Labour Court rules on automatically unfair dismissals in the context of changes in employment conditions
Since 2014, the employer in this matter has faced strong economic headwinds caused by a downturn in sales and increased costs. The result was the issuing of a notice of proposed retrenchments in terms of section 189(3) of the Labour Relations Act, 1995 (the “LRA”).
As part of the subsequent consultation process, the employer made various proposals that would alleviate the need to retrench. The most important of these was a restructuring of the workforce. In preceding years, employees had been able to narrow the scope of jobs that they performed. For example, a machine operator would refuse to clean the machine he or she operated and a crane driver would refuse to operate more than one crane. These restrictive practices meant that the employer had to hire additional employees. The employer proposed that jobs be restructured to widen their scope to include additional duties and that the new job structure conform to a five-grade job structure permitted in terms of the main agreement of the Metal and Engineering Industries Bargaining Council.
During the consultation process, an interim agreement was concluded with the National Union of Metalworkers of South Africa (“NUMSA”), in terms of which employees would work in accordance with the employer’s proposals in return for the payment of an additional 60 cents an hour until consultations in respect of adopting a five-grade job structure, as proposed by the union, had been concluded. This agreement would endure until the end of February 2015. This enabled the employer to terminate the employment of the employees who performed the additional duties that the remaining employees would undertake. The consulting parties also agreed that voluntary severance packages be offered to employees. As a result, the employer was able to agree to grant these packages to over 200 employees. This, together with an agreement on eliminating transport allowances, meant that the need to retrench was avoided, on the basis that the new job structure was adopted.
During the course of February 2015, NUMSA gave three days’ notice that it was terminating the interim agreement. This was done at a time when the employment of employees who performed the additional duties had been terminated and the employees who had taken voluntary severance packages had left. The result was that the employer was forced to agree to pay employees an additional R3 per hour in order to secure their agreement to work in accordance with the new job structure. Negotiations on the issue continued but failed when NUMSA demanded a wage increase of R5 per hour.
The employer took the position that it was implementing the new job structure and that the relevant employees’ positions had become redundant. However, all the employees were offered jobs in the new structure on the same terms and conditions of employment. A number of employees accepted this offer but another 733 employees rejected it and were retrenched.
NUMSA then referred an unfair dismissal dispute to the Labour Court. Of most importance was its argument that the retrenchments were automatically unfair. This argument was based on the provisions of section 187(1)(c) of the LRA, which provides that a dismissal is automatically unfair if the reason for the dismissal is “a refusal by an employee to accept a demand in respect of any matter of mutual interest between employer and employee”.
This section, in its previous formulation, has a controversial history and is linked to disputes and court decisions interpreting the Labour Relations Act, 1956. Prior to its amendment in 2015, the dismissal would be automatically unfair if the reason for the dismissal was to compel an employee to accept a demand as described above. In Fry’s Metals (Pty) Ltd v NUMSA & others, the Labour Appeal Court (the “LAC”) was faced with a dispute where employees argued that their dismissals had been automatically unfair because they had refused to work a new shift system. They argued that their dismissals had been automatically unfair because the dismissals had been effected in order to compel them to work the new shift system. The court rejected their claim and distinguished between the following two scenarios:
This approach was accepted by the Supreme Court of Appeal in National Union of Metalworkers of SA & others v Fry's Metals (Pty) Ltd. It was also accepted in Chemical Workers Industrial Union & others v Algorax (Pty) Ltd.
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