Operational options occasionally open to employers
26 Apr 2018
The recent case of National Union of Metalworkers of South Africa (NUMSA) and Aveng Trident Steel (Aveng) has finally (at least for now) settled the debate regarding automatically unfair dismissals in terms of section 187(1)(c) of the Labour Relations Act (“LRA”) in the context of an employer’s operational requirements.
Aveng experienced an economic downturn as a result of a decline in sales volumes and an increase in its base costs. As a result, it issued a section 189 notice in terms of the LRA.
During the consultation process, and in an attempt to prevent retrenchments, Aveng embarked upon a strategy to restructure and optimize its existing business model. This included redesigning job descriptions to broaden the scope of its employees’ duties. NUMSA later demanded salary increases for its members, which Aveng could not afford. Accordingly, Aveng implemented the new structure and declared the affected employees’ positions to be redundant. They were all offered jobs in the new structure. Many accepted this alternative to retrenchment but 733 rejected it and were dismissed.
NUMSA relied on the new wording of section 189(c) of the LRA and argued that Aveng failed to establish a need to retrench and that the employees were, in fact, dismissed for refusing to accept a demand in respect of a matter of mutual interest. To this end, it argued that the distinction drawn in the Fry’s Metals v NUMSA case can no longer be applied. In Frys Metals the court distinguished between two scenarios:
- If an employer dismisses employees in an attempt to compel them to agree to a change to a term/condition of their employment, this constitutes an automatically unfair dismissal;
- If an employer dismisses employees after failing to persuade them to accept a change, and takes the view that it will employ other employees who will work according to the change it seeks to implement, this will not constitute an automatically unfair dismissal. Here the employer is not trying to compel the employees to agree to the change.
In a long and technical decision, the court held that the above distinction in the Fry’s Metals case is still good law.
This means that an employer who:
- retrenches employees who refuse to accept a reasonable alternative to retrenchment which accommodates the employer’s operational requirements; and
- replaces them with employees who will work within the parameters of the employer’s operational requirements,
cannot be said to have automatically unfairly dismissed its employees.
However, employers must still err on the side of caution and seek guidance from employment law specialists when embarking on a retrenchment process in these circumstances. We say so for the following reasons:
- the employer must still satisfy the court that its employees were fairly dismissed and that it had a genuine operational requirement to change the term/condition of employment;
- there will, in all likelihood, be a factual dispute regarding the intention of the employer when dismissing the employees. To this end, what is communicated to employees during the consultations will be critical; and
- this judgment is likely to be taken on appeal.
- Can a retrenchment process start before a business rescue plan has been approved?
- Who to consult during a retrenchment exercise?