Generalisation and Second Generation Outsourcing – Aviation Union of South Africa and Another v South African Airways (Pty) Ltd and Others [2011] ZACC 31

Posted: November 25, 2011 in Uncategorized
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The minority per Jafta J at paragraphs 47 and 48 held that “[w]hether a transfer as contemplated in section 197 has occurred or will occur is a factual question… “[S]peaking generally, a termination of a service contract and a subsequent award of it to a third party does not, in itself, constitute a transfer as envisaged in the section. In those circumstances, the service provider whose contract has been terminated loses the contract but retains its business. For a transfer to be established there must be components of the original business which are passed on to the third party. These may be in the form of assets or the taking over of workers who were assigned to provide the service” (own underscoring).

Jafta J then concludes (at paragraph 55) that “[r]eading section 197 as a whole in the context of where it is located in the LRA and paying sufficient attention to its purpose and the objects of the LRA, reveal that it applies to any transaction that transfers a business as a going concern. It follows that the majority in the Supreme Court of Appeal erred in holding that the section does not apply to second generation outsourcing agreements”.

The majority judgment, as pronounced by Yocoob J, finds common cause with the above findings by Jafta J and goes as far as stating (at paragraphs 15 and 106) that “[i]t does not matter in principle what the ‘generation’ of the outsourcing is, or even whether the transaction is concerned with contracting out at all. The true inquiry is whether there has been a transfer of a business as a going concern by the old employer to the new employer… In determining whether contracting out amounts to the transfer of a business as a going concern, the substance of the initial transaction, more specifically whether what is outsourced is a business as a going concern rather than the provision of an outsourced service remains significant during subsequent transfers. If the outsourcing institution from the outset did not offer the service, that service cannot be said to be part of the business of the transferor. What happens here is simple contracting out of the service, nothing more, nothing less”.

Yacoob J on analysing the facts concludes that in casu a transfer took place and more specifically records (at paragraph 121 et seq.) that “[L]GM became obliged to sell all fixed assets and inventory dedicated only to providing the services in terms of the agreement back to SAA and to transfer or assign all third party contracts to SAA… [M]oreover, the cancellation of the agreement would necessarily mean that LGM would no longer be entitled to the use of property and to the leases already described… [I]n the circumstances, the cancellation clause of the agreement contemplated a transfer of the business as a going concern. The only debate was about whether the business as a going concern was to be transferred to SAA or to an interim service provider. As long as there is a transferor, the identity of that entity or person is of no material significance. The agreement contemplates transfer by LGM to SAA or to the interim service provider. It requires a transfer by a transferor, the old employer, to the transferee, the new employer”.

A SUMMARY OF THE LAW PERTAINING TO RETIREMENT AT “NORMAL RETIREMENT AGE”

Posted: November 24, 2011 in Uncategorized
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In terms of section 187(2)(b) of the Labour Relations Act, Act 66 of 1995 (“the LRA”) “[a] dismissal based on age is fair if the employee has reached the normal or agreed retirement age for persons employed in that capacity”.

In Schweitzer v Waco Distributors (a division of Voltex (Pty) Ltd) [1998] ZALC 48; [1999] 2 BLLR 188 (LC), the Zondo J (as he was then) at paragraph 27suggested the following test to determine whether section 187(2)(b) of the LRA find application: –

“(a) the dismissal must be based on age;

(b) the employer must have a normal or agreed retirement age for persons employed in the capacity of the employee concerned;

(c) the employee must have reached the age referred to in (b) above.”

It was held in Rubin Sportswear v SACTWU & others (2004) 25 ILJ 1671 (LAC); [2004] 10 BLLR 986 at 1678J that “[t]he word ‘normal’ as used in s 187(2)(b) really means what it says. It means that which accords with the norm” and further at 1679H that “[a] retirement age that is not an agreed retirement age becomes a normal retirement age when employees have been retiring at that age over a certain long period… If the period is not sufficiently long but the number is large, it might still be that a norm has not been established”.

What is clear from this statement is that the failure to consistently retire employee at a certain age would vitiate against the existence of a normal retirement age. This was also the view expressed by Basson J in Gqibitole v Pace Community College [1999] ZALC 5; (1999) 20 ILJ 1270 (LC) at § [25] to § [27].

Zondo J (as he was then) further in Schweitzer v Waco Distributors (a division of Voltex (Pty) Ltd) supra at paragraph 18 interprets continued employment subsequent to retirement in the same vein as the Industrial Court previously did (see inter alia Harris v Bakker & Steyger (Pty) Ltd (1993) 14ILJ 1553 (IC) and Badenhorst v G C Baars (Pty) Ltd (1995) 10 BLLR 19 (IC)) but on the following interpretation of section 187(2)(b) of the LRA:-

“Bearing in mind, therefore, that sec 187(2)(b) refers to a dismissal, the position would be that the dismissal referred to in sec 187(2)(b) which is said to be fair is a dismissal as defined in sec 186. Dismissal in sec 187(2)(b) cannot carry a meaning which is different from the meaning of dismissal in sec 186. The fact that the coming to an end of the contract of employment by effluxion of time is not contemplated in the definition of dismissal in sec 186 meant that the dismissal in sec 187(2)(b) must include a dismissal after the employee has gone past the agreed or normal retirement age. That is the situation in this matter”.

The judgment seem to find express support inter alia in Rubenstrein v Price’s Daelite (Pty) Ltd 2002] ZALC 28; (2002) 23 ILJ 528 (LC); [2002] 5 BLLR 472 (LC) at paragraph 24.

The principles as set out by Zondo J is also applied in Botha v Du Toit Very & Partners CC [2005] ZALC 28; [2006] 1 BLLR 1 (LC) where there was no agreed retirement age and no formal contract of employment and the employee was dismissed more than a year after the normal retirement age. Revelas J found that the true reason for the termination of the applicant’s services was the operational requirement of the respondent and poor work performance by the employee. She further at paragraph 17 found the dismissal substantively fair but procedurally unfair, this despite finding that “[t]he Act also does not prescribe any procedure to be followed before a retirement age is announced, but for the reasons set out above, I believe there should be one”.

The need expressed by Revelas J to consult prior to terminations seems to finds its origin in the Industrial Court inter alia in Johane v Rand Mine Milling & Mining (1995) 16 ILJ 1249 (IC).

Moshoana AJ in Rockliffte v Mincom (Pty) Ltd [2007] ZALC 58; (2007) 11 ELLR (LC) at paragraphs [36] and [37] disagreed with the view that an automatic unfair dismissal can only be procedurally unfair as “there is no basis upon which an automatically unfair dismissal could be procedurally fair only. In terms of section 188(1) a dismissal that is not automatically unfair if the employer fails to prove the dismissal was effected in accordance with a fair procedure. The wording of the section suggests that automatically unfair dismissals become so if the reason for it is prohibited. It does not matter if some form of procedure proceeds [sic!] such a dismissal” but followed Zondo J’s reasoning in finding that “[i]n an automatically unfair dismissal claim the inquiry ends at the point where, if a defence or having reached an agreed age is raised, such age has been reached. What happens afterwards is immaterial unless a defence of waiver is successfully raised’.

Pertinently, Professor John Grogan in “No Work for the Aged” (Employment Law: Volume 14 No. 6 (March 1999)) criticizes Schweitzer v Waco Distributors (a division of Voltex (Pty) Ltd) on the basis that “[i]f, as the Judge appears to suggest, every indefinite-period contract which contains a compulsory retirement clause is, in fact, a protracted fixed term contract that terminates automatically when the employee reaches retirement age, what purpose is served by Section 187(2)(b)? The dismissals to which it refers can, on this view, never happen. Furthermore this reasoning does not address Judge Zondo’s concern about the unfairness of giving employers carte blanche to dismiss employees whom they have permitted to work beyond retirement age. The answer to that, one would have thought, lies in the actual wording of Section 187(2) (b). It says a dismissal is fair if the employee has reached retirement age, not when he reaches it”.

At the outset this is with respect not what Zondo J (as he was then) in Schweitzer v Waco Distributors (a division of Voltex (Pty) Ltd) suggests, in fact it is exactly the opposite, i.e. that the a dismissal in terms of section 187(2)(b) of the LRA cannot be equated to the termination of a fixed term contract as fixed term contracts are expressly excluded from the definition of dismissal.

Further and prior to turning to the cases which stand critical of Schweitzer v Waco Distributors (a division of Voltex (Pty) Ltd), one might regard the dicta in Wanless v Fidelity (Pty) Ltd [2007] ZALC 107where D. Pillay J at paragraph 32 found that “[t]he Court accordingly finds that Mrs Wanless was not dismissed. Her services terminated in accordance with her contract of employment when she reached the retirement age of age 60. Section 187(2)(b) of the LRA stipulates that dismissal based on age is fair if the employee has reached the normal or agreed retirement age. Therefore, in so far as Mrs Wanless suggested that her services were not terminated by the effluxion of time but at Fidelity’s will, section 187(2) makes it clear that such a dismissal would be fair”.

It is unclear as to why D. Pillay J initially concluded that the applicant was not dismissed as it appears trite that section 187(2)(b) of the LRA deals with a dismissal.

The criticism aired by Professor Grogan’s finds at least obiter support in Datt v Gunnebo Industries (Pty) Ltd [2009] ZALC 23; [2009] 5 BLLR 449 (LC) per Steenkamp AJ (as he was then) at paragraph 27 and clear support in Randall v Ivor Michael Karan t/a Karan Beef [2010] ZALC 114; (2010) 31 ILJ 2449 (LC) where Francis J records that “[i]t cannot and is not our law that an employer can unilaterally decide when to retire an employee who it has required to work beyond his retirement age… The position would have been different if the applicant was dismissed after he had reached his retirement age. He would have had no claim. Where the respondent on its own decided to keep him in employment beyond that period there would have to be a fair reason to terminate his services”.

Though the ratio in Randall v Ivor Michael Karan t/a Karan Beef appears in line with the principles of fairness applicable to the limitation of statutory and constitutional rights, the interpretation afforded in Schweitzer v Waco Distributors (a division of Voltex (Pty) Ltd) appears more correct.

In the end one thus has to agree with Bosch in ‘Section 187(2)(b) and the Dismissal of Older Workers – Is the LRA Nuanced Enough?’ ((2003) 24 ILJ 1283 at 1303) who opines that “[w]here an employee has been dismissed upon or after attaining the agreed or normal retirement age for an employee employed in that capacity, it has been held that section 187(2)(b) operates to preclude employees from challenging the fairness of that dismissal. Section 187(2)(b) also appears to limit the right to equality. It is a justification for dismissals that might otherwise be considered unfairly discriminatory on the grounds of an employee’s age. While there might be sound policy arguments for permitting mandatory retirement ages, that must be done in light of the constitutional guarantee of equality and fair labour practices”.

Can an employer seek the review of a disciplinary sanction?

Posted: December 6, 2010 in Uncategorized
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In SAPS v Hari N.O. and Another the SAPS contended that the disciplinary sanction imposed by an SAPS senior commissioner presiding over the hearing was in fact not harsh enough.

 

The SAPS submitted that the presiding officer executed an administrative function and as such his findings were open to review.

 

The court per Steenkamp J, applied the judgment in MEC for Finance, KwaZulu-Natal & another v Dorkin NO & another where it was held that, if the conduct of compulsory arbitrations relating to dismissal disputes under the Labour Relations Act constitutes administrative action, then the conduct of disciplinary hearings in the workplace, where the employer is the State also constitute, without any doubt, administrative action. If it constitutes administrative action, then it is required to be lawful, reasonable and procedurally fair. Accordingly, if it can be shown not to be reasonable, it can be reviewed and set aside.

 

The court thus concluded that “[t]he applicants qua the state appointed the first respondent as chairperson of the employee’s disciplinary enquiry in this case. As in the case of Ntshangase, the action of the chairperson qualifies as administrative action. That being so, the action must be lawful, reasonable and procedurally fair” (at §31).  \

 

One is however immediately reminded of the dicta by the constitutional court in Chirwa v Transnet Ltd and others where Ngcobo J explained that “[t]he subject-matter of the power involved here is the termination of a contract of employment for poor work performance. The source of the power is the employment contract between the applicant and Transnet. The nature of the power involved here is therefore contractual. The fact that Transnet is a creature of statute does not detract from the fact that in terminating the applicant’s contract of employment, it was exercising its contractual power. It does not involve the implementation of legislation which constitutes administrative action” (at §142).

 

Steenkamp J was however alive to the following dicta by CJ in the Chriwa-judgment: – “It is important to note, however, that my reasoning does not entail that dismissals of public employees will never constitute ‘administrative action’ under PAJA. Where, for example, the person in question is dismissed in terms of a specific legislative provision… the requirements of the definition of ‘administrative action’ may be fulfilled” (at §194).

 

As such Steenkamp J concluded that “the distinction appears to me to lie in the fact that, in this case, the state is acting qua employer; and the functionary is fulfilling his or her duties in terms of legislation” (at §21).

Does s 138(7)(a) of the LRA impose a duty on an arbitration to provide reasons for the quantum of compensation awarded?

Posted: May 5, 2010 in Uncategorized
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In the matter of Moklakoana v CCMA and Another (JR284/09), Mr Mohlakoana’s dismissal was ruled substantively unfair by the CCMA and he was awarded compensation equal to the remuneration he would have earned in a two month period.

Mr Mohlakoana took the award on review as no reason was given for him being awarded only two months’ compensation.

Lagrange AJ (as he was then) found that “[e]ven though an arbitrator has a discretion and a degree of latitude on what to award in the way of compensation, it would be anomalous if the duty imposed on an arbitrator in terms of section 138(7)(a) of the LRA to provide brief reasons with an award did not include providing brief reasons for any remedy granted. For the employee and employer parties to any arbitration proceedings the most important components of any award are the arbitrator’s findings on the merits of dispute itself and any consequential relief granted. There is no reason why an arbitrator’s justification for an award should be confined to the findings on the merits of the dispute only.” (at §15)

Lagrange AJ granted the review of the compensation portion of the order on the basis that “[u]nless the justification for the relief can be readily discerned in the findings on the merits…, an arbitrator ought to provide brief reasons for the relief granted. In this case, the rationale for an award of two month’s remuneration cannot be determined from the commissioner’s findings on procedural and substantive unfairness”. (at §16)

Can the CCMA hear disputes regarding the procedural fairness where a single employee is retrenched?

Posted: April 6, 2010 in Uncategorized
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The Labour Court in Rand Water v Bracks NO and Others found that section 191(12) of the Labour Relations Act, allowed single employees to refer only disputes concerning the substantive fairness of their retrenchments to either the CCMA / Bargaining Council or the Labour Court.  The Court a quo argued that where the dispute related to the procedural aspects of the retrenchment of a single employee, only the Labour Court would have jurisdiction.

The Labour Appeal Court (per Jappie JA in Bracks NO and Another v Rand Water and Another (JA 2/08)) however found that “[s]ection 191(12) was introduced by way of an amendment by s 46(i) of Act 12 of 2002. The explanatory memorandum to the amending act states at paragraph 2.46 that s 191 is to been amended ‘to provide that if only one employee is dismissed for operational requirements the employee is able to refer the dispute up after conciliation to the Labour Court or to Arbitration.’ There is no indication that it was the intention of the legislature to limit a single employee’s election to dispute that can be referred to arbitration to cases where only the substantive fairness is placed in issue. My view is that the legislature intended to give a single retrenched employee, who may not be able to afford the legal costs of Labour Court litigation, the opportunity to have his/her unfair dismissal dispute resolved by arbitration. That appears to be the plain purpose of s 191(12). The court a quo therefore erred in placing upon s 191(12) a construction which limited a single employee’s election to either approach the CCMA or the Labour Court where both the substantive and procedural fairness of his/her dismissal for operational reasons are placed in issue” (at §12)

Points of clarity on the implementation of Employment Equity Plans

Posted: March 2, 2010 in Uncategorized
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The Labour Court recently (24 February 2010) in Solidarity obo Barnard and Another v South African Police Services (JS455/07) , per acting judge Paul Pretorius SC, surmised various important factors to be taken into account when appointing or promoting employees under the auspices of an employment equity plan.  These are: -

“The provisions of the Employment Equity Act and an Employment Equity Plan must be applied in accordance with the principles of fairness and with due regard to the affected individual’s constitutional right to equality. It is therefore not appropriate to apply, without more, the numerical goals set out in an Employment Equity Plan. That approach is too rigid. Due consideration must be given to the particular circumstances of individuals potentially adversely affected. In this regard the need for representivity must be weighed up against the affected individual’s rights to equality and a fair decision made.” [at §25.1]

“[I]ndividuals from non-designated groups (and perhaps from designated groups too) will be adversely affected by the implementation of employment equity plans. But both as a matter of substance and procedure implementation of employment equity plans should be effected with due regard not only to the individual’s right to equality but also to the dignity of affected individuals. This is particularly so when it comes to the application and effective use of internal dispute resolution procedures and statutory conciliation procedures.” [at §25.2]

“[T]he extent to which the implementation of employment equity plans may discriminate or adversely affect individuals is limited by law. In this case at least the following considerations are relevant. First, the terms of the Employment Equity Act require the application of its provisions to be done in a manner that is both rational and fair. Second, due recognition must be given to the affected individual’s rights to equality. Third, in the implementation of an employment equity plan, due recognition must be given to the right of affected persons to dignity.” [at §25.3]

“Where a post cannot be filled by an applicant from an under-represented category because a suitable candidate from that category cannot be found, promotion to that post should not ordinarily and in the absence of a clear and satisfactory explanation be denied to a suitable candidate from another group.” [at §25.4]

The causal nexus in sympathy strikes as examined in Coca Cola Fortune (Pty) Ltd v Food and Allied Workers Union and Others (J01/2010)

Posted: March 2, 2010 in Uncategorized
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Coca Cola Fortune is a franchisee of Coca Cola Africa (Pty) Ltd and has rights to bottle and distribute Coca Cola products to certain designated regions in South Africa. It is the exclusive distributor in these regions. [at §4]

FAWU’s members employed at ABI are currently participating in a nationwide protected strike at ABI. [at §5]

ABI has a franchise agreement with Coca Cola Africa which affords it exclusive rights to bottle and distribute Coca Cola products in certain regions in South Africa other than those where the applicant distributes (at §6) and FAWU has not initiated a secondary strike at Coca Cola Africa. [at §7]

The Labour Court (per Bhoola J) concluded that only issue for determination is whether the secondary strike proposed at the applicant would comply with the substantive requirements of section 66 (2)(c), which requires the nature and extent of a secondary strike to be “reasonable in relation to the possible direct or indirect effect that the secondary strike may have on the business of the primary employer”. [at §10]
FAWU contended that: “[t]he Coca Cola Company (presumably a reference to Coca Cola Africa) will be able to exert influence over ABI to resolve the disputes underlying the primary strike”.

Coca Cola Fortune submitted that FAWU would be in a position to do would be to exert pressure on Coca Cola Africa in the hope that as a consequent or “knock on” effect this would lead to Coca Cola Africa exerting pressure on ABI to resolve the dispute giving rise to the primary strike.

The Labour Court recorded agreement with this proposition and stated that the likely of Coca Cola Africa being able to exert pressure on Coca Cola Africa “is a remote possibility and could open the floodgates to secondary strikes with potentially limited indirect effect. However, even the potential ‘knock on’ effect… is a remote possibility given that that the primary and secondary employers are co-franchisees and in fact competitors. This is particularly so in circumstances where there is no secondary strike at Coca Cola Africa, which would render the likelihood of a shortage of product resulting in Coca Cola Africa exerting pressure on ABI to resolve the primary strike to be even more fallacious”. [at §13]

The Labour Court then concluded that “the absence of a secondary strike at Coca Cola Africa, for which no reasons have been furnished, would render the effect on the primary dispute a remote possibility, and would on its own justify a refusal of the relief sought by… FAWU. The reliance by… FAWU on the potential indirect ‘knock on’ effect of the secondary strike on the business of ABI would not in my view render the proposed nationwide and indefinite secondary strike at… Coca Cola Fortune reasonable. Accordingly, in my view, the nature and extent of the proposed secondary strike does not appear to be reasonable in relation to its possible effect on the primary dispute. Thus the requirements of section 66(2) (c) read with section 68 have not been satisfied”. [at §15]

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