Public Newsletter


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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 that discusses the fairness of 'substituting the chairperson's sanction with a more severe sanction', in the light of a LAC judgment in December 2015 relating to this topic. We also look at three new cases: The first case is a recent Constitutional Court decision on the consequence of delays in pursuing a review application. The second case takes a further look at whether the termination of a service agreement falls under a business transfer in terms of s197 of the LRA. The third case looks at whether a failure to participate in pre-retrenchment consultation can be used as a ground for alleging that the retrenchments are procedurally unfair.

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


The consequences of delays in pursuing a review application

An employer failed to report for duty from 28 February to 3 March. He was charged in terms of the employer's code with misconduct for being absent from work without leave (AWOL) for four days without advising the employer of his whereabouts and providing an acceptable reason. A disciplinary hearing was held and the employee was dismissed. He referred an unfair dismissal dispute to the CCMA which held that the dismissal was unwarranted because there was no evidence of habitual absenteeism and no disciplinary record for being AWOL. The arbitrator concluded that the dismissal was substantively unfair and ordered the employer to reinstate the employee and to pay him six months' salary.

The employer, Toyota, launched a review application in the Labour Court in terms of section 145 of the LRA. The review was based on the conduct of the arbitration by the CCMA commissioner. The employee, on the other hand, sought an order dismissing the review application on the ground of excessive delay in pursuing the review. This delay was approximately 22 months after Toyota's review application was lodged in the Labour Court. Toyota submitted that the delays were the result of the difficulties it had reconstructing the record and that it had not abandoned its review. The LC dismissed the review application on the basis of the delay. The LC subsequently dismissed Toyota's application for leave to appeal and so did the Labour Appeal Court.

The Constitutional Court in Toyota SA Motors (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (CCT 228/14) [2015] ZACC 557 (15 December 2015) held that the appeal should be dismissed on the basis of the excessive delay alone. The court recognised that sometimes there are problems when an incomplete record of the arbitration is provided to the parties. But it pointed to the Labour Court's Practice Manual which requires the party bringing the review to approach the Judge President for a direction on the further conduct of the review application, if the record of the proceedings under review had been lost, or if the recording of the proceedings was of poor quality. According to the Practice Manual, the Judge President then allocates the file to a Judge for a direction, which might include the remission of the matter to the person or body whose award is under review, or where practicable, a direction to the effect that the relevant parts of the record be reconstructed. Toyota failed to make use of these provisions.

The Constitutional Court stressed that labour dispute resolution is designed to be speedy - particularly as reinstatement is the default remedy for unfair dismissal. This case reminds that the failure to proceed promptly in review proceedings may result in the application being dismissed on procedural grounds, due to the excessive delay.

What happens to the employees when a service agreement terminates?

In 2012 General Motors advertised a tender for waste management. Environserv's bid was successful and they entered into a three year waste management service agreement. When the service agreement was approaching its end, General Motors invited tenders for waste management in August 2015 for a further 3 year period. Another company Interwaste successfully bid for this next period. Having lost the tender, Environserv sent a letter to Interwaste as the successful bidder and requested it to be substituted as the new employer of its 22 employees who were performing their duties at General Motors in terms of the service agreement. The employees formed about 1.1% of Environserv's workforce nationally.

Interwaste refused Environserv's request and denied that on 1 January 2016, when its contract with General Motors commenced, a transfer of business as a going concern as contemplated in section 197 of the LRA would take place. It argued that the service agreement coming to an end on 31 December 2015 and the fixed term contracts of employment of 20 of Environserv's employees would expire as a result of effluxion of time. At that point there would therefore be no employees to be transferred to Interwaste and the provisions of section 197 of the LRA were not applicable. No assets, goodwill or property of Environserv would be transferred to Interwaste at the end of the service agreement and General Motors never outsourced the waste management service as a business as a going concern. General Motors only contracted out the business without transferring its employees.

On its service contract Environserv employed 22 employees, 20 of whom were on fixed term contracts. Environserv had about 1500 to 2000 employees nationwide and managed hundreds of projects. It is in the nature of the industry that Environserv and Interwaste operate in, that businesses win and lose tenders to provide services for a limited period.

The Labour Court, in Enviroserv Waste Management v Interwaste (Pty) t/a Interwaste Environmental Solutions and Others (P408/15) [2015] ZALCPE 66 (18 December 2015), held that when the activities of Environserv were scrutinised the only conclusion that could be reached is that it was performing its obligations in terms of a service agreement which was intended to last for a limited period of three years. The court's view was this: performing obligations in terms of a service agreement does not on its own constitute a business as envisaged in section 197 of the LRA, and does not entitle employees to have their contracts of employment transferred in terms of section 197 of the LRA.

As always, the facts are crucial in determining whether or not s197 applies. The facts of this case (eg there was no initial outsourcing, and there was no transfer of assets or goodwill) were key to the outcome that s197 did not in this instance apply. Parties wishing to influence whether or not s197 applies, need to act proactively in influencing how the facts of their particular case may be perceived. This ruling may for example be of little assistance where a client outsources a key function (eg security, catering, cleaning) which is then transferred from one service provider to another. The termination of a service agreement in that context may well trigger section 197 of the LRA.

The consequences of not participating in pre-retrenchment consultations

In December 2009, NUM submitted wage negotiation proposals to the employer, demanding a 25% increase across the board, provident fund, housing and skills development. In March 2010, a further meeting was held where NUM officials reduced their demand to 15% but the employer insisted on no wage increment. In April 2010, NUM officials were invited to a meeting to discuss short time. NUM officials were not available and the employees were represented by a shop steward, Mengo, who agreed with the employer that employees would work short time. In a meeting in May 2010, NUM reduced its demand to 11% but the employer did not move from its position not to grant an increase as it alleged it could not afford it.

In June 2010, NUM officials were invited to a retrenchment consultation. As NUM officials opted not to honour the consultation meeting, Mengo represented the employees. The employer informed Mengo that the short time which NUM had suggested would not work. It also intimated that it would proceed to retrench. The employer served its employees with retrenchment notices.

The employer held a further meeting with NUM officials on 15 June. NUM informed the employer that its employees were on a go slow and demanded a 5% wage increase. They refused to discuss retrenchment and insisted on pursuing wage negotiations. At a meeting of 23 June, the employer disclosed the reason for retrenchment to be lack of business. In a meeting that the parties held on 20 July, NUM officials refused to discuss the issue of the criteria to be used in the retrenchment exercise and walked out to show their dissatisfaction about the employer's conduct of changing wage negotiations into a retrenchment consultation. The employer selected applicants for retrenchment using employees' skills to select fitters and LIFO to select general workers. It dismissed them for its operational requirements and paid them severance pay.

When this matter came before the Labour Court in Nelson Mengo and Others v Daly Sales and Merchandising (Pty) Ltd t/a Crakshaw Designs (P47/11) [2015] ZALCPE 65 (11 December 2015) the court held that an employee or union may not rely on its intransigence during the consultation process in proving the procedural unfairness of a retrenchment. This case is based on the underlying principle in s 189(2) that pre-retrenchment consultation is intended to be a 'meaningful, joint consensus-seeking process'. When one party opts out of this mutual obligation, it cannot later say there was procedural unfairness.


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Bruce Robertson
January 2016
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