The hotly contested right of an employer to implement alternative terms and conditions of employment based on its operational requirements and to retrench those employees who do not accept the alternative terms and conditions of employment, was considered by the Labour Appeal Court in the matter NUMSA and Others v Aveng Trident Steel and Others, JA25/18. Judgment was handed down on 13 June 2019.

In this case, Aveng Trident Steel was facing a sharp decline in sales volume and sought to realign its cost structure to ensure its sustainability. It initiated a consultation process in terms of section 189A of the LRA to realign its business and proposed, inter alia, the review of its organisational structure and redefinition of certain job descriptions. It proposed to cluster jobs along the lines of the provisions of the Main Agreement of the MEICB, which would lead to a combining of job functions resulting in significant cost savings.

NUMSA accepted the proposed realignment. This resulted in 249 employees opting for voluntary severance packages, 4 employees being retrenched and the termination of 257 limited duration contracts. Aveng Trident Steel concluded an Interim Agreement with NUMSA in terms of which consultations about job descriptions would continue whilst the remaining employees would perform the functions of those who had departed. 

NUMSA prematurely terminated the Interim Agreement and demanded a pay increase for the employees performing the work which was performed by those who had departed. Faced with the inevitability of not being able to continue with its operations, Aveng Trident Steel agreed to the increase and engaged NUMSA in further consultation regarding the redesign of job descriptions. NUMSA attempted to convert the consultations into a wage negotiation and consensus could not be reached. Aveng Trident Steel advised NUMSA that consultations on the job descriptions had been exhausted and that it would implement the new job descriptions. Affected employees were offered the positions with the amended job descriptions, without a reduction in pay, as alternatives to the retrenchment. Only 71 employees accepted the alternative offers and 733 employees were ultimately retrenched.

NUMSA contended that the retrenchment of the 733 employees constituted an automatically unfair dismissal in terms of section 187 (1) (c) of the LRA as it argued that the reason for the dismissal was the refusal by employees to accept a demand in respect of altered job descriptions. The Labour Court concluded that the employees were not dismissed for refusing to accept any demand but that they were dismissed based on the employer’s operational requirements. 

In the Appeal to the Labour Appeal Court, NUMSA contended that:

1. The Labour Court’s interpretation was inconsistent with Chapter VIII (dealing with strikes and lockouts) of the LRA, the plain meaning of the words used in the amended section 187 (1) (e) of the LRA, a purposive interpretation of the provisions and the spirit, purport and objects of the Bill of Rights.
2. The amended section 187 (1)(c) of the LRA also applied in circumstances where the demand was motivated by the genuine operational requirements of the employer to change terms and conditions of employment. 
3. To hold otherwise would in effect be reading in an implicit limitation on the fundamental rights to collective bargaining and strike.

Aveng Trident Steel argued that such an approach ignored the fact that collective bargaining could only yield changes to terms and conditions of employment if it resulted in an agreement. If no agreement was reached an employer would be left without any means of addressing its operational requirements, other than by a lock-out, and may never resort to retrenchment. Aveng Trident Steel further argued that such interpretation would undermine the employer’s right to fair labour practices by excluding recourse to retrenchments when legitimate operational requirements are at play.

After examining the history of the amendments to section 187 (1) (c) of the LRA, the LAC held that;

“… our prevailing jurisprudence has interpreted the LRA to permit dismissal on such grounds, being structural or similar needs – the upshot being that the right to retrench is implicit in section 187 (1) (c) of the LRA. It is doubtful, for the reasons following, that the purpose of the amendment was to change the law in this regard.”

The LAC held that section 187 (1) (c) of the LRA ought to be read in the context of the LRA’s scheme for the protection against dismissal, and in particular section 188, which provides that a dismissal that is not automatically unfair, is unfair if the employer fails to prove a fair reason, such as an employer’s operational requirements under section 189 of the LRA. In this regard, the LAC held:

“It follows that even where there is evidence suggesting a credible possibility that dismissal occurred because the employees refused to accept a demand, the employer can still show that the dismissal was for a different more approximate fair reason.”

The fact that the proposed change is refused, and dismissal ensues does not necessarily mean that the reason for the dismissal is the refusal to accept the proposed change. Whether Section 187 (1) (c) is breached does not depend on whether the dismissal is conditional, but rather on finding what the true reason for the dismissal of the employees is. The existence of a refusal merely prompts a causation enquiry. The actual reason for dismissal needs to be determined and there is no reason why employers’ operational requirements must be excluded from consideration as the possible reason for the dismissal. 

By parity of reasoning, the provisions of section 65 (5) of the LRA permits the dismissal of protected strikers where the employer is able to demonstrate a legitimate and substantial business necessity. Whilst dismissing protected strikers for an employer’s operational reasons is permissible the LAC stated that:

“By the same token, while employees cannot be dismissed for refusing to accept a demand, they can be dismissed if that refusal results in a more dominant approximate operational necessity.”

Accordingly, the real enquiry is whether the reason for the dismissal is the refusal to accept the proposed changes to employment. One must first determine factual causation by asking whether the dismissal would have occurred if the employees had not refused the demand. Once the factual causation has been determined and it is found that the dismissal would have occurred if the employees had not refused demand, one must consider legal causation, namely, whether such refusal was the main, dominant approximate or most likely cause of dismissal.

Applying these principles, the LAC found that the dominant reason or proximate cause for the dismissal of the 733 employees was Aveng Trident Steel’s operational requirements and that the dismissals did not fall foul of section 187 (1) (c) of the LRA. *Our managing partner, St. Elmo Wilken, has represented Aveng in this matter from the outset.