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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 on “Giving a Reference: What are the dangers?” We also look at two new cases: the first gives further insights at what a court looks at in assessing whether a retrenchment dismissal is substantively fair. The second looks at when a claim for an acting allowance can be treated as a ‘benefit’ in an unfair labour practice claim.
This public newsletter is a free edited version of the Worklaw subscriber newsletter.
Assessing the fairness of the decision to retrench
Should labour courts, which generally lack skills in business and financial planning, second-guess a business’s decision when it comes to restructuring?
Some time ago the labour courts moved from a position which did not overly interrogate an employer’s given reasons for retrenchments to a position that was far more critical. In Chemical Workers Industrial Union & others v Algorax (Pty) Ltd (2003) 24 ILJ 1917 (LAC) (paras 69-70) the LAC said it must not ‘defer’ to the employer, but critically and objectively assess the fairness of the dismissal. That assessment of fairness is for the court to make rather than the employer to say – just because the employer thinks it is fair, is not enough for the court to say it is fair.
In addition the court said it should deal with the matter on the basis of the employer using the solution which preserves jobs rather than one which causes job losses. This is especially so, the court said, because ‘resort to dismissal, especially a so-called no-fault dismissal, which some regard as the death penalty in the field of labour and employment law, is meant to be a measure oflast resort.' The court said it was entitled to intervene where it is clear that certain measures could have been taken to address the problems without dismissals for operational reasons or where it is clear that dismissal was not resorted to as a measure of last resort. The ‘last resort’ approach is also reflected in County Fair Foods (Pty) Ltd v OCGAWU & another  7 BLLR 647 (LAC) 656 para 27 where it was held as follows:
If the employer relies on operational requirements to show the existence of a fair reason to dismiss, he must show the dismissal of the employee could not be avoided.’
Similarly, it was found in FAWU & others v SA Breweries Ltd (LC C 1008/2001, judgement delivered 3 September 2004) that if the employer could have addressed the problems by using solutions which preserve jobs rather than causing job losses, the employer should have done so.
It is clear that the LRA requires the Labour Courts to determine the fairness of the dismissal objectively. But how is this done? Should the court investigate business strategy going back years and decide that things could have been done a different way?
In the recent case of Tharange v Digital Healthcare Solutions (Pty) Ltd (LC case Case no: JS386/2008; Date of judgment: 26 Oct 2010) the Labour Court, without referring to the authorities above, approached the matter in a common-sense way.
The employee had the responsibility to drive a process in promoting newly developed products in the public healthcare sector. She was required to assess the viability of developing products and services for the public healthcare sector and to determine the most appropriate way to penetrate that market. The shareholders had expressed their concerns about the feasibility of continuing with this initiative. After a series of meetings, the employee was dismissed for operational reasons. The employee claimed that she was unfairly retrenched.
The court said the following:
- It is not necessary for the employer to persuade the court that the dismissal was the only option under the circumstances.
- What the employer must do is to persuade the court that it was a fair, bona fide and reasonable option in the circumstances.
- The employer also need not persuade the court that the business was on the verge of collapse when it took the decision to close it down.
But given that the earlier authorities quoted above - Chemical Workers Industrial Union & others v Algorax and County Fair Foods v OCGAWU- are LAC judgements, it does leave parties in a pickle as to what the applicable measures are in assessing fair reasons for retrenchment. We suggest a cautious approach at this stage – unless or until such time as further judgements follow the approach adopted in Tharange v Digital Healthcare Solutions, we think parties would be wise to measure substantive fairness against the criteria established by the LAC in Algorax and County Fair Foods.
When is an acting allowance a ‘benefit’?
An employee was appointed to act as a project management unit manager in a Municipal Infrastructural Grant project. He was continuously employed in this acting capacity between 01 December 2004 and 30 June 2007, which comprised two distinct periods of appointment, the first running from 1 December 2004 to 30 June 2006, and the other from 01July 2006 to 30 June 2007. The employee was paid an acting allowance for the second period but not for the first. It seems that a requisition for the payment of an acting allowance was approved in both cases, subject to certain conditions.
The employee pursued internal procedures to resolve a grievance over the failure to pay him an acting allowance for the first period. After these procedures had been exhausted without success, the matter was referred to the South African Local Government Bargaining Council. The applicant claimed that the failure to pay him the acting allowance for the first period amounted to an unfair labour practice in terms of section 186(2) of the LRA.
As Worklaw subscribers will know, section 186(2) defines what acts or omissions arising between an employer and an employee may constitute an unfair labour practice. In order to refer a dispute under the ambit of the unfair labour practice jurisdiction, an employee has to utilise one of the categories mentioned. One of these under s186(2)(a), is ‘the unfair conduct by the employer…..relating to the provision of benefits to an employee’ and many judgements have attempted to give meaning to the term ‘benefits’.
In this case, the employee’s claim was dismissed by the arbitrator who reached the conclusion that an acting allowance does not constitute ‘a benefit’ in terms of section 186(2)(a) and therefore the Council did not have jurisdiction to hear the dispute. The arbitrator took the line that a claim for an acting allowance in the absence of a right based in contract, a collective agreement, or a right arising ex lege, is simply ‘a dispute of interest’ over a demand for further remuneration, and therefore not within the definition of unfair labour practice. The employee was clearly unhappy about this approach and took the arbitrator’s decision on review to the Labour Court
In Imatu & another v Umhlathuze Municipality & others (LC case no.D 644/09, date of judgment: 06 May 2011) the sole question on review was whether or not the arbitrator was correct in finding that the Council did not have jurisdiction to entertain the dispute on the basis that an acting allowance does not constitute a benefit in terms of section 186(2)(a) of the LRA.
After reviewing the case law and academic commentary, the court noted that there has been a shift in the conceptualisation of the ambit of the unfair labour practice claim, at least in relation to the notion that a pre-requisite for bringing such a claim is proof of a pre-existing right. The court said that once this conceptual hurdle has been overcome, it stands to reason that an unfair labour practice dispute over an acting allowance, in which an employee is making the claim on the basis that it was granted to him or others in similar circumstances on other occasions, is a claim that the employer has unfairly refused to confer the benefit on the occasion in question. This does not amount to a demand to make the benefit obligatory in the future. The latter claim would properly be the subject matter of collective bargaining.
The court commented as follows:
“It is still true that if the employee is successful in his unfair labour practice claim, this might clarify the factors the employer ought to consider in granting or refusing to grant the benefit in the future and might mean that it will be easier to predict when the benefit is likely to be granted, but that does not, in principle, make the dispute one about the creation of new rights”.
Using this approach the court held that the arbitrator’s interpretation of what constituted an arbitrable dispute led him to mistakenly exclude the employee’s claim for payment of an acting allowance for his first term in an acting capacity from the ambit of his jurisdiction. Consequently, the arbitrator’s award was set aside.
We think this case makes it clear that in an alleged unfair labour practice case regarding benefits, proof of a pre-existing right is not a pre-requisite for bringing such a claim. But there still has to be a factual basis, as in this case, to substantiate why the employer’s conduct was unfair, and this does not open the door to genuine disputes of interest being processed as unfair labour practices.
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