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A Question of Causation: The Constitutional Court holds that an employer can dismiss employees who refuse to agree to a change in terms and conditions based on that employer’s operational requirements

Reading Time 4 minute read

Following the construction boom leading to the 2010 FIFA World Cup hosted in South Africa, many industries in the country, including the construction and steel manufacturing industry, experienced a gradual downturn in business. Aveng Trident Steel, a division of Aveng Africa (Pty) Ltd was not immune and, in early 2014 the company decided to restructure its operations to reduce costs and maintain economic viability. In doing so it began a retrenchment process envisaging the dismissal of around 400 employees.

As part of the restructure Aveng proposed redesigned job descriptions through a reconfiguration of its 13 grade structure to a condensed 5 grade structure. The objective was to combine roles previously performed separately into a single role to save costs and preserve jobs while ensuring productivity.

The redesigned jobs would align with the relevant sectoral collective agreement and at the applicable prescribed rate in the MEIBC Main Agreement. This meant that the employees would continue getting paid as they were before. 

In October 2014, Aveng and NUMSA agreed that the employees would work in line with the redesigned jobs descriptions until finalisation of the grade structure, contemplated to be March 2015. However, before the expiry of this agreement, NUMSA declared that its members would cease working in terms of the redesigned job descriptions citing a lack of consultation. 

Following this, Aveng gave notice that the employees would face retrenchment unless they accepted the offers of employment into the roles with the redesigned job descriptions. None of the employees accepted.  Aveng then retrenched these employees. 

NUMSA challenged the fairness of the dismissals claiming that they were automatically unfair in terms of section 187)(1)(c) of the LRA.  Sections 187(1)(c) provides that:

“a dismissal is automatically unfair … if the reason for the dismissal is a refusal to accept a demand in respect of any matter of mutual interest between them and their employer.”

The Labour Court and Labour Appeal Court had held that the dismissals were not automatically unfair as the cause of or actual reason for the dismissals was not the refusal to accept a demand in respect of a matter of mutual interest, but Aveng’s operational requirements. 

The Constitutional Court agreed with the Labour Appeal Court. 

It stated that at the outset that there is a distinction between a section 189 consultation process and a collective bargaining process. The former is characterized by a consensus seeking objective where jobs are on the line whereas, in the latter process, the parties strategically wrangle with each other to secure the best deal for their respective constituencies in normal circumstances. 

The Constitutional Court found that NUMSA’s construction of a section 189 consultation process resembled a collective bargaining process in that they sought to solicit wage increases during the consultations and sought to take advantage of Aveng’s vulnerability.

The Constitutional Court went on to accept that section 187(1)(c) does not prohibit employers from dismissing employees who do not accept proposals to amend their terms and conditions of employment based on operational grounds and that a proper purposive interpretation of section 187(1)(c) invited an inescapable necessity to determine the real reason for the dismissal, which is a question of fact requiring an objective enquiry. The Constitutional Court applied with approval the two stage test established by the Labour Appeal Court.

  1. What was the factual cause of the dismissal?This is determined by asking whether the dismissals would have occurred but for the refusal to agree to the change to terms and conditions of employment.If the answer thereto is yes, then the dismissal is not automatically unfair as the dismissal would have occurred nevertheless.However, if the answer is no, this does not invariably mean that the dismissal is automatically unfair, instead, it extrapolates the enquiry to legal causation.
  2. What was the legal cause of the dismissal?This is determined by asking whether notwithstanding that there is evidence suggesting a possibility that the dismissals occurred because the employees refused to accept a proposed change to terms and conditions, can the employer still show that the dismissals were for a different, more dominant and proximate reason which was based on legitimate operation requirements?If the answer is yes, then the dismissals are not automatically unfair.

In applying this test, the Constitutional Court held that it is indisputable that the employees would not have been dismissed if they had accepted the proposed changes to their terms and conditions of employment.  Moreover, it was clear that Aveng intended to avoid dismissals. In those circumstances, NUMSA’s conduct in withdrawing the employees from continuing work in the redesigned jobs and demanding increased wages was not in good faith and placed Aveng in a precarious position. 

Accordingly, the Constitutional Court concluded that Aveng’s operational requirements were the proximate cause of the dismissals and not the employees’ refusal to accept a demand. Consequently, while an employer may not generally dismiss employees who refuse to accept a demand in respect of a change to the terms and conditions of their employment, it is not unfair to dismiss employees who refuse to accept a change in terms and conditions of employment during a section 189 process if the objective of the proposed change is the preservation of the employees’ jobs.

This bulletin was prepared by partner Ludwig Frahm-Arp and candidate attorney Tshepo Mokoana.

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