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Worklaw subscribers receive a monthly newsletter containing commentary on the latest labour law cases and trends. This newsletter contains an article on conflicting cases on access to arbitration by a retrenched employee. We also look at three cases: the first looks at who must be consulted by the employer in the pre-retrenchment phase. The second (a Supreme Court of Appeal case) looks at when an affirmative action appointment is unfair. The third (a Constitutional Court case) looks at the difference between compensation and backpay.

This public newsletter is a free edited version of the Worklaw subscriber newsletter.


Interim report: Test for legal representation at CCMA hearings

We planned to discuss a recent decision from the Labour Appeal Court - Netherburn Engineering CC t/a Netherburn Ceramics v Moabelo & others (LAC Case No. JA 1/05) - which held that the LRA is not in violation of the Constitution in not giving an unqualified right of legal representation at the CCMA. But immediately after the judgment was released, an application to declare the restriction on legal representation at arbitration proceedings of the CCMA unconstitutional, was lodged with the Constitutional Court.

As there will probably be a final decision on this matter this year, at this stage we simply refer you to the Labour Appeal Court’s decision, which you can access by clicking on Netherburn Engineering CC t/a Netherburn Ceramics v Moabelo & others. Once the Constitutional Court has given its decision we will report more fully on this issue.

Pre-retrenchment consultation: who must the employer consult?

After facing serious competition from cheap imported tiles, an employer decided to close down its outmoded plant and invest in a mechanised facility. All workers employed at the old plant became redundant. At the time, about 80 per cent of the employees were members of BCAWU, and about two percent, including the three applicants, of UPUSA.

After the employer issued a notice to all employees in terms of section 189 of the LRA, management engaged in consultations with BCAWU. Agreement was reached that selection criteria would be key skills and educational levels, and thereafter LIFO.

In Maluleke & others v Johnson Tiles (Pty) Ltd [2008] 11 BLLR 1065 (LC) none of the applicants possessed key skills or met the required educational standard. The applicants contended that they should not have been retrenched because they had longer service than some of the workers who had been retained, and claimed that they were victims of a conspiracy. They also claimed that the retrenchment procedure was unfair because their union had not been consulted.

The Court rejected the applicants’ argument that because there was an agency shop agreement between the company and BCAWU, the employer was obliged to consult UPUSA. The collective agreement between the respondent and BCAWU obliged the employer to consult that union. The employer therefore had no obligation to consult with any party other than BCAWU. Furthermore, the consultation had culminated in the conclusion of a further retrenchment agreement, which was also binding on the applicant employees. The court held that the retrenchment was both substantively and procedurally fair.

This case confirms that where an employer consults, according to agreed procedures, with the recognised union in terms of a collective agreement which requires the employer to consult with it over retrenchment, the employer has no obligation in law to consult with any other union nor with any individual employee.

When is an affirmative action appointment unfair?

The applicant applied for the post of Deputy Director: Administration at Grey’s Hospital, Pietermaritzburg. After interviewing the candidates, the selection committee decided that he was the most suitable, as he was then administering three hospitals and had strong leadership, planning and control competencies, all of which were found lacking in the other candidates. The panel’s recommendation was endorsed by the province’s Department of Health, but not by the Provincial Public Service Commission, which directed the department to appoint a black male candidate.

The applicant instituted action in the Labour Court, claiming to have been unfairly discriminated against on the basis of race. He sought “protected promotion”. The action was dismissed on the basis that the appointment of the appellant, a white male, would not have given effect to the constitutional imperative of promoting equality and transforming the public service, and could not therefore have been the most suitable candidate.

At the Supreme Court of Appeal (Gordon v Department of Health: KwaZulu-Natal [2008] 11 BLLR 1023 (SCA)) the applicant’s contention was that in the absence of a rational policy, plan or programme which justified the employer acting in an inherently arbitrary manner, the failure to appoint him was discriminatory and unfair. The employer on the other hand argued that its decision was beyond judicial scrutiny because, even in the absence of a specific plan or policy, appointing a black candidate was a measure designed to promote equality and the transformation of the public service.

The Court held that the applicant had obviously been discriminated against on the basis of his race. However, legislation provided that, in spite of the prohibition of discrimination, employers could adopt employment policies or practices “designed to achieve the adequate protection or advancement of persons or groups or categories of persons disadvantaged by unfair discrimination”. While affirmative action is designed to uplift the previously disadvantaged, the question was whether the appointment of the successful black candidate was “a measure” falling within the legislation.

The Court noted that the argument that the successful candidate’s appointment was a measure to advance employment equity, was the only justification advanced for discriminating against the applicant. The department had no policy or plan. In evidence, the Provincial Public Service Commission was unable to provide a coherent explanation for rejecting the appellant, or to explain how the question of representivity was addressed in the recruitment and selection process. This indicated that the commission held the view that the only way to promote equality was to appoint black candidates. The court held that the appointment was clearly ad hoc, arbitrary and unfair.

The Court held further that in the absence of an equity plan, the employer was obliged to follow legislation pertaining to selection and appointment, none of which permits the rejection of suitable candidates on the basis of race alone. The appeal was upheld, and the respondent was ordered to pay the appellant the difference between the salary he received from 1996 to the date of his retirement in 2003, and the salary he would have received had he been promoted.

The lessons from this case are clear:

  1. In the absence of an equity plan or policy in terms of which affirmative action is to be applied, an employer is obliged to comply with the legislative framework which prohibits discrimination on the grounds of race or sex.

  2. An ‘affirmative action’ appointment made without an equity policy is an ad hoc and arbitrary act. It can never in itself amount to a ‘measure’ within the contemplation of the Bill of Rights and legislation which clearly require something much more than an ad hoc act.

  3. An appointment is not a ‘measure’ in itself.

Compensation and back-pay

After his dismissal for alleged misconduct, the employee referred a dispute to the CCMA. The commissioner upheld the dismissal. The employee then launched an application for review. The Labour Court set aside the award and replaced it with an order that the employee should receive a final written warning, valid for two years. (This in itself is interesting- to the extent that there is a common approach, most employers apply a one year period for warnings). The Labour Appeal Court found that, while the Labour Court had not expressly ordered the employer to reinstate the employee, such an order was implicit. However, the LAC also found that it could not be inferred whether the order should have been with retrospective effect and, if so, from what date. The LAC ordered that the employee should be reinstated from the date of the award, a period of 19 months. The employer contended that the order was incompetent as the LRA does not permit an order of reinstatement to be made retrospective for a period exceeding 12 months.

The Constitutional Court in Equity Aviation Services (Pty) Ltd v CCMA & others [2008] 12 BLLR 1129 (CC) noted the LRA grants three remedies to unfairly dismissed employees: reinstatement, re-employment or compensation. Reinstatement or re-employment may be granted to a date not earlier than the date of dismissal, and compensation is limited to 12 or 24 months. The ordinary meaning of the word “reinstate” is to put the employee back in the job he or she occupied before the dismissal. Reinstatement, being the primary remedy, is aimed at putting employees in the positions in which they would have been but for the unfair dismissal.

The Act indicates, however, that the extent of retrospectivity is dependent on the discretion of the court or arbitrator, provided only that it may not be to a date preceding the date of dismissal. Normally, reinstatement will not be ordered from a date later than the award. The fact that the employee has been without income for the period between the dismissal and the outcome of the adjudication or arbitration is a factor which must be taken into account when determining whether the order should be made retrospective and, if so, for what period.

The employer’s argument was that reinstatement orders may not be made retrospective for more than 12 months. The Constitutional Court held that nothing in the language of the Act supports such limitations.  The Court held further that the backpay to which reinstated employees are entitled is not to be equated with compensation. While it was permissible for a court to award both reinstatement and compensation under the LRA 28 of 1956, this is no longer permissible under the current Act. These remedies are now alternative and mutually exclusive. This distinction explains the limits on compensation set by section 194. Although those limits seek to curtail the costs to employers of unfair dismissals, the LRA provides two mechanisms addressing that issue. The first is to be found in the provisions that preclude reinstatement in certain circumstances; the second is the fact that courts and arbitrators have a discretion regarding the extent of retrospectivity. The Court accordingly held that it is competent for the Labour Court and arbitrators to order reinstatement with retrospective effect for a period exceeding 12 months.

The principles to be drawn from this case are:

  1. The sum of money paid to an unfairly dismissed employee subsequent to an order of reinstatement with retrospective effect is not compensation as contemplated in section 193(1)(c) or section 194. The remedies in section 193(1)(a) are thus in the alternative and mutually exclusive.

  2. The backpay to which an unfairly dismissed employee becomes entitled when retrospective reinstatement is ordered is not limited to the maximum periods of compensation provided in respect of compensation as contemplated in section 194.

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Bruce Robertson
February 2009
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