Can an employer dismiss employees because they refuse to agree to a change to their terms and conditions of employment? An initial answer may be, “yes”.

When considering the fine print, however, there is a more difficult potential legal problem to overcome. Section 187(1)(c) of the South African Labour Relations Act, 1995 (the “LRA”) as amended in 2016, provides that a dismissal will be automatically unfair if the reason for the dismissal is “a refusal by employees to accept a demand in respect of any matter of mutual interest between them and their employer.”

In terms of the law, prior to the amendment of section 187(1)(c) of the LRA, an employer who wished to implement changes to terms and conditions of employment could, if its proposed changes were rejected by employees, justify dismissing these employees on the basis of its operational requirements, provided the retrenchment was final and irrevocable and the requirements of section 189 of the LRA were met (see the decision inNational Union of Metalworkers of SA & Others v Fry’s Metals(Pty) Ltd).

Whether an employer was entitled to adopt this course of action after the amendment to section 187(1)(c) was considered by the Labour Appeal Court (the “LAC”) inNational Union of Metalworkers of South Africa & others v Aveng Trident Steel (a division of Aveng Africa Proprietary Ltd) & Another.

When confronted with a decrease in sales and increased costs, Aveng gave notice of possible retrenchments in terms of section 189(3) of the LRA. One of the proposals made by Aveng as a retrenchment avoidance measure during the consultation process that followed was that its workforce be restructured. It proposed that that the scope of existing jobs be redefined so as to increase the duties associated with these jobs and that jobs be restructured to reflect the job descriptions contained in the main agreement of the Metal and Engineering Industries Bargaining Council. Extensive negotiations took place on this issue but the National Union of Metalworkers of South Africa (“NUMSA”) refused to agree to this proposal.

After reaching an impasse on this issue, Aveng informed NUMSA that it would be implementing the redesigned job descriptions and presented all the affected employees with new contracts of permanent employment together with redesigned job descriptions, without altering their rate of pay. Aveng informed the employees that if the contracts of employment were rejected, the employees would be dismissed. When the contracts were rejected by the employees, Aveng gave notice of termination of their contracts of employment.

NUMSA challenged the fairness of these dismissals and argued that the dismissals had been automatically unfair by virtue of the provisions of the amended section 187(1)(c). NUMSA argued that the dismissals were automatically unfair because the reason for the dismissals was the refusal by the employees to accept Aveng’s demands in respect of the redesigned job descriptions, a matter of mutual interest. Aveng denied that the dismissals were automatically unfair and argued that the reason for the dismissals was based on its operational requirements. The Labour Court found that the dismissals were not automatically unfair.

On appeal, NUMSA argued that the Labour Court erred in its interpretation of section 187(1)(c) of the LRA and that the dismissals were automatically unfair because:

• Aveng made a demand relating to a matter of mutual interest when it informed employees that it intended to implement the redesigned job descriptions;
• the employees refused to accept this demand; and
• the employees were dismissed for refusing this demand.

Aveng denied that the dismissals were automatically unfair and argued that the actual reason for the dismissals was its operational requirements. In particular, Aveng argued that:

• the wording of section 187(1)(c) of the LRA does not indicate that, because a proposed change to terms and conditions is refused and a dismissal thereafter ensues, the reason for the dismissal is the refusal to accept the proposed change;
• no “demand” was made and instead, an alternative to retrenchment was offered to the employees, which they had a choice to accept or not.

The LAC also found that the dismissals were not automatically unfair. Its reasoning was,inter alia, that:

• the court referred to the explanatory memorandum issued by the Department of Labour, which provided the reasons for amending section 187(1)(c). The memorandum stated that the purpose of the amendment was to remove an anomaly arising from the interpretation of section 187(1)(c) by the SCA in itsFry’s Metalsdecision.This anomaly was that, after theFry’s Metalsdecision, employers were wary of offering any form of re-employment to workers retrenched in the context of restructuring, even if there was a valid operational requirement for the retrenchment. This was because such an offer might be construed as falling within the reach of section 187(1)(c) of the LRA. This had the result that dismissed employees were often deprived of offers of re-employment.
• if employers were not permitted to dismiss employees who refuse to accept a change to terms and conditions of employment and to employ others in their place who are willing to accept the altered terms and conditions of employment that are operationally required, the only way to satisfy an employer’s operational requirements would be “through collective bargaining and ultimately power play”. The LAC found that this would be self-defeating by adding to the economic pressure put on an employer that was already struggling financially.
• NUMSA’s approach would “perversely” lead to employers being wary of proposing any change to terms and conditions of employment during the course of a section 189 consultation process. That would undermine the purpose of a consultation process which is to encourage “engagements on all potentially viable alternatives to retrenchment”.
• the fact that a proposed change is refused and followed by a dismissal does not mean that the reason for the dismissal is necessarily the refusal to accept the proposed change. The question whether section 187(1)(c) of the LRA is contravened does not depend on whether the dismissal is conditional or final, but rather on what the true reason for the dismissal of the employees is. The actual or proximate reason for the dismissal needs to be determined and there is no reason for excluding an employer’s operational requirements from consideration as a possible reason for dismissal.

The LAC ultimately found that the true question that must be determined is one of causation and the usual test for determining the reason for the dismissal must be utilised:

“[68] Hence, the essential inquiry under section 187(1)(c) of the LRA is whether the reason for the dismissal is the refusal to accept the proposed changes to employment. The test for determining the true reason is that laid down inSA Chemical Workers Union v Afrox Ltd. The court must determine factual causation by asking whether the dismissal would have occurred if the employees had not refused the demand. If the answer is yes, then the dismissal is not automatically unfair. If the answer is no, as in this case, that does not immediately render the dismissal automatically unfair; the next issue is one of legal causation, namely whether such refusal was the main, dominant, proximate or most likely cause of the dismissal.”

After considering the facts, the court found that the purpose of Aveng making the proposal was not to gain any advantage in wage bargaining, but was rather to restructure for operational reasons to ensure Aveng’s long-term survival. The employee’s rejection of the proposal necessitated the dismissal due to operational requirements. The dominant or proximate cause for the dismissals therefore was Aveng’s operational requirements.

Comment

What is clear from the judgment is that an employer, in the context of a retrenchment exercise at least, may dismiss employees for refusing to accept a change to terms and conditions of employment, provided of course that the employer can demonstrate that there is a genuine operational need to change terms and conditions of employment; that there is no reasonable alternative to dismissal; and that a fair consultation process has been followed.

Reviewed by Peter le Roux, an executive consultant in ENSafrica’s employment department.