Umicore, a manufacturer of catalytic converters, acquired Delphi (Pty) Ltd and operated from Delphi’s leased premises in Young Park and its own in Deal Party, Gqeberha. In 2015, Umicore decided not to renew the Young Park lease, which resulted in the potential redundancy of fifty (52) positions due to overlapping functions.
Following the requirements of section 189A of the Labour Relations Act, 66 of 995, as amended (“LRA”), Umicore conducted a pre-retrenchment process facilitated by the Commission for Conciliation, Mediation and Arbitration (“CCMA”). While it applied “last in, first out” (LIFO) for most employees, it deviated for laboratory staff by implementing a subjective “laboratory assessment.” Four (4) laboratory employees who refused to participate in this assessment were dismissed based on the results obtained in their absence.
The National Union of Metalworkers of South Africa (NUMSA), representing the affected employees, acknowledged the company’s economic rationale for restructuring but claimed the laboratory assessment was unfair and aimed to target higher-paid workers. Umicore defended the assessment as essential for retaining skilled workers and maintaining operational efficiency, arguing that it was conducted fairly and in line with agreed criteria. According to Umicore’s manager who developed the assessment questionnaire, the behavioural assessment was introduced to identify employees who could meet these operational demands, allowing them to showcase their skills through a series of questions focused on analytical thinking, multitasking, communication, initiative, enthusiasm, and attendance.
The Labour Court found the dismissals to be substantively unfair and ordered reinstatement. Umicore then appealed this decision to the Labour Appeal Court (LAC) for relief.
In the Labour Appeal Court (LAC)
As the core issue in the dispute was the fairness and objectivity of the selection criteria used by Umicore, the LAC reaffirmed that, without mutual agreement on selection criteria, any dismissal criteria must be fair and objective to prevent personal biases from influencing decisions. The LAC noted that the rationale for using objective criteria is to help ensure that dismissals are not influenced by personal biases or animosities.
The LAC highlighted the critical issues with Umicore’s behavioural assessment:
- Subjectivity of Criteria: The focus on subjective traits like initiative and enthusiasm was inappropriate and should not have been part of the selection criteria.
- Lack of Individual Evaluation: There was no individualized assessment of employees’ abilities to work independently, and the questions in the behavioural assessment did not effectively measure the intended competencies related to independent work and multitasking, making the process unfair.
- Question Design Issues: The questionnaire was poorly constructed, with many double-barrelled questions and a focus on explaining the importance of skills rather than assessing actual competence.
- Bias Against Employee Rights: Questions about attendance suggested penalization for employees who exercise their rights to annual and study leave, indicating bias.
- Difference in Assessment Methods: There is a clear distinction between evaluating employees based on superiors’ opinions and assessing actual performance. The behavioural assessment relied on open-ended questions that sought personal opinions rather than measurable, objective data regarding laboratory skills.
These factors led the LAC to conclude that Umicore’s selection process lacked necessary fairness and objectivity, resulting in the dismissal of Umicore’s appeal with costs.
Fair and objective selection criteria for retrenchment
According to Section 189(7) of the LRA, employers must utilize fair and objective selection criteria for retrenchment when agreed criteria are not in place. They bear the responsibility to demonstrate that dismissals were based on valid reasons. While common criteria include length of service, skills, and qualifications, adaptations may be necessary in specific cases. The Code of Good Practice on Dismissal Due to Operational Requirements advises that any deviations from standard criteria must be approached cautiously and justified by essential operational needs for the business’s success.
Furthermore, Section 8 of the Employment Equity Act 55 of 1988, as amended (“EEA”), prohibits psychological testing or similar assessments unless they (a) have scientifically been shown to be valid and reliable, (b) can be fairly applied to all employees, (c) are free from bias against any employee or group, and (d) are certified by the Health Professions Council of South Africa. While “psychological testing” is not explicitly defined in the EEA, it encompasses a range of tests measuring attributes such as intelligence, aptitude, and personality traits. The EEA mandates scientific validation for any selection tests involving psychological assessment. All selection techniques, regardless of the employment context, should accurately reflect relevant job abilities, skills and characteristics relevant to the job in question to ensure validity and fairness. This aligns with the fairness and objectivity emphasized by the LAC in previous rulings.
Employers unable to establish agreed selection criteria for retrenchment are strongly advised against using any that lack fairness and objectivity. If challenged for unilaterally implementing unfair and subjective criteria, they risk facing judicial scrutiny and potential cost orders.
By Andrea Miguel – Associate Attorney
JUSTINE DEL MONTE & ASSOCIATES INCORPORATED
