South African Commercial, Catering and Allied Workers Union and Others v Woolworths (Pty) Limited (CCT275/17) [2018] ZACC 44 (6 November 2018)

Principle:

  1. Section 189A(19)(b) of the LRA requires retrenchments to be operationally justifiable on rational grounds.
  2. The fact that a significant period might have lapsed from the date of dismissal to the date of the judgment is not a bar to reinstatement. An employee whose dismissal is substantially unfair should not be disadvantaged by delays of litigation she/he has not caused.
  3. The term "not reasonably practicable" as a reason not to order reinstatement as the primary remedy for unfair dismissal under s193(2)(c) of the LRA, means more than mere inconvenience and requires evidence of a compelling operational burden. An employer must lead evidence why reinstatement is not reasonably practicable, and the onus is on the employer to demonstrate that.

Facts:

Until 2002, Woolworths employed its employees on a full-time basis. These employees ("the full-timers") worked fixed hours totalling 45 hours per week. In 2002, Woolworths decided that in future it would only employ workers on a flexible working hour basis. These workers (flexi-timers) would work 40 hours per week. By 2012, Woolworths's workforce consisted of 16 400 flexi-timers and 590 full-timers. Full-timers earned superior wage rates and benefits. The remuneration package of some full-timers exceeded the wages and benefits applicable to flexi-timers by 50%, even though full-time workers and flexi-timers do the same work.

Woolworths decided that in order to cater for the current market, it needed to operate with an entire workforce consisting of flexi-timers. It decided to convert the full-timers to flexi-timers on the terms and conditions of employment applicable to flexi-timers. In order to do this, Woolworths first invited full timers to voluntarily convert to flexi-timers. It did not invite the Union to participate in this phase. Certain inducements were offered to the full-timers for the conversion. All of the full-timers save for 144 employees opted for early retirement, voluntary severance or agreed to convert to flexi-timers.

During the course of consultation some of the full-timers accepted the voluntary option, leaving 92 full-timers who opposed conversion and did not accept any of the voluntary options. Later SACCAWU and 44 members appreciated the need to work flexi-time and accepted that full-timers should be converted to flexi-timers. SACCAWU initially suggested that the full-timers retain their existing full time wages and benefits, but towards the end of the consultation process, SACCAWU varied its stance. It proposed that the workers would work flexi-time for 40 hours and be paid only for those hours and at lower rates. Woolworths however did not understand this to be a different proposal (a factor later found by the LAC to be pivotal to the outcome of this case), and rejected it.

Woolworths gave notice to terminate contracts of employment and retrenched 92 full-timers. SACCAWU, on behalf of 44 of these full-timers, launched an application in the Labour Court terms of s189A(13) of the LRA to challenge the fairness of the retrenchment procedure adopted by Woolworths. It also launched another application under s191(11), challenging whether there was a fair reason for retrenchment. These applications were later consolidated into one case.

The LC in SACCAWU and Others v Woolworths (Pty) Ltd (J3159/12, JS1177/12) [2016] ZALCJHB 126 (5 March 2016) was faced with the employer's argument that the restructuring was necessary so that all employees were to be treated the same. The Court held that employers ought to deal with pay inequity issues in accordance with chapter III of the EEA, rather than through dismissals for operational requirements for employees who refuse to agree changes to terms and conditions of employment that are designed to achieve equal pay. The LC found the retrenchments to be substantively and procedurally unfair, and ordered that the 44 employees be reinstated retrospectively from their date of dismissal.

On appeal, the LAC in Woolworths (Pty) Ltd v SACCAWU and Others (JA56/2016) [2017] ZALAC 54 (19 September 2017) upheld only part of the LC's conclusions and orders. The LAC agreed that the dismissals were substantively unfair, but changed the remedy from reinstatement to an award of compensation equal to 12 months' remuneration because it found that the full time posts were redundant. The LAC also set aside the LC's finding that the dismissals were procedurally unfair.

The decisive factor in the LAC's view was that the employer had failed to show that it properly considered the alternatives to retrenchment, given that it had misconstrued that the Union's last proposal was no different to its previous one. Had Woolworths properly understood the Union's last proposal, the LAC believed it would have realised that the retrenchment of at least some of the employees could have been avoided.

The Union and the employees challenged in the Constitutional Court the LAC's substitution of compensation for reinstatement as the remedy for the unfair dismissal, as well as challenging the LAC's finding that the retrenchments were not procedurally unfair. They argued that the dismissals were both substantively and procedurally unfair.

The ConCourt agreed with the LC's views. It found that the dismissals were both substantively and procedurally unfair, and that the retrenched employees should be reinstated retrospectively to their date of dismissal rather than receive compensation.

Regarding the question of substantive unfairness, the ConCourt highlighted the fact that Woolworths had stated during the consultation process that the fundamental reason for the retrenchments was to be able to employ employees on a flexi-time basis, and yet SACCAWU, at a late stage in the consultation process, had varied its stance and had agreed that employees would work flexi-time. Thus, in the ConCourt's view, the retrenchments were no longer operationally justifiable. Had Woolworths properly considered the alternatives presented by the Union, it may have realised that the retrenchments were no longer necessary. The ConCourt felt that Woolworths had also not proved that it had properly considered all possible alternatives, before deciding to retrench. For all these reasons, the ConCourt found that the retrenchments were substantively unfair.

The ConCourt emphasised that the fact that a significant period may have elapsed from the date of dismissal to the date a matter is finalised in court, should not be a bar to reinstatement. The ConCourt considered Woolworths' argument that reinstatement was not 'reasonably practicable' under s193(2) of the LRA, due to the fact that their previous permanent positions no longer existed, but countered this by saying the employees had already indicated they were prepared to work flexi-time under certain conditions. Furthermore, the positions (cashiers mostly) they previously occupied, even if not on a full time basis, continued to exist.

The ConCourt accordingly reinstated them retrospectively back into their previous full time positions, these being the conditions under which they were employed at the time of their dismissal, but directed the parties to resume the consultation process between them to reach an agreement on working flexi-time.

Extract from the judgment:

(Khampepe J:)

Operationally justifiable

[32]   Section 189A(19)(b) of the LRA requires the dismissals to be operationally justifiable on rational grounds. The Labour Court found that this requirement was not met. As I have already stated, for the purposes of this judgment it is not necessary for this Court to revisit the decision in Black Mountain Mining. That is because, even on the lower standard of rationality set out in Discreto, Woolworths has failed to show the retrenchments were operationally justifiable on rational grounds. The sole reason advanced by Woolworths for the dismissal is as contained in the section 189(3) notice, namely that "the company needs to be in a position to employ employees who are able to be used on a flexible basis". This stated purpose was achieved when the individual applicants, represented by SACCAWU, agreed to work the flexible hours and days required. It therefore follows that there was no longer a need for the retrenchments.

[33]   Woolworths has argued that a holistic reading of the section 189(3) notice reveals that there were additional reasons for the retrenchments, namely considerations of equity and cost efficiency. This argument is, with respect, farcical. The section 189(3) notice emphasises the "need to employ people who are able to work according to flexible working arrangements. This would improve both the costs and the operational efficiencies of the business". I agree with both the Labour Court and the Labour Appeal Court that a fair reading of this notice reveals that the sole reason for the retrenchments was the need for flexibility, with the benefits of that flexibility being greater cost and operational efficiency and not that these were intended to serve as self-standing reasons. Woolworths' transparent attempt to add these reasons as an afterthought must therefore be rejected.

Proper consideration of alternatives

[34]   During the consultation process SACCAWU proposed, as an alternative to retrenchments, that the employees would convert to the flexi-time model but maintain their same remuneration and benefits. In a letter of 30 October 2012, SACCAWU amended this proposal to the effect that the full-time workers would accept an 11% decrease in their remuneration. Woolworths has argued that it did not understand SACCAWU's proposal in its letter of 30 October 2012 to be any different from the other proposals which it had made and therefore did not consider same. This alleged misunderstanding does not save Woolworths from its failure to have properly considered this as an alternative to the retrenchments, but instead it evidences that this alternative was not properly explored.

[35]   The applicants also allege that Woolworths did not properly consider the offered alternatives to retrenchment such as natural attrition and / or wage freezes for the full-time employees. Additionally, the Labour Appeal Court found that Woolworths did not consider the possibility of ring-fencing as an alternative.

[36]   Given that Woolworths had been phasing out the full-timers for more than a decade, since 2002, it is inconceivable why this same model could not have continued, particularly as the number of full-timers since 2002 had significantly decreased. A wage freeze would also have sped up the rate of natural attrition.

[37]   None of the above alternatives were considered or attempted by Woolworths. Woolworths has also offered no tenable reasons for this failure, when it bears the onus to show that it had considered all possible alternatives in this regard. On the evidence before us, Woolworths has not shown that it properly considered these alternatives. This constitutes a breach of section 189A(19)(c) of the LRA.

[38]   It therefore follows that the dismissal of the individual applicants was substantively unfair because Woolworths has failed to prove that it complied with section 189A(19)(b) or (c). In other words, Woolworths failed to prove that the retrenchments were operationally justifiable on rational grounds or that it properly considered alternatives to retrenchments.

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[46]   Reinstatement must be ordered when a dismissal is found to be substantively unfair unless one of the exceptions set out in section 193(2) applies, namely that the affected employees do not wish to continue working for the employer; the employment relationship has deteriorated to such a degree that continued employment is rendered intolerable; it is no longer reasonably practicable for the employees to return to the position that they previously filled; or the dismissal is found to be procedurally unfair only.

[47]   As affirmed by this Court previously, the fact that a significant period might have lapsed from the date of dismissal to the date of the judgment is not a bar to reinstatement. An employee whose dismissal is substantially unfair should not be disadvantaged by the delays of litigation where she or he has not unduly delayed in pursuing the litigation.

[48]   At this stage, I deem it appropriate to focus particularly on the exception provided for in section 193(2)(c), namely instances wherein reinstatement is not "reasonably practicable".

[49]   The LRA does not define the term "reasonably practicable". However, guidance can be sought from various authoritative court decisions. The Labour Appeal Court in Xstrata held:

"The object of [section] 193(2)(c) of the LRA is to exceptionally permit the employer relief when it is not practically feasible to reinstate; for instance, where the job no longer exists, or the employer is facing liquidation or relocation or the like. The term 'not reasonably practicable' in [section] 193(2)(c) does not equate with term 'practical', as the arbitrator assumed. It refers to the concept of feasibility. Something is not feasible if it is beyond possibility. The employer must show that the possibilities of its situation make reinstatement inappropriate. Reinstatement must be shown not to be reasonably possible in the sense that it may be potentially futile."

It is thus evident that the term "not reasonably practicable" means more than mere inconvenience and requires evidence of a compelling operational burden.

[50]   An employer must lead evidence as to why reinstatement is not reasonably practicable and the onus is on that employer to demonstrate to the court that reinstatement is not reasonably practicable. In this case the dismissal was not for misconduct. The respondent dismissed the applicants for the reason that it believed that they were not prepared to work the so-called "flexi-time" that the respondent wanted them to work and were insisting on working and being paid on a full-time basis. It is accepted by all concerned that the respondent was mistaken in understanding this to be the applicants' position after they had made the last proposal before they were dismissed. It is also accepted by all concerned now that in fact the last proposal that the applicants made to the respondent entailed that they would work flexi-time. The applicants' proposal entailed that they would accept an 11% reduction in their salaries.

[51]   The effect of this proposal was that, whereas all along the applicants' employment was on a "full-time" basis, the basis upon which they were going to continue to be employed was going to change. In fact their hours of work were going to change from those applicable to the so-called "full-time" employment to those applicable to working "flexi-time". Full-time employment in this sense meant fixed hours and on fixed days in a week. "Flexi-time" employment meant employment on the basis of flexible hours and flexible days. The respondent was no longer prepared to employ the applicants and others doing the same job on a full-time basis and wanted all of them to work on a flexi-time basis. The overwhelming majority of cashiers had accepted the respondent's proposal to work on a flexi-time basis by the time the applicants made their last proposal before they were dismissed.

[52]   Counsel for Woolworths contended that the positions in this instance were no longer available and had ceased to exist upon the dismissal of the employees. He therefore submitted that the applicants' employment contracts could not be revived as full-time employment contracts. I do not agree that the positions in which the applicants were employed no longer exist. They were employed as cashiers and there has been no suggestion that the number of cashiers has decreased. It is the conditions of employment that have changed and not the positions themselves. Cashier positions do still exist within various Woolworths stores, and have not become redundant nor have they ceased to exist. If this was the position, Woolworths would not be able to be fully functional and operational as it is. As this Court said in Equity Aviation, reinstating an employee means restoring the employee to the position in which he or she was employed immediately before dismissal. This means reviving the employee's contract of employment that had been terminated previously.

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[56]   Although the respondent knows now that it had misunderstood the applicants' last proposal, there is nothing on record that suggests that it has, in the meantime, accepted that proposal as it was. They may have wanted to discuss it further with the applicants. Accordingly, we do not know what agreement the two sides could have ultimately agreed upon. That means that we do not know the terms and conditions under which the applicants would have continued to work for the respondent if they had never been dismissed. In these circumstances it seems to me that we should revive the contracts of employment which existed between the applicants and the respondent at the time of dismissal on the basis that as soon as possible after this judgment has been handed down the parties may resume the consultation process which ended when the dismissal took place and the applicants may then revive their proposal or make another proposal aimed at the parties reaching an agreement on the issue of them working flexi-time. Accordingly, Woolworths has not shown that reinstatement is not reasonably practicable.