The Constitutional Court settles the position on termination notices

22 Feb 2016

On 3 March 2015 the Labour Appeal Court (LAC) ruled that the Court’s prior interpretation of the validity of termination notices issued in violation of section 189A(8)(b)(i) of the Labour Relations Act (LRA) was incorrect.  On 22 January 2016 the Constitutional Court in Steenkamp & Others v Edcon Limited CCT 46/15 and CCT 47/15 (22/01/2016) confirmed the LAC’s judgment that dismissals which failed to comply with the specific time period imposed by section 189A were not rendered null and void and of no force and effect.

To recap, section 189A regulates large-scale retrenchments.  Read with section 189 which governs operational requirements dismissals in general, an employer is obliged to consult with appropriate bargaining agents and to engage in a meaningful joint consensus-seeking process aimed to reach consensus on appropriate measures to avoid, minimise, change the timing and mitigate the adverse effects of the dismissal as well as the method for selecting the employees to be dismissed and the severance pay to be paid.  This therefore invokes the section 189(3) consultative process.

With reference to large-scale retrenchments, section 189A allows for 2 procedures that may be followed after the section 189(3) notice has been issued:

(i) Where in terms of section 189A(3) either the employer has requested a facilitator or where the consulting parties representing the majority of the employees who the employer contemplates dismissing has requested facilitation and notified the CCMA accordingly within 15 days of the section 189(3) notice.  In these circumstances where a facilitator is appointed, and 60 days have elapsed from the date on which notice was given in terms of section 189(3) the employer may only issue a notice of termination at the end of the said period and either the registered trade union or the employees who have received such notices of termination may either give notice of a protected strike or refer a dispute to the Labour Court based on substantive unfairness.

(ii) Where a facilitator is not appointed a different process is followed in that the parties may refer a dispute to the CCMA after a period of 30 days have lapsed from the date on which notice was given in terms of section 189(3) and once the CCMA issues a certificate of outcome stating that the matter remains unresolved or a period of 30 days has lapsed since the referral was received by the CCMA, the employer may issue notices of termination.  Similarly as with the above, a registered trade union or the employees who have received such notices of termination may give notice of a protected strike or refer the dispute to the Labour Court based on substantive unfairness.

In terms of section 189A(10) a consulting party may not give notice of a strike in respect of a dismissal if it has referred a dispute concerning whether there is a fair reason for their dismissal to the Labour Court and likewise may not refer such a dispute to the Labour Court if it has given notice of a strike.  Whilst the amendments have removed the test for determining substantive fairness of a dismissal, an employee may bring an application to the Labour Court prior to dismissal alleging procedural unfairness in terms of section 189A(13) in which case the Labour Court may order the employer to follow procedure or restrain the employer from dismissing the affected employees until a fair procedure has been followed.

The LAC in Edcon were called on to interpret the provisions of section 189A(8) and in doing so held that the interpretation of same in De Beers Group Services (Pty) Limited v NUM [2011] 4 BLLR 318 (LAC) was incorrect.  In De Beers, the employer had similarly chosen not to use a facilitator and on 21 January 2009.  It issued section 189(3) notices inviting the employees to consult with regard to their proposed dismissals based on operational requirements.  On 13 March 2009, the employer issued notices of termination which would take effect on 22 March 2009 to 23 April 2009.  On 22 March 2009 the notice of termination began, some 60 days after the notices in terms of section 189(3) were given to the employees.  On 14 April 2009 the employees’ union referred the dispute to the CCMA for conciliation, some 3 months after the section 189(3) notices were issued, 30 days after the issue of the notice of termination and 9 days before the individuals were due to be retrenched.  On 23 April 2009 the employees were retrenched and on 19 May 2009 the conciliation meeting took place at the CCMA which issued a certificate of non-resolution.  The union had referred an unfair dismissal dispute to the Labour Court seeking an order declaring that the notices of termination issued to the employees on 13 March 2009 were invalid; alternatively, directing the employer to reinstate the employees pending compliance of a fair procedure and the requirement of section 189A(8) and the further alternative of voiding the employees compensation for procedural unfairness.  Both the Labour Court and the Labour Appeal Court held that if the employer fails to comply with the mandatory requirement of consultation in terms of section 189A(2) and moves to terminate the employment in breach of these provisions, then the dismissal must be considered to be invalid and accordingly of no force and effect.  A valid notice could only have been issued once a certificate of outcome had been produced.  This was because section 189A(2) was explicit in its language that an employer must give notice of termination in accordance with the provisions of section 189A.

In Edcon the employer had similarly chosen not to use a facilitator.  Edcon commenced with the process of restructuring during April 2013 which resulted in the termination of employment of approximately 3000 of its 40 000 employees.  In light of the fact that the facilitation route had not been followed the dismissals are government by section 189A(8) of the LRA.  51 referrals had been made to the Labour Court challenging the fairness of the dismissal and these referrals involved a total of 1 331 employees.  There was non-compliance with the time periods set in section 189A(8)(a) and (b).  The LAC sat as a Court of first instance.  The employees relied on a single cause of action namely that their dismissals were invalid within the meaning of that term as understood by the LAC in De Beers and accordingly having asserted their dismissals to be invalid and that they should be reinstated with full back pay.

The LAC in Edcon had relied on the following in the finding that De Beers was incorrectly decided:

  1. The implicit acceptance by the AD in Schierhout v Minister of Justice 1926 AD 99 that a wrongful or invalid termination can in effect bring a contract of employment to an end is consistent in our labour law.  Employees therefore had to be either reinstated and/or receive compensation as recourse.
  2. Sections 189A(8), (9) and (13) contemplates other remedies where there is non-compliance with the procedural provisions of section 189A(8).  The employees may embark on a strike and apply to the Labour Court to compel the employer to follow a fair procedure, interdict the employer from dismissing the employees before having done so, order the employer to reinstate the employees until it has complied with a fair procedure, or award compensation for any procedural unfairness.  Their aim is therefore to ensure that if the union or employees see a failure of procedure in the consultative process they should act immediately to rectify it as soon as the flaw is detected.  Remedies for procedural flaws should preferably be resorted to before the dismissal takes place or in its immediate aftermath.
  3. In addition, the concept of an invalid dismissal is incompatible with what the legislator intended in terms of sections 189 and 189A respectively.  As such, the LAC were persuaded that non-compliance with section 189A(8) was not intended by the legislator to result in the invalidity or nullity of any ensuing dismissal and that the De Beers judgment would have the anomalous effect of removing conventional dismissals from the scope of Chapter 8 of the LRA and will not be assessed on the basis of fairness merely because it was procedurally premature and branded as invalid.  The Court held further that the categorisation of the dismissal as invalid leads automatically to reinstatement which is a sanction not in keeping with the purpose of the LRA with reference to section 193(2)(d).

The majority in the Constitutional Court as per Zondo J found that the LRA does not contemplate the concept of an “invalid dismissal” meaning further that a breach on the part of an employer in complying within section 189A(8) may result in the dismissals being unfair, but not invalid.  Section 189A(8), (9) and (13) referred to above contemplates appropriate remedies in these instances.

It is therefore incumbent on employers to ensure compliance with the procedural provisions of section 189A and in instances where there is a failure on the part of the employer in doing so will not result in the subsequent dismissals being rendered invalid.  The dismissals however may be challenged as ordinary procedurally unfair dismissal claims.

See also: Mutual separation agreements: Caveat subscriptor

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
Get In Touch!

Dispute Resolution articles by

Dispute Resolution articles on GoLegal