There should be many serious concerns over the recent double-digit wage settlements in the private sector and the impact on the sustainability or creation of jobs or both.

Issues

#1 Employers are obliged by law to adopt measures to avoid job losses but are they bound to do so if they are represented in a bargaining council by an employer organisation ? Take SEIFSA at the MEIBC.

#2 How are employers affected when the Minister extends bargaining council agreements to non-party employers ?

#3 What effect does it have on the process of applying to the bargaining council for an exemption ?

#4 What happens to the rights of employers and employees when an exemption is refused and the employer is forced to comply or close down ?

#5 In the midst of the global economic slowdown do bargaining council agreements ‘trump’ all the initiatives that assist businesses in distress, including some dismissals based on operational requirements?

Statutory obligations

Some of the statutory obligations imposed on employers are summarised below and comments or opinions on this summary would be much appreciated.

It can be argued with some force that sections 189 and 189A of the Labour Relations Act 66 of 1995 (LRA) oblige employers at all times to ‘take appropriate measures’ to avoid the loss of any jobs and that it would be unlawful if they fail or refuse to do so.

The expression ‘take measures’ is defined as ‘a means of achieving a purpose’. Surely if the purpose is to save jobs, and not destroy them, it is legally appropriate and necessary for employers to use existing and acceptable measurement systems as a means of achieving that objective ?

Virtually no attention has as yet been devoted in legal circles to this strict statutory requirement and it is only a matter of time before this situation changes to the severe detriment of employers who fail to understand the need to comply with the law.

Measurement systems

Employers should be using existing and appropriate ‘measurement systems’ to ensure compliance with the statutory provisions and thereby manage the substantial financial and reputational risks of non-compliance.

Measures would include –
• calculating the ‘economic cost unit’ of the entire enterprise;
• ensuring that the incomes of employees match the value of their contributions; and
• ensuring appropriate and proportional income differentials between the basic wages at the various occupational and job levels.

Operational requirements

With regard to termination of employment for a reason based on ‘operational requirements’ this is a very brief summary of the impact of the relevant provisions of the LRA (more particularly sections 16, 189, 189A and 213) and the Basic Conditions of Employment Act 75 of 1997 (BCEA).

Section 213 of the LRA defines an employer’s requirements based on its ‘economic, technological, structural or similar needs’, as ‘operational requirements’.

Assume that employers have taken all ‘appropriate measures’ to avoid loss of jobs and there is a representative trade union. Other than on a voluntary basis, what must employers do when ‘contemplating’ the need to terminate employment based on ‘operational requirements’ ?

The LRA obliges employers to comply with various statutory provisions and it will be unlawful, and presumably regarded as unfair, if employers fail to comply strictly with those provisions.

Apart from having to prove legitimacy, lawfulness and fairness when terminating employment, employers must also prove that any information sought by the trade union, and which they have refused to disclose, is irrelevant.

Loss of jobs

When employers are able to prove that they were unable to avoid the loss of jobs, the following steps or requirements need to be complied with:

  • Adopt appropriate measures to minimise the loss of jobs.
  • Remain open-minded and act honestly (in good faith).
  • Notify the trade union in writing.
  • Disclose to the trade union in writing –
    o all relevant information and the reasons for termination.
    o alternatives considered and the reasons for rejecting each of them.
  • Allow the trade union to engage effectively in consultation.
  • Engage in a meaningful joint consensus-seeking process.
  • Allow relevant representations to be made.
  • Consider the representations.
  • Respond in writing with reasons for disagreeing with any written representations.
  • Attempt to reach consensus on all relevant issues, including selection criteria.
  • Ensure compliance with all the statutory procedural provisions.
  • Determine that it was necessary to give effect to operational requirements.
  • Determine that it was operationally justifiable on rational grounds.
  • Alternatives were properly considered.
  • Selection criteria were fair and objective.
  • Inform each individual employee in writing of the termination.
  • Provide each employee with reasonable notice (or payment).
  • Pay each employee ‘severance pay’ (at least one week per year of service).

Except in certain instances where the trade union and its members are allowed to strike, all dismissal disputes, based on operational requirements, are treated as ‘disputes of right’ and must be resolved by arbitration or by adjudication in the Labour Court.

The Labour Court may review and set aside awards. Judgments of the Labour Court may be appealed to the Labour Appeal Court. There could be further appeals to the Supreme Court of Appeal and even to the Constitutional Court.

Taking positive steps to prevent job losses

It is suggested that Froneman DJP (as he then was) confirmed the need for employers to take positive steps to prevent job destruction.

SACWU & others v Afrox Ltd [1999] 10 BLLR 1005 (LAC) Ngcobo AJP, Froneman DJP & Kroon JA

  • The right to strike is subjected to a number of significant limitations in the LRA … , whilst an employer’s fundamental right to fair labour practices is recognised in the employer’s right to dismiss an employee for a fair reason based on operational requirements and in accordance with a fair procedure (sections 67(5), 188(1)(a)(ii) and (b) and 189 of the LRA;
  • [29] Mr Gauntlett, who appeared with Mr Franklin for Afrox, suggested that there was both a textual and a substantive answer to this argument.
  • Section 67(5) provides for an explicit limitation on the protection of striking employees.
  • The limitation itself is not textually limited by either the language of section 67(4) or the definition of “operational requirements” in section 213.
  • The substantive answer, he submitted, lay in the functional limits of the right to strike, a factor alluded to by Landman J in the court below, where he spoke of the dependence of the right to work “on the existence in economic terms of the enterprise”.
  • A right to strike is predicated on the very existence of an enterprise providing employment for the employees who wish to exercise that right.
  • The employer’s right to fair labour practices in the form of a right to a fair dismissal based on operational requirements (section 188(1); … must come into play when the exercise of the right to strike threatens the continued operation of the employer’s enterprise.
    [36] It is implicit in the terms of section 189(2) that an employer, apart from taking part in the formal consultations on the aspects set out in the section, should also take substantive steps on his or her own initiative to take appropriate measures
    • to avoid the dismissals;
    • to minimise the number of dismissals;
    • to change the timing of the dismissals;
    • to mitigate the adverse effects of the dismissals;
    • to select a fair and objective method for the dismissals (see also section 189(7)) and
    • to provide appropriate severance pay for dismissed employees