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Dismissing employees who fail to accept a change to terms and conditions of employment

Can an employer dismiss employees who refuse to accept a change to their terms and conditions of employment? This question has been debated for at least two decades and concerns the interpretation of section 187 (1) (c) of the South African Labour Relations Act, 1995 (“LRA”), as amended over the years. This section provides that a dismissal will be automatically unfair if the reason for dismissal is “a refusal by employees to accept a demand in respect of any matter of mutual interest between them and the employer.”

In answering this question, the Labour Appeal Court (“LAC”), in a number of decisions, distinguished between what were described as “conditional dismissals” and “final dismissals”. A conditional dismissal took place if an employer dismissed employees in an attempt to compel them to agree to a change to terms and conditions of employment. If this occurred, it would constitute an automatically unfair dismissal. However, if the employer failed in its attempt to persuade employees to accept the change and then dismissed the employees on the basis of its operational requirements so as to be able, for example, to employ other persons who were willing to work the new shift system, this would be a final dismissal and would not constitute an automatically unfair dismissal. This is because the employer was not trying to compel the employees to agree to the new shift system. However, even if the dismissal was not automatically unfair, it could still be an unfair dismissal if the change could not be justified on operational grounds.

A recent South African Constitutional Court now dealt with this question.

Background

Aveng Trident Steel (Pty) Ltd experienced a downturn in sales and increased costs. It gave notice to the National Union of Metal Workers (“NUMSA”) of possible retrenchments. It proposed that the workforce be restructured and that job descriptions be redesigned. The consultation process proceeded and this resulted in some 253 employees taking voluntary severance benefits, and four employees being retrenched.

Thereafter, an interim agreement was concluded between Aveng and NUMSA in terms of which NUMSA agreed to work in accordance with Aveng’s redesigned job descriptions until such time as a five grade job structure proposed by NUMSA could be finalised and implemented. However, NUMSA terminated the agreement before the job grading system was implemented.

During subsequent negotiations, NUMSA indicated that it would only work in accordance with Aveng’s system if its members were granted a wage increase. Aveng stated that it could not incur the costs of the wage increase and indicated that it would continue to implement the redesigned job descriptions to address its operational requirements. NUMSA members were given the opportunity to continue performing the redesigned jobs but were told that, if they rejected this offer, they would be retrenched.

Approximately 733 employees rejected the offer and were dismissed on the basis of Aveng’s operational requirements.  NUMSA referred a dispute to the Labour Court and argued that the dismissals were automatically unfair and that the employees had been dismissed because they had refused to accept Aveng’s demand that they work in accordance with the redesigned job descriptions. NUMSA and its members were unsuccessful in both the Labour Court and the Labour Appeal Court and appealed to the Constitutional Court.

The Constitutional Court judgment

In National Union of Metal Workers of South Africa and Others v Aveng Trident Steel (a division of Aveng Africa (Pty) Ltd) and Another, the Constitutional Court’s decision consisted of the three judgments.

The first judgment, penned by Mathopo AJ, rejected the notion of final and conditional dismissals. It said that what a court has to determine was what the reason for the dismissal was – was it the employer’s operational requirements or was it because the employee had refused to accept an employer demand? This was simply a factual enquiry.  The second and the third judgments agreed that what had to be determined was what the true reason for the dismissal was.

This approach would cause relatively few problems for employers in the context of retrenchments or the restructuring of the workforce. If an employer can show that it has a genuine operational need to retrench or restructure, and if the employer offers alternative employment as a means of avoiding or minimising dismissals, but the employees refuse this offer, the operational need to dismiss still exists.

An important question that has to be asked is whether section 187(1)(c) will be applied in the same manner in the context of collective bargaining?

For example, an employer may decide that its production process would be more efficient and its profits would increase if a contractually agreed shift system was replaced with a new shift system in circumstances where there is no need to retrench. The employer then enters into negotiations with the recognised trade unions in order to seek agreement to this change. The unions refuse to agree to the change of the shift system unless they are accorded a significant wage increase.

One option for the employer would be to lock-out the relevant employees in an attempt to compel them to accept the change. But would the Aveng decision give the employer the option to dismiss the employees in order to replace them with new employees who would be prepared to work the new system on the basis of its operational requirements? If this were to be accepted, it could be argued that this subverts the scheme of the LRA and the collective bargaining process. The scheme of the LRA envisages that, if agreement cannot be reached on “interest disputes”, the parties may resort to a strike or lock-out to try to enforce their demands. Would a court, in this context, accept that an employer has this additional “weapon” to enforce its demand? The answer to this may be that the dismissal may not be automatically unfair but that a court would still be able to investigate whether the dismissal was fair and the employer would still have to comply with the requirements for a fair dismissal based on its operational requirements.

Peter le Roux

Employment | Executive Consultant

pleroux@ENSafrica.com

+27 83 626 2909