A recent Constitutional Court (“CC”) judgment has allowed employers to breathe a collective sigh of relief in the comfort that they cannot be threatened with unfair dismissal proceedings where an employee has unreasonably rejected an employer’s proposals aimed at avoiding retrenchments, and where the employer commences to dismiss the employee by reason of its operational requirements.
In its judgment in the matter of National Union of Metal Workers of South Africa and Others v Aveng Trident Steel (a Division of Aveng Africa) (Pty) Ltd and Another 2020 ZACC 23, the CC dismissed an appeal by the National Union of Metalworkers of South Africa (“NUMSA”), stemming from the Labour Appeal Court (“LAC”), in which the LAC held that various dismissals affected by Aveng were substantively and procedurally fair.
Aveng Trident Steel (Pty) Ltd (“Aveng”), a large steel manufacturer, experienced financial difficulty due to a severe decrease in its sales and concomitant profits. Pursuant to the financial misfortune suffered by Aveng, it elected to restructure its workforce in order for it to remain commercially viable. The restructuring was affected by reducing its staff complement under either an early retirement agreement, or in terms of a voluntary retrenchment process, and further by redesigning job descriptions for the employees not affected by these processes.
Following this decision, Aveng underwent a lengthy consultation process, as it was required to do in terms of section 189 of the Labour Relations Act, No. 66 of 1995 (“LRA”), wherein NUMSA, acting on behalf of the employees, and Aveng came to an interim agreement in terms of which the employees would work in accordance with Aveng’s redesigned job descriptions whilst the consultation process was being finalised. This state of affairs subsisted until NUMSA reneged on the interim agreement and demanded a wage increase on behalf of the affected employees.
Shortly thereafter, Aveng, believing that the consultation process had been exhausted, offered the affected employees alternative employment positions, in line with the redesigned job descriptions, in an attempt to avoid retrenchments. However, the employees rejected the alternative offers of employment and they were dismissed by Aveng as a consequence.
NUMSA then approached the Labour Court (“LC”) claiming that the dismissals constituted an automatically unfair dismissal in terms of Section 187(1)(c) of the LRA which states:
“(1) A dismissal is automatically unfair if the employer, in dismissing the employee, .. if the reason for the dismissal is—
. . .
(c) a refusal by employees to accept a demand in respect of any matter of mutual interest between them and their employer”
The core issue for the LC to decide was whether the dismissal of the employees was automatically unfair in terms of the LRA or whether such dismissals were properly affected by Aveng in compliance with the prescriptive provisions of section 189 mentioned above. In delivering its judgment, the LC held that the affected employees were in fact dismissed as a result of Aveng’s operational requirements and not, as contended by NUMSA, because the employees refused to accept the employer’s offer of alternative employment, which NUMSA saw fit to couch as a ‘demand’ as contemplated in terms of section 187(1)(c). The dismissal was therefore held not to have been automatically unfair.
NUMSA then took the matter on appeal to the LAC which dismissed it, upholding the judgment made by the LC. The LAC concluded that the dismissals were affected for a fair reason thereby satisfying the general requirement of substantial fairness. In reaching its decision, the LAC further found that section 187(1)(c) does not preclude an employer from dismissing employees, provided that such dismissal was due to operational reasons. NUMSA, who felt aggrieved by this decision, appealed it in the CC.
Before the CC, NUMSA, in arguing that the LAC judgment should be overturned, placed much of its reliance on a plain reading of the relevant portions of the LRA mentioned above. Aveng, in-turn, argued that it had engaged the affected employees in a bona fide consultation process in terms of which it suggested a restructuring of the company by redesigning the job descriptions of the affected employees as an alternative to retrenchment.
The CC delivered three separate judgments in this matter which differed in respect of the applicable legal test to determine the true reason for the dismissal. However, each judgment concluded that the employees were not unfairly dismissed and the CC unanimously confirmed that where an employer has dismissed employees as a result of their refusal to accept a proposed change to their terms and conditions of employment, as an alternative to retrenchment, and as a result of the employer’s operational requirements, then such a dismissal will be substantively fair and will not constitute a contravention of section 187 (1)(c) of the LRA.
It was further held that it is imperative for employers to be allowed to restructure their businesses to adapt to the ever changing economic climate and to remain competitive.
Please read the full judgment here
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