Employers Beware: Failure To Comply With S189 Can Be Expensive

Section 189 of the Labour Relations Act 66 of 1995, as amended (“the LRA”) sets out the parameters within which employers must operate when contemplating dismissals for operational requirements. Employers are required to adhere to section 189 and to ensure that the contemplated restructuring exercise is fair, both procedurally and substantively.

It is well established that employers have the right to restructure their business operations or retrench employees when necessary. However, parallel to the right to restructure operations, employers have a legal obligation to demonstrate that the decision to restructure or to retrench employees is commercially rational and that there exists a true reason for it.

In the recent unreported case of Chene Blom v Goldfields Logistics (Pty) Ltd JS858/16, the Labour Court was required to determine whether the dismissal of Ms Chene Blom (“the employee”) by Goldfields Logistics (“the employer”) for operational requirements was fair.

In this case, the employer had embarked on a restructuring exercise during January 2016. During the consultation process, the employee was not offered alternatives to dismissal, despite the employer having a vacant position which the employee could have filled.

The employee was ultimately retrenched. Aggrieved by the dismissal, the employee referred an unfair dismissal dispute to the Commission for Conciliation, Mediation and Arbitrations (“the CCMA”). The dispute remained unresolved at conciliation and was referred to the Labour Court for adjudication.

In assessing the evidence, the Court concerned itself with whether the employer followed due process in the retrenchment exercise, whether the employer had considered alternatives to dismissal and whether it was possible for the employer to avoid such dismissal.

Procedural Unfairness

In determining whether there was any procedural unfairness, the Court noted a few procedural defects in the process followed by the employer, including that the section 189(3) notice furnished to the employee was not in compliance with the requirements envisaged by the LRA. In terms of section 189(3)(b), the employer is required to set out alternatives to dismissal which it has considered before proposing the dismissal, as well as the reasons for rejecting the alternatives to dismissal.

The Court noted that substantial compliance by the employer was insufficient and that strict compliance was required. In the circumstances, the Court was satisfied that the employee was faced with a fait accompli.

Substantive Unfairness

In considering the substantive fairness of the dismissals, the Court noted that there was a vacant post of Fleet Manager and that this post was available during the consultation process and it was not offered to the employee. No reason was furnished to her explaining why she could not be offered this post. It is worth noting that, Mr Kruger, a General Manager of the employer, testified that the employee would not have required further training for the position of Fleet Manager.

The Court quoted the judgment of SA Airways v Bogopa and Others (2007) 28 ILJ 2718 (LAC) and highlighted that “…an employer may not dismiss an employee for operational requirements when such employer has a vacant position…”.

The Court held that the employee’s dismissal was not the only viable option and that her dismissal could have been avoided. The Court further held the view that the employee’s dismissal was already pre-determined and thus a fait accompli.

In its judgment, the Court held that the employee’s dismissal was both procedurally and substantively unfair and awarded her the maximum compensation and the employer was required to pay the costs.

Employers are encouraged to tread carefully when embarking on a restructuring exercise, as any failure to comply with the provisions of section 189 of the LRA could result in adverse consequences for the employer. In order to mitigate against any claims, employers must ensure that any engagement with employees under the auspices of operational reasons must be genuine, thorough and meaningful.

Written by Sinokuhle Skondo and Neil Coetzer
of Cowan-Harper-Madikizela Attorneys

Sino of Cowan-Harper-Madikizela
Neil Coetzer of Cowan-Harper-Madikizela Attorneys,