South Africa: Labour Court

11

J47/97

The applicant was employed by the respondent since 1966. He started as a clerk and gradually worked himself up to the managerial position he was in when his services were terminated during November 1996 due to certain operational requirements alleged by the respondent. The respondent underwent a restructuring process of a major nature. This followed a need for an additional controlling body in the respondent’s structure. In an amalgamation process the applicant's position became redundant. The applicant did not accept his retrenchment and contested the fairness thereof. Conciliation was unsuccessful and the conciliator concerned issued the relevant certificate of outcome.

The relief sought by the applicant in his statement of claim was as follows:

1. A declarator to the effect that the termination of his services was unfair and in breach of the provisions s189 of the Labour Relations Act No.66 of 1995 (“the Act”).

2. Reinstatement on the same terms and conditions which prevailed prior to the termination of his employment.

3. Costs.

The respondent’s Assistant Human Resources Manager, Mr Mukhtar Mohammed conducted the retrenchment discussions or negotiations with the Applicant. These discussions consisted of negotiating an acceptable retrenchment package for the Applicant. What the Applicant wanted was an early retirement at age 55.

On the 15th November 1996, and after negotiations were conducted between Mr Mohomed and the applicant, the applicant received a letter signed by Mr van Vuuren, the former General Manager, Human Resources, of the respondent, setting out the reasons for his retrenchment. In particular the letter mentioned the following important issues to which I refer later herein. Paragraph 9 of this letter (on page 45 of the bundle) reads as follows :

"The following criteria, in no specific order, were considered by GMS and Corporate Remuneration to determine which managers would head each of the restructured functions:

Specialist Skills

Experience Base

Transformational Skills

Leadership Qualities

Potential Growth and Development

Managerial Span

Current Job Activities

Performance Assessment

Past Achievements

Academic Background"

And then in paragraph 11:

"The persons who have been identified in terms of this criteria are Mr Jaap Jonker, the 106 manager and

yourself - ( referring to the applicant) - being one of the 109 managers. It is on this basis that you are then informed that you were the second person that was being declared redundant."

Then a proposed retrenchment package is set out:

1. Leave Pay.

2. Pro rata 13th cheque.

3. One week's pay for each completed year of service.

4. Actuarial or pension benefits in accordance with the provision of the Transnet Pension Fund rules.

5. Medical Aid membership as specified in the company Medical Aid rules.

6. Company travel benefits as specified in the current policy of the company but subject to the revision by the executive committee of the Transnet board of directors.

Mr van Vuuren did not have any particular recall as to what precisely was discussed between himself and the Applicant.

At best he had superficial discussions with employees about the amalgamation. It would be a fair to say that negotiations were left to Mr Mohomed. He, a patient and polite listener only negotiated the retrenchment package . He also testified to the effect that he did not express his views about the Applicant’s proposals as to a retrenchment package during these negotiations. According to his evidence the only thing which the applicant was interested in was a large package, or a satisfactory, “sweetener”,(a phrase used by the parties to indicate a sizeable retrenchment package). At the time the applicant was retrenched he had to work some 5 years before early retirement. The applicant in his dealings regarding this retrenchment, had in my view, an exaggerated expectation of the size of his retrenchment package which almost bordered on avarice. This could probably be attributed to the golden handshakes and incentives for people to leave when they had the opportunity in the past, when there was a need to reduce staff. According to Mr van Vuuren, over the period of the previous five or six years, and even further back, there were one or two opportunities where the Managing Director would decide, that if anybody wanted to leave, an offer of a certain percentage would be given to such a person on a voluntary basis. On the evidence, previously, employees were paid out comparatively large retrenchment packages. Therefore they were referred to as "sweeteners" in the respondent's line of business. According to Mr van Vuuren, who currently is the General Manager Human Resources of SANLAM, he noticed that a culture came into existence in terms of which, employees expected to be paid out large sums of money upon early retirement or retrenchment. The previous retrenchment policy which was in place provided inter alia, for two weeks severance pay, per year of service. This policy was revised and approved by a body called EXCO. In terms of the new policy a standard retrenchment package would be “non-discriminatory and in line with the current Labour Relations Act”. It comprised of the terms in the letter to which I have referred to hereinbefore, as follows :

1. Leave Pay.

2. A pro rata thirteenth cheque.

3. Applicable notice pay, if any notice pay was not worked.

4. One week's pay for each completed year of service.

5. Employees not qualified for early retirement under 55 years of age, a pension fund benefit.

Mr Jonker, one of the senior managers who was retrenched, testified that he personally informed the applicant of his retrenchment. He stated that the applicant was completely taken aback and shocked about the decision. Apparently there was a choice between the applicant and another employee, Mr Thom, as to who would be selected for retrenchment. Mr Jonker testified that they felt that Mr Thom still had dependants and would be a better choice from a humanitarian point of view. He conveyed this to the applicant. He felt sorry for the applicant. He stated that the applicant was very hurt. He also testified that at no stage was the need to retrench or the selection criteria discussed with the applicant as set out in the letter. He didn’t want to discuss the retrenchment with the Applicant because he himself was selected as a retrenchee. That these aspects weren’t discussed, I believe, is also consistent with the evidence of Mr Mohomed.

Mr Bruinders, on behalf of the respondent argued that it was highly improbable that the applicant was not told of the need to retrench and that the selection criteria was not discussed with him as testified by Mr Jonker. However, I saw nothing in the demeanour of Mr Jonker which led me to believe that there was anything improbable in his version. In my view, as I have said, it was consistent with the rest of the facts.

Mr van Vuuren, was not particularly helpful as to the

discussions he had with the applicant as to the need to retrench, selection criteria or any of the other requirements as set out in s189 of the Act. As far as Mr van Vuuren was concerned the only thing the applicant was interested in, was early retirement, which is true regarding Mr Mohomed's testimony, who conducted the negotiations with the applicant. The applicant at one stage complimented Mr Mohomed for his attitude during the negotiation process.

Whereas there is merit in the Respondents contention that, because the Applicant was only interested in the size of his retrenchment package he forfeited the right to be reinstated, this argument cannot be extended to the complaint about the lack of fair procedure.

The respondent simply did not follow the procedures laid down by section 189 of the Labour Relations Act 66 of 1995 (the “Act”). Section 189(2) reads as follows :

“(2) The consulting parties must attempt to reach consensus on

(a) appropriate measures-

(I) to avoid dismissals;

(ii) to minimise the number of dismissals;

(iii)to change the timing of the dismissals;

(iv) to mitigate the adverse effects of the dismissals;

(b) the method for selecting the employees to be dismissed;”

This was not discussed with the Applicant. Section 189(3), (5) and (6) of the Act reads as follows :

“(3) The employer must disclose in writing to the other consulting party all relevant information,including, but not limited to-

(a) the reasons for the proposed dismissals

(b) the alternatives that the employer considered Before proposing the dismissals, and the reasons for rejecting each of those alternatives;

(c) the number of employees likely to be affected And the job categories in which they are employed;

(d) the proposed method for selecting which employees to dismiss. (e) the time when, or the period during which,dismissals are likely to take effect;

(f) the severance pay proposed;

(g) any assistance that the employer proposes to offer to the employees likely to be dismissed and;

(h) the possibility of the future re-employment of the employees who are dismissed...

(5) The employer must allow the other consulting party An opportunity during consultation to make representations about any matter on which they are consulting.

(6) The employer must consider and respond to the representations made by the other consulting party and, if the employer does not agree with them, the employer must state the reasons for disagreeing.

(7) The employer must select the employees to be dismissed according to selection criteria.

(a) that have ben agreed to by the parties ;or

(b) if no criteria have been agreed, criteria that are fair and objective.”

The Applicant received a letter after the decision was made purporting to establish that the above requirements were met.

Section 189 of the Act underscores, as one of the basic tenets of fairness, that where an employee is retrenched for operational requirements, there must be proper consultations. The employee should be informed of the reasons for his retrenchment. Selection criteria must be discussed with such an employee. The employee must be well appraised as to why he was selected as a retrenchee. Alternatives has to be considered. Even if the applicant was only interested in a “sweetener” or early retirement, this does not exempt the respondent from the requirements of s189 of the Act. The respondent bears an onus to prove that the reasons behind the retrenchment were fair. This onus is imposed on employers in terms of s188 of the Act.

In my view, this onus was discharged by the respondent. The Applicant’s case is also more related to the breach of section 189 rather than a failure to prove a “fair reason”.

The new policy regarding retrenchment was negotiated during the time in which Mr Mohomed negotiated with the applicant. It had not yet been finalised. The final retrenchment offer made to the applicant, was in accordance with the new policy which came into operation. It was rather unfair to change the policy while the applicant was still negotiating with the respondent, without the applicant being informed in unequivocal terms thereof. Itseemed to me that Mr Mohomed politely went through the motions of the negotiations until the lower retrenchment payment could be finally offered to the applicant. In this regard it is important to note that the Applicant had a service record of, some thirty years. I am also of the strong view that Mr Mohomed should have made it very clear to the applicant from the beginning that his expectations were too high.

Mr van Vuuren did tell the applicant, however, that early retirement was out of the question but when observing the applicant's expectations, he should have been told of the likelihood was that he would only be paid out in terms of EXCO’s new policy.

By merely negotiating a package and not discussing alternatives to avoid retrenchment, simply because this was not raised by the applicant (the employee), is by no means a waiver of the applicant's rights in terms of s189 which I believe are fundamental to a retrenchment exercise. The respondent had a duty to follow the procedures set out in s189.

Section 189 of the Act, places the initiative of how the consultations are conducted, on the shoulders of the employer. What I regarded as particularly unfair was that when the applicant's attorneys sent a letter to the respondent, the respondent suddenly, for the first time, in the letter of 15 November to which I refer to hereinbefore, set out a long list of selection criteria. All the considerations behind the retrenchment are also listed here in an attempt to show that a fair retrenchment was effected, and that alternatives etc was considered. This letter was factually incorrect and disingenuous.

There were no genuine consultations with the applicant as required by the Act. Furthermore, the applicant testified, that he thought he was dealing with experts regarding retrenchments ( which was the case ) whereas he was not one. This is a further reason why a lack of fair coonsultation cannot be his fault entirely, as argued by the respondent.

The letter, in my view, dealt with all the issues that should have been dealt with, ex post facto.

In all the circumstances I found that the retrenchment was procedurally unfair.

I accept that the respondent had reason to restructure and even on the evidence of the retrenched Mr Jonker, which I have accepted, the amalgamation of the two departments was necessary. It cannot be said that no fair reason existed to amalgamate because the applicant was prejudiced by the outcome thereof. The Applicant was quite prepared to go on early retirement without questioning whether it was necessary if early retirement could be granted to him. I doubt whether he would have placed the issue of substantive unfairness before this court if he received a package which was to his satisfaction.

I now return to the question of the remedy. The applicant was remunerated up to February 1997. The trial concluded during August 1997. The applicant was unemployed for a period of 6 months and should therefore be granted compensation of 6 months. For this period he had no other income. I do not believe that there are any grounds upon which the applicant can persuade me to include amongst his losses the tax incentive which according to his representative was so unfairly dealt with. There is no basis upon which the applicant can proceed with this claim and I do not understand it to be part of his statement of case. It was a part of the general unfair procedure. The respondent was paid out a severance package of R162,571,15 being one week’s salary for each year worked. In addition he was paid his monthly salary of R12 965,15, his pro rata service bonus of R15 632,50, his travel allowance of R6 171,00, leave pay of R59 064,16 and the actuarial value of his pension being the sum of R844 439,66. He was entitled to these payments without forfeiting any compensation for the procedural unfairness.

I found that the dismissal was procedurally unfair. Therefore the respondent is to pay the applicant compensation in an amount of 6 months salary and that was (his nett salary), namely the amount of R77 790,90. (calculated at 6 X R12 965,15). The compensation is not subject to tax or further deductions by the employer. The respondent is to pay the costs of the hearing.

E REVELAS

11