National Union of Metal Workers of South Africa vs Aveng Trident Steel and another  1 BLLR 1 (CC)
Does the refusal by an employee to accept a change to terms and conditions of employment as an alternative to retrenchment constitute a “refusal to accept a demand in respect of any matter of mutual interest between the parties” and render any resultant retrenchment an automatically unfair dismissal? The 2015 amendment to section 187 (1)(c) of the Labour Relations Act 66 of 1995 created a grey area, which the abovementioned Constitutional Court (“CC”) judgment the has now clarified to some extent.
Respondent (“Aveng”) experienced a decrease in sales and profitability. On this basis it intended to restructure, and possible retrenchments were contemplated. A section 189A process was initiated during May 2014 and approximately 400 employees were expected to be affected. As part of the restructuring exercise, Aveng grouped certain job titles for optimization. During the process Aveng offered voluntary severance packages. Employees who opted for voluntary retrenchment would exit during October 2014. It was envisaged that the remaining employees, not accepting voluntary packages, would exit during November 2014.
During the September 2014 consultations, NUMSA proposed certain amendments to the grouping of job descriptions. In October 2014, the parties concluded an interim agreement whereby the consultation process regarding the job descriptions and grouping would continue but, while this was underway NUMSA’s proposed job descriptions would be implemented. It was envisaged that the consultation process, and final grouping of job descriptions, would be concluded in February 2015. Meanwhile, employees performing additional work would be paid an extra amount of 60 cents per hour.
During November 2014, the parties began negotiations regarding transport benefits. During these negotiations, no mention was made in relation to the job description and grouping as previously agreed. On 13 February 2015 NUMSA wrote to Aveng informing it that NUMSA’s members would no longer perform the additional duties as per the interim agreement, effectively terminating the interim agreement two weeks before the agreed end date. Premature termination meant that Aveng now had no one to do the work of over 500 employees. The employees who opted for the voluntary severance packages had already exited and consultations with the remaining employees had not been completed. Aveng believed the earlier termination was a deliberate ploy by NUMSA to extract higher wages amid the restructuring exercise.
On 23 February 2015, the parties met, and Aveng sought to discuss the proposed new job description and grouping with possible implementation in April 2015. NUMSA demanded an increase of R5.00 per hour. It was agreed that the members would continue performing the additional functions and receive an extra amount of R3.00 per hour, notwithstanding the fact that Aveng believed NUMSA had acted in bad faith. Later in March 2015, NUMSA demanded a further increase of wages. Aveng rejected the proposal as it was not viable given the need to decrease costs and the necessity to achieve efficiencies.
On 30 March 2015 Aveng informed NUMSA the consultation process had been exhausted and gave notice that it would implement the new structure for the redesigned job descriptions and grouping with effect from 10 April 2015. Furthermore, the extra amount of R3.00 per hour would no longer be applicable and employees had to indicate their acceptance or rejection of the reasonable offer of alternative employment by no later than 10 April 2015. Aveng also alluded to the risk of forfeiture of severance pay as per section 41 of the Basic Conditions of Employment Act.
After further discussions between the parties, the implementation date was extended to 28 April 2015. Aveng confirmed the consultation process had been exhausted and again called on the employees to accept or reject the reasonable alternative of employment by 21 April 2015. If the employees rejected the offer, their employment would be terminated on 24 April 2015. New permanent employment contracts were presented to the employees, which they rejected. On 24 April 2015, these employees were dismissed.
Labour Court Decision
NUMSA contended the reason for the dismissal was the refusal by employees to accept Aveng’s demand in respect of altered job descriptions, grade structures and matters of mutual interest, thus the dismissal was automatically unfair as per section 187(1)(c) of the Labour Relations Act.
Aveng denied that the dismissals were automatically unfair and maintained the reason for the dismissals was based on its operational requirements. It further contended that employers are permitted to dismiss employees and employ individuals who are prepared to work in accordance with terms and conditions of employment which are operationally necessary.
Labour Court (“LC”) held (1) the employees were dismissed for operational reasons and not for refusing to accept any demand; (2) employees had rejected a reasonable offer of alternative employment aimed at avoiding or minimising the number of dismissals; and (3) the dismissals were not automatically unfair.
Labour Appeal Court Decision
NUMSA contended that the LC had erred on the facts. NUMSA submitted that Aveng had made a demand relating to a matter of mutual interest when it implemented the new structure, employees had refused to accept the demand and were dismissed because of their refusal, thus being an automatically unfair dismissal.
Aveng submitted that no demand was made. Instead, an alternative to retrenchment was offered to employees which they could chose to accept or reject. Aveng further argued that the employees’ dismissals fell within the scope occupied by permissible dismissals for operational requirements and could not be seen as falling foul of section 187(1)(c) of the LRA.
Labour Appeal Court (“LAC”) held (1) if proposed changes are refused and a dismissal ensues it does not mean the reason for the dismissal was the refusal; (2) while employees cannot be dismissed for refusing to accept a demand, they can be dismissed if that refusal results in a more dominant operational necessity.
Thus, the essential query under section 187(1)(c) is whether the reason for the dismissal is the refusal to accept proposed changes. The determining test established by the court was that one must determine the factual causation by asking “would the dismissals have occurred if the employees had not refused the demand?”. If the answer is yes, the dismissal is not automatically unfair. If the answer is no, as in this case, it does not immediately mean the dismissal was automatically unfair. The next question is “whether the refusal was the main or most likely cause of dismissal?”.
LAC further held (3) NUMSA’s contention that the reason for dismissal was solely their refusal to accede to Aveng’s demands was not sustainable on the facts; (4) Aveng’s correspondence showed an intention to avoid or mitigate dismissals; (5) the consultation process embarked on during May 2014 was not only seeking agreement to change terms but intended to avoid dismissals as well; (6) the proposals were the only reasonable means to avoid dismissals and entailed no adverse financial consequences for the employees; and (7) NUMSA attempted to convert the proposal and consultation process to a bargaining opportunity for increased wages.
Finally, the LAC held that the dominant reason for the dismissals was Aveng’s operational requirements. The dismissals therefore fell within the scope of the permissible dismissals for operational requirements and did not fall foul of section 187(1)(c). The LC did not err in its conclusion. The appeal was dismissed with costs.
Constitutional Court Decision
NUMSA, aggrieved by the LAC outcome, approached the CC claiming the LAC judgment should be overturned and its members should be reinstated. NUMSA argued (1) the LC’s interpretation was inconsistent with the purpose of section 187(1)(c) and (2) 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.
Aveng naturally supported the reasoning of the LC and LAC and emphasised that the purpose of the section was to prevent employers from dismissing employees for ‘operational reasons’ only to re-hire a few of these employees later and when they would accept the ‘new operational requirements’ imposed by the employer. Aveng claimed it was genuinely in financial difficulties and therefore, the restructuring and ensuing operational requirements were genuine.
While three judgments were penned by the Justices, the salient points are as follows:
(1) the dismissal of NUMSA’s members was not automatically unfair in terms of section 187(1)(c);
(2) in an ever-changing economic climate which includes, inter alia, increased competition, operational reasons relate not only to downsizing, but also to restructuring the company and its workforce in the manner it carries out the work. Businesses that adapt quickly stand a better chance of survival; and
(3) Aveng engaged with its employees through NUMSA. NUMSA’s narrow-mindedness unfortunately did not assist in making it possible to save jobs. Wishing to prohibit Aveng from invoking provisions of the LRA, and dismissing employees under such circumstances, undermines the LRA’s objectives in ensuring viability and vitality of businesses.
In this matter NUMSA blurred the lines between a consultation process in terms of section 189A of the LRA and a collective bargaining process regarding the increase in wages. As the LAC judgment quite correctly questions, “would the dismissal have occurred if the employees had not refused the demand?”. If the dismissal would have occurred, then it is not automatically unfair. However, if the dismissal would not have occurred, the next question is whether the refusal was the main reason for the dismissal. In this case the refusal to accept the changes to the terms and conditions was not the main reason for the dismissal. The main reason for the dismissal was the necessity to group job descriptions to increase efficiencies in the operational structure and boost profits.
In essence, is there a valid reason for changing the terms and conditions of an employment relationship? If the employee refuses to accept changes, is the refusal the main reason for the dismissal or is there a greater purpose? These are the important questions and the circumstances of each matter must be considered carefully against the backdrop of the CC judgment.