Farinha v Boogertman and Partners

In context of project based work and bumping at senior management and professional management level the labour court mentioned  that the applicant may well have been similarly qualified and enjoyed similar experience to another employee and also suitable for retention, applying selection criteria is not ‘mechanical’ and fairness must prevail and there must be a balance between employee interests with those of the business (employer), and the labour court decided the criteria applied in the circumstances were both fair and fairly applied.

Essence

Labour court refused claim in context of lawfulness and fairness of project based work and breach of contract and bumping and selection criteria. 

Decision

(J 437/2019) [2021] ZALCJHB 17 (11 February 2021)

Order:

Refused application.

Judges

André van Niekerk J

Heard: 8 and 10 February 2021
Delivered: 11 February 2021

Related books

Darcy du Toit et al Labour Relations Law: A Comprehensive Guide 6ed 925 pages (LexisNexis 2015) at 106, 185, 190, 424, 475, 623

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

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

Garbers The New Essential Labour Law Handbook 7th ed (MACE 2019) at

Reasons

“[16] . . . . Given that I have found that the applicant’s contract did not offer him security of employment for the duration of the project in any absolute sense and that his employment was subject to termination on the basis of one calendar months’ notice (as was Araujo’s), the terms of the applicant’s contract offered him no advantage in the selection process. The yardstick remains fairness, and I have no hesitation in concluding, for the reasons reflected above, that the applicant was fairly selected for retrenchment.”

Quotations from judgment

Note: Footnotes omitted and emphasis added

[1] The applicant is an architect. In July 2016, he was employed by the respondent as a project architect in terms of what is described as a fixed term contract. The preamble to the contract records that the duration of the applicant’s contract is from 4 July 2016 ‘until suspension, termination or completion of the project which is specifically the Fourways Mall project and any related work in the precinct’.

The contract further provides that on suspension, termination or completion of the project, the contract would ‘automatically terminate’. The applicant testified that he expected the project to last for at least five years, and arranged his life accordingly.
On 28 February 2019, the respondent issued a notice in terms of section 189 of the Labour Relations Act (LRA). In the letter, the respondent recorded that a number of projects had been put on hold, delayed or discontinued and initiated a consultation process. After the completion of the consultation process, the applicant was selected for retrenchment and on 15 March 2019, the applicant was retrenched.

[2] The applicant referred an unfair dismissal dispute to the CCMA. That dispute remained unresolved and was referred to this court for adjudication. The applicant’s statement of claim envisages two discrete causes of action.

  • The first is a contractual claim in which the applicant challenges the lawfulness of the termination of his employment. He submits that he was employed in terms of a contract for a fixed duration and that the respondent unlawfully terminated the contract before the envisaged termination date.
  • In the alternative, the applicant contends that his retrenchment was unfair. He does not challenge the procedural fairness of his dismissal; he contends that his selection for retrenchment was unfair and that the respondent did not retrench as a measure of last resort.

The parties agreed that the court should hear evidence in respect of both claims and that given the structure of the applicant’s claims, the issue of the quantum of any damages suffered by the applicant be deferred until a decision on the merits.

In short, the court is required

  • first, to decide whether the respondent was entitled to terminate the applicant’s contract prior to the completion of the Fourways Mall Project; and
  • secondly, whether the applicant’s retrenchment was substantively fair.

[3] As I have indicated, the preamble to the contract reads as follows:

The duration of your contract with the Company is from 4 July 2016 until suspension, termination or completion of the project which is specifically the Fourways Mall Project and any related work in the Precinct.

On Suspension, termination or completion of the project, as detailed in paragraph (2) above, this contract shall automatically terminate. The termination shall not be construed as being retrenchment will dismissal, but shall be completion of contract. No enquiry is required when this contract terminates through the effluxion of time (sic).

[4] Paragraph 3 of the contract is headed ‘Termination of service’. The clause provides:

3.1 Notice given by either party must be given in writing but not less than one calendar months’ notice. Notice must be given before the last days of the month which precedes the months’ notice period. The Notice periods are as follows:
• less than 6 (six) months of employment – 1 (one) weeks’ notice
• employment more than 6 (six) months – 2 (two) weeks’ notice
• employment more than 12 (twelve) months – 1 (one) calendar months’ notice (sic).

[5] The contract is not drafted in the clearest of terms. For present purposes, there is a clear tension or incongruity between what appears in the preamble and clause 3.

The preamble appears to establish a contract of limited duration (being the duration of the Fourways Mall project, which the respondent concedes was not completed as at the date of the applicant’s retrenchment) which must be reconciled, if that is possible, with the right of either party to terminate the contract at any time by giving a month’s notice in terms of clause 3.1.

Although clause 3.1 is internally contradictory, at the time of his retrenchment, the applicant had completed more than 12 months and it is not in dispute that if the provision is applicable at all, the one calendar month notice period applies.

[6] I turn first to the applicant’s contractual claim. At issue is whether the employment contract concluded between the parties makes any provision for termination prior the completion of the Fourways Mall project. Mr Morgan, acting for the applicant, submitted that there was no such provision and that to the extent that the respondent relied on clause 3 of the contract, that clause established no express right to terminate the contract on notice prior to the completion of the project.

All that the clause provides (and then in contradictory terms) is the formula for termination of an employment contract on notice as provided in the Basic Conditions of Employment Act. The contract is thus one of a limited duration, cast in terms that entitled the applicant to remain employed by the respondent until the completion of the Fourways Mall project.

Ms Erasmus, who appeared for the respondent, submitted that clause 3 ought to be construed so as to afford either party the right to terminate the contract on one calendar months’ notice prior to the completion of the project.

[7] The principles of interpretation to be applied were affirmed in Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA). Wallis JA said the following:

[18] …The present state of the law can be expressed as follows:

interpretation is the process of attributing meaning to the words use in a document, be it legislation, some other statutory instrument, or contract, having regard to the context provided by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence.
Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production. Where more than one meaning is possible each possibility must be weighed in the light of all these factors.
The process is objective, not subjective. A sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the document….

The ‘inevitable point of departure is the language of the provision itself’ read in context and having regard to the purpose of the provision and the background to the preparation and production of the document…
[25] Which of the interpretational factors I have mentioned will predominate in any given situation varies. Sometimes the language of the provision, when read in its particular context, seems clear and admits of little if any ambiguity. Courts say in such cases that they adhere to the ordinary grammatical meaning of the words used.
However, that too is a misnomer. It is a product of a time when language was viewed differently and regarded as likely to have a fixed and definite meaning, a view that the experience of lawyers down the years, as well as the study of linguistics, has shown to be mistaken. Most words can bear several different meanings or shades of meaning and to try to ascertain their meaning in the abstract, divorced from the broad context of their use, is an unhelpful exercise.
The expression can mean no more than that, when the provision is read in context, that is the appropriate meaning to give to the language used. At the other extreme, where the context makes it plain that adhering to the meaning suggested by apparently plain language would lead to glaring absurdity, the court will ascribe a meaning to the language that avoids the absurdity.
This is said to involve a departure from the plain meaning of the words used. More accurately it is either a restriction or extension of the language used by the adoption of a narrow or broad meaning of the words, the selection of a less immediately apparent meaning or sometimes the correction of an apparent error in the language in order to avoid the identified absurdity.
[26] In between these two extremes, in most cases the court is faced with two or more possible meanings that are to a greater or lesser degree available on the language used. Here it is usually said that the language is ambiguous although the only ambiguity lies in selecting the proper meaning (on which views may legitimately differ).
In resolving the problem, the apparent purpose of the provision and the context in which it occurs will be important guides to the correct interpretation an interpretation will not be given that leads to impractical, unbusinesslike or oppressive consequences or that will stultify the broader operation of the legislation or contract under consideration.’

[8] When an employment contract is entered into for a fixed term, the courts will hold the parties to the fixed term and not permit any premature termination of the contract, except where one of the parties acts in material breach of the contract. fixed-term contract of employment.

In Buthelezi v Municipal Demarcation Board [2005] 2 BLLR 115 (LAC) in which the Labour Appeal Court (at 9) stated as follows:

There is no doubt that at common law a party to a fixed–term contract has no right to terminate such contract in the absence of a repudiation or a material breach of the contract by the other party.

In other words, there is no right to terminate such contract even on notice unless its terms provide for such termination. The rationale for this is clear. When parties agree that their contract will endure for a certain period as opposed to a contract for an indefinite period, they bind themselves to honour and perform their respective obligations in terms of that contract for the duration of the contract and they plan, as they are entitled to in the light of their agreement, their lives on the basis that the obligations of the contract will be performed for the duration of that contract in the absence of a material breach of the contract.

Each party is entitled to expect that the other has carefully looked into the future and has satisfied itself that it can meet its obligations for the entire term in the absence of any material breach.

Accordingly, no party is entitled to later seek to escape its obligations in terms of the contract on the basis that its assessment of the future had been erroneous or had overlooked certain things. Under the common law there is no right to terminate of a fixed – term contract of employment prematurely in the absence of a material breach of such contract by the other party.

[9] This approach was applied by this court in Nkopane & Others v Independent Electoral Commission [2007] 2 BLLR 146 (LC), in which the court [per Kennedy AJ] stated (at paragraph 41) that:

If an employment contract is truly a fixed term contract – of the type contemplated in Tiopaizi v Bulawayo Municipality 1923 AD 317 – it is legally incapable of valid premature cancellation for any reason other than material breach. An employee whose fixed term contract has been terminated for a reason other than breach is not confined to a contractual claim for damages. The dismissal can also be challenged as being unfair and relief for this can be claimed under the provisions of the LRA. (footnote omitted)

[10] These authorities beg the question as to the nature of the contract between the parties. In my view, they do not assist the applicant – the cases concerned contracts that are ‘truly’ a fixed term contract; a contract that is not terminable on notice by either party during its term.

In Lottering & others v Stellenbosch Municipality (2010) 31 ILJ 2969 [sic] ; [2010] 12 BLLR 1306 (LC), Cheadle AJ confirmed that if the contract is for a fixed term, the contract may only be terminated on notice only if there is a specific provision permitting termination on notice during the contractual period.

Magopeni v Acacia Mining SA (Pty) Ltd & others [2020] ZAGPPHC 300 (30 March 2020) [per Khumalo J] is similarly authority for the proposition that where parties enter into a fixed term contract of employment, there are two exceptions for a premature termination of the contract.

  • The first is that there should be a repudiation or material breach of the terms of the contract; alternatively,
  • the terms of the contract should provide for such termination.

In the latter instance, the courts have held that by entering into a fixed term contract of employment for a specific period, the parties intend to be bound by the contract for the stipulated duration unless there is express provision made for earlier termination (see also Nkopane v Independent Electoral Commission (2007) 28 ILJ 670 ; [2007] 2 BLLR 146 (LC)).

[11] In the present instance, the contract is a hybrid. The preamble to the agreement record [sic] that the period of employment is the duration of the Fourways Mall Project.

Clause 3 of the contract introduces a right to terminate the contract during the course of the fixed term. One might question, as the applicant’s attorney did, why the preamble was necessary if the intention was to conclude a contract that could be terminated on notice.

But the contract is what it is, and the court must make sense of it. But the approach to be adopted is one that requires the court to have regard, initially at least, to the language read in context, having regard to the purpose of the document and the background to the preparation and production of the document.

The language of clause 3 is clear. It imposes notice periods that either party may invoke to terminate the contract. While as Mr Morgan submits, the clause does not expressly refer to any right to give notice to terminate the contract, it is difficult to conceive of any other purpose that the clause might serve.

Indeed, the heading to the clause (‘Termination of Service’) makes clear the notice periods are established precisely for the purpose of terminating the contract.

Further, the background to and preparation of the document was the subject of the evidence by the applicant and the director responsible for the project and signatory to the agreement on behalf of the respondent, Mr Hennie Coetzee. The applicant did not suggest that the contract was immutably one for the duration of the Fourways Mall project – he conceded that if he were to become medically incapacitated, for example, or render performance to an unsatisfactory standard, that the respondent would be entitled to terminate the contract prior to the completion of the project.

The applicant specifically referred to force majeure as a basis that would entitle the respondent to terminate the contract before the contemplated date.

While I do not wish to categorise a need to retrench as force majeure, the fact remains that the applicant himself contemplated that circumstances outside of the control of either party might legitimately give rise to a lawful termination of the contract on notice.
That being so, I fail to appreciate on what basis the applicant contends that clause 3 should be disregarded as superfluous and disregarded.

[12] In so far as the applicant relies on the contra proferentem rule, this ordinarily requires a court to interpret an unclear written contractual provision, usually in insurance claims where exclusion clauses are at issue, against the party that drafted it.

It is not an absolute rule and is not ordinarily applied in relation to employment contracts.

[13] I find that the terms of the contract concluded between the parties are such that all things being equal, the applicant would be employed by the respondent for the duration of the Fourways Mall project, but that either party remained entitled during that period to give the other one calendar months’ notice of its intention to terminate the contract.

In other words, clause 3 of the contract permitted either party to terminate the contract on notice before the expiry of the fixed term stipulated in the preamble. Although the respondent failed initially to give a calendar months’ notice, prior to the commencement of the trial, the value of the applicant’s remuneration for the balance of the notice period was tendered and accepted.

It follows that by terminating the contract as it did, the respondent was not in breach of contract and that the applicant has no claim for contractual damages.

[14] In so far as the applicant claims in the alternative that his retrenchment was unfair, the LRA requires a termination of employment on the grounds of an employer’s operational requirements to be substantively and procedurally unfair.

Although initially placed in issue, the applicant did not contest the procedural fairness of his dismissal.

The requirements of the substantive fairness relate to the need to retrench (in other words, whether the employer had a bona fide and commercially rational reason to retrench) and to apply selection criteria that are fair.

In the present instance, the respondent proposed to adopt the last in – first out (LIFO) criterion, subject to the right to apply that criterion within specific departments and teams, job functions and with the retention of required skills.

The respondent’s case is

  • first that it is the applicant’s position that became redundant and that
  • he was thus fairly selected for retrenchment.

In so far as the applicant alleged that he ought to have displaced a Mr Araujo, the site architect engaged on the project, the respondent elected to retain Araujo rather than the applicant because Araujo was more familiar with the demands of the project, which at that stage was some five months from the stage of practical completion.

Coetzee testified that the applicant, as the project’s design architect, had been engaged in an office environment for most of the project, rarely visiting site. In contrast, Araujo was intimately engaged with the contractor on site, had a good working relationship with the contractor and was better placed to see the project to completion.

[15] In effect, the applicant’s argument is one of bumping – the [sic] contends that he ought to have bumped Araujo. Bumping on the basis of longer service has always been subject to factors such as skill, compatibility and client contacts (see, for example, Amalgamated Workers Union of SA v Fedics Food Services (1999) 20 ILJ 602 ; [1999] 2 BLLR 123 (LC)) [per Landman J].

This is particularly so at senior levels of management. While at a professional level, the applicant may well have been similarly qualified and enjoyed similar experience to Araujo, and while at that level he may well have been suitable for retention, the application of selection criteria in a retrenchment consultation is not a mechanical exercise.

What must prevail at the end of the day is fairness. That inherently requires that a court to balance employee interests with those of the employer, and to decide whether the criteria applied by the employer in the circumstances were both fair and fairly applied.

In the present instance, I accept Coetzee’s evidence that Araujo was more intimately acquainted with the demands of the project which by that stage was not far from practical completion, and that it would have taken some weeks for the applicant to be in the same position.

As Coetzee testified, and I did not understand this to be disputed, the respondent did not have the luxury of time and preferred to retain an employee who could continue supervision on site on an uninterrupted basis.

Araujo had been fulfilling the duties of site architect for a protracted period, he had developed a good working relationship with the contractor and was better placed than the applicant to see through the end of the project. While the applicant was obviously suitably qualified and experienced to do the same job (subject to the constraints that I have mentioned), this does not in itself render Araujo’s retention unfair.

The respondent was entitled to make a decision on the basis of what it considered best having regard to its business interests and the need to minimise dislocation that would be caused were Araujo to be replaced.

In the absence of any irrationality, arbitrariness or manifest unfairness in the choice it made, I fail to appreciate how the decision to select the applicant for retrenchment can be said to be unfair.

[16] I gained the impression during the applicant’s testimony that his real grievance was a sense that given the terms of his contract, he considered had a better claim to retention than other employees, and Araujo in particular.

Given that I have found that the applicant’s contract did not offer him security of employment for the duration of the project in any absolute sense and that his employment was subject to termination on the basis of one calendar months’ notice (as was Araujo’s), the terms of the applicant’s contract offered him no advantage in the selection process.

The yardstick remains fairness, and I have no hesitation in concluding, for the reasons reflected above, that the applicant was fairly selected for retrenchment.

[17] Finally, the applicant points to the engagement of 11 new employees shortly before the retrenchment exercise was commenced is an indication of the substantive unfairness of his retrenchment. There are at least two observations to be made.

The first is that the applicant has conceded a general need to retrench. In other words, he does not challenge the commercial rationale of the decision to embark on a consultation process and ultimately, to retrench employees. The undisputed evidence is that the new employees were employed at a much lower level than the applicant (some of them as student architects) and that they were as much affected by the retrenchment exercise as any other employees. The evidence, as I understood it, was that things could not have been as bad as the respondent submits.

I accept Coetzee’s evidence that architecture is a fickle business and that it was the loss of a major contract that occasioned the respondent’s turn in fortune. At best, the applicant’s evidence suggested the degree of permanent in the form of a failure properly to align levels of employment with available work, but that is no conclusion that assists the applicant’s case nor is it one that I can confidently draw from the evidence available to me.

[18] In summary, I am satisfied that the respondent has discharged the onus of establishing that the applicant’s retrenchment was substantively fair. His claim of unfair dismissal stands to be dismissed.

[19] Insofar as costs are concerned, this court does not ordinarily make orders for costs against individual employees who in good faith pursues a legitimately felt grievances. I accept that the applicant falls into this category, and I am satisfied that for the purposes of section 162 of the LRA, the requirements of the law and fairness are best satisfied by there being no order as to costs.

I make the following order:

1. The applicant’s referral is dismissed.

Court summary