IN THE LABOUR COURT OF SOUTH AFRICA
HELD AT JOHANNESBURG CASE NO.
J4930/2000
In the matter between:
SOUTH AFRICA TRANSPORT AND ALLIED
WORKERS UNION
APPLICANT
ABRAHAM MONYELO AND 54 OTHERS SECOND AND
FURTHER
APPL
ICANTS
And
Forecourt Express (Pty) Ltd RESPONDENT
JUDGMENT
ZILWA AJ
INTRODUCTION
1. In this application the applicants are challenging the dismissal
of the second and further applicants (“the applicants”) on the
30th September 1999 for alleged operational requirements. The
applicants contend that their dismissal was not for a fair reason
and that the respondent failed to comply with the requirements
of Section 189 of the Labour Relations Act no. 66 of 1995 (“the
Act”).
2. Consequently this court is enjoined to determine both the
substantive and procedural fairness of the applicants’ dismissal
by the respondent.
BACKGROUND FACTS
3. The respondent (“Forecourt”) is a subsidiary of Cargo Africa
and its main business is the ferrying of motor vehicles and it
had several contracts with various motor manufacturers in
South Africa. According to the respondent’s evidence (per Du
Plessis), it does not own a fleet of carriers nor does it employ
drivers, it outsources the actual collection and delivery of these
motor vehicles to independent transport companies and
supervise the logistics thereof. The respondent did not have the
contract to ferry vehicles for Daimler Chrysler SA LTD
(“DCSA”), of which 50% thereof was held by Fauna
Motorvervoer (PTY) LTD (“Fauna”). All the applicants were
employed by Fauna as drivers, yard workers, mechanic and
administrative staff respectively. Fauna had employees mainly
based in Eikenhof and East London.
4. On or about the 23 rd August 1999 the respondent bought
Fauna as going concern (liabilities excluded) in order to obtain
the DCSA contract from Fauna in the sum of R12 059 55000.
The respondent wanted the DCSA contract in order to increase
its market share and improve its profitability.
5. Fauna was a transport company which transported new
passenger vehicles for DCSA from its factory in East London to
either directly to the dealers or to a storage yard in Eikenhof in
Vanderbijlpark. Both passenger and commercial vehicles were
delivered by Fauna to dealers from Eikenhof across the
country.
6. The respondent contend, which is disputed entirely by the
applicants, that Fauna was not only a unprofitable operation,
but was financially unsound and had been for sometime. It
avers that the purpose of acquiring Fauna was to get the DCSA
contract and not to acquire Fauna so as to run it as a transport
carrier operation. It contends that the contract would not have
been profitable if it was operated as its previous owner, Willem
Jacobus Kruger (“Kruger”) had run it. If the DCSA contract was
run in the way that respondent ran the Volkswagen contract, it
was potentially very profitable. Fauna’s business structure did fit
with its operational objectives or requirements. This resulted in
the respondent selling off all the fleet it acquired from Fauna
and retrenching the applicants with effect from the 30 th
September 1999.
CONSULTATION PROCESS
7. The respondent consulted with the first applicant (“union”) on 4
occasion. The first meeting was held on the 20 th August 1999
between respondent, Fauna and the Union. Its purpose was to
inform the Union that the respondent had acquired Fauna as a
going concern and that the contracts of employment of Fauna
employees would be transferred to the respondent with effect
from the 1 st September 1999. Respondent further stated that it
would like to propose certain operational changes once it has
taken over to ensure that it operates effectively and on a viable
basis. These changes were set to be tabled in a meeting that
was to be held on the 26 th August 1999.
8. On the 26 th August 1999 the respondent was not yet ready with
its proposals and the respondent and the Union (“the parties”)
agreed on the following time table:
1. the respondent to forward its proposals to the union on
the 27 th August 1999.
2. the Union to forward clarifying questions to the
respondent by the 30 th August 1999.
3. the respondent to respond to the questions by the 31 st
August 1999.
4. Union to meet with employee on the 1 st September
1999.
5. the parties to meet further on the 2 nd September 1999.
9. On the 27 th August the respondent presented its proposal in
the form of a letter. The relevant parts of the letter read:
“ 1. Background
It is our view that this operation can not continue to be
operated on a viable basis without making significant
changes to the operation. The financial performance of
Fauna has been less than satisfactory during the recent
past. Forecourt has acquired the operation as certain
synergistic opportunities exist between this operation and
other contracts. (i.e. The Volkswagen SA contract)
operated by Fourcourt. Utilizing these opportunities will
not only make Fauna operation a viable prospect but it
would also enhance the viability of Forecourts other
vehicle ferrying operations.
2. PROPOSED OPERATIONAL CHANGES
A fleet of 13 carrier vehicles are currently operated by this
operation on a double crew basis. It is our proposal to change the
fleet as follows:
I. Five (5) of the current vehicles are old and in our
opinion
no longer viable. Mr. Fourie has offered to
purchase these vehicles.
II. Six (6) of the remaining vehicles will be sold to a
company
called Accurate Auto Ferriers with whom Fourcourt
will subcontract for ferrying vehicles in terms of its
contract. Fourcourt’s overhead and operating costs
will be reduced as it will not be required to operate
these vehicles on a permanent basis. Vehicles will
be contracted in on a demand basis whenever
required.
III. The remaining two (2) vehicles are available to be sold
to
owner drivers with whom Forecourt will contract to
ferry vehicles.
IV. The eight (8) vehicles referred to in (ii) and (iii) above
will
be utilized for local ferrying of vehicles and not for
forecourts long distance needs.
V. For the purpose of long distance ferrying forecourt
propose
to subcontract with Highway Carriers – a sister
company. Highway currently operates multi
purpose carrier vehicles. These vehicles could
carry motor vehicles in one direction and a general
freight load on the return leg, obviously bringing
significant efficiencies and cost saving to the
operation.
VI. Further efficiencies can be achieved by utilizing
vehicles
used on Forecourts Volkswagen contract more
effectively by using these vehicles for the Fauna
operation where possible.
The way in which the ferrying of vehicles in convoys are
currently operated is not efficient and is very costly.
Significant peaks and valleys exist in the demand for the
movement of vehicles in this manner. It is therefore our
proposal not to employ permanent staff for this purpose
but to hire in staff i.e. from the labour broker as and when
required, with obvious increased efficiency and cost
savings.
Should the abovementioned proposals be implemented a need for operating a workshop
for this contract is no longer required. It is therefore proposed to close down the
workshop attached to the Fauna operation.
Further costs savings can be achieved by integrating the management and
administrative functions of the fauna operation with the existing forecourt operations.
3. IMPLICATIONS FOR STAFF
Should the abovementioned proposals be implemented the
implications for employees currently employed at the
Fauna operation can be summarized as follows:
i. Forecourt will negotiate with Accurate Auto Ferriers
regarding the possible employment of six (6) of
forecourts drivers to operate the vehicles they intend to
purchase. The exact conditions of employment they will
offer still needs to be discussed and agreed.
ii. Two (2) of the existing drivers could be identified to
take over the two vehicles proposed to be operated on
an owner driver subcontract basis.
iii. This would mean that a total of 18 of the current drivers
will be surplus and should suitable alternatives not be
found it, regrettably, would mean that they may have to
be retrenched.
iv. We propose that we reach an agreement with the
labour broker who will have to provide temporary
convoy drivers to consider the employment of drivers
who may be surplus, should the company’s proposal
be implemented. These drivers could be utilized on an
adhoc basis in accordance with the demand for the
movement of the vehicles in convoy.
v. Should the workshop be closed it would result in a total
of 8 workshop employees becoming redundant. Once
again should suitable alternatives not be found it may
unfortunately result in retrenchments.
vi. The proposed integration of the administration and
management functions with that of Fourcourt would
also render a number of employees redundant
although the majority of these would not be the subject
of these consultations. For the purpose of these
consultations I would like to indicate that the tea lady
may be surplus.
consultations I would like to indicate that the tea lady
may be surplus.
We realize that the abovementioned proposals, if
implemented, could result in significant hardship to the
employee who might be affected by it. We do believe
though that the future viability of the business requires us
to sincerely consider the implementation of these
proposals.
Yours Faithfully
J. VAN DER WALT
HR ADVISOR “
10. The second meeting took place on the 7 th September 1999.
The Union noted that the changes proposed by respondent
were significant and inconsistent with the notion of taking over
a business as a going concern. It disagreed with the need to
retrench as it felt, inter alia, that Forecourt was simply
replacing its members with labour brokers. It further disputed
that the convoy drivers were subject to peaks and valleys as
they were constantly busy because of heavy workload.
However, respondent was adamant that it was necessary to
retrench all the employees that were employed by Fauna in
view of the financial situation. In fact, the respondent insisted
in the implementation of all its proposals depicted in its letter
of the 27 th August 1999. The parties then discussed
severance pay after which the Union proposed 4 weeks
severance pay and 2 weeks notice pay. Respondent on the
other hand proposed 1week severance pay for every year or
part thereof and 2 weeks notice pay. No agreement was
reached on any issue in this meeting. The respondent had not
supplied any financial statements to the Union in support of its
position on the financial issues.
11. The third consultation took place on the 10 th September 1999.
The Union proposed that the respondent delay the
retrenchment and asses the situation after 3 to 6 months and
the necessity thereof could be revisited, and that a committee
be established by National Bargaining Council for the Road
Transport Industry to mediate the dispute. The respondent
Transport Industry to mediate the dispute. The respondent
rejected both these proposals. The issue as to whether the
Union proposed the retention of the East London drivers is in
dispute. The Union indicated that it could only accept
retrenchment if respondent agreed on its severance package
proposal, however, the respondent responded that it stood by
its offer that was made in the previous meeting.
12. The final meeting was held on the 16 th September 1999. The
respondent indicated that will retrench all the employee except
17 East London convoy drivers, 2 yard employees at Eikenhof
and 1 inspector at East London. The retention of the latter 3
employees had been proposed by the respondent in the 10 th
September 1999 meeting. The dismissals were to be effective
from the 30 th September 1999. The respondent issued the
retrenchment letter on the 17 th September 1999. The
applicants were not obliged to work until the dismissal date.
The issue as to whether the respondent informed the
Union the DCSA contract required it to ferry vehicle off
wheels and therefore eliminating the need for convoy
drivers during the consultation process is in dispute.
SUBSTANTIVE FAIRNESS
13.It is trite that Section 185 and 188 of the Act prescribe that an
employee can only be dismissed for a fair reason. Where the
relies on the operational requirements of the business to justify
a dismissal of an employee, the onus is on the employer to
prove the existence of such valid economic reason.
14. Although previously the Labour Courts adopted a lenient
approach in assessing the commercial rationale for the
employers decision that leads to retrenchment, recently the
courts have, indeed, adopted a slightly stricter approach. The
courts do enquire whether a reasonable basis exists for the
employers decision, BMD KNITTING MILLS (PTY) LTD V
SACTWU (2001) 7 BLLR 705 (LAC) . The court is entitled to
consider whether there were viable alternatives to dismissals
and whether the consultation was a sham, NEHAWU &
OTHERS V THE AGRICULTURAL RESEARCH COUNCIL &
OTHERS (2000) 9 BLLR 1081 LC .
15.It is clear from the respondent’s evidence that due to its nature
and business model it did not own carriers or employ drivers
and its acquisition of Fauna was not going to change its existing
model. In fact, what it wanted was the DCSA contract from the
transaction. Its model entails the outright outsourcing of carriers
and the permanent use of labour brokers for convoy drivers.
16. It is, therefore, obvious to me that as early as the 23 rd August
1999 where the sale was concluded the respondent had
already concluded that it was to sell all the existing carriers and
engage the services of labour brokers. It is logical that when
there are no carriers there are no drivers, where there are
labour brokers there are no permanent employees, where there
are no company owned carriers there is no service / repair
workshop.
17. It is worth noting that in the respondent’s proposals dated the
27th August 1999 there was no mention or motivation for the
retrenchment of all 14 yard workers. One cannot assume that
their inclusion from any written proposals more so that the
affected employees were specifically mentioned. It is my view
that the respondent has failed to justify the dismissal of these
employees, although as an after thought the respondent
wanted to rely on efficiencies and financial situation as the main
reasons.
18. The respondent did not place any evidence before me in
support in of its contention that the financial situation of Fauna
was hopeless and that it had been so for a considerable period.
The evidence presented in court was economic in this regard.
The fact that some of the Fauna carriers were in disrepair and
that Kruger could not recapitalise the business and that being
the reason why Fauna was sold is a mere ipse dixit and the
court cannot speculate without a tangible information. Neither
Kruger testified nor Fauna’s financial statements were
presented in this court to substantiate the respondent’s
contentions.
19. The respondents audited financial statements for the year
ending on the 30 th June 1999 and the year ending on the 30 th
June 2000 were presented in court by respondent as evidence.
The year 1999 financials reflect a loss of just over R2 million.
Despite this loss the respondent managed to purchase Fauna
in August of the same year for over R12 million. This situation
boggles ones mind as to the bona fide of the precarious
position which the respondent found itself that necessitated the
retrenchment of about 80% of Fauna employees in less than 30
days from the date of its acquisition. The June 1999 reflected
loss further raises a question as whether the much talk about
efficient Forecourt business model is efficient in reality.
20. It further transpired from evidence that even though the DCSA
contract required that its motor vehicles must be ferried off
wheels this operation was phased in over a period of a year
with effect from the 1 st September 1999. In the circumstances
there can be no valid reason to retrench all the Eikenhof drivers
at the same time in September 1999 if the critical objective
thereof was not to replace them with labour brokers.
21. The respondent did not substantiate its contention that the
drivers were subject to peaks and valleys. The respondent
made this allegation in its proposals dated 27 th August 1999
some few days before it could take control of the Fauna
operation and logically to gain sufficient knowledge about the
operation and logically to gain sufficient knowledge about the
Eikenhof business activities. However, despite this logical
shortcoming it did not want to entertain any further period to
further assess the Fauna business in order to ascertain the real
need to retrench as it did.
In the view of the aforegoing I am of the opinion that the
respondent has failed to discharge its onus to establish
existence of the economic reasons to retrench. I am
inclined to believe that the respondent simply replaced
the applicants with the labour brokers in order to
streamline Fauna operations to fit its business model.
PROCEDURAL FAIRNESS
22. When an employer contemplates dismissals based on
operational reasons it must consult the representative Union or
the employee, in its absence, with the main objective of
reaching consensus on the aspects listed under Section 189 of
the Act. If consensus has not been reached then the court must
determine where the fault for such failure lie. If the failure is due
to the fault of the employer then the procedure followed is likely
to be found to be unfair. The courts, however, do not adopt a
checklist approach on the compliance with the requirements of
Section 189 of the Act by the employer. What is important is
whether the process was fair when taking into consideration the
requirements of the Act. See JOHNSON & JOHNSON (PTY)
LTD V CWIU (1998) 12 BLLR 1209 (LAC) and ALPHA PLANT
AND HIRE SERVICES (PTY) LTD V SIMMONDS & OTHERS
(2001) 3 BLLR 261 (LAC) .
23.Section 189 (3) provides as follows:
“ The employer must disclose in writing to the other party all the
relevant information, including, but not limited to
i. the reasons for the proposed dismissal;
ii. the alternatives that the employer considered before
proposing the dismissals, and the reasons for rejecting
each of those alternatives;
iii. the number of employees likely to be affected and the
job categories in which they are employed;
iv. the proposed method for selecting which employees to
dismiss;
v. the time when and the period during which, the
dismissals are likely to take effect;
vi. the severance pay proposed;
vii. any assistance that the employer proposes
to offer to the employees likely to be dismissed,
and
viii.the possibility of the future reemployment
of the employees who are dismissed.”
24. In relation to the above provisions it is apparent from the
evidence in this matter that the respondent did not comply with
its overall requirements. Neither its letter of the 27 th August
1999 nor the subsequent consultations indicate that the
respondent disclosed the alternatives that it considered before
proposing the dismissals and the reasons for rejecting each of
these alternatives, the proposed method for selecting which
employees to dismiss, and the yard workers were not disclosed
as likely to be affected by the dismissals.
25.The parties did not reach consensus on the selection criteria to
be utilized to select the employees to be dismissed. In such
circumstances it is imperative, in terms of Section 189 (7), that
the employer must utilize criteria that are fair and objective. It
appears from the evidence in this matter that the respondent in
selecting the employees to be dismissed did not consider LIFO,
the level of skills of the employees, employees close to the
retirement age, voluntary retrenchment or employees general
work performance and conduct. I am persuaded to form a view
that the selection criteria adopted by the respondent in this
matter was in fact arbitrary.
26.Without considering further evidential issues in this respect I am
satisfied that the dismissal of the applicants were procedurally
unfair.
27.I will make no finding in respect of the alleged automatically
unfair dismissal of Cecelia Matsana as applicant did not pursue
this matter during trial.
28.In view of the above I accordingly make the following order:
1. That the respondent’s dismissal of the second
and further applicants listed in Annexure “A”
on the 30 th September 1999 was both
substantively and procedurally unfair;
2. That the respondent is ordered to pay
compensation to the second and further
applicants listed in Annexure “A” hereof 12
months wages as reflected therein;
3. That the respondent is order to pay the costs
of this application including all the previously
awarded costs.
ZILWA A J
DATE OF JUDGMENT : 11 JUNE 2003
FOR APPLICANTS : MR. VAN DER RIET SC
INSTRUCTED BY
CHEADLE, THOMSON & HAYSON
INC.
FOR RESPONDENT : MR. T. J. BRUINDERS
INSTRUCTED BY
BOLUMAN GILFILLAW INC.