CASE NO. P256/00
IN THE LABOUR COURT OF SOUTH AFRICA
HELD AT PORT ELIZABETH
DATE 3.11.2000
In the matter between:
ANTHONY CROUCH Applicant
and
KURLAND BRIK (PTY) LTD Respondent
J U D G M E N T
LANDMAN, J:
[1] Mr Anthony Crouch was employed at the Port Elizabeth
office of Kurland Brik (Pty) Ltd (Kurland) as a regional manager
with the sale of bricks being his principal function. He was appointed
by Kurland in 1995 while his father-in-law, George Simpson, was a
director of the company. During January 1999 the shares were
transferred to Mr Clifford Alfie and Mr Graham Black, the former
factory manager, who became the new managing director. Mr Simpson stayed
on as a consultant and Mr Crouch remained in his position as regional
manager, Port Elizabeth. I should add that although he was termed the
regional manager he did not appear to have more than one employee
reporting to him. Mr Crouch's salary at the date of the transfer of the
shares had risen from R8 000,00 per month to R15 000,00 per month.
It was common cause that the Port Elizabeth office was
breaking even at all material times. It was not, how-
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Judgment 1
ever, thriving. Mr Black thought that a target should
be set for the Port Elizabeth/Jeffreys Bay region and
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he set the target at 400 000 bricks per month. This target was
not achieved. The target was lowered to
200 000 bricks per month. Even this was not achievable
in the first half of 1999, owing in part to the de-
pressed economy.
[2] During April/May of 1999 a meeting of directors was
held at the Plettenberg Bay factory of Kurland. Mr
Simpson, the consultant, was also present. It was deci-
ded that in order to increase profits, cost saving mea-
sures would be introduced in the P.E. operations. The
Port Elizabeth office, which Kurland rented, would be
closed. Mr Crouch was instructed to attend to this. Mr
Crouch assumed that it was incumbent upon him, as the
Port Elizabeth regional manager, to try and find free
office space. He made various approaches to various
companies but was unable to secure any free premises.
Mr Crouch's endeavours to find office space was no
doubt fuelled by his own views that it was not feasi-
ble for him to operate without an office. He was not
able to operate from his garages at home as his wife
conducted her business there.
[3] As at 19 August 1999 Mr Crouch did not have any clear
instructions as to how he was to operate in Port
Elizabeth. On 20 August 1999 Mr Crouch was informed by
Mr Black that the Port Elizabeth sales office would be
closed down. The way of doing business in Port Eliza-
beth would change. Mr Black again mooted, on that occasion, an
earlier proposal that Mr Crouch convert to
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Judgment 2
a commission only basis. He fleshed out his proposal. He proposed
that Mr Crouch be an agent selling Kurland's products on the following
terms:
"Up to 200 000 bricks available for sale in
P.E. area, a further quantity would be made
available for products sold in J/Bay area.
The commission on the sale of these bricks
is set at 15% of gross sale value before
VAT. To assist in setting yourself up in
September Kurland Brik will pick up 100%
of any shortfall between commission earned
and costs incurred as laid out in P.E.199
spreadsheet. This period will also serve as
a notice period for changes to your histo-
rical working conditions. In October 75%
of shortfall, in November 50%, December 25%.
From January 2000 only R & M on the bakkie
will be paid by Kurland and at this stage
there is no intention to replace that vehi-
cle. Anthony I mentioned to you that you
can use this offer for as long as you want
and do not have to feel committed but if it
works for you and you include J/Bay into
the numbers I don't see why it should not.
I would love to keep you on board.
Kind regards
Graham".
[4] Mr Crouch informed Mr Black that he was not interested
in the commission option, principally because he was
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Judgment 4
married, had a family and preferred the security of a
monthly salary. He sent an e-mail to Mr Black expres-
sing the hope that they could come to some mutually
beneficial arrangement. On 25 August 1999 Mr Black
fired a bolt out of the blue. He reviewed the history
of the business and his expectations and Mr Crouch's
position in the company since and subsequent to the
sale of the shares. He expressed his disappointment
that Mr Crouch did not want to accept the commission
only option. He ended by saying that a clean break
would be best for both parties. Mr Black concluded
that Mr Crouch's position as Kurland's representative
is on notice and will terminate on 30 September 1999.
Mr Black admitted in his testimony that he had not
mooted the possibility that Mr Crouch would be re-
trenched prior to his sending this e-mail on 25 August
1999.
[5] After receiving notice of termination of his services
Mr Crouch contacted Mr Black about the possibility of
a retrenchment package. Eventually some monies were
paid but this did not constitute severance pay. Mr
Black maintains that Mr Crouch is not entitled to seve-
rance pay. Mr Crouch worked until 30 September 1999. He
later sued in this Court for relief, alleging that he
had been unfairly dismissed. At the commencement of the
trial he made it clear that he did not challenge the
substantive reason for his dismissal, save to allege
that because the dismissal was in his opinion procedu-
rally unfair, it meant that the dismissal could also be
substantively unfair. Mr Crouch seeks the maximum com-
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Judgment 5
pensation permitted in terms of Sec 194 of the Labour
Relations Act 66 of 1995 and his costs.
[6] Prior to 25 August 1999 Kurland consulted with Mr Crouch regarding
the cutting of costs and, somewhat am-
biguously, about the future of the Eastern Province
operations. However, this consultation was not done
under the threat or shadow of an impending retrench-
ment. When the retrenchment materialised, no means of
avoiding the dismissal were explored. The timing of
the dismissal was not discussed. If it had been dis-
cussed, some accommodation as regards the preservation
of the Christmas bonus or the October increase could
possibly have been considered. The increase would also
have affected the question of the quantum of severance pay. There
was no discussion of severance pay prior to the decision to dismiss Mr
Crouch and no severance pay was paid thereafter. No proposals were made
to mitigate the effects of the retrenchment. For instance, no time
off was allowed to Mr Crouch to seek other employment or to re-
arrange his working life.
[7] I am aware that Kurland is a small employer and that
according to JOHNSON & JOHNSON (PTY) LTD v CWIU [1998]
12 BLLR 1209 (LAC), Sec 189 is not to be approached
mechanistically. I have also considered whether any of the
activities of Kurland, which took place prior to the decision to
retrench (which was in fact the date of
contemplation of retrenchment) should be taken into
account. The primary purpose of the activities engaged
into prior to 25 August 1999 was to save costs and to
save the P.E. operations in the sense of making it more
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Judgment 6
profitable. Kurland's activities during this period
had in effect been taken into by Mr Crouch because he
accepts the economic rationale for the abolition of his
post. I do not think that the events can be milked to
achieve much more than this. Nevertheless, it could reasonably
be expected of Mr Crouch to have made some
counter-proposals about Mr Black's suggestions regar-
ding a change to his position. But Mr Crouch's conduct is offset by
Mr Black's failure, despite five invita-tions to do so, to inform Mr
Crouch that his job security was in jeopardy.
[8] In the premises I am convinced that the dismissal of
Mr Crouch by Kurland was procedurally unfair. I find it
unnecessary to find if it was substantively unfair but I am willing
to presume this to be the case.
[9] In terms of the JOHNSON & JOHNSON decision I am en-
joined to consider whether I should award compensation,
which in this case amounts to R180 000,00, which is an
amount equivalent to Mr Crouch's remuneration, estimated
conservatively in the absence of full details about his benefits,
and not awarding him compensation at all. Mr Wilcox, who appeared for
Kurland, urged me to make no award for the following reasons:
(a) Mr Crouch immediately obtained other
employment;
(b) I should have regard to the actions of
Kurland prior to the decision to dis-
miss Mr Crouch; and
(c) it would be unfair to Kurland to order
it to pay compensation.
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Judgment 7
Mr Kroon, who appeared for Mr Crouch, has urged me to
award compensation to the fullest extent permissible in
terms of Sec 194 of the Labour Relations Act. He sub-
mits that I should exercise my discretion against Kur-
land because:
(a) of the gross nature of Kurland's dis-
regard of its obligations in a retrench-
ment situation;
(b) Kurland's failure to obtain advice as
to how to retrench an employee fairly;
(c) the fact that Mr Crouch was misled in-
to believing that his position would
not be made redundant; and
(d) Kurland's high-handed attitude to the
matter of severance pay.
[10] The considerations raised by Mr Wilcox must be viewed
in the light of the rationale for awarding compensation
for procedural unfairness. FRONEMAN, D J P in the
JOHNSON & JOHNSON case at 1220B put it this way:
"The compensation for the wrong in failing
to give effect to an employee's right to
a fair procedure is not based on patrimo-
nial or actual loss. It is in the nature
of a solatium for the loss of the right,
and is punitive to the extent that an em-
ployer (who had breached the right) must
pay a fixed penalty for causing that loss.
In the normal course a legal wrong done
by one person to another deserves some
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form of redress. The party who committed
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Judgment 8
the wrong is usually not entitled to be-
nefit from external factors which might
have ameliorated the wrong in some way
or other."
It follows that the fact that Mr Crouch obtained other employment
is not a factor which I should take into
account. The actions of Kurland prior to the decision
to retrench Mr Crouch have already been taken into
account. To the extent that they still play any role
they do not weigh heavily with me. If I were at large
I would probably not award Mr Crouch more than six
months' compensation but I do not have a discretion
to order what is just and equitable. I am bound by
the statutory formula.
[11] In the circumstances I find that Mr Crouch is entitled
to his full compensation, even though in my view he is
being over-compensated. However, to make no award would
be more unfair towards Mr Crouch than it would be fair
to Kurland.
[12] As far as severance pay is concerned, it is Kurland's
contention that alternative employment was offered to Mr Crouch,
that he refused this and therefore he is not entitled to severance pay.
The payment of severance pay in this case is governed by Sec 41 of the
Basic Conditions of Employment Act 75 of 1997. Sec 41(4) reads
as follows:
"An employee who unreasonably refuses to
accept the employer's offer of alterna-
tive employment with that employer or
any other employer, is not entitled to
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Judgment 9
severance pay in terms of sub-section 2."
In the context of the Basic Conditions of Employment Act
employment has a longstanding meaning. It does not
include work in the nature of an independent contract.
This is what was being offered to Mr Crouch. He was not being
offered alternative employment although
that may have been possible. In the circumstances
therefore Sec 41(4) does not apply in this case. Mr
Crouch is entitled to three weeks' severance pay.
[12] In the premises therefore the respondent is ORDERED to
pay to the applicant:
(a) R180 000,00 as compensation for his
unfair dismissal;
(b) R11 250,00 as severance pay;
(c) Interest at the prescribed rate on
the amount mentioned in paragraph
(b) as from 30 September 1999 to
date of payment; and
(d) The costs of this suit.
A A LANDMAN
JUDGE OF THE LABOUR COURT
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