BEMAWU obo Manley Mohapi v Clear Channel Independent (Pty) Ltd (2010) 31 ILJ 2863 (LC)

Principle:

  1. Only conditional dismissals can constitute automatically unfair dismissals under s 187(1)(c) of the LRA. Dismissals intended to be and operating as final - not, in other words, reversible on acceptance of the demand - can never have as their reason "to compel the employee to accept" that demand. They will not be automatically unfair.

  2. There seems no doubt that an employer can in law utilize the principles of operational requirements to terminate the employment of an employee who refuses to accept changes to terms and conditions of employment. However, a dismissal based on operational requirements would be automatically unfair if no valid operational requirements exist to justify changes, and if the dismissal is not final and intended to compel an employee to accept the changes in conditions of employment.

  3. Consultation over a contemplated retrenchment in terms of section 189(2) of the LRA requires the employer to ensure that the consulting parties are properly informed of the nature of the process and its possible outcome.

Facts:

The employer needed to restructure certain employees’ job profiles and salaries in such a way that they would no longer be entitled to commission. This was apparently necessary to address the employer’s business risk and to align these employees’ remuneration with other employees who did not earn commission. The employees refused to accept the changes to their existing working conditions. Several consultative meetings were held with the employees and their union, but they refused to accept the changes. The employer ultimately gave them notice that their employment was terminated for operational reasons. They were given a month’s notice but no severance pay, as the employer claimed they had declined a reasonable offer of alternative employment in terms of section 41(4) of the BCEA.

The employees referred their dispute to the Labour Court. They claimed their dismissal was automatically unfair as the employer had tried to compel them to accept its demand that they agree to change their working conditions, alternatively that their retrenchments were substantively and procedurally unfair.

The court found that the dismissals were not automatically unfair. Whilst the court accepted that the reason for the dismissals was the employees’ refusal to agree to change their conditions of employment, it found that the purpose of the dismissals was not to compel the employees to accept the change. For it to be so, the dismissals would have been reversible if the employees then accepted the change, whereas it was clear from the facts of this case that the dismissals were, once decided, permanent and not reversible,. The court also found that the need to do away with the commission structure for the affected employees and align their packages with other employees, was a valid operational requirement.

On the alternative claim that the retrenchments were unfair, the court stated that there seems no doubt that an employer can in law utilize the principles of operational requirements to terminate the employment of an employee who refuses to accept changes to terms and conditions of employment. But the court found that the employer had erred by confusing consultation over the proposed changes to working conditions with the consultation required under s 189 of the LRA to make a retrenchment fair. All the consultation had been aimed at attempting to agree on the proposed changes to working conditions, and there had been no joint consensus seeking process attempting to agree the range of issues specified under s189.

The court also came to the conclusion that the employer, by using selection criteria based on ‘redundancy’, failed to apply fair selection criteria for the retrenchment. We are a little confused by this, as the employer only contemplated retrenching employees who had not agreed to the changed conditions of employment. We are not sure what other criteria could have been applied in the circumstances, as it would be pointless to contemplate retrenching employees who were prepared to agree to the changed conditions.

The court found that the dismissals were substantively and procedurally unfair, and awarded the employees compensation of 12 months’ remuneration.

Extract from the judgment
[26]   In relation to automatically unfair dismissal the applicants rely on the provisions of s 187(1) (c) of the LRA. Section 187(1) (c) reads as follows:

'187(1) A dismissal is automatically unfair if the employer, in dismissing the employee, acts contrary to section 5 or, if the reason for the dismissal is - (c) to compel the employee to accept a demand in respect of any matter of mutual interest between the employer and the employee.'

[27]   In National Union of Metalworkers of SA & others v Fry's Metals (Pty) Ltd 2005 (5) SA 433 (SCA); (2005) 26 ILJ 689 (SCA) , the court held E that a dismissal would be automatically unfair when such a dismissal is effected for the purposes of compelling the employee to agree to the employer's demand and such a dismissal is temporary, pending the acceptance of the changes to the terms and conditions of employment. The dismissal in the circumstance as envisaged in s 187(1) (c) F is temporary pending compliance with the demand of the employer. Once the demand is accepted the dismissal is withdrawn and the employee is retained. In other words, the dismissal is conditional on the employee complying with the employer's demand.

[28]   In this respect the court in Fry's Metal in the middle of para 56, had the following to say:

       '... On this approach, only conditional dismissals can fall under s 187(1) (c) , and it is this that distinguishes them from the broader category of dismissals where the employer - irreversibly - "has terminated" the employment contract. Dismissals intended to be and operating as final - not, in other H words, reversible on acceptance of the demand - can thus never have as their reason "to compel the employee to accept" that demand. They will therefore not be automatically unfair. In such cases, the only factual enquiry confronting a court is the employer's reason for effecting the dismissal: once compulsion to accept the disputed demand (with ensuing reversal of the dismissal) is excluded, no further enquiry into the nature or categorization of the demand is required.'

[29]   There seems to be no doubt that an employer can in law utilize the principles of operational requirements to terminate the employment of an employee who refuses to accept the changes to terms & conditions of employment. However, a dismissal based on operational requirements would be automatically unfair if no valid operational requirements exist to justify changes and also as indicated earlier the dismissal is not final and intended to replace an employee A with those who may be willing to accept the changes in the conditions of employment. See also A van Niekerk et al Law @ Work (LexisNexis) at 226-7 where the learned authors after a brief analysis of both the decisions of Fry Metals and CWIU & others v Algorax (Pty) Ltd (2003) 24 ILJ 1917 (LAC) , say that:

       'At present, the law would appear to determine the application of the automatically unfair dismissal provision by reference to the employer's conduct and intention. If the employer intends to finally terminate the employment relationship by dismissing and to employ a new workforce on the terms rejected by those dismissed, there is no automatically unfair dismissal.'

[30]   Turning to the facts and circumstances of the present case, there is no doubt that the reason for the dismissal was based on the refusal by the applicants to accept the changes which the respondent saw as necessary to address its business risk which had not occurred but which could potentially happen. Thus the respondent was not introducing changes addressing something that has occurred in its business but sought to address a risk which could reasonably be expected to occur even after introducing all the necessary measures to prevent it from occurring. In this respect I have no reason to doubt the version of the respondent that the risk could reasonably materialize even with the introduction of the computer system to deal with the processing of the payment of the commission. The risk of fraudulent claims for payment of commissions remained even after the introduction of the computer system because of the human element in feeding the data into the computer. The other reason which I believe constitutes a good and reasonable aspect of the operational requirements is the fact that the restructuring was introduced to align the salary structure of the applicants with that of the other employees of the respondent.

[31]   It is therefore my view that the reasons for the dismissals of the applicants for operational requirements were clearly permanent and not conditional on the applicants accepting the changes which the respondent sought to introduce at the time. The fact that the dismissal was not conditional but final was confirmed by Mr Du H Buisson of the first applicant who stated that their understanding was that the dismissal was final and not negotiable.

[32]   It is for the above reasons that I find that the applicants have failed to show that their dismissals by the respondent were automatically unfair. Thus the applicants' claims for automatically unfair dismissal stand to fail.

……………………

[36] Turning to the facts of the present matter, it is apparent from the evidence presented that up until 26 July 2006, the parties were engaged in a consultation initiated by the respondent with the view to obtaining the consent of the applicants regarding the changes I to their terms and conditions of employment. Although there is evidence that makes reference to retrenchment, for instance in the minutes of 20 July 2006, there is no evidence that the respondent contemplated a retrenchment as envisaged by s 189 of the LRA. In this respect nothing is said in the letter of 12 June 2006, concerning the possible retrenchment. While the letter of 26 June 2006 indicated that the respondent anticipated retrenching the applicants that is not supported by the facts and the circumstances that prevailed. The letter is well crafted, and at the face value and using a checklist approach it could easily be said that the respondent had complied with the requirements of the law.

[37]   It is clear even from the version of the respondent that all meetings which took place prior to 26 July 2006 were not consultations as envisaged in terms of s 189(1) of the LRA. Accordingly, for the purposes of s 189, the meetings cannot be regarded as bona fide or genuine consultations concerning possible retrenchments. They were meetings which were not geared towards avoiding or minimizing retrenchments because at that stage retrenchment was not contemplated. What seems to have been envisaged was that the applicants would agree to the proposed restructuring of their salaries. It would also appear that even as late as the meeting of 26 July 2006, the respondent had not contemplated retrenching the applicants. The minutes of that meeting reflect the respondent having indicated that the original offer relating to the salary to be paid if they were to agree to the changes in the terms and conditions of employment remained. The respondent explained during that meeting how it arrived at the salary it proposed. And more importantly as concerning the issue of whether that meeting constituted consultation envisaged by s 189 of the LRA, it is stated at 41 of the bundle that the respondent is said to have stated that: 'Company said never foresee job loss as there is (sic) positions for both people.'

[38]   The respondent issued its notice of possible retrenchment on 26 June 2006. The reason for the contemplation of the retrenchment is set out in the letter the contents of which are quoted above. It would seem to me that the issue of contemplating a retrenchment arose after the applicants rejected the offer made during the meeting and when the first respondent insisted on re-negotiating the commission to be paid to the applicants. This becomes even clearer from a reading of the letter dated 26 July 2006, wherein the respondent sought to confirm what transpired during that meeting. The letter reads as follows:

'We refer to the consultation that was held this afternoon.

We would like to place the following on record:

  1. It was never the company's intention to retrench your two members as it had positions available for both employees.

  2. The company offered both the employees reasonable alternatives in order to avoid any job losses.

  3. By the employees not accepting the company's offer, they leave the company as indicted during today's consultation, with no option but to terminate their services with the company.

  4. The company has agreed to afford the employees an opportunity until noon on Monday 31 July 2006 to finally decide whether they want to accept the offer or not.

  5. The company was willing to negotiate on the issues relating to severance pay and re-employment. However you indicated that this will not be necessary as you will waive your claim on these issues.

  6. Should the employees not accept the company's offer of employment on

Monday as per point 4 of this fax, their service will terminate with effect from 1 August 2006. They company will not require the employees to work their notice period and in return the employees will be paid for their notice period of one month. Please do not hesitate to contact the writer directly should you have any further queries.'

[39]   The letter of 31 July 2006 from the respondent which was a response to the demand for disclosure of information by the first applicant B reveals very clearly that the consultant confused consultation that may have occurred when the respondent sought approval of the applicants to change the terms and conditions of their employment and consultation as envisaged by s 189 of the LRA. The letter reads as follows:

Dear Sir

We refer to your fax dated 28 July 2006.

We are of the opinion that the company has discussed the reasons behind the changes in terms and conditions of employment during consultation D process. All the reasons are also addressed in the 189(3) notice. It must also be noted that one of the biggest reasons is to bring the two employees in line with the other sales coordinators in the company and to have pay parity within the organization for specific positions.

We see the process as complete and are not willing to entertain any further issues pertaining to this matter. The company made its final offer to your members in the last consultation.

We are of the opinion that your members have all the information they need to make their informed decision. It is now up to them to do so.

Please do not hesitate to contact the writer directly should you have any further queries.

Kind regards.

[40]   In this respect the point made earlier needs to be re-emphasized. The purpose of the consultation which took place from the start to the end including the meeting of 26 July 2006 was for the purposes of persuading the applicants to agree to the restructuring of their salaries. The respondent had not at that stage contemplated retrenching the applicants. In other words the consensus-seeking process which the respondent embarked upon was not the one envisage by s 189 of the LRA. If the process was to be the one envisaged by s 189(2) then H the respondent was obliged to ensure that the applicants were properly informed of the nature of the process, and its possible outcome. The respondent ought to have made it clear to the applicants that the process they had embarked on was not only seeking their agreement to the changes of their terms and conditions of employment but that critically it was a process intended to avoid or minimize the consequences of dismissal or reduce the impact that dismissal may have on them.

[41]   The other point to be taken into account in the consideration of the fairness or otherwise of the dismissal concerns the selection criteria. It is trite that once retrenchment becomes a reality, the parties need to engage in a consensus-seeking process with a view to reach an agreement about selection criteria. As stated earlier in this judgment, if no consensus is reached regarding the criteria, the employer is obliged to apply an objective and fair criterion.

[42]   In the present instance there is no evidence that the parties reached an agreement as to the selection criteria of those employees who were to be dismissed. The question that then arises is whether the criterion applied by the respondent was objective and fair.

[43]   As indicated earlier, the criterion used in selecting the applicants for retrenchment amongst the sales employees of the respondent was 'redundancy'. In my view this is clearly an unfair criterion. In this respect I agree with the legal representative of the applicants that 'redundancy' can never be a fair and objective selection criterion, as it is the cause of the retrenchment.

[44]   In the light of the above I am of the view that the respondent has failed to discharge its duty of showing that the dismissal of the applicants was both substantively and procedurally fair. It is also my view that in the circumstances of this case, equity requires that the maximum compensation be ordered against the unfair dismissal of the applicants. And concerning costs, I see no reason why they should not follow the results.

[45] In the premises the following order is made:

  1. The dismissals of the applicants for operational reasons were not automatically unfair.

  2. The dismissal of the applicants for operational reasons was both substantively and procedurally unfair.

  3. The respondent is to pay both the second and third applicants compensation for 12 months calculated at the salary that each received as at the date of their dismissal.

  4. The respondent is to pay the costs of the applicants.