Regenesys Management (PTY) Ltd t/a Regenesys v Nortje and Others (JA49/2020) [2022] ZALAC 96 (18 July 2022)
A competitive process to seek to avoid retrenchment is not unfair. However, this does not remove the obligation on an employer to ensure that any resultant retrenchment meets the requirements of substantive fairness, with fair and objective selection criteria used to select those employees to be retrenched and alternatives to retrenchment properly canvassed and carefully considered.
Facts:
On 17 June 2015 the employer, a private business school based in Johannesburg, notified its staff to attend a meeting at which staff were informed that it was embarking on a restructuring process to improve the quality of academic delivery, reduce dropout rates, improve its financial performance and build sustainability. At the meeting, employees were informed that there was a need for retrenchments due to the employer's financial position, including that its salary bill made up 43% of expenses. Employees were informed that group meetings would be held the following day with staff to discuss the possibility of retrenchment.
On 18 June meetings were convened with the affected departments, which were handed a proposed new structure, simultaneously with letters in terms of section 189(3) of the LRA. The affected employees were invited to make written proposals regarding the proposed restructuring. Some did so. The first respondent and another employee requested that a facilitator from CCMA be appointed to assist the parties with the consultation process. The employer did not appoint a CCMA facilitator.
On 22 June employees, including the first to seventh respondents, were presented with the final amended organisational structure, a list of vacancies and a brief description of these positions, and were invited to apply for available positions within this new structure by no later than 13h00 the following day. The employees were informed that the selection criteria were knowledge, skills and behaviour. In its pleaded case, the employer stated that the criteria were competence, including knowledge, skills, past performance and behaviour.
The respondent employees applied for various positions in the new organisational structure but were unsuccessful and told that they were being retrenched.
The dispute was referred to the Labour Court which found the dismissals of the second, third, fifth and the seventh respondents to be substantively unfair. It was found that in not offering the second respondent the restructured position, albeit at a lower salary, so as to avoid her retrenchment, her dismissal had been substantively unfair. The criteria used were not fair and objective since the person appointed to the position was employed after her, and the reason given for that appointment was that she was younger, more dynamic and had a relationship with students.
The Labour Court similarly found the dismissal of the third and fifth respondents to be substantively unfair in that the employer had failed to apply fair and objective selection criteria. The third respondent, on the employer's own version, met the qualifications and experience required for appointment. Yet she was not appointed, as the employer had considered other factors such as how she came across to students and colleagues. In relation to the fifth respondent, a junior employee was appointed despite such position being a suitable alternative for the fifth respondent. Again, the LC found that fair and objective criteria were not applied, with no effort made by the employer to seek alternatives to the retrenchment of the fifth respondent.
The dismissal of the seventh respondent was also found to be substantively unfair in that selection criteria were not fairly and objectively applied and no good reason was advanced by the employer why the seventh respondent was not appointed to a suitable alternative position that was available. Although it was claimed that the seventh respondent lacked the required qualifications, other employees appointed into the same position also did not meet such minimum qualification requirements. The Labour Court consequently found that the employer had made no attempt to save the seventh respondent's job through the application of fair and objective selection criteria.
The Labour Court ordered that the second, fifth and seventh respondents be retrospectively reinstated with their severance payments set off against back pay due. It was ordered that the third respondent be paid the sum of R766 378,08, being equivalent to 12 months' compensation; and the appellant was ordered to pay the respondents' costs.
The employer appealed to the Labour Appeal Court which confirmed that the dismissals of the second, third, fifth and seventh applicants were substantively unfair. Whilst reaffirming the views expressed by the LAC in South African Breweries (Pty) Ltd v Louw (CA16/2016, C285/2014) [2017] ZALAC 63 (24 October 2017) that a competitive process that seeks to avoid retrenchment is not unfair, this does not remove an employer's obligation to ensure that any resultant retrenchment is substantively fair, with fair and objective selection criteria applied and alternatives to retrenchment properly canvassed and considered.
The LAC ordered the employer to reinstate the employees retrospective to the date of dismissal, into the same or similar positions held by them at the time of their dismissal, with no loss of benefits. These employees were ordered to repay any amount received as severance pay.
The LAC in this judgment has confirmed an employer's obligation to take seriously the avoidance of retrenchments by doing everything possible to offer alternative, restructured positions wherever possible.
Extract from the judgment:
Savage AJA:
[21] It was contended for the appellant that the Labour Court had erred in finding that the dismissals of the four respondents were substantively unfair on the basis of the decision of this Court in South African Breweries (Pty) Ltd v Louw (Louw). It was contended for the appellant that where the employer elects to appoint dislocated employees after a restructuring process, the assessment criteria used in doing so do not amount to "selection criteria" within the contemplation of section 189 of the LRA and that a competitive process undertaken to appoint employees into the new structure is not unfair.
[22] The reliance on Louw is misplaced. In that matter, the employee did not apply for a post, despite an invitation to do so, as a result of which he was retrenched. This Court made it clear that a competitive process to seek to avoid retrenchment is not unfair. However, this does not remove the obligation on an employer to ensure that any resultant retrenchment meets the requirements of substantive fairness, with fair and objective selection criteria used to select those employees to be retrenched and alternatives to retrenchment properly canvassed and carefully considered.
[23] No basis has been advanced by the appellant to justify a finding that the Labour Court erred in its conclusion that the dismissals of the four respondents were substantively unfair. The Labour Court carefully considered the material before it and motivated its findings having regard to both the facts and the law. Its finding that the dismissals of the four respondents were substantively unfair is beyond reproach and must stand. In argument, I understood counsel for the appellant to accept as much. It follows that the appeal against the finding that the dismissals of the second, third, fifth, sixth and seventh respondents were substantively unfair must fail.