Employment law update – Employers permitted to take prima facie decision on need to retrench

April 1st, 2019

In South African Commercial Catering and Allied Workers Union and Others v JDG Trading (Pty) Ltd [2019] 2 BLLR 117 (LAC), JDG Trading (JDG) concluded a collective agreement with the South African Commercial Catering and Allied Workers Union (SACCAWU), in which the agreement included ‘job security’ provisions regulating closures, relocations, and operational requirement decisions. In accordance with s 189A of the Labour Relations Act 66 of 1995 (the LRA) and the ‘job security’ provisions of the collective agreement, JDG issued SACCAWU with a s 189(3) notice informing SACCAWU that it intended consulting with it with a view to possibly retrench certain of SACCAWU’s members. SACCAWU alleged that the s 189(3) notice did not demonstrate any genuine commitment by JDG to a consultation process and requested further information from JDG relating to the operational rationale for the proposed retrenchments.

JDG provided copious amounts of information to SACCAWU, including a copy of the resolution of the JDG’s executive committee to initiate the consultation process. The resolution provided, among other things, that ‘the furniture brands of the Group must further reduce store staff numbers.’ Because JDG was bound by the resolution, SACCAWU argued that the consultation process was ‘superficial’ and the dismissal of its members for operational requirements was a fait accompli.

After a period of 30 days had lapsed from the date on which the s 189(3) notice had been issued, JDG referred a dispute to the Commission for Conciliation, Mediation and Arbitration in accordance with s 189A(8)(a) of the LRA. In turn, SACCAWU launched an urgent application in the Labour Court (LC) in terms of s 189A(13) of the LRA seeking an order –

  • declaring the consultation process to be unfair and a sham;
  • declaring the resolution to be in contravention of JDG’s duty to consult;
  • interdicting JDG from retrenching its members; and
  • compelling JDG to comply with a fair procedure by, inter alia, withdrawing the resolution.

SACCAWU submitted that the resolution was couched in peremptory terms and its meaning was clear, namely that JDG ‘must’ further reduce store staff numbers through its operational requirements. To the contrary, JDG submitted that the resolution was no more than a decision to proceed with the consultation process once retrenchments had been contemplated. The LC accepted that the resolution was cast in peremptory terms but held that it could be interpreted with reference to the events that transpired after its adoption. Once the resolution had been adopted, JDG embarked on a consultation process. It had not taken a final decision to retrench. The LC, therefore, dismissed the application.

On appeal, SACCAWU submitted that the LC erred in finding that the resolution could be interpreted having regard to the events that transpired after its adoption. It argued that it was entitled to be consulted prior to the taking of a decision to retrench, and a retrospective consultation process was improper. The issue on appeal was thus whether JDG had taken a final decision to retrench prior to issuing the s 189(3) notice.  That in turn involved determining the meaning of the resolution.

The Labour Appeal Court (LAC) rejected SACCAWU’s argument that surrounding circumstances should not be taken into account in interpreting the resolution. It was an established rule that the conduct of the parties before and after a contract is concluded may be used in interpreting the contracts meaning, and there was no reason why the same approach should not be taken when interpreting a unilateral statement such as a resolution. The retrenchment decision expressed in the resolution was, on the face of it, proper and valid. SACCAWU did not challenge the operational rationale of the decision to retrench and the evidence indicated that JDG was prepared to discharge its statutory consultation duties. Meetings with SACCAWU had been held over a period of three months and JDG’s attempts to comply with some of the SACCAWU’s suggestions belied any suggestion that the consultations were held against the backdrop of a fait accompli.

The LAC held that employers in the position of JDG will invariably form a prima facie view on the need for retrenchments. Employers cannot be held to a standard of a genuine commercial rationale for retrenchment if it would be prejudiced in subsequent court proceedings precisely for making such an assessment of its commercial realities. Employers must be entitled to form a prima facie view on retrenchment, provided it demonstrates and keeps an open mind in the subsequent consultation process. It was clear from JDG’s subsequent conduct that management did not regard the resolution as an instruction to retrench. JDG meaningfully engaged in a genuine consultation process which was still underway when the urgent application was launched. In the circumstances, the LC did not err in dismissing the application and accordingly, the LAC dismissed the appeal.

Nadine Mather BA LLB (cum laude) (Rhodes) is an attorney at Bowmans in Johannesburg.

This article was first published in De Rebus in 2019 (April) DR 36.