IN THE LABOUR COURT OF SOUTH AFRICA
HELD AT JOHANNESBURG
CASE
NO: J639/97
In the matter between:
PAPER, PRINTING, WOOD AND
ALLIED WORKERS UNION 1st
Applicant
PETER KHUMALO AND 57 OTHERS 2nd to further
Applicants
and
ELS BROTHERS (PTY) LIMITED Respondent
JUDGMENT
SEMENYA AJ
INTRODUCTION
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1. The respondent (“the employer”), in a letter dated 26 May 1997 addressed to the
representative union (“the union”) of the second applicants (“the employees”), advised the
latter, in a notice of retrenchment attached to the letter, that the services of the employees
were terminated for operational reasons. It is the conduct of the employer that is challenged
by the union and the employees, in this matter, on the grounds that the termination of the
employees’ services was both procedurally and substantively unfair.
2. The employer answers the complaint by stating that there was adequate compliance with the
Labour Relations Act, No.66 of 1995 (“the LRA”). The employer points to meetings that were
held with the union, where operational requirements of the business of the employer were
discussed. The essence of the contention held by the employer is that the operational
requirements of the business dictated a review of the terms and conditions of the employees’
services, in order to address the losses that were suffered by the business. Failing
agreement, the employer then terminated the services of the employees.
BACKGROUND
3. Mr Chris Els and his brother operated a partnership comprising, amongst others, a sawmill.
The present application concerns this aspect of their business. The sawmill employed all the
forty seven (47) applicants in this matter.
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4. At the time leading up to the dispute in this matter, the sawmill section was experiencing
some financial difficulties with losses ranging between R20 000.00 to R30 000.00 per month.
Mr Els, given the nature of the losses and the strain those losses were bringing to the other
businesses, as well as his relationship with his brother, considered closing down the sawmill
section of the business. He considered the continued operation impossible in the light of the
lack of returns on their capital investment and the gross subsidisation that was needed to
maintain the business.
5. Mr Chris Els, given his limitations in industrial relations matters, procured the services and
advice of Mrs Pearson – a human resources specialist. Flowing from this contact, it was
established that the closure of the sawmill and the consequent loss of jobs could be avoided
if the terms and conditions of service of the employees would be altered. At the time, the
employees were earning R35.00 a day per employee regardless of output. It was then
decided to engage the union to negotiate the change in the terms and conditions of service
of the employees so that the remuneration of the employees could be linked to output.
6. Ms Pearson and Mr Wurst on the side of the employer engaged the union in a meeting that
was held on 12 May 1997. The employer tabled proposals for discussion that the
operational requirements of the business required the change in the terms and conditions of
employment of the employees. These were: that the salaries of the employees must be
linked to production; that the rate of remuneration be 80c per ton; that workers agree to do
paid overtime; that annual leave be taken during the period in December of each year, and
that the backlog be addressed by partial closure of the mill which would result in a reduction
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of approximately ¾ of the employees working.
7. Following the discussion in the subsequent meeting, the union accepted the proposals
tabled by the employer save for one. The union indicated that there would be difficulties with
doing away with the fixed salaries. It indicated that it was amenable to a system of linking
the salaries to production only if, where the tonnage fell below expected levels, an enquiry
should be made to establish whether the problem was a result of fault on the part of the
employer or that of the employees – that if the tonnage was less than expected due to the
fault of the employer then the employer would take the consequences and conversely the
employees take the consequence if the fault was theirs.
8. The two sides could not agree with each other on the aspect of linking the salary to the
production. The employer did not want to enter into debate where tonnage was less than the
target. It considered that process problematic and a potential source of future disputes. The
employees considered it unfair that they should be prejudiced even where the problems of
realising targeted tonnage was due to poor quality timber, nontimeous delivery of timber and
machine malfunctioning.
9. The impasse could not be resolved at the end of both meetings. The employer insisted that
the meeting culminated in a fruitless outcome and that further meetings were incapable of
bridging the gap. The union insists that the end of the discussion left the question open with
a view to invite the owners of the business to a further meeting. The employer does not
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agree that there was an undertaking to hold further meetings and insists that at the end of
the second meeting the position was made clear that absent an agreement, the services of
the employees were to be terminated.
10. The parties went to the Commission for Conciliation, Mediation and Arbitration to conciliate
the dispute. The conciliation was not fruitful, with both parties tabling drafts of settlement
that maintained the conflicting views of either party on the issue of linking salary to output.
11. It was common cause that the employer engaged the services of new people in substitution
of the employees within a period of approximately two weeks of terminating the employees
services, albeit initially on a temporary basis and later on a permanent basis. Although
contested, the employer insisted that it was not practical to retrench some of the employees
and continue with the others because the business required a minimum number of workers
in excess of forty (40).
ISSUES
12. The questions to be decided in this matter are:
12.1. whether the respondent complied with the requirements of section 189 of the LRA
and if not,
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12.2. what is the appropriate relief.
ANALYSIS
13. The evidence tendered on behalf of the parties was in broad terms similar. The facts set out
in the background ties in summary with the evidence rendered on behalf of both parties. The
cross examination on behalf of the applicants addressed itself in the main to seeking to
establish that there were no operational requirements to justify the termination of the
employees’ services. Some time was spent in showing that the loss of approximately R14
000.00 for the year preceding was insufficient, given expenses of using the helicopters that
were incurred, to terminate the services of the employees; that the summary dismissals were
discriminatory and were a sham when the white employees were not told of the impending
closure
14. Zilwa AJ summarises the legal position contemplated in section 189 of the LRA, which
opinion I support, as follows:
“Section 189 of the Act sets out in detail procedures that should be followed by the employer
before dismissing an employee on operational requirements. They provide that when an
employer contemplates dismissing employees for operational reasons it is required to consult with
them or their representatives over a range of issues. During the course of such consultations, the
employer must disclose relevant information in order to make consultation effective. It is trite that
the purpose of such consultations, is to enable affected employees to make representations as to
whether retrenchment is necessary, whether it can be avoided or minimised, and if retrenchment
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is unavoidable, the methods by which employees will be selected and the severance pay they will
receive.
It is also trite that the consultation process is a joint consensus seeking exercise between the
employer and employee, and that compliance with requirements of section 189 of the Act should
not be assessed on a mechanical “checklist” approach. (see Johnson and Johnson (Pty) v CWIU
(1999) 20 ILJ 89 (LAC); [1998] 12 BLLR 1209 (LAC) 1216DJ; Whall v Brandadd Marketing (Pty)
Ltd (1999) 20 ILJ 1314 (LC); [1999] 6 BLLR (LC) 629FJ)”
15. Froneman DJP, in SA Clothing and Textile Workers Union and Others v Discreto – A
Division of Trump and Springbok Holdings (1998) 19 ILJ 1451 (LAC), at paragraph 8 makes
the point, confirmed by Davis AJA, in BMD Knitting Mills (Pty) Ltd v SACTWU [2001] 7 BLLR
705 (LAC), at 709, with which I associate myself:
“The function of a court in scrutinising the consultation process is not to second guess the
commercial or business efficiency of the employer‘s ultimate decision (an issue on which it is
generally, not qualified to pronounce upon), but to pass judgment on whether the ultimate
decision arrived at was genuine and not merely a sham (the kind of issue which courts are called
upon to do in different settings, everyday). The matter in which the courts adjudges the latter
issue is to enquire whether the legal requirement for a proper consultation process had been
followed and, if so, whether the ultimate decision arrived at by the employer is operationally and
commercially justifiable on rational grounds, having regard to what emerged from the consultation
process. It is important to note that when determining the rationality of the employer’s ultimate
decision on retrenchment, it is not the court’s function to decide whether it was the best decision
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under circumstances, but only whether it was a rational, commercial or operational decision,
properly taking into account what emerged during the consultation process.”
16. In Carephone (Pty) Marcus NO and Others (1998) 19 ILJ 1425 (LAC), Froneman DJP said:
“As long as the judge determining the issue is aware that he or she enters the merits not in order
to substitute his or her opinion on the correctness thereof but to determine whether the outcome is
rationally justifiable, the process will be in order.”
17. In adjudicating the question of whether the consultation is bona fide and whether the
decision is fair, I am enjoined by the authorities to look at the substance of the issues that
informed the consultation, evaluate the conduct and approach of the parties to the issues
and determine whether the decision by either party in relation to those issues is fair – by this
I mean, I must be satisfied that the decision to terminate the services of the employees was
a rational decision. In cases such as the present one, it is the substantive and not the
procedural fairness that has to be the final arbiter. Where an employer contemplates
restructuring, that would have the effect in form of changes to working conditions, the
employer generally believes that the business survival is dependent on change to work
conditions or practices and procedures.
18. In the light of the facts in the present case I am called upon to consider whether or not the
conduct of the employer in ultimately dismissing the employees was justifiable, given the
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operational requirements of the business. I am further to evaluate whether both parties bona
fide applied themselves to finding a resolution that was in the circumstances fair.
19. The evidence shows that the union and the employees were amenable to accommodate
most of the demands tabled by the employer, including using additional effort in clearing the
backlog that had arisen, without having to partially close the mill. I invited Mr Leech,
appearing on behalf of the employer, to point out why the solution proposed by the union to
the salary/output question was unreasonable. Mr Leech conceded that the proposal may be
reasonable but contended that the proposal by the employer was equally reasonable and
submitted that since both proposals were reasonable the employer ought to be given the
advantage to decide in those circumstances. Mr Leech, despite invitation, could not point to
any authority that supports that contention. I am unable to agree that any party to a
consultation process has a prerogative to insist on its own position without affording the
other proposal a fair consideration. To my mind, the suggestion by the union that the
employer should bear the consequences where the output falls short for reasons that have
nothing to do with the employees is a reasonable position and ought not to have been
rejected. Further, in the light of the fact that the union agreed to accommodate the other
demands placed on the table by the employer, it was incumbent on the employer to
demonstrate its good faith in giving the suggestion a fair chance, even if the suggestion
entailed an enquiry at each stage of establishing where the fault lies in the event of the
tonnage being less than the target.
20. I am also unable to find possible reasons why the employer could not invoke the remedy
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envisaged in section 67 of the LRA. The LRA provides a comprehensive mechanism to
address resolution of matters of mutual interest, which this was. I find it difficult to accept
that the operational requirements of the business were such as to require the dismissal of all
the employees and substituting those with new employees. In the circumstances, I find the
dismissal of the employees substantively unfair and cannot avoid the conclusion that the
consultation was a sham when it failed to accede to proposals that were inherently sound
and operable.
RELIEF
21. Despite the relief for reinstatement as claimed in the papers Mr Spoor, appearing for the
applicants, conceded that the relief of reinstatement was in the circumstances not
appropriate. I agree that given the fact that the employer has engaged services of other
employees who now have vested rights in respect of the work it would be inappropriate to
award the reinstatement in the circumstances.
22. In terms of section 194(2) of the LRA the compensation awarded to an employee whose
dismissal is found to be unfair because the employer could not prove that the reason for
dismissal was a fair reasons related to the employee’s conduct, capacity or based on the
employer’s operational requirements, must be just and equitable in all the circumstances, but
not less than the amount specified in subsection 1 and not more than the equivalent of
twelve (12) months remuneration calculated at the employee’s rate of remuneration on the
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date of dismissal.
23. In the light of the present circumstances, I believe that it would be just and equitable to
award to each of the individual employees an amount equivalent to twelve (12) months
remuneration calculated at their rate of remuneration on the date of dismissal.
24. The parties argued that costs should follow the result and I see no reason why this should
not be the case in the exercise of my discretion in terms of section 162 of the LRA.
In the circumstances I make the following order:
1. The dismissal of the individual employees was substantively unfair;
2. The respondent is ordered to pay the individual employees, within fourteen (14) days of date
of this judgment, the equivalent of twelve (12) months remuneration calculated on the basis
of each employee’s earning at the date of their dismissal;
3. The respondent is ordered to pay the applicants’ costs.
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DATED at JOHANNESBURG on this the 8 th OCTOBER 2001.
_____________________
SEMENYA AJ
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