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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 by Prof Alan Rycroft that looks at 'Suspension - Questions and Answers'. It provides an overview of the do's and dont's of suspension. We also look at three new cases: The first discusses a very recent LAC landmark judgment that takes another look at whether the LAC's previous decisions are correct, regarding whether a procedural irregularity in a retrenchment causes the dismissals to be 'invalid' (as opposed to being unfair). The second considers when a union can bind its members in a voluntary retrenchment consultation. The third looks at the differences between resignation and retirement from a legal perspective.

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


Invalid or unfair? The LAC declares 2 previous LAC decisions wrong

When the LRA (or any other Act) prescribes a specific procedure, what should the consequences be of a failure to follow that procedure? For example, if an employer gives a notice to retrench before the prescribed period of 30 days is up (as required in s 189A(8) of the LRA) does this failure to follow procedure make the retrenchments invalid or just unfair?

These questions have caused much debate, especially after the LAC, in two separate judgments, ruled that an unprocedural retrenchment is invalid. The effect of these previous judgments was that the dismissals were regarded as 'null and void' - ie they never took place - and the employees should be reinstated retrospectively as if they were never dismissed, before there could be any consideration of the fairness of the retrenchments. The employer then has to start all over again, even though the retrenchments may have taken place years before. These judgments, which can be found under Worklaw's case law section, are De Beers Group Services (Pty) Ltd v NUM [2011] 4 BLLR 319 (LAC) which was subsequently confirmed and applied in Revan Civil Engineering Contractors & others v National Union of Mineworkers & others (2012) 33 ILJ 1846 (LAC). At the time we were rather critical of these judgments - see Worklaw's February 2013 newsflash for more on this. Many thought that invalidity was too harsh a consequence for a wrong procedural step.

When another case with huge financial implications arose, the Judge President of the Labour Courts, acting in terms of section 175 of the LRA, directed that the matter be heard by the LAC sitting as a court of first instance (that means without first being heard by the Labour Court). The respondents in the matter were not just the employees of Edcon affected by the retrenchments and their union, NUMSA, but the Minister of Labour and the Minister of Justice and Constitutional Development who were also joined because of the significance of the judgment. The LAC gave judgment on 3 March in the matter of Edcon v Steenkamp and Others (JS648/13, JS51/14, JS350/14) [2015] ZALAC 2 (3 March 2015)..

The facts were that during April 2013, Edcon commenced with a process of restructuring based on operational requirements. The process resulted in the retrenchment of about 3000 employees (some of whom accepted voluntary severance packages). Edcon at the relevant time employed about 40 000 employees nationwide and the retrenchments occurred throughout the company.

None of the 1331 applicants challenged the substantive fairness of their dismissals. They all relied instead exclusively upon the De Beers principle to assert a cause of action that their dismissals were invalid and sought to be reinstated with full back pay. The cost of such orders, were they to be granted, would have been substantial. They argued that the unprocedural dismissals were "invalid" within the meaning of that term as applied in De Beers and Revan. In these cases the LAC held that where an employer issues notices of termination before the period referred to in section 189A(8)(b) of the LRA has elapsed (ie prematurely), the ensuing dismissals are invalid, and accordingly of no force and effect.

The LAC in Edcon said that the definition of dismissal is wide enough to include a wrongful or "invalid" termination in violation of contractual or statutory notice periods within its ambit. The word "terminated" in section 186(1)(a) of the LRA should be given its ordinary meaning of "bringing to an end". The ordinary meaning is not coloured by the lawfulness, fairness or otherwise of the action.

The LAC confirmed that non-compliance with the procedural provisions of s 189A(8) of the LRA does not in itself result in any subsequent dismissals being invalid (as opposed to being unfair) and a nullity entitling the employees to reinstatement. This is a significant judgment which we feel deals proportionately with a procedural error in a substantively fair retrenchment.

When can a union bind its members in a retrenchment consultation?

It is commonly understood that a registered trade union may act on behalf of its members and that any settlement negotiated and concluded between such trade union and an employer party is binding on members of the union concerned. Does this principle extend to voluntary retrenchments? This was the issue which arose in Elliot International (Pty) Ltd v Veloo and Another (DA12/11) [2014] ZALAC 36; [2014] 10 BLLR 955 (LAC); (2015) 36 ILJ 422 (23 July 2014).

We have often commented on the length of time involved in litigation. In this case the dispute started 11 years ago. In June 2004, the employees joined a registered trade union, FEDTUSA. In August 2004, a notice was issued by the employer inviting consultation on possible retrenchments. At the consultation meeting it was announced that if the affected employees agreed to a voluntary retrenchment, they would be paid more than what was otherwise prescribed by the law. After the meeting, each of the employees was presented with a copy of the voluntary retrenchment agreement to consider and sign. Later they received the agreement again with a letters saying that it was "as negotiated and agreed by all concerned including the Union representative and Shopstewards". It was common cause that the respondent employees had declined to sign.

When the union later alleged that the retrenchments were unfair, the employer expressed surprise at the union's allegation, insisting that after a long and intensive negotiation agreement was reached to satisfy all parties; not once had there been concern voiced that it was unfair or procedurally incorrect. The employer placed emphasis on the fact that as soon as there was agreement on the severance package, draft letters were handed to the union official to check for mistakes and then the employer went ahead "in order to follow their wishes."

All affected employees, including the respondents, had been paid their retrenchment packages on the basis of the formula and calculations appearing in the voluntary retrenchment agreement. The respondents never returned or tendered to return the money paid to them, which they should or could have done if they were opposed to voluntary retrenchment. The employer argued that the fact that they did not sign the voluntary retrenchment agreements did not affect the position that they agreed to the arrangement.

The Labour Court found that the probabilities strongly favoured the acceptance of the account given by the respondents that their refusal to sign the voluntary retrenchment agreement was sufficient proof to demonstrate their non-acceptance of the voluntary retrenchment deal. The Labour Court held that the termination of the respondents' employment constituted dismissals as envisaged in the LRA and that, in the circumstances of the case, such dismissals were unfair.

On appeal, the LAC agreed, and found that, although a union may act on behalf of its members during a compulsory retrenchment process and negotiate a settlement that is binding on them, in the case of a proposed voluntary retrenchment the union can only bind a member if such member has personally agreed to the settlement proposal and has specifically mandated the union to accept the proposal on his or her behalf.

We have the following concerns with the LAC's conclusions:

First, s 23 of the LRA makes it clear that a collective agreement reached between an employer and a registered trade union binds the members of that union. There is no limitation on the subject matter of a collective agreement. In this case it seems - the facts are not clear - that the union did reach an agreement on the severance package. This they were entitled to do. The fact that they didn't check or make it clear that some of their members were unwilling to accept voluntary retrenchment was a separate issue. If the employer had known clearly that there were some who were unwilling to accept the package there may have been a different outcome.

Second, we suggest the fact that the employees did not return the severance packages was too easily disregarded by the court by saying that lay-persons don't understand the legal consequences of a "in full and final settlement".

Third, the court was happy to reinstate employees after 11 years, imposing on the employer huge consequences for what seems to us to have been a reasonable misunderstanding about whether or not the union had a mandate to settle the voluntary retrenchments.

Resignation v Retirement

It is now settled that resignation is a unilateral act - the employee notifies the employer and no agreement is required. Withdrawing the resignation is however a bilateral act - it requires the employer to agree that the resignation is withdrawn.

What about early retirement? How different is this from resignation? This issue arose in the LAC decision in South African Municipal Workers Union and Another v South African Local Government Bargaining Council and Others (JA 84/13) [2014] ZALAC 64; (2015) 36 ILJ 441 (23 October 2014).

The employee was employed by a Municipality since 1996 in various capacities, culminating in her being appointed as the Executive Manager: Multi-Sectoral HIV and AIDS Unit. On 3 September 2007, she applied to terminate her service with the Municipality by way of early retirement and this was approved. On 4 September, she requested to withdraw the application. Her application to withdraw was refused. She was not immediately informed about the refusal. On 25 September, she noticed that she did not receive her monthly salary. Upon enquiring, she was informed that the Executive Director: Health did not approve her application to withdraw her application. On 05 October, the lock of her office door was changed and she found a letter attached to the door requesting her to vacate her office.

She referred an unfair dismissal dispute to the SALGBC. Conciliation was unsuccessful. She then referred the dispute to arbitration. The arbitrator found that the employee failed to prove that she was dismissed and therefore dismissed her claim. Being dissatisfied with the arbitrator's decision, the employee applied unsuccessfully to the Labour Court to review and set aside the decision. She then appealed to the LAC against the dismissal of the review application.

The LAC rejected the appeal with costs, and highlighted the differences between early retirement and resignation, in particular that early retirement is bilateral and requires the assent of the employer.


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Bruce Robertson
March 2015
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