Steenkamp and Others v Edcon Limited (CCT29/18) [2019] ZACC 17 (30 April 2019)

Principle:

The primary purpose of section 189A(13) of the LRA is to allow for early corrective action to get the retrenchment process back on track. Paragraphs (a)-(d) establish a hierarchy of appropriate relief. Only where it is not appropriate to grant an order in terms of paragraphs (a)-(c) may an order for compensation be granted in terms of paragraph (d). Compensation cannot be divorced from the remainder of the section and given a self-standing meaning.

Facts:

Edcon fell on hard times and in 2013 it began a process of operational restructuring. Approximately 3 000 employees, including the 1 818 applicants in this case, were retrenched between 2013 and 2015. The process began with Edcon issuing written notices in terms of the LRA. However, Edcon then issued dismissal notices prior to the lapse of prescribed time periods provided for in the LRA. Because of this procedural error, s 189A(13) was relevant. The section reads as follows:
If an employer does not comply with a fair procedure, a consulting party may approach the Labour Court by way of an application for an order-
  1. compelling the employer to comply with a fair procedure;
  2. interdicting or restraining the employer from dismissing an employee prior to complying with a fair procedure;
  3. directing the employer to reinstate an employee until it has complied with a fair procedure;
  4. make an award of compensation, if an order in terms of paragraphs (a) to (c) is not appropriate.

Despite the availability of this statutory remedy in terms of section 189A(13) to approach the Labour Court to compel Edcon to comply with a fair procedure or to interdict or restrain it from dismissing them before having complied with a fair procedure, the applicants elected not to do so. They also elected neither to resort to a retaliatory strike action in terms of section 189A(8)(b)(ii)(aa) of the LRA, nor did they elect to refer a dispute about their unfair dismissals to the CCMA in terms of section 191(1)(a) of the LRA. The applicants therefore placed no reliance on a claim for unfair dismissal in terms of the LRA on the basis of procedural and substantive unfairness.

Instead, the applicants elected to refer a dispute for an order of reinstatement challenging the validity of their dismissals on the narrow basis of Edcon's non-compliance with the statutory notice periods under section 189A(2)(a) and (8) of the LRA. They relied on two earlier judgments of the LAC in De Beers and Revan where the contention was upheld that a dismissal on a short notice as prescribed in terms section 189A, is invalid and of no force and effect. The LAC, sitting as a court of first instance, reconsidered what colloquially became known as the "De Beers principle" and concluded that the two earlier decisions in De Beers and Revan were "obviously wrong" and that the dismissals were not invalid.

Dissatisfied with the decision of the LAC, the applicants sought leave to appeal to the Constitutional Court (in Steenkamp I). They challenged the LAC's decision, restating their reliance on the De Beers principle that the failure to comply with prescribed procedures in section 189A(8) rendered the dismissals invalid and of no force and effect.

The Constitutional Court in a majority judgment in Steenkamp I agreed with the LAC and held that dismissals pursuant to the non-compliance with the time periods prescribed in section 189A(8) of the LRA were not invalid. The Court, however, recognised that its judgment did not necessarily mean that this was the end of the road for the applicants:
"Until the decision of this Court, the employees acted on the strength of decisions of the Labour Court and Labour Appeal Court whose effect was that in this type of case it was open to them not to use the dispute resolution mechanisms of the LRA and not to seek remedies provided for in section 189A, but instead to simply seek orders declaring their dismissals invalid. It is arguably open to them to seek condonation and pursue remedies under the LRA. Obviously, Edcon would be entitled to oppose that."
Following their setback and within 30 days of the judgment in Steenkamp I, the applicants reinvented their case. They launched an application in the Labour Court in terms of section 189A(13) of the LRA, now claiming 12 months' compensation in terms of paragraph (d) on the basis that Edcon did not comply with the peremptory provisions of section 189A which resulted in their procedurally unfair dismissals. The Labour Court granted condonation and held that, should the applicants be successful in their procedural unfairness claim, they would at least be entitled to relief under section 189A(13)(d), if relief in terms of paragraphs (a)?(c) was not appropriate.

Aggrieved by this outcome, Edcon approached the LAC. The issue for consideration was whether the Labour Court correctly granted condonation after the expiry of the prescribed 30-day period in terms of section 189A(13). The LAC upheld the appeal, stating that the application by the applicants was "fatally flawed", principally on the basis that the Labour Court misconceived the purpose and functioning of section 189A(13) of the LRA.

In overturning the Labour Court's decision on condonation, the LAC further expressed the view that a "failed legal strategy is doom" and cannot form the basis of a condonation application where an application in terms of section 189A(13) was filed years out of time.

The applicants appealed the decision to the Constitutional Court. The pertinent issues before the Constitutional Court are: first, whether the LAC was correct in overturning the decision of the Labour Court granting condonation to the applicants, in circumstances where they launched their procedurally unfair dismissal claim years outside of the 30-day statutorily prescribed time period and where the cause of action initially relied upon was found to be inappropriate and a 'failed legal strategy' in Steenkamp I; and second, whether compensation for procedural unfairness can be claimed as a self-standing remedy in the context of large-scale retrenchments in terms of section 189A(13)(d) of the LRA. The Constitutional Court held:
  1. The primary purpose of section 189A(13) is to allow for early corrective action to get the retrenchment process back on track.
  2. The compensation remedy cannot be divorced from the remainder of this section and given self-standing meaning. Section 189A(13) does not contemplate a procedure claiming compensation at some future remote time.
  3. The mere fact that the applicants' application in terms of section 189A(13) was delayed as a result of their pursuit of a futile remedy, did not entitle the Labour Court to ignore the purpose of the process provided for in section 189A(13).
  4. The Labour Court did not exercise its discretion judicially and that justified the interference by the LAC.

The applicants' appeal to the Constitutional Court was accordingly dismissed.

Extract from the judgment:

Basson AJ:

[58]   A central dispute between the parties is the question whether the remedy of "compensation" provided for in section 189A(13)(d) is a self-standing remedy. The applicants insist that it is. Edcon disputes this.

[59]   The remedies provided for in section 189A(13)(a)-(d) must be considered in the broader context of section 189A of the LRA and keeping in mind the overall purpose of section 189A(13).

[60]   The primary purpose of section 189A(13) is thus to allow for early corrective action to get the retrenchment process back on track. Paragraphs (a)-(d) establish a hierarchy of appropriate relief. Only where it is not appropriate to grant an order in terms of paragraphs (a)-(c) may an order for compensation be granted in terms of paragraph (d).

[61]   Can it be said then that the compensation remedy provided for in paragraph (d) is self-standing? The answer is no. The remedy provided for in section 189A(13)(d) cannot, as contended by the applicants, be divorced from the remainder of this section and given self-standing meaning.

[62]   Before this Court, counsel for the respondent conceded that a postponement by a Judge of the consideration of the paragraph (d) compensation remedy may create the basis for compensation being considered separately. I think not.

[63]   Whereas a postponement of the consideration of compensation at a later stage may separate its determination procedurally, a Judge who postpones consideration of paragraph (d) compensation would at least have had the benefit of considering the other three remedies and determined their inappropriateness.

[64]   On its own terms, paragraph (d) provides for an exceptional remedy which is granted only where the primary remedies provided for in paragraphs (a)-(c) are inappropriate. From the reading of the language in the text of paragraph (d), it is cogent that remedy (d) will only be considered where (a)-(c) are "not appropriate". This therefore means that a Judge who reaches the decision to postpone the consideration of paragraph (d) would have considered remedies in paragraphs (a)-(c) first and would have found these remedies inappropriate. Thus the compensation remedy can never be a stand-alone remedy. This was made clear by this Court in Steenkamp I, where it stated:

"Subsection (13)(d) provides that a consulting party may apply to the Labour Court for an award of compensation 'if an order in terms of paragraphs (a) to (c) is not appropriate. It seems to me that the phrase 'if an order in terms of paragraphs (a) to (c) is not appropriate constitutes a condition precedent that must exist before the court may award compensation. The significance of this condition precedent is that its effect is that the Labour Court is required to regard the orders provided for in subsection (13)(a)-(c) as the preferred remedies in the sense that the Labour Court should only consider the remedy in subsection (13)(d) when it is not appropriate to make any of the orders in subsection (13)(a)-(c)."

[65]   Second, considering the purpose and overall scheme of section 189A(13) and against the background of what is stated in section 189A(18) of the LRA, the wording of the legislation is to remove the option of claiming compensation for procedural unfairness long after retrenchment from the arsenal of remedies available to retrenched employees who are dissatisfied with the process followed during the consultation. Third, section 189A(13) does not contemplate a procedure claiming compensation at some future remote time. As the Labour Court held in Parkinson:

"The time limits applicable to an application in terms of section 189A(13) are well known. . . This court has made clear on more than one occasion that the purpose of section 189A(13) is one that enables this court to supervise an ongoing retrenchment process or one that has recently been concluded; it is not a remedy that is available well after dismissals have been effected."

[66]   The main purpose of the section and the remedies it provides is thus to "get the retrenchment process back onto a track that is fair." Even the remedy of compensation must be read in the context of the short-term remedies provided for in the same subsection and in light of the jurisdictional restriction provided for in section 189A(18). Compensation in terms of section 189A(13)(d) cannot be the primary relief.

Should the Labour Appeal Court have interfered?

[67]   The Labour Court exercised a true discretion when granting condonation. An appellate court's powers to interfere with the exercise of a true discretion are limited. It can only interfere where the discretion was not exercised judicially or where it had been influenced by wrong facts or principles or where the decision reached is one which "could not reasonably have been made by a court properly directing itself to all the relevant facts and principle".

[68]   The Labour Appeal Court's interference was justified. Not only was the discretion exercised by the Labour Court influenced by wrong principles, it resulted in a decision which could not reasonably have been made by a court properly directing itself to the relevant principles. It was not in the interests of justice that condonation be granted.

[69]   The Labour Appeal Court interfered with the Labour Court's discretion because of the Labour Court's misconception about the purpose and functioning of section 189A(13) of the LRA. Here the Labour Appeal Court criticises the Labour Court's acceptance that it has the jurisdiction to adjudicate disputes about unfair procedure in the context of large scale retrenchments. It concludes by emphasising the point that the jurisdictional competence assigned to the Labour Court in section 189A(13) cannot be read disjunctively from sections 191(5)(b)(ii) and 189A(18) because "plainly, this power is an exception to the primary prescription that no adjudication can occur about unfair procedure".

[70]   The Labour Appeal Court's criticism is warranted. The Labour Court misunderstood the jurisdictional competence conferred on it by section 189A(13) of the LRA. This much is clear if regard is had to the order granted by the Labour Court. In its order the Labour Court consolidated the application for compensation in respect of procedural unfairness under section 189A with the main action and referred it to trial. This is wrong. The jurisdiction of the Labour Court to adjudicate on the procedural fairness of a dismissal based on the employer's operational requirements has been ousted by section 189A(18) of the LRA. As the Labour Appeal Court correctly stated, the Labour Court's jurisdictional competence "cannot be read disjunctively from section 191(5)(b)(ii) of the LRA and section 189A(18) of the LRA".

[71]   Moreover, the procedure within section 189A(13) of the LRA provides for an urgent remedy on application whilst the parties are still locked in consultations or shortly thereafter in circumstances where the reinstatement of the dismissed employees can still salvage the consultation process by restoring the status quo ante. This process does not contemplate a trial at some further time after the horse has bolted. It cannot be said that the application had any prospects of success and thus it could not be said to have been in the interests of justice to grant condonation.

[72]   The delay in referring this matter to the Labour Court in terms of section 189A(13)(d) of the LRA ranges from 10 months to two and a half years. The Labour Court's view simply is that it would be "grossly unjust" to bar the applicants from pursuing their remedies under section 189A(13) merely because they have pursued a remedy that was later found to be incompetent. It further said that the principle that section 189A(13) is not a remedy that is available well after dismissals have been effected should not be elevated to an immutable principle and be applied in circumstances where the applicants have taken another legitimate course of action only to be later dispossessed of the cause of action and after the lapse of the 30-day period. The Labour Appeal Court is decidedly critical of this view taken by the Labour Court, as it ignores the fact that the process provided for in section 189A(13) is designed for expeditious use only.

[73]   This criticism is also warranted. The Labour Court does not appear to have fully embraced the intrinsic urgency within which judicial intervention must be sought pursuant to section 189A(13). Although the Labour Court refers to the 30-day period within which the application must be launched, the Labour Court appears to merely accept that because the applicants have provided a plausible explanation as to why the section 189A(13) application was not pursued from the outset, condonation should be granted. Again, having regard to the primary purpose of section 189A(13), which is to get the consultation process back on track whilst parties are still engaged in consultation or in timeous proximity to the dismissal of the employees when the process may still be salvaged, a long delay in seeking remedies provided for this purpose is simply inappropriate. The mere fact that the applicants' application in terms of section 189A(13) has been delayed as a result of their pursuit of a remedy that has subsequently been found to be wanting, does not entitle the court to ignore the purpose of the process provided for in section 189A(13).

[74]   This brings me to the explanation for the delay. Although the explanation for the delay is an important factor to be considered in any condonation application, it is but one of the factors. Whether an unsuccessful cause of action may form the basis of a condonation application will depend on whether it constitutes an acceptable explanation for the delay in the particular circumstances of the case. The Labour Appeal Court found that as a matter of principle it does not.

[75]   Although I do accept that a subsequently overturned legal strategy may constitute a reasonable explanation for the delay, this explanation must be viewed in its proper context. The section 189A(13) procedure has always been available to the applicants at that time. Yet they made an informed and deliberate choice to follow the De Beers avenue as opposed to the section 189A(13) procedure, because they regarded it a "slam dunk" with no fall-back position. Only once this avenue had been closed off, did they turn to the section 189A(13) procedure.

[76]   Lastly, the LRA specifically provides for a dispute resolution mechanism designed to deal with procedural flaws that arise during or immediately after the consultation process and to allow the Labour Court, acting as the guardian of the process, to set the consultation process back on track. Despite having this process available, the applicants have decided to rather pursue the common law remedy. This Court in Steenkamp I expressed its disapproval of the applicants' choice of the De Beers cause of action:

"The second basis for my conclusion that the applicants' appeal should be dismissed is a principle that, for convenience, I call 'LRA remedy for an LRA breach. The principle is that, if a litigant's cause of action is a breach of an obligation provided for in the LRA, the litigant, as a general rule, should seek a remedy in the LRA. It cannot go outside of the LRA and invoke the common law for a remedy. A cause of action based on a breach of an LRA obligation obliges the litigant to utilise the dispute resolution mechanisms of the LRA to obtain a remedy provided for in the LRA.

. . .

[A] litigant who bases its case on a breach of an obligation in the LRA must seek a remedy in the LRA and not outside of the LRA. This court has already laid down this principle. In one of the two majority judgments in ChirwaNgcobo J said:
'Where, as here, an employee alleges non-compliance with provisions of the LRA, the employee must seek the remedy in the LRA. The employee cannot, as the applicant seeks to do, avoid the dispute resolution mechanisms provided for in the LRA by alleging a violation of a constitutional right in the Bill of Rights. It could not have been the intention of the legislature to allow an employee to raise what is essentially a labour dispute under the LRA as a constitutional issue under the provisions of section 157(2). To hold otherwise would frustrate the primary objects of the LRA and permit an astute litigant to bypass the dispute resolution provisions of the LRA. This would inevitably give rise to forum shopping simply because it is convenient to do so or as the applicant alleges, convenient in this case 'for practical considerations'. What is in essence a labour dispute as envisaged in the LRA should not be labelled a violation of a constitutional right in the Bill of Rights simply because the issues raised could also support a conclusion that the conduct of the employer amounts to a violation of a right entrenched in the Constitution.'"
Conclusion

[77]   The Labour Court did not exercise its discretion judicially and that justified the interference by the Labour Appeal Court.

Costs

[78]   Although both parties sought costs if they were successful, the dictates of fairness and equity require that no order as to costs should be made. This is a labour matter and it raised an important issue of law which had to be considered by this Court.

Order

[79]   In the result the following order is made:
  1. Leave to appeal is granted.
  2. The appeal is dismissed.
  3. There is no order as to costs.