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Worklaw subscribers receive a monthly newsletter containing commentary on the latest labour law cases and trends. This newsletter contains notification of the new earnings threshold for the BCEA. We also look at two new cases : one dealing with when retrenchment is unfair, and the other on guidelines for assessing the fairness of a dismissal and grounds for reviewing an arbitrator's decision.
In our article we look at the defence of cultural entitlement to a charge of sexual harassment.
This public newsletter is a free edited version of the Worklaw subscriber newsletter.
LEGISLATION AMENDMENTS: DETERMINATION OF EARNINGS
For purposes of deciding whether an employee is eligible for certain benefits - especially overtime pay - the Basic Conditions of Employment Act 75 of 1997 periodically amends the cut-off salary amount. The new determination of earnings threshold in terms of s 6 (3) of the BCEA was published on 1 February 2008.
All employees earning in excess of R149 736 per annum are excluded from sections 9, 10, 11, 12, 14, 15, 16, 17(2), 18(3) of the Act (essentially hours of work and overtime provisions) with effect from 1 March 2008.
For the purposes of this notice 'earnings' means the regular annual remuneration before deductions (ie income tax, pension, medical etc) but excluding similar payments (contributions) made by the employer in respect of the employee. Subsistence and transport allowances, achievement awards, intermittent payments for occasional overtime etc shall not be regarded as remuneration for the purpose of this notice.
Retrenchment: is the job loss necessary?
In previous newsletters we have commented on the trend in the labour courts to scrutinize retrenchments to see if the dismissals really are a measure of last resort. This test limits the right of an employer to restructure business operations in the way it decides. When a court finds that the dismissals could have been avoided, employers are often bewildered and frustrated by the court's finding that those dismissals are then unfair, being dismissals without a fair reason.
Consider the following story: Prior to his dismissal the employee was employed as the Chief Financial Officer ("CFO"); he was dismissed for operational reasons.
The CEO, soon after joining, expressed her unhappiness with the personnel structure. She approached the board and was given a verbal mandate "to look into the structure". Having received the verbal mandate from the board, she then engaged in a brain storming session with the executive managers to look at how to bring about introducing a flatter structure. The reason for wanting to introduce a flatter structure was because she was not happy with the flow of information between her and middle management. The information flow was constrained by the fact that the middle managers did not report to her directly; they had in terms of the structure to report firstly to their two senior managers, namely the CFO and the Chief Operating Officer ("COO") who would in turn report to the CEO.
According to the CEO, because the two senior managers were generalists and not specialists, she did not receive first-hand information from the specialists about operational matters. The other reason was that the support function and line function were according to her "mixed up".
The CEO informed the executive managers that she had drafted a structure that she believed "will hopefully enhance efficiency and effectiveness". The executive mangers were also required to furnish her with comments in writing regarding the proposed structure. The employee, the CFO, replied requesting further clarification but expressing that he was "baffled" by the proposed restructuring.
At a later meeting between the parties, the CEO apparently explained the rationale for the restructuring. The contribution of the CFO in this meeting was in essence that he supported the structure because the board had said that "they should support the CEO". However, he expressed his concerns that the "CEO was putting us at risk with this structure". He also indicated that he did not see any problem with the current structure.
The above structure was then followed by a memorandum from the CEO, wherein she informed the employee that she noted that he had not made any counter proposal. The memorandum went on to say that the final structure and an implementation process would be presented the following day. The proposal went on to the human resources committee and the board. A day later the consultation process commenced, which was attended by the legal representative of the employee. This was followed, after correspondence, by another consultation meeting. After that, the employee was dismissed.
These were the facts that arose in Mthombeni v Air Traffic & Navigation Services Ltd (2008) 29 ILJ 188 (LC). The court took as its starting point the rulings of previous cases, accepting that implicit in s 189(2)(a)(i) and (ii) of the LRA is an obligation on the employer not to dismiss an employee for operational requirements if it can be avoided. Dismissal is a measure of last resort. This is because an operational requirements dismissal is a "no fault" termination.
The court accepted that an employer has an obligation not to dismiss an employee for operational requirements if the employer has work that the employee can perform either without any additional training or with minimal training. This is because it is a measure that can be taken to avoid the dismissal and the employer has an obligation to take appropriate measures to avoid an employee's dismissal for operational requirements. Retrenchments will only be accepted as valid if the employer can show that all viable alternative steps have been considered and taken to prevent the retrenchments or to limit these to a minimum.
Turning to the test for substantive fairness in dismissals for operational reasons, the court used the test of whether the retrenchment is genuinely justified by the operational requirements. Using this test the court concluded that the employer had failed to prove that the employee had been dismissed as a last resort.
What can we learn from this case? It does not say anything that hasn't been said before. But it does make restructuring more difficult when it is done for greater efficiency as opposed to ensuring economic survival. When an employer retrenches as a result of restructuring to achieve a "flatter" structure or a reorganized system, it should be able to prove that this is necessary and a measure of last resort.
Guidelines for assessing the fairness of a dismissal and grounds for reviewing an arbitrator's decision
South African labour law has taken a few turns in arriving at an appropriate role for arbitrators in assessing an employer's fairness in dismissing an employee. When the SCA decided in the Sidumo v Rustenburg Platinum Mines Ltd case that the 'reasonable employer test' was the correct test - and arbitrators therefore had to 'defer' to the employer's sanction - there was glee on the part of employers and anger on the part of unions. When the Constitutional Court reversed this in its now famous Sidumo decision, it was the unions' turn to feel gleeful.
To remind you, what the Constitutional Court said in the Sidumo case was that a commissioner has to determine whether a dismissal is fair or not. A commissioner is not given the power to consider afresh what he or she would do, but simply to decide whether what the employer did was fair. In arriving at a decision a commissioner is not required to defer to the decision of the employer. What is required is that he or she must consider all relevant circumstances. (Refer to Worklaw's November 2007 newsletter for more on this).
Recently in Fidelity Cash Management Services v Commission for Conciliation, Mediation and Arbitration and Others  3 BLLR 197 (LAC) the Judge President of the Labour Appeal Court, Judge R Zondo, had the opportunity to implement the Constitutional Court's Sidumo ruling.
The Court adopted the following approach:
In reaching a decision on the fairness of a dismissal, an arbitrator must-
- take into account the totality of circumstances;
- consider the importance of the rule that had been breached;
- consider the reason the employer imposed the sanction of dismissal and the basis of the employee's challenge to the dismissal;
- consider the harm caused by the employee's conduct;
- consider whether additional training and instruction may result in the employee not repeating the misconduct;
- consider the effect of dismissal on the employee;
- consider the employee's service record.
Worklaw subscribers will know that the Code of Good Practice on Dismissal already has clear guidelines for considering the fairness of a dismissal. Paragraph 7 of the Code can be summarized as follows:
- Did the employee break a workplace rule? If so-
- Was the rule reasonable?
- Was the employee aware of it?
- Was the rule consistently applied?
- Was dismissal the appropriate sanction?
The Court's guidelines set out above therefore deal specifically with the last point above, namely whether the sanction of dismissal is appropriate. Worklaw subscribers searching for one set of clear guidelines to apply in assessing this issue could understandably be somewhat frustrated. Paragraph 3(5) of the Code already gives guidelines on this subject, requiring the employer to consider the gravity of the misconduct, the employee's circumstances (including length of service, previous disciplinary record and personal circumstances), the nature of the job and the circumstances of the infringement itself. The Court's guidelines do overlap with these but are also different in some respects. The Court also went on to say that its guidelines were not an exhaustive list.
In our opinion it is a real pity that the Court did not take the opportunity to formulate a comprehensive set of guidelines that could guide parties in most instances in assessing the fairness of the sanction of dismissal. We intend having a go at this in one of our forthcoming newsletters...... watch this space!
As regards the test for reviewing an arbitrator's decision, the Court said that to determine whether a CCMA commissioner's arbitration award is reasonable or unreasonable, the question that must be asked is whether or not the decision or finding reached by the commissioner "is one that a reasonable decision maker could not reach".
The Court added that it will often happen that, in assessing the reasonableness or otherwise of an arbitration award or other decision of a CCMA commissioner, the Court feels that it would have arrived at a different decision or finding to that reached by the commissioner. When that happens, the Court will need to remind itself that the task of determining the fairness or otherwise of such a dismissal is in terms of the Act primarily given to the commissioner and that the system would never work if the Court would interfere with every decision or arbitration award of the CCMA simply because it, that is the Court, would have dealt with the matter differently.
The lessons of this case are that the LAC has immediately implemented the Constitutional Court's judgment in the Sidumo case. For employers this means that there can be no expectation of the arbitrator 'deferring' to the employer's sanction. In each case employers will bear the onus of proving to the arbitrator that the dismissal and sanction are fair.
It also means that the grounds for review are tighter. While the arbitrator's decision does not have to be grossly unreasonable before being reviewable (the test is simply whether a reasonable arbitrator could not have reached that decision), the courts will not interfere if the arbitrator's decision falls into the zone of reasonable outcomes for this case.
We are of the view that the Labour Court will in future be less reluctant to review an arbitrator's decision than may have been the case in the past. Employers using the review process to stall the implementation of an arbitral award may find themselves punished by costs orders.
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