Highveld Steel and Vanadium Corporation Limited v National Union of Metalworkers of South Africa and Others (JA29/02) [2003] ZALAC 21 (20 November 2003)

[1.] The appellant (Highveld) is a large scale producer of steel and ferro alloy products which it sells on the domestic and international markets. In order to remain competitive it embarked, over a period of time, on a succession of exercises to cut production costs and improve efficiency. In July 1999 Highveld commenced a round of consultations with the affected unions and in particular with the first respondent, the National Union of Metalworkers of South Africa (Numsa). These consultations were protracted and were punctuated by various disputes. One such dispute led to an application in the Labour Court for an interdict. The application was settled and the talks were resumed.

[2.] Eventually, on 17 January 2000, Highveld informed the unions that it regarded the consultation process in terms of s. 189 of the Labour Relations Act 66 of 1995 as being at an end. It further informed the unions of its intention to retrench 77 employees, most of whom were members of Numsa. Over 70 employees were in fact retrenched by the end of the month.

[3.] Numsa, on behalf of its members and some others (the individual applicants) challenged the fairness of these dismissals in the Labour Court. After a trial of some length Maleka AJ held that the retrenchments were substantively fair, but procedurally unfair. The learned Judge ordered Highveld to pay each of the individual respondents, subject to certain exclusions, compensation equivalent to twelve months’ remuneration calculated at the rates applicable immediately before the retrenchment, and costs. With leave granted by the Court a quo Highveld appeals against the order of compensation awarded by the Labour Court which was based on the finding that the dismissals were procedurally unfair. There is no cross-appeal.

“20. I agree with Mr Barrie, who appeared on behalf of Highveld that Numsa adopted a particular strategic approach to the consultation process, namely to delay the implementation of the retrenchments as much as possible. In my judgment, that approach, however much regrettable, did not relieve Highveld of its duty to implement the retrenchments in a manner which was fair and objective.”

[5.] The employees who were retrenched worked in four divisions and fell into several classes. The first main class consisted of “artisan helpers” in two divisions of Highveld’s works at Witbank. They were unskilled, and their work was to carry the tools of artisans and on occasions to assist such artisans in a physical way. Highveld concluded that, subject to certain exceptions where a second pair of hands was required, artisan helpers were an expensive luxury which could no longer be afforded. Overseas competitors did not employ such persons. Highveld introduced an education scheme in terms of which helpers were encouraged to improve their skills so as to qualify as “utility men”, who would be able to perform a wider range of tasks. Many helpers qualified, but others did not. Most of the latter were “pooled” as general workers and eventually a substantial number of them were retrenched.

[6.] The second main class of retrenched employees consisted of unskilled cleaners. They fell into various sub-groups which will be considered in due course. Then there is a third class of miscellaneous employees in various divisions who were considered by Highveld to be redundant for various reasons. It may be noted that the trial Court did not distinguish between the different classes and sub-groups of employees, but held that all the individual applicants had been unfairly treated. The few applicants who were excluded from relief, were excluded for other reasons. Likewise, when it came to the question of compensation, the trial Court drew no distinction between the different categories of employees.

[7.] In view of the conclusions reached by the Court a quo, and the contentions on appeal, it is necessary to set out an overview of the consultation process, paying particular attention to whether it was properly concluded and to the questions of the selection criteria and the timing. On 23 July 1999 Highveld gave the unions notice in terms of s. 189 of the Labour Relations Act of about 80 potential dismissals for operational reasons. At early meetings with the unions motivation for redundancies was furnished and selection criteria were discussed. Numsa favoured a variation of LIFO, whereas Highveld preferred a skills-based approach. Numsa suggested the introduction of a four shift system and a concommittant reduction in overtime. The numbers of potential retrenchees fluctuated. The union began to ask for information (i.e. documentation) on the need for retrenchment.

[8.] Negotiations were conducted for Highveld for the most part by Mr Hugo, its assistant general manager of human resources. On 30 August 1999 he sent a detailed document to the unions entitled: “Early Retirement and Redundancies”. With regard to redundancies it itemised 89 specified positions by division or department, and it furnished reasons for the various possible retrenchments. Examples of such reasons were: “position no longer exists”; “outsourcing”; and “surplus to requirement”. While some of the specified positions later fell out of the picture, and others were later added, many of the employees who were eventually retrenched can be found by description in this listing. In the flat products department, 9 artisan helpers and 2 “slabyard” were said to be redundant because “position no longer exists”. “Slabyard” were later better described as slabyard cutters; 3 were dismissed; and the reason changed. Under iron plant 20 artisan helpers were specified for the reason: “members reduced by 50 %”. There was an asterixed note to this item, reading:

The schedule in question, headed “Redundancy Criteria” , revealed a points system which took into account factors such as years of service, age, disciplinary record, sick leave, skills and education. Those artisan helpers in iron making who fared the worst would be considered redundant.

[9.] In the light of what had gone before, it is in my view fair to say that Highveld had indicated some selection criteria for the various positions, even to the extent of drawing a distinction between artisan helpers in one division (flat products, part of the steel division) and artisan helpers in another division (iron making). Highveld had previously indicated that it was not in favour of using LIFO as a selection criterion.

[10.] At subsequent meetings, prior to the interdict application, there was more discussion of the selection criteria among other subjects. After the application was settled, Highveld gave notice of a meeting “to further discuss the planned redundancies”. The meeting was held on 23 September 1999 and Numsa was represented among others by Mr Daniels, who was the union’s internal legal adviser. Highveld regarded this as a resumption of the consultations that had commenced in July. In evidence Mr Daniels initially conceded this on more than one occasion; but at the end of his evidence he sought to retract this concession and claimed that the talks were starting afresh. Mr Daniels was new to the matter and I have no doubt that the meeting of 23 September was a resumption of the consultations, even though the agenda changed in some respects. At the meeting detailed presentations were made in respect of the various divisions and indications were given of potential redundancies, some of them in the longer term.

[11.] In the ensuing weeks there were disputes about the disclosure of information and regarding its confidentiality. The parties eventually signed a confidentiality agreement in November. The union also sought to achieve a collective agreement on job security. There was another dispute about whether certain provisions of the “house agreement” were applicable to the consultation. I should mention that it appears to have been the attitude of Numsa at this point that the need for retrenchment should be debated first, and that the selection criteria should, if necessary, be discussed later. This may account for the fact that from September onwards, the union’s input on such criteria did not amount to much.

[12.] Despite the difficulties which arose, consultations continued. On 15 October 1999 Highveld sent an important document to Mr Daniels. It proposed a meeting to discuss further motivations of “the proposed divisional retrenchments in the following categories of employees” of which details were furnished. The positions under review were listed by division and by position. The numbers were given and the reasons provided. There was a summary which read thus:

Four divisions were involved: iron, steel (which included structural mill and flat products), engineering services, and human resources. The two latter divisions were new to the process; at the same time some other planned redundancies were dropped for the time being at least. It became common cause during the trial that it was this total of 95 which was eventually reduced to 77 in January 2000.

[14.] Some commentary on this comparison is necessary. First, with regard to the artisan helpers in iron making, whose numbers were being reduced, selection criteria (the points system) had been proposed on 30 August. Second, with regard to artisan helpers in the structural mill and flat products division, it is not clear from the typescript whether the proposed number was 16 or 17. Third, as to engineering services, the proposal to close the air-conditioning workshop was later abandoned or postponed. Further, the motor rewind workshop (armature rewinding) was replaced by a “strip and quote” facility of 3 positions. Fourth, in human resources, the personnel cleaners appear to have been the cleaners employed at the change houses which (like the single quarters) were to be outsourced.

[15.] The next important meeting for present purposes occurred on 7 December 1999. At that meeting the new grading system for employees, which had already been introduced, was explained. It meant that unskilled labourers, including artisan helpers, “would disappear from the scene.” A purpose of the meeting was to discuss the redundancies proposed on 15 October, supra. There was no material change to the figures. Mr Marshall spoke for the iron making division. He was then assistant general manager, iron making production services and mining. In response to questions he is reported in the minutes to have said:

“(a) whether artisan helpers had been tested for utility men position. Mr Marshall stated that all had been tested but that there were insufficient utility men positions available to accommodate the 18 artisan helpers. A policy decision had been made that artisan helpers are no longer required.

Mr Sherlock (works manager) spoke for flat products and the structural mill, and Mr Frost (service manager) for engineering services. He mentioned the “strip and quote” facility. With regard to the test department (weighfeeder), he said that “cleaning and maintenance to be done by I.P. personnel.” [I.P. meant iron plant]. I should add that it appears from the evidence of Mr Frost, and from other documents, that retrenchments were still being debated by a committee at divisional level in his department. I shall return to this aspect later. Mr Mafoane (manager, personnel and industrial relations) spoke for human resources and explained that the single (residential) quarters had outlived their usefulness and were to be outsourced from 1 January 2000. The consequent redundancies were 9 people (cleaning and food preparation), of which the contractor had indicated that he would accept 6. Mr Mafoane explained that the change house facilities were to be outsourced from the same date, leading to 12 redundancies, some of whom might be taken over by the contractor. Mr Hugo set forth the proposed redundancy package. Because the main purpose of the meeting of 7 December was for Highveld to furnish information, the union had little to say.

[16.] In a letter dated 10 December 1999 Mr Hugo re-iterated that the motor rewind workshop was to be closed, and provided further information regarding the single quarters and change houses. With regard to the latter, the inference is that there were only 12 employees. It is evident from the correspondence and the evidence that by this time Highveld was becoming impatient with what it perceived to be the unnecessary delays caused by Numsa. It endeavoured to accelerate the process but eventually agreed, with reluctance, to the next meeting being held on 13 January 2000, as previously scheduled.

[17.] Meanwhile a dispute about the disclosure of information had been referred to the Commission for Conciliation, Mediation and Arbitration. According to Highveld’s Mr Mafoane, he attended a meeting at the Commission on 13 December 1999 when the commissioner directed Numsa (per Mr Boshielo) to inform him before 1 January 2000 of any information which it was claimed Highveld had failed to provide, failing which the commissioner would regard the matter as closed (ie. resolved). Mr Mafoane stated in evidence that in January 2000, and again in April, he checked the Commission’s file and found no letter from Mr Boshielo or Numsa. Mr Mafoane’s evidence on this point was uncontroverted - Mr Boshielo did not testify - and there is no reason not to accept it. The relevance of the point is that at the meeting of 13 January 2000 Highveld took the stance that, by reason of the aforegoing, the information dispute was not being persued and that Highveld was not required to supply further information.

[18.] The final meeting (except at engineering services divisional level) took place on 13 January 2000 after the holiday period. Highveld had already indicated its wish to finalise the consultations at this meeting. There are no minutes, and we have to gather what occurred from the correspondence, the evidence and certain notes. At all events a list of 79 proposed retrenchments was tabled (p. 1169 of the appeal record), a reduction from 95. The air-conditioning department was dropped (4 positions), and some of the other previous figures had been trimmed. In summary the revised figures were:

[19.] Numsa was taken aback by this development since it was expecting further consultations. Meanwhile, Mr Frost’s divisional committee was still busy, in the belief that there was a two week period of grace. Alternative jobs were in fact found for some of the employees, which explains some of the exclusions made by the Court a quo. A dispute was declared by Numsa on 31 January 2000.

[21.] This division was first placed on the list of proposed redundancies in the communication of 15 October 1999. As will be seen from the annexure to this judgment, 19 redundancies were proposed, being 9 for the single quarters and 12 for the personnel cleaners (in the change houses). The reason given in both instances was outsourcing to private contractors. The figures remained the same in the list of 13 January 2000. Ultimately, 18 employees were retrenched, being no.s 28 to 45 on the list of 17 January 2000. They comprised 15 cleaners, 2 waiters and 1 cook. At the consultation meeting on 7 December 1999 Mr Mafoane explained the outsourcing in detail. He explained that the single quarters were able to accommodate some 220 people, but currently had only 36 Highveld residents. Nine people (cleaning and food preparation) would become redundant, of whom the contractor had indicated his willingness to accept 6. Mr Mafoane explained that the cleaning of the change houses was undertaken at a cost of R75 980 per month. (At Numsa’s request a breakdown of this cost was furnished three days later). The 12 cleaners would become redundant, all or some of whom might be taken over by the contractor. In the letter dated 10 December 1999 Highveld provided further information regarding the arrangements for the single quarters and the change houses, as well as the cost breakdown of the latter.

“those persons who may be retrenched as a result of the outsourcing (of cleaning and single quarters) must first be offered voluntary retrenchment. For those who do not accept voluntary retrenchment, the company must negotiate with the potential contractor to employ these persons. We stated and warned you that we believed that section 197 of the LRA 1995 may be applicable.”

[23.] Highveld recorded that it had noted the comment about transferring employees to the contractor. Highveld’s response (in its letter of 17 January 2000) was that it undertook to provide successful contractors with the detail of redundant employees, but it would be the contractor’s decision whether a redundant employee could be employed in terms of the contractor’s conditions of employment. Highveld also recorded that it had noted Numsa’s severance package proposal. Highveld’s response, in the same letter, was:

[24.] In evidence Mr Mafoane confirmed that the minutes of 7 December 1999 were a reasonable reflection of what he had said at the meeting. He stated that the successful contractor for the single quarters, Reef Food Services, interviewed the employees, of whom only two accepted an offer to join Refood. The change house cleaning contract was awarded to Acona Cleaning Services (Mrs Mazibuko) who was willing to take over all the cleaners. Only two employees arrived for a meeting, both of whom declined to join Mrs Mazibuko’s company.
</

South Africa: Labour Appeal Court

Highveld Steel and Vanadium Corporation Limited v National Union of Metalworkers of South Africa and Others (JA29/02) [2003] ZALAC 21 (20 November 2003)