comply with
section 189 of the Labour Relations Act, No. 66 of 1995(“ the
Act”) and she seeks compensation in terms of section 194 of
the Act . She does not seek reinstatement.
[2] Applicant was employed by Keyser and Gentry in 1986.
Due to a merger and other restructuring of the
organisation the respondent became her employer from
approximately September 1995. At the time of her
retrenchment the applicant was the manager of the
respondent's Sandton branch dealing with retail travel
business and her office was based in Woodmead. Also based in
Woodmead was another division of the respondent known as
Transworld. That was operating under the management of Ms
Debby Duncan. Transworld was also involved in the travel
business but specialised in group tours and conferences.
[3] Evidence of both the applicant as well as the
respondent's only witness, its financial manager, Mr Eric
Wasserman, showed that the company was experiencing
financial difficulties over a substantial period. Both the
Sandton retail branch under the applicant as manager and the
Transworld Division under Ms Duncan as its manager, were
during most months incurring substantial losses. During the
14 month period which ended on 28 February 1998 the company
as a whole incurred losses of approximately R6 million.
[4] Senior management decided to take remedial action.
Accordingly, during July 1998 the Board of Directors met and
approved the restructuring of the company on the basis that
the Sandton retail branch and the Transworld division should
be merged.
The main objective of this restructuring was to save costs,
in particular personnel costs which represented
approximately 70% of the division's operating costs. Apart
from other savings and economies the merger of the two
divisions would result in dispensing with certain staff
positions including one of the two positions of managers of
the respective divisions.
[5] A few weeks later, during August 1998, the three
executive directors, namely the managing director Mr
Nel, the financial director Mr Wasserman and the marketing
director Ms Hunter, took steps to implement the Board's
decision. The three executive directors decided that Ms
Duncan should be appointed to manage the newly amalgamated
division created by the merger of the Sandton retail branch
and Transworld. They decided this, according to the evidence
of Mr Wasserman, on the basis that although Ms Duncan had
less service with the company than the applicant, namely
five years compared with the applicant's 13 years service,
the applicant had experience only in retail travel and not
group tours and conferences whereas Ms Duncan had experience
in both areas.
[6] It is common cause that the applicant was not notified
in advance that the directors had taken or were
contemplating the decisions, that is firstly, the
decision to merge the two divisions and secondly, the
decision to appoint Ms Duncan in preference to the applicant
to manage the new entity. It is also common
cause that the decisions were not preceded by any
discussions with the applicant and she was not given any
opportunity to influence the taking of those decisions.
Furthermore, Mr Wasserman conceded that once these decisions
were taken they were final. The applicant was not given any
opportunity to seek to have them reviewed or changed.
Indeed, the directors would not have considered any reversal
of those decisions and they were not amenable to reopening
the issues.
[7] There was a delay in notifying the applicant of these
decisions due to the fact that the applicant's father
was seriously ill at the time and subsequently passed away.
The applicant was granted a week's compassionate leave at
the time of his death.
[8] On the morning of her return to work, namely on 17
September 1998, the applicant was called to a meeting with
Mr Nel and Mr Wasserman. They decided that they could not
delay any further the implementation of the Board's decision
to merge the two divisions and the executive directors'
decision to appoint Ms Duncan to head the new operation. Nel
informed the applicant of these decisions. She did not
immediately respond as the
news of this came as a considerable shock to her. The
applicant then asked what was to become of her. Mr Nel told
her that she had certain options available. The first option
was to leave the company immediately with a retrenchment
package. The second option was that she could take up a
position in what is referred to as BSP. That, I was told,
refers to the bank settlement plan operations involving
administration of debit and credit arrangements with
airlines. It was made clear to the applicant that this was
only a temporary position for three months, at the end of
which there would be no promise or certainty of any further
employment, whether permanent or temporary. The applicant
was asked to decide and inform management whether she would
accept the temporary BSP position or take immediate
retrenchment.
[9] There is a dispute on the evidence as to whether the
applicant was also invited at this meeting to consider or
make suggestions on any other possible role that she
could continue to play in the company. I shall, for reasons
which will become apparent later in this judgment, assume
that the respondent's version is correct in this regard.
[10] It is common cause that at her request the applicant
was to be furnished in writing with the details of the
retrenchment package which had been mentioned but not
discussed in detail during their discussion.
[11] Mr Nel and Mr Wasserman accordingly sent the applicant
a letter on Tuesday, 8 September 1998, which read in
its relevant parts as follows:
"The poor financial performance of the Woodmead branch has
made it necessary to restructure our operations to improve
its financial viability. This restructuring includes the
amalgamation of the Woodmead branch with Transworld.
It is with sincere regret that we have to inform you that
your position has become supernumerary as a result of the
restructuring. As discussed a retrenchment package is made
up as follows:
1. Your basic salary up to 31 December 1998.
2. An amount equal to one month's basic salary in lieu of
the annual bonus normally payable at the option of the
company.
3. ...[There then follows a number of paragraphs setting
out various other amounts which would be payable]...
If you however choose to accept the alternative temporary
position offered to you, the conditions and benefits
attached to the aforementioned
retrenchment package will no longer be valid and
any such package will have to be renegotiated.“
[12] The applicant asked for clarification of certain issues
in her letter of reply dated 9 September 1998 which read as
follows:
"Firstly, if I choose to accept the temporary position
offered to me for a period of three months, what position
would be offered to me thereafter and would this be a
temporary or a permanent position? If no position would be
forthcoming, what would the renegotiated retrenchment
package consist of? Secondly, with regard to the immediate
retrenchment package, I still require the purchase price of
the motor vehicle. Finally, I would also like clarification
with regard to the payment of my uniform. Obviously the
above information is required before I can advise you of my
decision."
[13] Mr Wasserman replied the same day in a letter which
stated:
"In reply to the two questions posed by you in the
abovementioned letter, I would like to respond as follows:
1. We are unfortunately not in a position to commit
ourselves as far as permanent or
temporary position is concerned after expiry of the three
months period (if you accept the offer of performing BSP
functions for that period). We, however, endeavour(sic) to
look for possible positions during those three months.
2. If you accept the temporary position of BSP the
available package at the end of that period will be as
follows: Your salary will be paid up to January 1999. All
current benefits will be maintained up to the end of the
three month period (30 November 1998) whereafter all
benefits such as pension and medical aid contributions will
cease. You will retain use of the company vehicle for the
three month period up to 30 November 1993 only."
[14] Apart from this correspondence it is common cause that
a number of discussions took place during the course of that
week between the applicant and Mr Wasserman. The primary
issue raised by the applicant related to the question why
the applicant had been selected for termination of her
employment rather than appointing her instead of Ms Duncan.
It was, however, made clear that the directors were not
prepared to reconsider that issue.
[15] On Friday, 11 September 1998, the applicant again met
with Wasserman. She questioned why she had not been
offered one of a number of positions which were then vacant
for senior sales consultants. This had not been offered to
or raised with the applicant by either Nel or Wasserman
during their discussion. The explanation offered by Mr
Wasserman was that this had not been done because the
positions were at a lower level and status than that of
divisional or branch manager and that the applicant might
find such demotion humiliating. Mr
Wasserman stated that Mr Nel had invited the applicant to
make other suggestions and that she could raise this
possibility with him. Nothing came of this however. It was
not pursued either by the applicant or by the directors.
Instead the applicant informed Mr Wasserman that she felt
that she had been treated badly and she wanted to get away
from the company and would therefore be taking the
retrenchment package.
[16] The applicant accordingly left the service of the
respondent on that day, i.e. 11 August 1998. She and
Wasserman discussed the payment of the package and the other
monies which were due. They also discussed a delay which
would arise while a tax directive was obtained. The
applicant indicated that she needed some money to tide her
over. By agreement she was paid the sum of R20 000.
Mention was made during this trial both in evidence and
argument of monies in respect of notice and severance
payment and other issues due in terms of the letter of 8
September which remained outstanding and apparently were not
paid pending the outcome of these proceedings. Those,
however, are not amounts claimed in these proceedings and
the attorneys confirmed in court that they will between them
seek to resolve what is payable in that regard, regardless
of whether and what compensation may be awarded in these
proceedings. That issue of the other amounts accordingly
does not concern this court further.
[17] What remains in issue, however, is the fairness of the
retrenchment. Having regard to the facts apparent from the
evidence, it is, in my view, clear that the
requirements of section 189 of the Act were not satisfied.
[18] It was submitted by Mr du Preez, who appeared on behalf
of the respondent, that the process followed at least
allowed the applicant the opportunity to make
representations on the severance package and certain related
issues. She was also invited to make other suggestions as to
other positions for which she might be considered in the
company thereby possibly avoiding retrenchment.
Even if it is assumed, though not decided, in respondent's
favour that this opportunity was afforded to the applicant,
the way in which the respondent dealt with the matter
overall, in my view, clearly falls substantially short of
what is required by section 189 of the Act .
[19] It was rightly conceded by Mr du Preez that there was
no compliance with section 189(1) of the Act . That section
requires that when an employer contemplates dismissing an
employee for reasons based on the employer's operational
requirements, the employer must consult with the employee or
his or her trade union or other representative. The
requirement of consultation is fundamental to the fair
process required for retrenchments. It seeks to ensure that
the employer
does not take a decision which may affect or may even
terminate the employee's employment for reasons unrelated to
any fault on the part of the employee, without at least
first providing an opportunity for the employee(or his or
her representative) to seek to influence that decision. It
allows the employee to provide input which may provide new
insights and
possibilities to the employer and which may also provide
suitable alternatives so as to avoid or delay retrenchment
or at least to alleviate or minimise its prejudicial
effects.
To ensure that the parties do not simply go through
meaningless motions in this regard, section 189(2)
specifically enjoins the parties to engage in consultation
in which they must actively seek to achieve consensus on the
various issues specified therein. These include in
particular, appropriate measures to avoid dismissals, to
minimise the number of dismissals, to change the timing of
dismissals and to mitigate its adverse effects. They must
also seek to reach consensus on the method for selecting
employees to be dismissed as well as severance pay for
those who are dismissed. Section 189(3) requires disclosure
of all relevant information, including the items
specifically referred to in that subsection. One of these
items is the proposed method for selecting which employee is
to be dismissed. Subsections 189(5) and (6) require an
employer to allow the employee or his or her representative
an opportunity during the consultation process to make
representations about any matter on which they are
consulting, for the employer to consider those
representations and if the employer does not agree with
them, to state the reasons for such disagreement. The
position has been summarised by Froneman DJP in Johnson &
Johnson (Pty) Ltd v Chemical Workers Industrial Union (1999)
20 ILJ 89 (LAC) , particularly at 95A to 97D. I quote certain
extracts from that passage as follows:
"Every person has a fundamental right to fair labour
practices (section 23(1)(a) of the Constitution). In the
present context expression is given to this in the LRA by
affording an employee the right not to be unfairly dismissed
(section 185) and an employer the right to dismiss an
employee for a fair reason based on the employer's
operational requirements and in accordance with a fair
procedure (section 188(1)(a)(ii) and (b)). Section 189
regulates the exercise of the competing fundamental rights
of an employee not to be unfairly dismissed and that of an
employer to dismiss for operational reasons. It is a
provision that is inextricably linked to the fairness or
otherwise of a dismissal based on operational requirements.
Apart from that it serves no other purpose."
After setting out in full the terms of section 189, the
learned judge continued as follows:
"The section places some primary obligations on an
employer in order to ensure that an employee is not unfairly
dismissed. The employer must initiate the consultation
process when it contemplates dismissal for operational
reasons (section 189(1);
Cf FAWU and Another v National Sorghum Breweries (1997)
11 BLLR 1410 (LC) at 1420F 1421B; 1998
(19) ILJ 613 (LC) at 623CI). It must also disclose relevant
information to the other consulting party (section 189(3)). It
must allow the other consulting party an opportunity during
consultation to make representations about any matter on which
they are consulting (section 189(5)). It must consider those
representations and if it does not agree with them it must give
its reasons (section 189(6)). But all these primary formal
obligations of an employer are geared to a specific purpose,
namely to attempt to reach consensus on the objects listed in
section 189(2). The ultimate purpose of section 189 is thus to
achieve a joint consensus seeking process. In this manner this
section implicitly recognises the employer's right to dismiss
for operational reasons but then only if a fair process aimed
at achieving consensus has failed. This is also apparent from
section 189(7) which provides that the employer must select the
employees to be dismissed on criteria either agreed to or if
that is not possible, on criteria that are fair and objective.
Achievement of a joint consensus seeking process may be foiled
by either one of the consulting parties. The employer may
obviously frustrate it by not fulfilling its obligations under
section 189(1), (3), (5), (6) and (7). The other consulting
party may do it by refusing to take part in any of the stages
of the consultation process or by deliberately delaying the
whole process. (Cf NEHAWU v University of Fort Hare (1997) 9
BLLR 1054 (LC); UPUSA and Others v Grinaker Duraset (1998) 2
BLLR 190 (LC) at 204D; Fowlds v S A Housing Trust Ltd and
Another, Case No. J561/98 (LC) at para 11). It may also appear
that any one of the parties simply went through the entire
formal process with no intention of ever genuinely reaching
agreement on the issues discussed. These different
possibilities depend on the facts of each particular case. The
important implication of this is that a mechanical checklist
kind of approach to determine whether section 189 has been
complied with is inappropriate. A proper approach is to
ascertain whether the purpose of this section, the occurrence
of a joint consensus seeking process has been achieved ... If
that purpose is achieved there has been proper compliance with
the section.
If not, the reason for not achieving the purpose must be
sought. If the employer alone frustrated the process in some
way or another, there can be no compliance. If the employer
was not at fault and did all it could from its side to achieve
the kind of consultation referred to above, the purpose of this
section would also have been achieved. Mention has already been
made that section 189 is inextricably linked to the issue
whether a dismissal based on operational requirements is fair
or not. In testing compliance with its provisions by
determining whether the purpose of the occurrence of a joint
consensus seeking process has been achieved or frustrated, a
finding of noncompliance by the employer will almost
inevitably result also in a dismissal being unfair for failing
to follow a proper procedure. It is difficult to envisage a
situation where the result could be different. Noncompliance
would not, however, necessarily result in a dismissal being
substantively unfair. ..."
[20] In almost all respects in the present matter the
respondent failed to comply with the requirements of section
189 and the purpose of that section.
The occurrence of a joint consensus seeking process has not
been achieved. This, in my view, was clearly due solely to
the failure of the respondent to initiate or to allow such a
process to occur. There was not even an attempt to consult
on the relevant issues or to seek ways of avoiding
retrenchment. As Mr Wasserman, the witness for the
respondent, candidly admitted, before any contact was even
initiated with the applicant a final decision had been
taken, to restructure the organisation in a way which was
aimed to ensuring the reduction of personnel costs and, in
particular, the elimination of one of the positions of
management,
likewise, without any prior consultation, it was implemented
on the basis that Ms Duncan rather than the applicant would
be selected to head the new merged operation. In all
likelyhood the applicant would be rendered effectively
redundant. The latter decision was likewise a final one
taken in the absence of any consultation and management was
not even prepared to consider reviewing or reconsidering
that decision.
[21] There was accordingly no opportunity to consult and
no effort to seek consensus either on ways of avoiding
retrenchment or on the process of selecting who was to remain
and who was to leave the company's employ. Of particular
concern in this regard in the present matter is the complete
lack of any opportunity for the
applicant to make representations as to why she should not
be selected to manage the merged divisions. She was clearly
faced with a fait accompli .
[22] An attempt was made both by Mr Wasserman in evidence
and by Mr du Preez in argument to portray the retrenchment
as not being certain or inevitable in that the applicant was
offered the three month BSP position (referred to
previously) and further she was invited to make suggestions
as to other possible positions. In my view neither of these
possibilities addresses the fundamental requirements of
section 189. The BSP
position was clearly stated to be a temporary one. Even if
it were accepted it would mean that the applicant still lost
her permanent position. The termination of even the
temporary work seemed highly probable, if not inevitable. It
was also offered on the basis that if it was accepted, the
retrenchment package offered in the letter of 8 September
1998, would fall away and would have to be renegotiated. The
possibility of other positions was not one which the
respondent seemed to regard as anything but speculative or
unlikely. The applicant was offered Hobson’s choice.
[23] It was suggested in evidence and in argument that the
applicant accepted the retrenchment package and therefore
cannot now be heard to raise any complaints regarding the
retrenchment or at least to claim any compensation in that
regard. In my view, this argument is spurious. The applicant
did not voluntarily accept or acquiesce in her retrenchment
and cannot be regarded, in my view, as waiving or
compromising any right to claim compensation. The package,
in any event, provided what was in effect equivalent to the
minimum severance benefit ordinarily payable under our law
for employees whose retrenchment occurs in a lawful and fair
manner. It was never offered, let alone accepted, on the
basis that it was to remedy or to substitute for a claim for
unfairness in the process followed. As pointed out by her
attorney, Mr McLaren, the severance package did not remove
or remedy the unfairness of the process.
[24] I am also unpersuaded by the argument that the
respondent's unilateral action can be justified on the basis
that it acted in the interests of saving the company from
further financial problems or that it was inevitable that Ms
Duncan should be preferred and that the applicant would have
to be retrenched.
This, in my view, portrays a complete lack of understanding
of or regard for the fundamental and clear requirements of
section 189 of the Act .
[25] Accordingly I conclude that the respondent failed in
the most material respects to comply with the process
requirements prescribed by section 189.
[26] Since the applicant does not seek reinstatement,
compensation would in the ordinary course be the
appropriate remedy. Mr du Preez submitted that I should
favour the respondent and refuse such an award of
compensation in the exercise of the court's discretion
either to grant or refuse compensation under
section 194. He referred in this regard to the remarks of
Froneman DJP in relation to the discretion the court has in
the case of Johnson & Johnson (supra) at 99I100A.
[27] In my view the facts of this case do not favour the
refusal of compensation. On the contrary, in my view the
requirements of law and fairness are best served by an award
of compensation. Both parties' attorneys agreed that in such
event the appropriate award would
be compensation calculated for the period of 11 months,
being the period since the date of dismissal to the
conclusion of the court hearing and that the applicant's
monthly remuneration was R10 000. The compensation is
accordingly calculated in the total sum of R110 000.
[28] With regard to costs, Mr du Preez submitted that my
discretion should be exercised on the basis that each party
should pay its own costs. In my view, the circumstances are
such that the requirements of the law
and of fairness would best be served if costs followed the
result.
[29] I accordingly make the following order:
(a) The applicant's dismissal is held to be unfair for want
of compliance with section 189 of the Labour Relations Act,
No. 66 of 1995.
(b) The respondent is ordered to pay the applicant
compensation in the total sum of R110 000.
(c) The respondent is further ordered to pay the
applicant's costs.
____________________
ACTING JUDGE KENNEDY
ON BEHALF OF APPLICANT : MR Ian McLAREN
Instructed by : McLaren & Associates.
ON BEHALF OF RESPONDENT : MR L DU PREEZ
Instructed by : Hofmeyer,Herbstein
Giwhala Cluver Inc .
DATE OF HEARING : 12 AUGUST 1999
DATE OF JUDGMENT : 13 AUGUST 1999