South Africa: Employment case law update – key takeaways

On Thursday, 17 October 2024, we hosted a webinar on the latest cases impacting the employment law landscape in South Africa.  Please click here to access a recording. Citations and mini-summaries of the cases discussed, together with key takeaways, are set out below.

Retrenchments

• National Union of Metalworkers of South African obo Members v SAA Technical SOC Ltd (JA109/23) [2024] ZALAC 41 (10 September 2024)

Dismissal – operational requirements – referral to Labour Court of unfair dismissal dispute alleging substantive unfairness – challenge to jurisdiction of Labour Court to entertain claim – after facilitated consultations in large-scale retrenchments concluded, union did not refer matter to conciliation before referring it to Labour Court for adjudication – proper interpretation of section 189A(7)(b)(ii) of Labour Relations Act 66 of 1995 (LRA) – section 189A(7)(b)(ii) makes specific reference to section 191(11) – section 191(11) prescribes a period of 90 days to refer the dispute to the Labour Court after the Commission for Conciliation, Mediation or Arbitration (CCMA) or bargaining council has certified that the dispute remains unresolved – facilitation and consultation are distinct processes – notwithstanding facilitation process, referral to conciliation is mandatory.

Key takeaway: In terms of section 189A(7)(b)(ii) of the LRA, where a facilitator is appointed to assist the parties with retrenchment consultations and 60 days have elapsed from the date the section 189(3) notice is issued, a registered trade union or the employees who have received notice of termination of their employment may ‘refer a dispute concerning whether there is a fair reason for the dismissal to the Labour Court in terms of section 191(11)’. The proper interpretation of this section has been the subject of some controversy over the years, with some authority indicating that a referral to conciliation was unnecessary, given that the parties would have already had the benefit of the facilitation process. This judgment confirms that notwithstanding the facilitation process, a referral to conciliation is a necessary step before challenging the substantive fairness of retrenchments in the Labour Court in terms of section 189A(7)(b)(ii) of the LRA.

The judgment is available here.

• Umicore Catalyst South Africa (Pty) Ltd v National Union of Metalworkers of South Africa (NUMSA) obo Members (PA3/23) [2024] ZALAC 37 (29 August 2024)

Dismissal – operational requirements – last-in-first-out (LIFO) principle used by employer as primary selection criterion, except in laboratory department – ‘laboratory assessment’ introduced midway through process, which primarily comprised a behavioural assessment in which employees required to complete a questionnaire describing how important they viewed certain skills in the laboratory and giving examples of where they demonstrated those skills – whether behavioural assessment was fair and objective component to selection process – assessment focused on inherently subjective considerations absent agreement – no individual on-the-job evaluations performed – nature of questions bore no real correlation to objectives – problematic formulation of questions – unfair to employees – failure to prove employees were selected based on fair and objective selection criteria – appeal dismissed.

Key takeaways: (1) In terms of section 189(7) of the LRA, employers must use fair and objective section criteria in selecting employees for retrenchment, where there is no agreement with the relevant consulting party on the criteria to be used. While skills may be an appropriate criterion, the fairness of this method of selection often boils down to the manner in which it is implemented. Where questionnaires are used to assess employees’ skills, employers can expect a court to consider the granular details of such questionnaires, including for example, the topics addressed, how the questions are formulated and their weighting, in its efforts to assess fairness and objectivity. Subjective factors, like personality traits, should be avoided in these assessments. It is also advisable to consider employees’ actual, observable, work output, rather than basing assessments on the opinions of managers. (2) While not the focus in this case, employers should also bear in mind that challenges may arise, too, in the application of otherwise fair and objective selection criteria. They should accordingly ensure not only that there is a fair and objective basis for assessing employees, but also that those assessments are conducted, and the results obtained and collated, fairly.

The judgment is available here. 

• Padayachee v Serere and Others (JR1162/21) [2024] ZALCJHB 254 (20 June 2024)

Application to review and set aside an arbitration award – arbitrator finding that dismissal of retrenched employee was substantively and procedurally fair – employer not obliged to have parallel consultations with a member of a consulting party – whether section 189(3) notice is always required for retrenchment to be considered fair – section 189(3) notice mandatory but not necessary where there is substantial compliance with sections 189(1), (2) and (3) of the LRA – circumstances for non-issuing of section 189(3) notice peculiar in this case – parties aware of reasons for contemplated dismissal and did not object to non-issuance of section 189(3) notice – impugned award falls within the bounds of reasonableness – review application dismissed.

Key takeaway:  The Constitutional Court has previously confirmed that section 189(3) of the LRA makes it obligatory for an employer contemplating retrenchments to issue a written notice to consulting parties inviting them to consult and disclose in writing all relevant information specified in section 189(3)(a) to (j) of the LRA. While the Court in this case found that the employer’s failure to issue a section 189(3) notice did not render the retrenchments unfair, it cautioned that the judgment should not be taken as precedent that issuing a section 189(3) notice is not mandatory. Indeed, employers would be well-advised to comply with the letter of the law and ensure that a notice is issued in each case. Not only is the information contained in the notice necessary for the parties to engage in meaningful consultations; the notice itself serves an important evidentiary function when it comes to proving the fairness of retrenchments. It is also the marker that commences the time periods for consultations in large-scale retrenchments. Where the mandatory provisions are departed from, each case has to be decided on its own merit to determine whether there was substantial compliance with section 189.  In this case, the employee had been represented by her union in meetings where the new organisational structure presented by management had been accepted and the employer had issued correspondence to the union indicating, among others, that it was not necessary to issue a section 189(3) notice, as the parties were aware of the reasons for the contemplated dismissal for purposes of section 189(3). The employee became aware of this letter, but neither she, nor her union objected to, or took issue with, the correspondence by the employer and/ or the non-issuance of the section 189(3) notice.  

The judgment is available here. 

• WBHO Construction (Pty) Ltd v Masenye NO and Others (JR1124.21) [2024] ZALCJHB 288 (30 July 2024)

Review application – arbitration award finding that termination of employment constituted unfair dismissal – whether employee was unfairly dismissed given existence of mutual separation agreement – employee alleging that he had been misled into signing agreement and signed under misrepresentation and duress – employer may not circumvent retrenchment procedure in section 189 of the LRA by signing retrenchment document disguised as mutual separation agreement – parties not ad idem on terms of agreement, thus agreement should be ignored – once employer had discussion with employee concerning its operational requirements, it was obliged to follow the statutory consultation process – no consultation process followed – arbitrator’s decision that dismissal unfair accordingly reasonable – application dismissed.

Key takeaway: While we have some concerns with this judgment, it illustrates the importance for employers to be cautious when concluding agreements with employees in the context of retrenchments. Where an employer, faced with operational requirements necessitating retrenchments, seeks to terminate an employee’s employment by mutual agreement, by way of a voluntary retrenchment agreement, it is advisable to commence the section 189 consultation process first. This would be done by issuing the section 189(3) letter and then discussing the possibility of a voluntary retrenchment as part of the consultation process and as an alternative to a ‘forced’ retrenchment. Once an employee agrees to this alternative, no further consultation meetings would be necessary. The agreement that is concluded with the employee should then clearly indicate that the employee has agreed and volunteered to be retrenched as an alternative to a potential forced retrenchment; that the employee is being paid an amount in addition to what they are legally entitled to (ie an enhanced severance package); and that, in view of the voluntary nature of the retrenchment and receipt of this enhanced package, the employee is precluded from instituting any claims against the employer and agrees to waive her/his rights in this regard. When concluded in these circumstances, and with these terms, a voluntary retrenchment agreement will have greater chances of being upheld as valid.

The judgment is available here. 

Settlement agreement

• Mabaso v Discovery Life (J1155/20) [2024] ZALCJHB 280 (2 August 2024)

Application to make settlement agreement order of court – during retrenchment process, applicant given voluntary severance package (VSP) agreement which he did not sign at the time – applicant signed agreement almost a month later, on same day that he admitted to committing significant and elaborate fraud against respondent and that he had stolen GBP 500 000 – when payments in terms of VSP agreement not paid by respondent, applicant approached court to make agreement an order of court – VSP agreement not an agreement in settlement of a dispute that the applicant has the right to refer to arbitration or the Labour Court, as no dispute existed prior to conclusion of agreement – termination occurred by mutual agreement and does not constitute a dismissal – agreement does not comply with criteria in section 158(1A) of the LRA – Court cannot make agreement order of court – application fails.

Key takeaway: In order for the Labour Court to exercise its discretion to make a settlement agreement an order of court in terms of section 158(1)(c) of the LRA, the criteria set out in section 158(1A) must be met: (i) the agreement must be in writing, (ii) the agreement must be in settlement of a dispute (ie it must have as its genesis a dispute); (iii) the dispute must be one that the party has a right to refer to arbitration, or to the Labour Court for adjudication, in terms of the LRA; and (iv) the dispute must not be of the kind that a party is only entitled to refer to arbitration in terms of sections 22(4), 74(4) or 75(7) of the LRA. A voluntary retrenchment agreement concluded in the context of a retrenchment process, as an alternative to a forced retrenchment will not meet such criteria, as it is not an agreement in settlement of a dispute that the party has a right to refer to arbitration or the Labour Court. This is because the voluntary termination of an employment contract by agreement does not constitute a dismissal (unless the employee alleges that s/he was forced to enter into the agreement) and there will accordingly be no dispute between the parties prior to the conclusion of the agreement.

The judgment is available here. 

Misconduct

• Tempest Car Hire v Lebyane and Others (JR50/22) [2024] ZALCJHB 283 (1 August 2024)

Review application – arbitration award finding dismissal substantively unfair and ordering retrospective reinstatement with back pay – employee telling colleague ‘you should die’ after colleague informed her she was feeling ill – employee immediately saying it was a joke – grievance lodged – employee dismissed for offensive and unacceptable behaviour towards a colleague – Commissioner focused only on credibility and did not deal with probabilities of the different versions – arbitration proceedings materially influenced by incorrect assessment of evidence – gross irregularity – parties should have been given opportunity to deal with hearsay evidence during arbitration proceedings – colleague resigned as a result of employee’s comment – offensive words have no place in the workplace – award unreasonable – award set aside and matter remitted to the CCMA to be heard by another commissioner.

Key takeaways: (1) One of the important duties of a commissioner in arbitration proceedings is to resolve the factual disputes between the parties. The commissioner must demonstrate the reasons for accepting one version over the other. This requires a proper assessment of the evidence. In the process of assessment, the commissioner must determine: (i) the credibility of the witnesses, (ii) the reliability of their evidence, and (iii) the probabilities or improbabilities of the two versions. In this case, the commissioner only focused on credibility and did not deal with the probabilities of the different versions, failed to take into consideration that the evidence of the applicant’s witnesses corroborated each other, and failed to establish the reliability of the witnesses. This meant that the outcome of the arbitration proceedings was materially influenced by an incorrect assessment of the evidence and rendered the award reviewable. (2) When it comes to credibility, not every error or contradiction by a witness affects their credibility. An evaluation must be made considering the nature of the contradictions, their number and importance and their bearing on other parts of the witness’ evidence. Although the Labour Court will not readily interfere with credibility findings made by commissioners, where such findings influence the outcome of the arbitration proceedings and ignore all other material evidence, the Court may interfere. (3) Where a commissioner knows that evidence that will be led will constitute hearsay evidence, s/he has a duty to afford the parties an opportunity to deal with this issue during the arbitration proceedings. Commissioners cannot simply ignore the fact that evidence is hearsay and only deal with this issue in the arbitration award.

The judgment is available here. 

• Algoa Bus Company (Pty) Ltd v Tirisano Transport and Services Workers Union (TASWU) obo Mzawi and Others (PA05/23) [2024] ZALAC 42 (10 September 2024)

Appeal against decision of Labour Court – respondent employee employed by appellant as a bus driver until her dismissal in 2021 after she was found guilty of reckless and negligent driving and causing an accident – evidence that employee accelerated on amber light and ran red traffic light – employee’s challenge to fairness of dismissal dismissed by arbitrator but upheld by Labour Court – Labour Court reviewed and set aside arbitration award and reinstated employee with retrospective effect – contrary to what Labour Court held, there is no obligation in law on employer to adduce evidence on appropriateness or suitability of dismissal as sanction for misconduct as necessary condition for proving fairness of dismissal – arbitrator making decision on appropriateness of dismissal as sanction must make value judgment – breakdown in trust or deterioration in employment relationship may be inferred from evidence – arbitrator’s decision reasonable – not open to Labour Court to interfere with award – appeal upheld.

Key takeaway: There is no general obligation in law on an employer to lead specific and discreet evidence as to the appropriateness of dismissal as a sanction for misconduct to prove that the dismissal was fair. An arbitrator is required to make a value judgement as to the fairness of an employer’s decision to dismiss considering all the relevant circumstances in totality.  In order to assist the arbitrator in doing so, it is important for an employer to adduce sufficient evidence, including in relation to the nature and seriousness of the misconduct and its consequences.

The judgment is available here. 

Automatically unfair dismissal

• Slabbert v Muji Motor Group (Pty) Ltd (D315/21) [2024] ZALCD 30 (16 September 2024)

Automatically unfair dismissal – application for monetary relief – whether reason for applicant’s dismissal was a transfer or a reason related to a transfer, alternatively whether dismissal based on age was automatically unfair – applicant employed by respondent’s predecessor in law in terms of oral agreement as a sales consultant – agreement made no mention or retirement age – applicant subsequently promoted at age 65 and his role later refined to new car sales manager when he was almost 70 years old – remuneration included basic salary plus commission – business transferred as going concern to respondent – applicant’s employment transferred to respondent – applicant advised by respondent that he had reached the normal retirement age of 65 in the motor industry and offered freelance position on sales commission basis without guaranteed salary as option to continue earning an income post-retirement – most proximate cause of dismissal was based on age – insufficient basis to conclude that reason for dismissal was transfer – no agreed or normal retirement age that applied to the applicant – dismissal was contrary to provisions of section 187(1)(f) of LRA – 12 months’ remuneration just and equitable compensation in the circumstances, given applicant’s age at time of dismissal.

Key takeaway: Section 187(2)(b) of the LRA provides that a dismissal based on age is fair if the employee has reached the normal or agreed retirement age ‘for persons in that capacity’. When relying on normal retirement age, the employer must not only show that the employee had reached the normal retirement age but also that the retirement age is normal to employees employed in the same capacity as the employee concerned. From previous Labour Court authority it appears that capacity may extend to outside a specific employer and include industry practice with respect to persons working in similar positions to that of the individual in question. Accordingly, industry-level collective bargaining agreements may be relevant. In this case, the collective agreements relied on by the respondent to establish the normal retirement age of 65 only applied to certain categories of employees employed within the registered scope of the Motor Industry Bargaining Council (MIBCO). Further, no evidence was adduced that in the motor industry employees who fall outside the prescripts of the rules of the Motor Industry Retirement Fund also retire at age 65 and more importantly, that it is the norm for employees in positions similar to the applicant (ie sales managers/managers) also to retire at age 65. Accordingly, the employer was not able to rely on a normal retirement age to justify the applicant’s dismissal based on age.

The judgment is available here. 

Restraint of trade

• Commercial Mobile Truck and Trailer Alignment Services Pty Ltd v Harmse and Another (2024/007833) [2024] ZAGPPHC 772 (29 July 2024)

Restraint of trade – trade connections – goodwill and professional relationships with customers – specialist services in form of wheel alignment and balancing and trailer repairs for clients’ vehicle fleets – clients require periodical wheel balancing and alignment with result that applicant provides periodical return services for its clients – first respondent formerly employed as operations manager and second respondent as assistant wheel alignment technician – restraints in employment contracts prohibiting respondents from competing with employer for period of five years after termination of employment within a radius of 250km from employer’s business premises and anywhere within the African countries in which the employer or its associated company has an office – first respondent setting up business in competition with applicant – procuring lease at premises previously occupied by applicant – applicant lost patronage of number of clients since establishment of competing business – respondent failing to show that restraint is unreasonable and thus unenforceable – first respondent currently employed by company that does not compete with applicant, so enforcement of restraint will not inhibit his ability to earn a living – duration should be reduced  to two years, being the limit which would be reasonable in this type of case – first respondent restrained for two years from resignation date within radius of 250 km from applicant’s business premises.

Key takeaways: (1) In considering the reasonableness of a restraint of trade in the context of trade connections, the Court re-affirmed well-known principles. In terms of customer connections, much will depend on the role of the individual, the frequency and duration of the contact between her/him and the customers, where such contact takes place, what knowledge s/he gains of their business and requirements, the general nature of the relationship, how competitive the rival businesses are, the type of products sold or services rendered and whether there is evidence that customers did indeed leave when the employee left. When there is evidence that the customer relationship was built and established during employment and a connection was formed with those customers and influence was gained over them by the employee, then this is considered part of the goodwill of the business, which is protectable. In order to escape a restraint, the employee will need to show that s/he never acquired any significant personal knowledge of, or influence over, the persons s/he previously dealt with. (2) One of the factors a Court will consider when determining reasonableness of a restraint of trade is the duration of the restraint. Even where a proprietary interest is established and a Court is willing to enforce what is otherwise considered to be a reasonable restraint, it will still exercise a value judgement when it comes to the duration of the restraint, to ensure that it is not excessive. In this regard, it appears that, in the absence of any specific evidence alleging unreasonableness in respect of the duration of a restraint, the limit which is generally considered to be reasonable in cases where the employer relies on trade connections as its proprietary interest is two years. This could, however, be reduced if the employee establishes evidence that the duration is longer than is reasonably necessary to protect the company’s interest. In this case, while the Court found that the former employee had failed to prove that the restraint was unreasonable and did not specifically challenge the duration of the restraint (being 5 years), in its judgment, the Court was only prepared to enforce the restraint for a period of two years and reduced the duration accordingly.   

The judgment is available here. 

Furnishing security in review applications

• Africabin Building Systems (Pty) Ltd V Mogaladi and Others (Africabin) [2024] JOL 66588 (LC)

Urgent application to stay enforcement of arbitration award pending finalisation of review application – arbitration award declaring dismissal of first respondent employee substantively unfair and ordering retrospective reinstatement and backpay in amount of R272 000 – applicant failed to furnish security in accordance with sections 145(7) and (8) of the LRA when launching review application – employee sought to execute award – company seeking to be exempted from furnishing security on basis that the significant security amount will have a serious impact on its trade and hamper its ability to operate its business – worrying trend has developed on the part of some employers who choose deliberately to disregard the security provisions, resulting in them rushing to court on urgent basis to stay enforcement of award and simultaneously apply for exemption from furnishing security – time has come for Court to seriously consider awarding punitive costs orders against these employers – insufficient evidence provided to show how payment of any portion of the amount would be unduly onerous and harmful to company’s business or operations – stay of enforcement of arbitration award conditional upon applicant paying 50% of the equivalent of 24 months’ remuneration into trust account of its attorneys and delivering security bond within 30 days of order.

Key takeaways: (1) In terms of section 145(7) of the LRA, the institution of review proceedings does not suspend the operation of an arbitration award, unless the applicant furnishes security to the satisfaction of the Court in accordance with subsection (8). Accordingly, where an employer seeks to initiate review proceedings, it is required to furnish security in accordance with section 145(8) of the LRA. The amount of security to be furnished where the order is one of reinstatement or re-employment is equivalent to 24 months’ remuneration, unless the Court directs otherwise, and if compensation is awarded, security must be furnished in the amount of compensation awarded. Payment of such security is not dependent on whether the employee opposes the review application or whether the company is of the view that the employee has abandoned a claim for reinstatement. The prospects of success are also irrelevant. Absent security, an employee is entitled to execute the award. (2) The Labour Court has identified a worrying trend among employers who elect to disregard the security requirements. Whilst punitive costs were not awarded in this case, employers should take heed that they may face punitive costs orders by the Labour Court should they elect not to furnish security, and do not apply to be exempted from this requirement at the time that they initiate review proceedings. (3) Where exemption is sought, an employer will need to show good cause and make the necessary averments for such relief in its founding papers. In this regard, proof of adequate or sufficient assets to satisfy the award should the review application fail is not the overriding requirement for exemption; it is only one factor to be considered. Evidence in terms of bank accounts, current and projected cashflow, the nature of the business and how furnishing security would impact the Company’s obligations are relevant factors. The Court will have regard to the particular circumstances of the case and considerations of equity and fairness to both the employer and employee, including any material prejudice that the employer may suffer if it is required to set the prescribed security. Exemption is not there for the taking, and employers would need to provide sufficient evidence to justify such application.  

The judgment is available here. 

Incapacity / supervening impossibility

• Silver Solutions Security (Pty) Ltd v Saayman NO and Others (PR192/22) [2024] ZALCPE 31 (15 July 2024)

Review application – arbitration award finding former employee’s dismissal unfair – dismissal for incapacity – supervening impossibility – client of applicant security company refused employee access to its premises on basis of alleged misconduct relating to soliciting of money and chocolate – client requested applicant to detach employee from the workplace – judgment to dismiss employee was inextricably linked to decision revoking employee access – arbitrator lacked crucial material to assess whether removal was valid – omission ultimately affected determination of fairness of dismissal – supervening impossibility not properly established due to lack of evidence – application dismissed.

Key takeaways: (1) When it comes to the fair reasons for dismissal, ‘incapacity’ is not always confined to ill-health, injury or poor work performance, as set out in the Code of Good Practice: Dismissal. Our employment law jurisprudence permits an employer to end an employee’s services based on incapacity resulting from, or due to, the supervening inability or impossibility to perform her/his duties, provided that such termination is fair.  This caters for situations where, for example, an employee’s work visa, accreditation, licence, or the like, expires or is cancelled and the employee is no longer legally entitled to perform the work s/he was engaged to do, or where a host employer refuses the employee access to its premises. However, even in such circumstances, there must still be a fair pre-dismissal procedure, which includes a consideration of alternatives to dismissal. (2) Where an employer seeks to rely on incapacity in the form of supervening impossibility as the grounds for a dismissal, in order to prove that such dismissal is fair, it will need to lead evidence on the cause of such impossibility. In this case, the trigger for the claim of supervening impossibility was that the employee committed misconduct, which resulted in the employer’s client refusing the employee access to the workplace and seeking the employee’s removal from the site. The applicant claimed that its client had the right to make this request based on the terms of the service level agreement concluded between the parties. In order to prove this, there had to be an interrogation of the alleged misconduct, and the applicant had to lead evidence regarding the agreement, which it failed to do. Without this evidence, the arbitrator lacked the crucial material needed to assess whether the employee’s removal was valid and, in turn, affected the determination of whether the dismissal was fair. On this basis, the employer failed to prove the fairness of the employee’s dismissal.

The judgment is available here.