South Africa: Employment case law update – key takeaways

On Thursday, 11 July 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

• Coca-Cola Beverages Africa (Pty) Ltd v Competition Commission and Another [2024] 7 BLLR 665 (CC) (17 April 2024)

Competition law – merger conditions – retrenchments – correct test for review of Notice of Apparent Breach (Notice) by Competition Commission – Coca-Cola Beverages Africa (CCBA) and its subsidiaries formed as a result of a merger of the four separate bottlers in 2016 – CCBA prohibited, for a period of 3 years after the merger, from retrenching employees in the bargaining unit ‘as a result of the merger’ and limiting retrenchments in the more senior roles, Hay Grade 12 and above, to 250 – CCBA’s reasons for retrenchments being to reduce costs to address impact of sugar tax and adverse macroeconomic circumstances – Competition Commission issued Notice relating to breach of the merger conditions – CCBA applied to review Competition Commission’s Notice – Competition Tribunal declared CCBA had substantially complied with relevant merger conditions and the retrenchments were not as a result of the merger – Competition Appeal Court (CAC) overturned decision of Tribunal as it approached the review of the Notice as an appeal – Tribunal should have applied the narrow review test, instead it considered afresh whether the retrenchments were ‘as a result of’ the 2016 merger – CAC accordingly upheld the Notice – CCBA appealed to the Constitutional Court, which held that Tribunal’s approach was correct – Tribunal’s function on review was to determine whether in fact the retrenchments were as a result of the merger – CAC mischaracterised the nature of the Tribunal’s review function  – no basis in law or fact for overturning judgment of Tribunal.

Key takeaway: In the context of a newly-merged firm, there will always be ‘some nexus’ between the merger and the subsequent decisions taken by a firm. Typical merger-related reasons will be the elimination of duplications between the merged entities. Retrenchments will not be ‘merger-specific’ where the proximate, real and dominant cause of, or the principal reason for, the retrenchments is economic circumstances unrelated to the merger. In this case, the implications of the sugar tax, which was imposed well after the 2016 merger (and prior to which both CCBA and the union, FAWU, made representations on the adverse effects the tax would have), together with the serious economic downturn, were the real reasons for the retrenchments.

The judgment is available here. 

• National Union of Food Beverage Wine Spirits and Allied Workers v Coca Cola Beverages South Africa (Pty) Ltd (JA 130/22) [2024] ZALAC 26 (27 May 2024)

Appeal – unfair retrenchments – alleged breach of merger conditions – Constitutional Court judgment of neutral effect in the determination of the central issue in these proceedings, i.e. whether the employees’ retrenchment was unfair either for a reason that is automatically unfair, alternatively for want of substantive fairness – allegation that retrenchment designed to compel merchandiser employees to accept new, less favourable wages and other terms and conditions without merit – not an automatically unfair dismissal for an employer to dismiss an employee who refuses to accept an offer of alternative employment made in the context of a retrenchment process, where the reason for dismissal is the employer’s operational requirements – company’s response to the crisis precipitated by the introduction of the sugar tax, increased costs and declining market rational and decision to restructure not unreasonable having regard to its operational requirements – appeal dismissed.

Key takeaways: (1) Despite the existence of any merger conditions relating to retrenchments, in an unfair dismissal (retrenchment) claim, the Labour Court will consider the matter on the basis of fairness, in light of section 189 or 189A of the Labour Relations Act, 1995 (LRA). Provided that the dismissal is effected for a fair reason related to the employer’s operational requirements, a breach of any merger conditions will not mean that the dismissal is unfair for the purposes of the LRA. (2) The application of section 187(1)(c) of the LRA focuses on the enquiry whether the reason for dismissal was a refusal by the employee to accept a demand made by the employer concerning a matter of mutual interest, and whether the refusal was the main, dominant or proximate cause of the dismissal. It is not an automatically unfair dismissal for an employer to dismiss an employee who refuses to accept an offer of alternative employment made in the context of a retrenchment process, where the reason for dismissal is the employer’s operational requirements.

The judgment is available here. 

• Regenesys Management (Pty) Ltd t/a Regenesys v Ilunga and Others 2024 (7) BCLR 901 (CC) (21 May 2024)

Dismissal – operational requirements – employees’ posts declared redundant – inadequate consultation – employees required to apply for own positions and were unsuccessful – selection criteria – knowledge, skills and behaviour – compensation under section 189A(13)(d) of the LRA can be standalone remedy – section 189A(18) does not exclude jurisdiction of Labour Court – appeal dismissed – cross-appeal upheld.

Key takeaways: (1) Section 189A(13) of the LRA deals with procedural fairness claims in the context of large-scale retrenchments and provides four possible remedies. In particular, a consulting party may approach the Labour Court for an order (a) compelling the employer to comply with a fair procedure; (b) interdicting or restraining the employer from dismissing an employee prior to complying with a fair procedure; (c) directing the employer to reinstate an employee until it has complied with a fair procedure; or (d) making an award of compensation, if an order in terms of paragraphs (a) to (c) is not appropriate. The purpose of sub-section (13) is two-fold. Sub-sections (a) to (c) reflect the primary purpose of the section, which is to enable the Labour Court to compel an employer to comply with a fair procedure before employees may be finally dismissed for operational reasons (i.e. to intervene in a process that is still ongoing). The secondary purpose manifests itself in section 189A(13)(d). That purpose is to hold accountable an employer who has dismissed employees finally for operational reasons without a fair procedure and to ensure that employees whose rights have been violated are granted appropriate relief. Relief in terms of sub-section (13)(d) can be granted as a standalone remedy where orders contemplated in the other sub-sections are not appropriate. (2) Section 189A(18) of the LRA does not oust the jurisdiction of the Labour Court to entertain procedural fairness disputes in large-scale retrenchments brought in terms of section 189A(13). Section 189A(18) deals with procedural fairness in a dispute referred in terms of section 191(5)(b)(ii) (i.e. a dispute that has been referred following a conciliation process); not a dispute referred in terms of section 189A(13), which may be referred directly for adjudication.  

The judgment is available here. 

Trade union membership

• AFGRI Animal Feeds (A Division of PhilAfrica Foods (Pty) Limited) v National Union of Metalworkers South Africa and Others (CCT 188/22) [2024] ZACC 13 (21 June 2024)

Union – locus standi – union’s constitution restricts its registered scope to workers in metal and related industries – employer objecting to union’s standing because employees working in animal feeds industry – union has no authority to represent dismissed employees in Labour Court because they are precluded from becoming members – dismissed employees were not eligible for membership – union has no legal standing in Labour Court proceedings.

Key takeaway: In terms of sections 200(1)(b) and (c) of the LRA, a trade union is entitled to act on behalf, or in the interest, of any of its members in any dispute to which any of its members is a party, provided that it is registered. Section 95 of the LRA requires a registered trade union to adopt a constitution which, among others, prescribes qualifications for, and admission to, membership. The consequence of registering a trade union is that it acquires legal personality, with its scope of operation being restricted by its constitution. Therefore, a trade union may perform any act in law as required or permitted by its constitution, and anything done outside of the registered scope, including accepting as members, workers employed in industries which fall outside its registered scope, would be beyond its powers and null and void. In this case, the dismissed employees were precluded, in terms of its constitution, from becoming members of the union and, accordingly, the union had no legal standing in the Labour Court proceedings involving such employees.

The judgment is available here.

Validity of a sick note

• Woolworths (Pty) Ltd v Commission for Conciliation Mediation and Arbitration and Others (JA90/22) [2024] ZALAC 29 (13 June 2024)

Unfair dismissal – employee submitting medical certificate that employer alleged was irregular – charged with breaching company policies and procedures – employer’s investigations suggested that doctor was selling medical certificates – employer’s suspicions that medical doctor who issued medical certificate is contravening standard operating procedure irrelevant to proving misconduct – real issue was whether or not employee saw the doctor on the day in question and whether he booked her off sick as stipulated in the certificate – no proof that employee was not sick or tampered with medical certificate or that she was aware of any illegal activities – appeal dismissed.

Key takeaways: (1) Ordinary workers cannot be expected to interrogate whether the medical certificates they receive are issued by a duly qualified medical practitioner. (2) Where an employer is suspicious of an employee’s medical certificate issued by a particular practitioner, that suspicion alone is not sufficient to warrant disciplinary proceedings on the basis that the certificate is irregular. Employees may be warned about using that medical practitioner. However, such notice to employees may only be issued once sufficient grounds have been established to validate the employer’s suspicions about the medical practitioner. Establishing such grounds would include an investigation into the medical practitioner’s conduct, which would necessarily involve regulatory bodies like the Health Professions Council of South Africa.

The judgment is available here. 

Unfair discrimination

• Solidarity obo Erasmus v Eskom Holdings SOC Ltd (C1001/18) [2024] ZALCCT 18 (24 May 2024)

Discrimination – race – policy and practice was that only applicants from under-represented groups would be shortlisted – internal applicant was only shortlisted because he stated that he was African on application – in terms of respondent’s practice of implementing its affirmative action measures white male had no possibility of being shortlisted – decision not to appoint applicant based on listed ground of race – respondent unfairly discriminated against applicant – practice of not shortlisting members of non-designated groups for advertised posts amounts to an absolute barrier – not an affirmative action measure as contemplated by the Employment Equity Act, 1998 (EEA) – compensation awarded for unfair discrimination.

Key takeaway: Employers’ employment equity plans must be lawful and in accordance with the EEA. Having a compliant employment equity plan is not sufficient; employers also need to apply their employment equity plans in a lawful manner that gives effect to the objectives of the EEA. An inflexible policy or practice whereby members of non-designated or overrepresented groups are precluded from being shortlisted for vacancies will constitute an absolute barrier to the ability of non-designated groups to compete with employment equity candidates and will not be considered to be a lawful affirmative action measure.

The judgment is available here.

• Enever v Barloworld Equipment South Africa, a Division of Barloworld South Africa (Pty) Ltd [2024] 6 BLLR 562 (LAC) (23 April 2024)

Unfair discrimination – employer invoking zero-tolerance substance use policy against employee who smoked cannabis at home – policy irrational and amounting to violation of employee’s constitutional right to privacy and unfairly discriminates against cannabis users as compared to alcohol users – unfair discrimination on an arbitrary ground – employer relying on health and safety obligations – failing to prove that work ability impaired or that employee created an unsafe working environment either for herself or fellow employees – compensation of 24 months’ remuneration awarded for automatically unfair dismissal and unfair discrimination.

Key takeaways: (1) A blanket approach to a zero-tolerance substance use policy, that is applied to all employees regardless of the nature of their work, may be found to constitute unfair discrimination. When relying on a substance abuse policy to discipline employees, intoxication must be proven, unless it can be shown that a zero-tolerance approach is an inherent requirement of the job for the particular employee/s concerned. In this case, while the employer did operate in an environment with heavy machinery, the employee occupied a desk job and the employer failed to prove that the employee’s work was adversely affected or that she created an unsafe working environment for herself or fellow employees by consuming cannabis in private. The Court found that, in the circumstances, the policy was unjustifiably overbroad, and the same standards could not be applied to an employee who works in an office outside of the dangerous environment. The Court did, however, stress that its finding may have been different had the nature of the employee’s work been different. (2) Employers need to reconsider their substance abuse policies and ensure that they are drafted in a manner that will not be seen to be infringing unjustifiably on the private rights of their employees. A practical approach to this will be required, rather than an overall reliance on a zero-tolerance policy.

The judgment is available here. 

Retrospective reinstatement

• Oudtshoorn Local Municipality v TW Tytya (C290/2021) [2024] ZALCCT 23 (6 June 2024)

Review and cross-review of arbitration award – respondent reinstated retrospectively to date of his dismissal, but amount of backpay circumscribed on grounds that he was on paid suspension for 24 months – distinction between compensation, re-employment and reinstatement – arbitrator failed to comprehend what reinstatement retrospective to date of dismissal means – any ground for limiting quantum of backpay is reliant on mistake of law that regards ‘backpay’ as compensation – applicant must remunerate respondent in accordance with his retrospective reinstatement from date of dismissal.

Key takeaways: (1) Reinstatement is the primary remedy for a substantively unfair dismissal and is aimed at placing an employee in the position s/he would have been in but for the unfair dismissal. Reinstatement may be ordered from a date later than the date of the dismissal, thus limiting retrospectivity. Where reinstatement is ordered retrospectively to the date of dismissal, backpay will then be due for the period calculated from the date of dismissal. (2) Compensation as a remedy for a substantively unfair dismissal is something different to backpay and may only be awarded where one of the exceptions in section 193(2) of the LRA is present, including that the circumstances surrounding the dismissal are such that a continued employment relationship would be intolerable. To defend a claim for reinstatement in arbitration or court proceedings, an employer must set out why the remedy of reinstatement to date of dismissal would be intolerable for the employer.

The judgment is available here. 

Restraint of trade

• MPU Communications (Pty) Ltd v Griffiths and Others (J 1633/23) [2024] ZALCJHB 29 (7 February 2024)

Application for enforcement of restraint of trade agreement and confidentiality undertakings against first to fourth respondents; and to interdict and restrain fifth respondent from unlawfully competing with applicant – in respect of second respondent, applicant failing to demonstrate that its information, know-how, technology or methods is unique and peculiar to it – nothing to suggest that second respondent is in possession of trade secrets and confidential information justifying protection by restraint – not for court to interdict and restrain employees who refuse to make any further undertakings beyond what contract provides; and in circumstances where there is no discernible evidence that they have acted in breach of their restraint obligations – application in respect of second respondent dismissed – in respect of first, fourth and fifth respondents, settlement agreements made orders of court – restraint enforced against third respondent.

Key takeaways: (1) Employers should be mindful of their onus of proof in seeking to enforce a restraint of trade against a former employee, which requires them to prove the existence of a restraint obligation that applies to the former employee; and that the former employee acted in breach of the restraint. Employers should accordingly not launch restraint interdict proceedings without having sufficient evidence to prove that the employee in question is, in fact, in breach of her/his restraint of trade agreement. It is not sufficient to require the employee to prove that s/he has not breached the restraint. In this case, the employer did not prove, nor did it even allege, that the employee is or was ever employed by the alleged competitor. (2) In seeking undertakings from an employee who is subject to a restraint of trade, an employer is bound by the provisions of the restraint itself and where an employee fails to provide undertakings that are broader than the original restraint, this is not a basis on which to approach a court for urgent relief to enforce the restraint.   

The judgment is available here. 

Misconduct dismissal

• Jewellery Council of South Africa v Maharaj and Others (JR2527/21) [2024] ZALCJHB 236 (30 May 2024)

Review application – arbitration award finding dismissal substantively unfair – dismissal for gross disrespectful conduct – altercation with chief executive officer (CEO) – CEO allegedly threatened – employee put on short time and salary reduced by 40% while CEO’s salary unchanged – employee’s position as accountant was critical and demanding and required her to work more than three days a week of short time – threats to take CEO to Commission for Conciliation, Mediation and Arbitration and courts not constituting misconduct – what was said during altercation was largely factual and not untrue – review application dismissed in part – compensatory aspect of award set aside – in awarding the employee eight months’ compensation at the rate before her salary reduction, commissioner committed an error of law – compensation to be calculated at the remuneration rate at the time of the employee’s dismissal.

Key takeaway: In granting the remedy of compensation for an unfair dismissal, arbitrators must abide by the limits provided for in section 194 of the LRA. In terms of this section, any award of compensation must be based on the employee’s rate of remuneration at the date of dismissal.

The judgment is available here.