Employment law update – Retrenchments

June 1st, 2013

By Talita Laubscher and Monique Jefferson

The employment of the two respondent employees in Super Group Supply Chain Partners v Dlamini and Another [2013] 3 BLLR 255 (LAC) was terminated for operational requirements on 30 April 2008. The respondents contended that their dismissals were procedurally and substantively unfair. On 18 August 2010 the Labour Court, per Molahlehi J, held that the dismissals of the respondents were substantively unfair, and he ordered the appellant to reinstate them.

The appellant carries on the business of Fast Moving Consumer Goods (FMCG) and at the time provided warehousing and distribution services to three entities. All resources were allocated to all three entities and were not dedicated to a specific contract. In about January 2008 two of these contracts were cancelled. The loss of these contracts had the effect that the appellant lost about 80% of its business and, consequently, the appellant required only about 100 out of its 700 employees. The appellant accordingly contemplated a restructuring of its operations and on 1 April 2008 it issued a notice of termination of service to employees who were to be retrenched, including the respondents. In terms of this notice, the appellant recorded as follows:

‘The new FMCG structure at Super Park will be much smaller with limited positions. The company considered making use of, amongst others, the LIFO (last in, first out) principle, but in order to ensure that the process is substantively and procedurally fair it was agreed that the filling of the new structure’s positions will be done by “open competition”, ie allowing everybody to have an equal chance to apply and to be considered for the positions in the new FMCG Super Park structure. In terms of the process all applications were reviewed and shortlisted applicants was [sic] invited to attend interviews towards the end of March 2008. Unfortunately your application as part of the open competition process was not successful.’

The appellant further informed the employees that, should it not be able to find alternative employment for them, their services would be terminated by 30 April 2008. In a letter dated 18 April 2008, the appellant informed the respondents that, ‘as agreed’, their employment was being terminated with effect from 30 April 2008.

As regards the ‘open competition process’, the appellant’s evidence was that the appellant embarked on this process in order to retain the best skills. The respondents were invited to apply for positions, but the appellant had no record that they had in fact done so. As regards consultation with the employees, the appellant’s human resources executive testified that consultation sessions were held with certain groups of people and, after these consultations, the appellant issued letters in which it invited the employees to consult with it. As far as he was concerned, the onus was on the individual employees to engage with the appellant. The human resources executive estimated that there was a minimum of two consultation sessions per group, but he was not aware if meetings were also held for night shift employees, which included the respondents. He could not dispute the respondents’ version that there was only one ‘mass meeting’ that lasted five minutes, in which they were informed that the appellant had lost the two contracts and that there would be structural changes within the appellant. The human resources executive also could not comment on the respondents’ version that they did not know that they had to consult – he emphasised that it was for the employees to initiate meetings for further consultation.

The first respondent testified, inter alia, that he had attended a meeting in January 2008 during which the employees were informed about the loss of the contracts and that there would be restructuring. Thereafter, he was not called to any further meetings. During one of his night shifts, the warehouse manager told him that he had to apply for his job or any other suitable position, and he subsequently submitted a form to the appellant. He said that he received the letter dated 18 April on 30 April. His letter was one of many in a box that the employees were told to search through for the one bearing their name. He did not know why he was selected for retrenchment. The second respondent’s evidence was similar in that he, too, did not know why he was selected for retrenchment.

The Labour Court held that, because s 189A of the Labour Relations Act 66 of 1995 (LRA) applied, it was precluded from determining the procedural fairness of the dismissals. However, the dismissals were held to be substantively unfair because there was no evidence that the selection criteria applied were fair and objective, as required by s 189(7).

On appeal to the Labour Appeal Court (LAC), Tlaletsi JA, with Ndlovu JA and Murphy AJA concurring, confirmed the decision of the Labour Court.

The court emphasised that an employer should not approach the consultation process with a predisposition to a particular solution but should approach the process with a mind open to alternatives that are practical and rational. Importantly, it held that it was not fair for an employer ‘to shirk its statutory duty’ to consult and create an onus on an employee to ensure that he or she chases the employer to ensure that consultation takes place. In this case, there was no evidence that there was consultation on selection criteria; that the employees knew and understood the selection criteria to be applied; that the criteria were fair and objective; that the respondents were fairly identified for retrenchment; that they did not apply for positions; or that those appointed had better or more appropriate skills.

As regards the remedy of reinstatement, the appellant argued that the respondents’ positions no longer existed and, as such, it was impossible for the appellant to reinstate them. The LAC noted, however, that there was no evidence before the court to support this claim. The evidence on record suggested, instead, that the first respondent’s position was taken by another employee even before the retrenchment was finalised; both the first and second respondents had been pickers and had moved up the ranks; the second respondent was multi-skilled and had worked primarily on the contract that was not cancelled; the appellant retained several employees who were junior to the respondents; and the respondents’ positions still remained, and may only have changed in title. In the circumstances, the LAC held that the order of reinstatement was correct.

The appeal was accordingly dismissed with costs.

Talita Laubscher BIur LLB (UFS) LLM (Emory University USA) is an attorney at Bowman Gilfillan in Johannesburg.

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

This article was first published in De Rebus in 2013 (June) DR 57.

De Rebus