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South Africa: Groundbreaking judgment: Constitutional Court rules on Labour Court jurisdiction in large-scale retrenchments

24 May 2024
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Overview

  • On 21 May 2024, the Constitutional Court handed down a groundbreaking majority judgment in which it considered the purpose, meaning and scope of section 189A(13) of the Labour Relations Act 66 of 1995 (LRA).
  • In particular, the apex court was asked to consider whether, given the wording in section 189A(18) of the LRA, the Labour Court has jurisdiction to adjudicate a dispute about the procedural fairness of a dismissal for operational requirements.
  • In the judgment penned by Zondo CJ, the Court held that section 189A(18) did not oust the jurisdiction of the Labour Court to entertain procedural fairness disputes in large-scale retrenchments.

On 21 May 2024, the Constitutional Court handed down a groundbreaking majority judgment in which it considered the purpose, meaning and scope of section 189A(13) of the Labour Relations Act 66 of 1995, as amended (LRA).

In particular, the apex court was asked to consider whether, given the wording in section 189A(18) of the LRA, the Labour Court (LC) has jurisdiction to adjudicate a dispute about the procedural fairness of a dismissal for operational requirements.

In the judgment penned by Zondo CJ in Regenesys Management (Pty) Ltd t/a Regenesys v Ilunga and Others (CCT 220/22) [2024] ZACC 8 (21 May 2024), the Court held that section 189A(18) did not oust the jurisdiction of the Labour Court to entertain procedural fairness disputes in large‑scale retrenchments.

The facts

In 2015, Regenesys Management (Pty) Ltd (Regenesys) conducted a restructuring exercise that resulted in the dismissals of nine employees for operational requirements. The retrenched employees referred an unfair dismissal dispute to the CCMA, claiming that their dismissals were both procedurally and substantively unfair. Conciliation was unsuccessful and the employees referred the dispute to the LC for adjudication.

The LC entertained the procedural fairness arguments and found the dismissal of all the employees to be procedurally unfair. It also found that certain employees’ dismissals were substantively unfair.

Regenesys appealed to the Labour Appeal Court (LAC). The company contended, first, that the LC did not have jurisdiction to determine the procedural fairness of the dismissals and, second, that the LC erred when it found that several dismissals were substantively unfair.

On the latter issue, the finding of substantive fairness, the LAC upheld the finding of the LC. However, on whether the LC had jurisdiction to determine the procedural fairness of the employees’ dismissals, the LAC disagreed with the court a quo and concluded that the LC did not have jurisdiction to determine procedural fairness.

Before the Constitutional Court, Regenesys sought leave to appeal against that part of the LAC’s judgment upholding the LC’s finding that the dismissal of certain employees had been substantively unfair. The retrenched employees sought leave to cross-appeal, on the basis that the LAC erred in finding that the LC did not have jurisdiction to adjudicate a dispute about the procedural fairness of a dismissal for operational requirements.

In our analysis of the Constitutional Court’s judgment below, we focus only on the issues in the cross-appeal.

Constitutional Court judgment

The issue before the Court in the cross-appeal was whether, given the provisions of section 189(18), the LC had jurisdiction to adjudicate a dispute about the procedural fairness of a dismissal for operational requirements, including one brought to the LC in terms of section 189A(13).

In dealing with this question, the Court studied the historical judicial interpretations of the relevant sections.

Section 189A(13) of the LRA provides as follows:

‘If an employer does not comply with a fair procedure, a consulting party may approach the Labour Court by way of application 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;

(d)     make an award of compensation, if an order in terms of paragraphs (a) to (c) is not appropriate.’

Before this judgment, our jurisprudence reflected the view that applications in terms of section 189A(13) were an ordinarily urgent remedy that enabled a court to intervene by setting a derailed retrenchment process back on track. Whilst the Constitutional Court agreed with this proposition, it also held that the purpose of the section went much further than previous judgments dealing with the section seemed to suggest:

  • According to the Court, the section’s purpose is twofold. Subsections (a) to (c) reflect the primary purpose of the section, which is to enable the LC to compel an employer to comply with a fair procedure before employees may be finally dismissed for operational reasons. In other words, the Constitutional Court agreed that the primary purpose was intervention 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 without insisting on compliance with fair procedure. The majority judgment held that relief in terms of section 189A(13)(d) could be granted as a standalone remedy where orders contemplated in section 189A(13)(a) to (c) are not appropriate.

The Court then turned to consider whether section 189A(18) ousted the jurisdiction of the LC with regard to disputes about the procedural fairness of retrenchments. That section provides that the LC may not adjudicate a dispute about the procedural fairness of a dismissal for operational requirements in any dispute that has been referred to the LC following a conciliation process. Once again, the Constitutional Court had regard to prior judgments, which held that the effect of section 189A(18) was to oust the LC’s jurisdiction.

In its consideration of subsection (18), the Court’s reasoning was as follows:

  • The LC has jurisdiction to adjudicate disputes brought in terms of 189A(13) about the procedural fairness of large-scale retrenchments. The remedies provided for in that section are special remedies, that enable a party to refer the dispute for adjudication. As a result, disputes referred in terms of section 191 (i.e., where there is conciliation first) cannot be heard by the LC.
  • In casu, the dispute about procedural fairness was referred in terms of subsection (13). Therefore, this did not trigger the LRA’s exclusion of the LC’s jurisdiction.
  • Any other interpretation would mean that even though workers have a right to procedural fairness, they would have nowhere to go to enforce that right.

The Constitutional Court set aside the LAC’s order and reinstated the order of the LC which ordered the reinstatement of the employees whose dismissals were substantively unfair and awarded compensation to those employees whose dismissals were held to be procedurally unfair.

Conclusion

This case is an important one and has significant consequences for litigants who seek to challenge the fairness of their retrenchments.

In particular, the Constitutional Court’s consideration of the remedies available in section 189A(13) indicates that employees to whom section 189A applies are expected to move quickly to achieve the primary purpose of subsection (13).

Should they fail to do so and seek only compensation in terms of subsection (13)(d), they should be wary that this is not the primary remedy available in terms of section 189A(13). A Court might not be of the opinion that it would be appropriate to grant this relief, particularly so, as Rogers J warns in his concurring judgment, where compensation for a large number of employees might spell disaster for the employer.