REPUBLIC OF SOUTH AFRICA
THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Reportable
Case no: JR1551/11
In the matter between:
SCHINDLER LIFTS SA (PTY) LTD				Applicant
and
THE METAL AND ENGINEERING INDUSTRIES
BARGAINING COUNCILS						First Respondent
COMMISSIONER KERRY DRISCOLL				Second Respondent
HENRY C HAARHOFF						Third Respondent
Date heard:          17 May 2013
Date delivered:    02 October 2013
Summary:	Review application- constructive dismissal- employee resigning after demotion and reduction in salary. 
Judgment
MOLAHLEHI J
Introduction
[1]	This is an application to review and set aside the arbitration award by the second respondent (the Commissioner) under case number MEGA31106 dated 25 May 2011 in terms of which the dismissal of the third respondent (the employee) was found to be unfair. The applicant was ordered to compensate the employee in the amount of R191 772.00 as a result of the unfairness of the dismissal. 
Background facts
[2]	The facts in this matter are broadly common cause. The employee was employed by the applicant as a service leader based at Maponya shopping mall in Soweto. On 14 August 2010, a baby was injured by a lift at the shopping mall. It is undisputed that the employee was informed about the incident immediately after it occurred. In terms of the applicant’s policy the employee was required to inform management of the incident within 24 hours. 
[3]	The employee did not report the incident and was consequently charged with the following charges: 
‘Failure to report on incidents and accidents as per management directive: In that on or about 14 August 2010 an incident occurred at Maponya Mall which created a potential safety risk, you were informed of the incident soon after but failed to report to line management within 24 hours as required, even after numerous communication from both management and the safety department on the importance of reporting any incident that occurs within 24 hours of awareness.
Breach of employee’s duty of good faith to the company:
In that…your failure to report the incident potentially exposes the company to a safety risk and a potential future business.
Deliberately supplying incorrect or falsified information:
In that on Friday, on or about end of August 2010, you told your Line Manager, Dean Coetzee that the incident happened on Wednesday the 25 August 2010 and you then changed the date and said it happened two weeks ago, you further stated that you were only informed on Wednesday “last week” by your service man.’
[4]	The employee disputed the charges and presented evidence on the incident that took place on 25 August 2010. He testified that he delegated the duty to report the incident to one Selby as he was attending a course and that Selby failed to carry out the instruction and was not charged with misconduct.
[5]	The employee was found guilty of the first two charges and dismissed. He then appealed against his dismissal. The appeal chairman found that the sanction of dismissal was too harsh, issued a final written warning and further made the following finding:-
‘ Demotion without salary being affected. 
Promotion without proper assessment being done…
He can’t plan, organise. 
He is a hand on person not a manager
Salary must be reviewed in line with position.’
[6]	On 23 September 2010, and subsequent to these findings made by chairperson of the appeal the applicant addressed a letter the employee which reads as follows:-
‘Disciplinary Action: Final Written Warning valid for 12 months effective the 20th September 2010 to 20th September 2011. As part of the sanction, you were also found no fit enough to carry on with your duties as Service Leader and therefore demoted to either a Field Engineer position, subject to availability of such a position or Service Technician position, Your current salary package and benefits will be adjusted accordingly to be in line with the position.’
[7]	The employee was aggrieved by the contents of the letter and accordingly responded by addressing letters to the applicant wherein he contends that his demotion amounted to unilateral change of conditions of employment without consultation and that his incapacity was never the issue at the internal appeal. He consequently requested the applicant to reconsider its position of demoting him. 
[8]	Despite the protestation by the employee, the applicant issue another letter on 1 October 2010, which reads as follows:-
‘Salary package: please be advised that your current package has been revised and your new package is R320 000 per annum. This letter is valid until the 01 October 2010, and should you fail to sign this letter by/before the 01 October 2010 close of business, the initial sanction (dismissal) will apply.’
[9]	The employee being unhappy with the contents of the above letter resigned and referred an alleged unfair constructively dismissal to the first respondent for conciliation and thereafter to arbitration. The arbitrator found that the employee was constructively dismissed and accordingly the dismissal was unfair. It was for this reason that the Commissioner awarded compensation equivalent to six months’ remuneration. It is that arbitration award which the applicant seeks to review and set aside.
Grounds for review
[10]	The applicant submits in the main that the arbitrator committed a gross irregularity in the performance of his duties because he failed to consider the fact that the third respondent has failed to resolve the dispute before resigning. The contention is that the third respondent ought to have lodged a grievance pertaining to his demotion thus affording the applicant an opportunity to respond. It is further submitted that the award is reviewable because the Commissioner failed to apply his mind to the evidence by stating that additional charge was added at the internal appeal. The applicant also disputed the finding that the employee experienced intolerable working conditions. 
[11]	The employee opposes the review application and submits that the appeal hearing was unfair as the chairperson of the disciplinary hearing added a further charge of incapacity which was not part of initial charges. The employee further submits that unilateral changes of his condition of employment by demoting him with substantial salary reduction were unbearable as it imposed new contractual terms which were not agreed to. The applicant argues that the employee was not compelled to resign as he was given a choice to either sign the new salary package or face dismissal. 
The arbitration award
[12]	The Commissioner found in concluding that the employee was not able to continue holding the position as service leader, the chairperson of the appeal hearing denied the employee the opportunity to refute that allegation as he was never offered the opportunity to do so.
[13]	The Commissioner further found that the issue of the ability of the employee to lead was not an issue with the chairperson of the disciplinary hearing to consider. It is apparent that this finding is based on the reading of the letter of dismissal.
[14]	As concerning the demotion the Commissioner found it to be a "drastic incursion into the employee’s contractual rights." According to her the common law and policy of the applicant supported the view that the demotion is a drastic step.
[15]	The commission considered the test to apply in constructive dismissal cases. In applying the test she concluded that on the facts and the circumstances of this case the employee was unfairly constructively dismissed. In reasoning that the dismissal was unfair the Commissioner found:
‘It is apparent that subsequent to the appeal hearing, the Applicant was left with three choices, namely, to accept the demotion, to refuse the demotion thereby reviving the dismissal, or to resign. It is clear that the Applicant intended to continue his employment with the Respondent and thus dismissal was an option he wished to consider. It is further apparent that the Applicant did not consider the demotion as reasonable or fair and that he had attempted to persuade the Respondent to consider its position. In the face of the Respondent’s failure to consult or discuss his submissions and its unilateral imposition of the demotion, I am persuaded that the Applicant was left with no other option but to resign. Indeed the Applicant’s letter of resignation manifested no voluntariness to resign on the part of the Applicant.’

Legal principles
[16]	It has been held that the test to apply in review matters involving the issue of constructive dismissal is not based on the reasonableness of the decision made but rather whether the arbitrator was right or wrong in arriving at the conclusion as he or she did.
[17]	 The issue which the Commissioner had to deal with in this matter was whether the employee was constructively dismissed, including whether such dismissal, once established, was fair or otherwise. The concept of constructive dismissal is defined in section 186 (1) (e) of the Labour Relations Act of 1995 which reads as follows:-
‘Dismissal means that –
(e) an employee terminated a contract of employment with or without notice because the employer made continued employment intolerable for the employee.’
[18]	And section 193(2)(b) requires an arbitrator to reinstate and unfairly dismissed employee unless – 
‘the circumstances surrounding the dismissal are such that a continued employment relationship would be intolerable.’
[19]	The general interpretation given to constructive dismissal concept as envisaged in section 186 (1) of the LRA is that  the employer has made continued employment intolerable for the employee to the extent that the employee is left with no alternative but to resign. The employee bears the onus of showing that the employer had made the continued employment relationship so intolerable that the only option he or she had was to resign.
[20]	It is also generally expected of the employee in cases of constructive dismissal to show that he or she had exhausted all internal procedures before resigning in particular the grievance procedure. However, failure to exhaust formal internal procedures like grievance procedure is not fatal in a claim for constructive dismissal. It is however, important that the employer should at least have been made aware of the conditions or the circumstances that made the working conditions intolerable and be afforded an opportunity to deal the causes of thereof. 
[21]	The principles governing the approach to adopt when dealing with the issue of constructive dismissal are set out in Pretoria Society for the Care of the Retarded v Loots, where the court held that the test was whether the employer’s conduct which led to the resignation of the employee was calculated and serious enough to destroy the confidence and trust between the parties. 
[22]	In Asara Wine Estate and Hotel (Pty) Ltd v Van Rooyen and Others the Court dealing with the issue of constructive dismissal held that:-
‘When an employee resigns or terminates the contract of employment as a result of constructive dismissal, such employee is in fact indicating that the situation has become so unbearable that the employee cannot fulfil his/her duties. The employee is in effect saying that he or she would have carried on working indefinitely had the unbearable situation not been created. He does so on the basis that he does not believe that the employer will ever reform or abandon the pattern of creating an unbearable work environment. If he is wrong in this assumption and the employer proves that his/her fears were unfounded, then he has not been constructively dismissed and his/her conduct proves that he has in fact resigned.’ 
[23]	In Ferrant v Key Delta, the Court held that:-
‘It would appear that the court should only determine whether the actions of the employer had driven the employees to leave. If the answer is in the affirmative, then such actions will amount to a constructive dismissal.’
[24]	The action of the employer in demoting an employee without consultation was found in Van Der Riet v Leisurenet t/a Health and Racquet Club, to be sufficient to constitute constructive dismissal. 
[25]	The Constitutional Court in Strategic Liquor Services v Mvumbi NO, held that the test for constructive dismissal does not require that the employee have no choice but to resign, but only that the employer should have made continued employment intolerable. This approach is similar to that of both the English and the, Canadian jurisprudence. It would appear that in the English law the focus in determining whether the employee was constructively dismissed is whether the employer had breached the material term of the contract of employment. 
[26]	In the English case of Marriot v Oxford and District Society Ltd NO 2,  the Court dealt with a situation very similar to the present in that the employer in that case addressed a letter to the employee informing him that he was to be demoted from being a supervisor and that his salary was to be accordingly reduced. In dealing with the implication of the letter Lord Denning had the following to say: 
“Seeing that the letter was not an offer, the next question is: was the determination of the contract of employment by the employer within the meaning of s3 (1) (a) of the Act? I think it was. This letter in effect told the man: ‘we are not going to perform our existing contract with you. We are going to reduce your grading as foreman, and we are going to pay you £1 a week less, whether you like it or not.’ That statement was a breach of contract. If Mr Marriott had accepted the repudiation and said ‘I will not agree with this reduction in my wages’ and left at the end of the week, the contract would clearly have been terminated by the employer."
[27]	In another English case, Lewis v Motorworld Garages, the court held that:
"It is now established that the repudiatory conduct may consist of a series of acts or incidents, some of them perhaps quite trivial, which cumulatively amount to a repudiatory breach of the implied term of the contract of employment that the employer will not, without reasonable and proper course, conduct himself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.”
[28]	The Court for Appeal for Ontario in dealing with the issue of constructive dismissal in Smith v Viking, held:
‘Action for constructive dismissal must be founded on conduct by the employer and not simply on the perception of that conduct by the employee will stop the employer must be responsible for some objective conduct which constitutes a fundamental change in employment or a unilateral change of the significant term of that employment.’
[29]	It is apparent from the above authorities that the test for constructive dismissal is one of causation. The first and essential enquiry is whether the resignation was due to the conduct or act of the employer. The second enquiry if found that the resignation was as a result of the conduct or act of the employer, is whether such conduct or act amounted to a serious and fundamental breach of the employment contract, exhibiting intention on the part of the employer not to continue with the employment relationship. The final aspect in the enquiry is whether the employee made the employer aware of its breach of the contract of employment. The conduct of an employer that may form a basis for constructive dismissal may in general take two forms. The conduct may be in the form of unilateral change in the conditions of employment and or in the form of harassment of an employee. 
[30]	In the present instance the Commissioner considered the legal principle in some detail and found that the applicant had made the working conditions of the employee intolerable.
[31]	In my view the Commissioner applied the correct principles of the law and correctly applied the facts to those principles. The facts which influenced the Commissioner to arrive at the decision as he did are the following:-
•	Subsequent to the dismissal ruling by the chairperson of the disciplinary hearing the employee appealed against the decision.
•	The appeal chairperson found the dismissal sanction to be too harsh, reduced the sanction to a final warning and found that the employee did not have the capacity to lead. 
•	The applicant then took a decision to demote and reduce the salary of the employee. 
[32]	In considering those facts the Commissioner found that:-
 “The totality of the facts and the circumstances of this case indicates that the applicant being the employer made the employment conditions of the employee intolerable leaving him with no option but to resign. It is common cause that the employee did not file a formal grievance before he resigned. He, however, made the applicant aware about his unhappiness and requested it to reverse the approach it had adopted. The applicant not only failed to respond but also failed to address the problem. In my view, if weight was to be given to the failure to file a formal grievance, that would amount to placing form above substance. The substance of this matter is that the employee did notify the applicant about his dissatisfaction about the approach that the applicant had adopted in particular about the reduction of his salary. The demotion and reduction in salary is a drastic step in particular when done without the consent of the employee. 
[33]	It should be noted that this case is different to those cases where an employee in anticipation of the outcome of a disciplinary hearing resigns. In the present instance, the disciplinary hearing had already taken place, the employee appealed against the sanction of dismissal. The appeal found that the dismissal was inappropriate. The chairperson of the appeal hearing without affording the employee a hearing regarding his capacity to lead the team, imposed the sanction of demotion. And soon thereafter the applicant indicated that the salary of the employee would be reduced. 
[34]	In my view, the letter informing the employees that he was demoted and that his salary was to be reduced, placed him (the employee) in no different position to that if he was told "you are dismissed."
[35]	The facts and the circumstances of this matter are compelling that but for the conduct of the third respondent, the employee he would not have resigned. It is apparent from the conduct and in particular the correspondence that the employee addressed to the third respondent that he still wanted to continue with the employment relationship and again to emphasise that but for the conduct of the third respondent he would not have resigned.
[36]	It would seem to me that, had the employee intended not continue with the e employment relationship he would have immediately resigned on receipt of the letter informing him of his dismissal. He appealed the decision which appeal was upheld by the chairperson of the appeal who found that the sanction of dismissal was inappropriate. He also did not immediately resign on receipt of the letter informing him that he was demoted. He requested to meet with the third respondent and also requested that the respondent should reconsider its decision to demote him, with no success. 
[37]	In essence the above analysis reveals that I am in agreement with the decision reached by the Commissioner. In this respect the Commissioner reached his decision after properly directing his attention to all the relevant legal principles and also applied the same correctly to the facts and circumstances of this matter. In brief the decision reached by the Commissioner is correct.
[38]	In light of the above, the applicant’s application to review the arbitration award of the Commissioner stands to fail. I see no reason in law and fairness why costs should not follow the results.
Order
[39]	In the premises, the applicant’s application to review and set aside the arbitration award made by the second respondent in this matter is dismissed with costs.

_________________
Molahlehi J
Judge of the Labour Court of South Africa

Appearances:
For the Applicant:	  Mr C Levin of Clifford Levin Attorneys	
For the Respondent: Genie De Carvalho of Roxo Law