Sneller Verbatim/JduP
IN THE LABOUR COURT OF SOUTH AFRICA
BRAAMFONTEIN CASE NO: JS1178/01
2003.01.21
In the matter between
JOHN JAMES BROWN Applicant
and
CASH PAYMASTER SERVICES (PTY) LIMITED
Respondent
________________________________________________________________
J U D G M E N T
________________________________________________________________
PAMMENTER A.J: The applicant in this matter is John James
Brown. He was born on 18 July 1941, and in 1970 he
commenced employment with a company which over the years
underwent a series of mergers and name changes, and which in
1998 was known as Datacor Holdings (Pty) Limited. For the sake
of convenience I shall hereafter in this judgment refer to this
company and its predecessors as "Datacor". It is not necessary
in this judgment to elicit all the different mergers and name
changes which Datacor underwent, it is suffice to say that for
the purposes of the Labour Relations Act, 66 of 1995 (which I
will hereafter refer to as the "LRA") the applicant must be
considered to have been employed by the same employer until
at least 1998.
His employment commenced in the United Kingdom, and
in 1982 he was transferred to South Africa. By 1998 he had
progressed to become the general manager of the Technologies
Application Group (which I will hereafter refer to as "TAG") which
was a trading division of Datacor.
It is not disputed that in terms of his contract of
employment his retirement age was 65 years, and that he
contributed to a pension scheme in terms of which he would
have received a pension at that age.
On 23 April 1998 Datacor sold TAG to Cash Paymaster
Services (Pty) Limited, the respondent in this matter. It is
perhaps relevant to note that at the time the respondent was a
subsidiary of the First National Bank Limited (which I will
hereinafter refer to as "FNB").
In terms of the contract of sale TAG was sold as a going
concern, and with it went the applicant's contract of
employment. It is not disputed that section 197 of the LRA, as it
read prior to it being amended by Act 12 of 2002, applied to the
transaction in question. At the time the respondent did not have
a pension scheme for its employees, and accordingly could not
offer the applicant the same benefits he had enjoyed when
employed by Datacor. In other respects the respondent was also
unable to offer the applicant the same terms and conditions
which had applied to his employment by Datacor. As a result a
series of negotiations commenced between the applicant and a
Mr Rose, the then human resources manager of the respondent,
which culminated in two documents being signed on 25 May
1998. The first was a letter from Mr Rose to Mr Brown the
applicant confirming an agreement which had been reached
regarding various matters concerning his employment. The
second was a letter headed "Offer of Employment" signed by Mr
Rose on 25 May 1998 and which was subsequently signed and
accepted by the applicant on 11 June 1998. The penultimate
paragraph of this latter document read as follows:
"The terms and conditions of employment set out in this letter must
be regarded as a summary of the most prominent aspects. More
comprehensive terms and conditions are set out in the CPS Staff
Manual, and such terms and conditions are subject to
amendment by the CPS Management." (Underlining added)
The reference to the CPS Staff Manual was a reference to
a manual produced by the respondent, amended from time to
time, which set out the terms and conditions of its staff's
employment.
It is perhaps also relevant to note that as regards the
salary which was offered to the applicant in the offer of
employment the same contained an element to compensate the
applicant for the fact that the respondent did not have a pension
applicant for the fact that the respondent did not have a pension
scheme, and therefore the applicant would have to make his
own arrangements in this regard. In a nutshell, his salary was
increased by an amount equal to Datacor's contribution to the
pension fund of which he had formerly been a member.
On 15 June 1998 the applicant signed a document headed
"Articles of Agreement made and entered into between Cash
Paymaster Services (Pty) Limited and John James Brown".
This document also contained terms and conditions of the
applicant's employment.
In April 1999 FNB sold the respondent to the Aplitech
Group (which I will hereinafter refer to as "Aplitech") and which,
as I understand the position, was a group of companies which
provided various different services to the public.
Mr Chalmers, the current group human resources
manager of Aplitech, gave evidence that in about October or
November 1999 a decision was taken to integrate certain of the
operating divisions of Aplitech. In so doing it also became
necessary to have a common human resources policy, including
a policy as regards retirement. Prior to that stage neither
Aplitech nor the respondent had any policy regarding retirement
age. At the time Mr Chalmers was the human resources
manager of the respondent and not of the entire Aplitech Group.
He and an associate determined that an appropriate retirement
age for all employees in the group would be 60 years. During
the course of his evidence he gave reasons for arriving at this
conclusion, namely that certain of the work some of the
employees were expected to perform was of a strenuous nature
and they could not reasonably be expected to continue doing so
after the age 60 years. Furthermore, his research indicated that
60 years was the normal retirement age for employees in the
financial services sector. He candidly conceded, however, that
he did not consult with any of the employees of the Aplitech
Group, including the applicant, before arriving at the conclusion
that the retirement age should be 60.
The board of directors of Aplitech accepted the suggestion
that the retirement age should be 60 years, and directed that
the CPS Staff Manual should be amended accordingly. This
resulted in the following insertion into the staff manual on 17
February 2001, which was made in the appropriate place,
namely:
"9.10.4 Retirement age for all staff is 60 years of age."
Immediately he learnt of this insertion in the manual the
applicant objected and wrote to Mr Chalmers on 23 February
applicant objected and wrote to Mr Chalmers on 23 February
2000. Much correspondence followed on the topic, and in
addition the applicant had meetings with various persons in the
Aplitech management, during the course of which he raised his
concerns.
Whilst cross-examining the applicant, Mr Redding,
counsel for the respondent, suggested to him that he had
accepted the retirement age of 60 years. However, when Mr
Chalmers gave evidence he made it perfectly clear, with
commendable frankness, that throughout the applicant had
objected to, and had never accepted, the new retirement age.
During the course of the meetings, and in the
correspondence to which I have referred above, the applicant
was offered a fixed term contract for a period of one year after
his retirement, with the possibility of this contract being
extended. He refused to accept the same, with the result that
his employment came to an end on 31 July 2001 being the end
of the month in which he turned 60.
A further issue arose between the applicant and the
respondent relating to what I shall refer to as "the retirement
package" offered by the respondent to the applicant on his
retirement. In a letter dated 14 May 2001 Mr Chalmers informed
the applicant that on his retirement on 31 July 2001 he would
received the following package:
1. One month's salary.
2. One week's salary for every completed six months of service with
CPS (i.e. the respondent).
3. All outstanding leave pay and pro rata leave pay.
It is paragraph 2 of this offer which has led to the dispute.
The applicant contends that in computing his time of service for
the purpose of the retirement package his service with Datacor,
and not only his service with the respondent, should have been
taken into account. He made this point immediately clear to the
respondent in a letter which he wrote to Mr Chalmers on 13 May
2001. However as things turned out the respondent was not
impressed with his arguments in this regard, and on retirement
his retirement package took into account only his service with
CPS, i.e. since 1998. It is relevant to note that the retirement
package was just that, namely an ex gratia payment on
retirement. It was not severance pay.
Further issues arose between the applicant and the
respondent regarding an increase in salary payable from 1
October 2000 and a bonus, which in the normal course would
have been payable to the applicant after the end of the financial
year at 30 June 2001. However during the course of the trial, the
applicant elected not to persist with his claims arising out of
these issues.
applicant elected not to persist with his claims arising out of
these issues.
It follows from all of the aforegoing that the issues to be
determined in this case are the following:
1. Whether the respondent was entitled to insist that the applicant
retired at age 60. (I shall henceforth refer to this issue as "the
retirement age issue").
2. Whether, for the purpose of calculating his retirement package, the
applicant's years of service with Datacor should have been
taken into account. (I shall refer to this issue as "the retirement
package issue).
I now turn to consider each of these issues separately.
THE RETIREMENT AGE ISSUE
Both parties are agreed that section 197 of the LRA is
pertinent to this issue. Although there was initially some
controversy regarding the interpretation of this section prior to
its amendment in 2002 this controversy has been resolved in a
number of recent judgments, all of which are binding on me.
These judgments are the following: National Education Health
and Allied Workers' Union v University of Cape Town and Others,
an unreported judgment of the Constitutional Court of South
Africa handed down on 6 December 2002. National Education
Health and Allied Workers' Union v University of Cape Town and
Others 2002 (23) ILJ 306. This was the judgment of the Labour
Appeal Court which formed the subject matter of the
Constitutional Court case referred to above. Food Grow (a
Division of Leisure Net) v Keo 1999 (9) BLLR 875 LAC (which I
shall hereinafter refer to as "the Food Grow judgment").
The legal position which can be gleaned from the above
three cases can be summarised as follows:
1. On the sale of a going concern the employee's contract of
employment is automatically transferred from the seller to the
buyer.
2. The terms and conditions of the employment contract may then be
varied by agreement between the parties.
3. They may be varied to such an extent that the old contract
remains in skeletal form only. However some incidents of the
old contract would be unalterable, such as the date of the
commencement of employment. (In this regard see paragraph
32 of the judgment of Conradie JA in the Food Grow case.)
As I have already indicated, in the present case it is
common cause that prior to the takeover of TAG by the
respondent it was a term of the applicant's employment that he
had the right to work until the age 65. (In this regard see
paragraph 3 of the Unidata employee handbook.) That term of
paragraph 3 of the Unidata employee handbook.) That term of
his employment could only be varied by agreement. None of the
documents which the applicant signed at the time of
commencing his employment with the respondent, and which I
shall hereinafter refer to collectively as "the new agreement",
dealt in specific terms with retirement. Therefore there was no
express term varying the retirement age clause which had
previously existed in the applicant's employment contract.
Notwithstanding this, Mr Redding argued vigorously that it
was clearly a tacit term of the new agreement that this was the
case, namely that the agreed retirement age would fall away.
He contended that on a perusal of the documents which
constituted the new agreement they clearly indicated that they
were intended to constitute the entire agreement between the
parties, and that nothing remained of the old agreement save
for the skeletal form referred to by Conradie JA in the Food Grow
case. There was, he contended, a complete novation of the
existing contract.
I should mention that it was not Mr Redding's contention
that the new agreement itself provided for a reduction of the
retirement age from 65 to 60 years. It was his contention that
the new agreement did away with the provisions in the existing
contract relating to the applicant's retiring age. Therefore, when
the applicant turned 60, as he had by then reached the normal
retirement age for persons employed in his capacity, he could
be dismissed without the dismissal being deemed to be unfair in
terms of section 187 of the LRA. In this regard he relied on the
provisions of section 187(2)(b) of that Act.
As pointed out by Mr Kochs who appeared for the
applicant a novation, because it constitutes a waiver of rights, is
never easily presumed. The most clear evidence of the intention
to waive the right is required. I believe that this is trite law and it
is not necessary to cite any authority in support of this
contention. It is also relevant that, it being common cause that
the applicant was dismissed, the onus was on the respondent to
prove that the dismissal was fair, which meant that it had to
prove the tacit variation of the employment contract. (In this
regard see section 192(2) of the LRA.)
I do not believe that the new agreement, read in the light
of the circumstances which existed at the time, prove such a
tacit variation. These circumstances which existed at the time
included the fact that the applicant would have had no reason
for wanting to waive his rights in regard to his retirement age,
for wanting to waive his rights in regard to his retirement age,
and the respondent, by virtue of the fact that it had no policy in
place regarding retirement age, would have had no reason for
wanting the applicant to waive his right. I believe it is also
significant that in the negotiations which preceded the
conclusion of the new agreement the respondent agreed to pay
the applicant extra in order to make up for the employer's
contribution to the pension fund which he had formerly received
from Datacor. It seems obvious that what was intended was that
the applicant's position as regards retirement should remain the
same. This would militate against any conclusion that the
parties intended, at least tacitly, that the applicant should waive
his rights as regards retirement age.
In the circumstances I find that the respondent has not
succeeded in showing that there had been any tacit variation of
the term of the applicant's contract of employment regarding
his retirement age.
In the alternative Mr Redding argued that the term in the
offer of employment dated 25 May 1998, which reserved the
right to the respondent to vary the terms of the CPSstaff
manual, entitled it unilaterally to vary the terms of the
applicant's employment as regards retirement age.
I believe there are two answers to this contention: The
first is that the clause must obviously be strictly interpreted. It
purports to take away rights of employees. It refers to "more
comprehensive terms and conditions" as set out in the CPS staff
manual, which terms and conditions "are subject to
amendment". On a strict interpretation thereof this clause does
not permit the introduction of a completely new condition, it
merely permits the amendment of an existing condition. The
CPS staff manual does not deal with the retirement age. It
appears to deal, only in paragraph 9, with what is to happen as
regards outstanding leave on retirement. The introduction of the
retirement age clause was therefore a completely new clause
which the respondent sought to introduce. I do not believe that
it was entitled to introduce this clause unilaterally.
The second answer is that, where a contract permits one
party to unilaterally vary the terms thereof, such a party may
only do so if he acts bono et viri, i.e. as a reasonable man would
act. In this regard see the judgment of the Supreme Court of
Appeal in Deeb v Absabank 1999 (4) SA 928.
Without wishing to be unduly critical of the respondent, I
do not think that it can be said that it acted reasonably in
unilaterally imposing the new retirement age without first at
least consulting with the employees who would be affected
thereby. Having regard particularly to the strictures against
thereby. Having regard particularly to the strictures against
unilateral variation of terms of employment in our labour law I
believe that a reasonable person, in the position of the
respondent, would first have consulted with the affected
employees before introducing the new condition regarding
retirement.
In the circumstances I am bound to conclude that the
respondent has not succeeded in showing a variation of the
term of the applicant's existing contract of employment
regarding retirement age when he commenced employment
with the respondent.
Before leaving this issue I should deal with a point which
was raised by me during the course of argument and adopted,
albeit faintly, by Mr Redding. Section 187(2)(a) of the LRA
provides that it is not unfair to dismiss someone who has
reached the normal or agreed retirement age. Mr Redding
contended that this subsection could be interpreted to mean
that even if there was an agreed retirement age an employee
could still be dismissed before that age, provided he had
reached normal retirement age.
I believe there is a short answer to this contention. Section
39(2) of the Constitution requires me to interpret section 187(2)
(a) of the LRA in accordance with the spirit and purport of the
Bill of Rights as contained in the Constitution. Section 23(1) of
the Constitution, which forms part of the Bill of Rights, provides
that the applicant is entitled to fair labour practices. It would
hardly constitute a fair labour practice if an employee, who has
agreed a retirement age with his employer, may be dismissed
earlier than that age simply because he has reached the normal
retirement age.
Accordingly even if the applicant had reached normal
retirement age, a matter which I do not believe it is necessary
for me to decide, he could, in my view, not be dismissed by the
respondent prior to his agreed retirement age. In the
circumstances I find that the applicant was unfairly dismissed.
The parties were ad idem that if I made this finding I
would of necessity have to find that the dismissal had been
automatically unfair in terms of section 187(1)(f) of the LRA. The
applicant does not seek reinstatement, accordingly there
remains to be considered only the compensation to which he is
entitled in terms of section 194 of the LRA.
However, because I believe the limit of compensation to
some extent must depend on whether or not the applicant
receives any award pursuant to the retirement package issue, I
shall deal with the compensation issue after I have dealt with
shall deal with the compensation issue after I have dealt with
the retirement package issue.
THE RETIREMENT PACKAGE ISSUE
The applicant basis his claim for the increased retirement
package on contract. He does not contend that he has any
entitlement to the package in terms of the Basic Conditions of
Employment Act, 75 of 1977, nor in terms of the LRA. Nor does
he contend that his entitlement arises out of any of the
conditions of his employment. It is his contention that his
entitlement stems from the letter addressed to him on 14 May
2001 by Mr Chalmers. I have already quoted in this judgment
the relevant portion of the letter. He contends that this letter, or
the relevant portion thereof, read with section 197(4) of the LRA
obliges the respondent, in calculating the retirement package,
to take into account his period of employment with Datacor.
Section 197(4) of the LRA, prior to its amendment, read as
follows:
"A transfer referred to in subsection (1) does not interrupt the
employee's continuity of employment. That employment
continues with the new employer as if with the old employer."
The subsection must of course be read in conjunction with
the remainder of section 197. This section has to do, inter alia,
with the preserving of an employee's rights on the sale of a
business. The applicant, however, had no right at the time of the
sale of TAG to a retirement package, and therefore that right
could not be preserved by section 197(4). The offer of the
retirement package was an ex gratia offer made by the
respondent. As such it could attach such conditions to it as it
saw fit. The position may have been different if the respondent
had had a policy in place regarding retirement packages which
determined that the package was based on the length of
service. However no such policy existed and the offer contained
in the letter of 14 May 2001 was a once off offer, to which the
respondent was entitled to attach such conditions as it saw fit.
In the circumstances I must conclude that the applicant
has not succeeded in satisfying me that he is entitled to the
increased retirement package.
Question of Compensation
I now deal with the quantum of compensation to which the
applicant is entitled following upon his unfair dismissal. This is a
matter entirely for my discretion, save that in terms of section
194(3) of the LRA the compensation may not exceed an amount
in excess of two years' salary at the time of the applicant's
dismissal.
During the course of argument both parties' legal
representatives urged me to take a number of factors into
representatives urged me to take a number of factors into
consideration in favour of either increasing or decreasing
compensation. I do not believe that it is necessary to list them
all here. The salient ones are however the following:
1. For the applicant to have been dismissed five years before his
agreed retirement age, and then only to have been given one
year's warning of that dismissal, must have made it very difficult
for him to reorganise his finances on retirement. He must have
suffered considerable financial loss. Not only was there a loss of
salary but also the fact that he would now have to draw on his
pension earlier, resulting in a reduced pension for the remainder
of his life. At his age it would not be easy for him to find
alternate employment. This factor militates strongly in favour of
awarding the applicant the maximum compensation permissible
in terms of section 194.
2. The applicant could have reduced his financial loss by opting for
reinstatement, he was certainly entitled thereto, and had he
done so his financial loss would have been considerably
reduced. There is nothing to suggest that the relationship
between the applicant and the respondent had broken down to
such an extent that it would not have been feasible for him to
have continued working for the respondent. On the contrary, I
distinctly got the impression on listening to Mr Chalmers'
evidence, that the relationship at a personal level was still quite
good. This factor militates against a high award of
compensation.
3. The respondent did offer the applicant a fixed term contract of 12
months with a possibility of extending the same. If he had
accepted this contract, at the same time reserving his rights to
approach the CCMA and if necessary the Labour Court, he could
have significantly reduced his financial loss.
I believe that the first of these factors far outweighs the
others. However, some consideration must be given to the other
factors, and accordingly I believe that it would be appropriate if
the applicant was to be awarded compensation equivalent to 21
months of his salary at the time of his dismissal.
It is common cause that at the time of his dismissal the
applicant's salary was R32 601,00 per month, 21 months' salary
accordingly equals R684 621,00. This is the award for
compensation which I intend to make.
Costs
I am enjoined to make a costs order which is in
accordance with both fairness and law. The applicant was
successful in regard to the retirement age issue, but
unsuccessful in regard to the retirement package issue. I am
unsuccessful in regard to the retirement package issue. I am
however in agreement with Mr Kochs that more than half of the
trial was spent in determining the retirement age issue.
In all the circumstances I believe that it would be both fair
and lawful if the applicant were to be awarded 70% of his costs.
O R D E R
In the circumstances I make the following order:
1. The respondent's dismissal of the applicant on 31 July 2001 is
hereby declared to be automatically unfair in terms of section
187(1)(f) of the Labour Relations Act, 66 of 1995.
2. The respondent is ordered to pay the applicant compensation in
terms of section 194(3) of the Labour Relations Act in an
amount of R684 621,00.
3. The respondent is ordered to pay 70% of the applicant's costs and
tax of suit.
ON BEHALF OF THE APPLICANT: MR KOCHS
ON BEHALF OF THE RESPONDENT: MR REDDING