THE LABOUR APPEAL COURT OF SOUTH AFRICA, JOHANNESBURG
Case No: JA 124/24
In the matter between:
WBHO CONSTRUCTION (PTY) LIMITED Appellant
and
DIDA MASENYE N. O First Respondent
THE BARGAINING COUNCIL FOR THE CIVIL
ENGINEERING INDUSTRY (BCCEI) Second Respondent
MASWANGWANDILE MDAYI Third Respondent
This judgment was handed down electronically by circulation to the parties’
representatives by email, published on the Labour Appeal Court website, and
released to SAFLII. The date and time for hand-down is deemed to be on
26 February 2026
Heard: 13 November 2025
Coram: Mahalelo ADJP and Waglay AJA et Djaje AJA
JUDGMENT
(1) Reportable: Yes/No
(2) Of interest to other Judges: Yes/No
(3) Revised
____________ ______________
Signature Date
2
DJAJE, AJA
Introduction
[1] This is an appeal against the judgment of the Labour Court, where the
appellant’s review application was dismissed. The appellant filed a review
challenging the arbitration award issued by the second respondent, which
determined that the appellant had unfairly dismissed the third respondent. The
court ordered the appellant to reinstate the third respondent.
Background Facts
[2] The third respondent started working with the appellant on 18 April 2018, as a
Final Level Grader Operator. In November 2020, Mr Peter Gray (Gray), the
appellant’s Operator Training Manager, approached the third respondent.
Their discussion involved the appellant’s operational needs and the possibility
of transferring the third respondent to Postmansburg in the Northern Cape,
where his skills were needed. The third respondent declined the transfer
because he did not want to be away from his family. He testified at arbitration
that Gray told him the appellant intended to retrench him, and that if he
refused the retrenchment, he would be dismissed. In contrast , Gray, testified
that the third respondent asked to be retrenched due to financial difficulties at
home. What happened after this discussion is significant. On 3 December
2020, the parties signed a document titled "Mutual Separation Agreement,"
and the third respondent received a severance pay of R181,541.75.
[3] The third respondent referred an unfair dismissal dispute to the second
respondent, culminating in an arbitration award dated 28 May 2021, which
found that the agreement was not a Mutual Separation Agreement but that the
appellant retrenched the third respondent and failed to comply with the
requirements of section 189 of the Labour Relations Act
1 (LRA). An order
reinstating the third respondent was issued.
1 Act 66 of 1995, as amended.
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Arbitration Award
[4] The issue before the second respondent was whether the third respondent
had been dismissed and whether the dismissal was fair. The remedy sought
was retrospective reinstatement. Upon analysing the evidence, the arbitrator
determined that the document signed by both parties was more of a
retrenchment letter outlining the retrenchment package to be received by the
third respondent. He found that although the document was titled "Mutual
Separation Agreement," its contents focused solely on retrenchment and the
benefits associated with it. He based his decision on the document's wording,
stating that the third respondent’s retrenchment package would include
severance pay, bonus pay, and leave pay, and that the date of retrenchment
would be 18 December 2020. The final page of the document indicated that
the third respondent was retrenched.
[5] The arbitrator determined that no retrenchment process occurred despite the
parties signing a document stating that the third respondent had been
retrenched. The version of Gray that the third respondent intended to resign or
be retrenched was dismissed. It was concluded that the third respondent was
coerced into leaving. The dismissal was found to be both procedurally and
substantively unfair because no retrenchment process was followed. The
appellant was ordered to reinstate the third respondent and pay him
R181,541.75.
Labour Court
[6] Dissatisfied/aggrieved with the award, the appellant brought a review
application under section 145 of the LRA to have the arbitration award
reviewed and set aside. The issues that the Labour Court had to decide were
as follows:
“1. Whether the first respondent’s finding that there was no procedure
followed for the third respondent’s retrenchment was reasonable;
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2. Whether, given the existence of a mutual separation agreement, the
first respondent’s decision that the third respondent had been unfairly
retrenched was irregular; and
3. Whether an employer may circumvent the retrenchment procedure in
section 189 of the LRA by signing a retrenchment document disguised
as a mutual separation agreement.”
[7] On the first issue, the court a quo found that the parties signed a mutual
separation agreement to end their employment relationship due to operational
requirements, but that the LRA requirements for retrenchment had to be
complied with. The court a quo held that the appellant's failure to comply with
the provisions of section 189 of the LRA was fatal and made the third
respondent's dismissal unfair. In that case, the decision of the first respondent
was found to be reasonable.
[8] The court a quo concluded that the discussion on operational requirements
before signing the mutual separation agreement showed that the appellant
was required to comply with section 189 of the LRA before the third
respondent could be retrenched.
[9] The court relied on the wording of the mutual separation agreement, which
specified the terms of a retrenchment package, indicating that the appellant
intended to retrench the third respondent. In the agreement, the following was
recorded: “We confirm recent consultations held and wish to inform you that
your retrenchment will be on December 1, 2020.”
Appeal
[10] The appellant challenges the judgment of the Labour Court on several
grounds which are:
“ 1. The court a quo erred in concluding that the appellant and the third
respondent had not concluded a mutual separation agreement which
terminated the third respondent’s employment with the appellant.
2. The court erred in finding that the appellant had instead unfairly
retrenched the third respondent.
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3. The court erred in applying the reasonableness test instead of the
legal correctness test in determining whether the appellant and the
third respondent had concluded a mutual separation agreement.
4. The court a quo erred in concluding that the appellant and the third
respondent were precluded in law from negotiating and/or concluding
a mutual separation agreement after the commencement of
consultations alternatively putative consultations about the possible
retrenchment of the third respondent.
5. The court a quo misconstrued alternatively failed to apply its mind to
the grounds of review raised by the appellant and instead identified
and dismissed grounds of review which were not apparent from the
papers and were not advanced during the argument of the review
application.”
Submissions
[11] The appellant argued that, during the section 189 process, the parties are not
barred from signing a mutual separation agreement, and that the court a quo
erred in concluding that, after discussing operational requirements, the
appellant was required to comply with section 189 of the LRA. In any case, if
the court found that the third respondent was retrenched, there must have
been a valid operational reason. Gray testified that when he told the third
respondent about the possibility of working in the Northern Cape, the third
respondent said that he did not want to be far from his family. It was clear that
there was no longer work for the third respondent at the Motheo site, and the
move to the Northern Cape was an option the third respondent declined.
Therefore, if the court found that the third respondent was retrenched, the
retrenchment was substantively fair.
[12] According to the appellant, the court a quo erred in applying the
reasonableness test, as the issue was whether the agreement between the
appellant and the third respondent was valid and enforceable.
[13] The third respondent in opposition argued that no meeting of the minds
[13] The third respondent in opposition argued that no meeting of the minds
occurred when the agreement was signed because the mutual separation
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agreement mentions a retrenchment process. This is also supported by the
parties' discussions before signing the agreement. The discussions centered
on the appellant's operational needs , which required it to follow the section
189 process. It was claimed that the third respondent was unlawfully
dismissed because, according to him, there was still work at the Motheo site
during the discussion. The move to the Northern Cape was uncertain, and
Gray was unsure whe n the third respondent would move there, meaning it
could not be considered an alternative for the purpose of retrenchment under
section 189 of the LRA.
[14] According to the third respondent, the correctness test would only apply if the
court a quo had determined that there was no dismissal. However, in this
case, the court needed to assess the validity of a mutual separation
agreement, which requires a reasonableness test rather than a correctness
test, and it found the dismissal unfair.
Applicable Legal Principles
[15] Section 189 of the LRA outlines the process an employer must follow when
considering dismissing an employee for operational reasons. Failure to
comply with the requirements outlined in section 189 of the LRA renders the
dismissal unfair. Specifically, section 189(2) and (3) of the LRA specify that:
‘189. Dismissals based on operational requirements.
(1) …
(2) The employer and the other consulting parties must in the consultation
envisaged by subsections (1) and (3) engage in a meaningful joint
consensus-seeking process and attempt to reach consensus on—
(a) appropriate measures—
(i) to avoid the dismissals;
(ii) to minimise the number of dismissals;
(iii) to change the timing of the dismissals; and
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(iv) to mitigate the adverse effects of the dismissals;
(b) the method for selecting the employees to be dismissed; and
(c) the severance pay for dismissed employees.
(3) The employer must issue a written notice inviting the other consulting
party to consult with it and disclose in writing all relevant information,
including, but not limited to—
(a) the reasons for the proposed dismissals;
(b) the alternatives that the employer considered before proposing
the dismissals, and the reasons for rejecting each of those
alternatives;
(c) the number of employees likely to be affected and the job
categories in which they are employed;
(d) the proposed method for selecting which employees to
dismiss;
(e) the time when, or the period during which, the dismissals are
likely to take effect;
(f) the severance pay proposed;
(g) any assistance that the employer proposes to offer to
the employees likely to be dismissed;
(h) the possibility of the future re- employment of
the employees who are dismissed;
(i) the number of employees employed by the employer; and
(j) the number of employees that the employer has dismissed for
reasons based on its operational requirements in the
preceding 12 months.’
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[16] In dealing with the privity and sanctity of a contract, the Supreme Court of
Appeal in Moha med’s Leisure Holdings (Pty) Ltd v Southern Sun Hotels
Interests (Pty) Ltd2 stated that:
‘[23] The privity and sanctity of contract entails that contractual obligations
must be honoured when the parties have entered into the contractual
agreement freely and voluntarily. The notion of the privity and sanctity
of contracts goes hand in hand with the freedom to contract. Taking
into consideration the requirements of a valid contract, freedom to
contract denotes that parties are free to enter into contracts and
decide on the terms of the contract’
[17] Again, in Wells v South African Alumenite Company3 the court held that:
“If there is one thing which, more than another, public policy requires, it is that
men of full age and competent understanding shall have the utmost liberty of
contracting, and that their contracts, when entered into freely and voluntarily,
shall be held sacred and enforced by the courts of justice.”
Analysis
[18] It is well established that the third respondent and Mr. Gray discussed the
appellant's operational needs during the site visit. Additionally, following that
discussion, the third respondent and the appellant entered into a mutual
separation agreement. The agreement outlines the payment of severance pay
to the third respondent, along with a bonus, leave pay, travel expenses,
payout of shares if applicable, and the transfer or payout of the Provident
fund. The third respondent acknowledged and accepted the terms of the
agreement in full and final settlement of ‘ all or any claims ’ against the
appellant.
[19] In his testimony, Mr. Gray stated that during a site visit to see the third
respondent, they had an informal discussion about the operational needs of
the appellant. He also mentioned a project in the Northern Cape where the
third respondent could be assigned. The third respondent indicated that he
2 2018 (2) SA 314 (SCA).
2 2018 (2) SA 314 (SCA).
3 1927 AD 69 at p. 73.
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could not go to the Northern Cape; it would be better for him to be retrenched,
as he was busy with a home construction project and preferred not to be away
from home. This conversation led to the agreement between the appellant and
the third respondent. (to terminate the employment)
[20] As stated in Universal Church of the Kingdom of God v Myeni and Others 4
that :
“…….For a valid contract to exist, each party needs to have a serious and
deliberate intention to contract or to be legally bound by the agreement, the
animus contrahendi. The parties must also be ad idem (or have the meeting
of the minds), as to the terms of the agreement. Obviously, absent the animus
contrahendi between the parties or from either of them, no contractual
obligation can be said to exist and be capable of legal enforcement.”
[21] In the agreement between the appellant and the third respondent, an offer
was made to the third respondent. The third respondent accepted the offer
voluntarily in full and final settlement of all or any claims that he may have
against the appellant in the future. The appellant submitted that the arbitrator's
award is unreasonable and should have been reviewed and set aside by the
Labour Court. On the issue of reasonable awards, the Labour Appeal Court in
Fidelity Cash Management Services v Commission for Conciliation, Mediation
and Arbitration and Others5 held that:
‘The test enunciated by the Constitutional Court in Sidumo for determining
whether a decision or arbitration award of a CCMA commissioner is
reasonable is a stringent test that will ensure that such awards are not lightly
interfered with. It will ensure that, more than before, and in line with the
objectives of the Act and particularly the primary objective of the effective
resolution of disputes, awards of the CCMA will be final and binding as long
as it cannot be said that such a decision or award is one that a reasonable
decision maker could not have made in the circumstances of the case. It will
decision maker could not have made in the circumstances of the case. It will
not be often that an arbitration award is found to be one which a reasonable
decision maker could not have made but I also do not think that it will be rare
4 (2015) 36 ILJ 2832 (LAC) at para 44.
5 (2008) 29 ILJ 964 (LAC) at para 100.
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that an arbitration award of the CCMA is found to be one that a reasonable
decision maker could not, in all the circumstances, have reached.’
[22] The award found that there was no mutual separation agreement; instead, a
letter of retrenchment was issued to the third respondent. The court a quo ,
however, held that a mutual separation agreement existed, with terms of
retrenchment, and that by signing the agreement, the appellant avoided the
objectives of section 189 of the LRA. The court a quo held that:
“[39] In my view, the applicant cannot use a mutual separation agreement
to circumvent the procedure set out in section 189 of the LRA and
therefore, the first respondent’s decision, that the procedure for
retrenchment was not followed and that the dismissal was
procedurally and substantively unfair, is one that a reasonable
decision maker would have arrived at.”
[23] Regarding the applicable test during arbitration, t he arbitrator had to
determine whether the parties' agreement was properly entered into and
enforceable. This would be the determining factor in whether the third
respondent was dismissed and whether it was unfair. In Johnson Uniform
Solutions (Pty) Ltd v Brown and Others 6 the Labour Appeal Court , in
addressing the applicable test in disputes, held that:
“[34] In assessing whether the CCMA or the Bargaining Council had
jurisdiction to adjudicate a dispute, the correctness test should be
applied. The court of review will analyse the objective facts to
determine whether the CCMA or Bargaining Council had the
necessary jurisdiction to entertain the dispute. See SARPA v SA
Rugby (Pty) Ltd and Others; SA Rugby (Pty) Ltd v SARPU.
[35] The issues in dispute will determine whether the one or the other of
the review tests is harnessed in order to resolve the dispute. In
matters where the factual finding of an arbitrator is challenged on
review, the reasonable decision- maker standard should be applied.
review, the reasonable decision- maker standard should be applied.
Where the legal or jurisdictional findings of the arbitrator are
challenged the correctness standard should be applied. There will,
6 (DA10/2012) [2014] ZALCJHB 32 (13 February 2014) at paras 34 to 36.
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however, be situations where the legal issues are inextricably linked to
the facts so that the reasonable decision- maker standard could be
applied.
[36] It is therefore important to determine whether the dispute, between the
parties, is a jurisdictional one or not. The dispute to be resolved
determines the test to be applied. In this matter, the dispute between
the parties was whether there was in fact a dismissal. If there was no
dismissal the Bargaining Council would not have jurisdiction. If there
was a dismissal the Bargaining Council would have jurisdiction. The
existence or otherwise of a dismissal is therefore a jurisdictional issue.
The correctness standard and not the reasonableness standard
should therefore be applied. The court a quo, as both parties agreed,
applied the wrong standard.”
[24] The dispute in this case concerned the validity of the agreement between the
parties. The question was whether the court a quo's reasonableness test
should have been applied. The validity of an agreement is a legal matter that
does not require a reasonableness test as established in Sidumo and Another
v Rustenburg Platinum Mines Ltd and Others
7, but rather a correctness test.
Therefore, the arbitrator lacked the necessary jurisdiction, and the court a quo
should have reviewed the award and set it aside.
[25] There was no finding that the third respondent was coerced into signing the
agreement. It is a fact that both parties entered into and signed the agreement
voluntarily. The third respondent received his severance package as agreed.
The conclusion that the appellant avoided the section 189 processes is
unfounded, as there is nothing preventing parties from entering into a mutual
separation agreement at any time when operational requirements are
discussed. The parties' agreement was consensual, and there is no evidence
of coercion; therefore, the mutual separation agreement is valid and
enforceable. The agreement being valid , there is no question of dismissal,
enforceable. The agreement being valid , there is no question of dismissal,
and as such, the first respondent had no jurisdiction to entertain the dispute.
7 (2007) 28 ILJ 2405 (CC).
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[26] Even if the unfairness of the dismissal were to be considered, the appellant's
operational requirements were discussed with the third respondent, albeit
informally. An alternative, his relocation to the Northern Cape, was considered
but found unsuitable by the third respondent. Additionally, this does not make
the dismissal procedurally or substantively unfair.
Costs
[27] Labour courts are courts of equity and costs do not ordinarily follow the result.
Nothing in casu warrants a departure from that principle. Accordingly, there
will be no order as to costs in this appeal.
[28] In the premise the following order is made:
Order
1. The appeal is upheld.
2. The judgment of the Labour Court delivered on 30 July 2024 is set
aside and substituted with:
“(a) The arbitration award dated 28 May 2021 is reviewed and set aside.
(b) The appellant did not dismiss the third respondent;
(c) There is no order as to costs.”
3. There is no order as to costs in this appeal.
____________________
J. T. Djaje
Acting Judge of the Labour Appeal Court of South Africa
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Mahalelo ADJP and Waglay AJA concur.
APPEARANCES:
For the Appellant: Adv M J Van As
Instructed by: Fluxmans Attorneys
For the Third Respondent: Mr L Sebako
Instructed by: Sebako Attorneys