Numsa v Aveng Trident Steel

Society accepts the paramount importance of operational requirements and the economic viability of enterprises and senior management is best placed to conduct the operations and one of the primary purposes and objectives of labour legislation is to advance economic development and on the evidence the trade union reneged on an agreement and by acting in bad faith placed the enterprise in a precarious position and the law did not preclude the termination of services of employees for a valid and fair reason based on genuine operational requirements, subject to abiding by a meaningful joint consensus-seeking process as required by s189 of the LRA.

Essence

Operational requirements of any enterprise are paramount in an ever-changing economic climate characterised by increasing global competition.

Decision

(CCT178/19) [2020] ZACC 23 ; [2021] 1 BLLR 1 (27 October 2020)

Order:

Disallowed appeal from judgment of John Murphy AJA

Judges

Mogoeng CJ, Jafta J, Khampepe J, Madlanga J, Majiedt J, Mathopo AJ, Mhlantla J, Theron J, Tshiqi J and Victor AJ

Judgments:

Mathopo AJ: [1] to [105] – see below

Majiedt J: [106] to [136] – to follow

Jafta J: [137] to [155] – to follow

Heard on:  5 March 2020  Decided on: 27 October 2020

Related books

Darcy du Toit et al Labour Relations Law: A Comprehensive Guide 6ed 925 pages (LexisNexis 2015) at 225, 340-1, 434-6, 473-4, 477-80, 518-9, 601

Darcy du Toit et al Labour Law Through The Cases – loose-leaf service updated 6 monthly (LexisNexis 2020) LRA s187(1)(c) s189

Van Niekerk and Smit (Managing editors) et al [email protected] 5ed (LexisNexis 2019) at 278, 338, 340

Cheadle et al Strikes and the Law (LexisNexis 2017) at 206-8

Rochelle le Roux Retrenchment Law in South Africa 1ed (LexisNexis 2016) at 44-52, 165

Reasons

‘[99] In an ever-changing economic climate characterised by increasing global competition, operational reasons not only relate to the downsizing of the workforce, but also to restructuring the manner in which an existing workforce carries out its work. Restructuring entails a number of possibilities, including shift system duties; adjusted remuneration; and merging of jobs or duties. Generally, businesses that adapt quickly will survive and prosper. Those that do not will decline and fail. Realising its predicament, Aveng engaged with its employees through NUMSA regarding a re organisational plan through a structured consultative process. NUMSA’s intransigence played a major role in making it impossible to save jobs. To prohibit Aveng from invoking the provisions of the section and dismissing employees under these circumstances would undermine the LRA’s objectives in ensuring the viability and vitality of businesses.

[100] It is in the best interests of society that an employer remains economically viable. The owners and managers of the business are best placed to run the businesses. Sight should not be lost of one of the primary purposes of the LRA – to advance economic development. Aveng took NUMSA into its confidence, by disclosing its financial position as early as April 2014. At no stage did NUMSA argue that it was misled. On the contrary, the evidence demonstrates that NUMSA reneged on the interim agreement and failed to act in good faith, placing Aveng in a precarious position.

[101] Nothing in the section, read in the context of the LRA as a whole, precludes employers from dismissing employees for operational requirements. This is subject to the requirements that the dismissal is substantively fair (for bona fide operational requirements) and procedurally fair (after a satisfactory consultation process).”

Quotations from judgment

Note: Footnotes omitted and emphasis added

Introduction

[1] This case concerns the plight of 733 employees who were dismissed for what the employer described as operational requirements. The issues surface in this application for leave to appeal by the National Union of Metal Workers of South Africa (NUMSA) on behalf of its members, the second to further applicants, against the judgment and order of the Labour Appeal Court. That Court confirmed the decision of the Labour Court which held that the dismissal of the second to further applicants – as employees – was not automatically unfair in terms of section 187(1)(c) of the Labour Relations Act (LRA). Section 187(1)(c) provides:

“(1) A dismissal is automatically unfair if the employer, in dismissing the employee, acts contrary to section 5, or 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”.

[2] The core issues at the Labour Court, the Labour Appeal Court and this Court remain unchanged. The crux of the matter is whether the dismissal of the second to further applicants was automatically unfair in terms of section 187(1)(c) of the LRA, or whether it was based on the first respondent’s operational requirements per sections 188 and 189 of the LRA, which dismissals are not automatically unfair. Key to this enquiry is whether the second to further applicants were dismissed for refusing to accept a demand in respect of a matter of mutual interest between them and the first respondent. The matter brings to the fore the proper interpretation of section 187(1)(c) of the LRA.

Parties

[3] The first applicant is NUMSA, a trade union registered in terms of section 96 of the LRA. The second to further applicants are former employees of the first respondent and members of NUMSA. NUMSA and the second to further applicants, will collectively be referred to as the applicants. The first respondent is Aveng Trident Steel (a division of Aveng Africa (Pty) Limited), a duly registered company that operates in the metal industry as a steel manufacturer and supplier of a wide range of steel products (Aveng). The second respondent is Imperial Logistics Dedicated Contracts (a division of Imperial Group Limited), a duly registered company (Imperial).

Background facts

[4] The material facts have been fully set out in the judgments of the Labour Court and the Labour Appeal Court. They need not be repeated here. Only those facts that are germane to the purpose of this judgment will be restated.

[5] During April 2014, as a result of harsh economic conditions, Aveng experienced a decline in sales and profitability. To maintain its profitability, it had to reduce its increasing costs, especially in relation to labour, electricity and transport. The drop in the volume of sales meant that some of the machines were under-utilised. This necessitated the alignment of Aveng’s workforce and production output with the market conditions. Aveng soon realised that it could no longer continue with its business model and resorted to restructuring its business in order to survive.

[6] On 15 May 2014, Aveng initiated the consultation process by filing a notice with the Commission for Conciliation, Mediation and Arbitration (CCMA) in terms of section 189(3) of the LRA. In the notice, Aveng indicated that about 400 jobs might be affected, and had hoped that some employees would agree to work in the redesigned positions to avoid the necessity of initiating retrenchment proceedings. At that stage, Aveng had a total workforce of 1784 permanent employees.

[7] On or about 29 August 2014, a consultation meeting was held, at which Aveng’s management indicated that employees were invited to apply for voluntary severance packages (VSPs) or early retirement if they so wished, and that the opportunity to do so would remain open until 5 September 2014. NUMSA requested an assurance that no “forced retrenchments” would take place. In response, Aveng stated that while it was envisaged that no “forced retrenchments” would ensue, no guarantee could be provided in this regard. NUMSA then proposed, as an alternative to the redesigning of the job descriptions, a five-grade structure.

At that time, Aveng had a thirteen-grade structure in place. NUMSA’s understanding was that the five grade structure would allow for a redesigning of the job descriptions without interfering with Aveng’s organisational structure and reduce costs beyond those provided for in a collective agreement; which Aveng was a party to and which was referred to as the main agreement of the Metal and Engineering Industries Bargaining Council (MEIBC).

[8] During September 2014, another consultation meeting was held where Aveng’s Employee Relations Executive, Mr Komane, mentioned that, in order to avoid “forced retrenchments”, employees who did not receive VSPs had to be placed in the redesigned positions. Furthermore, that there would not be any need for “forced retrenchments” if “grey areas” were addressed. The “grey areas” were identified as follows:

(i) that Aveng would have a workforce with an adequate skill set for its business to operate effectively and successfully;

(ii) finalisation of job descriptions; and

(iii) selection and placement of existing employees in appropriate redesigned posts, after the VSPs and Limited Duration Contracts (LDCs), for those fixed term employees who had contracts for a duration of less than six months on average.

[9] It is common cause that further consultation meetings were held, which resulted in the termination of the services of 253 employees, of which 249 employees opted for VSPs and the remaining four were retrenched. Those who opted for VSPs were given notice of termination of employment which took effect on 10 October 2014. Termination of employment for those retrenched employees took effect on 7 November 2014.

[10] During October 2014, NUMSA and Aveng concluded an interim agreement in terms of which employees agreed to work in accordance with Aveng’s redesigned job descriptions until the five-grade structure was finalised. It was contemplated that this would only be in March 2015. It was further agreed that the employees performing additional functions would be paid 60 cents per hour. The employees worked under the proposed new structure for a period of six months.

However, on 13 February 2015, NUMSA reneged on the interim agreement and sent an email to Aveng, informing it that its members would no longer perform the redesigned jobs. This, according to NUMSA, was because Aveng had not yet negotiated the five grade structure that was supposed to be implemented from the beginning of March 2015.

[11] On 30 March, it became clear to Aveng that NUMSA had no desire to engage in a meaningful consensus seeking consultation process to resolve the five grade structure issue, but rather sought to use the consultations to demand wage increases. Aveng thus addressed a letter to NUMSA informing it, among other things, that after considering its proposals, it was unable to accommodate its demands any further and could not increase its costs. NUMSA was informed that the consultation process had been exhausted. Aveng would continue, however, to implement its new redesigned job descriptions structure to address its operational requirements, as the jobs that existed prior to the consultations had now become redundant. As employees of NUMSA had been performing the redesigned jobs, Aveng offered them an opportunity to remain in those jobs, but “should they reject it, they [would] unfortunately be retrenched”.

[12] The parties tried to resolve their issues, but to no avail. On 31 March 2015, the parties met and Aveng refused to withdraw its letter dated 30 March 2015. The parties met again on 16 April 2015 where NUMSA expressed its confusion over Aveng’s letter. NUMSA asserted that it was led to believe that the forced retrenchments had ended following the termination of the contracts of employees who had accepted the VSPs and those that were on LDCs. The parties were unable to resolve their differences and, on 17 April 2015, Aveng addressed a letter to NUMSA in the following terms:

“Given that your members and other employees have performed the duties as per the new job descriptions in terms of the interim arrangement agreed to between the parties, we shall afford them the opportunity to be engaged in the new positions at the rate prescribed by the main agreement of the MEIBC for performing work in such positions. This reasonable offer of alternative employment is a further bona fide effort on our part to avoid the contemplated retrenchments. Should they reject it, they will unfortunately be retrenched.”

[13] During April 2015, 71 employees accepted Aveng’s offer. However, approximately 733 employees rejected the offer and their services were subsequently terminated on 24 April 2015 for reasons that Aveng advanced as retrenchments for its alleged operational requirements.

[14] Approximately a year after the dismissal of the second to further applicants, Aveng outsourced its fleet and transferred its transport business to Imperial, including 110 of its employees. The takeover relates to one of the claims pursued by NUMSA for the reinstatement of its members. Adjudication of this claim would require an examination of the potential and practicable reinstatement by Imperial of some 110 employees who form part of the second to further applicants.

Litigation history

Bargaining Council

[15] On 22 May 2015, NUMSA referred an unfair dismissal dispute to the Metal Engineering Industries Bargaining Council (MEIBC) for conciliation. The dispute could not be resolved and a certificate of non resolution was issued. Thereafter, NUMSA approached the Labour Court.

Labour Court

[16] Before the Labour Court, NUMSA argued that the dismissal of the second to further applicants was automatically unfair in terms of section 187(1)(c) of the LRA. In disputing this, Aveng argued that the dismissal of the second to further applicants was for operational requirements in terms of the LRA. It adduced the evidence of its Chief Operating Officer, Mr Moodley. He testified about the challenges facing the steel industry and particularly the economic distress Aveng found itself in as a result thereof. According to him, it was necessary for Aveng to restructure its operations because of the decline in its profitability and sales volume. The head of the Human Resources Department, Ms Mofokeng, gave evidence on the consultative process between Aveng and NUMSA.

In short, her evidence was that NUMSA did not negotiate in good faith as it continued to make unreasonable demands by soliciting wage increases for its members when the financial position of Aveng had been clearly disclosed to NUMSA. The last witness for Aveng was the Managing Director of Imperial, Mr Enslin. His evidence dealt with the impracticability of reinstatement. On the other hand, NUMSA closed its case without leading any evidence, despite propositions by counsel that witnesses would be called to lead countervailing evidence.

[17] The Labour Court held that the individual employees were not dismissed for refusing to accept any demand, but for operational requirements after rejecting the alternative to dismissal proposed by Aveng during the retrenchment consultation. It reasoned as follows:

“A dismissal where the reason for it is the refusal to accept a demand is prohibited. However, a dismissal where the reason for it is the operational requirements is not to be precluded in the section. To say so would render the provisions of section 188(1)(a)(ii) read with section 189 nugatory.”

[18] The Labour Court held that NUMSA had a duty,

  • first, to produce credible evidence to show that there was a demand followed by a refusal to accept such a demand that led to an automatically unfair dismissal in terms of section 187(1)(c). NUMSA failed to provide such evidence and therefore there was no demand.
  • Second, NUMSA failed to produce any evidence disputing the evidence of Mr Moodley and Ms Mofokeng with the result that this evidence remained unchallenged.

The Labour Court concluded that it had to be accepted that the old jobs performed by the second to further applicants were redundant and the retrenchments were thus substantively fair. It relied on the judgment of the Labour Appeal Court in Mazista Tiles where it was held that:

“The [employer] could still decide its business required that the employees’ terms and conditions of service be changed in order to be more profitable and more competitive. If the employees rejected the proposal on changing terms and conditions, as it was the position in this matter, then the [employer] would be entitled to dismiss them for operational reasons under section 189.”

[19] The Labour Court reasoned that the dismissal of the employees was not automatically unfair. It would not be reasonably practicable for Imperial to reinstate the dismissed employees. Aggrieved by the outcome, NUMSA appealed to the Labour Appeal Court.

Labour Appeal Court

[20] On 13 June 2019, the Labour Appeal Court upheld the Labour Court judgment and agreed with Aveng that no demand was made as envisaged under section 187(1)(c). It held that Aveng made a proposal to NUMSA, the primary purpose of which was to facilitate Aveng’s restructuring for operational reasons, in order to ensure that it survived its economic distress. It further held that NUMSA took advantage of the economic plight of Aveng and sought to convert the consultative processes into a collective bargaining opportunity for increased wages. The failure of the employees to accept the employer’s proposal, based on dire operational requirements, contributed to their dismissal and was accordingly fair.

Consequently, it held that the second to further applicants were dismissed as a result of Aveng’s operational needs, and not as a consequence of their refusal to accept a demand in respect of a matter of mutual interest. It concluded that

“[t]he employees’ dismissals accordingly fell within the zone of permissible dismissals for operational requirements and did not fall foul of section 187(1)(c) of the LRA”.

[21] In reaching its conclusion, the Labour Appeal Court held that section 187(1)(c) does not preclude an employer from dismissing employees, provided that the dismissal is for operational reasons. The question of whether the section is contravened does not depend on whether the dismissal is conditional or final, but on the true reason for the dismissal of the employees. Thus, the true reason for the dismissal of the employees must be determined and, in that examination, the employer’s operational requirements play a pivotal role.

[22] In determining whether the true reason for the dismissal was a refusal to accept the proposed changes to employment or whether it was based on operational requirements, the Labour Appeal Court applied the “true reason” or “dominant cause” test as laid down by the Labour Appeal Court in Afrox. The Labour Appeal Court concluded that, on the facts, the dismissal would not have occurred without the refusal of alternative employment.

The true reason for the dismissal was the employer’s operational requirements.

[23] In dismissing the appeal, the Labour Appeal Court concluded that NUMSA’s interpretation of the section would undermine the fundamental purpose of section 189 of the LRA. The section encourages engagement between employers and employees, facilitating the creation of alternatives to retrenchments, and to avoid scenarios where employers are shackled and rendered unable to propose changes to the terms and conditions of employment in terms of section 189 consultations. Aggrieved by this outcome, NUMSA approached this Court for leave to appeal.

In this Court

Applicant’s submissions

[24] Before us, NUMSA argues that the judgment of the Labour Appeal Court must be overturned and that the second to further applicants should be reinstated. It submits that if their reinstatement is not reasonably practicable, as contended by Imperial, then the employees should be appropriately compensated. NUMSA argues further that the Labour Court’s interpretation, which was endorsed by the Labour Appeal Court, is inconsistent with the literal, purposive and contextual interpretation of section 187(1)(c).
According to NUMSA, a plain reading of the provision contains three requirements:

  • (i) a demand;
  • (ii) that relates to a matter of mutual interest; and
  • (iii) the dismissal of employees because they failed to accept such demand.

It contended that on a plain reading of the section, a dismissal is automatically unfair even if employees are dismissed for rejecting a demand that arises from or as a result of the employer’s operational requirements. In other words, it posited that there are no qualifications or exceptions in this regard. It further contended that section 187(1)(c) of the LRA does not expressly allow for an exception based on operational requirements for employers to dismiss employees as it does in relation to fair dismissals in accordance with section 188 or dismissals for operational reasons during a protected strike under section 67(5) of the LRA.

[25] It alleges that the Labour Appeal Court erred in applying the true reason and dominant cause of the dismissal test, as enunciated in Afrox. It submits that the Afrox case is distinguishable from the facts in this matter and that the application of the test is not appropriate.

[26] NUMSA argues further that the Labour Appeal Court’s interpretation of the provision limits the right to strike as set out in section 23(2)(c) of the Constitution, and urged this Court to adopt an interpretation that best promotes the constitutional right to strike.

[27] NUMSA contends that the Labour Appeal Court’s assessment of facts is yet another reason why the appeal should succeed; and that, in truth, the offer was a demand as contemplated by section 187(1)(c) because it had a serious sting and consequences attached to it. It submits that the dismissal was consistent with the tenor of the letter which suggested that if employees failed to accept the offer, dismissal would ensue.

It was urged upon us to accept that the employees were put on terms by the employer and this conduct was not akin to a proposal as suggested by Aveng. It was suggested in oral argument that the Labour Appeal Court overlooked the fact that this was a second notice, preceded by the first notice of 31 March 2015. The effect of the latter notice, according to NUMSA, rendered it a matter of mutual interest.

[28] NUMSA further contends that the parties were engaged in section 189 consultations and that the section requires that there should be proposals aimed at reaching consensus. It argued that an employer should negotiate with the trade union with an open mind and seek to find a viable solution. Aveng, by its letters, displayed its unwillingness to act accordingly in this process. NUMSA submits that, when the section 189 notice was issued, Aveng indicated that only 400 jobs would be affected and undertook not to retrench any of its employees, but nevertheless went on to dismiss 733 employees. According to NUMSA, taking into account the high number of dismissed employees, the reason for the dismissals could not have been operational requirements.

Respondents’ submissions

[29] In opposing the application for leave to appeal, Aveng and Imperial support the reasoning of the Labour Appeal Court. They place particular emphasis on the purpose of the amendment to the section and stressed that the amendment sought to cure the anomaly that arose as a result of previous court decisions, which sought to preclude employers from dismissing employees for operational reasons, only to re hire some of them whenever circumstances permitted. They rely on the explanatory memorandum which they contended clearly articulated the purpose of the amendment. More about the explanatory memorandum later.

[30] Aveng argues that it was engaged in a continuous bona fide (good faith) retrenchment consultation process throughout. Realising the distressed financial position it faced, it suggested the restructuring of the company and the redesigning of the job descriptions as an alternative to retrenchment. The employees agreed and started working in terms of the new agreement. It was only in February 2015 that NUMSA inexplicably started demanding higher wages.

Aveng was held to ransom, as it had retrenched some of its employees by that stage. It contended that the parties were not engaged in collective bargaining but that Mr Komane’s statements were made during retrenchment consultations. Aveng submits that the interpretation of the section contended for by NUMSA undermines the right of employers to dismiss employees for operational reasons. Moreover, it undermines the right to fair labour practices in section 23(1) of the Constitution.

[31] Imperial confined its case to the reinstatement of the dismissed employees. As stated earlier, it aligned itself with Aveng in supporting the findings of the Labour Appeal Court. For its part, it contended that on the undisputed evidence of Mr Enslin, it would be impracticable to reinstate the employees. It submits that reinstatement would cripple Imperial by increasing its monthly costs and that this would result in the entire contract failing with possible job losses of around 200 employees.

Leave to Appeal

[32] It is axiomatic that in order for leave to appeal to be granted, a matter must engage this Court’s jurisdiction and it must be in the interests of justice to grant leave to appeal. A matter engages this Court’s jurisdiction when it raises a constitutional issue or an arguable point of law of general public importance which ought to be considered by this Court.

[33] This Court has held that matters which concern the interpretation and application of legislation enacted to give effect to the Bill of Rights do raise constitutional issues. This matter clearly engages this Court’s jurisdiction as it concerns the proper interpretation and application of section 187(1)(c) of the LRA which gives content to automatically unfair dismissals underpinned by the right to fair labour practices which are entrenched by section 23(1) of the Constitution. Thus, it raises a constitutional issue.

[34] Allied to this are other constitutional issues, which also engage this Court’s jurisdiction.

  • First, NUMSA’s averment that the provision must be interpreted in a manner that best promotes the right to strike in section 23(2)(c) of the Constitution.
  • Second, Aveng’s rebuttal that NUMSA’s construction of the provision undermines its right as an employer to dismiss for operational requirements which in turn undermines its right to fair labour practices provided for in section 23(1) of the Constitution.

[35] Notwithstanding the engagement of its jurisdiction, this Court enjoys the discretion to determine whether it is in the interests of justice to grant leave to appeal. It considers a number of factors in this regard. In addition to reasonable prospects of success, which although not determinative, carries substantial weight, there is a string of other key factors to be considered. These include the importance of, and the public interest in, the determination of the constitutional issues raised.

Retrenchments usually involve the loss of jobs and income by a number of employees through no fault of their own. They have a more significant “social and economic ill effect” than other forms of dismissals because they affect a “larger number of employees.” Such issues are of critical importance to the parties involved, the labour force and other future employment relationships. Therefore, reaching certainty and finality on when dismissals constitute retrenchments that are not automatically unfair in terms of section 187(1)(c) of the LRA, is in the public interest and warrants a determination by this Court.

[36] Also implicated is the robust debate concerning the impact of the amended section 187(1)(c) of the LRA. This Court is called upon to decide on how this provision is to be interpreted in the context of the LRA as a whole, taking into account its structural integrity as well as the jurisprudential force of prior case law.

Importantly, this matter is not narrowly circumscribed to the parties in the present matter; it has a broad practical reach. Employers, employees and their representatives alike will benefit from clarity from this Court on this matter. The interests of justice thus warrant that leave to appeal be granted.

Issues for determination

[37] As stated earlier, the overarching issue that arises on the merits is whether, on a plain reading of section 187(1)(c) of the LRA, a dismissal is automatically unfair even if employees are dismissed for rejecting a demand that arises as a result of the employer’s operational requirements. At the heart of this matter is the proper interpretation of section 187(1)(c) of the LRA.

[38] On my reasoning, it is not necessary to decide whether Aveng’s letter of 17 April 2015 was a demand.

Analysis

Section 189 retrenchment consultations versus collective bargaining

[39] From the outset, there is a need to distinguish between the section 189 consultation process and collective bargaining. This is so because dismissals that are truly for operational requirements would not trigger section 187(1)(c), and the fact that a demand is made in the context of retrenchment consultations is thus a significant factor in ascertaining whether the true reason for the dismissal was the employer’s operational requirements.

[40] Retrenchments should not be resorted to until “certain procedural requirements intended to minimise the impact on employees” have been complied with. When employers contemplate dismissing their employees for operational requirements, they are required to consult in terms of section 189(1) of the LRA. The nature of such a consultation process, including “its objective and agenda”, is prescribed by section 189(2) of the LRA. This consultation “requires engagement by all the consulting parties with the purpose of reaching consensus”. It is important to note that the approach to this consultation must not merely be a checklist approach – that is, it must not be purely formalistic. There is both a procedural and substantive aspect to this consultation process.

This has been clarified by the Labour Appeal Court in Afrox where the Court stated:

“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 and to provide appropriate severance pay for dismissed employees.”

[41] On the other hand, collective bargaining is the process through which both employers and trade unions

“seek to reconcile their conflicting interests and goals through mutual accommodation [in matters of mutual interest]. The dynamics of collective bargaining are demand and concession; the objective is agreement.”

Thus, in contrast to a consultation process, collective bargaining entails negotiating “so as to arrive at some agreement on terms of give and take.”

[42] It is said that collective bargaining “supersedes, but does not replace negotiations” between the parties and that it results in agreements “which bind employers and individual employees and supersede individual contracts to the extent that they conflict”. Furthermore, it entails bargaining which “falls between the two extremes of dictation and submission”. What is abundantly clear is that there are two aspects to collective bargaining: collective and bargaining in the sense that it is a process which is aimed at reaching consensus and binding the parties. Importantly, there must be a willingness to reach agreement, even by compromise.

[43] It was noted in MAWU that there is a “distinct and substantial difference between consultation and [collective] bargaining”. The former, in anticipation of retrenchments, “calls for a joint problem solving approach so that the needs of all parties can be explored”. The latter seemingly “tends to close the mind [of the parties] to exploring in good faith all options for finding mutually acceptable solutions” and, in its very nature, sees the parties “wrangle with each other to secure the best deal for their respective constituencies, often by bluffing and trying to outwit or outmanoeuvre each other.”.

[44] This does not mean, however, that there should be a rigid or mechanical distinction between the two processes. In some instances, the processes may be inextricably linked to each other in such a way that the distinction may become difficult to discern. Collective bargaining can only yield changes to terms and conditions of employment if it culminates in an agreement.

[45] On the applicants’ interpretation, if no agreement is reached in the context of retrenchment consultations, the employer is left with no means of addressing its operational requirements and may never resort to retrenchments without contravening section 187(1)(c). This construction is untenable. The facts of this case demonstrate that NUMSA was not inclined to agree to any changes unless they resulted in wage increases for its members. This was at odds with the purpose of the retrenchment consultation process which was geared at addressing Aveng’s distressed financial position. I will elaborate further on this later on.

Historical development of section 187(1)(c)

[46] Before considering the correctness of the Labour Appeal Court judgment, it is necessary to have regard to the legislative framework within which Aveng dismissed the employees and the history of the section at the core of this matter. Prior to its amendment, section 187(1)(c) read as follows:

“(1) A dismissal is automatically unfair, if the employer, in dismissing the employee, acts contrary to section 5, or if the reason for the dismissal is—
. . .
(c) to compel the employees to accept a demand in respect of any matter of mutual interest between the employer and the employee.”

[47] Before the amendment, section 187(1)(c) prohibited the dismissal of employees if the reason for the dismissal was to compel employees to accept a demand in respect of a matter of mutual interest between the employer and the employee. In terms of this section, an employer who wished to implement changes to the terms and conditions of employment could, if their proposals were refused, embark on a section 189 exercise with a view to retrenching those who were not prepared to work within its operational requirements, provided that the retrenchment was final and irrevocable. This clearly meant that the requirements of section 189 had to be complied with first. This line of reasoning was also endorsed in ECCAWUSA.

There, the Labour Court held:

“[W]here the amendment to the terms and conditions is proffered by an employer as an alternative to dismissal during a bona fide retrenchment exercise and it is a reasonable alternative based on the employer’s operational requirements, the employer will be justified in dismissing employees who refuse to accept the alternative on offer”.

The aforegoing remarks found favour with the Labour Court judgment when it dismissed NUMSA’s case.

[48] Owing to the difficulties presented by the interpretation of this section, the Labour Court in Fry’s Metal was confronted with a similar problem, albeit in the realm of collective bargaining. That case involved an adjustment of shifts and the removal of a transport subsidy. The employer, Fry’s Metal, wished to introduce operational changes that necessitated alterations to the employees’ terms and conditions of employment. It sought to negotiate a collective agreement on the proposed changes and tried to convince the employees that the changes would ensure an increase in productivity, resulting in its continued viability and, consequently, would enhance job security. But no collective agreement was reached. Fry’s Metal announced at a meeting with employee representatives that employees who were prepared to accept the intended changes would be retained in their positions while those who refused may be retrenched.

[49] The Labour Court, per Francis AJ, considered two questions in determining whether the dismissal constituted an automatically unfair dismissal.

  • The first was whether the proposed changes constituted a matter of mutual interest as contemplated in section 187(1)(c).
  • The second was whether the employer, in insisting on a new shift system, sought to compel the employees to accept a demand in respect of a matter of mutual interest or,
  • in the alternative, whether the employer could legitimately implement the new shift system for operational reasons.

The Labour Court held that the dispute involved the creation of new rights or the diminution of existing rights, as per the conception of disputes of mutual interest. It further held that the employer had sought to avoid the path of conciliation and that there had been a subsequent lock-out to persuade the employees to accept its proposals. It came to the rescue of the employees and held that the dismissal was not a legitimate instrument of coercion in the collective bargaining process. It further held that the definition of lock-out meant that tactical dismissals were precluded and section 187(1)(c) of the LRA rendered any dismissal to compel acceptance automatically unfair.

[50] In essence, the Labour Court found that this sub-section deserved a wide reading, giving employees protection against both threats of dismissal and actual dismissal if the employer’s object was to secure altered terms and conditions of employment. However, this decision was reversed on appeal by the Labour Appeal Court.

The Labour Appeal Court, per Zondo JP, held that a dismissal fell within the scope of section 187(1)(c) if it was conditional in the sense that the employer retained an intention to accept the employees back into its employ if they acceded to its demand. The Labour Appeal Court expressed itself in the following terms:

“A dismissal that is final cannot serve the purpose of compelling the dismissed employee to accept a demand in respect of a matter of mutual interest between employer and employee because, after he has been dismissed finally, no employment relationship remains between the two.”

[51] It further held:

“[T]here is a distinction between a dismissal for a reason based on operational requirements and a dismissal the purpose of which is to compel an employee or employees to accept a demand in respect of a matter of mutual interest between employer and employee. The distinction relates to whether the dismissal is effected in order to compel the employees to agree to the employer’s demand which would result in the dismissal being withdrawn and the employees being retained if they accept the demand or whether it is effected finally so that, in a case such as this one, the employer may replace the employees permanently with employees who are prepared to work under the terms and conditions that meet the employer’s requirements. An ordinary retrenchment, where the employees who are being retrenched will not be replaced, is, of course, also a dismissal for operational requirements.”

[52] In essence, the Labour Appeal Court emphasised the distinction between automatically unfair dismissals under section 187(1)(c) and ordinary dismissals under section 188, which include dismissals for reasons of the employer’s operational requirements. The former are prohibited by the LRA, while the latter are not.

[53] The Labour Appeal Court’s decision in Fry’s Metals was followed by Algorax. The latter case also concerned changes to the terms and conditions of employment in the form of new shifts. The salient difference was that the employer in Algorax offered its employees the option of accepting changes to terms and conditions and this offer remained open, even when the matter was before the Labour Court.

The employees refused to accept the new terms and conditions and were retrenched for refusing to accept these changes. The employer was unsuccessful in defending its actions, because the Labour Appeal Court held that, although there were indications that the employer had the intention to compel the employees to accept its demand as well as indications that the purpose was to get rid of the employees permanently, on a balance, the employer’s purpose was to compel the employees to agree to the employer’s demand.

Relying on the Labour Appeal Court decision in Fry’s Metals, the Court held that for a dismissal not to be automatically unfair in terms of section 187(1)(c), it could not be subject to withdrawal upon the employee accepting a demand in a matter of mutual interest and therefore must not be temporary. It also held that the dismissal of the employees was substantively unfair because there were alternatives, short of dismissal, that adequately could have solved the employer’s operational requirements.

[54] The Fry’s Metals decision was taken on appeal to the Supreme Court of Appeal. That Court expressed itself as follows:

“To deal with the apparently overlapping categories the LRA creates, [Thompson] suggested that the courts would have to determine on a case-by-case basis when an employer-employee dispute had permissibly ‘migrated’ from the bargaining domain (where matters of mutual interest cannot legitimately trigger dismissals) to the ‘legal domain’ (where the employer is permitted to dismiss for operational reasons). The core difficulty with this argument is that the dichotomy between matters of mutual interest and questions of ‘right’ do not, in our view, form the basis of the collective bargaining structure that the statute has adopted. The unavoidable complexities that arise from the supposed ‘migration’ of issues from matters of mutual interest to matters of ‘right’ demonstrate, in our view, that the dichotomy does not form the basis of the statutory structure, and section 187(1)(c) cannot, accordingly, be interpreted as if the legislation proceeds from that premise.”

[55] Thus, both the Labour Appeal Court and the Supreme Court of Appeal held that section 187(1)(c) means no more than that an employer may not resort to a temporary and tactical dismissal in order to coerce employees into accepting a particular employment outcome.

What is apparent from the Fry’s Metals and Algorax judgments is that section 187(1)(c) does not prevent employers from dismissing employees who do not accept proposals to amend the terms and conditions of employment on operational grounds.

[56] These judgments attracted a lot of academic interest. Their legal effect was summarised by academics, Coetzee and Beerman, as follows:

“[I]n Fry’s Metals the Labour Appeal Court and Supreme Court of Appeal together devised a reading of the section which construed it narrowly. It interpreted section 187(1)(c) to indeed only protect employees from being dismissed if the purpose of the dismissal was to compel them to accept a demand on a matter of mutual interest, and the dismissal was of a temporary nature. If the employer effected a permanent dismissal, because employees would not accept its demands, section 187(1)(c) could not come to the employees’ protection.”

[57] As academics continued to grapple with these issues, much of the criticism centred around what they described as the anomaly in the interpretation of section 187(1)(c). Thompson raised the possibility of an amendment to section 187(1)(c) to outlaw all dismissals in the context of economic disputes as follows:

“It is suggested that such ‘remedial’ steps would not serve industrial society well. On reflection, if the intention was that section 187(1)(c) should outlaw all dismissals in the context of economic disputes, it was being asked to do too much heavy lifting. And in any event, to locate that kind of control measure in the ‘automatically unfair’ basket was simply too drastic. The contest between claims for business flexibility on the one hand and protection against labour exploitation on the other is too complex and too important to be addressed by blunt-nosed legislative injunctions. A wide interpretation of section 187(1)(c) had the potential to hamstring the adaptive capacity of business mightily, and so inflict a great game on the economy. The court could have tempered this again by a generous and overriding interpretation of the sweep of the operational dismissal provision (the ‘employer’s leeway’), section 188(1)(a)(ii), but the exercise would have been a tricky and uneasy one.”

[58] In Fry’s Metals the Supreme Court of Appeal criticised Thompson’s view on the identification of viability as a factor in illuminating the case for an operational requirements dismissal and labelled it as an imprecise concept.

[59] Some academics suggested that section 187(1)(c) offered little assistance on how best to reconcile the imperatives of collective bargaining and operational requirements. Employers who wished to implement changes to the terms and conditions of employment could, if their proposal were refused, embark on a section 189 exercise. This uncertainty or confusion made it difficult for employers intent on embarking on retrenchments to initiate that process without flouting the law, with the result that employers were wary of offering any form of reinstatement or re-employment to employees retrenched in the context of restructuring, even if there was a valid requirement for the retrenchment. This was because some courts construed offers to take back workers as the true reason for the retrenchment. This resulted in dismissed employees being deprived of offers of re-employment.

The proper meaning of section 187(1)(c) as amended

[60] Section 187(1)(c) was amended with effect from 1 January 2015 in order to address and cure the anomaly. The explanatory memorandum provides that the purpose of the amendment is to—

“[A]mend section 187 of the Act to remove an anomaly arising from the interpretation of section 187(1)(c). In the case of Fry’s Metals (Pty) Ltd (2005) 26, the [Supreme Court of Appeal] held that the clause had been intended to remedy the so-called ‘lock-out’ dismissal which was a feature of pre-1995 labour relations practice. The effect of this decision when read with the decision of Algorax is to discourage employers from offering reemployment to employees who have been retrenched after refusing to accept changes in working conditions.
The proposed amendment seeks to give effect to the intention of the provision as enacted in 1995, which is to preclude the dismissal of employees where the reason for the dismissal is their refusal to accept a demand by the employer over a matter of mutual interest. This is intended to protect the integrity of the process of collective bargaining under the Act and is consistent with the purposes of the Act.”

[61] The explanatory memorandum shows that the amendment of the provision was not aimed at altering the existing law relating to the provision but simply to address the identified anomaly that came from an interpretation of the provision by the Supreme Court of Appeal and the Labour Appeal Court in Fry’s Metals and in Algorax. This anomaly, as the unintended consequence of those decisions, resulted in employers being discouraged from offering re-employment to retrenched employees who had been retrenched after refusing to accept changes to working conditions. The amendment reinforces the fact that the LRA does not allow employers engaged in collective bargaining to dismiss employees for refusing to accept the employer’s demands. Evidently, it did not outlaw Fry’s Metals type dismissals altogether.

[62] The parties expressed the explanatory memorandum as follows:

  • on the one hand, Aveng was of the view that the amendment resonated with the intention of the Legislature.
  • NUMSA, on the other hand, argued that the explanatory memorandum is ambiguous and does not spell out the specific anomaly which the amendment was intended to cure.

The centrepiece of NUMSA’s argument is that the amendment of section 187(1)(c) has the effect that employers are no longer permitted to dismiss employees and replace them with others who are prepared to work in accordance with the terms and conditions that are operationally required. NUMSA further contended that the distinction between final and conditional dismissals has fallen away, as has the causation test, which determines whether the dominant reason for the dismissal was the employer’s operational requirements or the refusal to accept a demand.

[63] One would have thought that with the amendment, the position would have been clarified. Regrettably, as the facts and differing views of the parties in this case demonstrate, uncertainty still abounds.

[64] In order to ascertain the proper meaning of section 187(1)(c) as amended, it is appropriate to illustrate how legislative instruments are to be interpreted. The meaning of the section must be garnered from the plain language of the text, its scope, location in the scheme of the LRA and its purpose. In doing so, we must also heed the interpretative injunction that promotes the spirit, purport and objects of the Bill of Rights.

In NEHAWU, this Court held:

“The declared purpose of the LRA ‘is to advance economic development, social justice, labour peace and the democratisation of the workplace’. This is to be achieved by fulfilling its primary objects, which includes giving effect to section 23 of the Constitution. It lays down the parameters of its interpretation by enjoining those responsible for its application to interpret it in compliance with the Constitution and South Africa’s international obligations. The LRA must therefore be purposively construed in order to give effect to the Constitution.” (Footnotes omitted)

[65] This Court, in Bertie Van Zyl, explained that

“[t]he purpose of a statute plays an important role in establishing a context that clarifies the scope and intended effect of a law”.

The purpose of the section must therefore be contextualised within the right to fair labour practices pursuant to section 23 of the Constitution and the purpose of the LRA as a whole. More importantly, in the context of this case, the section must be read to create clear and properly circumscribed parameters which employers and employees engaging in retrenchment processes must understand and through which they must operate. The LRA makes provision for an employer to dismiss striking workers for conduct, in terms of section 67(5) or for operational requirements.

[66] A closer look at section 187(1)(c) reveals an inescapable need to determine the real reason for the dismissal. The provision sets out the salient requirements that need to be met before an automatically unfair dismissal can be triggered. The question that arises is whether section 187(1)(c) permits an employer to dismiss employees for rejecting a demand that arises as a result of the employer’s operational requirements.

[67] A careful analysis of the wording of the section, alongside the explanatory memorandum, demonstrates that the interpretation contended for by NUMSA is incongruous with the section.

What that contention boils down to is that an employer considering operational requirements may never resort to retrenchments without contravening the section. This, in my view, would undermine an employer’s right to fair labour practices as entrenched in section 23(1) of the Constitution, since it would take away its right to resort to retrenchments where operational requirements render them necessary.

The fallacy in NUMSA’s submission can best be described in the following scenario: employers are allowed to retrench for operational requirements during a protected strike, including a lock-out, but not in a normal retrenchment situation where job-losses could be minimised or avoided. In my assessment, the purpose of amending the provision was to deal with the anomaly created by case law which had the detrimental effect of precluding employers from offering alternative positions, short of dismissal, to employees, or from offering any dismissed employee reinstatement on amended terms and conditions of employment following a restructuring process.

[68] NUMSA’s submission is startling because it would perpetuate the anomaly that the amendment sought to cure. On that interpretation, employers engaged in section 189 consultations would be wary of proposing any changes to the terms and conditions of employment which may, if accepted, address their operational requirements and save jobs, for fear of facing automatically unfair dismissal claims if changes are rejected and retrenchments follow. NUMSA’s construction would render such consultations nugatory and undermine the fundamental purpose of section 189, which is to encourage engagement regarding viable alternatives to retrenchments.

Determining the true reason for dismissal

[69] The sole enquiry under section 187(1)(c) is whether the reason for the dismissal is the refusal to accept the proposed changes to employment. A proper interpretation of the section requires a careful analysis. The wording of section 187(1)(c) does not suggest that simply because a proposed change is refused and a dismissal ensues thereafter, the reason for the dismissal is necessarily the refusal to accept the proposed change. On the contrary, the true reason for the dismissal, irrespective of whether a proposed change is rejected, stands to be determined.

[70] Determining the reason for a dismissal is a question of fact and the enquiry into the reasons for the dismissal is an objective one. One of the ways this can be done is to apply the test in Afrox. There is no basis on which to exclude an employer’s operational requirements from consideration as a possible reason for dismissal. The causation analysis espoused in Afrox was premised on the fact that section 187(1)(c) uses the phrase “if the reason for the dismissal is” and not the nature of the rights at play. While, admittedly, the provision itself does not place an injunction to utilise the Afrox test per se, I will demonstrate below that, in determining what the true reason for the dismissal is, the Afrox test is most useful.

[71] NUMSA sought to meet this argument by contending that even if employees are dismissed for rejecting a demand that arises as a result of the employer’s operational requirements, the dismissal is automatically unfair. According to NUMSA’s construction, an employer faced with operational requirements is precluded from dismissing employees under such circumstances. The Labour Appeal Court disagreed with NUMSA and held that the employees were dismissed as a result of Aveng’s operational needs, rather than their refusal to accept a demand in respect of a matter of mutual interest. The material enquiry is whether the reason for the dismissal was the refusal to accept the proposed changes to the terms of employment in terms of the Afrox test for factual and legal causation.

In my view, if the purpose of the amendment was to do away with the Fry’s Metals type dismissals, this could have been clearly done in both the amendment as well as the explanatory memorandum.

[72] I agree with the Labour Appeal Court that, on a proper interpretation of the section, “[i]t no longer matters what the employer’s intention or purpose might be” since there has been a shift in focus “from the employer’s intention in effecting the dismissal to the refusal of the employees to accede.”

It also correctly held that the

“question whether section 187(1)(c) of the LRA has been contravened does not depend on whether the dismissal is conditional or final, but rather on what the true reason for the dismissal of the employees is.”

[73] To resolve the issues that arise from the facts of this matter, the Labour Appeal Court relied on the Afrox causation test to determine the true cause for the dismissal. For those cases where it is not easy to determine what the true reason is, I agree that a useful analysis is found in the Afrox test.

[74] In Afrox the issue was whether the dismissal occurred as a result of the employees’ participation or support (or intended participation or support) in a protected strike in terms of section 187(1)(a) or whether it was based on the employer’s operational needs by virtue of sections 188(1) and 189.

The Court held:

“The enquiry into the reason for the dismissal is an objective one, where the employer’s motive for the dismissal will merely be one of a number of factors to be considered. This issue (the reason for the dismissal) is essentially one of causation and I can see no reason why the usual twofold approach to causation, applied in other fields of law, should not be utilised here”.

[75] And went on to state that:

“The first step is to determine factual causation: was participation or support, or intended participation or support, of the protected strike a sine qua non (or prerequisite) for the dismissal? . . . [T]he next issue is one of legal causation, namely whether such participation or conduct was the ‘main’ or ‘dominant’, or ‘proximate’, or ‘most likely’ cause of the dismissal. There are no hard and fast rules to determine the question of legal causation.”

[76] In such cases, the court would determine what the factual and legal causes of the dismissal were by

  • first asking whether the dismissal would have occurred if the employees had not refused the demand.
  • If the answer is in the affirmative, the dismissal does not amount to an automatically unfair dismissal.
  • If the answer is in the negative,
  • the second leg is necessary: is such refusal the main, dominant, proximate or most likely cause of the dismissal?

This means, as the Labour Appeal Court found, that the merits of the employer’s decision in such circumstances must be examined.

[77] The Afrox test has been endorsed and applied in various cases dealing with section 187(1) dismissals that are automatically unfair in contrast to section 189 dismissals for operational reasons that are not automatically unfair. Admittedly, some of these cases, like Afrox, concerned section 187(1)(a) versus section 189; not section 187(1)(c).

In my view, it is not controversial to apply the Afrox test with equal force in the context of section 187(1)(c). This is supported by the string of cases that reveals how the Afrox test has been accepted and applied by the Labour Appeal Court in the context of other subsections of section 187(1). In any event, the Afrox test is employed more generally when the courts are required to ascertain the true reason for dismissals.

[78] Turning to the specific text of section 187(1) of the LRA, the wording of that section provides that “[a] dismissal is automatically unfair if the employer, in dismissing the employee, acts contrary to section 5 or, if the reason for the dismissal is. . . .” This requires courts to interrogate and determine, among various factors, what the cause of the dismissal is. In this matter, the key enquiry is whether it is the refusal by employees to accept the proposed changes to the terms of employment or Aveng’s operational requirements.

[79] The Labour Appeal Court in Department of Correctional Services v Police & Prisons Civil Rights Union held:

“The reason contemplated and to be sought by the court is the objective reason in a causative sense. The court must enquire into the objective causative factors which brought about the dismissal, and should not restrict the enquiry to a subjective reason, in the sense of an explanation from one or other of the parties.”

[80] This requires the courts to determine the probable cause of the dismissal by examining the facts before them and assessing whether that cause is the main or dominant, or proximate, or most likely cause of the dismissal. As a result, there is no logical reason why the Afrox test, which in essence seeks to distinguish automatically unfair dismissals from those that are not automatically unfair, cannot similarly be applied in the context of section 187(1)(c).

This is further buttressed by the fact that the section itself uses the language “if the reason for the dismissal is”, making it clear that establishing the true and dominant reason for the dismissal is paramount.

In doing so, it clearly denotes that an examination of the reason, which can be ascertained through a causal analysis, must be established in order to determine whether or not the section has been contravened. Since the section itself implies a causation requirement, it is apposite to utilise the causation test as articulated in Afrox.

[81] I have had the benefit of reading the judgment penned by my brother, Majiedt J (second judgment), and that of my brother, Jafta J (third judgment). We arrive at the same conclusion that the appeal must fail. However, our differences lie in our approaches to the conclusion. To be clear, I accept that the point of departure is to consider the facts and evidence of a particular matter. Our labour law jurisprudence supports the Afrox test as a nifty mechanism to determine the true reason for the dismissal. The second judgment disagrees with this judgment on two fronts:

  • first, whether on the proper interpretation of section 187(1)(c) causation is still a requirement.
  • Second, whether the Afrox causation test is still relevant for determining the true reason in terms of section 187(1)(c).

[82] The second judgment adopts the approach in Algorax where the Labour Appeal Court, with Zondo JP writing for the majority, applied the conventional method of evaluating evidence for the resolution of irreconcilable versions. Although Zondo JP did not expressly refer to Stellenbosch Farmers’ Winery, a reading of the judgment indicates that he adopted the principles laid down in that case.

[83] The third judgment endorses the second judgment, but goes further to find that the language of section 187(1) “is not capable, let alone being reasonably capable, of an interpretation that the provision requires the invocation of causation, whether factual or legal, for determining the reason for dismissal. At the level of interpretation, there can be no legal basis for imputing causation to the provision.” And that this interpretation “is text-defiant and as a result there is no legitimate legal basis that I can think of which grounds the application of causation to matters regulated by section 187(1).”

[84] Before dealing with our differences, it is apposite to make the following observations and demonstrate how reliance on Algorax to the total exclusion of Afrox is misplaced: Algorax was a case of an automatically unfair dismissal in terms of section 187(1)(c) where Zondo JP did not discard the test in Afrox. Nor did he propagate for different tests being applied in the various subsections of section 187(1). The suggestion that there are two tests does not bear scrutiny.

[85] I interpose to say that the approaches, generally speaking, seem to represent two fundamentally opposed view points to the question of the determination of the reason for the dismissal in the context of section 187. The obvious danger of preferring one test and disregarding the other is apparent as I will demonstrate later in this judgment.

[86] I now turn to address the apparent dichotomous approaches in this and the second judgment. To properly contextualise this dichotomy, sight should not be lost of the fact that in its pre-amendment form, section 187(1)(c) provided that a dismissal is automatically unfair if the reason for the dismissal is “to compel the employee to accept a demand in respect of any matter of mutual interest between the employer and employee.”

Section 187(1)(c), before the amendment, therefore envisaged an investigation into the probable motive or purpose on the part of the employer which would amount to a prohibited reason for a dismissal.

The other subsections of section 187(1), on the other hand, and which were interpreted in the Afrox case, contemplated a state of affairs or event rather than a motive that would constitute the reason for a dismissal, hence the causation test. Since the amendment in 2014, section 187(1)(c) provides that a dismissal is automatically unfair if the reason for the dismissal is “a refusal by the employees to accept a demand in respect of any matter of mutual interest between the employer and the employee”. The language of section 187(1)(c) has thus been brought in line with the rest of section 187(1).

[87] It is unclear to me why section 187(1)(c) requires a different test to the one applied to the rest of the subsections in section 187(1). I find it difficult to accept that there should be a different interpretation. There is accordingly no basis for the finding that section 187(1)(c) is distinguishable or warrants a different treatment to the other provisions contained in section 187(1). I hasten to add that Algorax was decided on the basis of section 187(1)(c) in its pre-amended form and is no authority for the proposition that causation is not the appropriate enquiry when interpreting section 187(1)(c) in its current form. In any event, it is not apparent to me that Algorax does not, in fact, apply the causation requirement. There is no need to depart from the Afrox test in the context of section 187(1)(c).

[88] Lastly, the second judgment concludes that the causation test as applied in the law of delict is fraught with difficulties and impracticable to apply. A reading of Algorax suggests otherwise. Even though Zondo JP did not specifically refer to the causation enquiry in the determination of the true reason or dominant cause of the dismissal, he conducted an evaluation of the facts. Essentially, he embarked on an enquiry into causation which sought to determine the dominant factor precipitating the dismissals.

Factual causation, as I understand it, concerns a particular kind of link or connection between at least two facts or set of facts. As with all facts, factual causation is something that either exists or does not. The court usually determines the test on the basis of evidence and probabilities before it. The Labour Appeal Court rightly enquired into the circumstances that led to the dismissal. In doing so it relied on the knowledge of the facts as well as reliable evidence. This approach resonates neatly with the Afrox test.

[89] Zondo JP’s silence regarding the Afrox test does not imply that the test has been departed from. It does not follow that because he adopted the common sense approach or conventional method of evaluating evidence, he discarded the Afrox test. Rather, the law reports are replete with various judgments of the Labour Appeal Court endorsing and applying the Afrox approach.
The clearest examples of this includes POPCRU and Long where the Court continued to rely on Afrox and stated that:

“ In order to determine whether section 197 applies, the question that has to be asked is whether the probable cause of the dismissal was the transfer of the business as a going concern or a reason related to such transfer.”

[90] In my view, stripped of all the conflicting textual interpretations in this judgment and that of my brother, Majiedt J, the factual determination of the true reason for the dismissal in both judgments remains the same. It is in any event questionable whether the Court in Algorax applied a test that is different from the Afrox test. The parties also did not require this Court to determine whether the two tests are incompatible. Thus, circumventing the Afrox test merely because it is cumbersome is unsustainable. Algorax does not provide compelling support for the view that factual causation is not the proper enquiry in interpreting section 187(1)(c), and any suggestion that Afrox is no longer good law is, thus, misplaced.

[91] Causation seeks the true cause for the dismissal and it does so by interrogating the reason for the dismissal. In this case the causation test seeks the ultimate cause of the dismissal – whether it is because of the refusal of a demand or due to operational requirements. The causation test accepts that in some scenarios there may be more than one possible outcome.

[92] Ultimately, this judgment and that of my brother, Majiedt J, reach the same conclusion in relation to the facts of this matter and there is no need to say which of the approaches adopted is better in law. What matters most is that we both hold that the dismissal in this case is not automatically unfair.

Application of the facts

[93] As mentioned above, the central question is whether the true reason for dismissal is the refusal by the employees to accept the proposed changes to employment or Aveng’s operational requirements. On the facts, the approach in Afrox cannot be faulted. In terms of factual causation, it is undisputable that the second to further applicants would not have been dismissed if they had accepted the proposed changes to employment. However, the facts clearly reveal that the letter was intended to avoid or minimise job losses.

It is difficult to conceive why after the employees had been working in terms of the interim agreement for a period of six months, they inexplicably changed tack and reneged on the agreement, and demanded more money. There is force in the submission that when parties are engaged in economic bargaining one of them should not lightly be allowed to threaten to pull the plug on the process resulting in the demise of the other if it does not get its way. This is exactly what NUMSA did.

[94] Aveng faced harsh economic conditions and needed to restructure in order to survive and avoid the wholesale loss of jobs of its entire workforce. It proposed to remedy this by restructuring and getting rid of redundant positions. It commenced consultations in this context and received a proposal to change from the thirteen-grade structure that was utilised under the main agreement, to the five-grade structure. While consulting on ways to change structures, the remaining employees performed redesigned job descriptions. Sight must not be lost of the fact that there were several employees that had been retrenched as part of the VSPs and LDC.

[95] This restructuring occurred in the context of retrenchment consultations and not collective bargaining over wages. The effectiveness of the new structure under the interim agreement was, however, disrupted when NUMSA reneged on the interim agreement before it had terminated by effluxion of time. The refusal to work within the new structure amounted to an “insurmountable operational requirements” problem for Aveng.

The jobs that were performed before the redesigning of the job descriptions were no longer viable. If Aveng so wished, it could have terminated the services of its employees then. However, it did not. Instead, when this joint-consensus-seeking effort failed, it offered the second to further applicants reasonable alternative employment, on the same terms and with the same redesigned job descriptions according to which they had previously been employed. When they refused to accept the offer, they were retrenched.

[96] No fault can be found in the way Aveng pursued and responded to the process of negotiations and consultations. It conducted itself in a transparent, honest and bona fide manner. During the negotiations, there were continuing grounds for it to argue that it had a fair reason to terminate the services of its employees on the basis of its operational requirements, but it elected not to do so. It continued to engage with NUMSA to avoid job losses.

[97] Although it is probably true to say that the refusal to accept the proposed changes to employment accelerated the decision to dismiss, it seems to me that it cannot be said to be the main, proximate, or dominant cause for the dismissal. The need to ensure that the business was economically viable and remained sustainable was the most pressing consideration. Aveng could no longer compromise in light of its circumstances. Importantly, it was not in a position to bind itself any further to more than it could offer.

As the Labour Appeal Court noted:

“Aveng’s viability was at stake, proceedings with a bargaining power play . . . was not a realistic option in the circumstances. The primary purpose of Aveng in making the proposal was not to grasp an advantage in the wage bargain, it was rather to restructure for operational reasons to ensure Aveng’s long term survival. . . . The bargaining pressure thus brought to bear exacerbated the operational requirements problem. The proposal having been negotiated to impasse, the imperative or dynamic to dismiss for operational reasons transcended tactical positioning to become fair reason. The failure of the employees to accept the proposals engendered an insurmountable operational requirements problem that constituted a fair reason for dismissal.”

[98] I agree with the Labour Appeal Court that “[t]he proposals were the only reasonable and sensible means of avoiding dismissals and entailed no adverse financial consequences for the employees”. Therefore, the dismissal of the employees for operational reasons was the main or dominant cause for the dismissals, and constituted a fair reason for the dismissals.

Conclusion

[99] In an ever-changing economic climate characterised by increasing global competition, operational reasons not only relate to the downsizing of the workforce, but also to restructuring the manner in which an existing workforce carries out its work. Restructuring entails a number of possibilities, including shift system duties; adjusted remuneration; and merging of jobs or duties. Generally, businesses that adapt quickly will survive and prosper. Those that do not will decline and fail. Realising its predicament, Aveng engaged with its employees through NUMSA regarding a re organisational plan through a structured consultative process. NUMSA’s intransigence played a major role in making it impossible to save jobs. To prohibit Aveng from invoking the provisions of the section and dismissing employees under these circumstances would undermine the LRA’s objectives in ensuring the viability and vitality of businesses.

[100] It is in the best interests of society that an employer remains economically viable. The owners and managers of the business are best placed to run the businesses. Sight should not be lost of one of the primary purposes of the LRA – to advance economic development. Aveng took NUMSA into its confidence, by disclosing its financial position as early as April 2014. At no stage did NUMSA argue that it was misled. On the contrary, the evidence demonstrates that NUMSA reneged on the interim agreement and failed to act in good faith, placing Aveng in a precarious position.

[101] Nothing in the section, read in the context of the LRA as a whole, precludes employers from dismissing employees for operational requirements. This is subject to the requirements that the dismissal is substantively fair (for bona fide operational requirements) and procedurally fair (after a satisfactory consultation process).

[102] On a plain reading of section 187(1)(c), it cannot be suggested that the section should not be interpreted in a manner that permits dismissal for operational requirements. That said, it does not mean that employers have carte blanche (complete freedom to act as one wishes) to dismiss employees. Courts must guard against disguised retrenchments that take place where collective bargaining prevails. Courts can police opportunistic or disingenuous employers by determining the true reason for the dismissals. As I have said above, one of the ways this can be done is by applying the Afrox test, to unmask the true reason for the dismissals.

As Zondo JP stated in Algorax:

“The court must not defer to the employer for the purpose of answering that question. It cannot say that the employer thinks it is fair, and therefore, it is or should be fair. Furthermore, the court should not hesitate to deal with an issue which requires no special expertise, skills or knowledge, but simply common sense. Where an employer has chosen a solution that results in the dismissal of a number of employees when there is an obvious and clear way in which it could have addressed the problem without any or fewer employees losing their jobs, and the court is satisfied, after hearing the employer on such a solution, that it can work, the court should not hesitate to deal with the matter on the basis of the employer using a solution that preserves jobs, rather than one that causes job losses.”

[103] I am satisfied that, on the facts of this case, the applicants were not dismissed for rejecting a demand in respect of a matter of mutual interest. The dominant or true reason for their dismissal was the employer’s operational requirements. It follows that the dismissal of the second to further applicants was not automatically unfair in terms of section 187(1)(c) of the LRA.

[104] In light of the finding that Aveng was justified in dismissing the employees for its operational reasons, it is not necessary to make a determination on whether it is reasonably practicable to order Imperial to reinstate the second to further applicants.

Order

[105] The following order is made:

1. The application for leave to appeal is granted.
2. The appeal is dismissed.
3. There is no order as to costs.

Court summary

Media summary – 27 October 2020

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On Tuesday 27 October 2020 at 10h00, the Constitutional Court handed down judgment in an application for leave to appeal against the judgment and order of the Labour Appeal Court, which found that the dismissal of the second to further applicants was not automatically unfair in terms of section 187(1)(c) of the Labour Relations Act 66 of 1995 (LRA).

During April 2014, as a result of harsh economic conditions, Aveng experienced a decline in sales and profitability. To maintain its profitability Aveng had to reduce its increasing costs in relation to labour, electricity and transport. The drop in the volume of sales meant that some of the machines were under-utilised and necessitated the alignment of Aveng’s workforce and production output with the market conditions. Aveng soon realised that it could no longer continue with its business model and resorted to restructuring its business in order to survive. On 15 May 2014, Aveng initiated a consultation process in terms of section 189(3) of the LRA. In the notice, it indicated that about 400 jobs might be affected, and hoped that some employees would agree to work in the redesigned positions to avoid the necessity of initiating retrenchment proceedings. At that stage, Aveng had a total workforce of 1784 permanent employees.

On or about 29 August 2014, Aveng’s management indicated that employees were invited to apply for voluntary severance packages (VSPs) or early retirement, if they so wished, and that the opportunity to do so would remain open until 5 September 2014. NUMSA requested an assurance that no “forced retrenchments” would take place. However, Aveng could not guarantee this. NUMSA then proposed, as an alternative to the redesigning of job descriptions, a five-grade structure. At that time, Aveng had a thirteen-grade structure in place. NUMSA’s understanding was that the five-grade structure would allow for a redesigning of the job descriptions without interfering with Aveng’s organisational structure and reduce costs beyond those provided for in a collective agreement; which Aveng was a party to, and which was referred to as the main agreement of the Metal and Engineering Industries Bargaining Council (MEIBC).

During September 2014, a consultation meeting was held where Aveng’s Employee Relations Executive (Aveng’s ERA) mentioned that in order to avoid “forced retrenchments” employees who did not receive VSPs had to be placed in the redesigned positions. Furthermore, that there would not be any need for “forced retrenchments” if “grey areas” were addressed. It is common cause that further consultation meetings were held which resulted in the termination of the services of 253 employees, of which 249 employees opted for VSPs and the remaining four were retrenched.

During October 2014, NUMSA and Aveng concluded an interim agreement in terms of which employees agreed to work in accordance with Aveng’s redesigned job descriptions until the five grade structure was finalised. It was contemplated that this would only be in March 2015. It was further agreed that the employees performing additional functions would be paid 60 cents per hour. The employees worked under the proposed new structure for a period of six months. However, on 13 February 2015, NUMSA reneged on the interim agreement and informed Aveng that its members would no longer perform the redesigned jobs. This, according to NUMSA, was because Aveng had not yet negotiated the five grade structure that was supposed to be implemented from the beginning of March 2015.

On 30 March 2015, it became clear to Aveng that NUMSA had no desire to engage in a meaningful consensus seeking consultation process to resolve the five grade structure issue, but rather sought to use the consultations to demand wage increases. Aveng thus addressed a letter to NUMSA informing it that Aveng was unable to accommodate its demands any further and could not increase its costs. NUMSA was further informed that the consultation process had been exhausted. They were further informed that Aveng would continue to implement its new redesigned job descriptions structure to address its operational requirements, as the jobs that existed prior to the consultations had become redundant. As employees of NUMSA had been performing the redesigned jobs, Aveng offered them an opportunity to remain in those jobs, but “should they reject it, they [would] unfortunately be retrenched”.

The parties tried to resolve their issues on several occasions, but to no avail. On 17 April 2015, Aveng addressed another letter to NUMSA reiterating the letter of 30 March 2015. During April 2015, 71 employees accepted Aveng’s offer. However, approximately 733 employees rejected it and their services were subsequently terminated on 24 April 2015 for reasons that Aveng advanced as retrenchments for its alleged operational requirements. Approximately a year after the dismissal of the second to further applicants, Aveng outsourced its fleet and transferred its transport business to Imperial, including 110 of its employees. This takeover relates to one of the claims pursued by NUMSA for the reinstatement of its members. Adjudication of this claim required an examination of the potential and practicable reinstatement by Imperial of some 110 employees who form part of the second to further applicants.

On 22 May 2015, NUMSA referred an unfair dismissal dispute to the MEIBC for conciliation. The dispute could not be resolved and a certificate of non resolution was issued. Thereafter, NUMSA approached the Labour Court.

Before the Labour Court, NUMSA argued that the dismissal of the second to further applicants was automatically unfair in terms of section 187(1)(c) of the LRA. In disputing this, Aveng argued that the dismissal of the second to further applicants was for operational requirements in terms of the LRA. The Labour Court held that the individual employees were not dismissed for refusing to accept any demand, but for operational requirements after rejecting the alternative to dismissal proposed by Aveng during the retrenchment consultation. It further held that it would not be reasonably practicable for Imperial to reinstate the dismissed employees. Aggrieved by the outcome, NUMSA appealed to the Labour Appeal Court.

On 13 June 2019, the Labour Appeal Court upheld the Labour Court judgment and agreed with Aveng that no demand was made as envisaged under section 187(1)(c). It held that Aveng made a proposal to NUMSA, the primary purpose of which was to facilitate Aveng’s restructuring for operational reasons, in order to ensure that it survived its economic distress. It further held that NUMSA took advantage of the economic plight of Aveng and sought to convert the consultative processes into a collective bargaining opportunity for increased wages. Consequently, the Labour Appeal Court held that the second to further applicants were dismissed as a result of Aveng’s operational needs, and not as a consequence of their refusal to accept a demand in respect of a matter of mutual interest. In reaching its conclusion, it held that section 187(1)(c) does not preclude an employer from dismissing employees, provided that the dismissal is for operational reasons. The question of whether the section is contravened does not depend on whether the dismissal is conditional or final, but on the true reason for the dismissal of the employees. Thus, the true reason for the dismissal of the employees must be determined.

In determining whether the true reason for the dismissal was a refusal to accept the proposed changes to employment or whether it was based on operational requirements, the Labour Appeal Court applied the “true reason” or “dominant cause” test as laid down by the Labour Appeal Court in SA Chemical Workers Union v Afrox Ltd (Afrox test). When there is more than one possible reason for dismissal, the Afrox test seeks to determine the true or dominant reason therefor through the application of a causation test. The Labour Appeal Court concluded that, on the facts, the dismissal would not have occurred without the refusal of alternative employment. The true reason for the dismissal was the employer’s operational requirements. In dismissing the appeal, the Labour Appeal Court concluded that NUMSA’s interpretation of the section would undermine the fundamental purpose of section 189 of the LRA, which encourages engagement between employers and employees – facilitating the creation of alternatives to retrenchments, and to avoid scenarios where employers are shackled and rendered unable to propose changes to the terms and conditions of employment in terms of section 189 consultations. Aggrieved by this outcome, NUMSA approached the Constitutional Court for leave to appeal.

Before the Court, NUMSA argued that the judgment of the Labour Appeal Court should be overturned and that the second to further applicants should be reinstated. It contended that the Labour Court’s interpretation of section 187(1)(c), which was endorsed by the Labour Appeal Court, was inconsistent with the literal, purposive and contextual interpretation of section 187(1)(c) of the LRA. Furthermore, on a plain reading of the section, a dismissal is automatically unfair even if employees are dismissed for rejecting a demand that arises from or as a result of the employer’s operational requirements. It alleged that the Labour Appeal Court erred in applying the true reason and dominant cause test as enunciated in Afrox. This was so because the matters were distinguishable and the application of the test was inappropriate. Furthermore, the offer by Aveng was a demand contemplated in section 187(1)(c) because it had a serious sting, and consequences attached to it. For that, the appeal had to succeed. Finally, it argued that if reinstatement was not reasonably practicable, then the employees should be appropriately compensated.

Aveng and Imperial supported the reasoning of the Labour Appeal Court. They placed particular emphasis on the purpose of the amendment to the section and that it sought to cure the anomaly that had arisen as a result of previous court decisions which sought to preclude employers from dismissing employees for operational reasons, only to re hire some of them whenever circumstances permitted. They relied on the explanatory memorandum to the Labour Relations Amendment Act 6 of 2014 which they contended clearly articulated the purpose of the amendment. Aveng argued that it was engaged in a continuous bona fide (good faith) retrenchment consultation process throughout. Realising the distressed financial position it faced, it suggested the restructuring of the company and the redesigning of the job descriptions as an alternative to retrenchment. The employees agreed and started working in terms of the new agreement. It was only in February 2015 that NUMSA inexplicably started demanding higher wages. Aveng was held to ransom, as it had retrenched some of its employees by that stage. It contended that the parties were not engaged in collective bargaining but that Aveng’s ERA’s statements were made during retrenchment consultations. Aveng submitted that the interpretation of the section contended for by NUMSA undermined the right of employers to dismiss employees for operational reasons. Moreover, it undermined the right to fair labour practices in section 23(1) of the Constitution.

Imperial confined its case to the reinstatement of the dismissed employees. As stated earlier, it aligned itself with Aveng in supporting the findings of the Labour Appeal Court. For its part, it contended that on its undisputed evidence, it would be impracticable to reinstate the employees. It submits that reinstatement would cripple Imperial by increasing its monthly costs and that this would result in the entire contract failing with possible job losses of around 200 employees.

The first judgment penned by Mathopo AJ (with Mogoeng CJ, Khampepe J, Madlanga J and Theron J concurring), the Constitutional Court held that the dismissal of the second to further applicants was not automatically unfair in terms of section 187(1)(c) of the LRA. It held that in an ever changing economic climate characterised by increasing global competition, operational reasons not only relate to the downsizing of the workforce, but also to restructuring the manner in which an existing workforce carries out its work. Restructuring entails a number of possibilities, including shift system duties; adjusted remuneration; and merging of jobs or duties. Generally, businesses that adapt quickly will survive and prosper. Those that do not will decline and fail. Realising its predicament, Aveng engaged with its employees through NUMSA regarding a re organisational plan through a structured consultative process. NUMSA’s intransigence played a major role in making it impossible to save jobs. To prohibit Aveng from invoking the provisions of the section and dismissing employees under these circumstances would undermine the LRA’s objectives in ensuring the viability and vitality of businesses.

The first judgment also agreed with the Labour Appeal Court that the proposals were the only reasonable and sensible means of avoiding dismissals and entailed no adverse financial consequences for the employees. Therefore, the dismissal of the employees for operational reasons was the main or dominant cause for the dismissals, and constituted a fair reason for the dismissals. In respect of the interpretation of section 187(1)(c) of the LRA, the first judgment found that the section requires courts to interrogate, among various factors, what the cause of the dismissal is and determine the probable cause of the dismissal by examining the facts before them and assessing whether that cause is the main or dominant, or proximate, or most likely cause of the dismissal.

As a result, there is no logical reason why the Afrox test, which in essence seeks to distinguish automatically unfair dismissals from those that are not automatically unfair, cannot similarly be applied in the context of section 187(1)(c). Importantly, the section itself uses the language “if the reason for the dismissal is”, making it clear that establishing the true and dominant reason for the dismissal is paramount. In doing so, the section clearly denotes that an examination of the reason, which can be ascertained through a causal analysis, must be established in order to determine whether or not it has been contravened. Since the section itself implies a causation requirement, it is apposite to utilise the causation test as articulated in Afrox.

The second judgment penned by Majiedt J (Jafta J, Mhlantla J, Tshiqi J and Victor AJ concurring) concurs with the outcome and order reached in the first judgment that the dismissal in the matter was not automatically unfair in terms of section 187(1)(c) of the LRA, but differed with the first judgment’s reasoning that the true reason for the employees’ dismissal in terms of section 187(1)(c) can be determined by applying the causation test as propounded by the Labour Appeal Court in Afrox. On this aspect, the second judgment held that the causation test, which is traditionally employed in delict and criminal cases for purposes of linking the wrongful conduct to the harm suffered, is not suitable in this context, and has the potential to yield an incorrect outcome.

The second judgment noted that the application of the causation test as stated in Afrox is not feasible from a plain reading of section 187(1)(c). That an interpretation of section 187(1)(c) as imposing a causation test unduly strains the language of the section and misconstrues the rationale for causation as a legal requirement. Consequently, the second judgment held that the approach adopted by the Labour Appeal Court in Chemical Workers Industrial Union v Algorax, which entails the evaluation of evidence adduced to prove the true reason for the employees’ dismissal where there are two conflicting reasons, is to be preferred.

A third judgment penned by Jafta J (Majiedt J, Mhlantla J, Tshiqi J and Victor AJ concurring), agreed with the first judgment, except with regard to its interpretation of section 187(1)(c) of the LRA and its approval of the Labour Appeal Court’s decision in Afrox. The third judgment held that Afrox proceeded from an incorrect premise in that it did not base its conclusion on the language of section 187(1). The third judgment provided additional reasons to those contained in the second judgment and held that on its proper interpretation the section does not incorporate causation as a requirement.

Media summary – 5 March 2020
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The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On 5 March 2019 at 10h00, the Constitutional Court will hear an application for leave to appeal against the judgment and order of the Labour Appeal Court which dismissed the applicants’ appeal against the order and judgement of the Labour Court. This application concerns the proper interpretation of section 187(1)(c) of the Labour Relations Act 66 of 1995 (LRA).

On 15 March 2014, the first respondent, Aveng Trident Steel (a division of Aveng Africa (Pty) Ltd) (Aveng) filed a notice with the Commission for Conciliation, Mediation and Arbitration to initiate a retrenchment consultation process. During the consultation process, Aveng and the first applicant, the National Union of Metal Workers of South Africa (NUMSA) – acting on behalf of the second to further applicants who were employees of Aveng – agreed that employees of Aveng would be offered Voluntary Severance Packages (VSPs), and those employees engaged in Limited Duration Contracts (LDCs) would have their contracts terminated.

In the result, around 500 VSPs / LDCs left Aveng during 2015. On 17 October 2014, the parties entered into an interim agreement, in terms of which the employees agreed to work in accordance with Aveng’s redesigned job descriptions for a period of six months pending the finalisation of consultations.

However, on 13 February 2015, NUMSA reneged on the interim agreement and informed Aveng that its members would no longer perform any duties in terms of the interim agreement. The parties resumed consultations but were unable to reach consensus on all the consultation issues. This led to Aveng informing NUMSA on 30 March 2015 that the jobs performed prior to the commencement of the consultation had become redundant, and that Aveng would implement a new structure with redefined job descriptions with effect from 10 April 2015.

Aveng further informed NUMSA that the employees faced retrenchment if they failed to accept the offer of alternative employment as they would unfortunately need to be retrenched.

The parties resumed consultations again and upon failing to reach consensus on their remaining issues, Aveng reiterated in a letter dated 17 April 2015 that the consultation process had been exhausted and that the jobs that existed prior to the commencement of the consultation had become redundant.

It urged employees to accept the offer of alternative employment with redefined job descriptions or face retrenchment. As a result, 71 employees accepted the alternative employment offered by Aveng and 733 employees refused and were subsequently dismissed for Aveng’s alleged operational requirements.

A year after the dismissal, Aveng transferred parts of its transport business to the second respondent, Imperial Dedicated Contracts (a division of Imperial Logistics Africa Ltd) (Imperial), in terms of section 197 of the LRA. Approximately 110 of the second to further applicants are affected by the possibility of reinstatement to Imperial (affected employees).

NUMSA approached the Labour Court claiming that the dismissal of its members constituted an automatically unfair dismissal.

The central issue before the Labour Court was whether the second to further applicants were dismissed by Aveng for refusing to accept a demand in respect of a matter of mutual interest in terms of section 187(1)(c) of the LRA or for Aveng’s operational requirements.

The Labour Court held [on 13 December 2017 per Moshoana J] that the second to further applicants failed to produce credible evidence showing that they were subjected to an automatically unfair dismissal. It reasoned that a dismissal where the reason is a refusal to accept a demand is prohibited. However, the reason for the dismissal on the facts was the employer’s operational requirements and not a refusal to accept a demand.

It concluded that the dismissal of the second to further applicants was not automatically unfair and was substantively fair.

NUMSA approached the Labour Appeal Court on appeal. The Labour Appeal Court found [on 13 June 2019 per John Murphy AJA] that section 187(1)(c) of the LRA must be read with section 188 of the LRA which provides that a dismissal that is not automatically unfair, is unfair if the employer fails to prove that the reason for the dismissal is a fair reason such as one based on the employer’s operational requirements under section 189 of the LRA.

Even where there is evidence suggesting a credible possibility that dismissal occurred because the employees refused to accept a demand, the employer can still show that the dismissal was for a different more proximate fair reason – such as its operational requirements.

It held that whether section 187(1)(c) of the LRA is contravened depends on the true reason for the dismissal of the employees – the proven existence of the refusal of a demand merely prompts a causation inquiry.

The Labour Appeal Court found that the dominant reason or proximate cause for the dismissal of the employees was Aveng’s operational requirements. It found it unnecessary to determine the practicability of reinstating the employees in the employment of Imperial, and thus dismissed the appeal with costs.

Aggrieved by the decision of the Labour Appeal Court, NUMSA approached the Constitutional Court for leave to appeal. Before the Court, it submits

  • firstly that the Labour Appeal Court’s interpretation of section 187(1)(c) of the LRA is incorrect. This is because it is inconsistent with the literal, purposive, contextual and constitutional interpretation of the provision.
  • Secondly, the Labour Appeal Court ought to have adopted a broad interpretation of the word “demand” in order to give effect to the right to strike pursuant to section 23(2)(c) of the Constitution. The Labour Appeal Court erred when it found that Aveng’s letter of 17 April 2015 did not constitute a demand for purposes of section 187(1)(c).
  • Thirdly, the Labour Appeal Court erred when it found that Imperial ought to not reinstate the affected employees when there was no evidence on the record in order to establish that it was not reasonably practicable to reinstate the affected employees in terms of section 193(2)(c) of the LRA.

Aveng submits that NUMSA’s textual interpretation of section 187(1)(c) is unsustainable because it disregards the words “if the reason for the dismissal is” which denotes a causation analysis.

Aveng further submits that its letter of 17 April 2015 was not a demand for purposes of the provision. This is because the letter was not sent during the course of collective bargaining, but to convey alternative employment in the course of retrenchment consultations.

Imperial plays a limited role in this matter and has largely aligned itself with the submissions of Aveng. It submits that it would not be practicable to reinstate the affected employees. It further submits that if the Constitutional Court finds in favour of the applicants, then compensation should be awarded and not reinstatement.

Alternatively, the Constitutional Court should refer the matter back to the Labour Court for evidence as to whether reinstatement is practicable.