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THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

JUDGMENT

Not Reportable

Case no: C 285/14

In the matter between:

RUDOLF STEPHANUS LOUW                                                                                  Applicant

and

THE SOUTH AFRICAN BREWERIES (PTY) LTD                                                 Respondent

Heard:           19, 20, 21, 22 October 2015 and 15 December 2015                             

Delivered:     19 April 2016

Summary:     Unfair dismissal for operational reasons. The binding effect of pre-trial minutes- raising issues not covered by the pre-trial minutes. Subjectivity creeping into fairness of the selective criteria. Employee not afforded a hearing before including performance review in the selection criteria. Duty of employer to find alternative to retrenchment. Always unfair where dismissal occurs when there is an alternative available at the time of the dismissal.  

JUDGMENT

MOLAHLEHI, J

Introduction

[1] This is an action in terms of which the applicant seeks an order declaring his dismissal for operational reasons to be both procedurally and substantively unfair. Initially, the relief sought was that of compensation but the applicant has subsequently amended his pleadings to include a prayer for reinstatement.

Background facts

[2] It is common cause that the main business of the respondent is the sale and distribution of beer and soft drinks. The business operations are divided into several regions across the country. For the purposes of this judgment, the focus is in relation to the dispute that arose between the parties in the Eastern Cape Province and, specifically, the Southern region.

[3] The depot of the Southern Cape region is based in Knysna and the sales office is in George. The business in that region is also operated through a third party distributor.

[4] As indicated earlier, the issue in this matter concerns the alleged unfair dismissal of the applicant who prior to his dismissal was employed as a sales manager, responsible for sales and trade marketing of the respondent’s business. He was prior to his dismissal based at the George Office.

[5] Before the retrenchment of the applicant, the respondent had embarked on a phased-in restructuring exercise known as Leo II and III. At the completion of the final phase of the restructuring and that apparently would have been the Leo II process, the respondent informed the employees that people employed in the sales division would not be affected by the restructuring. This was communicated to the employees in an internal communique dated 17 September 2013 which reads as follows:

‘In March 2012 we introduce a fit for purpose review to identify positions that may become redundant, where Webb was being duplicated as well as capability gaps that needed to be filled. We continued that journey in July 2012 to further identify areas of duplication, opportunities to centralise efforts in areas where internal resources three up to allow for greater focus on market-facing activities. At the same time we also design and invested in our sales organisation to deliver improved customer service in the lower end tavern class of trade, a key growth area in the market... We are now embarking on the third and final phase in building an organisational structure that is fit for pupils to deliver on our business strategy.... This includes a review of the following functions: demand creation/ PRMG, supply chain, D S D finance (COF manufacturing regions, S & D regions), human resources…. No shop floor employees from the S & D (sales division) and manufacturing core functions are impacted by this process. We are hoping to finalise the structural results by the end of September 2013 and start with the recruitment from 30 September 2013, with proposed implementation of the new structures on 1 November 2013.’

[6] The respondent then on the same day issued employees with notices in terms of s 189 (3) of the Labour Relations Act (the LRA). The consultation meetings with the employees also commenced on the same day.

[7] The applicant was invited to the meeting on 18 September 2013 with the district manager, Ms Davidson and the HR business partner, Mr Mr Jwili. The applicant was at that meeting issued with the notice in terms of s 189(3) of the LRA and attached to it was a power presentation setting out the details of the proposed organisational structure. The notice indicated that two employees in sales were affected. The applicant and other affected employees were invited to make their submissions regarding the proposed structure.

[8] The other thing that happened during that meeting was that Ms Davidson took the employee through the power-point presentation relating to the proposed of restructuring. The proposed structure provided for the creation of the post of an area manager for the region. It also indicated that the sales manager position would be made redundant. In addition to setting out the rational for the restructuring, the document presented during the meeting invited the applicant ‘to a consultation process’ with the view to reaching consensus on the issues that had arisen. The applicant was also informed at that stage that ‘no final decision has yet been taken as we first wish to consult you on the matter’. It was also pointed out that the respondent would ‘give consideration to any viable alternatives that you are able to propose in this regard and we invite you to make any suggestions that you may have’.

[9] The applicant indicated to the meeting that his view was that a decision had already been taken as to who would be appointed to the new position of area manager.

[10] At the second meeting which was held on 20 September 2013, with Mr Jwili, the applicant requested the specification of the proposed area manager position and indicated that he was already performing the functions of the area manager. He also indicated that there were rumours that he had already been dismissed. The other point he raised in that meeting was that he had been unfairly treated in relation to his performance review.

[11] The third meeting which was with Ms Band was held on 25 September 2013 and the subsequent meeting thereafter with Ms Band was on 27 September 2013 which was over the phone. The same applies to the fourth meeting which was on 1 October 2013.

[12] The applicant submitted his proposal on 2 October 2013, the essence of which was that the applicant should consider retaining the sales manager position, regard being had to the responsibilities associated with the depot and for in-trade coaching.

[13] The selection criteria which was proposed in the s189 (3) notice and which was finally applied by the respondent reads as follows:

‘... to select the best candidate for the job based on the top profile; taking into account skills, historically agreed performance ratings, qualifications and experience and thereafter length of service.’

[14] It is common cause that the applicant submitted a written counterproposal regarding the proposed restructuring on 2 October 2013. The essence of this proposal was that the service manager position should be retained. The respondent rejected the proposal on the basis that it entailed duplication of functions and that it contradicted the key principles of the restructuring process. It is not in dispute that the applicant made no proposal in relation to the selection criterion.

[15] The establishment of the new structure, which had at its top management level the area manager, was confirmed with the applicant by telephone on 21 October 2013. It was later confirmed in an email addressed to him. He was also informed that his position of sales manager had become redundant. 

[16] The applicant together with two other employees applied for the position of the area manager. The applicant was unsuccessful and was, accordingly, informed of the outcome in writing on 31 October 2013. The applicant then requested feedback on the outcome of his interview which was provided on 4 November 2013 and was also informed that various other recruitment opportunities were being considered. On the same day, Ms Band sent the applicant an e-mail informing him that there was a vacant post in Port Elizabeth. The applicant declined considering the position as he regarded it as not being a reasonable alternative.

[17] The parties had further discussions over the telephone regarding alternatives to retrenchment on 13 November 2013 but were not able to find any suitable alternative positions for the applicant. It was following this that the applicant was issued with the notice of retrenchment on 31 December 2013, in which he was informed that his employment with the respondent would terminate at the end of the month.

[18] Aggrieved by the termination of his employment, the applicant instituted the present proceedings.  

The issues for consideration

[19] The key issue raised by the respondent in argument is that the case of the applicant is based on issues not pleaded or raised in the pre-trial minutes. In this respect, the respondent contends that the applicant stated in the statement of case formally that his dismissal was substantively and procedurally unfair without providing particularity to that claim.

The respondent further contended that the applicant was not entitled to go outside the issues that had been narrowed down in the pre-trial minutes. The applicant was thus limited in relation to the question of whether there was a general need to retrench according to the respondent to the averment by the applicant that he was already performing the function of the area manager. ’

[20] The respondent further contended that the case of the applicant should have been confined to the contention that he should have been appointed to the position of area manager as he was already performing the duties of the new post. The case of the applicant should, the respondent further contended, have failed on this point as soon as it was shown that he was not in fact performing those functions.

[21] In relation to the selection criteria, the respondent contended that the applicant did not take issue with that and thus his case should be confined to the averment that he  was already performing the function of area manager and thus he should have been appointed directly to the position without requiring him to compete for it. The other point raised by the respondent was that the case of the applicant should have been limited to the allegation that Mr Stevens, the successful candidate, was appointed despite the fact that he had less managerial experience.

[22] In relation to the applicant’s complain that restructuring was a fait accompli the respondent contended the case of the applicant should have been limited to the following:

‘... prior to his retrenchment, Applicant was already treated unfairly in his last performance review in that, subsequent to this performance review, he was already informed by Band that he should consider another role. The consultation process amounted to a sham.’

[23] In contending that the applicant was not entitled to go beyond the scope of the pleadings and pre-trial minutes, Mr Leslie, for the respondent, relied on the case of Zondo and Others v St Martin’s School,[1] where this Court in dealing with the issue of the status of pre-trial minutes had the following to say:

‘[10]     The purpose of a pre-trial minute is to narrow down issues in dispute and to limit the scope of litigation. The consequences of signed pre-trial minutes are that the positions taken by the parties in their respective pleadings may be reconciled or compromised. The contention of the applicants that the signed pre-trial minutes contradict what is stated in the pleadings has no merit in as far as the validity and enforceability of the pre-trial minutes. In my view, it is the natural consequence of the pre-trial minutes that certain aspects of the pre-trial minutes may contradict certain aspects of the pleadings. For instance the employer could in its statement of case dispute the employment contract but then concede the existence of the employment contract in the pre-trial minutes.

[11]      It is well established in our law that a pre-trial minute is no different to any other agreement concluded consequent to deliberations between the parties or those that they may have expressly or impliedly authorised to represent them. It follows therefore that a pre-trial minute constitutes a binding agreement between the parties. It is for that reason that the courts ordinarily hold the parties to the contents of their pre-trial minute. A party can only resile from a pre-trial minute on condition special circumstances exist to do so.’

[24] The above principles derive from the authority of NUMSA and Others v Driveline Technologies (Pty) Ltd,[2] where the Labour Appeal Court pointed out that whilst, it was enjoined to uphold the provisions of the pre-trial minutes, it, however, had to read that in conjunction with the pleadings. In dealing with this issue, Conradie, JA had the following to say:

‘[17]     The flaw in Mr Pretorius’s argument is that the pre-trial minute in the present case was, on a proper interpretation thereof, not a settlement of any issue between the parties. All it did was to more closely define the issues as they were then perceived to be. There is not the faintest suggestion that the appellants intended to abandon any claim for relief not already incorporated in their statement of case. The contention that by framing the issues as they did the parties intended to exclude every other issue from consideration is not supported by the wording of the pre-trial minute.’

[25] The LAC further per Zondo DJP (as he then was) held that:

‘[91]     To my mind the cases are consistent that whether or not a party will be allowed to raise or rely upon or introduce a cause of action or issue after a pre-trial agreement or pre-trial minute has been concluded in a case depends on whether it can be said that the party seeking to rely upon or to introduce or raise such cause of action or issue has abandoned that cause of action or has agreed either expressly or by implication (I would say necessary implication) not to pursue or rely upon such cause of action or point or has informed the Court or the other party that such point or such cause of action or issue will not be relied upon. If he has, he cannot be allowed. If he has not, he can be allowed. This is quite apart from those circumstances where a party would be able to resile from such an agreement on the same basis as he would be able in law to resile from any other contract.’[3]

[26] In my view, the facts of the present case is distinguishable from those of  St Martin’s case in that the applicants in that case sought to resile from the pre-trial minutes in their totality on the basis that their erstwhile attorney in signing the minutes had no authority to do so and in any case he signed the minutes under duress.

[27] In the present matter, the pre-trial minutes provide the following under the heading: “4. ISSUES THE COURT IS TO DECIDE:”

‘Whether the dismissal of the Applicant was procedurally and substantively fair.’

[28] The essence of the respondent’s contention is that the applicant challenge to the selection criteria has to be limited to the issue of whether Mr Stevens had less experience than him and not to the other issue of his appointment.

[29] It is apparent from the reading of the pre-trial minutes and the pleadings in general that it can never be said that the applicant abandoned his cause of action in relation to both substantive and procedural fairness by signing the pre-trial minutes. There is nowhere in the pre-trial minutes where the applicant can be said to have abandoned issues relating to the cause of action set out in the pleadings, mainly the alleged substantie and procedural fairness of the dismissal.

Procedural fairness

[30] The issue of the selection criterion is governed by s 189 (2)(b) of the LRA which enjoins the employer and the other consulting parties in a dismissal for operational reasons to engage in a meaningful joint consensus-seeking process and attempt to reach consensus in relation to procedural fairness on the method for selecting the employees to be dismissed. In the case where the consulting parties are unable to reach a consensus on the selection criteria, the employer has the right to adopt a selection criteria which is fair and objective.  

[31] The key complaint of the applicant in the present matter relates to the inclusion of the performance rating in the selection criteria. The one aspect of the complaint in this respect is that he was told by Ms Band that performance would not form part of the selection.

[32] In my view, the applicant seems to have misinterpreted what was said by Ms Band at that stage. The comment which was made by Ms Band at the beginning of the process was made in the context where the applicant enquired as to whether he was being retrenched because of his performance review. The explanation, as I understand it, was that the retrenchment was not due his performance. It did not mean that performance would not be included in the selection criteria.

[33] Turning to the inclusion of the performance rating in the selection criteria, it is common cause that the interview panel took that into account in assessing the applicant’s application. In her testimony, Ms Band sought to down play the significance of the performance rating of the applicant in relation to the assessment of his application. 

[34] In National Union of Metalworkers of SA on behalf of Members v Timken SA (Pty) Ltd,[4] the court in dealing with the issue of selection criteria that includes productivity as a factor in the assessment of an employee’s application for a job held that:

‘[26]     In support of its argument the respondent relied on the case of Engineering Industrial and Mining Workers Union and another v Starpack (Pty) Ltd (1992) 13 ILJ 655 (IC), where the court held that productivity and conduct have been held to be fair selection criteria provided that the affected employees are given the opportunity to challenge the assessment. In the present instance the applicants were not afforded the opportunity to challenge the data used in arriving at the conclusion that the attendance records were negative and therefore influenced their scores in the assessment of whether or not they should be retrenched.

….

[28]      Where the selection of employees is based on factors such as attendance record, tardiness and performance, such employees should be given an opportunity to make representation against the negative conclusion that may be drawn against them as a result thereof.’

[35] The court further held that the duty to show that the criterion used was both objective and fair in its definition and application rests on the employer.

[36] Although, Ms Band sought to down play the use of the performance review by the interviewing panel, it is apparent from the record of the interviewing panel that the performance rating of the applicant was not simply an observation made in passing. In my view, the performance review formed part of the evaluation and the comparison between the candidates. In this regard, the spread sheet used by the panel amongst others reveals the following:

	Lee Stevens	Ant Vaalbank	Rudi Louw
Last performance Review	·        5 [greatest performer] ·        Consistently high performer	·        4 [good performer] ·        Consistent good performer	·        2 [not achieving] ·        Performance improved significantly since last PR ·        Commendable achievement made.

[37] In my view, subjectivity crept into the selection criteria through the use of performance rating in evaluating the candidates. This also brought into the selection criteria the element of fault on the part of the applicant. It is as though the applicant brought on himself the retrenchment because of his failure to perform at the required standard. The fact that he did not appeal against the performance rating is, in my view, irrelevant in the assessment of the fairness of the selection criteria and its application. The respondent was aware long before it formulated the selection criteria that the applicant was unhappy with the rating that he received. The respondent should for this reason not have included this factor into the selection criteria before affording the applicant the opportunity to be heard in that regard.

Substantive fairness

[38] It as is trite that an employer has the right to dismiss an employee on the ground of operational requirements. The right is accompanied by the duty to act fairly both in terms of procedural and substantive fairness. In respect of substantive fairness, the duties of the employer entails taking steps and measures on its own to, avoid dismissal, minimise the number of dismissals, mitigate the adverse effect of dismissal and to change the timing of the dismissal.[5] These duties are based on the fact that it is the employer who initiate the process of dismissal for operational reasons and thus it cannot sit back and place the burden on the employee to find alternatives or measures to avoid or delay the dismissal for operational reasons.[6]

[39] In scrutinising the fairness of the dismissal the court will, in having regard to the totality of the facts, consider whether a dismissal for operational reasons was in the circumstances a reasonable option.[7] It is generally accepted that where dismissal can be avoided retrenchment cannot be fair.

[40] The approach to be adopted by the Court when scrutinising the fairness of a dismissal for operational reasons was set out in Decision Surveys International (Pty) Ltd v Dlamini and Others,[8] in the following terms:

‘If the employer resorts to retrenchment when alternatives to retrenchment are available, it cannot be said that the ultimate decision to retrench is necessarily fair. The court will, therefore, examine the reasons advanced for retrenchment in order to determine whether the ultimate decision to retrench is genuine and not a sham. However, this is not to say courts are to second guess the commercial or business efficacy of the employer’s decision. Nor is the enquiry whether the best decision was taken… The enquiry is whether the retrenchment is properly and genuinely justified by operational requirements in the sense that it was a reasonable option in the circumstances.’

[41] It is common cause in the present matter that the position of the area manager in Aliwal North remained vacant for some time even after the unsuccessful application for the same position at George by the applicant. There is no evidence from the respondent as to why that position could not have been used as an alternative to either delay the retrenchment or for that matter avoiding it by either appointing the applicant in an acting position or full time into it.

[42] The vacancy at Aliwal North arose not as a result of the restructuring but because the incumbent was promoted. The respondent advertised for the position but could not for some time obtain a suitable candidate. The position remained vacant even after the unsuccessful application for the position at George by the applicant. There seems to be no doubt that the applicant qualified for the position as he had been shortlisted and was interviewed for the position.  

[43] There seems to be no doubt from the facts of this case that the respondent in dealing with this matter closed its mind to any alternative but  focused on the fact that it had adopted the selection criteria which required the applicant to apply and compete for the position. Accepting for a moment that the George position involved other internal candidates who were affected by the restructuring, the same does not apply to the Aliwal North position. As stated earlier, the position remained vacant for some time and after several attempts at recruiting a suitable candidate. An external candidate was found some time after the applicant was notified of the intention to retrench him and after he was unsuccessful in his application for the position at George.

[44] I have already said that the applicant qualified for the position at Aliwal North having been shortlisted, interviewed and obtaining position two in that interview. The interviewing panel in a sense found him a competent person to perform the function of the area manager.

[45] The respondent contended that the applicant was to blame for his dismissal in that he failed to apply for the position even after he was invited to do so. In a sense, the applicant was dismissed for failing to apply for the position at Aliwal North. In other words at the time of his dismissal there was work that he could still do. 

[46] In light of the above, I find the dismissal of the applicant to have been both substantively and procedurally unfair. I see no reason why the primary remedy of reinstatement should not be made in the circumstances of this case. I also see no reason why costs should not follow the results.

Order

[47] In the premises, the following order is made:

1.            The dismissal for operational reasons of the applicant by the respondent was both substantively and procedurally unfair.

2.            The respondent is ordered to reinstate the applicant retrospectively to his position or any equivalent position without loss of benefit including back-pay due to him.

3.            The respondent is to the applicant’s costs.

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Molahlehi, J

Judge of the Labour Court

Appearances:

For the Applicant:      Adv T J Golden SC instructed by Schroter Attorneys.

For the Respondent: Adv G A Leslie instructed by Bowman Gilfillan Inc.          

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