National Union of Metalworkers of South Africa and Others v Lectropower (Pty) Ltd (JS1151/2014) [2018] ZALCJHB 266 (6 July 2018)

Principle:

Selection criteria must be agreed to by the consulting parties, and if no criteria have been agreed, criteria must be fair and objective. The onus is upon the employer to demonstrate that the criteria it chose in the face of a disagreement is indeed fair and objective.

Facts:

Cases have confirmed that the duty to show that the selection criteria used for retrenchment were both objective and fair rests on the employer. The employer must prove:

  1. that it selected the employees to be dismissed according to selection criteria that have been agreed to by the consulting parties, or failing that, criteria that are fair and objective; and
  2. that the manner in which the criteria were applied was objectively justifiable.

Cases illustrate that employers need to be able to justify both the criteria and the application of those criteria. In this case, the Labour Court found the employer was able to justify the choice of criteria as well as their implementation. It was accepted that a proper consultation process in terms of section 189 of the LRA was followed by the employer, and further that there was indeed a need to retrench. The only issue in dispute was whether the selection criteria used by the employer to select the individual applicants was fair or not. Although the applicants initially contended that there was an agreement that only LIFO would be used, the union later conceded that the employer was correct that there was agreement that LIFO was to be used in certain instances, whilst in others, strategic/operational needs determined the selection. The issue became whether the selection criteria had been applied fairly and objectively.

The court was satisfied that based on the facts (the employer led clear evidence on each stage of the decision making) there was no reason to doubt the fairness of the employer's decision to dismiss those chosen for retrenchment using the criteria of skills, experience and its strategic/operational requirements rather than purely on the basis of LIFO. The chosen criteria did not lack transparency, fairness or objectivity.

The court found that it could not be doubted that due to the nature of the employer's client requirements and the products produced or serviced, it made sense to retain employees with the necessary skills, technical know-how, qualifications and experience. The court evaluated the manner in which the employer weighed up the skills and experience of various employees and held that the employer could justify the decisions it made.

A sobering aspect of this case was the costs order against the union. The employer asked for a punitive cost order against NUMSA, as it was of the firm view that this claim was frivolous and vexatious. Finding that the union's case had no merit from the beginning and should never have been before the Court, the judge said "I accept that there is an on-going relationship between NUMSA and the respondent. I have however always held the view that such a relationship is not a bar to a cost order, especially in circumstances where a party should have had serious introspection prior to pursuing a claim such as in this case. In the circumstances, the requirements of law and fairness dictate that NUMSA should be burdened with the costs of this claim."

Contrasting this judgment is the case of Kenco Engineering CC v National Union of Metalworkers of South Africa (NUMSA) obo Members (JA/29/16) [2017] (LAC) (1 August 2017) where the LAC found the employer's application of the selection criteria to lack objectivity. In that case the employer proposed that the following be applied as selection criteria:

  1. skills,
  2. work performance,
  3. attendance and
  4. safety records

NUMSA challenged the procedural and substantive fairness of the retrenchments. The LAC confirmed that the employer was required to place sufficient evidence before the court to enable it to assess whether or not it used and applied skills, work performance, attendance records and safety records in a fair and objective manner, thereby discharging the onus to prove this. But it did not do so. The selection criteria used by the employer were simply not demonstrated to have been fairly and objectively applied.

Despite the outcome in the Kenco Engineering CC judgment, it nevertheless recognised that LIFO is not the only possible criteria for retrenchment. But the judgment is also a reminder that the onus is on the employer to prove the fairness of any selection criteria used and that they were applied in a fair and objective manner. This will inevitably require detailed evidence from the management team that applied the criteria and selected the employees to be retrenched. Cases will be won or lost on the strength of this evidence. A different outcome might have been achieved if clear evidence had been led of how the criteria were applied.

Extract from the judgment:

(Tlhotlhalemaje,J:)

25.   In terms of section 189(2)(b) of the Labour Relations Act (LRA), the employer and other consulting parties must engage in a meaningful joint consensus seeking process and attempt to reach consensus on the method for selecting the employees to be dismissed. Under section 189 (7) of the LRA, the employer must select the employees to be dismissed according to selection criteria(a) that have been agreed to by the consulting parties, and (b) if no criteria have been agreed, criteria that are fair and objective. The onus is upon the employer to demonstrate that the criteria it chose in the face of a disagreement is indeed fair and objective.

29.   The respondent's contention was that LIFO was one of the criteria used, together with strategic/operational requirements. In respect of the boiler-making section, it cannot be doubted that due to the nature of the respondent's clients' requirements and the products produced or to be serviced, it made sense to retain employees with the necessary skills, technical know-how, qualifications and experience.

33.   I am therefore satisfied that based on the facts, and comparisons between Kirton and Orme on the one hand, and Segabutle and Sekgathume on the other, there is no reason to believe that the respondent's decision to dismiss the latter two upon a consideration of skills, experience and its strategic/operational requirements rather than purely on the basis of LIFO, cannot be said to be lacking in transparency, fairness or objectivity.

36.   In the light of the above conclusions, I am satisfied that the respondent had discharged the onus placed on it to demonstrate that the selection criteria adopted in dismissing the individual applicants was fair and objective. In considering an award of costs, the court takes into account the requirements of law and fairness. The respondent sought a punitive cost order against NUMSA as it was of the firm view that this claim was frivolous and vexatious.

37.   Having had regard to the basis of the applicants' claim, I am satisfied that it had no merit from the beginning and should never have been before the Court. I accept that there is an on-going relationship between NUMSA and the respondent. I have however always held the view that such a relationship is not a bar to a cost order, especially in circumstances where a party should have had serious introspection prior to pursuing a claim such as in this case. In the circumstances, the requirements of law and fairness dictate that NUMSA should be burdened with the costs of this claim.