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Fry' Metals (Pty) Limited v National Union of Metal Workers of South Africa and Others (JA9/01) [2002] ZALAC 25 (6 December 2002)

.RTF of original document

IN THE LABOUR APPEAL COURT OF SOUTH AFRICA
HELD IN JOHANNESBURG
Case no: JA9/01
In the appeal between:

FRY’S METALS (PTY) LIMITED                                   APPELLANT

and

NATIONAL UNION OF METAL
WORKERS OF SOUTH AFRIC
A ND FIFTY FIVE OTHERS   1ST AND FURTHER RESPONDENTS

________________________________________________________________
JUDGEMENT
_______________________________________________________________

ZONDO JP

INTRODUCTION

[1]      This appeal raises the following questions:-
(a)     
Does an employer have a right to dismiss employees who are not prepared to agree to certain changes being effected to their terms and conditions of employment when such changes are necessary for the viability of the employer’s business or undertaking or are necessary to improve productivity or efficiency in the business?
(b)     
if an employer has such a right, what is the relationship between that right, on the one hand, and, on the other, an employee’s right implicit in sec 187(1)(c) of the Labour Relations Act, 1995 (Act no 66 of 1995) (“the Act”) not to be dismissed for the purpose of being compelled to agree to a demand in respect of a matter of mutual interest between employer and the employee?

[2]      The appellant is involved in the business of smelting and refining lead from secondary materials. Its customer base is primarily the lead acid battery manufacturing industry. According to the appellant it supplies approximately 55% of the total South African lead consumption and approximately 75% of all lead manufactured locally. The first respondent is a registered trade union of which the second and further respondents are members. The second and further respondents (“the individual respondents”) are employed by the appellant. In 2000 the appellant sought to dismiss the individual respondents. They, together with their union, brought an urgent application in the Labour Court to inter alia, interdict the appellant from dismissing them and from effecting certain changes in the workplace. The Labour Court granted them an order that effectively achieved that result. The appellant applied in the Labour Court for leave to appeal. The application was refused. The appellant then petitioned this Court which granted leave to appeal against the judgement of the Labour Court. This then is the appeal against that judgement of the Labour Court.

The facts

[3]      In May 2000 the appellant contracted a firm of consultants called Xybanetx to review its operations and to make recommendations on how to increase productivity. It did this because it believed that it was essential for the continued viability of the appellant to be productive and, where possible, to increase its productivity. The appellant believed that, if it did not do this, it would eventually have to close down. In June 2000 the consultants submitted their report.

[4]      As a result of the report, the appellant called a meeting between itself and the union. The meeting took place on the 1st September 2000. The only matter of substance for discussion on the agenda of that meeting was given as the appellant’s viability. At the meeting the appellants’ representatives stated that the purpose of the meeting was two fold, namely:
(a)      to give the shopstewards an overview of the status of the appellant, and,
(b)      to present a proposed collective agreement to the shopstewards which sought to address the human resources element of the problems.
The minutes of that meeting which were prepared by the appellant’s representatives reveal that the appellant informed the shopstewards “of the various investigations and/or proposals to address the future of [the appellant] to make the company viable and also ensuring employment for its employees”. The appellant proposed a collective agreement “to address and formalise the human resources element”. This was given to, and, discussed with, the shopstawards.

[5]      The appellant’s employees were working a three shift system. In terms of the appellant’s proposals the three shift system was going to be replaced with a two shift system. Each of the three shifts was 8 hours long with the first shift starting at 06h00 each day seven days a week. The two shift system was going to entail two 12 hour shifts with the first one starting at 06h00 seven days a week. In its answering affidavit the appellant pointed out that at the time of the application the appellant’s effluent department worked two eight hour shifts for five days a week. There was no hand-over between shifts. The appellant stated that this caused a productivity problem which it wanted to address. The lack of hand-over resulted in lost productivity time of about one hour per day. Obviously, in seven days this translated to seven hours. The appellant also wanted to withdraw the transport subsidy that it had been giving its employees. It said that this was going to be the consequence of the introduction of the two shift system. The shopstewards were given an opportunity to go and study the proposed collective agreement and respond only at the next meeting which the parties scheduled for the 6th September 2000.

[6]      The parties held a meeting on the 6th September. The shopstewards responded to some of the proposals. They accepted some of the proposals and rejected others. In respect of some proposals the shopstewards needed more time or asked for clarification or more information. According to the appellant’s answering affidavit, the shoptewards rejected the proposed two shift system “emphatically and in (an) inflammatory language” and made no alternative proposals.

[7]      The parties held another meeting on the 15th September 2000. The minute of that meeting reveals that the purpose of the meeting was to enable the shopstewards to respond to certain proposals to which they had not as yet responded. The shopstewards rejected most of the proposals but accepted others. It was then agreed between the parties that another meeting would be held on the 22nd September 2002. On the 22nd September a meeting was held as arranged. The shopstewards responded to the appellant’s proposal on the disciplinary procedure. The appellant’s representatives outlined which proposals had been accepted and which ones had been rejected by the shopstewards. The management then held a caucus meeting. After the caucus meeting the appellant’s managing director explained the need to effect changes in order for the appellant to be efficient. He stated also that the union had rejected the appellant’s proposals on most issues. He emphasised the need to implement the proposals by the 1st October 2000. He also stressed the appellant’s commitment to continue operating and creating employment for its employees.

[8]      The appellant then read out a certain letter to the shopstewards that bore that day’s date. In the letter the appellant referred to the fact that it had made certain proposals to the union aimed at effecting certain changes including changes in the terms and conditions of employment of employees in order for the appellant to be efficient and that the union had rejected these proposals. The letter also stated that the effect of the proposed changes was to introduce continuous shifts in the operations of the departments of Polyprop, Smelter, Refinery, Laundry and Cleaners. Another effect was also to introduce a shift hand-over procedure. The appellant attached to the letter a document containing all the proposals. It said that about 55 employees would be affected by the proposed changes.

[9]      The appellant stated that at its negotiations with the union it had become clear that the affected employees were not prepared to accept the proposed changes. The appellant stated in the letter that, in the light of this it was proposing that the affected employees who were prepared to accept the changes be retained in their positions and that those who did not accept the changes “may be retrenched”. The appellant went on to say in the letter that in the event of retrenchments,
(a)     
the retrenchments would take place after the 21 day notice required by the main agreement; it also said that such notice was being given therein;
(b)     
any affected employee who did not accept the changes and who had an opportunity to obtain alternative employment could request time off to attend job interviews; it further said that, if reasonably possible, permission would be granted for this;
(c)     
the appellant would consult the employees and/or their representatives regarding any assistance which they may require in the event of retrenchment;
(d)     
those affected employees who did not accept the required changes would, if no reasonable alternative position was available, be notified of their retrenchment on or about the 16th October 2000; it further stated that, since it was the appellant’s view that an acceptance by the affected employees of the required changes was a reasonable alternative to retrenchment, it was not expected that employees who got retrenched would be paid a retrenchment package.

[10]     The appellant stated in the letter that the purpose of the letter was to convey in writing a summary of the important points to be considered. The affected employees and their trade unions were invited by the appellant to convey to the appellant their views and representations on any issues referred to in the letter as soon as possible. The letter further said that a meeting would take place between the appellant and the employees’ representatives on Thursday the 28th September 2000 to enable the views of the employees’ representatives’ to be conveyed to the appellant.

[11]     According to the minutes of the meeting of the 22nd September the response of the shopstewards to the letter included statements to the effect that the appellant’s purpose was to force the employees to accept the appellant’s proposals, that the appellant’s intention was to divide the workers, that the appellant would no longer be there in six months’ time, that this was intimidation by the appellant, that the appellant was playing with fire and that they would close the appellant down. In the founding affidavit the respondents stated that they understood the letter of the 22nd September to be an ultimatum to employees to accept the appellant’s proposals or face dismissal. In its answering affidavit, the appellant denies that the letter was an ultimatum to employees to accept its proposals or face dismissal. It states that the letter made it clear that, for cogent reasons, the appellant deemed it necessary to introduce a two shift system and that, “if the employees were unwilling to accept such a system, retrenchments might occur”.

[12]     The parties held a further meeting on the 28th September. The parties again discussed their differences. The shopstewards asked the appellant’s management whether it was their intention to retrench employees. The management confirmed this to be the case. The minutes of the meeting reveal that, when the shopstewards accused the management of using retrenchment as a threat against the workers, the management responded by saying that they were also feeling threatened by the workforce “not wanting to change to make the company more viable”. The meeting ended with the shopstewards declaring a dispute with the appellant. In par 33.2 of the founding affidavit the respondents state that the union “accused the [appellant] of threatening to retrench workers if they failed to comply with the new terms and conditions of employment as set out in the proposed collective agreement”. In the paragraph the respondents state that the management replied that the appellant was retrenching “as workers would not agree to changes to terms and conditions of employment”. In the last sentence of the paragraph the respondents allege that the appellant stated that, if the union agreed to the new shift system, there would be no need to retrench employees.

[13]     On the 2nd October 2000 the union addressed a letter to the appellant asking for clarification whether the appellant was contemplating a new shift system or embarking upon retrenchments. The appellant responded with a letter dated the 3rd October. The body of the appellant’s reply, in so far as it is relevant to this matter, reads thus:-
“1.       Because the consultation process has not produced any other viable alternatives to retrenchment and employees have indicated their rejection of the alternative working arrangement (as documented in annexure “A”) [the appellant] has been left with no choice but to contemplate retrenchment.
2.      
------------------------------
3.      
If the proposed working arrangement is accepted by your members the need to retrench would not arise.
4.      
In the event that the alternative working arrangement is accepted by the employees or a different viable alternative is proposed it would not be necessary to continue with retrenchment
5.      
We trust that the matter has now been sufficiently clarified”.

[14]     On the 3rd October 2000 the appellant distributed notices to workers informing them that they would be retrenched on the 13th October 2000. The contents of those notices are important in this matter. For that reason it is necessary to reproduce them in full. They read thus:-
“ Dear Sir

Notice of retrenchment

The [appellant] was unsuccessful in its efforts to negotiate a collective agreement with your union and its members relating to a number of issues including changes to working hours. The [appellant] therefore gave notice to NUMSA and all employees of its intention to consult in respect of the retrenchment of those employees who were not prepared to accept the new working hours needed by virtue of the [appellant’s] operational requirements. Having explained the [appellant’s] proposals to the union and the shopstewards and, having invited them to consult, the [appellant] has been informed that all affected employees, including you, are not prepared to accept the new hours of work.

Therefore, you are hereby notified that your employment with the [appellant] is to be terminated for reason (sic) of its operational requirements. The following will apply:
1.      
should you require time off during working hours to attend job interviews, permission will be granted if reasonably possible;
2.      
All monies due to you including leave pay, leave bonus, etcetera, will be paid to you on your last day;
3.      
It is not the [appellant’s ] intention to pay a retrenchment package because your acceptance of the changes to working hours would eliminate the need to retrench you and is a reasonable alternative to retrenchment. If, however, you are prevented from accepting the change to working hours for [a] good reason, you are required to contact me as soon as possible and explain these reasons to me. For good reason, the [appellant] may reconsider its position;
4.      
If you reconsider your position and are prepared to accept the changed working hours, please sign the attached document which confirms that you will work in terms of the required shift system. Provided that the signed document is returned to me by Monday 9 October 2000, you will not be retrenched. After that date, even if you accept to work in terms of the required working hours, the [appellant] does not guarantee that you will be retained.
5.      
If you do not understand any part of this notice, please communicate with me or with your union, without delay, so that it can be explained”.

[15]     According to the respondents’ founding affidavit, the workers rejected the letters. On the 9th October the workers forcibly removed two managers or directors from the appellant’s premises to, according to the respondents, “convey a sense to the managers of what it was like to be dismissed.” According to the appellant’s answering affidavit, the workers prevented the managers’ return to the premises in defiance of an order of the Labour Court. Following upon the events of the previous day a meeting was held on the 10th October between the appellant’s management and its attorneys, on the one hand, and, the workers, on the other. During this meeting there was a discussion of some of the appellant’s proposals on changes but no agreement was reached.

[16]     On the 18th October 2000 the appellant gave the affected workers letters of dismissal. The letters read thus:-
“Mr .......
Clock no ........
NOTICE TO RETRENCHED EMPLOYEES  
Because you have rejected the new two shift system operationally required by the [appellant], you have been given notice of your retrenchment and your employment will terminate on 20 October 2000.

Please note that the [appellant] does not want to retrench you and will retain [you] in its employ provided that you agree to work the shift system.

If you would like anything explained to you before finally making up your mind to accept or reject the shift system, please contact your manager URGENTLY so that he can explain this to you and answer any questions you may have.

Please do not reject the shift system, unless you are ceratin of your choice. If you have any special personal problem which prevents you from working the proposed shift system, please let your manager know URGENTLY:- in such case, the [appellant] will try to accommodate you.

If you have decided not to accept the shift system, then we confirm that your services will no longer be required and that you will be paid until Friday 20 October 2000. You will be paid your usual wages on that day and as soon as possible next week, your outstanding pay together with pro rata bonus and leave pay will be paid directly into your account.

Yours faithfully
FRYS METALS
______________
TO Karshagen
Technical Director”.

Proceedings in the Labour Court

[17]     The respondents then launched an urgent application in the Labour Court for an order, inter alia,:-
(a)     
interdicting the appellant from dismissing the second and further respondents for their failure to accede to the appellant’s demands with respect to the implementation of a two shift system and the withdrawal of a transport subsidy in the context of proposed changes to terms and conditions of employment;
(b)     
interdicting the appellant from implementing the proposed shift system until it had obtained the agreement of the second and further respondents or until it had exhausted the dispute resolution provisions of the Labour Relations Act, 1995 and the main agreement for the Iron, Steel, Engineering and Metallurgical Industry and until it had the necessary exemptions from that agreement from the provisions governing working hours and public holidays;
(c)     
directing the appellant to withdraw the letters of termination issued to the second and further respondents, and,
(d)     
declaring that the proposed change constituted a matter of mutual interest.
There were other orders sought which are not relevant for present purposes.

[18]     In par 45 of the founding affidavit the respondents submitted that the then proposed dismissals would be unfair and unlawful. They went on to say: “The [appellant] is proposing to dismiss the second and further [respondents] as a result of their failure to agree to changes to their terms and conditions of employment. It is submitted that this action of the [appellant] constitutes a step to compel a demand, and if implemented such dismissals would be automatically unfair dismissal (sic) in terms of section 187(1)(c) of the Act”. In par 46 it was submitted that the employees had a clear right not to be dismissed unfairly “on the above grounds”. In its answering affidavit the appellant denied that the dismissal was effected in order to compel the employees to agree to the proposed changes.

[19]     The Court a quo subsequently handed down a judgement in favour of the respondents. It found that the appellant’s proposed dismissal of the second and further respondents was sought to be effected in order to compel them to agree to its proposed changes on their terms and conditions of employment. It found that this was contrary to the provisions of sec 187(1)(c) of the Act. It made no order as to costs. The Court a quo effectively granted the respondents all the orders they sought except costs.

The appeal