Employment law update – Reinstatement of employees until a fair consultation procedure is followed

July 1st, 2017

Monique Jefferson BA (Wits) LLB (Rhodes) is an attorney at Bowmans in Johannesburg.

In Association of Mineworkers and Construction Union and Others v Piet Wes Civils CC and Another [2017] 5 BLLR 501 (LC), the Association of Mineworkers and Construction Union (AMCU) instituted urgent proceedings in terms of s 189A(13) of the Labour Relations Act 66 of 1995 (LRA) in terms of which it sought the reinstatement of its members who had been dismissed for operational requirements without a consultation process taking place.

The respondent employers provided services to Exxaro coal mine in terms of a contract. Exxaro terminated the contract and the respondent employers consequently terminated the employment contracts of those employees who provided services to Exxaro. The employers did not consult with AMCU or the employees as it was of the view that it was not necessary to do so given the fact that the employees were engaged on fixed term contracts, which expressly stated that employment would only endure for as long as the employers were contracted to provide services to Exxaro.

Steenkamp J considered the provisions of s 198B of the LRA in terms of which an employer may only employ an employee who earns below the prescribed annual earnings threshold on a fixed term contract or successive fixed term contracts for longer than three months if the nature of the work is of a limited or definite duration or the employer can demonstrate any other justifiable reason for fixing the contract term. Steenkamp J found that the onus was on the employer to show that linking the term of the employment contract to the supply of work by clients was a justifiable reason for fixing the term. If the employers did not discharge this onus then the employment would be deemed to be of an indefinite duration and the employer would be required to consult with the employees before retrenching them.

Steenkamp J referred to recent case law in which it has been held that an event in s 198B of the LRA does not include the termination of a contract by a client of the employer. In this regard, a provision that provides for termination of employment at the behest of a third party undermines an employee’s right to fair labour practices and is against public policy, unconstitutional and unenforceable. Steenkamp J remarked that the purpose of s 198B was to provide security of employment and to allow an employment contract to terminate at the behest of a third party would undermine this purpose. Steenkamp J held that the employers had not discharged the onus of showing that there was a justifiable reason for employing the employees on a fixed term contract for longer than three months. Thus, the employment was of indefinite duration and did not simply terminate when Exxaro terminated the contract. The termination of the contracts may be an operational rationale to justify retrenchment but this could only be determined once a meaningful joint consensus seeking process was followed with the employees.

Steenkamp J ordered the reinstatement of the employees until the employers comply with a fair procedure. Given the fact that s 189A contemplates a consultation process of 60 days after issuing the s 189(3) letter to commence the process, Steenkamp J remarked that once the employees have been reinstated they should be consulted with for 60 days after the date of the judgment, preferably with the assistance of a facilitator. Steenkamp J, however, did not make an order in this regard and simply stipulated that the employers must follow a fair procedure.

Validity of settlement agreement

In Fleet Africa (Pty) Ltd v Nijs [2017] 5 BLLR 450 (LAC), the employee had been previously employed by the City of Johannesburg (the city) and her employment had transferred in terms of s 197 of the LRA to an entity, which was subsequently taken over by Fleet Africa. At some point the city entered into an agreement with Fleet Africa in terms of which Fleet Africa rendered fleet management services. The employee was involved in rendering these fleet management services.

The city terminated its contract with Fleet Africa on 29 February 2012 and a dispute arose as to whether the employees who mainly performed the fleet management services should transfer to the city. The dispute was brought to the Labour Court (LC) and was subsequently referred to private arbitration and then an arbitration appeal panel.

At the same time Fleet Management lost another contract with another client and the need to retrench arose. Fleet
Africa commenced a retrenchment consultation process, which ran parallel with the arbitration appeal process. On 21 May 2012, the employee entered into a settlement agreement with Fleet Africa in terms of which she would receive a voluntary retrenchment package. The terms of this agreement were that the amounts paid were in full and final settlement of any claims that she had including any entitlement to transfer in terms of s 197 to the city. The city was not aware of the retrenchment consultation process that was underway at the time.

On 29 May 2012, the arbitration appeal award was issued in terms of which it was declared that the employee had retrospectively transferred to the city with effect from 1 March 2012. Fleet Africa then sought to res

ile from the settlement agreement arguing that when it entered into the settlement agreement on 21 May 2012 the employee was no longer an employee of Fleet Africa as her employment had transferred to the city on 1 March 2012.

The employee instituted proceedings in the LC seeking an order that the settlement agreement be declared a valid and binding agreement and be made an order of court, which the LC did. Fleet Africa then appealed this decision on the basis that the settlement agreement was null and void and the LC lacked jurisdiction to determine the matter. In this regard, Fleet Africa argued that the LC failed to take into account the retrospective effect of the arbitration appeal award, which overtook the settlement agreement and resulted in the employee no longer being an employee of Fleet Africa when the settlement agreement was entered into.

The Labour Appeal Court held that for a settlement agreement to satisfy the requirements of s 158(1A) of the LRA there must be a dispute between the parties, which either party has the right to refer to arbitration or to the LC. Fleet Africa relied on s 142A(1) of the LRA, which gives the Commission for Conciliation, Mediation and Arbitration (CCMA) the power to make settlement agreements arbitration awards. Ndlovu JA remarked that s 142A(1) adds to the CCMA’s powers while s 158(1A) elaborates on the LC’s powers under s 158(1)(c). These sections could, therefore, not be read together. Ndlovu JA had to determine whether there had been a dispute when the settlement agreement was signed. He held that there had been a long-standing dispute and Fleet Africa had adopted a two-pronged strategy to deal with this. In this regard, Fleet Africa had been unaware of what the outcome of the arbitration appeal process would be and, therefore, commenced a s 189 process as an alternative outcome. Both the consultation process and the arbitration process had a common objective of resolving the dispute.

Fleet Africa argued that the conclusion of the settlement agreement was conditional on the outcome of the arbitration appeal award. Ndlovu JA found that there was no reference to a suspensive condition in the settlement agreement and this would need to have been expressly dealt with in the agreement.

It was held that once the settlement agreement was concluded on 21 May 2012 the employment relationship between Fleet Africa and the employee came to an end and the outstanding arbitration appeal process should have fallen away insofar as it related to that employee. The employee was no longer entitled to transfer in accordance with s 197 as that would have amounted to a double benefit. The court noted that s 197 provides for the automatic transfer of employees unless otherwise agreed in terms of s 197(6). It thus envisages that a s 197 dispute may be resolved by agreement.

It was held that the settlement agreement complied with the requirements of the common law and s 158(1)(c) read with s 158(1A) of the LRA. Thus, the LC properly exercised its discretion to make the settlement agreement an order of court. The appeal was dismissed with costs.

This article was first published in De Rebus in 2017 (July) DR 46.