Amcu v Piet Wes Civils CC (J2834/16, J2845/16) [2017] ZALCJHB 7 ; [2017] 5 BLLR 501; (2017) ILJ 1128  (13 January 2017) per Steenkamp J.  Upheld by Murphy AJA on appeal by the LAC on 10/07/2018

The LC reinstated employees ito s 189A(13) of the LRA pending the outcome of a fair procedure and proper consultation over contemplated dismissals based on operational requirements.  LRA s 198B considered and held that ‘fixed-term’ contracts could not be terminated automatically when the client gave notice to terminate.  The employer had to follow a fair procedure ito s 189A of the LRA and had failed to do so.  Even though there was only procedural unfairness the LC was empowered to order reinstatement pending the outcome of a proper joint consensus-seeking procedure.

Excerpts without footnotes

Introduction

[1]   This is an urgent application in terms of s 189A(13) of the LRA.[1] The second and further applicants are members of the first applicant, the Association of Mineworkers and Construction Union (AMCU). They were employed by the respondents, Piet Wes Civils cc and Waterkloof Skoonmaakdienste cc respectively.  They say they have been dismissed for operational requirements; that it was a large scale retrenchment contemplated by s 189A of the LRA; and that there was no consultation.  They seek reinstatement pending a proper consultation process in terms of s 189A(13).  The respondents say that the workers were not dismissed, for operational requirements or at all.  They were employed on fixed term contracts; the contracts expired; and their contracts of employment terminated by operation of law.

Background facts

[2]   AMCU initially brought two separate applications against Piet Wes and Waterkloof, the two respective employers. They have been consolidated.  Where it is necessary to draw a distinction, I shall do so.

[3]   Both respondents provide services to Exxaro coal mine as contractors. They entered into various contracts with Exxaro to perform certain tasks.  Exxaro terminated the contracts on one month’s notice.  The respondents terminated the employees’ contracts as a direct result of losing the Exxaro contracts.

[4]   It is common cause that neither respondent entered into a consultation process with AMCU or the employees in terms of s 189 of the LRA. They say it was not necessary: the employees were all employed on fixed term contracts.  Although no fixed termination dates were specified, the contracts were contingent upon the respondents’ contracts with Exxaro.  The employment contracts would only endure for so long as the respondents received work from Exxaro.

[5]   Exxaro terminated its contracts with the respondent in November 2016 on one month’s notice. In turn, the employment contracts were terminated.  By the time this application was heard, the employment contracts had already terminated (on the respondents’ version) or the respondents had dismissed the employees (on the applicants’ version).  Either way, they are no longer employed.

[6]   The applicants seek an order in terms of s 189A(13) of the LRA, forcing the respondents to consult. The respondents say that is simply not a factor: the workers were employed on limited duration contracts; the contracts expired; ss 189 and 189A are not applicable and no consultation is called for.

The legal principles

[7]   In order to evaluate the applicants’ claim properly, it must first be considered whether any consultation was called for in terms of s 189; or, as the respondents contend, whether the contracts of employment simply terminated by operation of law.

Application of s 189B of the LRA

[8]   Piet Wes Civils had a contract with Exxaro that was only due to expire in 2021. But Exxaro terminated it on one month’s notice.  Waterkloof Skoonmaakdienste entered into different contracts for different tasks, but those have also been terminated on notice.

[9]   The respondents say that, in their contracts of employment, the workers agreed that their contracts of employment would only endure so long as the respondents were contracted to Exxaro. In the case of Waterkloof, the employment contracts contained this clause:[2]

. . . . .

[11]   One of the listed justifiable reasons is when the person is employed to work exclusively on a specific project that has a limited or defined duration.[1] In such a case, if the person is employed for longer than 24 months, the employer must pay the employee on expiry of the contract one week’s remuneration for each completed year of service.[2]

[12]   The respondents have tendered payment of this amount. AMCU rejected it; its stance is that the employers must embark on a consultation process in terms of s 189.  It does not accept that the employment contracts are governed by s 198B(4)(d).  Instead, it relies on s 198B(5):

‘Employment in terms of a fixed term contract concluded or renewed in contravention of subsection (3) is deemed to be of indefinite duration.’

[13]   The onus is on the employer to prove that there was a justifiable reason for fixing the term of the contract and that the term was agreed.[3]

[14]   It is common cause that the clause quoted above is contained in the employment contracts. But, argued Mr Cook, it is not a genuine fixed term contract contemplated by subsection 4(d); therefore, it is in contravention of subsection 3 and therefore deemed to be of indefinite duration.  The clause on which the respondents rely, he argued, is against public policy and pro non scripto.

[15]   In neither employer’s case was the nature of the work for which it employed the employees “of a limited or definite duration” as contemplated by s 198B(3)(a). Instead, it was linked to the employer being supplied with work by “his clients”, i.e.    Have the employers demonstrated that that was a “justifiable reason” for a fixed term contract as contemplated by s 198B(3)(b)?  If the employers discharge that onus, the contracts will justifiably be seen as being for a fixed term and the employers’ defence should succeed; but if not, the employment of the employees will be deemed to be of a fixed duration in terms of subsection 5 and the employers would have to consult over any contemplated dismissals for operational requirements.

[16]   One of the “justifiable reasons” contemplated by subsection (4)(d) is an instance where the employees are employed to work exclusively on a specific project that has “a limited or defined duration”. But that was not the case here.  Exxaro simply terminated its contracts with the two employers on notice; there is no indication on the papers that a specific project had come to an end.  The employers have not demonstrated a justifiable reason for fixed term contracts in that regard.  An example of a real justifiable reason in terms of this subsection would have been, for example, where Exxaro had contracted the respondents to clean up a specific mine, or to do so within a specified time.  This is not such an example.

. . . . .

[18]   More recently, shortly after s 198B came into operation, the Court came to a similar conclusion in a case involving the same company.[1] The Court, with reference to Sindane v Prestige Cleaning Services[2] and Mahlamu v CCMA, expressed the view (albeit obiter) that ‘event’ in s 198B(1)(a) does not include termination of a contract by a client of the employer. And with reference to s 198B, the Court continued: . . . .

. . . . .

[19]   On the facts of the case before me, I hold a similar view. The contract was not intended to be for a fixed duration, or to terminate on the occurrence of a specified event or the completion of a specified task or project as contemplated by s 198B(1).  And to place the construction of a ‘specified event’ on the cancellation of the Exxaro contract would, in my view, go beyond the intention of the legislature.  The very purpose of the enactment of s 198B was to provide security of employment, except in circumstances where a fixed term contract is clearly justified, such as seasonal work or employment to carry out a specific task or to do so within a specified period.  To make the workers’ employment contingent upon the whims of a third party that can simply terminate the contract between it and the employer on notice, does not fit that purpose.  The employers have not, in my view, discharged the onus of showing that there was a justifiable reason to employ the workers on a fixed term contract for more than three months, as contemplated by s 198B(3)(b).  The employment contracts were either of an unlimited duration or must be deemed to be of an indefinite duration as contemplated by s 198B(5).

[20]   Given that finding, the employment contracts did not terminate automatically when Exxaro terminated its contracts with the employers, Piet Wes and Waterkloof Skoonmaakdienste. The termination of the Exxaro contracts may well be a justifiable and fair reason for dismissing the employees for operational requirements; but that can only be ascertained after a proper consultation process in the form of a meaningful joint consensus-seeking process as contemplated by s 189 and s 189A.

Application of s 189A(13)

[21]   Section 189A(13) has as its purpose to compel an employer in large scale retrenchments to follow a fair procedure if it has not done so.

[22]   As the learned authors in Labour Relations Law: A Comprehensive Guide[1] [at 497] point out, “the purpose of providing for application proceedings rather than ordinary referral is presumably to simplify and expedite the resolution of disputes about procedural unfairness”. Hence this urgent application.

[23]   The authors of South African Labour Law[2] explain:

‘The procedural dimension of retrenchment has been hived off from the substantive dimension.  The idea is that if a union or employee sees a failure in the consultative process, they should not stand on their rights but act at once, and approach the court for appropriate relief.  The intent no doubt is to allow for early corrective action so that a process failure will not escalate into a substantive injustice.’

[24]   The Constitutional Court recently gave a comprehensive judgment dealing with the provisions of s 189A. In Steenkamp v Edcon Ltd  Zondo J (for the majority) discussed s 189A(13) in circumstances such as these, where the employees had already been dismissed:

‘[161]        If an employer has already dismissed employees without complying with a fair procedure, the consulting party may apply to the Labour Court in terms of subsection (13)(c) for an order reinstating the employees until the employer has complied with a fair procedure.   The significance of the remedy of reinstatement in subsection (13)(c) is that it is made available even for a dismissal that is unfair only because of non-compliance with a fair procedure.   That is significant because it is a departure from the normal provision that reinstatement may not be granted in a case where the only basis for the finding that the dismissal is unfair is the employer’s failure to comply with a fair procedure.    In such a case the norm is that the Labour Court or an arbitrator may award the employee only compensation.

[162]         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) to (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) to (c).

[163]         This is a reversal of the legal position that obtains in the case of dismissals for the employer’s operational requirements governed by only section 189 where dismissal is only procedurally unfair and not substantively unfair as well.   In these cases the Labour Court is required not to order reinstatement at all.   So, in making the remedy of reinstatement available for a procedurally unfair dismissal and also making it one of the preferred remedies in subsection (13), the Legislature has gone out of its way to give special protection for the rights of employees and to protect the integrity of the procedural requirements of dismissals governed by section 189A.

[164]         The extensive remedies in subsection (13) provide at least partial compensation for the fact that in respect of disputes concerning the procedural fairness of dismissals the employees have been deprived of the right to adjudication that other employees have.   In part the extensive remedies in subsection (13) for non-compliance with procedural fairness have been provided because of the importance of the pre-dismissal process.’

[25]   In this case, it is common cause that there’s been no consultation: the employers did not think it necessary. The primary remedy prescribed by the legislature and endorsed by the court is that of reinstatement until the employers have complied with a fair procedure.

[26]   The employees who have been dismissed – clearly for operational requirements arising from the cancellation of the Exxaro contracts – must be reinstated until the employers comply with a fair procedure. That holds true for all but 18 of the Piet Wes employees.

. . . . .

Conclusion

[30]   I find that the employees were employed for an unlimited duration pursuant to the provisions of s 198B of the LRA. They were dismissed for operational requirements, being the loss of the Exxaro contracts.  The employers have not consulted in terms of ss 189 and 189A of the LRA.  They must be compelled to do so.  The employees must be reinstated until the employers have complied with a fair procedure, as contemplated by s 189A(13)(c).

[31]   The LRA contemplates a facilitated consultation process of 60 days after a written notice of contemplated dismissals for operational requirements in terms of s 189(3).[1] It seems to me to be in line with the purpose of the Act that, once the workers have been reinstated, the parties should be given a further 60 days to consult – preferably with the assistance of a facilitator — after the date of this judgment. However, I make no order in this regard, other than to stipulate that the employers must follow a fair procedure.