NUMSA v Aveng Trident Steel
In NUMSA v Avent Trident Steel the Constitutional Court had the opportunity to revisit the application of section 187(1)(c) of the LRA in relation to automatically unfair dismissals. The Judgment is both unremarkable, in the sense that it confirms a long body of prior jurisprudence permitting employers to engage in retrenchments in order to secure a reduction in terms and conditions of employment, but also significant because it has created substantial uncertainty in relation to the legal test that applies where disputes arise.
By way of an introduction, the erstwhile section 187(1)(c) of the LRA (now amended) rendered a dismissal automatically unfair if the reason for the dismissal was “to compel the employee to accept a demand in respect of any matter of mutual interest between the employer and employee”. The section applied to collective bargaining / a power play. It permitted employers to demand that employees accept reduced terms and conditions of employment, but it prohibited them from terminating employment in order to compel the employees to accept that demand.
In a number of Judgments limiting its application, the section was held not to constitute an absolute prohibition against the termination of employment. That is so because, where there was a genuine operational need to restructure, employers retained the right to rely on section 189 in order to retrench those employees who refused to accept reduced terms and conditions. This could occur irrespective of whether the reduction was initially proposed as part of a restructuring exercise or commenced during collective bargaining and later transformed into an operational necessity.
Notwithstanding the above, the law reports are replete with Judgments prohibiting so-called ‘conditional retrenchments’. That is to say, employers were prohibited from retrenching employees for refusing to accept a reduction to their terms and conditions of employment but simultaneously offering to re-employ those employees if they capitulated and accepted the proposed new terms and conditions of employment. This constituted the automatically unfair dismissal envisaged in section 187(1)(c) of the LRA.
The abovementioned Judgments, in turn, gave rise to concerns that section 187(1)(c) was contrary to public policy because it discouraged employers from offering re-employment to retrenched employees for fear that they might trigger an automatically unfair dismissal. These concerns were addressed by way of the Labour Relations Amendment Act 6 of 2014 which amended section 187(1)(c) to state that a dismissal would be automatically unfair if the reason for the dismissal is “a refusal by employees to accept a demand in respect of a matter of mutual interest between them and their employer”.
Gone was any reference to the word ‘compel’ or considerations of ‘conditionality’. Instead, the focus became whether the reason for the dismissal, in the first place, was the employees’ refusal to accept a demand or alternatively the genuine operational requirements of the employer. The former was prohibited, the latter was permitted.
Turning to the facts before the Constitutional Court in NUMSA v Aveng Trident Steel. Aveng had engaged in a restructuring exercise as a result of a decline in sales and profitability. It had sought to reduce terms and conditions of employment in the form of redesigning job profiles and altering rates of pay. An interim agreement in respect of the new terms and conditions of employment was concluded with NUMSA which operated for approximately five months. NUMSA unexpectedly reneged on the agreement. Consequently, Aveng advised NUMSA that the employees could elect to remain employed in terms of the new job descriptions (applicable in the interim agreement) and be paid on the rates applicable in terms of the MEIBC main agreement, or alternatively they would be retrenched. Approximately 733 employees rejected the offer and they were dismissed for operational reasons. NUMSA asserted that the reason for the dismissal was that the employees had refused to accept a demand and consequently that it was automatically unfair. Aveng asserted that the reason was its genuine operational requirements and accordingly that the dismissal was fair.
Fortunately, all ten of the presiding Justices of the Constitutional Court agreed that the appeal should be dismissed and that the Judgment of the Labour Appeal Court should stand. That is to say, they agreed that where there is a genuine operational need to reduce terms and conditions of employment, then section 187(1)(c) does not find application and the dismissal is fair. The critical question, as it has always been, is what the reason for the dismissal is.
Unfortunately, the Justices split five-five across three separate Judgments in relation to the legal test that applies to determining the reason for the dismissal.
In the first Judgment, the Court favoured the so-called ‘Afrox’ test. That test involves two parts. Firstly, the Court must determine whether the act (i.e. a reduction in terms and conditions of employment) is a sine qua non or pre-requisite for the dismissal. If that is the case, then an assessment must be made as to the dominant/proximate cause of the dismissal. This involves drawing inferences from the facts. These parts are often referred to as ‘factual’ and ‘legal’ causation in criminal law and delict matters. Thus, if the true reason for the dismissal (based on the dominant impression) is the employees’ refusal to accept a demand, the dismissal would be automatically unfair. Conversely, if the dominant impression is that the reason for the dismissal was the employer’s operational requirements, then the dismissal would be fair.
In the second and third Judgments, however, the remaining five Justices rejected the factual and legal causation test and instead applied the test adopted by the Supreme Court of Appeal in Stellenbosh Farmers’ Winery in relation to resolving material disputes of fact. This involves an assessment of the credibility of the witnesses (including internal and external contradictions in the evidence given, bias as well as demeanour in the witness box), their reliability (including the opportunity to observe the event in question as well as the quality, integrity and independence of the witnesses recall) and generally the probabilities or improbabilities of the contradictory versions.
Consequently, in the second and third Judgments, considerations of factual and legal causation have no bearing on any assessment of what the true reason for the dismissal is. The fact that the Constitutional Court split five-five means that there is presently no certainty in relation to the legal test applicable to determining the true reason for the dismissal in terms of section 187(1)(c) or more generally in relation to automatically unfair dismissals as a whole.
While such legal issues may not be relevant to the layperson, they have a critical impact on how automatically unfair dismissal cases are pleaded, argued and how witness evidence is ultimately presented. The split on this issue renders such disputes all the more complicated and fraught with risk. Unfortunately, this issue will have to be re-visited by the Constitutional Court so that clarity can be provided. In the meantime, competent advice in respect of any automatically unfair dismissal dispute must be sought so as to appropriately mitigate the risk.